Sangamo BioSciences, Inc. (NASDAQ:SGMO)
Bank of America Merrill Lynch 2014 Health Care Conference Call
May 14, 2014 12:20 PM ET
Edward Lanphier - President and CEO
Colin Bristow - Bank of America
Colin Bristow - Bank of America
Thanks for joining to the Bank of America Health Care Conference. My name is Colin Bristow I’ll cover the U.S. major pharmaceutical names. It’s my pleasure to introduce Edward Lanphier, President and CEO of Sangamo [BioSciences].
Thank you Collin and thank you for including us in this year’s conference. My presentation will contain forward-looking statements I would refer you to our filings with the SEC and particularly Forms 10-K and 10-Q.
The single most important thing to know about Sangamo is our core technology. It’s really what drives and enables everything we do. What we’ve done is take a naturally occurring class of proteins, a type of protein whose normal function in our bodies and in virtually every organism on this planet is to bind to DNA and control or regulate the expression of our genes. And these proteins are called zinc finger proteins. And if you think about this similar if you go back 40 years and you think about the evolution of monoclonal antibodies. What we took was (inaudible) a protein structure out of our bodies an antibody. We brought that into the laboratory and we began to focus that antibody on a target that we are interesting in. So whether it’s the EGF receptor or the FGF receptor whatever happens to be we use techniques to select and perfect the specificity of that antibody to a target. And that is exactly what we have done with this naturally occurring human protein motive zinc finger proteins, we have built proteins and can build proteins that combines specifically and singularly to any DNA sequence we want that’s the core competency. We can then use that to target a gene and affect that gene in a clinically relevant or commercially relevant way.
For Sangamo what I am going to focus on in this presentation is we are interested in identifying genes where there is absolutely no ambiguity between the gene and a disease, target that gene and impact that gene in a way that we don’t just try and improve the outcome or affect the treatment but actually cure the disease.
So those are really the fundamental things to know about us, the core competency of engineering these proteins to target exactly the gene we want and the kinds of biology the kinds of clinical outcomes that we are trying to drive. So I am going to spend most of this talk talking about the targets that we are going after, the status of those programs but at the end of the day 95% of what you should take out of this is the core competency and the kinds of biologies we can drive.
So this is the only slide I am going to use to talk about the technology platform at the top of this zinc finger proteins again we can engineer these to target precisely and singularly the DNA sequence we want and as I will tell you on the next slide DNA in us is the same as DNA in mice is the same as DNA in corn this could be applied to any host, any gene sequence.
And then again back to the antibody metaphor, much like an antibody with the conjugate to toxan or an isotope, we link to these zinc fingers that bind exactly to the gene we want a protein, a functional domain that would turn on the gene or turn off the gene as in the left hand side of the slide or enzymes, nucleases, they allow us to target a break in that DNA that we want to target and then resolve that break either by disrupting the expression of the gene or by inserting a gene at that target site. So specifically genome editing.
And as I said, we have been quite successful in monetizing this technology and applying it broadly across multiples species, multiple organisms at the bottom of the slide, over the last 10 years or so, we have done significant partnerships with Dow Chemical in the ag space, in the plant ag space with Sigma-Aldrich and transgenic animal and engineered cell line space and collectively with those partnerships have brought in about a $100 million to Sangamo and continue to generate royalties and milestones.
But the focus of our platform for us is really to engineer genetic cures. And I will go through each one of these but we are working with Shire in the area of hemophilia, again Factor VIII gene hemophilia, factor IX hemophilia, unambiguous correlation and I will go through each one of these. We are also working with them in Huntington’s. And then recently, we announced the partnership with Biogen in the area of sickle cell and beta- thalassemia and I will come back to the target there as well.
But the real goal for us is to apply this technology to genes where there is no ambiguity about the relationship between the gene and the disease and then develop novel therapeutics, curative therapeutics around that. So how do we think about the application of this platform? Well, the far left hand side is that tool box of either regulating of specific gene or engineering a specific gene. The top part of the slide, we can deliver these zinc finger transcription factors or the zinc finger nucleases in-vivo and we employ a vector AAV to go either directly into the liver; and this is a way in which we can actually use the most powerful protein secreting organ in our body for our own purposes, I'll come back to that, but we can use this to essentially replace these recombinant proteins that these patients get on a weekly or monthly basis. We want to turn their liver into their own protein production factory. We can also apply this directly into tissues such as the brain or the eye and I'll show you examples of that.
