Executive Summary / Key Takeaways

• ACELYRIN has undergone a significant strategic transformation, pivoting from a multi-asset immunology pipeline to focusing primarily on its lead candidate, lonigutamab for Thyroid Eye Disease (TED), culminating in a planned merger with Alumis Inc.
• The company's historical strategy centered on acquiring and accelerating development of differentiated assets like izokibep and lonigutamab, leveraging hypothesized technological advantages such as izokibep's small size for tissue penetration and lonigutamab's potency and subcutaneous delivery potential.
• Recent financial performance reflects this strategic shift, with operating expenses decreasing due to reduced izokibep development and restructuring, though net losses increased in Q1 2025 due to lower non-recurring income compared to the prior year.
• The proposed merger with Alumis, recently approved by SLRN stockholders and expected to close in Q2 2025, aims to create a stronger, more diversified company with a projected cash runway into 2027, intended to fund lonigutamab development through BLA filing.
• Key risks include the uncertainty and potential delay or failure of the merger closing, the successful execution and outcome of the delayed lonigutamab Phase 3 program, intense competition in the TED market, and the ability to effectively integrate operations post-merger.

A Foundation Built on Acquisition and Differentiated Technology

ACELYRIN, INC., established in 2020, set out with an ambitious strategy: to identify, acquire, and accelerate the development of transformative medicines, initially focusing on the complex landscape of immunologic diseases. This approach was rooted in the belief that certain molecules, deemed "diamonds in the rough," possessed inherent characteristics that could unlock clinically meaningful differentiation for patients. The company's early history is marked by key acquisitions and licensing deals, notably the 2021 agreement for izokibep and the 2023 acquisition of ValenzaBio, which brought lonigutamab and SLRN-517 into the fold. These moves, coupled with a successful IPO in May 2023, provided the initial capital and pipeline to pursue this vision.

At the heart of ACELYRIN's early strategy were its lead technological assets, izokibep and lonigutamab, each hypothesized to offer distinct advantages. Izokibep, an IL-17A inhibitor, was characterized as a small protein therapeutic, approximately one-tenth the size of a conventional monoclonal antibody, possessing high potency and an albumin-binding domain. The hypothesis was that this small size would enable robust tissue penetration, potentially leading to deeper, more differentiated clinical responses in diseases like hidradenitis suppurativa (HS) and psoriatic arthritis (PsA), where inflammation affects dense, poorly vascularized tissues. Early data from izokibep trials, such as high rates of enthesitis resolution in PsA and HiSCR100 responses and draining tunnel improvements in HS, were presented as evidence supporting this hypothesis, suggesting the molecule could achieve levels of disease resolution not previously reported by other agents, and potentially without the safety concerns associated with inhibiting additional IL-17 subunits like IL-17F.

Lonigutamab, a humanized IgG1 monoclonal antibody targeting the IGF-1 receptor (IGF-1R), represented the company's foray into Thyroid Eye Disease (TED). This molecule was highlighted for its high potency, stated to be up to 75-fold higher than teprotumumab (the currently approved TED therapy), and its unique epitope binding that triggers rapid receptor internalization. Crucially, lonigutamab was designed for subcutaneous delivery. The technological premise here was that subcutaneous administration, combined with the molecule's potency, could allow for optimized efficacy by maintaining necessary minimum drug levels while potentially limiting safety liabilities, particularly hearing impairment, which has been associated with high maximum drug concentrations seen with intravenously administered IGF-1R inhibitors. Early Phase 1/2 data for subcutaneous lonigutamab showed rapid improvements, efficacy at lower exposure levels compared to IV agents, and, importantly, no reported cases of hearing impairment, hyperglycemia, or menstrual disorders to date, lending support to the potential for a differentiated profile.

These technological differentiators were intended to form the basis of ACELYRIN's competitive moat, enabling it to potentially capture market share by offering superior efficacy, safety, or convenience compared to existing therapies. The initial multi-asset strategy aimed to leverage these advantages across several immunology indications, positioning the company for multiple potential BLA filings and commercial launches.

Strategic Reprioritization and Financial Realities

Despite the promising early data and strategic vision, 2024 marked a significant turning point for ACELYRIN. In August 2024, the company announced a strategic reprioritization, suspending new internal investment in izokibep development for HS, PsA, and axial spondyloarthritis (AxSpA), as well as the SLRN-517 program. This decision, driven by strategic capital allocation considerations, acknowledged that the broad izokibep program might be better advanced by a larger organization with more extensive resources and infrastructure. This pivot was accompanied by a workforce reduction of approximately 13% and associated restructuring charges.

