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Sangamo BioSciences, Inc. (NASDAQ:SGMO)

Analyst Briefing Conference Call

December 06, 2012, 05:00 pm ET

Executives

Edward Lanphier - President & CEO

Ward Wolff - EVP & CFO

Geoff Nichol - EVP, Research & Development

Philip Gregory - VP, Research & CSO

Analysts

Edward Lanphier

Good evening. Thank you all for coming to the 2012 Sangamo BioSciences’ Analyst Briefing. My name is Edward Lanphier; I am the president and CEO of Sangamo BioSciences and welcome. I am joined this evening by several members of our management team. Ward Wolff, our Chief Financial Officer; Geoff Nichol, our Executive Vice President of Research and Development; Philip Gregory, Vice President of Research and Chief Scientific Officer and Liz Wolffe, our Head of Corporate Communications.

I am also joined by several members of our Board of Directors including Bill Ringo, Chairman of the Board; John Larson, Founding Board Member; Paul Cleveland, Stephen Dilly and Saira Ramasastry are all here as well.

A couple of just housekeeping issues before we begin. First, I would like to ask you all the signs on your table suggest to hold your questions to the end; we are going to go through this in a fairly rapid way, but we love to take questions at the end, so write goes down and hold those till we are finished. Also I would like to ask you all at this point to turn off your cell phones. I don't know that I would be able to cause you to stop texting and emailing, but I would like you to ask you at least turn off the ringers on your cell phone. And lastly, we would like to invite you to join us for a reception following this presentation out on the same floor, but out in the front of the building. So with that let's begin.

This presentation will contain forward-looking statements and I'm actually going to pause on this slide a little more than I normally do when I slide by it in these public presentations because this presentation actually will have quite a bit of forward-looking statements more so than we have ever done and its an exciting opportunity for the team here. We've been looking forward to this for quite a while. But I would refer you to our Forms 10K and 10Q filed with the SEC for risk factors and other issues.

So the agenda is a packed one, one that we’re going to try and go through in about an hour and a half and that’s fairly ambitious, but we hope to have time at the end for questions and I'll come back and go through the contents of the agenda, but let me start with a couple of introductory comments.

First, I think those of you who know the company, know that the thing that really, really differentiates Sangamo is our core technology. Our ability to engineer a naturally occurring class of proteins, zinc finger proteins in a way that we can cause them to target exactly the DNA sequence we want and then use that to drive biology at the DNA level and that is the fundamental differentiator for Sangamo than any other company and any other technology platform.

We can use this in many, many ways and I'll talk about that, but the real focus for this company and what we're going to talk about tonight is to develop this as a novel class of human therapy and actually a novel way of treating diseases, not just treating them, but actually moving towards cures and much of that is going to be the focus of our discussion tonight.

We've also been very successful in leveraging this technology in the areas outside of human healthcare and I am going to look forward to giving you an update on some of that in my introductory comments, but that business model has given us the ability to access capital in a non-dilutive way and keep a modest burn rate and at the end of this presentation today, we’ll actually overlay the objectives that we're going to talk about with our financial model. And lastly but very, very importantly we absolutely dominate the intellectual property in this area.

So let me come back and talk a little bit about the applications of this technology platform. And if you go around starting on the right, research tools, this is a technology, because it targets DNA, allows us to permanently engineer genomes, and as is driven the creation of novel trends, generic models, engineered cell lines and for protein production and we will come back and talk about that with our Sigma relationship. It also can be directly applied in plants and I am looking forward to giving you an update on our Dow AgroSciences collaboration.

But as I mentioned before, by targeting the DNA and actually being able to change DNA sequences in a permanent way we hope to revolutionize the way medicine is practiced, instead of looking at treatments we are hoping to look at cures and that’s really the basis of what we are going to be talking about tonight.

So let me talk about how we monetize this ability to target and apply this technology in so many areas and I will start at the bottom. Our collaboration with Dow AgroSciences started in 2008; it’s been a very productive one, but it hasn’t been very visible to the Street. Dow AgroSciences is a subsidiary of Dow Chemicals and so it really doesn’t get the visibility, but we have recently had a conversation with them and I am very, very pleased to give you a couple of milestones that’s been accomplished by them.

First, Dow has really invested in this and established the zinc finger nuclease technology not only scientifically, but from a regulatory perspective as the gold standard for engineering plant genomes. Dow has now modified over 20 ergonomically significant genes in numerous crops species. They have done over a dozen sub-licenses of our technology; remember the structure of our Dow deal gives them the rights not only to use this internally which they are doing, but also they are distributor for the technology across the plain Ag space and so they have done sub-licenses ranging from tomatoes to Algae biofuels to potatoes to trees to canola to and the list goes on and on and so they have been very successful in monetizing it. They filed over 20 patents since 2009 in the plant space using and incorporating the zinc finger nuclease.

So perhaps from my perspective, one of the most exciting and important developments they have done is they have been enable to get from USDA a determination that zinc finger based knockout in plants because of the specificity, those plants would not be regulated as a genetic remodified organism. And that is incredible development not only again scientifically, but from a regulatory perspective that establishes this technology going forward, the goal standard for engineering plants. And so our collaborators at Dow while not as visible as they going to become much more visible and as with their permission that I give you that information here.

Sigma has been much more out spoken. They have a major website, we refer to people if you really want to understand our technology go to the Sigma website, it’s spectacular. They have been a great partner and a major partner, they have products in several business units and they are in the research reagents space custom based reagents off the self reagents targeted integration kits in the transgenic animal space. They really now are the absolute dominant player in the area of transgenic rat models, and they have dozens of dozens of transgenic rat models in the neuroscience space, the cardiovascular space, the tox space in immunology and inflammation and so it’s a spectacularly successful group.

And then in the SAFC group where they are using engineered GMP CHO cells, they are CHO cell lines for protein manufacturing; that’s going extremely well. Some of you might remember that we actually had partnerships with Pfizer and Genentech before we did the second agreement with Sigma to bring that protein engineering program into them, and some of those programs are now in manufacturing and making clinical trials materials, so that's matriculating as well, so great relationship there.

And then I think recently our first major therapeutic partnership we announced earlier this year with Shire in the area of hemophilia and in monogenic diseases. The structure 13 million upfront, seven gene targets, four of which are hemophilia target that just named Huntington as their fifth target, two remaining targets and very significant downstream milestones and we will talk in this presentation today about some of the nearer-term ones that are in the IND filing.

And there's 8.5 million in milestones per target for each one of those INDs and one of the most important things, 200 million per target in terms of commercial and regulatory milestones but also tiered escalating double-digit royalties in that agreement.

So a very, very important collaboration and collectively those partnerships have to-date have brought in over a $100 million into the company and very importantly, we retain as we do as hire, very significant downstream value, 10.5% royalties from Sigma, 25% of all the revenues in all the revenues in all of the Dow sublicensing agreements and as you know we actually increased our revenue guidance this year to the $18 million to $20 million range which is quite significant and it creates a really diversified business model.

And one of the things that I want you to think about as we go through this is not just what we are going to talk about in terms of value creation but I also want you to think about risk mitigation and I'll talk about that from a business model perspective as we go forward. But the principal focus for us and where the rubber really hits the road and where our passion is, is in applying this technology in human health and that's really the major Sangamo focus.

The rubber hits the road, on this slide. This is where we are. I'm not going to spend a ton of time going through it just right now because we are going to go through each one of these in detail and give you a sense of the preclinical in this case the preclinical programs, the proof of concept data, the timelines around development of this for INDs and then overlay that with the financial developments.

But and so what we are going to do is really talk about engineering genetic cures. That's really the message that we are trying to communicate tonight. So let me give you a sense of what we are going to do in terms of the agenda.

Philip is going to review for you the technology platform in some detail. Philip and Geoff and I will talk a little bit about the critical factors that really go into selection of therapeutic targets and how we view those and what the critical factors are and that section Philip is going to talk to you about what I think is one of the most innovative and now most important developments in any area of biotechnology today.

And that's in Vivo Protein production platform and you’ll be hearing an awful lot about that tonight and you will be hearing more about it on Monday at Ash when our collaborator Kathy High presents this data on Monday afternoon.

We will then turn to our clinical programs and talk about and update you on HIV. We will spend a majority of the time talking about the rationale and timing around our preclinical programs and particularly in the context of monogenic diseases.

And then lastly, Ward is going to take all of these activities that we've talked about and overlay our financial model on top of that and give you cash guidance or cash directional guidance over the next three years.

So, this is a big departure for us in terms of really looking forward but it’s the right time for us to do that. And so now being able to hold myself back let me tell you what we are going to tell you and I'll tell you what we told you at the end.

So first, I think it’s for me but I hope you’ll conclude at the end. This platform is amazingly robust. It can do things that nobody else or nothing else can do. And the real goal that we will measure our success around is that if we can change the way medicine is practiced in terms of actually engineering genetic cures. And you are going to see several examples of exactly how we are going to go about doing that.