On the bottom, we can also use this technology by taking cells out of the body engineering those cells and putting them back in. The bottom of the slide, we can do this in pluripotent cells without modification is then in all of the daughter cells or derivative cells of that stem cell and things like sickle cell and beta-thal are great examples of where that can potentially be curative. We can also this in differentiated cells like CD4 T-cells, which are the target of the HIV virus, and I'll come back and talk about that application.
But this is how we strategically think about the application of the platform and where it can be applied with differential advantages, again focused on not just therapeutic development, but engineering curative outcomes.
So, let me start with the ex-vivo approach and our most advanced effort which is in the area of HIV where we're knocking out a gene that HIV must use to infect their target which is the CD4 T-cells. So, this is a complicated slide, I'm going to try and go through it fairly quickly. At the far upper left hand side, what we do is ex-vivo we take T-cells, CD4 T-cells out of an HIV patient, we put into those T-cells a zinc finger nuclease that targets a gene that makes CCR5, which is a receptor of protein on the surface of CD4 cells that HIV must use to infect those cells. And the picture here is of a person named Timothy Brown, the so called [brain] patient who received stem cells from a person who had both of his CCR5 genes naturally mutated, he didn't make normal CCR5, didn't make CCR5.
And when those stem cells went into Timothy Brown who had HIV, he is four years later HIV free because his immune system could not be infected by the virus, but could destroy the virus. And that’s precisely what we're trying to recapitulate with zinc finger nuclease is knocking out CCR5, but again autologous cells, so that you can do this for any HIV patient.
One of the outcomes on the right hand side of this slide is acute control of viral replication; very analogous to what antiretroviral therapies do. Our goal is a functional cure, meaning a patient can go off of their antiretroviral therapies and their immune system modified to knockout CCR5 to now control the replication of virus.
We’re also at the bottom left hand side very interested in creating cells that traffic throughout the body, most of our T-cells, 80% of our T-cells are actually outside of the blood stream in our gut, in our lump, in our brain. And those cells infected by the virus are setting there just waiting to put more of the virus back into the blood.
We've shown that these cells can circulate and significantly reduce the reservoir, the so called reservoir of HIV. So this is the true mechanism of our approach, SB-728-T. In March, there was a lot of activity around this program, published in the New England Journal of Medicine, the early work that we've done with Carl June and more recently the data we presented a CROI, I won’t go through each one of these. But the basic idea is what we’ve been able to show is if we can knock out both of the genes, the CCR5 genes, so called biolytic modification, again a sufficient number of those cells into these patients that we can have a direct control of viral replication in a long-term depletion of the viral reservoir.
In terms of next steps, we’ve completed these dose ranging studies both looking at patients who have a natural mutation in their CCR5 gene and we have three of seven patients during that study who became undetectable, one patient continuing out of antiretroviral in last report at CROI 31 weeks. And also using a strategy where we enhance the engraftment of these cells using Cytoxan preconditioning.
And so we’ve announced that we’ve initiated a Phase 2 trial, 12 subjects at an optimal Cytoxan dose and to enhance the engraft one of these modified cells that’s ongoing or begun. We’re also modifying the process to eliminate the introduction of the nucleases by an antivirus with messenger RNA. This enhances the modification efficiencies, but it also gives us the opportunity if necessary to retreat these patients.
So those are ongoing and we’ll update on this program as I said at the bottom of this slide at the American Society for Gene and Cell Therapy and I’ll say more about that in a moment.
So that’s what we’re doing, ex-vivo in differentiated cells, CD4 cells. We can also apply this technology in stem cells and the most advance effort here is our program where we’ve partnered with Biogen in the area of hemoglobinopathies and specifically sickle cell disease and beta-thalassemia.
And so the call here is to actually recapitulate a production of a protein, the fetal globin gene which is turned on during in utero development and also for a short period of time after birth. People who have sickle or beta-thal, but have a natural mutation in BCL11A don’t show any of the symptoms of that -- of the sickle or beta-thal. And as you can see from the quote here from Biogen, the goal here is a functional cure for both beta and sickle.
And I think in the context of some of the news that was announced yesterday or this morning in the area of stem cell, beta-thal and sickle very exciting work for patients, very important for patients. But as these programs develop, stem cell modification strategies for both sickle and beta-thal, there will be clear differences between the strategy that we are undertaking which is the transient very short term expression of zinc finger nucleases knocking out a disrupting BCL11A leaving nothing behind, just the disruption of BCL11A versus alternatives that have long-term expression of the beta-globin gene. So exciting news for patients, exciting and important for the field of stem cell modification in hemoglobinopathies but as the programs develop, I think we’ll see very clear choices and differences for patients.
