Acelyrin (SLRN) Q3 2023 Earnings Call Transcript

Acelyrin (SLRN)
Q3 2023 Earnings Call
Nov 07, 2023, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Acelyrin Q3 2023 earnings conference call. At this time all participants are in listen-only mode. After the speaker's presentation there will be a question-and-answer session.

[Operator instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Tyler Marciniak, vice president of investor relations, communications, and corporate operations. Please go ahead.

Tyler Marciniak -- Vice President, Investor Relations, Communications, and Corporate Operations

Thank you, operator. Good afternoon everyone and thank you for joining us. Before we begin, I'd like to remind the audience that this conference call will contain forward-looking statements, such as those related to progress of our clinical trials and anticipated data readouts, our future financial and operating results and investments, and our ability to commercialize our product candidates. These forward-looking statements involve risks and uncertainties that could cause our actual results and events to differ materially.

We urge you to review the risk factors section of our form 10-Q for the quarter ended June 30, 2023 filed with the SEC and also available on our website at acelyrin.com along with statements in today's press release and our slide presentation, which identifies certain factors that could cause our actual results, performance, and events to differ materially. Additionally, these statements are based on information available to us today, November 7th, 2023, and we undertake no obligation to update them as circumstances may change. Joining us on today's call are Dr. Shao-Lee Lin, our founder and CEO; and Gil Labrucherie, our chief financial officer.

I will now turn the call over to Dr. Lin. Shao-Lee?

Shao-Lee Lin -- Founder, Chief Executive Officer and Director

Thank you, Tyler. Good afternoon, everyone. Thank you for joining us for the third quarter update call. As we approach the end of 2023, we feel fortunate for the progress we have made throughout the course of the year.

We began in January with the transformative expansion of our portfolio through the acquisition of another private INI company. And in May, we were pleased to close a successful IPO in a challenging market environment. We are grateful to our investors for walking alongside with us in our journey as we remain focused on building a leading INI company and continuing to advance programs across multiple autoimmune and inflammatory diseases with the goal to deliver transformative medicines for patients. Our strategy remains steadfast.

To identify candidates, we believe are diamonds in the rough where based on molecule characteristics, our collective experience and expertise, and the evolving scientific and medical understanding, we can establish development plan that test our hypotheses around clinical differentiation and the potential benefit for patients. We are advancing our portfolio of programs across multiple indications including izokibep, a next generation inhibitor of IL-17A, being studied in multiple trials with registrational potential within the rheumatology, dermatology, and ophthalmology settings. Lonigutamab, a subcutaneously delivered inhibitor of IGF-1 receptor being developed for thyroid eye disease. And SLRN-517, an earlier stage program we are evaluating for allergy-related [Inaudible] diseases such as chronic urticaria.

In addition to our clinical progress, we continue to build our organizational capability and capacity to support our portfolio. Most recently, we announced the appointment of Patricia Turney as our chief technical operations officer, responsible for overseeing technical operations, CMC regulatory, corporate quality, and facilities. Patricia brings to Acelyrin more than 25 years of biopharmaceutical experience across R&D, clinical, and commercial supply management and expands our capacity for multi-asset, late-stage manufacturing at a pivotal time as we advance a robust portfolio with multiple large scale clinical trials underway and prepare for potential regulatory filings and commercial launches. We also welcomed in September Dr.

Shep Mpofu, our senior vice president of development, responsible for clinical development and translational sciences. Shep brings more than 20 years of industry experience, including a long tenure at Novartis, where he most recently served as senior vice president and chief medical officer for Novartis gene therapies. Prior to that, Shep was the global lead for [Inaudible], where he advanced the product from early development through to multiple approvals across indications, including psoriatic arthritis or PsA, hidradenitis suppurativa or HS, uveitis, and axial spondyloarthritis or AxSpa. His extensive experience will be key as we advance our pipeline across many of the same disease states.

Before Gil will review our financials in greater detail later on the call, I do want to underscore our strong financial position. With nearly $800 million on our balance sheet, we can execute on our strategy over the coming months and years and achieve numerous key milestones across the entire portfolio of programs and indications. Let's turn now to a review of our progress across the portfolio. As a recap, izokibep is a small protein therapeutic designed to inhibit IL-17A with a high potency through tight binding affinity that has the potential for robust tissue penetration due to its small molecular size, which is about one-tenth the size of a monoclonal antibody and has an even binding domain that extends half life.

We have hypothesized that the high potency and small size of izokibep can lead to clinically meaningfully differentiated responses for patients across multiple indications where this mechanism of action has been validated, and that this can be achieved with the safety profile consistent with that of the IL-17A class as has been demonstrated by the currently marketed monoclonal antibodies [Inaudible] and [Inaudible]. IL-17A as a target has not demonstrated dose limiting toxicity over ten years of post-marketing and millions of patient years of safety experience. This will be important as we discuss what appears to be an evolving understanding around targeting the IL-17 axis more broadly than selectively targeting IL-17A, Let me begin with psoriatic arthritis, which is our most advanced program and represents the largest potential indication for izokibep. Psoriatic arthritis is a chronic inflammatory disease with multiple clinical manifestations including arthritis, psoriasis, spondylitis, dactylitis, and importantly enthesitis, which is an inflammation of the strong dense, poorly vascular tissues that anchor our ligaments and tendons to bone.

Enthesitis impacts the majority of moderate to severe psoriatic arthritis patients and has been historically very difficult to treat. It is a marker of disease severity and a source of residual pain and physical dysfunction which impacts quality of life for patients. There are approximately 1.6 million PsA in the U.S. In the 2022 PsA treatment market was valued at $8.8 billion globally and is estimated to grow to nearly $18 billion by 2030.

Historically, PsA treatments have been more effective in the joints and skin, but not the harder to treat manifestations of the disease such as enthesitis. Rapid, deeper, and more durable resolution of disease across clinical measures is the key to improving overall quality of life, which is ultimately our goal for patients. We have already shared results from a phase 2 placebo-controlled trial izokibep in PSA, which demonstrated differentiated dose ordered responses as early as one month into treatment and increasing over time. This included an ACR50 response of 50% at week 12 or 44% placebo adjusted.

Resolution of enthesitis as measured by the leeds enthesitis index was 82% at week eight at our 80 milligram every other week dose. Week 12 was not a protocol specified time point for this measure. Any resolution is a standard approach to reporting improvements for enthesitis. To enable comparison with recently reported enthesitis data for one of the IL-17A/Finhibitors, we also analyzed subjects with LEI of two plus at baseline with an improvement of two plus points at our week eight versus the other agents data at week 12.

This analysis showed 100% response at week eight in patients receiving 80 milligrams of izokibep versus 0% in placebo. These results are relative to 71% reported at 120 milligrams for the IL-17A/F agent at 12 weeks without disclosure of a placebo as a reference for that agent. At you are in June of 2022, we presented primary endpoint 16 week data, showing izokibep demonstrated clinically meaningful benefits across disease manifestations including 52% ACR50 response, 85% PASI 75 response, and 88% resolution of enthesitis, which to our knowledge, is a level of resolution not previously reported for any other agent. These clinical bonus benefits subsequently drove significant improvements in quality of life across all domains.

And importantly, this included statistically significant improvements in pain, functional capacity, and sleep disturbance as measured by the Psoriatic Arthritis Impact of Disease questionnaire or PsAID. PsAID is a validated psoriatic arthritis specific patient reported outcome measure. Furthermore, earlier this year we were delighted to report initial long-term efficacy from the same phase 2 trial that showed that with longer duration of treatment, patients experience durable and deepening resolution of disease across clinical manifestations of PsA, leading to further improvements in quality of life as measured by the PsAID. Additional data demonstrating that increased duration of therapy continues to enhance resolution of disease will be presented in both poster and oral podium sessions taking place next Monday during the upcoming American College of Rheumatology convergence in San Diego.

At 46 weeks, a participants receiving izokibep 80 milligrams every other week, 79% achieved ACR50 response, up from 52% at week 16, and even higher orders of clinical response in measures approximating resolution of disease were observed with 52% achieving ACR70, 71%, achieving PASI 100, and 89% achieving enthesitis resolution. Notably, patients who switched from placebo to 80 milligrams every other week at week 16 responded quickly with more than 60% of patients in both the switch group, as well as the original 80 milligram every other week group, achieving minimal disease activity by week 46. Importantly, this efficacy was delivered with a safety profile consistent with previous izokibep experience and that of the IL-17A class as a whole with no evidence of dose limiting toxicity. Modeling from the phase 2 PsA data predicted the potential to increase response over time as has been demonstrated with the 46 week data.

