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Sangamo Biosciences, Inc. (NASDAQ:SGMO)

J.P. Morgan Healthcare Conference Call

January 17, 2014 2:00 PM ET

Executives

Edward Lanphier – President and Chief Executive Officer

Operator

Good morning everyone. My name is Britney [ph] and I’m on the Biotech Equity Research team at JPMorgan. Our next presenting company is Sangamo Biosciences and presenting today is President and CEO, Edward Lanphier.

And with that I will hand it over to Edward.

Edward Lanphier

Thank you Britney. And thank you JPMorgan for including Sangamo in this year’s conference. I usually go straight into the forward-looking statement, but I want to quote one of my colleagues at Sangamo when we had our holiday party he said he is a German guy he was Edward best year ever. 2013 was a great year for us. But with that said, these are forward-looking statements. I think 2014 is going to be even better and that’s what I look forward to telling you about.

So, Sangamo as many of you know is very unique, very unique in one specific way and that’s our core technology. We’re developing a platform that allows us to engineer proteins to bind very, very specifically to any sequence of DNA we want, and then drive biologies at the DNA level. And so much what I’m going to talk about is completely derivative of that fact. A platform technology, target DNA any sequence we want with singular specificity and then use that to drive unique biologies, permanent biologies at the DNA level. And the goal for this platform and I’ll say this a couple of times during the talk, isn’t necessarily just to develop a better drug or an improved formulation. Our goal is literally to change the genomes in a way that we can provoke permanent cures to diseases. So, this is not an unambitious objective, this is a paradigm shifting effort. And what I’m looking forward to is updating you on the progress that we’ve made to do that. So, at the highest level summary this is the way we kind of think about the technology itself.

We use a naturally occurring protein called zinc finger proteins this is the way we humans and plants and even yeast have evolved to, bind to and control the genes in our genome. This is the most abundant class of DNA-binding proteins on our planet. We have round numbers 30,000 genes in our genomes 3,000 of those genes, 10% in code zinc-finger proteins, this is the operating system for our genome and what we’ve been able to do is bring that into the laboratory and make it industrial to be able to design in a combinatorial way these proteins so we can target exactly the gene sequence we want. And then we link these to what we would call functional domains naturally occurring proteins that allow us to either turn on or turn off the expression of a gene, for the physically and permanently modify that gene change the DNA sequence.

So. that’s the platform we’ve been I’m going to say a very successful in monetizing and leveraging this core science into specific commercial areas, we’ve been good at saying we’re going to stay focused in the therapeutic space we did deals early on with Dow Chemical and Dow AgroSciences and Plants doing all the different research, we did a deal two years with Shire in the area of hemophilia and again I’m going to talk to you about all of these, but the goal there isn’t the better Factor VIII or factor IX or longer lasting a better circling, the goals to cure kids. And I’ll tell you about that.

We also just announced a week ago, today is Thursday, the anchor for the meeting today is Thursday a week ago we announced that important partnership with Biogen Idec and I can recall I referred to this before, but any who didn’t hear George Scangos’ presentation on Monday I’d refer you to his transcript.

So how do we think about this platform for targeting DNA and really developing novel therapeutics. So left-hand side of the slide that’s the kind of the platform turn on, turn off, change DNA. We can apply this technology in two ways. We can put these engineered zinc-finger proteins directly into a human and that’s the In Vivo approach and here we merry our technology with a delivery platform called AAV, Adeno-Associated Viral Vectors and I’ll tell you all about what we’re doing there. We also can use this on an ex-vivo basis take cells out of the patient physically modify those cells with our technology, and then put those modified cells back into that same patient.

The focus for us and hopefully you can this from a highlighted point of view are that the colors here that the blue is what we’ve partnered, the green is where we’re extending our resources into these areas and I’m going to go through each one of these buckets, each one of these areas and talk about how we’re applying our technology and what we, the current status of that of what goals are going forward. But I want to emphasize one more time. That the goal and you can pick any one you want on here. Our HIV Program, our Hemoglobinopathies Program and Sickle are programs and lysosomal storage diseases or in Factor VIII and Factor IX. The goal is not a better therapeutic, the goal is literally to engineer genetic cures to do human genetic engineering, to change the DNA in a person, in a way that they no longer have the disease and they make the correct protein. And that’s a huge opportunity, but it’s a huge opportunity but it’s a huge challenge as well.

So let me tell you where we are and let me kind of work backwards if you will, from the most recent news and I think what investors are, have focused on most this week and that’s our newly announced partnership with Biogen Idec in the area of hemoglobinopathies and specifically Sickle Cell and Beta-Thal.