This is where we will talk about the things we are doing. We will update you on SB-509, SB-728-T where we are in terms of the clinical developments and the data coming out on the Phase 2 programs and Geoff will talk about where we are in terms of data presentations.

As I mentioned, we're going to really go through the preclinical programs in detail and introduce and discuss in some length this in Vivo Protein replacement platform. It's a very novel, very powerful way of actually being disruptive for all of the major protein therapeutics approaching replacement therapies.

And lastly, we will also go through our Huntington’s program and talk to you about where we are in the sickle cell anemia program, so all of those will be updated. Collectively, what we want to conclude, well by this time next year, we could have a Phase 3 ready asset in terms of our HIV program and our goal by the end of 2015 is to have seven new INDs.

The enormously ambitious objective but we're going to go through our goals and the rationale for that and we're going to be able to accomplish this given our business model with ending 2015 with between $40 million and $45 million in cash and that assumes no additional partnerships, no additional financing and no additional grants.

So with the cash and with the partnerships we have, we're going to be able to add enormous value and keep a very, very modest burn rate. So I also ask you to think a little bit about this strategy and the context not only value creation but also in terms of risk mitigation.

And again I will summarize this in more detail at the end but if you look at our business model, both from a partnership perspective and a proprietary product perspective, we balance that, we go forward in a balanced way.

We're also looking at therapeutic products across different disease targets, across different delivery platforms, both on in Vivo, ex-Vivo basis that also creates value that diversifies risk.

We're also very interested in looking at very well validated gene targets where there is an unambiguous correlation between that and there are many, many of those genes and we will talk to you about what kind of targets make sense for us.

And lastly, because of our balance sheet strength and because of the business model, we actually mitigated great deal of risk and can had a lot of value while we are doing that. So, we will come back to this but these are some of the key takeaways that I hope you will focus on as we go through the presentation.

So with that said, I would like to turn the presentation over to Philip to talk to you about our therapeutic platform and therapeutic applications.

Philip Gregory

Thanks Edward. So, what I would like to do today is to introduce our ZFP therapeutic technology platform and to do that what I would like to start with as a goal that Edward introduced to you which is the genetic engineering of cures in patients with untreated medical needs.

And so to put that in perspective, if you take a disease like hemophilia B, the problem lies in the protein. In the bottom right hand corner of the slide, you can see that there is a protein there that could be mutated or absent in disease and hemophilia B is the absence of the [Factor IX] protein.

But actually it’s not the protein that’s really the problem here, it’s actually the DNA that encodes that protein and the DNA that encodes the instruction to tell users to create this particular entity and the mutation that cause the disease lie in these DNA segments called genes.

The genes are expressed to create the Factor IX protein in this example, through this process is a transcription and translation. And so when we think about correcting a disease, we think about correcting that disease at the DNA level and that requires us to have a technology that can function at a single gene level, single gene specificity within the context of the 46 or so chromosomes and over 20,000 genes that exist in the human genome.

And so we require technology to consumption with its exclusive specificity. So I am going to show is A technology, I think the only technology that can achieve that degree of specificity and retain the potency required to achieve genetic corrections of monogenic diseases.

So that technology is based on natural class of DNA binding protein. It’s called a Zinc Finger protein, that’s the most abundant type of DNA binding protein found in humans. In fact, if you (inaudible) the analogy it’s much like the antibody is the general solution to binding, peptides or proteins. In my view, the Zinc Finger is the general solution for protein that binds the DNA.

The crystal structure of Zinc Finger has been solved and so we know exactly which amino acid positions serve to change the DNA binding specificity of each individual finger and that enables us to engineer individual Zinc Fingers to bind just specific DNA sequences.

Very importantly these proteins are also modular in the way that they bind DNAs. The binding of one finger is to refer to approximation independent of any other finger in that same molecule. And so what I want to design the Zinc Finger to bind to an investigative target in size and we start up thinking about this problem at the individual finger level, where one finger has to be tailored by making specific changes to the critical amino acids in that finger to recognize the particular triplets and then I make use of the modularity I described earlier to create for example of two finger unit, they now recognize a six based test side.

And in fact Sangamo’s archived all of these two finger units is what powers our design platform. So we have already built many thousands of two finger units and already pre-characterized them, and that allows us to use them when we want to design a protein to a new size.

So for example, if I want to create a Zinc Finger protein to recognize therefore (inaudible) I can go to our archive and select the three modules necessary to stitch together to fuse together if you will and create a lung protein now six finger proteins that recognizes the (inaudible) and that's important because a longer protein means a longer site. A longer site is rarer within the complex genome and allows us to drive to exquisite specificity. So this demand provides us with the ability to specify a unique address within the human genome. We can do that because we can design towards the sequence what we know is unique. It’s a long enough sequence and we can tailor that protein affinity and specificity to achieve finding only to that site and ignore all off target sites.

So we've also developed a very highly automated method for the assembly of these proteins in which we have high group of methods for the design and assembly of the zinc finger proteins that allows us to then put them through the appropriate functional tests including a lead optimization and ultimately take a final zinc finger protein who wants take them to into clinical studies.

It’s the same automated process that actually underpins all of the other businesses that have been supported by a zinc finger protein platform. So the plant agriculture with that that has been introduced to you as well as all the business units that Sigma are currently using, is all driven, all powered by the same automated platform. So what I hope I have showed you so far is that we have the ability to design zinc finger to essentially any DNA sequence. We have the ability to optimize these proteins to have exquisite specificity for that target site and we have a validated path from the target to a final lead that we can use in clinical study.

So that brings us back to the question of okay I have made a zinc finger protein, how do I drive to a therapeutically relevant outcome. And for this we go back to another key from nature, and that is that we can take the functional demands from natural proteins that carry out for example gene regulations or DNA cleavage and fuse them to the zinc finger protein and in doing so we can have the zinc finger would have specific DNA binding to a region of the genome that you've selected. We can have that zinc finger direct the activity via activation or a pressure event or cutting event to that one location specified by the engineered zinc finger protein.

So the way we think about our technology that is put very simply it’s a tool box. We could look at a particular genetic disease and we could ask where in the genome is the best place to apply our technology to have an impact with that disease and which lever which particular activity do I want to target that location to bring about the appropriate change in gene expression or in the correct of mutation.

So to put it a different way if the top box here is our zinc finger protein DNA finding activity, we could think about our technology in two different ways. On the left hand side there's the possibility of doing gene regulation, so this is the ability to either turn up or turn down the expression of a particular gene and on the right hand side we can go one step further and actually by interacting with the DNA directly we can edit the genome to literally cut a particular mutation out of the genome or introduce corrective DNA to a defined size again specified by that zinc finger protein.

So I'm going to spend the next couple of slides just running through these two pathways. So first on the gene regulation front and so to set the idea very simple, we take a zinc finger protein that's targeted to a promoter, that promoter controls whether the gene is made or not and by loading into that promoter on the right hand side here a transcriptional activation design we can instruct the cell to make more of that genes, make more mRNA, which therefore markets more protein.

By contrast, if I take the same concept, I can load a zinc finger protein in to a promoter or a regulatory region of a gene, but bring instead a transcriptional repression domain as shown in the left hand side of the slide, and in that case, I can shut off gene transcription. That means I shut of the presence of the mRNA. That also means therefore I don’t make any protein, and so this is way of silencing a particular gene and this is the silencing approach that’s actually is going to underpin our Huntington’s disease strategy which I would go through in more detail later in the presentation.

So coming back to the top-end, on the genome editing front where we can literally go in and modify the genome per se, because this is a little bit more complex, I am going to spend a few slides introducing how we go about doing it.

So first things first, we need a gene target. So for example, a gene that we want to either disrupt or correct. So an HIV program for example, this gene would be the CCR5 gene. To create a knockout of that gene, what I first have to do is to design zinc finger protein that recognize the appropriate sequence and we can do that very simply and they must find DNA in the correct orientation and spacing to bring about the dimization of this nuclease domains.

So I have to set this proteins down on DNA. I have to bind the right sequences and have to bind with the right distance and this correct orientation, otherwise there is no cutting. And while that’s more complicated, it does mean that we derive tremendous specificity from this reaction to finding any one of this proteins alone is not sufficient to produce a double-stranded break.

So assuming I’ve got the proteins to bind DNA in the correct orientation spacing, the ZFM cleavage will then occur and that produces a double-strand break. Now that cut, that cut of the genome is what I need to create to generate all of the interesting outcomes that we can drive from this genome editing approach. So the cell has many redundant pathways for the repair of double-strand breaks and depending on which one repairs the break, we could generate different outcomes.

So if I just put the nuclease in and do nothing more than for the nuclease into the cell and allow the cell repair that double-strand break, it will do so using a process code non (inaudible) and joining more NAGJ. This is an error prone process, it’s simply the two ends of the DNA are glued back together again and there is no proof reading to make sure that errors have not occurred at the side of the break. And so this process is inherently mesogenic and will drive to the knockout of the encoded gene, so our CCR5 program for example we’ve targeted the ZFMs to the coding sequence of CCR5 and by running this process we can essentially eliminate CCR5 and the service itself.

