Good afternoon, and welcome to the Surrozen Corporate Update Conference Call. My name is Josh, and I will be your manager for this call. I will now turn the call over to Craig Parker, CEO of Surrozen to begin the call..

specific Frizzled receptors are expressed in corneal endothelium of both normal and Fuchs' human donors and can therefore be used in designing and targeting our SWAP molecules. We can observe Wnt activation through specific SWAPs that enhance proliferation of primary human, corneal endothelial cells in vitro.

And we've established a corneal cryo injury model to measure the therapeutic effect of activating Wnt signaling in the corneal endothelium. In vivo Surrozen Wnt activating molecules are efficacious in reducing corneal thickness and improving opacity. The next step for our program is to optimize a lead molecule and select a development candidate.

Slide 20. Well, let me tell you about another ophthalmologic program that we're excited about. We're pursuing a potential treatment for severe dry eye with our SWAP technology. Severe dry eye is characterized by atrophy of the tear producing glands in the eye and insufficient regeneration.

The objective with the Wnt activating approach is to stimulate regeneration of the tear producing cells in the lacrimal gland and restore fluid secretion. We've established multiple lacrimal gland injury models in rodents, in which tear production is reduced.

One using Intraleukin-1 alpha to promote inflammation-driven injury, the other, a lacrimal duct ligation model that results in necrosis to the gland. An important first mechanistic step in restoring tear production is to regenerate the tear-producing cells in the gland called the acinar cells.

We've shown that a single injection of a SWAP molecule results in an increase in the weight of the lacrimal gland and a demonstrable proliferation of these acinar cells. So we're having a clear effect at the cellular level of increasing the number of target cells in the gland.

In the IL-1a induced injury model, we've shown that SWAP molecules activate Wnt signaling in the tissue, which leads to an increase in tear secretion. The method for measuring tear secretion in this model is actually the same as that used in clinical trials of agents for dry eye, a phenol red thread.

In this model, there's a statistically significant increase in tear production with SWAP molecules at days 2, 3 and 4. Similarly, in a duct ligation model of lacrimal gland injury, we've shown that treatment with the SWAP molecule restores tear production through activation of Wnt signaling and proliferation of acinar cells.

Next step for the program is to optimize and finalize a lead molecule for development. We expect at least one of these programs to move forward into development in 2023, potentially in collaboration with a corporate partner.

Both involve local administration of our antibodies to the affected tissue and therefore, would not be expected to have any potential liver exposure liabilities. Slide 21, and I'm going to turn the slide over to Chuck..

one, aligning resources and R&D investments for the 2 lead clinical development programs with a focus on obtaining proof-of-concept data; two, prioritizing investment in the most advanced discovery preclinical programs, lacrimal and cornea; and thirdly, reducing operating expenses with the goal of maintaining a strong balance sheet.

Following the corporate prioritization and restructuring activities, we anticipate a reduction in operating expenses, excluding noncash and nonrecurring charges of approximately 15% in 2023 compared to 2022.

Cash, cash equivalents and marketable securities were approximately $76 million as of the end of 2022, and we expect our cash runway to last into the second half of 2024. Finally, I wanted to highlight in the fourth quarter of 2022, we entered into a securities purchase agreement with Continence.

Given they decided that they were winding down their fund, they were an overhang on our stock, so we entered into an agreement to repurchase approximately 5.4 million shares of our common stock and approximately 1.3 million warrants for a purchase price of approximately $2.7 million.

Following the repurchase, Continence no longer hold any shares of our common stock or warrants to purchase theirs in common stock. We're excited with the multiple opportunities that lie ahead of Surrozen in 2023 and 2024. We've shared some of our key milestones and catalysts through 2024 on this slide.

We shared our thoughts on cash runway into the second half of '24 as we think about our key upcoming milestones and catalysts, and I'll briefly highlight a few of these.

First, for SZN-043, as Craig mentioned, we've enrolled the first patient for chronic liver disease and expect to have data by the end of the year, and plan to initiate a Phase Ib clinical trial in 2024 with potential proof-of-concept data in the second half of 2024.

As it relates to 1326, we've opened enrollment for the Phase I in healthy volunteers, and we expect to be able to have data by the end of the year, and we'll initiate a Phase Ib trial in 2024 in UC patients and expect to have proof-of-concept data in the second half of '24.

As I've already mentioned, with SZN-413, which is partnered with Boehringer Ingelheim, we expect by the end of the year for them to nominate a candidate which will trigger a $10 million milestone payment, and as it relates to our research programs, we expect to nominate an additional program and/or partner that potential program.

So now I'd like to turn it back to the operator, and we'll open up the call for questions..

