Sangamo Biosciences' CEO Presents at Lazard Capital Markets 9th Annual Healthcare Conference (Transcript)

| About: Sangamo Therapeutics, (SGMO)
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Sangamo Biosciences, Inc. (NASDAQ:SGMO) Lazard Capital Markets 9th Annual Healthcare Conference Call November 13, 2012 3:30 PM ET


Edward Lanphier – President and Chief Executive Officer


Ryan S. Martins – Lazard Capital Markets LLC

Ryan S. Martins – Lazard Capital Markets LLC

Hi I’m Ryan Martins one of the biotech analysts here at Lazard. Our next presenting company is Sangamo Biosciences. Sangamo has a very exciting and broadly applicable platform technology that is interesting that DNA-binding proteins that actually can modulate genes and turn them on and off, and also modify these genes. They have wholly-owned program in HIV, also have collaboration with Shire for hemophilia and monogenic disease along with few other programs that they’re working on, on their own. To give us an update on the Company, we have with us President and CEO, Edward Lanphier.

and he is going to give a presentation for about ten minutes and we’ll just head into some Q&A. So on to you.

Edward Lanphier

Thank you, Ryan and thank you for including Sangamo in this year’s conference, under having a shameless start off, I want to wish my father a happy 80th birthday today. I think that’s pretty correct handing there.

As Ryan said, I’m going to take ten minutes that thirty slides I’m going to go through some very quickly just very high level, and because more trust in me and certainly more interesting for me will be a chance to take questions and talk about the Company and talk about where we’re going.

The presentation will contain forward-looking statements, and I’ll refer you to our forms 10-K and 10-Q that filed with the SEC. So again, these are the bigger slides are up on our website, for those of you are familiar with the Company, I won’t go through it, but the real critical piece to walk away from any discussion about Sangamo is our core technology, our ability to engineer a class of naturally occurring DNA-binding proteins called the zinc finger proteins to target exactly the DNA sequence for a while. And then this is the key concept, throughout biology at the DNA level. And that is unique to Sangamo, it’s unique to really developing therapeutics. And so that’s the critical piece to know about, and I’ll come back to this at the end.

And this is just one slide on zinc fingers again, highly conserved. this is how most genes on our planet are regulated and in most species and what we do is use the natural modularity of these proteins to target exactly the sequence we want. And then wait them with an appropriate functional domain to drive that biology and I’ll try to talk about what those are as we go through that.

And so if you think about this, this is a toolbox. We can target exactly the gene we want. and then on the left-hand side of the slide, we can use it to turn on or turn off for the endogenous gene, the gene inside the patient or we can use it on the right-hand side of the slide to actually physically change the nucleic acid sequence, stop a gene from making a protein or to change the nucleic acids in a way that it makes it different protein. And that’s particularly relevant where there’s a mistake in the gene, you want to correct that gene, and therefore make the correct protein.

So this is the toolbox that we use. but the real goal here is very straightforward and very clear to use this toolbox, to use this platform toward exquisite specificity, and that really is a critical piece as you’re thinking about outcomes that are permanent and outcomes that are at the DNA level exquisitely specific under the topology at the DNA level and really alter the course of disease or if this sets engineered genetic cures. And that's really the goal here is to leapfrog treatments to really begin to approach the idea of cures.

And that’s the standard, that’s the definition of where you should be thinking about Sangamo. So this is a slide that we want to spend more time dissecting at our December 6 Analyst Briefing, when we go through our platform and well ahead of what you might expect out of us in the next two to three years.

But essentially what you should think about is, we can take the technology for gene regulation and gene modification and drive drug therapeutic development in an in-vivo setting, we can also do this in ex-vivo setting, and several of these are highlighted in terms of where we are and some of our collaborations.

The next slide actually, this is where the rubber hits the road for us. And then hopefully, Ryan will have a chance to talk about some of these, so our HIV program, and then into the monogenic disease base. So very, very quickly, and I’m happy, we’d come back to this.

