Sangamo BioSciences, Inc. (NASDAQ:SGMO)
The 31st Annual J.P. Morgan Healthcare Conference Call
January 9, 2013 1:30 PM ET
Edward Lanphier – President and CEO
Matthew Lowe – JP Morgan
Matthew Lowe – JP Morgan
Hi there, welcome everybody. My name is Matthew Lowe, the JP Morgan BioTech team. Our next company to present is Sangamo BioSciences. We will have a breakout afterwards in the Sussex Room down the corridor to the right hand side. If I could also ask you please to turn your cellphones off. And without further adieu, I will hand over to the CEO Edward Lanphier.
Good morning. And let me start by saying thanks very much for including us in this year’s conference as our often good get tedious comments but it’s not we really appreciate being included this year. My presentation will contain forward-looking statements I’d refer you to our Form 10-Ks and 10-Qs we filed with the SEC.
So this has really been a year, then 2012 that’s been a real sea change for us. While the core technology that we’re pursuing, the ability to engineer a specific class of DNA-binding proteins, zinc finger proteins and drive biology at the DNA level, the physically changed gene sequences and to actually regulating endogenous genes. While that hasn’t changed, it’s continued to mature. The clarity of the applications for us particularly in the area of human therapeutics and particularly relating to single gene based diseases, so called monogenic diseases has come into great focus.
And with our partnership that we announced about a year ago with Shire, and the focus on that and then our leverage off of that investment has really put us in a very different position than we were at this time last year, and so I look forward to updating you on that today.
So, our business model has been to invest heavily in this core competency, it’s very proprietary, it’s very powerful, leverage that into areas outside of human therapeutics with very strong partnerships with Dow Chemical and Dow AgroSciences subsidiary with Sigma-Aldrich and in the research area, collectively those two agreements to date have brought in over $90 million to the company and we have significant downstream milestones in revenues and royalties coming in from those.
Our first therapeutic partnership with Shire that I mentioned we announced just last year, is focused on seven disease targets, four of which were picked up front and these are all in the hemophilia area, I didn’t mean to do that.
And then recently selected Huntington’s disease and I’ll go through each one of those. But this platform – it’s a very general platform that can be applied in a specific way to any gene of therapeutic relevance. And so that’s really been the focus for us. And you’ll see many companies present its slides very similar to this, I’m going to go through this in some detail.
But what is underneath this is really the unique aspect of Sangamo, we’re not trying to develop novel therapies, we’re not trying to develop the next great treatment for hemophilia. We’re actually able to go in mechanistically, physically and permanently and specifically change a disease related gene, permanently change, correct it. And if you can do that, and if you can cause that gene to now behave in a post disease “normal way” you can remove the need for the therapy that was underlying that disease and you can really, literally cure the disease. And that’s the difference here, that’s the key for Sangamo.
We’re able to focus on single genes and engineer genetic cures, and that’s an enormously ambitious objective, and I get that. But let me show you how we’re doing that and where we’re going. So, from a strategic perspective, we think about this platform at the far left hand side of this slide, and we see, where are the opportunities where there is no ambiguity, no ambiguity about the target? And I’ll go through this and talk about that. And how can we then leverage what we do into that therapeutic realm so we can do this in Vivo and I’m going to spend a bunch of time talking about the direct systemic delivery to deliver and what we can do there for protein replacement, we can also do this directly into target tissues.
And I’ll spend some time talking about the brain work what we’re doing in Huntington’s but it can be applied broadly. We can also do this to direct cells, and that’s really, really relevant in infectious diseases like HIV and in stem cells it’s very broad and I’ll talk about all the HIV in that area but also the work that we’re doing in hemoglobinopathies and sickle cell disease and in Beta-Thalassemia.
So, it’s a broad platform, I’ll come back to this at the end and talk about the leverage that we gain off of any investment that we make in any program in this area. But today I’m going to focus on those programs that we’re actively moving towards either in the clinic or actively moving towards the clinic.