That’s an example of what we are doing Ex Vivo, let me turn to the In Vivo side we can deliver zinc finger nucleases directly to the liver using AAV. The goal as I mentioned right upfront is to employ the liver which is the largest secretor of proteins in our body to actually secrete normal levels, clinical level of whatever protein we want. So how do we do this? What we use in the liver is the most powerful driver, the most powerful promoter in the liver which is the albumin promoter. We make actually pounds and pounds of albumin every year. And what we want to do is co-opt well less than 1% of the albumin promoter, insert downstream from the albumin promoter whatever gene we want and we can do this by engineering zinc finger nucleases that make a very specific, site specific break at that site and then insert at that side whatever gene we want. And you can see many examples of established enzyme or protein replacement therapies.
The key thing here is that we really only require very, very little protein production because of the potency of these proteins. And I don’t expect you all to read all of these here, but this gives you a sense of several of the major protein replacement or enzyme replacement therapies in the bottom blue box, the percentage of liver cells that we need to modify at the abutment locus in order to generate clinically relevant levels of these proteins on a permanent basis.
And I think that’s really the key. By inserting this say Factor VIII or Factor IX gene that we are doing with Shire into the endogenous gene at that specific site, as liver cells turn over just like all of the other parts of the DNA will be retained in both of those cells, this protein or this gene will also be retained. And that’s a significant difference than putting the gene, the coding -- the Factor IX gene or Factor VIII gene into a liver cell where it’s not integrated into the genome.
So we are doing this program with Shire, we are on track to file an IND for both Factor VIII and Factor IX by the end of this calendar year. But we retained rights outside of that area. So while Shire is funding all of our internal and external work in the area of Factor VIII and Factor IX around this albumin strategy or In Vivo Protein Replacement platform, we own the rights to numerous lysosomal storage disorders. And we have guided to filing two INDs next year using the strategy around LSDs for our own account and we will continue as we talked about on the first quarter call to forward integrate around this strategy, both in terms of additional targets but also in terms of internal GMP manufacturing capabilities.
So if successful -- and this is we presented the most recent data around this at ASH; if successful this strategy is agnostic to the target gene that we inserted that site. And obviously there are enormous commercial opportunities to displace many of these enzyme and protein replacements.
So, finally on the In Vivo side, let me give you one example of where we're going directly into the brain. This is in the area of Huntington’s which is as I'm sure you all know, a truly awful diagnosis. And this is a case where we're using the zinc finger to repress or to shut off the expression of a target gene. Why would we want to use that? Well, because in Huntington’s there are actually two alleles -- we have two alleles of all of our genes. But in Huntington’s, hopefully -- all of us are hopefully like the left hand side, the blue side is both of our genes have in the range of teens of these CAG repeats. But Huntington’s patients or people who will get Huntington’s, one of their allele has these long term, longer CAG repeats and that ends up producing this toxic protein.
So, what we've been able to do with zinc fingers, because of their specificity, it targets just the disease related allele and leaves the important correct allele alone. These are data from a cell line of Huntington’s patients with varying level of CAG repeats. And as you can see, we’ve built zinc fingers that shut off the disease related allele and leave the normal gene sequence to express and to continue to produce in a normal way.
And so, it's really the selection or selectivity, the specificity of these zinc finger proteins that's being exemplified here. And again, going back it's the specificity of being able to target any gene we want with singular specificity that really differentiates this platform. And we'll continue to update on this program, we're doing this in collaboration with Shire and we're on track to file an IND around this program next year.
Also in last year, we acquired a company called Ceregene, which was really the world's leader in the area of gene therapy in the brain, in the central nervous system. It treated well over a 100 patients on multiple protocols in Parkinson's disease and there is an ongoing Phase 2 study in Alzheimer’s using nerve growth factor that they licensed from Genentech but probably more importantly, we acquired all of the intellectual property, the reagents, the GMP materials, toxicology studies around multiple studies are putting AAV into the brain, we're leveraging that in multiple CNS programs.
So putting it altogether, at the very top left hand side, I told you we just presented data around our T-cell program and HIV at CROI along with the New England Journal of Medicine paper. The Phase 2 trial is now ongoing. The majority of those patients will be treated with materials modified with the mRNA process. And we expect to have all 12 patients treated and accrued on this study by the end of the year and data out of the study in the first half of next year.