The HIV program is focused on using the zinc finger nuclease technology to knock out the CCR5 gene and T-cells, CD4 cells of people with HIV with the goal of actually causing those cells to be immune from the HIV infection, but they will come out an immune response to the virus. And to cut through all of the data to-date what we’ve been able to show is that we’re successful in doing that knocking out both of the CCR5 genes, we can have a statistically significant correlation to reduction and even elimination of viral load in HIV patients. So two ongoing Phase 2 trials and very recent data presented about a month ago and ICAAC that is very encouraging from the immune system perspective, and reconstitution of the immune system but the critical issue here on the ongoing two Phase II trials, and the guidance there is preliminary data in the first half of next year, complete data in the second half, the real focus there is on viral load and reduction in viral load.

The vast majority, I think the street attention at this point has really turned towards the applications in monogenic diseases. And the ability as I said to do gene correction or gene regulation to genes where there is, in my words, unambiguous correlation between the gene and the disease. And so many of these appear that you’ll recognize I think fill that that requirement, unambiguous correlation between a mutation or a problem at the

DNA level and the ability then to drive a therapeutic outcome by either regulating or modifying that gene. And that's really what this does.

This is a unique technology platform, the only technology platform that allows us to go in and target any gene, modify that gene are in-vivo or ex-vivo basis and drive that correction of that modification towards a permanent cure of the disease. And you see some of the lists here. We just show you a couple of pieces of data, a couple of things are highlights, again happy to come back to this, all of this has been previously presented, this is work in the area of hemophilia and I’ll emphasize the following, even it’s a mouse model or the human factor IX gene, the hemophilia gene development of states in it is in the mouse.

A single injection of the zinc finger nuclease caused a permanent correction of the endogenous diseased gene correcting it to the correct gene type, the correct you create acid sequence making the correct protein and normalize in the coagulation times in that mouse model. And this is largely and depends on how you want to divide it up, but what drove Shire’s interest in our collaboration, the ability to go in with a single treatment, and permanently correct the sufficient number of disease genes in hemophilia to normalize the clotting times. And that would cause these patients do not have to take factor IX, or factor VIII or whatever it happens to be.

I’ll come back to this point, highly leveragable across many protein replacement therapies. On the other side of the coin in the gene regulation side, it’s the other program that Shire just selected. These were data that we’ve just highlighted at the Society for Neuroscience, and our ability to engineer the zinc finger protein that specifically, and the key here is specifically target these long repeated sequences, in the Huntington’s gene, but ignores the normal sequences that you and I are carrying.

And so in patients where there are more than 30 or so of these CAG repeats, we’re able to very specifically target those, shut those down, and actually this has been shown in animal models, not just stop the progression of the disease, but actually reverse the disease itself. And that’s the goal, these are the data I don't have time to go through them now, but the key thing to hear is the focus on, I don’t know what I'm doing that. To focus on the mutation and where the numbers in the CAG repeats are at the top versus the controls of the wild type and which you can see is the exact same therapeutic reagent, completely reprocess the disease gene and ignores the wild type gene that is needed.

So this is moving forward from a preclinical development, and this is one of the Shire targets. And this is the emphasis or is featured as a hot topic two weeks ago at Society for Neuroscience.

So I mentioned the Shire collaboration a couple of times, let me just give you a little bit of color on that, these are an agreement we announced in the first quarter of this year. Shire has exclusive worldwide rights to seven targets, five of those have been named. They are the four hemophilia targets, seven, eight, nine and ten and now Huntington’s. The structure is pretty straightforward, Sangamo does all of the work through IND filing and Shire funds 100% of that work both internal and external expenses, milestones along the way that IND Shire takes over the development in all of the expenses of that and we continued to move forward with our own programs.

The economics of that 13 million upfront for those seven targets again, funding all of the internal and external R&D expenses, a total of 8.5 million per target through IND filing, and then another 200 plus million post-IND filing in clinical, regulatory, and commercial milestones per target. And probably what I’m most pleased with in terms of the economics of this deal, these are obviously preclinical targets, we have significant double-digit and tiered escalating royalties in this agreement.

So we keep and we’re able to keep in set of things like Co-promote and Co-market in the U.S. able to keep a significant financial incentive in the commercialization of these products. So a significant collaboration for us and again, just to emphasize I think from a strategic perspective, there is the second bullet point really speaks to that, where do we think we can compete in an area where we have significant technical advantages, and then how do we think about prioritizing those targets. And this gives you a sense of the sort of issues that we look at, and as I mentioned, we’ll spend a lot more time dissecting this and going into this on our December 6th meeting.