We could also use a different repair pathway called the homologus recombination, if we also provide the cell with a second volume and that molecule as a homologous piece of DNA that contains a repair template, the DNA repair template, so the cell can use to instruct it as to how to repair that double-strand break. So in this case the information encoded in the donor DNA so the DNA repaired template is sometimes also called a donor DNA because it donates information the cell uses to repair the double strand break.

The information it literally undergoes a coffer paced reaction just as you might imagine in Microsoft Word, where the information encoded in this repaired template is copied into the genome with specificity being driven at two levels both by where this zinc finger protein has cut and by the homology in the arms of the donor DNA. So there’s two levels of where it is processing (inaudible) specificity to load information specific to the base pay into the genome at that site. And in doing this I can clearly cut out a mutation that’s cause of disease or I can introduce entirely new pieces of DNA that will express a collective protein for example and this is the technology that underpins our hemophilia strategy, which I will describe shortly.

So our genome-editing approach then gives us the two outcomes by being able to design highly specific and destructive Zinc Finger nucleases, we can bring about first genome-editing of by knocking things out and genome-editing by correcting a mutation that’s caused that disease. Importantly in both cases this affect is permanent, we are correcting the genome itself and so the affect on the genome and on the cell is essentially forever, and so this allows us to a singular administration of these reagents create a permanent change that to the genome and therefore a permanent change to the disease.

So what I hope I’ve shown you is that the zinc finger protein technology gives us the ability to carry out these different and unique outcomes that we think are very disruptive in the way to think about how to treat genetic disease. On the left hand side the gene regulations approaches that’s tailoring either the turning up or the turning down of gene expression, on the right hand side the ability to alter the genome itself to either knockout or correct a mutations that are cause of disease.

So to bring back to the goal, we want to use this highly disruptive, highly specific technology to bring about ZFP therapeutics with exclusive specificity, that can drive therapeutic outcomes that permanently alter the course of disease. And what I hope I have shown you is that this technology is the only one that can provide these types of outcomes and really drive this genetic engineering.

And with that introduction technology I hand back over to Edward.

Edward Lanphier

Thanks Philip. So that's our tool box. That's the ability to target and then modify or change biology at the DNA level and Philip talked about our ability to do this in a highly specific way and extremely efficient way, but the expression is alright, so how are you going to use this in terms of therapeutics and what are the kinds of critical criteria that you need to think about or we think about when selecting targets to move forward? And so we will talk a little bit about what is a qualified target, what do we think about have to be the characteristics of a gene that makes sense for us? And then can we apply that tool box that Philip discussed in a way that really can drive a genetic cure? And then lastly and very importantly can we deliver that engineered transcription factor or that engineered zinc finger nuclease to the target tissue for the right duration in order to have the therapeutic effect?

And so let's first talk a little bit about a qualified target. There are really five critical things that we think about. There are a lot of others, but they are going to boil it down the pot. One of the most important is that there is an unambiguous correlation or association with the gene and the disease and by definition that's what monogenic diseases are, that's what a mistake in the factor-eight gene is in hemophilia. That's what a mistake in Gaucher is in terms of Gaucher, but monogenic disease with a correlation, unambiguous correlation to the disease.

The next is there is an unmet need and while there are therapies, the real goal here is to engineer cures to change the lives of these patients, so that they don't have to go in on a bi-weekly basis and get infusions of proteins. But that their own bodies literally make enough of the exact correct protein in a way that they are really cured of that disease. And so is there that need in that disease setting.

Next and again this is what Geoff will talk to you about, are there established delivery platforms. And I want to emphasize that, established delivery platforms that can be applied to deliver this in a way that we absolutely know that that's an element of formulation really that can be applied to this area. Also ideally we would like to sail fast. We would like to know early on in terms of both animal studies and within in human clinical trials that POC is highly predictive of an ultimate therapeutic outcome and in monogenic diseases and protein replacement you can do exactly that.

And lastly there is a significant value to the patient, there is a significant value to the payers in terms of how they value this and therefore there is significant value to Sangamo in developing that. So that's how we think about qualified targets and if you overlay this criteria with the targets we are currently pursuing, I think you will see that they fit these areas; CCR5, unambiguous biological correlation in terms of HIV entry into T-cells. Hemophilia, again unambiguous correlation and the ultimate value of replacing these targets or replacing these products with engineered genetic cure. So that's the first element of thinking about the kinds of critical factors that go into a target selection. The next issue is product strategy. Do we have a toolbox from what Philip described that can actually drive the sort of clinical outcomes that will create a cure for these diseases. Philip?

Philip Gregory

Thanks Edward. So what I'm going to try and describe to you today is what I believe to be an extremely exciting application of our genome editing technology. So this takes this highly disruptive technology platform that I described that allows us to carry out targeted and permanent genome editing but applies it to what we’ve called an In Vivo protein replacement platform and I’ll describe what that means and how we intend to apply it. But importantly, this is broadly leverage-able. We think this is a way of carrying out a reaction that can treat a vast range of enzyme and protein replacement therapies and so this is all under our goal of engineering genetics cures.

So a little bit of a background first. So in monogenic disease such as hemophilia B, Factor IX mutation, we start out in our gene correction approach by targeting the endogenous gene and coding Factor IX and that’s what showed here, the promoter here of the Factor IX gene and so what we first do of course is design zinc finger protein to recognize that specific mutation in that gene and so the zinc fingers are designed to bind early in that particular gene. They carry out the reaction described as double strand break and that stimulates this process of repair allowing to efficiently takes the information from a DNA re-pattern plate that contains the corrective Factor IX information and in doing so repair and reconstitute the Factor IX gene and therefore repair and reconstitute the expression of wild type normal Factor IX protein.

So that’s been the path for how to do a single gene that’s mutated in disease and design a zinc finger protein to specifically target that specific gene; and we've done that very efficiently. So these are three different examples and all published in Nature. The first is with, X-SCID, blood disease which we demonstrated highly efficient modification in hematopoietic stem cells.

The second, really highlighted the specificity of these approaches and which we targeted the outer one in (inaudible) locus and actually induced stem cells and demonstrated that just one change happen to most stem cells the change directed by the zinc finger nucleases. And at the bottom, we have also been able to demonstrate In Vivo genome editing to restore hemophilia in a mouse model of disease. And so this is exactly what describes you this gene correction approach targeting the Factor IX gene.

But we asked ourselves could we go one step further than doing this one gene at a time and the technology is very powerful that can certainly do that but wouldn’t it be great if we could find a way of leveraging one locus to be able to produce every protein we could think off that will be useful in protein replacement. So what I am going to describe is our approach to that problem and so this is the problem we set ourselves can be leveraged genome editing to make it In Vivo protein replacement platform.

So conceptually then let’s just start at the top, let’s start with a naturally highly expressed gene. So just as I just described for the Factor IX locus, a very highly expressed gene look exactly the same; it’s just that the promotion of that gene is very, very powerful, that means the gene makes a lot of mRNA and it makes a lot of protein. But I just described you a technology that we can place the double strand break anywhere on the genome I want and that double strand break can also be placed in a highly active gene.

And so we can come up with the expression of that gene by selecting the zinc finger nuclease as the target early in this super express locus. Again, we can use is does it repair template that can now include any therapeutic gene that you are interested in expressing from that locus and if we successfully target that we will have now the expression of this therapeutic gene driven by the super storm promoter that exists and in this case in the liver and is normally expressed.

So what locus can be choose to bring about this In Vivo protein replacement platform; so I think the properties of this locus are very clear and it would have to be safe to be going to this locus, it has to be safe, it should be tissue specifics so that we can achieve the specificity and function that we want and then it also needs to be of courser very highly expressed. And we’ve selected the albumin locus in the liver as our target locus. It has all the properties that we desire; it’s safe to crop a small percentage of the outman expression, it’s highly tissue specific, it’s only in the liver and that is very, very highly expressed, it’s actually the most abundant class of protein found.

To put that in perspective, it produces about 80 grams of albumin per week, which we put it into pounds in a year is about nine pounds of albumin is produced by your body per year. So it’s very clear with that level of expression, I would only need to coop to maybe 1% or less than 1% of the total albumin production rate to achieve a stable permanent therapeutic and protein production that would be now sufficient to take on hemophilia or any other protein replacement or license a disease and any other enzyme replacement that I am thinking about treating.

And so the concept is very simple then, our highly expressed gene is the albumin gene. We designed zinc finger nuclease as the target, the albumin locus. We provide a corrective donor template that encodes which ever therapeutic transgene we wish to express from that locus, and if we ever successful then that newly reconstituted gene expresses whatever therapeutic protein wants, but now under the control of the albumin promoter.

And of course as I described, this approach is agnostic to whatever piece of DNA we include in the repair template. So it could be Factor IX for hemophilia B or Factor VIII for hemophilia A or indeed any of the lysosomal storage diseases enzymes.