The financial impact of this strategic shift is evident in the company's recent performance. Research and development expenses decreased to $42.1 million in Q1 2025 from $58.0 million in Q1 2024, and to $31.6 million in Q3 2024 from $74.6 million in Q3 2023. These decreases were primarily a result of reduced clinical development activity and lower personnel costs following the restructuring and the winding down of certain izokibep trials. General and administrative expenses also saw decreases, falling to $17.7 million in Q1 2025 from $24.7 million in Q1 2024, and to $12.3 million in Q3 2024 from $19.9 million in Q3 2023, largely due to lower stock-based compensation expense, although Q1 2025 saw an increase in professional fees related to the pending merger.

However, despite the reduction in operating expenses, the company's net loss increased to $55.3 million in Q1 2025 compared to $35.0 million in Q1 2024. This was primarily due to a significant decrease in other income, which included non-recurring gains from vendor arrangements ($30.0M) and an asset sale ($7.0M) in Q1 2024, with no similar transactions in Q1 2025. The company also incurred $4.2 million in stock-based compensation and $2.9 million for asset impairment in Q1 2025.

Further challenges emerged in December 2024 when the Phase 2b/3 trial of izokibep in uveitis did not meet its primary or secondary endpoints. This led to the decision to stop all remaining izokibep development and terminate the license agreement with Affibody (TICKER:AFFI B) effective January 31, 2025. The SLRN-517 program license was also terminated in January 2025. These decisions solidified ACELYRIN's focus squarely on lonigutamab.

As of March 31, 2025, ACELYRIN held $411.1 million in cash, cash equivalents, restricted cash, and short-term marketable securities, with an accumulated deficit reaching $792.2 million. The company's liquidity position is critical, as it continues to fund operations without product revenue. Management has stated that existing capital is expected to fund operations for at least the next 12 months from the May 14, 2025 filing date.

The Path Forward: Lonigutamab and the Alumis Merger

With the pipeline significantly narrowed, ACELYRIN's future hinges on the success of lonigutamab and a transformative corporate event: the merger with Alumis Inc. Following the strategic pivot, ACELYRIN continued to advance lonigutamab, announcing additional positive Phase 2 data in January 2025 and achieving FDA alignment on the Phase 3 program design during a positive End-of-Phase 2 meeting in Q3 2024.

The planned Phase 3 LONGITUDE program for lonigutamab involves two global trials enrolling approximately 350 patients (active and chronic TED) randomized 2:1 to receive a 100mg subcutaneous loading dose followed by 50mg every two weeks, or placebo. The primary endpoint is proptosis response rate at 24 weeks, with dosing continuing through 52 weeks to evaluate longer-term treatment potential. This design reflects the company's focus on demonstrating differentiation in a real-world patient population and addressing the unmet need for chronic TED treatment.

The most significant recent development is the definitive merger agreement with Alumis, announced in February 2025 and amended in April 2025. This all-stock transaction, approved by ACELYRIN stockholders on May 13, 2025, is expected to close in Q2 2025, with ACELYRIN becoming a wholly owned subsidiary of Alumis. Under the amended terms, ACELYRIN stockholders will receive 0.4814 shares of Alumis common stock for each ACELYRIN share, resulting in approximately 48% ownership of the combined entity on a fully diluted basis.

The rationale for the merger, as articulated by management, is to create a leading clinical biopharma company in immune-mediated diseases with a strengthened financial position and a more diversified pipeline, leveraging the combined development and commercial expertise. The combined company, which will operate under the Alumis name and be led by the current Alumis executive team, is projected to have a pro forma cash position of approximately $737 million as of December 31, 2024, providing a cash runway into 2027. This runway is expected to fund the lonigutamab development program through BLA filing, a critical milestone for value creation. The merger process also saw an unsolicited indication of interest from Concentra Biosciences, which the ACELYRIN board determined was not superior to the Alumis transaction, leading to the adoption of a stockholder rights plan.

However, the merger introduces its own set of uncertainties and risks. The closing is subject to customary conditions, and there is no guarantee it will be completed in a timely manner or at all. The pendency of the merger has already led to the delay of the lonigutamab Phase 3 initiation until closing, potentially impacting timelines and increasing the risk of competitors advancing faster. If the merger agreement is terminated under certain circumstances, ACELYRIN may be required to pay Alumis a $10 million termination fee.

Competitive Dynamics and Positioning

ACELYRIN has operated within highly competitive therapeutic areas dominated by large pharmaceutical and biotechnology companies with significant resources and established market presence.