So that gives you a sense of the therapeutic pipeline. In one minute, I’ll go through the rest of this, we have a very significant collaboration exactly the same technology, which Sigma-Aldrich in the research and transgenic animals and research cell lines, also with Dow Chemical and their Dow AgroSciences subsidiary, this hybrid business model with us focused on and really owning with the exception of the Shire collaboration, all of the therapeutic targets have given us significant access to non-dilutive capital.

So approximately $19 million to-date, but more importantly, ongoing in the case of Sigma, significant royalties, 10.5% royalties on all product sales and in Dow milestones and 25% of all sublicenses, and that’s allowed us to operate the company I think in a unique way from a burn rate perspective, if you look at the second line there cash used in operations, we’ve kept the burn rate in the $20 million to $25 million range, while prosecuting all of these programs on our own and this year, we started the year with $85 million in cash and we’re guiding to ending the year with at least $75 million in cash while prosecuting two Phase II HIV trials and everything else on our own, because of this hybrid business model, because of these partnerships.

and I’ll say on the bottom of this slide. Those are the sorts of things that we’ll also discuss on December 6, not just our development plans and the strategy behind that, but also how we overlay this in terms of our balance sheet and where we are headed on these things. And so there’s a summary of things to come and highlights and focus for people, I’ll stop here Ryan and happy to take questions.

Question-and-Answer Session

Ryan S. Martins – Lazard Capital Markets LLC

Yeah, thanks Edward. Maybe, we can start out by just asking about modifying DNA has carried generally with the concerns in the past about off target effects and maybe if you can talk to us about how your approach maybe unique compared to these other approaches in the past and approaches that maybe pursued right now?

Edward Lanphier

Sure. I mean I think the issue of off-target is a broad topic of discussion that gets back to things with viral vector and integration, the mutagenic integration and so on. so that the key I think that’s the best way to think about this is, like an antibody platform. we know as you all know from being investors in this space for a long time that one can take an antibody and using things like page, display and selection strategies and create an antibody that’s similarly specific to that target sequence.

Now you can massively flood a cell or a system with that same antibody and you can see it binding, but several orders of magnitude less tightly or less often to that and you can do that with DNA binding proteins. but on any kind of levels, we are able to engineer zinc fingers, and we’ve published this many, many times going through a process that’s very much like combinatorial chemistry where we optimize, and then select and optimize and select for zinc fingers that have essentially no off target effects and we’ve published several times using whole genome sequencing and showing that the only modification in the genome associated with the zinc fingers is the exactly the site that we’ve targeted.

So there are groups that have published on non-optimized zinc fingers or non-optimized zincs that do have off target effects, the work that we take forward from a clinical perspective have gone through a process of optimization where we know that there is a single site to be modified.

Ryan S. Martins – Lazard Capital Markets LLC

Okay. and then just on the zinc finger proteins, how do you deliver them into cells, I guess in some case you’re delivering them into cells, in some cases into specific organs, are the specific gene delivery systems that work better than others for cells organs or it’s optimizing?

Edward Lanphier

It’s a great question. So when you think about the critical elements that make a successful zinc finger therapeutic, we just talked about the ability to engineer the zinc finger to exactly the sequence, choose the right functional domain for regulation or modification. But all of that is superfluous, relevant whatever you want to say if you can’t deliver it to the right tissue. And so if you go back to that slide that I showed early on in the process, you looked at in vivo and then ex-vivo, all of that then demands that you think about. Well, if you’re going to go into the liver, which is where we’re modifying the factor IX gene or the factor VIII gene or looking at lysosomal storage diseases. What’s the best systemic delivery to get highly efficient modification in the liver of the targets, so how long do you need expression of that gene is it a repressor, where you need constitutive expression, is it a nuclease for transient expression.

So all of those criteria then drive the selection of the formulation, in this case, the delivery system. So for in vivo liver delivery, we use AAV and there are many different AAV stereotypes that have lots of different characteristics that we’ve just talked about. In the eye, in the brain, in the lung, there are different delivery systems that either give you transient or long-term delivery. And then ex-vivo, there are many ways to do better on our panel this morning. One of the groups up there is using a lengthy vivo vector and integrating lengthy vivo vector to get long-term gene expression. We’re able to use transient RNA delivery essentially, because all we need is very short-term delivery of the nucleases and the donor in order to get permanent modification of the gene, so nothing integrating into those target tissues.