[Operator Instructions]. Our first question comes from Dae Gon Ha with Stifel..

Congrats on all the progress. Good to hear things are back in motion on your side of the table. Maybe I'll just start with two before I hop back in the queue. Regarding the 043....

I don't hear anything..

Hello. Can you guys hear me? Hello.

Can you guys hear me now?.

Yes..

Congrats on all the progress. I wanted to ask two questions. One was more of a clarification for the 043 plan. Is there a change in the study plans? Because I thought the Phase I next study was in early cirrhotic patients, but now it seems like chronic liver disease.

So was there a change? Or what was the, I guess, the nuance that I'm missing? And based on the liver transaminase observations, can you speak to your confidence or strategy to mitigate similar observations in more hepatically-impaired patients? And then I've got a follow-up..

Thanks for the questions, Dae Gon. So yes, you observed a nuance in what we think are the patients likely to be enrolled in the study. So the general objective of the study -- well, the primary objective of the study is unchanged, which is safety. We think that -- and cirrhotic patients are chronic liver disease patients.

For many etiologies like patients with hep C, for example, cirrhosis is defined by in part a FibroScan score or transient elastography score of 7.5. We're taking patients with lower FibroScan scores. So they will certainly have chronic liver disease. They will have fibrosis. But whether they have frank cirrhosis, I think we'll just have to see.

So that's the nuance in the description of the target population that you picked up on is they may have FibroScan scores that are low enough that they would not be considered to be cirrhotics yet, but they would certainly have fibrosis and have hepatic impairment..

Got it.

And what about the hepatically-impaired aspect? How might that be a potential complication for you guys? Or do you have strategies to mitigate that?.

No. We have not identified a specific mechanism where one could mitigate, for example, by co-administering something else. And so I think, as I mentioned, we've observed that damaged tissue tends to be more sensitive. And so I think this is really going to come down to the dose response in disease tissue versus healthy tissue.

So not -- there's no specific mechanistic strategy at this point based on the data that we've generated. But again, it's possible that at quite low doses, there's a regenerative response that doesn't bring with it some hepatocellular injury..

Okay. Regarding that MABEL aspect you were talking about, so if we think about your 1326 study, how many more dose cohorts are you going to be exploring? I think I heard you say starting with 0.04 but going up to 1 milligram dose.

Have you clarified how many cohorts that would be? And kind of by extension, this notion of higher-than-expected exposure in humans versus animal studies.

Is that also an effect for your 043 molecule as well?.

Yes. We'll publish some of the pharmacokinetic data at some point for both molecules, but 043 was roughly in line with our PK projections from animals. We're -- Dae Gon, we're not going to disclose all the dosing cohorts, but it's a pretty typical dose level strategy. And we can continue to go above 1.

And it's possible, for example, that we could go up to 2.5, where we've seen one of these events with a different route of administration. So one potential hypothesis, for example, is that Cmax may be a contributor. We don't have preclinical data suggesting that, but it's seen with other molecules, and we're giving the molecule IV.

And we may ultimately want to test whether there's a difference at doses we've tested IV with the subcutaneous dose. So....

Our next question comes from Hannah Adeoye with JPMorgan..

It's Hannah on for Eric. Just a few from us.

Have you commented on the half-life of 1326 before? And if so, are you able to speak to any of the expected dosing regimens or frequency for a multiple ascending dose study based on your preclinical and clinical findings thus far? I guess, generally, I'm trying to see what gives you comfort that the AEs you've observed initially....

Hannah, I couldn't hear that, I don't know if others could..

Okay. I can repeat.

I was saying, have you guys commented on the half-life of 1326? And are you able to speak to any expected dosing regimens or frequencies for a multiple ascending dose study based on your preclinical and clinical findings thus far? Just trying to see if there's any data points to give you comfort that the AEs that you've observed thus far won't be seen over longer dosing intervals? Were you able to get that?.

One moment, please, the conference will begin momentarily. Go ahead, Hannah..

Can you guys hear me now?.

Yes..

Just was asking about the half-life of 1326 and your expected dosing regimen or frequencies for a multiple ascending dose study..

The half-life is about -- for 1326, you're asking, correct?.

Yes..

The half-life is about 5 days. Keep in mind, though, that because there are a number of Wnt pathway target genes that are activated when you activate the pathway, the biological effects could be longer lasting than the -- what you might anticipate from the half-life of the antibody.

And so it's not a straightforward align the PK with the frequency of dosing. So we think this could be in every other week or perhaps even less frequent dosing regimen. We have not finalized that yet for the Phase Ib portion. And obviously, we want to see all the human PK data at different dose levels.