We also expect to file mid-year the same strategy of CCR5 knockout, but in stem cells and that's work that’s been previously funded by the California Institute for Regenerative Medicine and that program is going very well. And then as I mentioned three more INDs this year; two around the albumin strategy that we're doing with Shire Factor VIII and Factor IX and then the beta-thalassemia IND that’s being funded by Biogen, our partnership with Biogen. And Sangamo will carry that program into initial clinical studies. The exact same reagents, the exact same zinc finger nucleases that we're using to knockout BCL11A and beta-thal are the same zinc finger nucleases we’re using in sickle. And so we're guiding to having the sickle cell IND filed next year and Biogen will push that one forward.
And then as I mentioned, the albumin strategy is really agnostic to the target gene that we inserted that side. And so we’re guiding to having two lysosomal storage diseases for our own account, INDs filed by the end of next year and then the Huntington’s program that I talked about with Shire next year and also data from the fully accrued and fully treated Alzheimer’s program that we acquired from Ceregene, so a very active next 18 plus months going forward.
In terms of catalyst I think that really gives you a clear sense of where our focus is and what’s going on. We will continue to present data and I’ll say more on the next slide about ASGCT around these programs and we’ve guided in the case of our HIV program in terms of partnerships that post this Phase 2 study and pre-entering pivotal studies, we will partner both the stem cell and the T-cell HIV program and I’ll speak about the financial guidance in a moment.
In terms of ASGCT, this has always been a major meeting for us, this year is no exception. We put out a press release this morning at least listing many of the abstracts that will be presented by ourselves and our academic collaborators in this area, but 14 were post the presentation really covering most of the major programs that we’re working on except for those that we updated on at ASH in December, so quite a bit of activity and important meeting for us next week.
In terms of the balance sheet, I think we have a reputation for being good source of capital. Last year in September we raised about $70 million and then on the heels of the New England Journal and ASH, I am sorry CROI data in March, we raised another $100 million with J.P. Morgan. And we ended the first quarter with $245 million in cash. And because of our partnerships with Shire and Biogen and the funding that we get for all internal and external researches funding, as well as significant milestones either on IND filing or Phase 1 milestones, we’re guiding to ending this year with at least $225 million in cash.
And again, because of those milestones and because of those funding, even though we will be filing two INDs on our own in 2015, directionally our burn rate is very modest. And for those of you who can read the small print that does not include any additional partnerships or include any funding assumed for Shire to takedown the additional two targets that they have, target six and seven. So, we are in very strong shape. And from a balance sheet perspective, about 68 million shares outstanding no debt, no warrants, no convertible just common stock on the balance sheet.
So in summary I think this is the way at least we think about the company. This technology platform is highly, highly differentiated. It allows us to build proteins that could target singularly and specifically any DNA sequence we want. And we can use that to drive biology from exactly that site very, very analogous to what has evolved over the last 30, 40 years from a monoclonal antibody perspective.
Our goal is to target genes where there is no ambiguity between the relationship of the gene and the disease. And not just to develop a new therapy or a better treatment for these patients, but actually to permanently and physically change the DNA in a way that that ends up curing the disease. So enormously ambitious not at all without it’s risk and benefits, but if successful this can truly change the lives of many, many patients with these monogenic diseases.
I won’t go through the summary, I think I have covered most of the status on the therapeutic programs, but all of these programs are pushing forward and we will continue to update on those. Collectively this is -- our goal is eight INDs by the end of 2015 with two Phase 2 readouts by that time. Major partnerships and sufficient cash; and as you can see from a balance sheet perspective and from our projected burn rate perspective, we are not in a position where cash is a risk item for us. We have more than sufficient run rate not only to see through the goals that I’ve outlined here, but really to forward integrate around many of the targets that we’ve talked about.
And lastly, just to take it up to 30,000 feet given the technology platform, given the generality of the platform it’s allowed us to build a business model where we can drive significant value or near-term visibility about the derisking of the platform and the value, but at the same time create and maintain the long-term value for our own account. And so we’ve developed a business model where we’ve offset risk and brought in capital from partnerships, but kept the vast majority of the genome for ourselves and for our shareholders.
We have diversified in terms of therapeutic approaches in-vivo, ex-vivo, stem cells, liver, brain. And so if one of those areas doesn’t pan out, we have many different shots on goal; not just from a gene target perspective, but from a product development perspective. And as I mentioned, we are focused on gene targets where there is clear validation around the target and the relationship of the gene to the disease. And I think from our last financing we have really removed any of the balance sheet risk for the company.
