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Sangamo BioSciences Inc. (NASDAQ:SGMO)

2013 Barclays Global Healthcare Conference Call

March 13, 2013 4:45 PM ET


Edward Lanphier – CEO


Ying Huang – Barclays Capital

Ying Huang

Okay. Good afternoon, everybody. My name is Ying Huang, I am the [inaudible] here at Barclays. Our next presenting company is Sangamo BioSciences. And I'm very pleased to introduce Edward Lanphier, the President and CEO of the company. With that, let me turn over the podium to Ed.

Edward Lanphier

Thank you very much. It's a pleasure to be here. My presentation will contain forward-looking statements. I refer you to our Forms 10-K and 10-Q and particularly our recently filed 10-K.

So for those of you new to the story, the single most important thing to remember about Sangamo and if you walk out of this room with nothing else, is our core technology is significantly different, absolutely unique compared to any other company in biotech. We have the ability to engineer a naturally occurring class of proteins. Proteins whose normal function it is to bind to DNA. And we can engineer these in a way that we can cause them to target exactly the DNA sequence we choose and use that ability to drive biology, to change the expression of a gene or to physically change the DNA sequence.

So it's an incredibly powerful and quite frankly, very proprietary technology platform that we at Sangamo are using to develop novel drugs. And it's important to emphasize that strategic focus. We're not just trying to develop an incremental improvement, we're actually developing a new modality that at the end of the day, it isn't intend to get a better treatment, it's actually intended to drive genetic cures. And I'll be talking specifically about that strategy and why the technology platform permits that as we go through the presentation.

But I think those are two key critical points; a highly differentiated technology platform and our goal is not just incremental improvements and therapeutics but actually genetic cures.

We've also been very successful in leveraging the same core technology outside of human therapeutics DNA and plants has the same as DNA and rat for humans or [inaudible] and I'll talk about that. But it has allowed us to operate the company in a very fiscally responsible, very different way than the vast majority of biotech companies. And at the end I'll come back and talk about our cash position and balance sheet.

So one slide just to give you a visualization of the technology platform. If we were an antibody company, I'd show you the constant and variable regions of an antibody and how we can engineer that. This is our technology and for those of you in room, this is a single zinc finger here and each individual zinc finger, both in nature but also the way that we're able to engineer them combined the three base pairs of DNA and that allows us then to target exactly the triplet we want. But then this natural so called modularity actually like Lego's allow us to link these engineered proteins together to target enough unique sites in a genome and with enough length so that we can target a single site in the context of say of the human genome where are 3 billion base pairs of DNA.

So think about that math. If you only were targeting, say, six contiguous base pairs, that will happen all the time in a 3 billion base pair genome. But if you can target a sufficient length, in this case, 18 of those, you can target a single address. And that allows us to be singularly specific in what we do. And then we can link these zinc fingers that target the DNA to a so-called functional domain, something that allows us to drive biology. And this cartoon begins to talk about that biology.

So we can use this targeting method to actually turn on or turn off gene expression, and I'll talk about turning off gene expression in our Huntington Disease program. The vast majority of the discussion I am going to have however is in the zinc finger nuclei space where we can use this to singularly stop a gene from being expressed or we can use this to do what's called targeted insertion. We can put a new gene exactly where we want to put it.

And that is particularly relevant when you start talking about diseases that are driven by a single gene or a mistake in a single gene, the so-called monogenic diseases, so that gives you a sense of the platform.

Turning now to how we've developed this. As I mentioned, we've been very successful in monetizing this with Dow AgriSciences in plant space, Sigma-Aldrich and the research in transgenic animal space, and more recently with Shire and the human therapeutic space and I'll cover all of those in detail. So collectively, this has brought in over $100 million into Sangamo that we've been able to use to develop our therapeutic platform which is really the basis for the value proposition in the company.

So what is that strategy? What is the approach that we're taking in terms of human therapeutic product development? Well, on the left-hand side here, think about this is our toolbox of both gene regulation and gene modification or genome editing. We can use this in vivo meaning directly into a patient to go in and talk about protein replacement in the classic monogenic disease basis. And I'll spend time talking about those programs.

We can also go directly into target tissues, and I'll focus on the brain today or we can cells out of the body and I'll spend a lot of time talking about our HIV program and some time talking about our programs in hemoglobin atrophies like sickle-cell disease. And so those are the highlighted programs here.

But I think the key issue is that the technology platform is agnostic to the gene. It's agnostic to the delivery strategy and therefore, there are many, many targets or opportunities for us to go after. I'm going to focus on these highlighted ones here today. But as I mentioned right up front, the goal here isn't for instance in hemophilia to develop a longer lasting factor aid or a more easily delivered factor 9.