That half life, by the way, was in primates for 5 days..

[Operator Instructions]. Our next question comes from Yatin Suneja with Guggenheim..

Can you guys hear me?.

Yes, you're coming in loud and clear..

I can't hear him..

Craig, can you hear me now? Once I get signal from the company I'll ask the question..

Craig, please give us the word when you can hear us?.

I can hear you. I can't hear Yatin..

Now? Hello? I think we are able to hear. I don't know because the other line is able to hear.

Chuck, can you hear us?.

I can hear you.

Craig, can you hear Yatin?.

No..

You can hear me?.

Yes.

Can you translate the question?.

Why don't we do that..

Let me ask the question, Chuck, do your best in translating. So with regard to 043, I think you mentioned that you have confirmed target engagement. Can you characterize that for us? Was there a dose response? And how do you feel about 0.5 dose? Is that sufficient to elect either a clinical or a biological activity? That's one.

And maybe a similar question for the other one because I don't think you said for 1326, anything on the target engagement..

Yes.

So Craig, can you hear me?.

Yes..

Question is we mentioned that we've confirmed target engagement and there was a dose response.

So I think for -- Yatin is asking actually for both programs, for 043 specifically, how do we feel about 0.5 and the biological activity that we might see? And a similar question as it relates to 1326?.

And Yatin, I can't hear you, so make sure you let Chuck or others know that you can hear me. So as you noted -- you can hear me, okay. As you've noted, we've confirmed target engagement with 043, at least targeting ASGR1 receptor through ALP elevation. So these are not adversities.

These are ALP elevation that results from blocking ASGR1, which is a scavenger receptor in the liver that takes ALP out of the circulation.

I think your question is really about what kind of doses have we seen activity in animal models? And are we in the range with 0.5? And while we've typically employed higher doses in animal models, we think we're in a range that could be a therapeutically active dose, and then I'll just also make the observation that obviously, given that we had not seen any of these adversities in other species, other species may not be that translatable for predicting a dose response.

So we're in the range, and I wouldn't be overly concerned or focused on the exact dose in the mouse translating to humans since the translatability for tox has not been there. For 1326, we do not have a target engagement assay, so we'll take getting into UC patients and biopsying the tissue to identify whether we've activated Wnt signaling.

So in that situation, in that setting, we have an assay for a Wnt target gene called Axin2 which we'll look for to confirm that we've activated the pathway..

Got it. Maybe one more question, Chuck, if you can translate. This is -- so I think it seems like at this point, we cannot rule out whether this is the phenomenon that you're seeing at least on the liver-related AEs, is it target-specific? We cannot rule that out. However, you are saying that these damaged tissues might be more sensitive.

So can you help us understand is there any threshold effect at certain doses you might not see. I'm just curious like what gives you confidence....

Chuck, I can't hear anyone still..

Yes, these damaged tissues are more sensitive..

Craig, can you hear me?.

Yes..

Okay.

So he -- Yatin's question has to do with -- we can't -- at this point, you can't really rule out the liver issues are target-specific, and seeing that the damage might be more sensitive, is there any threshold effect at certain doses that we've seen or might see based on the data we've collected?.

So to answer the first part of your question, Yatin, this does seem to be a liver-specific effect while our SZN-1326 is targeting Frizzled5, which is enriched in the intestinal epithelium in ulcerative colitis patients. It is expressed on hepatocytes.

So that would be consistent with an effect that's similar to 043, meaning they're both hitting liver to some extent. And I think, as to your -- the second question, I think, is what -- how do we find the therapeutic index? Is there -- what's the likelihood of finding a therapeutic index.

And again, I think we have to be cautious about extrapolating too much from the animal models.

As I've emphasized, I think the robust nature of the response in multiple different animal models for both molecules, the consistency of that response across experiments and across different types of injury, I think is very compelling evidence of the pharmacology and the biological rationale, but I wouldn't get too focused on the exact doses that we tested in animals.

And I think if this is a Wnt-related effect related to regeneration, in the healthy liver, it may be, and I don't -- we don't have data to support this hypothesis right now, but it may be that the damaged liver, because there is some active regeneration ongoing will really just display the benefits of regeneration and not these bumps in transaminase, but we'll just have to see what the data says in humans.

I don't think we have any preclinical data to exactly answer that question..

Thank you. And this concludes the Q&A session. I'd now like to turn the call back over to Craig Parker for any closing remarks..

All right. Well, thanks, Josh, and thanks, Surrozen team for joining me, and thank you all for joining the call and for your interest. I apologize that we had a little bit of a phone game for me to be able to hear questions. But thank you again for your participation and look forward to hearing from you in the future..

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect..