REGENXBIO, Inc. (NASDAQ:RGNX) Q1 2020 Earnings Conference Call May 7, 2020 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
Gbola Amusa - Chardan Capital Markets
Mani Foroohar - SVB Leerink
Costas Liappas - Morgan Stanley
Good afternoon, and welcome to the REGENXBIO First Quarter 2020 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 first quarter ended March 31, 2020. 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 Annual Report on Form 10-K for the full year ended December 31, 2019, and comparable sections of REGENXBIO’s other filings which are 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, May 7, 2020 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.
Thank you, Patrick. Good afternoon, everyone, and thanks for joining us. On today's conference call, we will provide a recap of our recent progress advancing and expanding the NAV Technology Platform, as well as expected future milestones.
Steve will provide an update on our clinical programs, and Vit will provide an update on the financial results for the first quarter of 2020. Then, we'll open the call for questions.
First, I want to take a moment to say that I hope everyone is healthy, staying safe during the Covid-19 pandemic. At REGENXBIO, we’ve made some changes to our business operations in order to support the health and safety of our employees and the community, and we are fortunate that we’ve been able to successfully advance our business during this time.
As always and especially throughout the past few months, our overall focus remains on the important goal of improving lives through the curative potential of gene therapy, and I am grateful that our team is dedicated to this pursuit even in these challenging times.
Along these lines, we’ve made important progress in recent months at REGENXBIO as we continue to see the remarkably consistent and durable effects of gene therapy treatment, patients with severe wet AMD.
If you haven’t done so already, I highly recommend referring back to our webcast that we hosted on April 22, in which several leading retina specialists joined us to provide their perspectives on our recently announced data.
Our RGX-314 gene therapy is designed to enable sustained production of an anti-VEGF antibody fragment in the eye, and we’ve now demonstrated stable and consistent results out to two years in the third dose cohort. We believe this is the longest timeline of continuous therapeutic effects demonstrated in wet AMD patients from a single administration of an anti-VEGF treatment.
We also provided additional data from the fifth cohort, which received a higher dose of RGX-314 and in which 73% of patients remain anti-VEGF injection free nine months after a one-time administration of RGX-314.
In our program, we are thinking carefully of all aspects of clinical management, not just anti-VEGF injections, are cognizant that variables that might impact patient care and vision, and Steve will provide more details on these results and next steps for the program in his remarks.
Beyond RGX-314, we’ve continued to drive our internal gene therapy pipeline forward as we previously announced in February, we presented encouraging initial data at the World Symposium from Cohort 1, the Phase I/II trial for MPS II and we look forward to providing additional data from these patients in mid-2020.
We have begun enrolling patients in Cohort 2 where they are receiving a higher dose of RGX-121 and look forward to providing interim data on Cohort 2 in the second half of 2020. We anticipate several other important updates this year including from our Phase I/II trial of RGX-501 for the treatment of HoFH, our Phase I/II trial of RGX-111 for the treatment of MPS-I and our RGX-181 program for the treatment of CLN2 disease, as well as our research programs in hereditary angioedema, neurodegenerative , and neuromuscular diseases.
Lastly, construction of our GMP production facility here in Rockville continues, and the facility is expected to be operational in 2021. We expect the facility to enable us to strategically scale production while continuing to ensure high quality for patients.
So with that, I’ll turn the call over to Steve for a clinical and regulatory update.
Thanks, Ken. As you’ve mentioned, last month we announced updated data from our Phase I/II a study of RGX-314 for the treatment of wet AMD. We reported that the gene therapy continued to be well tolerated at all dose levels and there were no reports of ocular inflammation beyond what is expected following routine vitrectomy.
The latest efficacy update was focused on the two-year data from Cohort 3 of the study. Patients in this cohort received 6C [ph] 10 genome copies per eye and now at two years after administration of RGX-314, they have demonstrated markedly improved visual acuity and stable retinal thickness as well as significantly reduced need for anti-VEGF intraocular injections and stable protein expression.
50% of patients within this cohort did not receive any anti-VEGF injections over the full two years of the study, and one additional subject did not receive injection starting nine months after the administration of RGX-314.
We saw an impressive improvement in visual acuity with an increase of 14 letters in both the full cohort as well the four patients who did not receive anti-VEGF injections in the second year of the study.
This improved vision and durability of anti-VEGF activity is particularly meaningful as real world evidence has shown us that patients commonly lose vision over time, even with current standard of care.