The modeling further predicts the potential for increased efficacy with higher doses over the 80 milligrams every other week utilized in the phase 2 trial. To that end, the ongoing phase 2b/3 trial of PsA is evaluating both 160 milligrams weekly and every other week to continue to maximize potential responses for patients. Aside from the higher dosing, the design of this trial is consistent with that of the phase 2 with a few notable exceptions. Firstly, this is a truly global study with 352 patients across 71 sites including 40 in the U.S.

and 30 internationally to enable the potential for registration across geographies. In addition, there is an increased percentage of enthesitis at baseline and an increased percentage of PNS failures, meaning individuals who have had an inadequate response, intolerance, or contraindication. These aspects all have the potential to impact the specific point estimates relative to phase 2, but are important in understanding the potential benefits of izokibep for PsA patients. Both are important given the contribution of enthesitis as to severity of disease including continued pain and disability and also the increasing number of patients who have not simply been exposed to TNF inhibitors but have demonstrated an inadequate clinical response.

This phase 2b/3 trial in PsA completed enrollment in the second quarter of 2023. Over 75% of patients have completed through the primary endpoint at week 16, and the discontinuation rate is 5.9%. Top line data continues to be expected in the first quarter of 2024. Now we'll turn our attention to hidradenitis suppurativa, which continues to be an area of rapid evolution.

Just last week, only the second treatment for HS and the first new option for patients in almost a decade was approved by the FDA. We have the great fortune of having members of our team who held important roles in the context of each of these approved therapies. And for all of us, it's always gratifying to see new treatment options for patients. At the same time, while the IL-17A safety profile is well-established, we have also seen, especially recently, our understanding of the safety profile of targeting subunits beyond IL-17A continues to evolve and may become a more important consideration.

Targeting both A and F leads to dose response an increase in fungal infections. This was seen in data from both agents targeting inhibition of IL-17A and F. After 24 weeks of treatment. One demonstrated an approximate doubling of fungal infection risk from 12 weeks, which increased to about 20% in the planned dose and almost 30% in their higher dose with the beginnings of reports of occurrence of these fungal infections in areas beyond just skin.

Additionally, the risk of suicidal ideation and behavior was noted in a recent label of an IL-17A/F neighbor. This has been noted previously in the label of an anti IL-17 receptor inhibitor which blocks all the subunits of IL-17 including IL-17F. Cumulative data from these two agents over the registration programs raises the question of relationship between inhibiting IL-17 more broadly than is IL-17A, specifically the potential association with the inhibition of IL-17F. This recent label also noted the requirement for routine laboratory monitoring for liver toxicity, which is not previously been noted for the IL-17A inhibitors.

So the landscape is actively evolving in terms of balancing efficacy and safety hurdles for new treatments for [Inaudible]. We believe in izokibep's potential in HS with roughly 25% of patients achieving high score 100 responses within 12 weeks, which means they rapidly achieve resolution of all abscesses and nodules without new training tunnels. This is a level of responders achieved in half the time reported by others. And without the safety or tolerability considerations of targeting IL-17F in addition to IL-17A.

As we've previously shared, both our phase 2b/3 and our ongoing phase 3 trial are moving forward in discussions with the FDA will help inform next steps to advance our registrational program. We expect to have an update by the end of this year or early next year. And in addition to PsA and HS, we continue to explore the potential for izokibep to make a meaningful difference for patients with both asthma and uveitis. Enthesitis is a central feature of [Inaudible], and we believe the rates of enthesitis resolution demonstrated in the phase 2 PsA trial suggest the potential for clinically meaningful differentiated benefits for patients with this disease.

We will use the optimal dose from the PsA program to inform a planned future phase 3 program in AxSpA. We also continue to enroll our phase 2b/3 clinical trial of izokibep as a treatment for uveitis. Previously reported data for another IL-17A inhibitor delivered intravenously has validated the inhibition of IL-17A as potential therapeutic for uveitis. While izokibep is a lead program in our portfolio, we have two other programs, lonigutamab and SLRN-517 which we are developing in thyroid eye disease and [Inaudible] for the diseases.

Thyroid disease is a vision threatening progressive chronic all immune disease, and similar to HS, the TED landscape is evolving rapidly. Our team has deep experience in this indication with many involved in developing the only currently approved treatment. Recent clinical data demonstrating the effectiveness of inhibiting IGF-1 receptor in chronic TED supports our approach to developing lonigutamab not just for acute disease, but also more like treatments for chronic inflammatory autoimmune diseases. This includes targeting greater depth and durability of response with longer term dosing and the goal of achieving resolution of disease.

Recent updates from the FDA to the warnings and precautions of the currently approved therapy also highlight hearing impairment as a serious potentially permanent side effect of treatment. We have hypothesized this hearing impairment may be directly related to the inhibition of the normal function of IGF-1 given its role in regenerating cells at the inner ear subsequent to routine auditory insults. The unique characteristics of lonigutamab may allow us to optimize efficacy by maintaining minimum drug levels needed to achieve improved depth and durability of response. Limit safety liability including hearing impairments potentially associated with high maximum drug concentrations and maximize patient convenience through subcutaneous delivery.

The phase 1/2 trial of lonigutamab delivered subcutaneously in 10 patients is ongoing. We anticipate initial proof of concept data including proptosis response and clinical activity score by end of first quarter 2024. SLRN-517 is a fully human, highly potent IgG monoclonal antibody directed against C kit with the potential to address muscle-driven diseases. We are conducting a phase 1/2 proof of concept trial of SLRN-517 and expect top-line results in the second half of 2024.

With that overview of the portfolio, let me now turn the call over to Gil for a review of our financials. Gil. Thank you.

Gil Labrucherie -- Chief Financial Officer

Thank you, Shao-Lee for that overview of our portfolio, and good afternoon everyone. As Shao-Lee mentioned, we are fortunate to be operating from a strong financial position as we not only advance our portfolio of clinical stage programs, but also build our organizational capability and identify potential additional diamonds in the rough to add to our pipeline. At September 30, 2023, cash and cash equivalents and short-term marketable securities totaled $788.4 million which we expect to fund operations through key value driving milestones across all three programs. Research and development expenses were $74.6 million for the third quarter, as compared to $12.5 million for the same period in 2022.

Comparing 2023 to 2022, the company has undergone significant growth including expansion of izokibep program across multiple indications and the addition of two programs in 2023, both of which are now in clinical stage development. General and administrative expenses were $19.9 million for the third quarter, as compared to $2.9 million for the same period in 2022. The quarter ended September 30, 2023 includes stock based compensation expense of $11.7 million. These increases in expenses were primarily a result of expanding our organizational capability to support the development of our broad portfolio of immunology product candidates.

Finally, our net loss for the third quarter of 2023 totaled $83.9 million or $0.87 per share, compared to $14.4 million or $8.17 per share for the third quarter of 2022. The total net loss for the current quarter includes stock-based compensation expense of $15.3 million. As you can see, we continue to carefully allocate capital across our robust clinical portfolio, and we're delighted to have a strong financial position from which to continue our important work for patients. And now I will turn the call back to Shao-Lee.

Shao-Lee?

Shao-Lee Lin -- Founder, Chief Executive Officer and Director

Thanks, Gil. As you've heard, we continue to make steady progress in our efforts to build a leading immunology company. We feel fortunate to have an experienced team, a robust pipeline, and a strong financial position providing runway through multiple key milestones across all three clinical programs. We remain committed to our long-term vision to accelerate the development and commercialization of transformative medicines to address unmet medical needs and to deliver sustainable value to our shareholders, partners, and most importantly to the patients we serve.

In the ever evolving landscape of our industry, we understand the importance of adaptability and resilience. We are committed to making data driven disciplined decisions as well as being responsible stewards of our human and financial resources in navigating challenges and embracing opportunities. Once again, I thank you for your trust and support. We look forward to your continued partnership as we journey ahead together.

Operator, we are now ready to open the call to questions.

Questions & Answers:

Operator

Thank you. We will now conduct the question-and-answer session. [Operator instructions] Our first question comes from Yasmeen Rahimi from Piper Sandler. Please go ahead.