So I'm just going to show you a couple of examples of data that we've already generated using the in Vivo Protein Replacement platform. The first is in hemophilia and just to put this in context, the goal in treating hemophilia is to achieve about 5% of the normal levels of hemophilia, that's the red line of the bottom of the slide and that's to-date that's achieved by using protein replacement which is done by regular infusions of the recombinant protein and the associated peaks and of course troughs and the half life of that protein.

We've already published on the use of our technology to correct the endogenous Factor XI locus and that's what showed in the gene locus parts using that process we are able to create 22% over 20% of the wild-type level of Factor XI which of course is corrective in terms of clocking time and of course that's also permanent we've also, we've permanently modify the Factor XI locus.

So on the right hand side what I can show you now is what happens if you use the albumin locus. So this locus is highly expressed. We do run exactly the same process, its exactly the same target DNA if you will, encoding the corrective Factor XI sequence and it just gets exerted into the albumin locus and now we make 66% of the normal Factor XI levels and I should say that for those of you that will be attending Ash on Monday, you will see even higher levels being presented by Kathy High and collaborators.

That's an example in the hemophilia space, what about the lysosomal storage diseases. We've actually done all of the diseases I'm showing you here. We've demonstrated, I'm just picking one here which is MPS-1.

And again on the left hand side, a normal human lever that’s the wild-type (inaudible) show you what will happen, that's a 100% of the normal level, mice of course don’t make any human MPS-1 and so they have background levels but if I include a donor DNA and take appropriate corrective [cDNA] for this lysosomal storage disease and the appropriate Zinc Finger Nuclease in this case the albumin Zinc Finger Nuclease, we can generate over 200% at the levels of this particular enzyme.

But again, it’s clearly not restricted to this particular lysosomal storage disease. It could be applied to any protein replacement enzyme that we wish to put into this locus and have controlled and expressed by the strong promoter, the albumin promoter in Vivo Protein Replacement platform.

So I've shown you examples from hemophilia and from lysosomal storage diseases but of course there are many others including many of the metabolic diseases that are also potentially corrected by expression of proteins in the liver.

So what I hope I have shown you is product strategy that we've developed. Take this highly disruptive technology platform with the ability to target a specific location in the human genome specifically the albumin locus to achieve permanent genome editing.

This creates an In Vivo Protein production platform which we can leverage across a number of different replacement and enzyme replacement strategies and we think really establishes essentially a pipeline of products within this particular platform.

And so with that, I'm going to hand over to Geoff who is going to talk to you about some of the next stage of development.

Geoff Nichol

Thanks Philip. You can have the best target in the world and you can have the best product strategy in the world but if you can't deliver the product then you cannot create a useful therapeutic.

What I would like to do is talk about delivery technology at Sangamo. The key question here is what's the best method on that is going to be determined by whether you are going ex-Vivo or In Vivo with your delivery approach? If you are going In Vivo, what's your route of administration?

We're obviously aiming to achieve the most efficient delivery that we positively can and the longest duration of therapeutic effect, and for our technology that can be due to the duration of expression of the delivery the fact that use but with our technology, we add to that the fact that when we alter the gene, we can do that permanently. So our technology offers the advantage of permanent correction of genetic defect.

At Sangamo, we have enormous expertise in ex-Vivo, delivery approaches. I am not going to talk about those just yet but I would like to do is concentrate on In Vivo delivery which we need for our protein replacement platform and here the vector of choice is the adeno-associated virus.

This has an enormous clinical and preclinical background. It's being used in dozens of clinical trials. It's being used in dozens of clinical trials in hundreds of patients and has proven safe and efficacious. It's been delivered to multiple tissues. It is inexpensive to manufacture at both clinical and commercial scale and they are well established regulatory paths through IND, through clinical development and with the recent approval of Glybera actually onto the market.

We use these vectors in two ways in our portfolio. The first which we use for the protein replacement platform is to in fact provide systemic delivery of the AAV vector. Here we take the pair of ZFNs and the corrective gene template that Philips told you about we encode those into the DNA of AAV vectors which we can manufacture. They are administered intravenously. They traffic the AAV viruses traffic to the liver internalize in the hepatocytes and permanently correct the gene and those permanently corrected hepatocytes then for their lifetime and for their progenies lifetime and for their progenies’ progenies life time they will secrete the corrected protein forming a basis for our protein replacement approach.

A second way that we can use these vectors is by local tissue delivery and this is the approach that we have taken in the Huntington program. Here we have ZFP Transcription Factor Repressor which Philip will talk about more later.

We can encode that into the DNA of the AAV vectors, these are then delivered locally by MRI-guided injection into the parts of the brain around the (inaudible) which are most affected by Huntington disease they then internalize in the neurons and they repress the mutant Huntington allele in those neurons and shutdown the production of the toxic mutant Huntington protein which causes the disease.

We have obtained broad worldwide licenses to use AAV using the serotypes five and six as well as the enormously scalable back into virus production system which provides us with the portfolio of AAVs to address all the targets in our current portfolio and the range of targets in virtually every target that we can imagine in a wide range of future applications.

So I hope in summary, I have demonstrated that we have In Vivo delivery platform available to us which is affective, safe, proven and for which we have freedom to operate. Finish here the sort of the summary of the different success factors that we need to use. Edward spoken about how we select the most qualified targets, Philip has spoken to the product strategy that we can use, and I talked about delivery.

When I left [Medarex] and joined Sangamo about 18 months ago. Edward sat me and said Geoff you have got four months to come up with a near-term portfolio that we can execute on and I want that portfolio to be as wide as it can possibly be, as wide as it can possibly be given the resources that we have.

I wanted to address some maximum amount of unmet medical need. I want to do that as quickly as we possibly can. And I wanted to be maximally diversified against the risk of the qualified targets, the risks of the different product strategies that we have and against the risks of different delivery approaches and he said that should be easy, and I would like to tell you a little bit of how we actually went about doing that, how we spent that four months going through the approaches that we've outlined here to come out with the current portfolio. Essentially we diversified first on delivery approaches, and we divided the universe of diseases that we had into four buckets.

The first in-vivo delivery by the systemic root and the second in-vivo delivery by the direct tissue route, and thirdly ex-vivo modification of non-stem cells, and fourthly ex-vivo modification of stem cells, and we looked at all the possible diseases, indications and targets in each of those four buckets and picked the best one from each to form the current portfolio, and I'll talk more about why we did that but essentially it comes down to the adaptation of the old adage. If you are in a hold and you are digging and the hole is filling with oil then keep digging and so we chose these lead indications to essentially put our technology to the test and give us the opportunity to expand in each of those to explore success and the portfolio you see there hemophilia lysosomal storage diseases, Huntington, T-cells and HIV and stem cells and hemoglobinopathy and AIDS lymphoma. The current portfolio just the beginning.

I would like to move on with Philip to talk about that portfolio. I'm going to start with our most advanced program which is SB-728 for HIV and AIDS. This uses a the sort of knock approach that Philip has described ex-vivo in T-cells, and I'm being provocative or looking at things in a slightly different way. You could say that HIV infection is one of the most prevalent genetic diseases that there is, because it’s really not possible to get the disease started unless you express CCR5 on your CD4 cells. CCR5 is a major company-receptor for entry. If you express no CCR5 on your CD4 cells you essentially prevent the beginning of the infection because the virus can't get in and can't stop destroying your CD4 cells.

The rare individuals lucky enough to be homozygous for CCR5 delta-32 mutation, which leads to zero expression in CCR5 on the cell surface, resistant to HIV infection. The link patient who received a stem cell transplant which was homozygous for the CCR5 delta-32 mutation has been free of disease since receiving that transplant over four years ago and the beauty of our technology is that we can reproduce. We can knock out CCR5 in any patient and reproduce that protective phenotypes, and in a sense provide a protected immune system inside an immune system for anyone with HIV infection with a goal of functional cure and it works like this. We (inaudible) the cells from the patient, we enrich CD4s, we use our magic technology to knock out CCR5 in a large number of those CD4 cells. We expand that group and I'll talk a little more about what that expansion does. We try and preserve a convenient time. We can complete the treatment by infusing the patient’s own cells back and have them on graft.

We've done this to around about 50 patients so far the cells in graft and are very long lived and traffic and seem to behave in every way like active CD4 cells. The infusions are well tolerated. There is a very substantial increase in the overall total CD4 count. In addition to the engrafted cell, the total CD4 count, which is very long lasting, and in our exploratory phase I program, we look at the effect of the therapy during a brief interruption, treatment interruption of heart therapy, and in that exploratory program, we found a statistically significant correlation between the level of engraftment of CD4 cells that had both CCR5 (inaudible) knocked out, including the patient who had the highest level of engraftment becoming aviremic by the end of the treatment interruption.

This to me provided a very strong basis for our Phase II confirmatory proof-of-concept strategy which is to get the biallelic engraftment rate as high as possible, and we are doing that in two ways. The first which is embodied in our CCR5 delta-32 heterozygote Phase II study is to take these heterozygote, people who have one [LEO] already knocked out as a head start and our therapy works twice as well in them as it does in the rest of us.