And finally, Cohort 3 showed consistent protein production over two years giving us confidence that the transduced cells in the retina have been producing the RGX-314 protein at a steady rate throughout the study.
We also provided an interim update from Cohort 5. 73% of patients were anti-VEGF injection free over nine months. We are very pleased with these results and look forward to additional efficacy data at the one-year time point. We will use this data to then finalize the design of the pivotal program for RGX-314, which we expect to initiate in the second half of 2020.
We are also planning to start trials of RGX-314 using the in-office suprachoroidal delivery approach in 2020 for both wet AMD and diabetic retinopathy. We look forward to providing additional information about these trials over the coming months.
Turning to our rare disease portfolio, data thus far from our Phase I/II trial of RGX-121 has been encouraging as patients in the first cohort demonstrated consistent and sustained reduction in heparan sulfate in the CSF and available data support early signs of neurocognitive stability.
We look forward to providing additional data from these three patients in mid-2020, meanwhile enrolment in Cohort 2 at a higher dose level continues and is expected to be complete in the first half of 2020 with interim data expected in the second half of 2020.
Recruitment screening and additional site activations are ongoing in our Phase I/II clinical trial evaluating RGX-111 for the treatment of MPS I. Recruitment in this trial had been previously focused on an initial patient over the age of 18, but the protocol was recently amended to allow enrollment of patients as young as four months of age. We expect to provide a program update in the second half of 2020.
We also anticipate updates from our Phase I/II trial of RGX-501 for the treatment of HoFH in the first half of this year. We have several other study programs headed towards the clinic including the HAE and neuromuscular programs and I look forward to providing additional details in the coming months.
With that, I turn the call back over to Ken. Ken?
Thanks for that summary, Steve. REGENXBIO has an extensive footprint in the gene therapy space and we are always purposeful in developing partnerships with key players in the space to continue to realize the potential of NAV technology.
Our NAV technology is currently being applied in one marketed product and more than 20 additional partnered product candidates. We continue to track the positive progress of Novartis’ ZOLGENSMA uses the NAV AAV9 vector.
Novartis has stated that they are treating about a 100 patients per quarter in the U.S. based on their current launch. We are encouraged by the success with the Novartis team in reaching patients.
I believe that this is among the most successful launches of gene therapy so far and believe that it demonstrates the transformational impact NAV technology can have on the treatment of genetic diseases with significant unmet needs.
We were also pleased to see the positive regulatory developments in Japan and Europe this quarter, which signal additional validation in the technology across the globe.
And importantly for the entire gene therapy field, Novartis recently published additional detailed data for the intrathecal delivery of ZOLGENSMA, which has shown improvement in motor function and achievement of motor skills following treatment. I am excited for the additional progress to come from this program.
In addition, we recently announced another exclusive worldwide license agreement with Ultragenyx extending our company’s existing gene therapy partnership. This agreement will enable the Ultragenyx team to apply our NAV technology AAV8 and AAV9 vectors to the development of a new gene therapy for a rare metabolic disorder and provides further validation of the breadth and depth of our intellectual property portfolio.
Throughout the remainder of this year, we also anticipate regulatory updates from our partners like Audentes Therapeutics, now part of Astellas for their gene therapy candidate for X-linked Myotubular Myopathy which uses our NAV AAV8 vector.
The promising milestones and achievements from our partners as well as the progress in our own internal pipeline provide additional validation, the proprietary NAV technology platform and further demonstrates the transformational impact that can come from a one-time administration of gene therapy.
With that summary, I want to turn the call over to Vit for a review of our financials.
Thank you, Ken. REGENXBIO ended the quarter on March 31, 20120 with cash, cash equivalents and marketable securities totaling $356.6 million, compared to $400 million as of December 31, 2019. The decrease was primarily attributable to net cash used in operating activities of $35.6 million and cash used to purchase property and equipment of $4.6 million.
Revenues were $17.6 million for the three months ended March 31, 2020, compared to $900,000 for the same period in 2019. The increase was primarily attributable to $10 million of royalty revenue recognized on net sales of Zolgensma in the first quarter of 2020, as well as $7.2 million of license revenue recognized from a new licensing granted to Ultragenyx during the period.
Commercial sales of Zolgensma commenced in the second quarter of 2019, and REGENXBIO is eligible to receive a milestone payment of $80 million from AveXis upon the achievement of $1 billion in cumulative net sales of Zolgensma. As of the end of the first quarter of 2020, they’ve reported over $530 million in net sales. So we are more than half way to that milestone.