Yasmeen Rahimi -- Piper Sandler -- Analyst

Good afternoon, team, and thank you so much for all your really thoughtful remarks for us. Team as we're awaiting that PsA data early next year, could you maybe comment on sort of how soon post the second phase to be phase 3? Would you be in a position to get ready and file for approval in PsA and whether the data would be sufficient on the heels of both of the results? So if you could just provide color in that regard. And then two, if you could just maybe comment on how you're tracking or have been tracking or tracking currently suicide ideation, liver enzyme abnormality to the extent you can across all studies. And I'll jump back into the queue, and thank you again.

Shao-Lee Lin -- Founder, Chief Executive Officer and Director

Thank you guys. This is Shao-Lee. So with regards to PsA, we anticipate that registration will require both the ongoing phase 3 that we hope to be part of that package as well as a confirmatory study which is standard for these indications. We haven't yet provided guidance specifically at the time post, you know, sort of post this study readout relative to when we think that will be.

But obviously we'll sort of move forward expeditiously as expeditiously as possible. With regard to the signals that you've noted, really, since the [Inaudible] experience with this group, these have been endpoints that have been followed across the IL-17 class, and we're following the standard approaches there as well.

Yasmeen Rahimi -- Piper Sandler -- Analyst

OK. Thank you. I'll jump back into the queue. Thanks.

Operator

One moment for our next question. Our next question comes from Tyler Van Buren from TD Cowen. Please go ahead.

Unknown speaker

Hi, this is Beth on for Tyler, thank you guys for taking our questions. We have two for you. So first, looking forward to the top line PsA phase 2/3 readout in Q1. How are you thinking about the bar for success given the izokibep phase 3 data and other recent competitor readouts? And then two, for the lonigutamab head patient readout in Q1, how many patients worth of data might we see across the three to four dose cohorts? And how de-risking do you expect the early proptosis data to be as we think about efficacy in later stage trials? Thank you.

Shao-Lee Lin -- Founder, Chief Executive Officer and Director

Super thanks to that, Beth. So your first question was about the upcoming PsA 2b/3 readout in first quarter of '24 and the bar for success. The way we think about this is that the phase 2 study that we've already completed that went up to 80 milligrams, and we're going to share the long term data even even additional measures of resolution of disease at the upcoming ACR meeting. We feel like that study already demonstrated the potential for differentiation with izokibep, especially the top dose 80 milligrams every other week.

We've seen top range results with regards to joints and skin at the week 16 primary endpoint and really outsized enthesitis results as we recap today within that time frame, and that just haven't been seen before with other agents. And we've shared that at the 46 week time frame, we see sort of even continued deepening of those responses. Again, as we've shared today with ACR50 -- or sorry, 70, up at above 50%, PASI100 scores up over 70% and emphasized is still in the kind of 80 to 90% range. So we're very, very pleased with those results.

We think that they fundamentally de-risk the 2b/3 that's coming up. We conducted that 2b/3 really because our modeling from that phase 2 suggested to us that we could get some additional efficacy out of additional -- pushing the exposure a bit more within the context of the disease state. And so that's the reason for the additional dose ranging the 2b portion, if you will, of the 2b/3 that's upcoming. As a for instance, we know from our earlier psoriasis experience that moving from 80 every other week to 160 every other the week in psoriasis did give us a bit of a bump with regards to efficacy.

So at a minimum we hope to recapitulate that. But already we feel like we have a differentiated offering. And then your second question was about lonigutamab and how much data we would have moving forward and how de-risking that is sort of overall think what you can anticipate is that from a proof of initial proof of concept perspective, we'll have proof -- we'll have a number of patients that are very similar to what's been demonstrated previously for the viridian and immune events sort of or compounds on the order of six or so patients in those experiences have been sufficient to really demonstrate the potential for signal across both proptosis as well as clinical activity score. So we'll have those measures within the context of ten patients to evaluate.

We may have more patients than that, but as as we move forward we'll have a better beat on that. And and because of the strong signal in terms of efficacy that we see with this axis, we anticipate it's not going to take much more than that to see a signal for these agents. Again as has been demonstrated already.

Operator

One moment for our next question. Our next question comes from Vikram Purohit from Morgan Stanley. Please go ahead.

Unknown speaker

Hi, everyone, this is Gospel for Vikram. We have two questions regarding PsA and HS. So for PsA. I was wondering what the competitor data readout has -- data tells you if anything about the importance of molecule size for the treatment of PsA.

