REGENXBIO, Inc. (NASDAQ:RGNX) Q3 2019 Earnings Conference Call November 5, 2019 4:30 PM ET
Patrick Christmas - Senior Vice President and General Counsel
Kenneth Mills - President and Chief Executive Officer
Stephen Pakola - Chief Medical Officer
Vittal Vasista - Chief Financial Officer
Conference Call Participants
Gena Wang - Barclays PLC
Mani Foroohar - SVB Leerink
Kostas Biliouris - Morgan Stanley
Good afternoon, and welcome to the REGENXBIO Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. As a reminder, this conference call is being recorded.
I would now like to turn the call over to Mr. Patrick Christmas, Senior Vice President and General Counsel for REGENXBIO. You may begin.
Good afternoon and thank you for joining us today. With us are Ken Mills, REGENXBIO's President and Chief Executive Officer; Dr. Steve Pakola, our Chief Medical Officer; and Vit Vasista, our Chief Financial Officer.
Earlier this afternoon REGENXBIO released financial and operating results for the three months ended September 30, 2019. The press release reporting our financial results is available on our website at www.regenxbio.com.
Today's conference call will include forward-looking statements regarding our financial outlook in addition to regulatory and product development plans. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from those forecasted and can be identified by words such as expect, plan, will, may, anticipate, believe, should, intend, and other words of similar meaning.
Any such forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties. These risks are described in the risk factors in the Management's Discussion and Analysis sections of REGENXBIO's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, which is on file with the Securities and Exchange Commission and available on the SEC's website.
Any information we provide on this conference call is provided only as of the date of this call, November 5, 2019 and we undertake no obligation to update any forward-looking statements we may make on this call on account of new information, future events or otherwise.
Please be advised that today's call is being recorded and webcast. In addition, any unaudited or pro forma financial information that may be provided is preliminary and does not purport to project financial positions or operating results of the company. Actual results may differ materially.
I would now like to turn the call over to Ken Mills, President and Chief Executive Officer of REGENXBIO.
Thank you, Patrick. Good afternoon, everyone, and thanks for joining us on today's conference call. We'll provide a recap of our recent progress advancing and expanding our NAV Technology Platform. Steve, will provide an overview of the RGX-314 data presented at AAO, and an update on our clinical programs, and Vit will provide an update on financial results for the third quarter of 2019. We'll then open the call for questions.
Over the course of the past decade, REGENXBIO's mission has remained clear, to improve lives through the curative potential of gene therapy based on our proprietary NAV Technology Platform. We believe single administration gene therapy treatments can significantly alter the course of disease in many patient populations and we are committed to our work with these patients in mind.
We continue to advance and broaden our pipeline across two treatment modalities, AAV-mediated antibody delivery and monogenic gene replacement. Both, modalities utilize our NAV Technology Platform to develop treatments for those suffering from rare genetic diseases and expand treatment options for diseases broadly affecting public health.
We've made great strides in the past several months. Last month, we presented interim results from our lead program RGX-314 at the American Academy of Ophthalmology Annual Meeting. This included results from all five dose cohorts in a fully-enrolled Phase I/IIa trial in wet AMD. The new data demonstrated a significant reduction of anti-VEGF treatment burden, while improving or maintaining vision and retinal thickness after a single administration of therapy.
Our study for RGX-121 in subjects with MPS II has enrolled three subjects in the first cohort. And we look forward to reporting the initial data from that program at year-end. With a reminder, RGX-121, our goal is to help patients with severe Hunter syndrome, who have or experienced, or expected to have CNS manifestations of disease.
Additionally, RGX-501 is designed to treat patients with HoFH or Homozygous Familial Hypercholesterolemia. Our study of RGX-501 has also completed enrollment in the second cohort and we look forward to reporting the initial data from that program at the end of the year.
Our license partners continue to make important progress for patients as well. We have seen strong first full quarter launch of Novartis' Zolgensma for pediatric patients with Spinal Muscular Atrophy or SMA, a debilitating and deadly disease. Zolgensma is the first FDA approved gene therapy based on REGENXBIO's proprietary NAV Technology Platform, which was a major milestone for gene therapy and patients and families facing SMA. The results are validation of the NAV Technology Platform and Novartis has shared that approximately 100 patients have been treated with Zolgensma since launch.