In the IL-17 inhibitor space, izokibep faced competition from approved therapies like Novartis's (NVS) Cosentyx and Eli Lilly's (LLY) Taltz, as well as other pipeline candidates. While ACELYRIN highlighted izokibep's potential for differentiated efficacy based on its unique molecular characteristics (small size, potency), these competitors possess vast commercial infrastructure, established physician relationships, and significant market share. The decision to halt internal izokibep development reflects the challenge of competing head-to-head across multiple large indications without the scale of these rivals. The competitive landscape for IL-17 inhibitors is also evolving with increasing scrutiny on the safety profiles of agents targeting multiple IL-17 subunits, which ACELYRIN had hoped to leverage by emphasizing izokibep's focus on IL-17A and its safety profile consistent with that class.

The current focus on lonigutamab places ACELYRIN (and the future combined company) in direct competition with Amgen's (AMGN) Tepezza, the only approved therapy for TED. Tepezza, an intravenously administered anti-IGF-1R antibody, has established market dominance. However, ACELYRIN positions lonigutamab as a potentially differentiated alternative based on its subcutaneous delivery (offering greater convenience and potentially lower administration costs), higher potency, and the potential for an improved safety profile, particularly regarding hearing impairment, which is a noted concern with Tepezza. While early lonigutamab data supports these potential advantages, the delay in initiating the pivotal Phase 3 program until the merger closes could allow other companies developing TED therapies to advance their programs, potentially eroding lonigutamab's first-mover advantage in the subcutaneous space or capturing market share before its potential launch.

The merger with Alumis is a strategic response to this competitive environment. By combining Alumis' pipeline, including its TYK2 inhibitors, with lonigutamab, the combined entity creates a more diversified portfolio across immune-mediated diseases. This diversification, coupled with a significantly strengthened financial position, is intended to enhance the combined company's ability to compete more effectively, fund larger clinical programs, and potentially negotiate better terms with suppliers and partners compared to ACELYRIN as a standalone entity.

Risks and Future Considerations

Investing in ACELYRIN (and the future combined company) carries significant risks inherent in clinical-stage biopharmaceutical development. The most immediate risk is the successful closing of the merger with Alumis. Any delays or failure to close could severely impact ACELYRIN's financial position and future prospects, potentially necessitating alternative financing under unfavorable terms. The pendency of the merger also presents business uncertainties and contractual restrictions, including the delay in the critical lonigutamab Phase 3 program initiation.

Beyond the merger, the success of lonigutamab is paramount. Clinical trials are lengthy, expensive, and their outcomes are uncertain. Despite promising early data and FDA alignment on the Phase 3 design, there is no guarantee that the pivotal trials will demonstrate sufficient efficacy and safety for regulatory approval. The failure of the izokibep uveitis trial serves as a recent reminder of these inherent risks. Even if approved, market acceptance of lonigutamab will depend on demonstrating a compelling value proposition (efficacy, safety, convenience) against an entrenched competitor like Tepezza and other emerging therapies.

Reliance on third parties for clinical trial execution and manufacturing also poses risks. Any failures or delays by CROs or CMOs could impact timelines and costs. Maintaining and enforcing intellectual property protection for lonigutamab in a competitive landscape will be crucial and potentially costly. Furthermore, the combined company will face ongoing regulatory obligations and potential pricing and reimbursement pressures, which could limit market access and profitability. Litigation risks, including the pending securities class action and merger-related lawsuits, could result in substantial costs and divert management attention. Finally, the successful integration of ACELYRIN's operations and personnel into Alumis post-merger is critical for realizing the anticipated benefits and achieving the projected cash runway.

Conclusion

ACELYRIN's journey has been one of rapid evolution, marked by bold acquisitions, promising early clinical data, and a recent strategic pivot driven by capital discipline and clinical trial outcomes. The company has transitioned from a multi-asset pipeline centered on the hypothesized advantages of izokibep and lonigutamab to a focused entity whose future is now largely tied to the potential of lonigutamab in TED and the successful completion of its merger with Alumis.

The proposed merger represents a strategic consolidation aimed at creating a more financially robust and diversified clinical-stage company better positioned to advance lonigutamab through pivotal trials and potentially unlock its value in the competitive TED market. While the strategic rationale and projected cash runway into 2027 are compelling, the investment thesis is heavily weighted on the successful closing of the merger and the subsequent execution and positive outcome of the lonigutamab Phase 3 program. Investors should carefully consider the inherent risks in clinical development, the competitive pressures in the TED landscape, and the uncertainties associated with the merger process as key factors influencing the company's trajectory. The coming months, particularly the expected merger closing in Q2 2025, will be critical in shaping the future of the combined entity and its ability to deliver on the promise of transformative medicines.