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Sangamo Biosciences Inc. (NASDAQ:SGMO)

Sangamo BioSciences at Lazard Capital Markets 8th Annual Healthcare Conference Call

November 15, 2011 11:00 am ET

Executives

Edward Lanphier - President & CEO

Analysts

Operator

I am Coleen (inaudible) introducing Edward Lanphier from Sangamo BioSciences and he will speak to you today. Thank you.

Edward Lanphier

Thank you, Coleen, and thank you for including Sangamo in this year's conference. My presentation will contain forward-looking statements. I will refer you to our Forms 10-K and 10-Q filed with the SEC. As many of you know that the core competencies of Sangamo is our ability to target specific DNA sequences and then either regulate, turn on or turn off or physically modify an endogenous gene. Our goal is to develop this as a new class of therapeutics and I will spend most of my time today talking about that, but we've also been very successful in leveraging and monetizing this outside of therapeutics with significant partnerships with Dow AgroSciences and with Sigma-Aldrich.

I’ll talk about that in a moment. And that’s given us a differential business model, a strong balance sheet. We have about $85 million in cash at the end of the third quarter. We’ve guided to ending the year with approximately $85 million in cash which comes to about a $25 million burn which gives us several years worth of cash in the bank. And lastly we dominate the intellectual property in this space.

So one slide just very quickly to talk about the core technology and then I’ll move on to the therapeutic programs. As I said Zinc finger DNA binding proteins allow us to target exactly and specifically any DNA sequences we want. We can then link to these DNA binding proteins’ functional domains. Proteins allow us to turn on or turn off the expression of endogenous gene and that’s what we were doing for instance in our Parkinson’s program where we are activating the endogenous GDNF gene. We can also use this technology to actually physically change, physically modify an endogenous gene and this is particularly relevant in diseases where genes cause the diseases such as monogenic diseases and this is the program which we our most advanced clinical activities are in the area of HIV and I’ll talk about that in more detail.

So this is the core competency as DNA is DNA, we’ve been able to leverage this not only into human therapeutic programs, but into research collaborations with Sigma-Aldrich and into plant applications with Dow AgroSciences, but Sangamo owns a 100% of the therapeutic rights and that’s what I am going to focus on for this part of the presentation.

Our most advanced effort is in the area of HIV Aids and because we targeted the DNA level, the target is really the critical component here. And what we’re focused on initially is modifying T-cells and looking at this CCR5 gene. This is natural and HIV must use CCR5 or protein expressed on the surface of CD4 T-cells in order to infect that cell type. There is a natural mutation in people can trace our ancestry back to Eastern Europe, where that gene is dysfunctional. They are missing amino acids from that protein and that protein does not allow HIV to enter the cell and so our goal using the Zinc finger nuclease technology is to actually recapitulate both that genotype, so a dysfunctional CCR5 gene and that phenotype, a protein that does not allow HIV to infect the cells and if we are successful in doing this, we can create a compartment of the immune system that not only cannot be infected by the virus, but is capable of having an antiviral effect and thereby patients being able to go off their HIV medications and still control the virus or have a code functional cure. So that’s the objective of this program.

We have two ongoing clinical trials, both looking at this in a population of patients who are aviremic. So they are currently on hard therapy, have unmeasurable viral load and this allowed us to do several things, to look at the safety of this modified cell approach, to look at the engraftment of these cells, do they go in, do they circulate normally, do they traffic normally, and also what’s the effect on the immune system. And data from both of these or all of these areas were presented both at the conference for retroviruses and opportunistic infections in the first quarter and then just two months ago in September at [ICAC], but the real question in an anti-HIV approach is there an anti-viral effect and we are able to evaluate this in one of these clinical trials and that’s the trial at the University of Pennsylvania where these subjects come in, they are on hard therapy, they receive the modified cells that have the knocked out CCR5 gene.