And then in regards to HS, I was wondering have you been able to further analyze the results to better understand the placebo response and discontinuation rate observed? If so, did you currently see any read across to the ongoing PsA readout and idea measures that have been put in place for that study to prevent similar issues from arising? Thank you.

Shao-Lee Lin -- Founder, Chief Executive Officer and Director

Thank you for that Gospel. You know, maybe I'll start backwards a little bit to tie it back in which is -- and I appreciate the question. Obviously, given our HS readout that we shared in September, we've been extraordinarily hyper vigilant with regards to putting in any measures such that we understand in real time are to continue to understand and ensure that we are understanding in real time any discontinuation as well as putting into place anything that could help from a placebo response perspective. We don't anticipate any read through to our PsA, and we think that our sort of blinded continued analysis haven't suggested to us any issues in that regard.

We have continued further deep dives with regards to the data set, and as I shared in our prepared remarks, we anticipate having more information with regards to that program by end of year, early next year to share when we have relevantly compiled both our conversations with the health authorities as well as the deep dives that that continue to be ongoing. So bottom line is HS continues to move forward with regard to the 2b/3 study that ran out as primary as well as the ongoing phase 3 as planned. As we had previously discussed, we don't anticipate a read through to PsA. And from the PsA perspective, we do think that there is important still with regards to the molecule size and the potential for differentiation.

We think our phase 2 results especially in emphasis point to that exactly where the threshold was for the size cutoff that could enable us to get into that dense strong sort of poorly vascular tissue relative to other molecules wasn't entirely clear. I will say that the data more recently suggests that not only is the threshold between our 18 kilodaltons and the 150 or so for for the market in monoclonal, but perhaps is even between the 18 and the 40 that was -- kilodaltons of the recently released HS data, given the difference in enthesitis. I've shared with you today in our prepared remarks, our best attempt at an apples to apples comparison given the data that was presented not with regards to LEI resolution which we've shared previously. But with regards to LEI two plus at baseline, improving more than two plus points over the course of the study.

And recall that that was for us at week eight an earlier time point because we didn't collectively 12, 100% response for that degree of change or improvement versus the placebo of 0% relative to 71% without the placebo reported.

Operator

One moment for our next question. Our next question comes from Emily Bodnar from H.C. Wainwright. Please go ahead.

Emily Bodnar -- H.C. Wainwright and Company -- Analyst

Hi. Thanks for taking the questions. Kind of along the lines of some of the other questions on PsA, I was wondering if you can maybe discuss what endpoints are metrics that physicians are most looking to see improved upon or where they kind of see the largest unmet need where you think you can differentiate? I know you've talked about enthesitis already, but are there any other places where where you kind of see differentiating. And then maybe just some expenses that you can touch on -- it looks like in 3Q the expenses kind of doubled from the second quarter.

So is that kind of a base level for you going forward or any guidance you can give on expenses for the remainder of the year next year? Thank you.

Shao-Lee Lin -- Founder, Chief Executive Officer and Director

Yes. Thanks for that Emily. Maybe I'll start with PsA disease state manifestations, etc. And I'll let Gil handle the second question.

Um, so you know with regards to where we think the field is going and what's important for patients and therefore for our investigators and colleagues as well is that we really need to do better with regards to our treatment offerings for these patients. We've traditionally been talking about an ACR50 response and the 50% sort of range. And what that means is that half the people will get 50% better with regards to their joint disease, which is a pretty low bar still if you think about how much unmet need, how much better we should be able to do. So things like ACR70s are as close to remission as we've been able to have within the ACR scoring system, PASI100 or you know sort of all clear skin emphasizes resolution means that don't have any more emphasis that I can measure, which is terrific.

And so it's really the totality of all of the manifestations of this disease that, therefore, as you can imagine, impact most the overall quality of life of a given patient. So it's important not just to hit the joints in the skin, although, of course one, wants to hit them as hard as one can really be able to talk about remission or resolution. ACR70 and you know the majority of people achieving ACR70s, the vast majority of people achieving PASI100. And now we feel like within the vast majority of people achieving resolution of their enthesitis, which is again a marker of severity of disease, of residual pain, and dysfunction for these patients that obviously adds up to the quality of life.