Research and development expenses were $37 million for the three months ended March 31, 2020, compared to $25.2 million for the same period in 2019.
The increase was primarily attributable to personnel-related costs as a result of increased headcount, laboratory and facility costs, expenses associated with conducting clinical trials for our lead product candidates and externally sourced services for preclinical, regulatory and manufacturing-related activities.
General and administrative expenses were $14.8 million for the three months ended March 31, 2020, compared to $11.6 million for the same period in 2019. The increase was primarily attributable to personnel-related costs as a result of increased headcount and professional fees for advisory and other services.
Net loss was $40 million or $1.08 basic and diluted net loss per share, for the three months of March 31, 2020, compared to a net loss of $32.2 million, or $0.89 basic and diluted net loss per share for the same period in 2019. As of March 31, 2020, we had approximately $37.2 million common shares outstanding.
Based on our current operating plan, we expect the balance in cash, cash equivalents, and marketable securities of $356.6 million to fund the completion of our internal manufacturing capabilities and clinical advancement of our product candidates into 2022.
With that, I will turn the call back to Ken to provide final thoughts.
Thanks for that update, Vit. So next week is the American Society of Gene and Cell Therapy Conference and we’ve announced a number of scientific posters and presentations that will be shared.
Our research and development team continues to demonstrate a deep and impressive knowledge in AAV discovery characterization delivery and significant experience and expertise in process development, production at large-scale.
So we look forward to participation with our industry partners, friends and colleagues highlighting some of the work next week, as well as continuing to share new data from our ongoing research throughout 2020.
Finally, as I worked with our team to continue to pursue our mission for patients balance the challenges in dealing with the COVID-19 pandemic, I have also reflected more on how the potential gene therapy treatments to help ease the burden on the medical community, while also protecting patients, families, caregivers, even larger communities from certain risks involved current treatment options during events like what we are experiencing with this pandemic.
There are many patient populations that rely on traveling, regular access to treatment and medical care facilities, for injections or infusions that are important medically necessary, sight saving or lifesaving medicines.
Single administration gene therapy treatments can deliver important alternatives in moments where travel and access is restricted. Healthcare resources are limited and product supplies maybe threatened.
Against the background of a pandemic that’s waxing the global healthcare resources at unprecedented levels, it’s even more apparent to me that our single administration treatments have the potential to also create safer and more robust system for care.
The medical community and the biotech financial community should be doing everything possible to support and expedite single administration treatment, especially for large and at risk populations.
We continue to make strong progress advancing key programs, broadening our internal gene therapy pipeline after more than a decade of steadfast effort and focus, we remain dedicated and committed to improving lives through the curative potential of gene therapy.
With that, happy to turn the call over for questions. Operator?
[Operator Instructions] And your first question comes from Gena Wang with Barclays.
Thank you very much for taking my question. First, congratulations on the latest update on wet AMD data. That was really impressive, especially after recent [ph]update from other competitors. So, and I think, I wanted to ask you is, regarding the suprachoroidal data and initiation in first half this year, and also the clinical data, first cohort data by the end of this year. Just wondering, what kind of data should we expect will you be presenting by the end of this year regarding the patient numbers, if we understand correctly, it’s six patients and what other data would you be able to share with us?
Hi Gena. Steve here. Thanks for the question. Yes, as you mentioned, our guidance is, we continued to target starting our suprachoroidal delivery development program first with a wet AMD study and to kick that study off by the end of the first half of this year, and we still are guiding towards having interim initial data at the end of the year.
We haven’t actually disclosed how many patients we have in the study and other details, and we look forward to providing that later. But, certainly, we stand by our guidance of giving an update based on some of the data that we will have as of the end of the year.
One of the nice things of the wet AMD indication is, we already have a good handle on wet AMD in terms of looking at the appropriate types of endpoints, both anatomic functional and treatment burden endpoints that we’ve talked about in the past and very recently with our recent data update in our sub-retinal delivery program.
So, we have a good handle on those types of endpoints, and I think you can envision similar types of data readouts.
Your next question comes from Gbola Amusa with Chardan.
Hi. Thanks for taking my call and congrats as well on the 2-year durability data for 314. I had a couple questions on the potential for inflammation for your in-office suprachoroidal approach. Obviously, there’s a lot of benefit in going in the office, but some would argue there is greater potential for inflammation with that approach.
So, one – two questions is, do you agree with that assessment? And then second, given that we’ve seen very recent and very early results with intravitreal gene therapy using expanded courses of prophylactic steroids addressing issues, maybe – addressing it thoroughly issues of inflammation with the [indiscernible] capsid and wet AMD and also RT, do those results go early?