So again, the selections we make for delivery, and it’s required in order to completely enable the therapeutic is really derivative of the delivery, the system that we’re going into in vivo or ex-vivo, and then the target tissue, and then the type of duration that we want to get out of the expression.

Ryan S. Martins – Lazard Capital Markets LLC

And maybe just following up on the HIV program, how do you actually collect these cells, how many cells do you actually get versus how many eventually really get modified, and then how many eventually do get infused and engrafted as you termed it?

Edward Lanphier

Sure. So the process is an autologous cell therapy, you go through, the patient comes into a leukapheresis center or a blood collection center, and in about an hour procedure, the blood circulates through this leukapheresis machine and we concentrate the CD4 cells, the patient goes home. Those cells then come into a GMP production manufacturing facility where they are modified with the zinc finger nuclease and we can talk about what those efficiencies are both particularly from a biallelic perspective. and then those cells are frozen, samples of those go through testing, quality control, quality assurance to all those SOPs and then about six to eight weeks after the initial leukapheresis, the patient comes back into the clinician’s office where the cells are re-infused, it’s an outpatient procedure. so a couple of hours in that and then the patient goes home.

So that’s the timing, six to eight weeks that’s the loop autologous cell therapy. In terms of the issues of efficiency on that it’s an increasing number as process development improves, but typically we’re in the range of 30%, 40% of the T-cells or the CD4 cells are modified at least one gene and between 5% and 10% of those cells are biallelically modified. They go through an ex-vivo expansion, and then they also expand once they’re in the patient.

Ryan S. Martins – Lazard Capital Markets LLC

And so when you expand those cells, I mean how many fold expansion is that before you kept that back in?

Edward Lanphier

We usually put back in somewhere around $10 billion.

Ryan S. Martins – Lazard Capital Markets LLC

Okay. And other patients for those six to eight weeks, are they in anyway compromised or why do you allow they have those CD4 cells up?

Edward Lanphier

No, I mean that we’re not taking; we expand, so we’re taking out $1 billion or in that range. so no, we have not seen any. And so far, there haven’t been any safety concerns on the trials.

Ryan S. Martins – Lazard Capital Markets LLC

Okay. And are these modified key cells that you engraft back in. are they able to get to viral reservoirs?

Edward Lanphier

That’s a great question. So one of the successes in the HIV space has been HAART, the Anti-Retroviral Therapy, but one of the downsize of HAART is it doesn’t have an effect on the virus outside the bloodstream, you can see undetectable virus in the blood, but the vast majority certainly of T-cells, and much of the virus is outside of the blood and in the gut and in various reservoirs of the virus.

And so we have done biopsies that probably the work that we’ve published or talked about the most is in the gut mucosa where we biopsy patients post infusion of these modified cells, and we not only have seen normal trafficking of these modified cells meaning they behave like normal CD4 cells and traffic in and out of the bloodstream. But we’ve also seen these cells have a selective advantage in the presence of the virus in these reservoirs. And long-term, if this therapy is successful, one of the real advantages, it has over current therapies is that these cells will traffic to those areas outside of the bloodstream and hopefully begin to reduce the virus in the reservoirs of these subjects.

Ryan S. Martins – Lazard Capital Markets LLC

And maybe following up, can you talk to what the longest duration is that you’ve seen a patient remain undetectable and I think you also have some data recently about memory T-cells and how that relates to sort of undetectable?

Edward Lanphier

There’s two things, let me speak to the long-term and then to the undetectable. so we have patients out now approximately three years where we are able to see the modified cells and the work that was just presented at ICAAC speaks to those type of cells that we’re seeing out in these patients and this speaks to the immune reconstitution relative to these memory T-cells, the kinds of cells that last a very long time, there are stent like cells, and have the ability then to respond quickly if they’re exposed to that same antigen again, so those are some of the durability issues and as it relates to the modified cells and to the immune system reconstitution.

In terms of the anti-viral effect where we have reported to-date, patients that have become aviremic, those patients by protocol went back on HAART at the end of the treatment interruption. So the patient became aviremic or no detectable viral load during a treatment interruption, but by protocol then went back on HAART. So, the trial that are now ongoing are intending to speak to this issue of durability from an anti-viral effect and those protocols provide for a 16-week treatment interruption. And then if the patient is undetectable within that 16-week window, then can stay off HAART and we can evaluate the durability going forward from there.