So I’m not going to go through a lot of detail about the disease essentially it’s a mistake in the adult beta-globin gene that causes this clinical phenotype in different, represented in different ways in Sickle and in Beta-Thal. But one of the things that’s true is, any kid that’s born who has this disease who don’t know it right away, because they continue to express a thing called gamma-globin or fetal hemoglobin. And after a period of time, a year or so, there is a transcription switch that turns off the expression of fetal hemoglobin and there were people who don’t have, having mutation that switch they never turn it off and if they have the disease it’s a very, very mild form of the disease.

And so what we’ve shown and I’ll show you some data in just a second, is that we can go in to stem cells, CD34 stem cells of patients with either beta-thal or sickle turn off permanently, knockout permanently their BCL11A gene and that allows for fetal hemoglobin to be produced at therapeutic levels. And that’s exactly what we presented a month ago or so at ASH. This was actually a featured podium presentation as well as a press release hosted by ASH on this work. Again I won’t go through the detailed, anybody who wants this presentation please see me or Liz Wolffe we’re happy to get you all of the data here. But the top line is this, with transient, short-term, hours of expression of zinc finger nuclease, we can make permanent disruption of BCL11A in stem cells that drive a clinical scale and clinical efficiency to dramatic improvements or elevations in fetal hemoglobin and again the goal here is to re-engraft those modified stem cells in a way that they permanently exist and now make that corrected globin carrying capacity so a functional cure.

This is the outline of the agreement we just announced on Thursday with Biogen Idec. Sangamo is responsible for all of the work through the initial clinical trials in beta-thalassemia and we will jointly determine the responsibilities in the Sickle Cell Program and then Biogen will take on all of the downstream clinical development, manufacturing and commercialization. We retain a co-promote right in the United States. This is a narrowly defined license in the area of sickle cell, and beta-thalassemia and the economics which again are in our announcement $20 million upfront for exclusive rights in the area of sickle cell and beta-thal, full funding at Sangamo for all of the work that we do, including the initial clinical trials. Round numbers $300 million in milestones with the near-term milestones being Phase I milestones of $7.5 million from each of the beta-thal and the Sickle Cell Programs, tiered escalating double-digit royalties and we retained a co-promote in the United States for both programs.

So, this is exciting I have a world of respect for Biogen in terms of their scientists – scientific capabilities and translational capabilities, but I’ve been talking a long time about the power of this platform to not just generate therapies but to generate cures. And so, I’d refer you to the quote in the announcement from Biogen from Doug Williams, their Head of R&D where he says, we’re interested in developing Sangamo’s gene-editing technology to create a single approach that has the potential to have a functional cure for both beta and sickle.

So, exciting program, great data were published today, I represented at ASH happy to get you all, but I think significant validation, not just of this approach but of our platform. So also at ASH we presented a significant update on our In Vivo Program, remember what I just talked about was an ex Vivo Stem Cell Program. We presented a significant update on our In Vivo Program in Factor VIII and Factor IX that we’re partnered with Shire, but the strategy that I’ll review for you is a general one that can be applied to any of these Protein Replacement Therapies or Enzyme Replacement Therapies. So what is this approach.

We presented this is at a couple of years at ASH and I think last year, sorry ASH 2012, the mouse data around the albumin strategy was featured in the final symposium is one of the best of ASH, because this is the general strategy, we have built zinc finger nucleases that we put into the liver of these animals, because we’re still in animal studies, where we can make a break in just down the stream from the albumin promoter and then we can put it in a donor gene, a gene of interest can be anything we want and cause that to integrate, permanently integrate just down the stream from the albumin promoter, well via albumin. Well we make pounds, literally pounds of albumin a year.

And what we would like to do is take way less than 1% of the albumin genes in the liver in order to put in whatever therapeutic protein we want whatever the interesting therapeutic proteins. Well these are ones where there is a lot of recombinant protein that’s sold because kids or people have diseases like hemophilia so recombinant factor VIII, recombinant factor IX, Gaucher’s, Pompe’s, Fabry’s these are all enzyme of protein replacement therapies and this strategy of using and harnessing the albumin promoter is agnostic to the gene that we want to put down the stream from that.

So this is highly leverageable. And how much of this do we really need how much of the albumin we need, this is an eye test and I apologize I have put it in mostly so people would come back and look at the slides. It’s the blue box down below but we need far, far less than 1% so very, very little of the albumin gene co-opted in order to get therapeutic levels of any of these Protein Replacement Therapy.

So, the pointy edge of the sword on this strategy for us is our collaboration with the Shire, two years ago we did an exclusive deal with them in the area of hemophilia so Factors VIII and IX and that program is going extremely well. We presented the mouse data on this at last year’s ASH and this year we presented the very important and many people believe clinically predictive data from the non-human primate studies.

And again, anybody who would like to have the presentation from ASH on this we’re happy to provide it, but at the highest levels of summary of those data again permanent modification of the endogenous albumin gene as the liver regenerates the, because it’s inserted into the endogenous gene all of the progeny of those cells still have that Factor VIII or Factor IX gene and we’ve presented and published that work in the mouse model and then we recently again at this ASH showed a non-human primates that we were able to get therapeutic levels, circulating therapeutic levels of a target therapeutic protein and really provides proof-of-concept for this. And I’ll talk about this at the end, but our goal this year is to take both the Factor VIII and the Factor IX programs to IND and file those INDs and at that point Shire takes over the clinical development.

But what we have retained, what Sangamo has retained is the ability to leverage this exact same approach, these exact same nucleases, these exact same albumin strategy for a dozen plus other enzyme replacement therapies, because remember the strategy is agnostic to what we put into that point. So we are working very, very hard on well validated, well, large market opportunities or again our goal is very disruptive, it’s to actually have a permanent insertion, permanent correction and therapeutic circulating levels. And this is data that we presented at ASH again I think we presented on four different LSDs showing the insertion at the albumin locus and that program is going forward very well.

So, in general terms and I’ll come back to the timing guidance on this, if we’re successful and this is hard work, I’m not suggesting this is like falling off a log, but if we’re successful the goal here is to insert whatever therapeutic gene makes sense in a person with a disease, put it in and about less than 1% of their liver cells downstream from the albumin promoter with the goal of those liver cells secreting that protein into the bloodstream in a way that is corrective or therapeutic for that disease. So, exciting and very disruptive potential platform.

We also presented work again on our Shire collaboration in November on our Huntington’s Program I’ll move little more quickly through this piece of things. As you all know Huntington’s is a terrible disease, there’s nothing that can happen and people know they are going to get it, because people who are, won’t get the disease have a limited number of these so-called CAG repeats or these duplicated amino acids in their gene. People who have longer sequences, much longer sequences in one of their two alleles of the Huntington genes will get Huntington’s. And it’s a terrible and devastating disease.

And this is just a cartoon or a graph if you will of, on the left-hand side these are the length of the CAG repeats in normal alleles, people who have the disease in one of their alleles have multiple CAG repeats. And so what we have done, is we’ve been able to build a zinc finger, remember it binds with the DNA level and this is where these CAG repeats are, at the DNA level.

We’ve been able to build zinc fingers that discriminate a 100%. And only repress the disease related allele and leave the other allele completely alone, and that’s what is summarized here and please, if you have any interest in this program ask, we’ll get you the data presentations from the Society for Neuroscience that we presented in November. But the key findings are what I’ve just said, highly selective repression of the disease allele leaving alone the normal allele which is needed in these area, in both the mouse model of – sorry Huntington’s and also in-patient cell lines. And I won’t go through it now, but there is a very, very severe model of Huntington’s as a clasping mouse model and we presented the first In Vivo data around that program.

One other things that’s critical and I mentioned this upfront, is that in order to effectively utilize this very robust technology platform we have, is we have to get it to the right cell, for the right period of time and with the right duration, and so on so, this is delivery platform.

And so one other things we’ve worked on long and hard is to make sure we have accessed to and are therefore agnostic to whatever delivery system makes sense for a given disease in a given target. And so the bottom of this slide reminds me to tell you that we’ve gone very deep in the area of AAV and this summer we acquired a company, the leading company in the area of AAV and the CNS. The company called Ceregene, it spun out of the company called Cell Genesys that acquired that company from Celmatix which is something I know some about.

So it’s a long, long way of saying. This is a very interesting asset, we acquired it this summer. This group has by far in a way treated more people than any group combined or all groups combined in CNS gene therapy. We’ve acquired all of those rights all that GMP processing, all of the data and it’s directly leverageable, not only into our Huntington’s Program with Shire, but into other CNS applications.

So that gives you a sense of where we are, where we’re going. I want to close on the programs and discuss really our most mature effort and that’s in the area of HIV. This is an absolutely game changing effort in the area of HIV. Again the goal here isn’t to develop a better, faster, deeper, stronger, longer lasting antiretroviral therapy. The goal here is to modify an HIV patient’s immune system in a way that that modification can create a compartment of the immune system capable of not only destroying or affecting the acute replication of that virus, but trafficking and this is the critical piece, trafficking throughout the body where no antiretroviral therapies go, they look lot like the bloodstream and actually begin to affect the reservoir, this deep body of HIV that’s inherent in these patients and no other therapy has been shown to do that.

So this is the dual approach that we’ve taken I’m going to start at the bottom of the slide, we presented these data at the HIV persistence during therapy what does that mean, it means the virus exists in the reservoir even during therapy. And so what was really featured at this particular conference in December was the bottom here, this reservoir depletion and immune reconstitution element and as the bottom bullet-point said, nine out of nine patients and this is from a Phase I trial that we started over three years ago nine out of nine patients who received one therapy, one therapeutic infusion of these modified T-cells all of them had a reduction in their HIV viral reservoir and a concomitant increased improvement in their CD4 counts.