Do they motivate you to use an extended course of prophylactic steroids for your SCS microinjector programs?
So those two questions on, very quickly. Novartis just said that there is a multi-billion dollar potential for ZOLGENSMA, and again has updated guidance and you got obviously up to 10% of that. Could you cover what they said in various public forums on the timing of the ramp towards that guidance?
Steve, maybe I’ll let you start with the 314 questions.
Okay, that makes sense. Hi, Gbola, that’s a great question. Suprachoroidal delivery is a different route of administration than subretinal. Subretinal is the gold standard, that’s where we have the most efficacy and safety and clear demonstration that there isn’t inflammation associated with sub-retinal gene therapy, and that obviously, we are very excited about for our lead program with sub-retinal delivery.
Suprachoroidal, the in-office potential delivery there, where we still are anatomically delivering very close to the target tissue of the RPE and the photoreceptors, but you raise a legitimate question, what do we know about immune privilege or lack thereof and the potential for inflammation.
Historically, there has been inflammation seen, an immune response with suprachoroidal delivery of earlier generation AAV vectors such as AAV2 and AAV5. One of the things that got us very excited about suprachoroidal delivery with our proprietary NAV technology is actual preclinical data in both small and large animal models where we’ve seen no inflammation with suprachoroidal delivery of AAV8 vector including RGX-314 in multiple studies.
So that gives us comfort that perhaps there is less of a risk of inflammation with suprachoroidal delivery than exists with intravitreal for example.
So with intravitreal, we know historically -- universally, really with preclinical and clinical experiments that at the doses that you have to give with either AAV2 or other vectors that you have to give a high enough dose to have diffusion to get to the back of the eye, the target tissue and screw the internal limiting membrane barrier that invariably at doses where you get good transduction, and you also see immune-mediated inflammation.
And we continue to see that frankly validated in any preclinical experiments or clinical data that’s come out with intravitreal administration.
And Gbola, just turning to the question about ZOLGENSMA, I think what we’ve seen most recently between Novartis’ update at their last earnings call and then they had an update around new data that was presented at MDA is that, for the IV route of administration that’s of course, currently approved and being marketed facilitating the sales numbers that we are seeing based on the U.S. approval.
There has been some regulatory events in Japan and Europe. Specifically, they’ve pointed to that indicate that, reimbursement is coming in other jurisdictions as early as the end of the first half of this year.
In addition, with respect to the new intrathecal data that we mentioned earlier in the call, there was an update on the STRONG study showing improved outcomes as described and there has been guidance from Novartis that a BLA could be filed or equivalent I guess, worldwide as early as the second half of 2020 or into 2021.
So, we continue to be really encouraged by the data by what we are seeing in terms of the uptake of the use of gene therapy. Again, I think, we are looking at what must mean , among if not the most successful launch for gene therapy to-date and our liking to see the regulatory and commercial milestones that are emerging.
Your next question comes from Mani Foroohar with SVB Leerink.
Hey guys. Thanks for taking the question. I will start with SCS question. Using the suprachoroidal delivery, do you expect that all common designed to be reasonable and practical and you’d remove the inclusion criteria that patients with pseudophakic in the sub-retinal study? So could there be a broader population that could be addressed with suprachoroidal or potentially more rapid involvement?
And then, the second question, kind of boring financial question. Can you give us a sense of the all-in scale of the CapEx build-out? And then, as a third question, obviously, a disclosure from one of your partners Abeona regarding termination of that license, do you – is it appropriate to presume royalties on that program would be excluded, but the $28 million contractual payment would still be received this year by REGENX?
Or is that the wrong way to think about it? And would you consider doing a program in Sanfilippo 3A or BSOs? So I guess, my four questions, sorry.
That’s all right. I wrote them all down. Steve, do you want to address the SC question? Thanks Mani by the way.
Sure. Yes, we’ll go chronologically. So, thanks, Mani. So, SCS, so, on the pseudophakic question, one clarification; in our ongoing study, the inclusion and exclusion criteria were including pseudophakic patients in other words, patients who had cataract removal and have a intraocular lens. That actually doesn’t relate at all to the clinical potential to address either phakic or pseudophakic patients.
It’s purely a study design aspect, because of the fact that after a vitrectomy, there is an increased rate of cataract development and potentially having cataract surgery thereafter where that would really confound one of the key efficacy measures in the ongoing study and then also a pivotal efficacy endpoint in the future study.
