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Sangamo BioSciences, Inc (NASDAQ:SGMO)

Bank of America Merrill Lynch 2013 Health Care Conference Call

May 16, 2013 01:00 pm ET

Executives

Edward Lanphier – President, Chief Executive Officer

Analysts

Masha Chapman – Bank of America Merrill Lynch

Masha Chapman – Bank of America Merrill Lynch

We’ll get started. So, welcome to the last day of the Bank of America Merrill Lynch Healthcare Conference. My name is Masha Chapman, and I work on the Biotech team at BofA. And it’s my pleasure to introduce our next speaker, Edward Lanphier, President and Chief Executive Officer of Sangamo.

Edward Lanphier

Thank you very much and thank you for inviting Sangamo to this year’s conference. My presentation will contain forward-looking statements. I would refer you to our forms 10-K and 10-Q filed with the SEC.

Given that the American Society for gene and cell therapy is in full swing in Salt Lake and we were just there yesterday, this presentation is really going to focus on significant amount of the data that we’re presenting there actually, 12 different presentations. But I’m going to highlight two today; one, a data that we presented yesterday from our SB-728-T HIV program, and then I’ll talk a little bit about at least in general terms what I think is one of the most interesting presentations we’re going to make, it is actually going to be on Saturday in our In Vivo Protein Replacement Platform.

So, just to remind everybody, Sangamo is focused in the area of genome regulation, genome editing driven by our core technology of engineering zinc finger DNA-binding proteins, our focus is to develop novel therapeutics that actually permanently change gene sequences in a way that our goal is to engineer genetic cures.

And I’ll give you some sense of where we are in that. We’ve also been quite successful in terms of the business model and the financing of the company, and I’ll touch on that at the very end.

From a strategic perspective, we’re able to leverage this technology platform both in an In Vivo base putting these proteins directly into a person as well as modifying cells, also we take out of the body, modify and put back in. And again, our HIV program is focused in the latter, the ex-vivo side, In Vivo Protein Replacement Platform in the liver in a systemic delivery.

So, I’m going to emphasize today our work in HIV and hemoglobinopathies and In Vivo Protein Replacement, and first the work that we described yesterday in quite a bit of detail at the American Society for Cell and Gene Therapy.

And so, I’m going to go through many of the slides that our Chief Medical Officer, Dale Ando, presented yesterday, but for those of you on the webcast and who listen to the replay, I’ve attached to the end of this slide deck all of Dale’s slides from yesterday. So, I’m going to present a high level view, all of the data slides are attached here and you can access those at the end of this deck.

So, I think many of you know that the core strategy around this is to really recapitulate a well validated known genotypic mutation that’s a mistake in the CCR5 gene that led to this observation that people who don’t have the production of CCR5, when exposed to the virus, don’t get infected, and And probably the best example of that is the so called Berlin patient who received an allogeneic bone marrow transplant from a person with homozygous, meaning both of their CCR5 genes were knocked out and this person is five years plus viral free.

Our goal is to employ our zinc finger technology to knock out the CCR5 gene in cells that come out of an HIV patient to recreate this protected class of cells that are also immunologically active to the virus, and this is a cartoon of that process, an autologous cell therapy process in which we modify those cells and then reinfuse those back into the same patient.

We’ve done quite a bit of clinical work both in terms of our own sponsored programs as well as with academic collaborators including Carl June, and I’m going to summarize the data that we presented at ASGCT yesterday, starting with the first trials that we did, cohorts one through three in immunological non-responders.

And I emphasize the latter case in terms of the stage of disease of these patients, so called immunological non-responders. These are patients who have been sick for quite a while and you can see that third bullet point, averaging median in the age of 21 years of disease, and their CD4 counts coming into this study are very low, they’re in the 200 to 500 range, which is a concern if you have the virus, so these are patients who have been on various forms of anti-retroviral therapy for a very long time. We did a dose escalation from a safety perspective.

But if you look at the key clinical data that we’re interested in evaluating here, it’s well beyond just safety. And so, one of the things I’m going to talk about, but I want you to keep in mind as I go through the discussion of both immune reconstitution as well as proviral effects of the reservoirs is only the baseline status of these people, are not where you would really start if you were looking for efficacy, these are people who have been sick for quite a while and don’t have particularly functional immune systems.

So, the first observation on these patients is really one broadly of immune reconstitution, and we’ve seen a very significant increase and a durable increase in their CD4 counts, remembering CD4 is the target of HIV, and in the vast majority of these patients, we saw a very important improvement in their CD4, CD8 ratio which is an overall measure of immunological health, because the CD8 cells were obviously involved in the actual destruction or killing of the antigen or the invading virus in this case.