Now I want to take a moment to discuss an update on the RGX-314 program that was just announced this afternoon. We've recently received notification from the Food and Drug Administration, that they have questions regarding certain commercially available third-party surgical devices that are used for the subretinal delivery of RGX-314 and they have placed the Phase I/IIa study on a partial clinical hold.
As I mentioned earlier, we have completed dosing of all subjects in that study and I want to be absolutely clear that the FDA's concerns are not related to the gene therapy itself. We also are not aware of any surgical delivery device concerns or complications from our study or from other groups using similar surgical delivery devices.
We are conducting a review of readily available and substitutable alternatives for these devices, should they be needed. And we're working with the FDA to further understand their concerns. As a result, we do expect the delay of the initiation of the Phase IIb study in wet AMD and the filing of the IND planned for the Phase II study of RGX-314 for the treatment of diabetic retinopathy until the first quarter of 2020.
Now REGENXBIO's formula for success has been driven by breakthrough science talented people, sound capital management, and a disciplined execution of our plans. We remain committed to making the potential of one-time gene therapy a reality for patients and working through this process is no exception.
We're driving forward on an expanding pipeline of internal programs designed to address both chronic and rare diseases. And it's an incredibly exciting time to realize the fullest potential of the NAV Technology based gene therapy.
With that, I'd like to turn the call over to Steve for a clinical and regulatory update.
Thanks, Ken. I'm pleased to share advances in our internal programs across ophthalmologic, CNS and liver-directed therapies. I'll begin with our RGX-314 program for the treatment of wet AMD, a disease that affects more than 2 million patients in the U.S., Europe and Japan. Patients with wet AMD usually require anti-VEGF therapy as frequently as every month indefinitely to prevent vision loss.
Continual long-term therapy with intraocular anti-VEGF injections is a burden to patients and families and many patients struggle to comply with the recommended therapeutic regimen for current anti-VEGF therapies, leading to under-treatment and ultimately vision loss over time. RGX-314 utilizes the NAV AAV8 vector to deliver a transgene encoding an anti-VEGF antibody fab to potentially halt the proliferation of blood vessels in the retina.
As previously announced, we presented interim results from the RGX-314 Phase I/IIa dose escalation clinical trial in subjects with wet AMD at AAO in October of this year. The Phase I/II study enrolled five cohorts with 42 subjects in total. The subjects in the study were chronically treated with anti-VEGF therapy prior to enrollment in the study.
Across all cohorts, they had an average annualized rate of 9.6 injections prior to entry. Subjects had received up to 13 anti-VEGF injections in the year prior, the most any subject can get, as physicians are only able to treat with anti-VEGF injections every four weeks. RGX-314 was well tolerated in all five cohorts with no drug-related serious adverse events and most adverse events were assessed as mild.
Importantly, there were no clinically determined immune responses or drug-related ocular inflammation. Importantly for RGX-314, we did not screen out subjects with AAV8 antibodies and nearly 50% of subjects in the study, did have AAV8 specific neutralizing antibodies. But no effect on subject response to RGX-314 in subjects with those antibodies was observed.
At one-month post administration of RGX-314, we saw a dose-dependent increase in protein across all cohorts. Three of the subjects in the third cohort, continue to be anti-VEGF injection-free 1.5 years after RGX-314 administration. And after 1.5 years, continue to have stable RGX-314 protein levels.
In Cohort 3, subjects have continued to demonstrate sustained visual and anatomic outcomes over 1.5 years with an average increase in visual acuity of nine letters and an average decrease in central retinal thickness of 40 microns. These results are in the backdrop of a significant reduction in anti-VEGF treatments.
Impressively 50% of the subjects have not had to receive any rescue anti-VEGF injections over a year and a half, while at the same time demonstrating sustained improvement of visual acuity and decreased retinal thickness.
Initial data from Cohorts 4 and 5, which had 12 subjects each were presented for the first time at AAO, demonstrated stable-to-improved vision and retinal thickness and 75% of subjects in Cohort 5 remained anti-VEGF injection free up to six months after RGX-314 administration.