So, you’ll see this, this motif as we go through the talk. What I want to do is emphasize the target and the binary nature of that target in the disease setting, the modality or the approach that we can bring to bear so we can regulate or modify an endogenous gene. And then the objective, what is the clinical objective in these?
So, first starting with our most advance program in HIV AIDS, this is an area where again our goal is a functional cure. And what do I mean by that? I mean, taking somebody who is – has HIV is treated with a highly active anti-viral therapies or heart, modifying that patient’s immune system in a way that they can go off heart and have a well controlled or eliminate that virus. And this is really the next major step, beyond treatment towards functional cure.
So, infectious disease is pretty complicated, it doesn’t sound like a monogenic disease but it is. HIV uses a specific receptor, the CCR5 receptor to infect the immune system, to infect T-cells in the absence of that receptor, those cells don’t get infected and they are perfectly normal from an immune perspective. And that’s the target we’re going after, there is enormous validation around CCR5 as a target, probably the most visible both from a scientific as well as a lay-press perspective is the so called Berlin Patient, this is an American who had both HIV and Leukemia, went over to Germany, received an Allogeneic transplant of stem cells from a person who had both of his CCR5 genes missing or had the so called Delta 32 deletion in those.
Transplanted in pretty onerous procedure, four years later both viral and cancer free, very validating proof of concept, lots of other data around that. But a very rare, rare opportunity, we can engineer we have engineers zinc finger nucleases that specifically target the CCR5 gene. And we can apply this to anybody’s T-cells and we’re doing that.
But the goal here isn’t an incremental treatment, the goal here is a functional cure, so where are we with that, we’re now in two phase, two clinical trials but those are driven by a clear signal, a statistically significant correlation between the number of these cells that we modify where we knock out both of the genes, that’s bi-allelic, both of the genes knocked out and reduction in viral load.
And that’s entirely consistent with that human proof of concept, the greater the number of cells the greater the correlation to viral load reduction, so we’ve designed two phase, two trials, not going to go into them in detail today, there are other forms for doing that that are specifically focused on that hypothesis, maximizing the number of bi-allelic modified cells that are engrafted into these patients taking them off their heart therapy and evaluating the anti-viral response. And those trials are ongoing I’ll talk about the guidance.
But we’ve recently presented data just a couple of months ago at ASH, that says if you do that if you put these modified cells in, you may have an effect on viral load and that’s really the key driver. But can you actually improve the immune system, the immunological health of patients. And data presented at ASH and we’ll talk about going forward at Croy this year, the two large HIV meeting, really suggest that we can have a durable, significant increase in the CD4 cells and the CD4 CDA ratios in these patients, overall immunological health, and that’s really unprecedented.
The ability to improve, actually up above, in some cases doubling their CD4 counts. And so very exciting and we’ll continue to talk about that immunological data and that’s the last bullet point, we’ll do that at Croy.
So, summary of this program again a very high level unprecedented antiviral and immunological activities to date, very, very focused Phase 2 trials ongoing in terms of focusing on maximizing bi-allelic modification and looking at antiviral activity but very, very strong immunological underpinnings of this.
And I’m not going to spend time today on it but I’ll talk about it at the end in terms of the numbers of new I&Ds that are coming, we actually along with collaborative of City of hope expect to take this program forward into hematopoietic stem cells as well in 2014.
So, quick summary of what we’re doing in HIV, let’s move on now to – where I think we’d all say there is no ambiguity about the elements here in monogenic diseases, these are classic protein replacement programs, hemophilia, lysosomal storage diseases. The current standard of care, and it’s varies between the diseases and the protein, so this is a cartoon, not a specific issue, I know it says clouding factors and so on, but think about this as protein replacement.
You go into a doctor’s office, you receive an infusion, take several hours, and you’re going in at high levels, because those proteins over time like with all of it, those protein start to disappear and then you go back in, and you go back in and you go back in and it’s a lifetime deal. Those of us who don’t have hemophilia or gouaches make normal levels of our protein, we make it constantly and it’s there. Our goal is to do exactly that, but to do that for patients who have that disease, that is engineering a genetic cure.