And the critical piece is to say, okay, that’s interesting, but could this happen without the modification, and the answer is no. There has been a lot of work done in the adoptive immunotherapy space, and this has not been seen in any other setting unless you’ve knocked out CCR5. And so, this really drives the rationale behind SB-728 as an immune reconstitution agent.

A quick summary and there is much more detail in the depth that I mentioned that was presented yesterday, but a quick summary of what’s driving that immune reconstitution with a single infusion of these modified cells at a year’s point. Well, what’s driving it is there is highly statistically significant correlation between the cells that we’re putting in and the increase in the patient’s own CD4 cells.

And on the right hand side, what really matters if you’re trying to have an immunological approach to this viral disease isn’t just the increase in CD4 cells, it’s the increase in those cells that are responsible for continuing to durably exist and can attack the virus or attack the pathogen that when it sees it, and these are the central memory T-cells.

And so, in order to have a functional cure, meaning, take a patient off of HAART and control the virus, you need to have this compartment of the immune system and you need to have these central memory T-cells, and that’s exactly what these data are showing.

But the question then is, okay, if you have this, what’s the effect on the virus. And so, for the first time yesterday, we presented and I’ll show you another slide in just a moment, absolutely remarkable data. Remember, these are patients who have low CD4 counts, who have been on drug for a very long time, and while HAART is successful in keeping the RNA levels in the bloodstream to undetectable, it is absolutely nothing for the vast majority of the virus which is outside the bloodstream in the so called reservoirs in the gut-associated lymphoid tissues, in the lymph system, in the brain, and so on.

And if you measure this integrated virus in PBMCs, you can get a very clear sense of how much of the reservoir exists, and this is a highly statistically significant correlation in the reduction of pro-viral DNA as it relates to the drug being put SB-728-T.

So, this is going way beyond, this is really now pushing towards what is the principle area in HIV research, which is reservoir reduction and depleting the reservoir, so highly statistically significant correlation between our drug and that. What’s truly remarkable, and I think what you’ll see presented at every HIV meeting for the rest of this year and beyond by many of our people and our collaborators is the following:

We saw in 7 out of 9 patients, this proviral DNA reduction, but what’s never been seen before is an expansion and improvement in the patient’s own CD4 counts. And so, well, IL-7, IL-2 have been used to pump up CD4 counts. There has been a correlative increase in proviral DNA. Never before has there been a study that’s shown an increase in CD4 counts, but a concomitant reduction of the reservoir. So, these are spectacular data and really I think have not been – certainly have not been presented before and I don’t think are as of deeply appreciated as they should be.

So, in summary and cohorts one through three, again significant improvements in the overall health of the immune system in these patients driven by the most important subset that being the central memory T-cells and those central memory T-cells are modified with our zinc finger nucleases.

And very importantly, long-term decrease of the HIV reservoir, nothing else is doing that, and particularly in the sense of seeing a reduction with an increase in the CD4 counts. So, very encouraging data and for those who are looking for and are interested in purely the viral load reduction elements of this, I think this is very, very much on point.

So, now I’m moving to our ongoing trials, those are completed studies, we’re continuing to evaluate these patients over time. Now, to our ongoing trials, we said we’d presented preliminary data. The strategy here in both of the studies I’m about to talk about is derivative of work that we did a couple of years ago with Carl June at the University of Pennsylvania. And so, this is a study that is very much, the outlines of this study is very much like the studies I’m about to talk about, so I’m going to spend a little bit of time on it.

If you look at the far left hand side of the slide, that’s time zero. That’s the day that these patients received SB-728-T, so that’s when they get their cells back that have been modified to knock out the CCR5 gene.

You’ll note the line across near the bottom, that’s the threshold of viral detection for the virus. And so, you’ll see there is nobody, there is nothing above it in the beginning because all of these patients are on HAART, they are all on drug. So, they get our drug on day zero, they stay on their HAART medication, and then they start at the top of the slide you can see this treatment interruption.

And because of what I was talking about earlier, because while HAART keeps the blood low in terms of RNA from the virus, there is massive amounts of the virus in the reservoirs. And so, as soon as HAART goes away, there is an explosion of virus back into the blood stream, it happens every time because of the reservoirs.

If you go back three slides if you can deplete the reservoir, you can eliminate this which means you actually drive to no viral levels without drug, but here what we did is we said, okay what happens to these patients. And so you see six subjects here, I’m going to point to 205, because that’s really what drove our interest in this subject.