And one of the measures of sort of this overarching resolution of disease is also minimal disease activity. And as we've shared, both our switch from placebo to active in the phase 2 study as well as the 80 milligram from the get go. Those subjects are achieving about 60% minimal disease activity in the upcoming data set that will be presented. So we're excited about this.

We think that the 2b/3 gives us the potential to impact this even further and we already know that the opportunity exists based on our existing data to do that from a skin improvement perspective.

Gil Labrucherie -- Chief Financial Officer

Great. And to the financial question, Emily, you know as I said in my prepared remarks, we ended the quarter with over $788 million in cash on the balance sheet. So, obviously, we're in a very strong financial position, were at sufficient funding to go through countless across our pipeline. At this stage, we're not giving specific line item guidance, but I can tell you that we're thinking very carefully about how we allocate capital stage appropriate.

We're scaling the investments as as we scale the trials and so we are in obviously in 2024 planning and we're looking very closely at that and being prudent with our capital. But we're really pleased with where we are at this point.

Emily Bodnar -- H.C. Wainwright and Company -- Analyst

Got it. OK. Thank you.

Operator

[Operator instructions] Our next question comes from Akash Tewari from Jefferies. Please go ahead.

Akash Tewari -- Jefferies -- Analyst

Thank you so much for taking my questions. So I remember as of September, you had mentioned the blinded dropout rate for your upcoming arthritis trial was around 5%. Any color on what that's tracking through as we get into November. And what level of dropout do you plan with for this trial with your current powering assumptions? And then I guess maybe on HS.

Can you go over precisely what your HS protocol deemed to be drug related or not? For example, in the circumstance by which a participant had an injection site reaction and also stop treatment, how would you determine whether that was a drug related discontinuation or otherwise? Thanks so much.

Shao-Lee Lin -- Founder, Chief Executive Officer and Director

Thanks, Akash. So with regards to your first question about the PsA study that's about to read out and discontinuation rates. So as I shared in our prepared remarks, we are at over 75% of patients within the context of that trial having completed through the primary endpoint and our discontinuation rate currently is 6.9%. So we feel -- apologies, 5.9%.

And it just speaks to my mindset with regards to my next comment, which is really that anything below 10% is the usual threshold that we think about for clinical trials in general. And if it bounces around within the context of that number, but is below 10%, we really are concerned. So we're feeling very good about where we are with that study at this juncture. And as I said earlier to Emily's comments, really don't feel like there's any read through that -- and we wouldn't have expected that, but we don't think we're seeing that.

Separately with regards to HS and and scoring of ISRs and whether or not those are adverse events, we take that as as reported to us. ISR and whether or not they were dropouts due to ISRs, when we talk about our dropouts as discontinuation, we were responders without adverse events, we actually went back through and didn't just take at face value. How whether or not it was reported to us as a -- whether it was a loss to follow up or through consent, etc. We went back through the entire electronic data set and evaluated for whether or not there was a pattern including looking for ISRs that weren't necessarily reported as an AE. And that pattern also does not exist, which I think is probably your underlying question.

Akash Tewari -- Jefferies -- Analyst

Awesome. Thanks so much.

Operator

I am showing no further questions. I'll now turn the conference over to Tyler Marciniak for closing remarks.

Tyler Marciniak -- Vice President, Investor Relations, Communications, and Corporate Operations

Thank you all for joining today's opportunity for us to share with you our third quarter financial results and corporate updates. As Shao-Lee and Gil mentioned, thank you for your trust and support as we continue to build a Acelyrin into a leading INI company. We look forward to engaging with you regularly and transparently. But in that vein, I would like to highlight once again our upcoming PsA data presentations at ACR and the several investment conferences we are attending in the coming weeks.

We hope to see you in person soon and would encourage you to view the fireside chats and other resources we regularly post to our website. And of course, please feel free to contact our investor relations team at any time if we can be of service to you. With that, we'll conclude our call for today. Thank you very much.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Tyler Marciniak -- Vice President, Investor Relations, Communications, and Corporate Operations

Shao-Lee Lin -- Founder, Chief Executive Officer and Director

Gil Labrucherie -- Chief Financial Officer

Yasmeen Rahimi -- Piper Sandler -- Analyst

Unknown speaker

Emily Bodnar -- H.C. Wainwright and Company -- Analyst

Akash Tewari -- Jefferies -- Analyst

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