And so, the strategy then for us takes two fold, two different ways to win here. One, we can go into the factor 9 gene, we can design zinc finger nucleases that bind exactly to that gene, highly specifically, and we can go in and insert the correct sequence. And when we do that we get exactly the levels, or exactly that correct protein made. And we’ve done this dozens and dozens and dozens of times, the bottom one here, I know the Brits misspell hemophilia, I apologize for them.
But we’ve published – I’m sorry Liz, but we’ve done this – we’ve done this with alpha 1-antitrypsin and in the top highly efficient endogenous human gene correction using a zinc finger nuclease. And what that doesn’t continue to say is, and/or by the way we can engineer this to any gene we want. So, we can do this to the endogenous side and we published that.
What we just announced and this is brand new, we just presented at ASH this year, is because we can go to any gene, why not go to a gene that makes massive amounts of protein and the albumin gene in the liver secretes that protein. So, we can co-opt just a very small percentage of what our huge amounts of protein, 80 grams a week, I mean that’s a snickers bar a week of albumin, snickers bar baseball, I mean, whatever you want to say that’s a lot of albumin. We take 1% of that, we can actually get therapeutic levels of almost any of these enzyme replacement therapies.
And so, great strategy but highly leverageable, we can take exactly the same nucleases to the albumin sequence, put those through clinical trials, the only thing we change is the donor sequence, we can apply this to hemophilia, we can apply this to lysosomal storage diseases, there is a very long list. So, highly, highly leverageable and in disease settings where early clinical data can be highly, highly predictive and it’s not a small opportunity, this is extremely disruptive. And you all know better than I do that size of the markets – the markets caps of companies that are working in hemophilia, they are working in Gouaches, that are working in (inaudible), this is highly disruptive.
If we can do what we just talked about, go in, fix that gene or put it in the albumin locus, and get this delivered to secrete therapeutic levels of these proteins, these businesses as recon of proteins go away that’s the opportunity here. And so let me tell you where we are with this.
So, we’re working with Shire in the area of hemophilia on factor 8 and factor 9. A year ago I couldn’t tell you guys why Shire did that deal I can now tell you why Shire did that deal it’s these kinds of data. And so hemophilia, two ways to win, the endogenous gene and the albumin locus, and here are the data that we just presented at ASH.
The normal levels on the left hand side in the grey bar, 22% is what we’ve published in nature when we corrected the endogenous locus. But we just showed using the albumin strategy that we can return in this mouse model to 100% of normal expression of the human factor 9 gene. Remember the albumin locus doesn’t care what gene you put in, so this is the factor 9, but is it biologically relevant, yep, it normalizes coagulation time. So, this is the biological evidence of not only normal levels but corrective levels.
And so, we’re running like scalding dogs along with Shire, they’re pretty excited about this, to move this into the clinic. And we’re on track to bring two factor 8 and a factor 9 IND into the clinic next year. And if we’re successful, early clinical data in all of these enzyme replacement programs are highly predictive. So, this is the lead dog here, this is where we’re really running it but again, highly, highly leverageable, albumin doesn’t care. And there is a lot of opportunities that’s in. And so, we’re running like scalded dogs on this and these are the data that we just presented at ASH.
And this is getting a lot of traction, a lot of visibility. So, we all know what LSDs are, we all know that they require constant enzyme replacements, we just presented ASH showing well, this is actually only on one of the four, we presented on four different LSDs at ASH, again showing the albumin strategy, showing better, this is actually a dose escalation, this is the top dose, showing even better than normal levels of this. And we can control that based on dose.