The goal here is to work at the DNA level to physically change the DNA sequence in a way that we actually engineer genetic cures. And that's the critical opportunity. Enormously ambitious, it clearly has its risks but it's an incredible opportunity and if successful, it will truly change the way medicine is practiced.

And many of you heard me say this before but I think it's important to note that there are other people who think that this strategy is actually very doable. And this is quote coming from Francis Collins, the head of NIH, just a little over a month ago. And he talked about the following; he said, "You might want to replace a disease-causing mutation with a healthy snippet of DNA. Well, if you're going to do that, you better use a zinc finger nuclease to correct the mutation that causes that disease." In this case, he's talking about our work in sickle-cell disease, okay, or in sickle. "This is a transformative technology, this genome editing tool, and I expect that ultimately, we will develop the ability to edit our own genome in safe, responsible way that relieves human suffering and improve human health." That is engineering genetic cures as stated by Francis Collins, the head of the NIH.

So let's turn now specifically to where we're employing the strategy and what we're doing. Now focused on our HIV program to start. The strategy here employs again, a very well validated target, CCR5. This is a receptor on the surface of T-cells, CD4 T-cells which HIV must use to infect the immune system, to infect those cells. It's well known that individuals who do not have CCR5 have natural mutation in both of their genes that they don't and cannot get infected by the virus.

The best human proof of concept to this is the so-called Berlin patient that I'm happy get into that in detail. But this is a person who really showed that that strategy can be applied. But it was a very rare event. Our goal, and what we're developing now is a strategy that we believe can be applied to any HIV infected T-cell program with the goal of making the compartment of the immune system uninfectable by the virus but capable of launching an antiviral response, therefore, taking patients off of their anti-retroviral therapies and controlling their virus, the so-called functional cure.

So to date, we've shown that there is a highly statistically significant correlation between our ability to disrupt or knockout with our zinc finger nucleases. Both of the genes that encode CCR5 and the reduction in viral load. And we've initiated two phases -- two clinical trials on that and I'll come back and talk about one last data from those in a moment.

We've also recently presented data on the other side of the HIV, not just in terms of impact on virus but in terms of impact on the immune system of patients. When we previously presented data in September and just last week at the CROI conference, the conference on retroviruses and opportunistic infections. So let me just say a few things about that.

So we had two oral presentations at CROI, I'm going to focus really on this top here. And the title really begins to focus on what I want to talk about. The central memory, T-cells, is the critical component for sustained CD4 reconstitution in HIV subjects who received these modified cells. Now, why is that relevant?

Well, let's talk about a little bit of background. First, HIV destroys CD4 cells. That's the target of these cells. And while heart can cake in the bloodstream, cause the patient to be an undetectable viral load, it doesn't have an effect on the immune system. And in many cases, you see a continuing erosion of the CD4 count over years.

The critical component in terms of mounting an antiviral response, the piece that you'd really want to have if you're going to reconstitute the immune system and protect it, are these long-term, central memory T-cells. And so, a couple of pieces of data and then let me try and put this into context for you.

So the data presented at CROI last week, and I think it's important to emphasize this because either for out of ignorance or malice -- I don't think it's ignorant. I think some of these data has been misunderstood and misinterpreted -- so again, safe and well tolerated. But what we showed in eight out of nine patients was an increase at a year’s point in their CD4 count, and that's really driven by the genetic modification to these central memory T-cells.

So why is that important? Why is that critical? Well, if you think about HIV for a moment like any other virus. Think about it as the chickenpox virus or the measles or whatever we happen to have when we were kids. If we were exposed to that again, we have these long-term central memory T-cells that are stem-like in terms of their ability to respond. They see that virus again, they proliferate significantly and they destroy that virus.

Well, that can't happen in HIV because the HIV destroys those cells when it sees it. But if you can create a compartment of the immune system that is CCR5 negative and have these central memory T-cells, you've created an opportunity much like causing HIV to be seen by the immune systems of these patients much like any other virus.

And so what would be necessary from an immunological perspective in order to create a functional cure would be the components of the immune system and in particular the central memory T-cells to not only be a large part, a significant part of this enhanced CD4 part, but be those cells where we've knocked out both of the CCR5 genes. And that's exactly what was presented at COI [ph]. And I think people who have sort of talked about this data really should focus on that fact.

So that gives you a sense of what was presented at COI and I'm happy to come back and go through this in a detailed way. But a very encouraging data which I believe and I think we believe is the kind of data that we think is necessary in terms of generating and I also meant functional cure in HIV.