In order to deal with the rest of us, we have a second approach to enhancing engraftment and that is to copy what the people in adopted T-cell treatments for cancer do and they treat with cyclophosphamide or cytoxan they give a short lymphopenic dose of cyclophosphamide just before they put the T-cells in and they can often get a logs of increase of engraftment of those cells and we know that cytoxan can be given safely in lymphopenic doses to HIV patients, and so we have those escalating trial using cytoxan to enhance engraftment currently ongoing.

The end point of those studies is a prolonged treatment interruption during which time we evaluate the effect on viral load. While those studies are enrolling, we have continued to evaluate primarily in neurological data on the patients who were in our Phase I program, and we presented that data at ICAC in September of this year to great scientific interest. Again, we described the way that we engraft these cells, they have been around in our patients for over two years now and still continue to be active and appear to be trafficking. The approach is safe and in patients who have even deficient CD4 on heart given our therapy over 70% of those patients are actually have their CD4 counts raised so much by the therapy that it remains normal a year after the therapy sufficiently higher so that if they had that level of CD4 count, they would not qualify for heart treatment in the first place.

So the most important and exciting part of this was the demonstration that the cells we put back in as well as the CD4 cells that seem to expand within the patient following the therapy consists primarily of these central and transitional memory cells. These are CD4 cells that we all have, but remember viral infections that we’ve had in the past and often we suffered heavily from those viral infection the first time around. The second time around they are ready and those memory cells, spot the virus and move immediately into actions and essentially prevent the virus from ever taking hold. And if ever we needed the right cell to be this sort of immune system, perfected immune system with in an immune system, its just this very cells.

So certainly necessary to have a large number of memory cells in the engrafted cells that we return to the patient, and let's see the phase 2 data to see whether it’s going to be sufficient to make a different to viral load. So in summary this is a very exciting product. I mentioned the presentation at CROI, this is the fourth year in a row that we have been asked to present this data orally at CROI which is maybe not a record but certainly this is highly unusual. So this is an exciting program the antiviral and immunological results are exciting and interesting. We are going to be presenting yet more data at CROI in March upcoming next year. We have our two phase 2 studies which are both on track to deliver preliminary data in the middle of next year and full data by the end of the year.

In addition you know there's more, in addition we have a what you could call a back up or a follow-up program where we use the same technology to change stem cells, to modify hematopoietic stem cells and the idea here is very similar to the CD4 cells where we can in fact increase, mobilize, purify CD34 hematopoietic stem cells, we can then disrupt CCR5 in the stem cells and then be in a position to infuse back those stem cells after mild oblation and the plan here is to use it to treat lymphoma, but any of you who are aware of the Berlin patient will realize this is exactly what we've done for the Berlin patient. He was treated with homozygous Delta-32 to treat his lymphoma and he has been cured of it ever since, so essentially this provides a follow-up or a backup if you like to a CD4 program as I see it for potentially a functional cure for HIV infection. I would like to point out that this is a program funded by the California Institute for Regenerative Medicine and in collaboration with the City of Hope and the University of Southern California.

In terms of timings, we anticipate that we will be presenting preliminary data first half of next year on our Phase 2 CD4 program as well as full data by the end of the year. We have successfully modified stem cells to a very high level and we have successfully engrafted those. So we think we are on the downhill journey to complete toxicology and other studies to have an IND for our stem cell program in 2014.

Moving on to our preclinical therapeutic program, let's talk first about hemophilia. This is a program with our partner Shire. It is supported by Shire Pharmaceuticals. It uses a therapeutic approach where we essentially correct the gene in the liver using In Vivo systemic delivery. As I am sure you will know hemophilia is caused by in the case of hemophilia A mutation in factor eight, hemophilia B factor nine, on the X chromosome and with the disease deficient in the respective clotting factors causes spontaneous and traumatic bleed in the absence of chronic life time replacement therapy; it causes enormous illness and usually death in childhood or early adulthood.

We have developed as Philip has described two ways to win here, one is to correct at the endogenous locus, the other is to correct at the albumin locus as part of our protein replacement platform and we would then transform the current therapy which is frequent life-long expensive hugely expensive infusions of replacement clotting factor with the situation that you and I have where we are generating for our entire lifetime sufficient clotting factor from our own livers and we would essentially transform the therapy and cure the disease with a single infusion.

And we have data as Philip has described. This is data from (inaudible) group at Children’s Hospital of Philadelphia and it shows in mice that are deficient in Factor IX, if we give them zinc finger nuclease to create the break and we give them a replacement template for a corrected Factor IX, we can see ongoing with 20 weeks and certainly well past that counting for permanent production of about 20% of the normal level and well above the 5% level needed to provide effective therapy. If we can do that at the endogenous locus as Philip has described, we can do way better than that in this case, three times better. But if you have a look at the data that Kathy is going to present on Monday, you will see, even higher levels using the albumin locus and this is the data that we have in hand.

In the case of the correction of the endogenous locus, seeing as we’re well north of the 5% level, we can take the prolonged clotting times and reduce those essentially to normal in these mice and not surprisingly, with even greater production of the corrected clotting factor, we can do exactly the same thing by correcting at the albumin locus. With this proof of concept data, we are working hard and fast with Shire to move this through all of the steps that we need to towards again INDs for hemophilia B and hemophilia A in 2014.

Moving on to lysosomal storage diseases, this is the first of the approaches where we get it right with one disease using our particular approach. We can then start to expand it to other diseases. And this is our own program, it again uses the ZFP approach for correction and In Vivo systemic delivery and as you know these lysosomal storage diseases are the monogenic diseases due to absent or defective enzymes which cause progressive tissue damage and often very significant developmental delay at the beginning of life and usually having terrible and profound clinical affect during childhood and early life. They are treated with again lifelong frequent infusions of enzyme replacement therapy which is staggeringly expensive and extremely disruptive; we will come back to that.

And this was a situation where we can use the albumin locus to provide essentially potentially the same effect as this enzyme replacement therapy using we estimated sat down and said how much do we need of this? So essentially exposed the patient to the same amount as they are going to get from the enzyme replacement therapy and for most of these diseases like gaucher fabry hunter disease we only need about one-tenth of 1% of the daily production of albumin in order to reproduce that similar exposure to the therapeutic enzyme. So we can take the current standard of care which is, imagine yourself, you go in for four to five hours every two weeks for the rest of your life in order to get any kind of therapy from this at a cost of between $200,000 and $400,000 per year and contrast that with what we maybe able to achieve which is essentially a single therapy at the early stage in life, that the only one that you will ever need that will then lead to a life time production of what is likely to be replacing millions and millions of dollars where as of enzyme replacement therapy.

When we thought about this idea, we already had our data from (inaudible) showing that we could correct albumin locus for Factor IX and said well how can we rapidly show that we can do the same thing in these diseases and Philips described that, but essentially what we did is we took wild type mice, quickest experiment we could do, made ZFNs for the albumin locus in mice and gave boost to the mice that ZFN plus the corrective template for gaucher in one group, fabry in another group MPS1 and MPS2 in the remaining two groups. And we gave them the normal human template, we had assays that could detect the human rather than the mouse which obviously is the normal mouse are expressing their own enzymes, the human enzymes is efficiently different that we can detect them and we assay them in the liver and Philips shown you this data for disease where essentially in three mice, we are well off of the production of at a normal human liver would produce in the livers on these wild type mice, but we haven't quantitative it but, I can show you the western blocks and we get exactly the same, a sort of super physiological production in the livers of mice for gaucher, fabry and hunter.

So we sort of four for four at this point, and very, very excited about the potential for this platform. Again, we are in a position to start moving towards an IND and this would follow our hemophilia INDs and we estimate and anticipate that those would be INDs that we will submit in 2015.

I would like now to hand over to Philip to show our different strategy with Huntington.

Philip Gregory

Thanks Geoff. So for the Huntington’s approach this is once again a different strategy and both in terms of what's particularly in terms of how the technology is being applied. So Geoff has been talking to you about so far is largely used our nuclease technology, but for Huntington disease we've selected our gene repression technologies.

So this is the ability to shut off the expression of the targeted gene and this also uses an In Vivo direct tissue administration. Geoff introduced the vectors for you 85 to 86. These are the ideal vectors for this type of brain and direct brain infusion and also support the other programs that we are introducing today.

So what causes Huntington’s disease is another classical monogenic disease. It’s caused by mutations in a protein called Huntington and you can see here the devastating consequences of expressing just one copy of this mutant gene. You can see that the neuronal loss that occurs in the brain and from a patient who has Huntington disease.

In terms of presentation of this neuronal loss it causes a movement disorder of (inaudible), it causes muscle weakness and also decline that ultimately leads to an untimely death.

To-date, they are absolutely no treatments for Huntington disease. It’s a classical unmet medical need. So how can we use Zinc Finger Proteins to treat Huntington’s disease? Well, there are mouse models that gave us a very significant clue and that is that in mouse models of Huntington’s disease, if you shut off the expression of the mutant gene then not only do you prevent the progression of disease but you actually reverse the [enzymes].