So, highly leverageable, highly disruptive program, and this is right behind the hemophilia INDs, so two INDs on our own account that we’re guiding to by in 2015. So, that gives you a sense of what we’re doing in the enzyme replacement or protein replacement area. The albumin strategy, the EnVivo protein replacement strategy, I keep forgetting to call that, it’s the EnVivo protein replacement program for us. And so, sort of stay tuned and you’re going to hear a lot about that.
Shifting gears, going back to that strategy slide, we can go systemically, we can go directly to tissues Huntington’s again, not ambiguity about the target here, going directly into the brain. This is a horrific disease, it’s not as common to many people as hemophilia and lysosomal storage diseases in the biotech world it’s a horrific disease. It’s a late onset, but you know you’re going to get it. And there is nothing you can do about it, it’s an awful disease. And yet, why do you know, well you know because, if you don’t – if you’re not genetically predisposed for Huntington’s, you have somewhere between 20 to 30, of these so called CAG repeats in your Huntington’s gene but if you have 40, 50, 60 of these CAG repeats, you’re going to get Huntington’s and there is nothing that can be done about and there is nothing out there.
What we’ve been able to do, and this is again the fifth target selected by Shire and these are the data that we just presented at Society for Neuroscience, we’ve been able to engineer a zinc finger repressor that ignores the normal gene but completely shuts off the disease related gene, and that’s what these data are and we’ve already presented these and talked about so I won’t go through it here.
But what you can see is, that the lead candidate we have ignores the wild type correct gene and specifically down regulates the disease gene. So, again, lots of enthusiasm collectively at Sangamo and Shire on this program and we’re moving really hard on this goal being to get this into the clinic in 2015.
Last program I want to highlight here, is a Sangamo owned program, again monogenic disease, this leverages our ability to go into – and we’ve done a lot of this work into hematopoietic stem cells for the largest of those diseases, this is sickle cell disease and Beta-Thalassemia. Again, I think you’re familiar with this sickle cell disease, red blood cells have the stickling phenotype and have a really know-ability of very limited ability to transfer oxygen Beta-Thalassemia, little bit worse, the red cells done even develop or mature.
We’re going after a target that allows us to address both of these diseases with equal efficacy. And it leverages off the current standard of care for severe sickle cell. The problem is you have to find a well matched Allogeneic donor, you go through essentially total modulation so you have to eliminate the stem cells in the patient who has it so you can get sufficient engraftment of these allogeneic and there are lots of issues particularly graft versus host.
But if you can go in and specifically change their own stem cells in a way that allows them to correct and make normal erythrocytes, those cells and graft they are permanently there, you have a opportunity to cure these diseases. And this is very exciting, there is lots of interest in this. And this is – we’ve already accomplished a huge percentage of this, we’ve already shown that we can get very, I mean at very high levels of modification, add clinical scale, a clinical manufacturing scale so this is 100 million stem cells. And when we modify those cells they engraft normally and they differentiate normally, they differentiate into normal erythrocytes. So, we’re well down the path on this and we believe we’ll have this into the clinic next year.
So, summary of this and I’ll move to more of the business side of things. But the summary of this is that we’re really getting a lot of traction around this platform. In the HIV space two ongoing phase, two clinical trials focused on the antiviral activity or viral load endpoint, but also a strong emerging database around the immune constitution elements of this approach. Seven new INDs over the next three years, leveraged by and focused on monogenic diseases, rare diseases, where again, we can show very early on that that correction leads to biological activity, so even pre-clinically we think it’s de-risking but early stage clinical data is highly, highly predictive. And we’re moving this forward aggressively in the area of hemophilia and Huntington’s with our partner Shire and the other programs we’re moving forward on our own.
One of the keys and I’ll spend some time on this on the last slide is, that obviously with a platform we’re not a one-trick pony, but we’re also able to leverage where we have success. So, the albumin strategy is a great example of that. In stem cells, similar sort of thing, those kinds of modification efficiencies that I just referred to in the area of sickle and Beta-Thal, that can be leveraged across numerous diseases. And so, this is an opportunity to both leverage what we do but also de-risk the overall opportunity and I’ll talk about that.