Whether it's sufficient or not, it actually speaks now to the ongoing Phase 2 trial that are underway one, in the area of this delta-32 heterozygotes that allow us to get a doubling of this biallelic knockout and another in the area of engraftment enhancement that is ongoing.

And so we've guided to preliminary data from these trials in mid May at the American Society for Cell and Gene Therapy. But I think the critical piece is that early on, we reported unprecedented anti-viral activity in the context of a 12-week treatment interaction which really is unprecedented in that context. And we've now augmented the work that we have reported in terms of the reconstitution of the immune system and the kind of immunological results that we believe are necessary in order to create a functional cure.

So that gives you a sense of how we're employing this one element of the toolbox, this is a gene knockout in the area of HIV. Quickly I want to turn to the area of protein replacement in monogenic diseases and specifically our work in hemophilia.

So the standard of care in any enzyme replacement therapy whether that's Gaucher's, or Pompe's, or Factor VIII or Factor IX, it is the need for a bolus infusion of the protein that erodes overtime and then another bolus, another bolus. But people who don't have the disease produce a therapeutic level of the protein all along their own.

Our goal is to actually recreate that normal characteristic. If you, for instance, do not have hemophilia, you produce a constant level or a normal level, sufficient level of Factor IX to make clotting happen in a normal way. Our goal is to recapitulate exactly that genotype in patients who do have the disease as well as the following clinical phenotype around their clotting.

So how do we do that? Well, one thing that we can do is go straight to disease gene correct or change that gene sequence, having a still control under its own promoter and thereby produce the correct protein product and we've now done this many, many times as this is just a few of the examples that we've published in nature.

But what if you wanted to have a more general strategy and that's a strategy that we laid out at ASH a couple of months ago. What we can do is target a gene that already makes massive amounts of protein put any gene we want that makes the therapeutic protein of interest into that particular site and coop that highly expressed gene for our own purposes to make the therapeutic protein.

And the ideal candidate for that just to skip along is the albumin gene. This is a gene we really literally make tons of this protein. We make 9 pounds of this protein on an annual basis. If we were to just take a couple of grams of that on an annual basis, we could actually replace any of the protein therapeutics that are needed.

So the strategy is we employ our nucleus in the albumin gene, insert whatever gene we want at that site and to coop the albumin gene for that strategy. This is something that would be highly, highly leverageable because that site in the albumin gene is agnostic to the target you put in to there if it's a Factor VIII gene, if it's a Factor IX gene, if it's Gaucher, it will still cause the same level of production and we only need very, very small amounts of the fact of the albumin gene to do that less than 1%.

So it's highly leverageable. It's also massively disruptive. If we're successful with that, we already know that A, the protein replacement is therapeutically relevant and B, this is a multi-billion dollar annual business that we could potentially coop and take over. So a huge opportunity.

Let me talk about hemophilia. There are two ways we can approach. This one, is at the site of the actual mistakes or the so called endogenous gene or the other is the albumin strategy. This summarizes data that we've presented as recently as in December at ASH.

This is where we corrected the gene under the control, the Factor IX gene under the control of its own promoter. This is when we put the Factor IX gene into the albumin locus and this is actual protein in the blood of this mouse model of hemophilia.

So that's the protein, but the biology we want to know about is do we normalize the clotting in this hemophilia mouse model and the answer is absolutely yes. In this mouse model driven by both the endogenous gene as well as the albumin locus we normalize the coagulation time.

So this is exactly what we're doing right now. We're working with our partner Shire on both the Factor VIII and the Factor IX targets. We're moving quickly through the delivery scale up in not on human primates and the goal here is to file both the Factor VIII and the Factor IX IMD [ph] next year.

So that's one of the areas we can leverage this so called in vivo-protein replacement platform. The other areas into license on the storage diseases or any of the other enzyme replacement therapies and as you know, LSDs are again highly validated targets, large markets in terms of recombinant protein. We can put this into the albumin locus and leverage that.

And these are again examples of one of the data sets, in this case in Hurler's disease that we presented at ASH at late last year, but we also presented data around Gaucher's, Pompe's and Hunter's, so a highly leverageable platform and one that could be applied broadly.

Sangamo owns all of these targets. So the only ones in the strategy that without [inaudible] are the hemophilia targets with Shire in all of these so we've guided to two IMDs around LSDs in 2015.

So broadly applicable to very large markets and I think that's something that is really driven investor interest in the company over the last three or four, five months. Very quickly we're also working with Shire in the area of Huntington's disease. This is a down regulation strategy, so the other side of that toolbox shutting down or turning down the expression of the gene.