It's important to note that our re-treatment criteria in the study are fairly liberal, in the sense that rescue injections were allowed for any fluid or disease activity at the investigators discretion. These criteria included increased new or persistent fluid in the retina, a vision loss of five letters or more associated with fluid or new ocular hemorrhage. So even with this low bar for re-treatment, we have seen a significant reduction in anti-VEGF injections.
We are now planning to initiate the Phase IIb trial for wet AMD in the first quarter of 2020. The Phase I/IIa data from the ongoing RGX-314 trial in wet AMD will be used to support final trial design, including patient numbers and dose selection, as we finalize the plans for the surgical delivery device with the FDA.
We also plan to file an IND application for a Phase II trial evaluating RGX-314 in subjects with DR in the first quarter of 2020. Meanwhile, we continue to evaluate in-office delivery of RGX-314 to the suprachoroidal space using Clearside Biomedical's SCS Microinjector and expect to announce clinical plans in 2020.
This route of administration could allow for the treatment of an expanded population of patients with wet AMD and DR by providing access to gene therapy treatment in all settings of patient care. This route of administration may also allow physicians to treat physicians with diseases like DR earlier in the disease course with RGX-314. Last week, we exercised our option to fully license the SCS Microinjector for the delivery of AAV vectors.
Next, I'll turn to our gene therapy pipeline for the treatment of monogenic diseases, including our liver-directed and CNS-directed programs. In our liver-directed program, RGX-501 for the treatment of Homozygous Familial Hypercholesterolemia, we have completed dosing of subjects in Cohort 2 of the Phase I/II clinical trial, evaluating RGX-501 with prophylactic corticosteroids. We expect to report interim data by the end of the year, which will include safety and efficacy endpoints, such as lipid outcome measures.
Turning to our CNS programs, we completed dosing of subjects in Cohort 1 in the Phase I/II clinical trial evaluating RGX-121 for the treatment of MPS II via intracisternal delivery, direct to the CNS. We expect to report interim data from this trial by the end of the year.
The primary and secondary endpoints of this trial includes safety and tolerability, change in biomarkers is measured in cerebrospinal fluid, serum and urine, and change in neurodevelopmental parameters. The subject recruitment and additional site activations are ongoing in our Phase II clinical trial of RGX-111 for the treatment of MPS-I.
We are pleased to report that last month RGX-111 was administered to a patient with MPS-I outside of our current protocol through an investigator-initiated study at the Children's Hospital in Orange County. As of November 4, the therapy has been well tolerated.
Turning to RGX-181 for the treatment of CLN2 Batten disease, we now expect to file an IND or foreign equivalent for the first in human clinical trial in the second half of 2020, following additional pre-clinical development and analysis to support clinical development. We will continue our diligent work to drive these programs forward and we look forward to providing you with updates on our progress.
With that, I turn the call back over to Ken.
Thank you, Steve. REGENXBIO has an extensive footprint in the gene therapy space and our scientific innovation could potentially bring many breakthrough gene therapy treatments to market, through our own product candidates, as well as the product candidates developed by our licensee network.
As of October 31, 2019, our technology was being applied in more than 20 partnered product candidates in development. 15 of these partnered product candidates were in active clinical development. We continue to see progress and expansion in our partnered pipeline. For example, in July we granted a non-exclusive license to Pfizer for the NAV AAV9 Vector for the development and commercialization of gene therapies for the treatment of Friedreich's ataxia.
In the fall of 2019, our partners at Audentes Therapeutics are expecting to complete enrollment of the pivotal expansion cohort of their trial of AT132 in subjects with X-Linked Myotubular Myopathy with the BLA planned for mid-2020. And of course, as I mentioned earlier, Novartis' Zolgensma, which also uses the NAV AAV9 Vector had a strong first full quarter launch.
You see as licensee programs progress and achieve commercial efficacy and safety milestones in their development, they further validate the broad application of the NAV Technology Platform and provide additional data that collectively drive the advancement of the AAV gene therapy space. You can please refer to our press release issued earlier today for specific updates on other external partner programs.