After four weeks of those cells circulating, these patients will go on a treatment interruption or a drug holiday where they go off-drug for 12 weeks. And then go back on drug and we’re able to evaluate during that period of time when the virus goes up if there’s any anti-viral effect. And so data that were presented at [ICAC] are the following and so at the (inaudible) day zero you see that these patients come in with a well-controlled viral load, really an undetectable viral load.

At week four, they go off their drug and as expected all of these patients on this cohort see a significant increase in their viral load and then during their treatment interruption that typically plateaus, they go back on drug and the viral loads come down. But as you can see, there’s a couple of unusual observations here, the patient 205 in green actually return to an unmeasurable viral load during the treatment interruption which is highly unusual.

And a couple of the other patients had a one-to-two log reduction in their viral load before going back on HAART. And so when we looked at these patients more carefully, it turned out that patient 205 actually had one of his genes, one of this CCR5 genes had this delta-32 mutation and therefore he had double the number of both of his genes knocked out and so when we correlated or looked at the biallelic modification where both of the CCR5 genes are knocked down, the patient 205 in green here because he started with half of this genes already knocked down had a significant higher percentage, a little over 10% or 12% of his modified CCR5 genes were biallelically modified and you can see the orange patient and the blue patient also had the second and third highest biallelic modification.

Those are the ones that are correlated to a one-to-two log reduction and so when we looked at the correlation between biallelic modification and viral load reduction we saw a statistically significant reduction in viral load in those patients with the highest amount of biallelic modification. So these are the data that were presented at ICAC, but it really gives us a clear sense of next steps. We want to try and achieve the highest level of biallelic modification and there’s two strategies to do that.

One, look at this population who have a natural mutation in one of their genes, the so called heterozygote population and thereby repeat what we saw in that patient 205 and then also look at strategies where we can significantly way beyond doubling, but actually a hundred to a thousand fold increase the engraftment and expansion of these biallelically modified cells.

And so the conclusions from the early Phase I trials are as follows, these data represent a significant progress towards the functional cure reducing this HIV on a, during a treatment interruption is unusual and in patient 205 it was actually undetectable. I talked about the correlation between biallelic modification and reduction in viral load and that really leads us to what we have recently guided and that is the initiation of two new trials.

I am pleased to announce today that actually we have begun screening on the first one, the delta-32 population and we expect to initiate the engraftment enhancement study in the first half of next year. We also expect to present data from our recently completed accrued study the 1002 trial in treatment naïve subjects in 2012 as well. So that gives you a sense of where we are in the HIV program, very exciting opportunity and one that we are working very hard to move forward quickly. We will have more data in 2012 on that program.

I want to spend the rest of the presentation talking about the application of the zinc finger nucleases technology in so called monogenic diseases. And again, it goes back similar to the HIV program where you have a completely validated target. We know that that gene correlates directly to the disease and monogenic diseases by definition are just there.

So in this content it gives you a sense of what we’re able to do. On the left hand side, you see the zinc finger nucleases can create a double stranded break at a chosen site and what we’re able to do in a CCR5 program is disrupt that gene so it no longer makes the correct CCR5 protein and that creates this protected genotype.

We can also put in place in these cells a donor DNA; a DNA sequence that has a great deal of homology to the target DNA, but has slightly different nucleic acid sequences and this is particularly relevant in monogenic diseases where there is a mistake in the gene that causes an incorrect protein, we can actually physically correct or change that DNA sequence and thereby actually address a potential cure for that monogenic disease.

And the advantages of this are clear. We only need transient or very short term expression of the zinc finger and the donor DNA, so 48-72 hours to get a permanent change in that gene and that gene stays under the control, its in-situ stays under the control of its own promoter.

So all of the normal biological feedback, all the control the normal way that that gene will be expressed and obviously, because we can engineer this to any sequence, this can be applied to any monogenic disease or rare disease opportunity.

Our first publication in this space was actually in the journal Nature back in 2005. This was targeting the X-linked skin gene or the so called ‘bubble boy disease’ but as you can see from the title of the paper in Nature highly efficient endogenous human gene correction using design zinc finger nucleases.