So I suggest that if one could simply dial down the expression of the mutant gene leaving the wild-type gene alone that would be a way of reversing the symptoms of disease and so this has led to a field to search for a gene repression strategies that can essentially shut off the expression of the mutant gene and we think we have the ideal one because the mutation exists at the DNA level.

This is a triplet expansion disease that exists at the DNA level and we can develop a Zinc Finger Protein yardstick if you will that can determine the length of the CH you repeat and selectively repress just the mutant allele and I will show you how we do that.

So I mentioned that Huntington’s disease is caused as a monogenic disease and drilling down a little bit its caused by an expansion of subsequent triplet the CAG triplet in the first exon of this gene.

So subjects who have repeat lengths of approximately 20 CAG repeats are perfectly normal and however if the repeat length grows to be 35 or more and then that protein, the protein made that has a longer CAG repeat is toxic and causes the (inaudible) that caused the disease.

And so the ideal thing would be to suppress the mutant copy of this gene and in fact even more importantly because we know that mice that carrier complete knockout of Huntington protein actually die during development, we definitely don't want to touch that wild-type allele, we need something that is highly selective, only suppressing the mutant allele and leaving the expression of the wild-type allele.

Okay, so how do we do that? Well, we have designed Zinc Finger Proteins that have been tailored in terms of their affinity and specificity such that they are effectively meticulously yardsticks. They will not interact with the shorter wild-type allele but they do bind tightly to the allele bringing this repression activity to only to that mutant allele and suppressing that mutant allele very effectively.

So I am going to show you just a little bit of data that we presented recently at this year’s Science for Neuroscience presentation, demonstrating that we made a Zinc Finger Protein that can suppress the Huntington gene and very importantly, selectively suppress only the mutant allele.

So what I am showing you here is a measure of the levels of the messenger RNA encoding Huntington and we have an assay that allows us to measure either the amount of Huntington expressed in the wild-type allele, wild-type copy of the gene or it read the amount of expression coming from the mutant allele.

So in the first column which is a healthy source and a healthy donor, both alleles are normal lengths and so nothing happened. The red and blue bars are exactly the same height.

However, in four different patient lines that contain repeat lengths of anywhere from 70 down to 44 repeats, what we can see is that our 90% suppression of the mRNA and coding only the mutant protein while the wild-type protein levels remain completely consistent throughout.

So we have a protein that has exactly the biological activity we're looking for suppression of the mutant allele but not a suppression of the wild-type allele.

So very excited about this approach. It’s essentially the sort of a Holy Grail for Huntington’s disease which has been selective modulation of just the mutant protein, and as I’ve said we have selected this as our strategy in animal models now looking at how our different lead candidates behave in these (inaudible) Huntington’s disease and we are in volume in [primate] studies are scaling up their appropriate delivery technologies.

The next steps to IND will include the scale of manufacturing obviously the classical toxicology studies necessary and then we have to submit of course the appropriate IND and to put this on the timeline that Geoff has already introduced to you, we think if things go well we can have an IND supporting our Huntington program again in 2015.

And so with that I would like to hand over to Geoff who will talk to you about our seventh program and the hemoglobinopathy.

Geoff Nichol

Thanks Philip. The hemoglobinopathy approach that we have been taking builds on the ZFP approach which we are using actually for HIV program whereby we can as well as the correction program, so we have actually got two approaches both to knockout or to replace at effective gene and that uses an ex-Vivo delivery approach in stem cells as we are doing with our HIV program.

The hemoglobionopathies we are talking about a sickle cell disease and beta-thalassemia both of them are due to the case of sickle cell and absolutely always the same mutation in case of beta-thalassemia, a wide range of mutations that all affect the beta-globin gene that we all need to make normal hemoglobin.

In sickle cell disease the effect is to cause cycling of cells when the oxygen tension (inaudible) this causes painful crisis as well as veno-occlusive syndromes such as stroke which are highly debilitating and usually fatal in childhood without adequate supportive therapy and beta-thalassemia the effect are so severe that patient simply cannot make enough hemoglobin and will die of anemia due to poor production and rapid destruction of the red cells and they are dependent throughout their lives on constant transfusions of red cells which then lead to iron overload and profound tissue damage for which they then need even more therapy.

Our approach is to try to essentially cure that disease; the standard of care, the curative standard of cure is a matched stem cell transplant usually has to be a related donor not every patient can receive that, we are going to that in more detail in a moment.

We have a bunch of ways to win here, with sickle cell because it’s a single mutation, we can go in the right at the locus and this is the complicated locus, just putting in a correction by random integration for example is not so great because it’s a locus controlled geographically from a distance away, so going right where it actually happens is crucially important and we could go and correct the sickle cell locus.

Also turns out that a form of globin which we all have when we are born called fetal globin which is made up half of its made up instead of being beta-globin its made of gamma globin and gamma globin is normally switched off soon after we are born, turns out that gamma globin can stand in for beta-globin in both of these diseases and in rare mutations where that gamma globulin production has not switched off in childhood and if you have sickle cell disease or thalassemia, you simply don't get the disease because this gamma globulin protects you fully from the effect of the disease, and it is possible to find, identify and knock out those known genetic pathways for switching off the gamma globulin gene and switching it back on again and providing stem cells that actually would resemble the fetal globulin that we have when we are first born and would essentially cure the disease which is a second approach that we can take.

That takes the current standard of care of genetic transplant which is tough to find a match. It usually has to be a sibling or certainly a related match donor only available maximum to 20% of patients. Fully mild or ablative conditioning regiment, and then the cells that are put in because its not always a perfect match, they can create very morbidity producing graph versus host disease. We can in contrast take the patient’s own stem cells, change them appropriately and use the same procedure and probably with a less aggressive mild or ablative regiment and return them to cure the disease without any risk of graph versus host disease.

So essentially we can have the standard of care therapy to be available to in principal 100% of patients using their own cells. We've made great progress on this program. Using one of the knockout approaches we are achieving at clinical scale knockout rates greatly exceeding 50% which is clearly enough to carry forward. We haven't grafted those cells into SCID mice and have engrafted and shown the continued expression of the knockouts. We haven't named the target but it’s a very, very hard target in this area. And we believe we are within an ace of being able to pull the trigger and move forward to take this to IND, and we would anticipate that that IND could be submitted again one of the earlier INDs in 2014. So that's our near term portfolio.

As I mentioned before in each of these buckets, if we hit it with success in each and any of these buckets, we've got a bunch of other things that we can exploit along the way. As you've seen we hit positive results with albumin in hemophilia and then we've translated that potentially to lysosomal storage diseases and we can do the same thing with a positive hit in each of the other areas, direct tissue injection. We don't have to go to brain. We can go to other brain diseases but we can go to heart. We can go to skin. We can go to lung. We can go to eye or we can go to muscle and the list continues.

If as we move forward with our HIV program, we don't have to modify just the CD4 cells, we can modify CD8 cells in the setting of cancer. We can knock out crucial immune control proteins in the CD8 cells that are used in adoptive treatment of cancer and greatly enhance their effect. So we have back up programs in that area and likewise stem cells once we have an effective stem cell therapy its then easier and much more economically effective to go for those number of small number of diseases like XSCID which are devastating and actually be able to develop treatment for those as well.

So hit it in one area and then we can just keep digging in that area and propel a broader and broader portfolio. We've made sure that we've provided some money in the budget to continue to renew this pipeline going forward. So I think, I would like to say that we have come up with a portfolio that is as wide as our resources allow. I know that we're just working day and night to move all of these programs forward. I think we are addressing areas of enormous unmet medical and economic need and addressing those very smartly. I think we're doing this in a very timely fashion. And when we look at the data that we already produced, we're both reducing risk and diversifying risk across a wide portfolio in terms of target, in terms of the way we use the technology, different ways we can use the technology as well as the approach that we would take to delivery.

And with that I rest my case. I just spend the money. I appeal to the CFO to find it for me and so I am going to turn it over to Ward to talk to you about how this works out financially.

Ward Wolff

Thanks very much Geoff and good to see everybody. Clearly, you heard an impressive portfolio that Jeff described and what I would like to do is spend a little bit of time and just talk about historically what our business model has meant in terms of ultimate cash in and out of the company. As Edward noted in his earlier remarks, we do have a unique business model that’s really been supplemented by significant partnership arrangements that have really given us the ability to have a very modest burn. In this slide the red bars at the bottom is sort of our net cash operating burn and that includes revenues from various collaborations and grants and activity and what not as well as the expense structure we have.

So as you can see that operating burn has been in the 20 to 25 million range. In addition, in three of the last five years we have had partnership either initiations or expansions of existing partnership agreements those are in the blue bars. So in 2008 Dow AgroSciences had exercised their commercial license that had bought in 6 million. In 2009 we expanded our relationship with Sigma and that brought in 20 million and just this year in 2012 as you have heard we had upfront payment from shy of 13 million. So that’s been a nice complement.