Finally, construction of our cGMP production facility in Rockville, Maryland continues as planned. When completed, it's expected to support production of NAV Technology based vectors at scale, up to 2,000 liters using our platform suspension cell culture process. The facility will be designed to meet global regulatory requirements and is expected to be operational in 2021.
Importantly, the additional manufacturing capacity utilizing our platform process will allow us to more efficiently advance development programs from research stage to the clinic and ultimately to patients. We expect our manufacturing network to be capable of supporting early and late-stage programs, including those which may require large scale vector supply.
With that, I'd now like to turn the call over to Vit for a review of last quarter financials. Vit?
Thank you, Ken. REGENXBIO ended the quarter on September 30, 2019 with cash, cash equivalents and marketable securities totaling $417.1 million, compared to $470.6 million as of December 31, 2018. The decrease in cash, cash equivalents and marketable securities, during the nine months ended September 30, 2019, was primarily attributable to $82.2 million of net cash used in operating activities during the period, partially offset by an unrealized gain of $29.4 million related to our marketable equity securities of Prevail Therapeutics.
Revenues were $14.7 million for the three months ended September 30, 2019, compared to $5.3 million for the same period in 2018. The increase was primarily attributable to $9.2 million of royalty revenue recognized during the third quarter of 2019, related to net sales of Zolgensma.
Commercial sales of Zolgensma commenced in the second quarter of 2019, and we are also eligible to receive a milestone payment of $80 million from AveXis upon the achievement of $1 billion in cumulative net sales of Zolgensma.
Research and development expenses were $35.7 million for the three months ended September 30, 2019, compared to $18.5 million for the same period in 2018. The increase was primarily attributable to personnel costs, as a result of increased headcount, laboratory and facilities costs, and external expenses associated with conducting clinical trials in manufacturing-related services.
General and administrative expenses were $12.4 million for the three months ended September 30, 2019, compared to $9 million for the same period in 2018. The increase was primarily attributable to personnel costs, as a result of increased headcount.
Net loss was $34.6 million or $0.94 basic and diluted net loss per share for the three months ended September 30, 2019, compared to net loss of $19.2 million or $0.56 basic and diluted net loss per share for the same period in 2018. Based on our current operating plan REGENXBIO now expects its balance in cash, cash equivalents and marketable securities to be at least $365 million as of December 31, 2019.
With that, I will bounce and turn the call back to Ken to provide final thoughts and review of our upcoming milestones.
Thanks, Vit. The past quarter marked a highly productive and exciting time for the company. After a decade of steadfast effort and focus, we remain dedicated and committed to improving lives through the curative potential of gene therapy.
Before we close, I'd like to take a moment to recognize the ongoing excellent work of our employees, partners, clinical trial investigators, and of course and especially every patient and family, who have chosen to participate in our clinical trials.
With our innovative science inspired people and partners and strong cash position, we continue to feel well positioned to achieve future milestones and advanced therapies for patients with significant unmet medical needs.
With that, we will now open the call for questions. Operator?
[Operator Instructions] Our first question comes from the line of Gena Wang from Barclays. Your line is open.
Thank you for taking my questions. The first question is regarding the partial clinical hold for wet AMD program. Just wondering what exactly is this surgical device and was it used across all the patients?
Hi, Gena. It's Ken. Thanks for the first question. As we mentioned, we were recently informed by FDA that they are assessing aspects of the surgical delivery device, specifically the devices that are third-party devices – commercially third-party devices that are available and that we have used for the surgical delivery in the Phase I/IIa study. But we're still working with FDA to determine the exact cause and the precise elements of their exact concern. So in the meantime FDA has placed the trial on a partial clinical hold, even though the patients have already been dosed with the one-time gene therapy.
I should clarify that the regular assessments and safety monitoring of all subjects enrolled continue and continue to be performed as normal. So it has been a fully enrolled study where really the last intervention was delivered about six months ago. So we are not aware of any delivery system concerns. We didn't report any concerns or complications from the Phase I/IIa study ourselves. So we're waiting for FDA to provide more details.
So for the other alternative surgical device you mentioned, how comparable are they compared to the previous one? And then do you also need to work on those finding before using this new device?