Up on the left hand side at the top of the Nature cover you can see genome editing; re-writing the rules of gene therapy, because to summarize the data in this as I said, we can correct the endogenous gene with just short term expression, but it leaves it under the control of its own promoter thereby all of the normal feedback that would expect, all the normal biological regulation of this approach.

So this was done in a model system to establish both the efficiency but get the generality of this approach for other disease targets. We’ve also taken this forward into other cell types including CD34 hematopoietic stem cells; that’s particularly important in diseases of the blood and one of the most common and most important diseases monogenic diseases of blood in this country is sickle-cell anemia; in Southern Europe beta-thalassemia. This is a single base pair of mismatch in the beta-globin gene of in African Americans in this country.

And what we’ve shown is that we can go in with zinc finger nucleases in CD34 cells with very high efficiency and singular specificity; correct that change, correct that mistake in the CD34, in the beta-globin gene such that we get expression of the normal beta-globin gene and again under the control of its own promoter. So this is an example in the target cell type for the therapeutic. We can also do this in embryonic stem cells and in induced pluripotent stem cells and we’ve published with several labs including the Jaenisch lab in that area.

One of our most recent examples of this and I think a striking example is in Alpha 1-Antitrypsin Deficiency which strikes about one in 2,000 individuals in Northern European descent. And so the experiment that we did in collaboration with a group in the UK was to take skin cells from a patient with this disease, those cells were then deemed differentiated and they were returned back to a pluripotent cell, induced pluripotent stem cell, IPS cell. In that cell, we then took the zinc finger nucleus collected and stake in the Alpha 1-Antitrypsin gene. Those cells were then engrafted back into a mouse model into the liver of that model and the animal is actually cured of that disease. So the correct protein was then produced.

So a very striking example of the ability not only to apply this in Alpha 1-Antitrypsin, but in any of disease states where you can take those cells back and modify those cells re-engraft them. And importantly, and really one of the striking parts of this paper that was just published again in Nature just a month or so ago was not only the gene correction, but the absolute pristine specificity of this approach in correcting that endogenous gene leaving under the control. The only change in the entire cell was the change made by the zinc finger correcting that mistake.

And then we can also do this In Vivo, this is what that was presented at ASH last year by our collaborator Kathy High from the University of Pennsylvania. This is in a model system of Factor IX, one of the hemophilia targets. And the experiment here was we went in with the zinc finger nuclease posit donor into the liver of this mouse model that have the human Factor IX mistake in its gene and with a single injection, we were able to correct the endogenous gene and this is just some of the data that were presented in ASH last year showing a therapeutically relevant levels of Factor IX circulating in the blood of this mouse model and very importantly return to coagulation timeframes essentially equivalent to the wild type animal.

So not only biological correction of the gene, but genotypic typical correction of the coagulation timeframes. This was of the 3,000 or so abstracts presented in ASH last year featured as one of the 20 best of ASH in the final symposium. And again, these are the same basic issues. Transient expression of the nuclease is permanent correction of the gene under the control of its own promoter and genotypic correction of coagulation timeframes. And this work was also just recently published in Nature in June of this year.

So I hope this gives you a good stance of the generality of this technology and where we are from a development perspective. But again, to summarize, nucleases allow us to target any gene at a predetermined site and in human genome it’s going to be effective across enormous number of therapeutic strategies from primary cells to adult stem cells such as CD34 cells to induced pluripotent stem cells and also from an In Vivo perspective.

It eliminates any of the issues that you have with other gene therapy strategies such as random insertion. We get transient exposure of nucleases’ permanent modification to endogenous gene and this really does change the way one you can think about not only addressing diseases, but actually looking at engineering genetic cures from for monogenic diseases.