In addition, we have had the opportunity where appropriate to do modest equity raises, and we did that in the green bars here in 2009 and 2011. We do have a very vanilla balance sheet about 53 million shares outstanding, no debt, no converts and what not. So it’s a very straight forward sort of financial profile. But this has given us over this five year period the ability to end each year in the 65 million to 85 million range and we have guided that we are going to end this year at over 75 million with respectively a net overall burn of under 10 million in 2012. So I just wanted to kind of give you that historical philosophy as how we have operated the company and how we funded the company.

This is a slide you have seen several times, but it does point out just the volume of activity we are working on, and just wanted to point out that in the three INDs that referred to this that the Shire targets that we would have cumulative milestone payments there of about 25 million should we able to take this to the IND. So that is clearly a helpful offset again from a cash flow standpoint.

In terms of how we are modeling the company going forward, what we try to do is model the full portfolios that you’ve heard Jeff and Philip described. We’ve got essentially seven programs we are funding and in terms of the research and preclinical activities, three are funded by Shire, three are on our own and one is funded by the existing grant from [SARM]. In addition we have modeled in a couple of additional programs, we initiated in 2014, 2015.

From a revenue side, we have included the Shire funding and various milestones in the three programs. We’ve also included the ongoing very consistent revenue stream from Dow AgroSciences and Sigma as well as ongoing ramp, so it’s really been four portfolio in the revenue side. The revenue do exclude the research funding for additional programs selected by Shire. They have two more programs available to select, we have not assumed anything there and we have not assumed a new partnerships or any equity financings in the model. On the expense side, we again have included the full internal and external cost for all of these programs.

So what this gives us as I said, we guided in 2012 over $75 million in cash, this slide depicts really sort of the gross revenue in the blue bars and then the gross expenses in the red bars. And this also includes the Shire milestone funding in 2014 and 2015. But I think what's interesting about this slide is that we as you've heard from Geoff and Philip have an incredibly deep portfolio we are working on but really we will be able to do this in a very conservative way from a cash usage standpoint. We will give updated guidance at the JPMorgan Conference in January in San Francisco, but right now we are looking to guide the end of 2013 in the $55 million to $60 million and if we can continue to execute the way we've done so far, this would give us $40 million to $45 million at the end of 2015 which is clearly an interesting model from our standpoint and giving us multiple years to keep funding programs without going to the marketplace and that's something that we are very excited about.

So just to summarize here before turning it back over to Edward, I think the theme here is that we've got sufficient capital to execute this very robust pipeline and we'd still end 2015 with $45 million in cash. This does include Shire funding which has been an important component of the model as well as milestones accumulating over $25 million during that three year period. And we think there's upside as well because I think as a company we've demonstrated that we can do interesting things from a partnership standpoint in expanding existing relationships, but there are some upside here that we are not modeling at this point.

So I just wanted to provide that overview and I'll be happy to answer any questions during Q&A, but I'll turn it back over to Edward for final comments.

Edward Lanphier

Thanks Ward. So that was drinking water out of a fire hydrant. A lot of information, a lot of slides, a lot of information, but hopefully what we've done is we lay out our vision, our strategy for the next several years and so let me come back to where I started on all of this and repeat some of the things that I hope have been reinforced in this presentation.

Our zinc finger toolbox is enormously powerful and very proprietary platform that we are focused on applying in a way that we really believe can change the way medicine is practiced. Instead of looking at treatments, chronic treatments, our goal is to permanently stably insert a gene in a way that sufficient protein is naturally produced in that patient and eliminate the need for exogenous therapy, eliminate the need for exogenous protein delivery. It’s an incredibly ambitious but I think you've seen the derisking data around that as well as the critical path and timelines to moving that forward.

We've done an awful lot of work in the HIV area and as Geoff went through we really have both unprecedented anti-viral data and immunological data to-date. We have two ongoing Phase 2 trials and based upon those data, if successful really puts us in a position to have a Phase 3 ready asset at this time next year. That's a data driven process, but you'll see preliminary data the first half of next year, complete datasets by the end.

For me one of the most interesting platforms in all of biotech right now is this ability to target the albumin locus and to insert at that site any CDNA we want, any gene we want that then gets very significant high levels of expression and secretion from the liver into the blood stream. It’s a platform for addressing and replacing essentially all enzyme replacement therapies or hemophilia in Factor VIII and Factor IX. It's an incredibly powerful, highly leverage-able and from an economic perspective, very disruptive technology and I think it's going to create a lot of value.

We also talked to you about our Huntington’s program. This is an area where we are moving very quickly and believe that this is a space where our technology, given the specificity of gene repression and the ability to use really the preferred vectors for both liver delivery and brain delivery, AV5 and AV6 put us in a position to look at curative outcomes for Huntington’s and as Geoff outlined for you, we already have at clinical scale, in hematapoeitic stem cells, disruption levels greater than 70% in terms of modification and so when we engraft these modified cells, they give exactly the biological phenotype that we expect and compare those with non-modified for generators we engraft those, engraft identically. So there is no difference in the cells except for the single modification we made.

So this is a very rich pipeline and one that as Geoff said, we're working night and day around, but as we move this forward, and if successful, we're in a position to put seven new programs in to the clinic over the next three years and that’s a very, very exciting opportunity. And particularly when you overlay that with the economic model that we have and you look at our historic cash flows and then you overlay that with what we're projecting for 2013, 2014, 2015 and the kinds of revenues that we will see from Sigma, from Dow and then from the Shire milestones, we're going to do all this, we're going to create this value while burning round numbers over three years $30 million. And I think if you look, for me, if you look at broadly biotech investments, I don't know any company that has that kind of platform, that kind of pipeline yet that kind of financial control. So it’s an exciting opportunity for us to roll this out but one of the things I asked you to think about it’s not just from a value creation perspective but also the strategy and the things we have talked about from an investor risk mitigation perspective and Geoff put it perfectly.

We have lots of ways to win here. We don’t have to be right on every single one, but if we are right on one of them, we can drill down in that area and be very successful. So, we have a platform that allows us, a business model allows us to partner in certain areas but it also gives us great leverage of those partnerships to drive therapeutic programs of our own and you see that perfectly in the hemophilia program for albumin and what we are able to drive right behind that in terms of LSDs and other ERTs.

It’s also again go back to Geoff’s point, a diversity of therapeutic development strategies In Vivo to the liver, In Vivo directly to the target tissue, ex-Vivo to differentiate itself CD4, CD8 and ex-Vivo into CD4 or other [IPFDs] rather for (inaudible).

So it’s a highly differentiated and risk mitigating strategy in terms of the therapeutic profile. We also are agnostic to the target, we are not a company that says well we are really passionate about this one target and we are going to live and die based upon the success and validation of that one target. The technology can be applied to any of those and you’ve seen the breadth of our ability to go after those.

And lastly, the balance sheet strength that we have now and the business model that we have established allow us to create this value but during that period of time we are also going to be holding onto the strength of that balance sheet through this development process.

So that’s an awful lot to take in but I can tell you it’s an awfully exciting time at Sangamo and we are very excited about having this opportunity to present this to you. Again, the real goal for us the real homerun and vision for us is not just to get of our treatments but to change the way medicine is practiced and really engineer genetic cures.

So with that, I think we have a little bit time before they throw us out of this room at 7:00 for Q&A, so Philip and Geoff and Ward would you mind coming up and we will get started on the Q&A, thank you.

Question-and-Answer Session

Edward Lanphier

So as this is being webcast and I want to make sure people on webcast hear the questions. I am going to repeat your question, as what really I think so.

Unidentified Analyst

(Question Inaudible)

Edward Lanphier

Okay, so the question has to do with the Huntington’s program, on what percentage of cells that the brain need to be to have the Huntington gene repressed in order to have a therapeutic affect? So let me actually say something little more global and then certainly ask Philip to comment.

One of the actually (inaudible) early on, but one of the things that we want to do today is layout a strategy and a vision and you give you a sense of where we are going and what we are going to do.

An example of how we are going to be presenting data, we are going to present data exactly the way where we have in the past and so for instance, timing of discussing out albumin as we have said there is going to be an oral presentation by Kathy High on Monday at Ash laying out all of that albumin data and even better than what we showed you here.

So that's going to be form where we are going to go into details about the individual programs. So I just want to sort of give you that sense but Philip in that regard is there anything you want to say from a high level perspective on this?

Philip Gregory

Yeah, I mean, so it’s a good question. We think about an approach to Huntington’s which focuses on specific structures in the brain as the initial indication where we can get very high delivery and probably hit the majority of at least the neuronal cells in that particular structure. And by selecting both the exact anatomical region that is most effective at that stage of disease and the appropriate vectors that you've heard to enable that delivery, we think we can get a substantial expression of the Zinc Finger Protein and enough cells to see a clinical benefit and certainly in the mouse studies that have been published that's been the case.

Unidentified Analyst

(Question Inaudible)

Edward Lanphier

The question that's asked is quantification of that and again what I prefer to do and you might be able to do that refer to present those data at an appropriate time and in appropriate meetings.