But, very importantly, we expect gene therapy anti-VEGF delivery to work in both pseudophakic and phakic patients. So, given that, we would address in other ways demonstrating the safety and response in a pseudophakic population to ensure that we have a broad label for example. So, we don’t intend in the long-term for there to be any exclusions related to that.
In the near-term for even clinical development and even early-stage development, you are exactly right with in-office suprachoroidal delivery, there wouldn’t even be that technical desire to exclude patients who are phakic. So, we would allow all comers from that respect.
So, Mani, continuing on with the questions, with respect to the new build-out for the new headquarters and GMP facility, I think that, the effects of the new space is directly a function of kind of what our involvement is going to be which is going to increase over the course of the year. Keep in mind that, this is a new building that’s being built for us.
We signed a lease with Alexandria in the end of 2018 and has been carrying forward. They’ve initiated that build last year. We are obviously not paying out of pocket for that building. This is something where we’ve entered into a long-term lease agreement with Alexandria and those are going to be operating costs on a go forward basis.
As the building starts to come into focus, it’s going to be a phased approach to offices, labs, and then ultimately the GMP facility and capital expenses for furniture, fixtures and of course, equipment will then migrate into our budget.
Although, there will be tenant improvement allowances that are part of our leasehold improvements agreements with ARE as they build out that facility, we will also not necessarily be moving into the entirety of the building at the outset. So, while we’ve recently extended the terms of the agreement with Alexandria to have access to the entire building, we don’t have to build everything out right away.
So, from a CapEx perspective, we’ll be modulating based on meaning to some extent. But this will be something that I think by the second half of the year, we’ll start to have more of an effect than what we’ll see in the first half of the year from a CapEx outlay perspective.
And I think, we’ll be something that over the term of the entire build out and moved that into this new headquarters, which I think is really valuable thing to do to bring all of our groups together in one place from an efficiency perspective. This is something that certainly is going to be in the tens of millions overall over the life of the program.
And finally, on your points about the questions rather about the status of the Abeona license agreement. So, that’s right. I mean, I think, your first part of the question, I mean, we have an agreement which effectively, our agreement with Abeona status is terminated right now.
There is no license that Abeona has and there is no royalties that would come to REGENX on the basis of a terminated license agreement.
But as a result of the breach by Abeona for their failure to pay, there are outstanding amounts due to us that we will be payment for it.
[Operator Instructions] And your next question comes from Matthew Harrison with Morgan Stanley.
Hello everyone. This is Costas on for Matthew. Two questions from us. One is related to 121 and I was wondering what type of data shall we expect in the second half of 2020? And whether you are planning to disclose the baseline HS, levels of the patients? And then, I can move to the second question.
Yes, so, one – recall, we completed recruitment of the first cohort and we’ve given preliminary data there where we’ve seen clear proof-of-concept in terms of heparin sulfate reduction in the CSF. And we have announced and disclosed previously we’d be giving an update later this half of the year and we also have a second cohort recruitment ongoing.
So, we look to be able to give an update on results from that cohort in the second half of this year.
And will you be disclosing the baseline HS levels of the patients or you cannot discuss this now?
The baseline ages, could you say?
The HS - the sulfate - heparin sulfate levels of the patient?
Yes, so we will be giving more details around response and certainly based on heparin sulfate for sure on Cohort 1 and Cohort 2 in second half.
Great. Thank you. And my last question is on the AJ program. I was wondering what is needed before you are able to select the candidate and announce it in the second half of 2020? Thank you.
Yes, I think, the research group is to appoint where there has been science and research going on to optimize all the different components of the construct including sort of promoter and financing element. So, I think we were pretty locked in even when we announced the program that the vector type was going to be AAV8.
So, I think at this point in time, I think we even have a poster next week showing some of that science at ASGCT. It’s really just a down selection of some of the different variations of the construct for expressing that anti-kallikrein inhibitor antibody and moving that into full-scale form and TOX studies that will support the IND, Costas. So, that’s going to the next step. Thank you.
[Operator Instructions] And there are no further questions at this time. I would now hand the call back to Ken Mills.
Well, thanks everyone for joining today. Again, hope that everyone stays safe and well in a situation and through the reentries that are occurring. We are eager to see everyone soon when we have the opportunity and then we are all feeling that a bit. And I appreciate everyone participating today. We look forward to providing you all with future updates.
Have a great night.
That concludes today’s conference. Thank you for your participation. You may now disconnect.