So, that is the spectacular observation and the one that really does get the intention HIV community. The other area is the acute viral load and I’ll focus really on the key observation that drives our strategy around this piece, and that’s the second bullet point. What we’ve shown and I’ll show you the data on the next slide, is that there is a statistically significant, highly statistically significant correlation between the number of the cells that we put in that where we modify or knockout the CCR5 gene and reduction in viral load. And the third bullet point there is, we’re using strategies to augment the engraftment of these cells and it’s working we’re actually moving towards a threshold, a therapeutic threshold of these biallelicly modified cells. And I include the following slide at the, against the suggestions of many of my colleagues because it’s very complicated and confusing but I want it out there, I want people to be able to see what we’re looking at and why we believe with these escalating Cytoxan doses we really are moving towards a threshold of being able to establish consistently the engraftment of biallelicly modified cells and its concomitant affect on viral load reduction.

So, don’t have time today to go into this, I encourage people who are interested in where we are on this and why, we believe we’re on the threshold of having a threshold determine that drive significant A viremia meaning viral load reduction I’d love to talk about it.

And with that I’m going to just actually emphasize when we will be talking about it again and that’s like the second of the bottom bullet point here we have. I’m pleased to say we have again two oral presentations at CROI this year, the Conference on Retroviruses and Opportunistic Infections and this is in early March and we will use that conference we’ll present new data on those presentations but we’ll also use that conference to talk more about where we’re going with this program, what are the optimal doses around Cytoxan, what are the baseline characteristics that represent the most responders or vesting grafters in these programs. And that’s what’s really summarized in these upper bullet points. The last thing I’ll say and I’ll emphasize this in just a moment is, on the heels of all this work that we’ve been doing for last three or four years in autologous T cells, CD4 T-cells we’re also going to be filing midyear, this year a program in hematopoietic stem cells were also knocking out CCR5. And that’s an opportunity on the slide here.

So this summarizes hopefully and gives you a contextual sense of timing on all of the things I’ve been discussing. Phase II data will be presented at CROI in March and ongoing activities through the rest of this year in Phase II work we’ll talk more about that. The Stem Cell HIV program I just discussed midyear this year and then very, very important for us is, it’s moving this albumin strategy, moving this In Vivo Protein Replacement Program into the clinic by filing INDs by the end of this calendar year and moving our Second Stem Cell Program, this is the partnered program in beta-thalassemia to an IND by the end of this year. Those are where we’re focused, that’s what’s driving value and that’s where every single person at Sangamo is focused. Beyond that, there’s enormous leverage of what we’re doing, remember I said that same BCL11A knockout, the same zinc finger nucleases, the same target cell, CD34 cells can be applied in sickle and so enormous leverage to take that forward to an IND in 2015.

The same albumin reagents, the same delivery platforms, the same toxicology size could be leveraged into now these LSDs and that’s what we’re focused on for our account in 2015 and then the Huntington’s Program in 2015 as well. So, over the next 24 months I think an enormous amount of visibility, enormous amount of progress that we are moving forward. And just to quantify some of this, we guided to ending this year after doing a $70 million financing, in September we guided to ending this year between $125 million and $130 million in cash. I can tell you we’re going to be at the top end of that range and with the $20 million upfront from Biogen we’re in a very strong cash position and actually expect to end this year with above a $130 million. But we’ll give more formal cash guidance on fourth quarter conference call in February. But a strong position and more than sufficient runway, more than sufficient runway to really hit some of these key milestones over the next couple of years.

So one-minute summary, the zinc finger platform is unique, it’s powerful, it’s proprietary to Sangamo and it’s enormously general, it can be applied to any gene and we can engineer these to be enormously specific. And our goal and it is enormously ambitious and you’ve just heard it, is not to develop novel therapies, it’s to develop cures. And if we’re successful, I think it can be very, very disruptive. You’ve got a sense of the path we’re on, you have a sense of the kinds of strategies so we’ve taken, a sense of the targets that we’re going after, the rationale for that and that’s summarized where we are here. But all of that together and as I said we’re going to have a lot of data flow over the next 6, 12, 18, 24 months. And I think is an opportunity for us to really call shareholders to see the potential in this that we see and I think the Biogen agreement that we announced last week has given the people a lot of enthusiasm to continue to look into this platform.

So major partnerships, sufficient capital to get things done, but we’ve retained in enormous value for the platform itself and are continuing to invest in that. So a business model that balances proprietary programs with partnerships, diversity of therapeutic approaches, ex-in vivo direct into the tissues, a variety of validated targets that are well established in terms of their therapeutic relevance and a strong balance sheet to get us there.

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

Question-and-Answer Session

[No Question-and-Answer Session in this event]

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