Yes, I think we don't – again no precise concern of FDA as it relates to the device and the third-party devices. I think what we have been able to do is, start to work internally to assess what maybe a concern. And what we know about our internal delivery system is that, it's entirely comprised of commercial third-party devices. And if FDA has concerns, once we learn more about the specifics of their concern, we feel pretty confident that several of the components in the device system could be exchanged with something that also maybe commercially available.
Okay. And my last question is regarding the suprachoroidal injection. Would you need a new IND for next year’s trial and at what dose would you use for this trial? And also, will you prescreen existing AAV8 neutralizing antibody for that delivery?
Hi, Gena. Thanks for the question. This is Steve. So we'll be updating our plan and providing information on the plan for suprachoroidal delivery. As far as your question of whether you would need a separate IND or not. Not necessarily, certainly treating the same type of population that we're treating under the existing IND.
As far as dose, we feel pretty comfortable at least in a general sense of the range of dosing based on the pre-clinical data we have, where we see very comparable transduction and also protein expression with similar concentration and volume of drug given suprachoroidally compared to what we've seen subretinally.
But it is a different space, where the drug would be delivered, although still very close to the target tissue and that's one of the reasons we are excited about suprachoroidal. So I think based on the full dose ranging that we've done with subretinal delivery, that gives us a good starting point in terms of thinking of what type of dose ranging we do for suprachoroidal.
Okay. And lastly, the pre-existing AAV8 neutralizing antibody?
Yes. So we're currently evaluating that aspect. So as you know with subretinal delivery, a relatively immune privilege space, we can dose subretinally independent of what the neutralizing antibody status is on patients and that's one of the several positives of the gold standard current approach to subretinal delivery. With suprachoroidal delivery, it still remains to be determined whether neutralizing antibody status would be relevant in terms of treatment in that setting. So that's one of the factors that we're evaluating currently.
Thank you very much.
Our next question comes from the line of from Mani Foroohar with SVB Leerink. Your line is open.
Hey, guys. Thanks for taking my question. So I'll start with a one quick one for Vit. When we think about your cash and securities balance estimates for the end of the year, what assumptions are included in those projections for Zolgensma royalty and what assumptions or how much value is baked in for the Prevail shareholdings – is the assumption that Prevail sales order is right where it is or if there is some other value assumption you're making? And then I have a quick follow-up.
Sure, Mani. So as it relates to Prevail, our assumption is that they will maintain its mark-to-market value that we recorded as of 9/30/2019. And then as it relates to Zolgensma, we can go off of is the limited guidance that Novartis provided as it related to their expectations for Q4 sales.
Perfect. That answers my question, which is the presumption that remained flat Q-over-Q to their guidance. So you got my follow-up. Thanks and I'll hop back in the queue.
Our next question comes from the line of Matthew Harrison from Morgan Stanley. Your line is open.
Hello. This is Kostas on for Matthew. I have two questions on the MPS programs. Regarding RGX-111, when shall we expect to see a data update from this program?
So our MPS programs will be updating at the end of the year.
So this is for both 111 and 121, right?
Well, we've announced today that we completed recruitment in the first cohort of the MPS II program. So there is where we have patients that we will be updating at the end of the year. We also did announce that we dosed – not we, but a separate treating investigator, treated patient in the MPS I program under an investigator-initiated study.
Okay. Thank you. And one question for RGX-181. I believe you had previously planned an IND submission by the second half of  and now you have moved it to an earlier date. Can you please give us some information about what you need to do before you submit an IND? Thank you.
Yes. So we have a preclinical program that's currently ongoing. So we haven't disclosed any information based on the interim status of the data that we have. But suffice it to say, that we still need additional completion of various preclinical work before we'd be able to proceed.
Okay. Thank you.
[Operator Instructions] I am showing no further questions at this time. I would now like to turn the conference back to Ken Mills for his closing remarks.
Thanks everyone for participating today. We continue to be encouraged by the progress that we've made in the third quarter and look forward to a strong close to 2019 and keeping everyone apprised of continued updates with internal programs and the NAV Technology Platform. So have a great rest of the evening.
Ladies and gentlemen, this concludes today’s conference. Thank you for your participation and have a wonderful day. You may all disconnect.