Ryan S. Martins – Lazard Capital Markets LLC

And maybe just moving on to the monogenic diseases, obviously you did the Shire collaboration, curious what the motivation was for finding a partner there versus going at alone in terms of focusing on those monogenic disease?

Edward Lanphier

Yeah. I think the business model for us is somewhat different than maybe the vast majority of biotech companies that may have great passion around a target or a great passion around a particular disease area or something like that, we have a platform and that platform is leveragable in terms of one of the things we’ll speak to in December is just the how leveragable this is into lots and lots of areas. And so the business model in the therapeutic space, and we’ve obviously done something slightly different in the research space, and the ag space where we’ve given exclusive rights to partners. There is to move forward with our own programs to points of clear value inflection, and then either move those forward further forward ourselves and ultimately, if we’re successful in some of these rare disease areas potentially for integrated. but used points of value inflection to monetize the investment we’ve made, bring that value back in and drive our own programs farther and farther forward.

And in the case of Shire with hemophilia, they gave us an opportunity to have a partner significant upfront funding. And then all of the infrastructure, all of the issues required to take hemophilia forward are paid for by our partner, both internal and external and all of that investment we can leverage into the lysosomal storage disease areas and several other areas, and these are things that we’ll be talking about as we start to project or give investors a little bit of insight into what our plans are over the next two to three years.

Ryan S. Martins – Lazard Capital Markets LLC

And then just on the Huntington’s program, how do you think about in terms of clinical development, because you need to have, I guess it’s a great area in some ways, because you have greater than 40 CAG repeats, the more severe patients with 35 or less sometimes don’t even ever develop full-blown Huntington’s, how do you think about that from a clinical development perspective?

Edward Lanphier

No, I don’t think we have at this moment a line in the sand, if you will in terms of how many CAG repeats will be in the accrual criteria or not, I think that’s going to be data-driven and certainly, something that we’ll discuss with Shire. But in terms of the timelines and the development steps and the next critical data points, and that’s sort of thing, we’ll be discussing that in more detail in December, I won’t hold out that we’ll have Phase I, Phase II accrual criteria by that point. but we’ll give you a sense of those timelines.

Ryan S. Martins – Lazard Capital Markets LLC

Okay. And then finally, maybe if you could touch up on some of your own proprietary monogenic disease programs, which one seemed more exciting that you have data on that you could maybe even think about?

Edward Lanphier

I think that in the ASH abstracts are now out, I think they came out yesterday and there’s a couple in there that I think will be interesting for the industries to look at leading into the Analyst Day, and we’ll give you a sense of sort of there again, what I was talking about the leveragability of the platform. but in particular, we’re very interested in taking exactly the same kind of strategies that we can imply in the hemophilia area, and particularly in some of these very large highly expressed genes and then putting genes, putting cDNAs into those positions. so like the albumin gene, which is one of the things that’s discussed in the ASH data that’s highly leveragable into any protein replacements.

So you’ll see a lot of emphasis on the lysosomal storage diseases where cyclically or similarly there are Safe Harbor sites in stem cells, the AVS-1 site and we’ve already published extensively on being able to put any transgene into that Safe Harbor site. And so these are very leveragable approaches and I think you’ll get a sense of our priorities, again in the December meeting.

Ryan S. Martins – Lazard Capital Markets LLC

Okay. And maybe, if you could just finally touch on the Sigma collaboration that you have, it seems like a good way for you to get accessed to research on the world, to try to see what kind of work is going on. and I think you have some of these two rights on through the collaboration work?

Edward Lanphier

Yeah. I mean the Sigma collaboration has been, as I’d like to say ‘11 on a ‘10 scale have had so many levels, there are an aggressive, creative, thoughtful partner from to top to bottom of the organization, they’ve been supportive. It’s been everything, we could have hoped for both on the financial side, on the research side, but as you point out, this has put our technology into the hands of essentially anybody on the planet who wants to use it. and the level, I mean to look at PubMed, look at the level of publications have gone. and I think the bottom line is in all of those cases, we’ve retained the therapeutic rights to any and all use of this technology in the therapeutic area.

Ryan S. Martins – Lazard Capital Markets LLC

Okay. Well, Ed, I think we’re out of the time, but thanks so much.

Edward Lanphier

Yeah, it’s a pleasure. Thanks for having us.

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