Philip Gregory

So in the mouse it’s about 70% of the cells of the neuronal cells received a vector and that's more than enough in any given area to achieve therapeutic benefit.

Geoff Nichol

I can probably just add a little bit to that and that the AAV vectors that use like AV6 in this setting also radiate beyond, you know they travel up the neurons and so they radiate beyond where you actually put them. So that gives you some extra anatomical spreading opportunities but Phil is right you probably won't need a 100%. No one knows exactly what you need because we need to get to humans to absolutely determine that but we think we can get there and obviously we will be doing a lot of work. We are doing a lot of work to evaluate how much you know what the dose effects are and what the anatomical coverage is and so on before we finally take this to people.

Unidentified Analyst

(Question Inaudible)

Edward Lanphier

So for the people on the webcast the question has to do with the albumin locus work and getting levels of expression out of the albumin locus for Factor XI in hemophilia. So Philip?

Philip Gregory

Right. So in the study I showed you, we would expect obviously every allele which has converted over to expressing in that case Factor XI is clearly not expressing the albumin gene anymore.

In terms of the fraction of the liver that we have to convert over to kind of co-opt if you will to express the therapeutic gene of interest, that’s exactly a very small percentage. So in the data I showed you, that was probably only about 3% to 5% of the allele the gene copies of albumin that are expressing Factor XI and giving well over 60% of the normal Factor IX levels and secreted. So it really is a great demonstration just how much production you get from that albumin locus.

Unidentified Analyst

(Question Inaudible)

Edward Lanphier

So the question has to do about the durability of the insertion and how long it lasts?

Philip Gregory

Right. So we have data and so I can tell you so far is that we have data that show that for every animal that we maintain so far and for as long as it has been alive, we continue to see expression. The longest data (inaudible) in the Factor IX in the albumin locus we have essentially with the Factor IX locus and for that, we have data well over a year at this point.

But I want to make one additional point and that is in the major publication that describe the Factor IX studies, we performed a partial hepatectomy on the animals that have undergone this correction process and the reason that was done was it forces an enormous amount of regeneration of delivers.

So the (inaudible) recover over about a week or two weeks, the residual [liver] is left to regenerate. And despite doing that, despite that (inaudible) to these animals and we saw stable Factor IX production throughout.

And so we use that to demonstrate stability of the effect because of the genome of these cells is modified and even when they have to reproduce tremendous speed, we don’t lose any sickle and in contrast, so the classical AAV approach that was done at the control in that study, we lost completely the expression from the AAV.

Unidentified Analyst

(Question Inaudible)

Edward Lanphier

So the question again has to do with the Huntington’s program and the amount of coverage it’s required.

Geoff Nichol

Yes, so the data I showed you was from patient fibroblast lines and we have also done that in patient [IDA] cells and we have done it in neuronal cultures but have been derived from those [IPFL] and the results were identical and we have also used the neurons and from the (inaudible) mouse model so just extracting neurons again ex-Vivo manipulations exactly the same results and these AAV vectors on those neurons ex-Vivo and got the same results.

So I think it’s certainly a good question that but you are using fibroblast line that’s not in your own line how will that be different, but I think we have done the bridging studies to eliminate that concern.

Philip Gregory

And again in terms of the anatomical coverage the MRI-guided approach allows us to do planning, volume metrics and have more than one we can put a bunch of [spears] if you like also of AAV into, to actually provide anatomical coverage.

Unidentified Analyst

(Question Inaudible)

Edward Lanphier

The question is what are the assumptions in the financial guidance about the HIV program?

Unidentified Company Representative

I think what we have modeled is that we have the ongoing studies that Geoff described in 2013. So that's been built into the model and by the time we finished those studies and including there is some room there for expanding, at least one of the studies. We would have basically come to point in the road where we would say this asset is partnerable and in terms of investing in the phase 3 what not right now, we would probably opt to build a partnership route. So it is not phase 3 assumptions in the model.

Unidentified Analyst

(Question Inaudible)

Edward Lanphier

Yeah, the question has to do with, is the other any partnering assumptions for the HIV program in the….

Unidentified Company Representative

No, no.

Unidentified Analyst

(Question Inaudible)

Edward Lanphier

So question is about, homologus recombination versus an ATJ, Philip

Philip Gregory

Yeah, so we do that really by and supplying the donor DNA, all right, so its prepared template to buy the repair outcome, to use of that donor DNA versus, just preparing by non (inaudible) end joining. We can't guarantee that the cell will repair only using the one pathway, and so we select the region and the genome very, very carefully. So in both the [augment] strategy and in the Factor IX gene replacement strategy, we are actually using intronic sequence which of course doesn’t hold for anything, but allows us to introduce to the corrective repair template and into this intronic regions and be spliced in to the mRNA that's been made from that promoter. So should an [ATJ] happen at that site, it will have no deleterious effect but if won't contribute to the production of the design outcome,

Unidentified Analyst

(Question Inaudible)

Edward Lanphier

The question has to do with the Huntington’s program and the number of zinc finger repressors involved.

Philip Gregory

That's a great question. So the short answer is no. We rely on having tailored the affinity of the protein to the CAG repeat such that the length of the repeat is necessary to achieve the productivity of binding that zinc fingers naturally have and so on a short repeat there's insufficient productivity to allow the protein to bind and interact stably whereas on the longer repeat, that productivity is present and that allows for a long residence time of the repressor. And that long residence time is required for 90% plus repression.

Geoff Nichol

On this particular question I would also refer you to the presentation that was made at society for neuroscience about a month ago, two months ago.

Unidentified Analyst

(Question Inaudible)

Edward Lanphier

The question has to do with the albumin locus, the durability of the expression and then also the levels of expression of the target gene from the albumin locus.

Philip Gregory

Right so for albumin as I can tell you the data we have and that is that we see a rise in the levels of protein production stimulated by the albumin. We got to get to the albumin [locus] over the first three to four weeks and then that stabilizes and thus and has been consistent and maintained at that level for the life of the animal. So we haven't seen either a decrease or an increase after that initial sort of build up.

Unidentified Analyst

(Question Inaudible)

Edward Lanphier

The question has to do with the turnover rate of parasites and how that affects this.

Philip Gregory

Right so don't forget because we are modifying the endogenous albumin locus should that cell divide both daughter cells would inherit a corrected albumin locus that will be expressed in the gene, and so we don't think that that will lead to any decrease in the levels of secretion over time.

Edward Lanphier

And so the question is what about increase?

Philip Gregory

Yeah so I think the too much we can deal with dosing and by looking at the behavior over a long period of time, but we've done sort of the first study of that by doing this partial appendectomy study and we didn't see any alteration in the levels even with that sort of challenge, even forcing over two-thirds of the liver to regenerate at the levels of Factor IX expression we are maintaining stably throughout that process.

Edward Lanphier

Yeah, I think that's exactly the plan and that's what's published in the nature publication on the Factor IX locus modification is the partial appendectomy and speaks to that question. So we would be happy to get to that nature paper.

Unidentified Analyst

(Question Inaudible)

Edward Lanphier

The question is toxicity issues surrounding the albumin strategy.

Philip Gregory

So we honestly don't imagine anything special about the toxicology program that will be necessary to enable albumin strategy versus any other gene specific strategy. We obviously have to make sure the zinc finger reagents are safe and sufficiently specific to target that locus and that locus only but in terms of albumin itself, believe it or not, there are patients or subjects that don’t make any albumin. They are not healthy, but you can actually remove that gene completely despite it's huge expression level. So in this situation, where we are simply converting some tiny fraction, maybe 1% to 5% of the albumin (inaudible) over to the expression of this alternate gene, we don’t see any reason why that should have any associated toxicity.

Unidentified Analyst

(Question Inaudible)

Edward Lanphier

The question has to do about AAV as a delivery vehicle.

Philip Gregory

AAV so far been almost surprising in a safety profile. There is no for all the studies today have included liver studies with obviously other payloads, have thus far demonstrated both the incredible safety of the [specter], and I should point out that’s built off of a large number of [not even] primate studies in which tremendous doses of [specter] have been used without any observed toxicity. So that seems to be I think one of the best tolerated vectors that we're aware off.

Geoff Nichol

Yes, and AAV infection alone doesn’t cause any illnesses. It's common in a human population and probably in most animal population. So many of us have been affected with AAV already and it doesn’t seem to have in the big population experiment any deleterious effect.

Edward Lanphier

And Phil on the AAV topic, just maybe a little bit on AAV5 or AAV 6 for people who aren’t familiar with those vectors.

Philip Gregory

Right, so these are specific stereotypes which change the (castate) composition of the base vector and also the [trokers] and the specificity at which the vectors, infect different cell types. We selected 5 and 6 because of the portfolio of products that we wish to move forward with and both of which are we think are ideal for the liver but also for the brain applications including Huntington disease.

Edward Lanphier

So I am getting the high sign from the back that it’s after seven. So I would like to thank you all very much for taking time to join us this evening. I would like to thank my colleagues very much for all their hard work on this. And please join us for the reception out in the lobby. Thank you.

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