So, thank you very much. And we are happy to take questions.
Colin Bristow - Bank of America
I’ll kick off with a couple and then if we could get -- out. So if we made to the gene publication, the Phase 1 data, I think it is one in four patients became undetectable. And was there a correlation were there any predictive factor that you identified with regard to these patients. I know its 11% to 28% of the patients had modified T-cell population. Was there a correlation there and what would you; in your modeling what you will define is optimal?
Right. And so the question is the answer. The New England Journal paper spoke to the first 12 patients that were treated on this protocol in collaboration when the University of Pennsylvania in Carl June and Bruce Levine and group there. Out of that came a patient who became undetectable during this treatment interruption and upon they say in football upon further review it turns out that this patient actually had one of his two CCR5 genes naturally mutated, so called heterozygote, CCR5 heterozygote.
And that led to an observation that if we could enhance the biallelic both genes knocked out engraftment of these modified cells that had a direct correlation to viral load reduction. And so that's what really two drove two significant studies that we've done over the last 18 months. One, in this population of delta-32 heterozygotes where of the seven evaluable subjects three of them became undetectable during the treatment interruption, one of them continues to be off in our retroviral therapies and has reported that was of 31 week.
The other was again with people who have normal CCR5 gene, so about 90%, 95% of HIV population. In that population we did an enhancement through Cytoxan preconditioning where we enhanced the engraftment. And all of this led to and this is I think the key point is a highly statistically significant correlation between exactly what you said, the number of biallelically modified cells engrafted and circulating in these patients and the logarithmic reduction in biallel load.
So this Phase II study takes all of that information and that's hypothesis and drives it into a optimal Cytoxan Preconditioning as well as this mRNA modification approach which increases the biallelic modification rate, but also provides for the opportunity if necessary to retreat. So all of that I think is directly in line with this hypothesis that we are pursuing.
Colin Bristow - Bank of America
(Inaudible) you have a sense for what is the threshold for the modified T-cell operation.
Yes, we do. And that's in the range of 10% to 12% of biallelically modified cells. I would refer people to the presentation or the slide that represented at CROI in early March. And to the announcement that we put out in early March around those data where I think all of that’s discussed in detail.
Colin Bristow - Bank of America
Thank you. We've been hearing about sort of various successes you have had with treating HIV patients for sometime now. And what I want just an understanding a little better as the path forward. What you need to see to be able to move this into a Phase III, what are your plans around that and that's it? Thank you.
Right. So the question is next steps on HIV program. So the plan is to complete the Phase II trial, the additional 12 subjects will complete the accrual and treatment of those patients this calendar year, we will have data out of that in first half of next year. What we've said is our goal before going into pivotal studies is to partner both the T-cell HIV program and the stem cell HIV program for pivotal studies and so that's really the next steps for us, the guidance.
Well they are sufficient if they are, if the outcomes are there, yes, and that's why you are doing the study.
Hi Edward, [Jim O'Carroll]. Can you give us a little bit more color on the relationship with Sigma-Aldrich and Dow Agro? I am sure the revenues from there pale in comparison to the human therapeutics, but what does it look like there financially now?
The question has to do with our partnerships outside of human therapy, so start with Dow. The Dow partnership has gone extremely well. But I am going to say three years, maybe four years ago we really did a major technology transfer to Dow. And so they’re developing, using the science using it in crops our downstream income will come from product development in as they move through various commercial milestones, so milestones and royalties coming from Dow.
They’re not terribly vocal about where they are in all of this. And so it’s difficult to get a lot of visibility around it. But it’s going well and being applied. I’ll give you one quick example because of the specificity of zinc finger nucleases they’ve been able to achieve receive USDA conformation that crops modified with zinc finger nucleases because of the specificity are not going to be designated GMOs. So it gives you one example of zinc fingers is the gold standard in that area.
In the case of Sigma-Aldrich, the scope of their partnership is really in the research area. So research for reagents for genome-editing, engineered transgenic animal models, engineered cell lines and so on. That’s again a program where we received milestones based upon cumulative sales and royalties on product sales. It’s not a huge revenue generator for us and as other genome-editing, simpler genome-editing technologies come forward those will probably have the greatest impact in the research reagent space, primarily due to the ease of engineering but the lack of specificity.
Colin Bristow - Bank of America
I think we are out of time now. Thanks everyone and thanks to Edward.
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