205 actually had this natural mutation in one of his genes. So a heterozygote, so we said holy cow, this guy is half way there already, and he became, as you see the green dot at the bottom there, he became aviremic, undetectable viral load before by protocol going back on his HAART during this treatment interruption. So, we said holy cow, that’s interesting let’s see if we can recapitulate that.

And so, that’s what this cohort 5 study in delta 32s are intended to do. So, we include delta 32 subjects [atrophic] (ph) virus and with relatively strong immune systems, and the only difference here is that we did a 16-week treatment interruption but essentially the same kind of protocol right, they get infused, they are on HAART, they go off HAART, we evaluate the reduction in viral load.

So, to date, we’ve recruited 10 subjects on the study, four subjects were presented yesterday, I’ll highlight what was being done there. Three additional subjects are enrolled and on study, and three subjects had to be stopped because they were dual tropic.

So, of the four subjects that we reported on to-date, two of the four subjects had a material reduction in their viral loads, and I’m going to come back to why we think that is in a moment. I’ve emphasized patient 205 to you, I’m going to emphasize patient 504, I’m going to come back to why I’m saying that. But this is the same protocol, day zero, they received a treatment and here you’re seeing a little more data. Look at the spike in their CD4 counts and the green line is our modified cells. The words up there is [pentamer] (ph), that’s how we measure the modification of the modified cells but that’s the work.

So then they go off of HAART and you see the black line that’s viral load, boom goes up. And what you see during the treatment interruption is a significant increase in the modified cells given the virus is now in the blood stream, it’s being activated and becoming immunologically active, and what you see in this patient, he became undetectable viral load before going back on HAART.

And so actually she, it’s a she, she didn’t know she was undetectable at the end of this 16-week period. She went back on HAART temporarily when she realized or heard she was undetectable, she was back off of her HAART and she remains off of HAART, and so obviously we’re very interested in this subject and we’ll continue to follow her. And as I tell you again and again, we expect to have complete datasets by the end of the calendar year for all seven subjects.

But one of the things that’s really important beyond just the number of cells and I’m going to come back to the issue of Biallelic engraftment in a moment. What you see in the green line, it is what’s the composition of those cells and this goes back to these immunological non responders and how long they’ve had the disease and what kind of damage the virus has done versus patients who have a stronger immune system to really look at the capability of these cells, the mountain anti-immune response is to look at the functionality and in particular their poly-functional anti-gag response, meaning how responsive are these cells to various lymphokines and cytokines stimulation, it’s a direct measure of their ability to have an anti-immune response.

And one of the things that’s very interesting in this subject and I’m going to tell you in 504 and I’ll tell you about 506, is they had the most significant reductions in viral load, they also have the greatest response in terms of their poly-functional gag response.

And much like the reservoir depletion correlation with CD4 cells increases, these are data that you’re going to hear quite a bit about over the never several months, including this afternoon, one of the analysts that covers us is hosting a dot-call with Rafeeq’s colleague I think in just a couple of hours, who will really drill down into that. So, any of you who have access to that either on live or on the replay there is an expert call on this data this afternoon.

So, in summary on the delta 32, this is an ongoing trial. And we expect to have much more data and much more follow up by the end of the year as we’ve guided. I think the critical thing is we’re seeing a reduction in viral loads during the treatment interruption, two of the four patient’s consistent reduction. One achieved A- Viremia while knock on HAART.

Importantly we continue to look at the kinds of biological indicators that are most involved in both immune reconstitution as well as anti-viral. But again, I emphasize what is both necessary and what we’re trying to determine is it sufficient in order to have a functional cure we have shown. And that’s I think a very important takeaway from these early observations.

The last is, and this is very consistent with this idea of increasing the number of cells Biallelic modification and I’ll spend a bunch of time on that in a moment. If the pre-condition of these subjects before they get their infused SB-728 cells in order to get in a significant enhancement, this is a study that’s a dose escalation to our point to the fourth major bullet point under cytoxan conditioning.

And what we’ve had to do is go slowly through the safety parts of this so the first two dose cohorts are very low levels of cytoxan, they’re not intended to have an engraftment, enhancement capability. We’ve completed those and so this is a summary of where we are. To date we’ve completed the first two dose cohorts, little bit of nausea, little to the cytoxan but has been optimized or the results with anti-medics.

And so this is ongoing. The key issue though is the third dose, the 1,000 mgs/m2 is really the dose where we think we can begin to see this engraftment enhancement capabilities and that’s exactly where we are now. We’re starting that part of the study.