The reason that's important is in Huntington's patients one of their genes actually it has many, many, many of these so called CAG repeats and patients who have more than 35 of these CAG repeats, they know that they will get this disease and it's an awful, awful disease. And people know it from early on that they are going to have these symptoms.

So what one would want to do is develop a strategy that knocks out or prevents the expression of the genes that causes this toxic protein but leave the normal protein alone. And that's exactly what we're shown. We presented this data at the Society for Neuroscience last year, so we are able to develop a zinc finger repressor that leaves alone the normal gene, but essentially completely shuts off the expression of this so called long CAG repeat.

And this is again a program that we're funding or is funded by Shire. We're working with them on this and our goal is on IMD in 2015.

And lastly, a program that's actually moving very quickly is our own program in stem cells in the area of hemoglobinopathies or sickle cell disease and betathalassemia. This is a shared disease across these indications where there's a mistake in the hemoglobin gene and our goal is to actually cure this disease by leveraging the current standard of care.

So the current standard of care in the moderate to severe population of these allogeneic stem cell transplants but they really have enormous consequences including needing full immunosuppression as well as significant risk of graft versus host.

If you do this in an oncology setting where you just changed their own stem cells, you only need very mild immunosuppression and there's no risk of autoimmune disease. But this is a program that's moving very quickly for us. We have very successful levels of modification in oncology stem cells and our goal is to file an IMD next year on this program.

So collectively taken between all the work we're doing in the Phase 2 trials, in HIV, and the data we're presenting there, our goal is to file seven new IMDs over the next three years in the areas I've talked about.

And that gives you sort of, if you will, the top of iceberg because as I mentioned right up front, the technology itself is agnostic to the target. And once we have shown in any one of these buckets that we can go in, modify it in a way that has a protective curative effect, there are enormous other opportunities in each one of these areas and so it's a highly leverageable platform and one that we believe we have a whole lot of opportunity to pursue. But we could only do that if we're in the context of a physically responsible company that's well-run and has a capital to do that and so we've been very successful in monetizing the technology value while retaining a significant amount of upside for our own account.

And you could see from our partnerships here, the manifestation of that is that we've been able to keep a very strong cash position, this looks back five years in our year and cash position across this, so [ph] in terms of opportunistic financing, for a Barclays financing here in April of 2011 so two years ago.

But looking forward and particularly with our partnership with Shire and the kinds of milestones that will come with IND filing, we're guiding to ending this year with at least $55 million in cash. But with the two IND filings with Shire and the $8.5 million per IND that comes from that, we're looking at a $50 million to $55 million to in some case, a zero to $5 million burn [ph] in 2014.

And, again, with milestones from Shire, our revenue is from Sigma and Dow. We believe that we can file seven INDs prosecute these phase 2 trials in HIV in over a three-year period have essentially a $30 million to $35 million burn and I think that's really impressive I think [ph] in the biotech business.

So in terms of near-term catalyst, I think we've talked about all of these. I think the data that were presented CROI last week are very important data. They really emphasize what is necessary in order to -- from an immunological perspective, to drive an ultimate functional cure. The ongoing clinical trials in phase 2 really now begin to speak to this issue and impact on viral load and we'll present preliminary data ASGCT in May.

I'll just summarize now in the time that is left here. I hope I've left you with the following points, first, enormously robust and extremely validated technology platform with both partnership as well as massive publications and we dominate this from an intellectual property perspective.

Our goal is not to develop the next generation therapeutic, our goal is to change the way medicine is practiced and to actually go in and engineer genetic cures and you have a sense of where we're focused on that. And so [ph] the bottom on this slide really summarizes some of the things I said. But I hopefully have also left you with the sense of the scope and opportunity of this platform.

And so collectively, our goal, seven new INDs over the next three years and we can do this in a very physically responsible way given our partnerships and in particular the milestones with Shire.

And I'll close on this point and I hope this came across in the discussion, so the strategy creates significant near-term value, HIV data, seven new INDs over the next three years but it also, I think, is an opportunity to mitigate the downside risks due to the diversification of targets, delivery strategies that we're taking as well as the opportunity to leverage success in any given area across multiple programs, so a business model which provides partnerships and capital but also significant value and proprietary programs, diverse therapeutic targets, a variety of addressable and well-validated targets and lastly, a strong balance sheet and like [ph] a business model that's going to allow us to invest in these programs in a way that [inaudible] that maintains the strength of that balance sheet.

So thank you very much and I'll look forward to questions during the break out.

Question-and-Answer Session

[No Q&A session for this event]

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