So that’s a brief update and in terms of where we are with our therapeutic pipeline. As I mentioned, we’ve been very successful in leveraging the same technology particularly the zinc finger nuclease technology with partnerships outside of the therapeutic space. Sigma-Aldrich is doing a fantastic job and I refer you to their website, as well as their conference calls in talking about the importance of this and their growth strategies. We also have a very broad collaboration with DOW Chemical and their DOW AgroSciences subsidiary applying this technology across plants. DOW is using this internally, but they are also are distributor of this technology, or licensor of this technology and have done multiple supplies in the plant agricultural space.

And these agreements, these collaborations have a material financial effect for us to dig. We generated over $80 million from these approaches and very importantly we have a significant ongoing involvement in the commercial success of these programs in the case of the Sigma collaboration a 10.5% royalty on all product sales and in place of the DOW collaboration milestones but also a 25% participation in all of the additional supplies they do.

This has allowed us as I mentioned right upfront to operate the company in a different way while prosecuting multiple clinical trials and bringing these further and further forward. To-date we have never burned more than $25 million in the calendar year and this year we are on track to have a burn of about $25 million.

We ended the third quarter with $85 million in cash and we expect to end the calendar year with approximately $85 million in cash. So that gives you some sense of the milestones and revenues coming in from those additional partnerships.

From a balance sheet perspective, $52 million shares outstanding. No debt, no warrants, no convertible preferred’s or anything like that; just common stock outstanding.

In terms of our near term catalyst and goals, I think I mentioned most of these but I do want to emphasize that we have additional data coming out in the hemophilia program at this year's Ash and so in about a month, this will take the mouse data that I showed you earlier and look at the durability of that in this [mouse-model]. So an aged mouse model looking at the factor 9 gene correction work and throughout 2012, you will see additional data both from our HIV programs as well as from these pre clinical programs. I have mentioned the Sigma and Dow revenue sources but our goal from a business development perspective on the therapeutic side is to bring these programs, both the clinical programs as well as the pre-clinical programs forward to the point of value influctionio, look for appropriate partnerships around these and those are certainly a priority for us. And lastly, we ended the third quarter with $85 million and we’re on track to end the year with approximately $85 million in cash. So thank you for your attention. I am happy to take questions.

Question-and-Answer Session

Unidentified Analyst

(inaudible).

Edward Lanphier

We are working on that as hard as we can and we haven't given any specific guidance on timelines but it’s certainly a high, high, high priority for us.

Unidentified Analyst

(inaudible).

Edward Lanphier

It’s really just the blocking and tackling of pre-clinical developments. So it’s proof of concept or efficacy in the pivotal animal model, in the case of hemophilia it’s the dot mode. And then moving the vector development into GOP, and then eventually GMP production, normal toxicology studies and then clinical protocols, IRB approvals and FDA submissions.

So there's no inventive steps here. It’s really just the blocking and tackling of pre-clinical joint development. But it’s a high priority for us. Yeah.

Unidentified Analyst

Talk about the durability, in terms of response to HIV program also based on that, how often you would expect to treat the patients?

Edward Lanphier

So the question is durability on the HIV program. The T-cells how often we would contemplate retreating. And it’s a great question. That’s one of thing we’re evaluating. So we are now pick a number, 2025 patients treated into the study at various levels of duration and we’re evaluating that. Based upon other adopted immunotherapy programs and which there are many. T-cells are terminally differentiated cell types. We’d expect to see them eventually unwind although the memory T-cells lasts for quite a while. What we’ve modeled commercially is between one and two-year durability and then a retreatment but I think that’s going to be obviously data driven process.

Unidentified Analysts

So the three clinical part system? (inaudible).

Edward Lanphier

Yes, thanks for the question, I didn’t have a chance to talk about that. That’s a program. We are now in non-human primates in collaborations with the group at UCSF. We expect to have a data about in 2012 and we have zinc finger activator of the endogenous GDNF gene and so we are driving expression in this substantial (inaudible) of the patients own GDNF protein, which we think and we are showing at least pre-clinical overcome some of the immunogenicity that has been seen with the (inaudible) protein. Great, thanks very much for your questions.

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