So, now let me talk about that entire issue of engraftment enhancement, why are we doing the heterozygote study and why are doing engraftment enhancement. And here are new data that we presented yesterday. A highly statistically significant correlation between Biallelically modified cells, definition, those cells for our zinc finger nucleases targeting CCR5 have disrupted both of the genes in a given CD4 cell and reduction in viral load.

So, we said coming out of the Penn study, we’ve seem this guy going in and reading, we’ve seen a couple of people reduced in viral load. We think there is a real correlation here. That correlation has only been enhanced. The power of breadth of that is only – it is only been enhanced by these data.

So, increased engraftment and Biallelically modified cells is precisely what we’re doing in this third cohort of the cytoxan space. We’re exactly where we want to be based upon these data.

The last data slide I want to show you is one, I want to go back to what I was trying to put in your heads, the patient 205 and patient 506. If you look at those subjects who have had the most significant amount of viral load reduction and if you look at the level of engraftment of Biallelically modified cells, we were clearly starting to establish a therapeutic threshold and this is very, very exciting. That gives us a target.

8% to 10% of modified cells. And so the one person on the green side, the non-delta 32, this was the patient at Pan who had a two-load reduction in viral load. We look at the engraftment numbers that he had. So this is really where we’re headed. We’re seeing a dose response in this and reaching to a therapeutic threshold of Biallelically modified cells and it’s correlation with viral load.

So, that’s a lot of information. I encourage people who are interested in this to review these summary slides that covers what I’ve talked about. But cohorts one through three are really teaching us a lot about a, the immune reconstitution aspects of this therapy which are critical in this disease and b, I think the newest element is reservoir depletion that is the real critical element here, reservoir depletion in the context of immune reconstitution, absolutely unheard of and remarkable.

In the delta 32, again, ongoing but early indications of exactly what we thought. Maximizing Biallelic engraftment, maximizes viral load reduction. Stay tuned.

Cytoxan study, early in the non-therapeutic doses and moving into what we think will be an engraftment enhancement dose, exactly what we want to do, increase Biallelic modified cell engraftment, impact viral loads. And those of it are the studies that are ongoing right now. And finally, just a reiteration of where we are and the new data on Biallelic engraftment.

So, one of the things we didn’t talk about yesterday and I do want to mention here our next steps. I think I’ve covered most of this, three additional subjects in terms of cohort five, three more subjects at the top dose level and the cytoxan study. And then we will expand that study to another six subjects on tolerated dose and including potential modifications with regard to some of the biomarkers that we’ve been looking at and so on.

We’re also again working with Carl June, both in terms of an increase, now going up to 3,000 mgs/m2 to enhance engraftment, I mean, this is highly statistically significant. We all think we’re on the right track here. And so we’re going to push this until we see exactly that kind of outcome. And we’re also improving the process and moving to a non-messenger and a base modification.

And lastly, behind all of this, next year we’ll be filing and IND of taking this exact same approach from T-cells and doing it into myeloid progenitor.

So, that’s a quick overview. As I said at the end of this slide deck, for those of you who are online or listen to the replay, are all of the data-slides from the – from yesterday’s talk.

But let me turn quickly then to what I also think is a very important presentation that will be made on Saturday, I believe it is selected as one of the top six in all of ASGCT. And that relates to our In Vivo Protein replacement platform.

So, as those of you with us know we publish pretty extensively, these are examples of where we’ve been able to go in and fix correct change, the disease related gene, in a way that permanently corrects it and permanently changes the disease phenotype.

So, the zinc finger nucleases can be engineered to any of these sites. What we presented at ASH late last year and I talked about early this year, is the ability to leverage his approach into one gene, a very, very productive gene, the albumin gene in the liver. And because we can go in with zinc finger nuclease we can put anything we want into that site and we have.

And so, we talked about factor 9, we presented data in several phases on the storage diseases, had ASH this last year. And I’ll say this twice, I’ll say it now and I’ll say it again, and an ASGCT on Saturday, you should expect to see more and I think significant work in this space.

But this space is broadly leveragable across enormous number of protein replacement platforms. These are data that we did in collaboration with Cathy Hyde, the University of Pennsylvania in factor 9. And you can see on the right hand side, that’s where we put the factor 9 gene into the albumin locust co-opting less than 1% of the albumin genes and getting a 100% of normal factor 9 expression, and remember this is a permanent modification and the downstream biology shows normal clotting times in these animals for the life of the animal.

So, again, highly leveragable into other areas. We own all of the LSDs, we’re partnered with Shire, on the factor 8 and factor 9 and those continue to move forward, I’ll give you the R&Ds but these are the preliminary data we presented in ASH last year on the LSD space and that continues to move forward very well. I’ve mentioned the bottom abstract here 11 o’clock on Saturday.