So, and actually that’s just the point I just made. So, highly leverageable across all of these areas, I focused on a couple of programs, but if we’re successful there we can apply this in lots and lots and lots of ways. So, moving to the commercial side of things, I mentioned important partnerships with Dow, with Sigma and with Shire. And this has been very consistent with our business model for a very long time, and that’s a qualitative comment, the quantitative element of that is here.
We’ve done a good job, and I want to quite frankly take credit for this, we’ve done a good job of managing the balance sheet, of using a diversified business model and opportunistic financings to create, to remove financial risk from this company and you can see that here. So, we guided ending this year, we started last year ’11, I mean, go back to this time last year, we started last year with $84 million in cash, I just gave you a long list of things that I think are pretty material. And the total burn last year was 10 million bucks. And I don’t know how many companies are going to present this conference and say that, I mean that. So, it’s a diversified and I think de-risked financial model.
Going forward and with the clarity that our partnerships give us and particularly the Shire partnership, we’re able to look actually farther forward at our balance sheet and the kind of cash management that we have. So, assuming no new partnerships, no new financings, no new grants, nothing except what we have and assuming that this doesn’t even assume the selection of Shire’s sixth or seventh target, and the finance, the value that comes from that, assuming none of that – we believe – but assuming that we accomplish what I just went through, we’re in a very good position to de-risk and add value in the context of a strong balance sheet.
So, near-term catalyst, I’ve actually covered a lot of this already on the HIV front, we expect guiding to having preliminary data from our ongoing Phase 2 trials in the first half of this year, complete datasets by the end of this calendar year from those two trials. And then more data particularly on the immunological side of this approach coming up at Croy and I think we’ve already said that.
You’re going to continue to see, and I’m not being quite as dramatic as the data that we just presented in ASH, but you’re going to continue to see us publish and present. And I think we have a – I know we have an outstanding track record from a publication and presentation perspective and you’ll continue to see that strategy for discussing particularly our pre-clinical and clinical programs.
Commercially, again we got a lot of success in monetizing outside the therapeutic area, the Shire collaborations are first in the therapeutic space we’re going to continue to add value as we go through. But we also – this is a platform there is a lot of opportunities to win here. And we think we can continue to add value and do more partnerships.
And lastly, we are on track to end 2012 – we ended 2012 within our guidance, we got it to at least $75 million, I can update that today with a huge increase to $76 million. And I’ve already told you we expect to – without any new financings or new partnerships, and this calendar year between $55 million and $60 million.
So, two more minutes. Summary, if there is a secret sauce, if we’re ultimately successful, it’s this hot bullet point. This is a highly differentiated, extremely powerful technology platform and we own it. We believe that the kind of outcomes that we can drive aren’t just incremental therapies but they actually can generate genetic cures. And it’s an enormously exciting opportunity and there is real data around it and those are summarized here, I won’t go through it because I want to actually get to this last point, those are the things I’ve covered.
So, guidance, seven new INDs, completing these Phase 2 trials, good balance sheet. But from an investor perspective, this last bullet point I’d like you to think about it a little bit. This strategy is poised to create significant value. But it’s also because of the leverage, because of the diversity of what we’re going after and these bullet points underneath they’re trying to articulate that, I think there is a lot of protection on the downside as well. And so, the business model, you’ve seen how we’ve done that and the partnerships that we’re going and the value creation on a proprietary programs, you’ve seen the diversity of therapeutic approaches, systemic, direct tissue, cell targets, we can go after any of these. And we’re good at it.
We’re also are addressing disease targets and there is a lot of them but there is no ambiguity about the correlation between the gene and the disease and our strategy, our technology allows us to uniquely approach that in a biologically relevant way. And lastly I think we’ve done a good job of de-risking the financial side of the story.
So, I really, really appreciate your time today. This is an exciting time for Sangamo. And I look forward to any questions in the breakout.
[No Q&A session for this event]
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