So, I don’t have time today to go through (inaudible), I’ll talk about timelines. But I think it’s very important to always discuss our work in the Huntington’s program that we’re doing with Shire, it’s going very well. And hemoglobinopathies which is our own, and you should expect to see a significant visibility particularly around the hemoglobinopathies program in the relative near future.

So, all of this adds up to what I think is an extremely robust pipeline and data-flow. You’ve gotten a very quick sense of the preliminary data that we just presented, that’s the first data triangle in – at ASGCT and I think those data are absolutely spectacular. But I think they are preliminary data, at least as it relates to delta-32 and cytoxan studies. So stay tuned at the end of the year we’ll have complete datasets around that.

And then over the next two years, three years, seven new INDs, three of which are fully funded by Shire, both in terms of research and development and upon firing those INDs we receive an $8.5 million milestone in R&D. And then a total of over $200 million in milestones as those programs move forward through development and commercialization.

And then right behind the Shire factor 8 and factor 9 INDs, again using the same leveragable albumin strategy, we’re guiding to two LSDs into the clinic for our own account. And then next year, the hemoglobinopathies into the clinic.

So, as I mentioned, right upfront, we’ve been very successful in leveraging this core technology. It’s agnostic to the gene, it’s agnostic to the tissue, it’s agnostic to the host. And so, with DOW we’ve done a very significant partnership in agriculture. With Sigma we’ve done a very important partnership in the earlier transgenic animal models and engineered sell lines.

Collectively those together have brought in nearly $100 million in the Sangamo to date. And we have ongoing milestones and royalties from those collaborations. The Shire partnership as I mentioned, they’re funding 100% of our internal and external costs across major milestones.

And so, we’ve always had a history I think of being considered good stewards of capital. But I think we’ve actually taken into a new level. And so going forward, with those partnerships while filing 7 new INDs and in completing all of the HIV work that I have mentioned, all of that on our own nickel, the assumption of no new financings, no new partnerships, no new grants for just succeeding around these milestones that I talked about with Shire, over the next three years our burn rate is guided to be around $30 million and I think that’s remarkable for a company that’s adding that kind of value that we’re adding.

And from a balance sheet perspective, 53 million shares outstanding, no debt, no warrant, no converts, just of the NOVA common stock.

So, three more slides just to summarize things. ASGCT is in full swing. And listen I was there yesterday and we have several of our colleagues there. We hosted a lunch there yesterday for full (inaudible) results plus three of our top shareholders, it was a great meeting.

We will see more data coming out we’ll have a press release on Monday, summarizing some of the key findings that I’ll mention in the KOL call later this afternoon. And if you can access that either live or replay I’d encourage you to do that. I will give you the more color particularly to the immune reconstitution and reservoir depletion aspects of the HIV program.

And again, as I mentioned you’ll see more data around our pre-clinical programs and I’d highlight the hemoglobinopathies not at ASGCT but shortly after that.

So, in summary, if we’re successful and if there is a magic sauce it’s this core technology. It’s extremely robust and I think we’ve got a very clear vision of where we can apply this with clear differential, technical advantages to try and engineer genetic cures.

We’re well on our way to doing that. The HIV data are unbelievably powerful. And by the end of the year we’ll have complete datasets with the preliminary data and the data from cohorts one through three put us on a track in terms of what is necessary in order to drive a functional cure for HIV. Now is the challenge to optimize some of those conditions.

You’ll see more data around our In Vivo Protein Replacement Platform. And again over the next two or three years that’s going to get an enormous amount of visibility. And I mentioned Huntingtons and hemophilia just stay tuned on that.

All of that adds up, to a significant amount of activity and data around our HIV program this year. And then seven new INDs by 2015, and a sufficient amount of cash, actually a very strong cash position to get through all of that.

And lastly I think it’s important to talk about our business model or business strategy. And while I think it’s clear we’re focused on creating near term value, I think we’ve also mitigated some of the inherent risk in biotech both by the business model in terms of what we’ve partnered and what we’ve kept, and the revenues that we derive from that.

The diversity of therapeutic product strategies In Vivo Ex-Vivo specific, T-cells, stem-cells, it gives us a lot of different shots on goal. And we’re agnostic to the target so we can follow the biology around that. And lastly, we’ve got the balance sheet to execute on this.

So, thank you very much for your attention. I appreciate your time.

Masha Chapman – Bank of America Merrill Lynch

Thank you. Unfortunately we are out of time. So we can’t ask questions but they were very impressive. Thank you very much for participating.

Edward Lanphier

Thank you.

Question-and-Answer Session

[No Q&A session for this event].

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