Editas Medicine, Inc. (EDIT) Q2 2017 Earnings Report, Transcript and Summary

Good afternoon and welcome to Editas Medicine's Second Quarter 2017 Financial Results and Update Conference Call. [Operator Instructions] Please be advised that this call is being recorded at Editas Medicine's request. I would now like to turn the call over to the Editas Medicine team. Please proceed.

Good afternoon. This is Mark Mullikin, Senior Director of Finance and Investor Relations at Editas Medicine. Welcome to our second quarter 2017 conference call. We issued a press release earlier this afternoon reviewing our second quarter 2017 results and updates regarding the company, which will be covered on this call. A replay of today's call will be available on the Investors & Media section of our website approximately two hours after its completion. After our prepared remarks, we will open the call for Q&A. As a reminder, various remarks that we make during this call about the company's future expectations, plans and prospects constitute forward looking statements for purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent quarterly report on Form 10-Q, which is on file with the SEC. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to today. I will turn the call over to our Chief Executive Officer, Katrine Bosley.

Thanks, Mark. Good afternoon, everybody, and thank you for joining us for our corporate update call for the second quarter. I am joined today by several members of our executive team, including Andrew Hack, our Chief Financial Officer; Vic Myer, our Chief Technology Officer; and Charlie Albright, our Chief Scientific Officer. We made progress on multiple fronts during the second quarter. On our call today, we'll review how we advanced our product pipeline and platform technology, continued to build the business for the long term and strengthened our organization. First, I'd like to discuss our pipeline progress and starting with our lead program in Leber congenital amaurosis type 10 or LCA10. We remain on track to file our IND by mid-2018 for EDIT-101, which is our preclinical product candidate for LCA10. There are a number of points about the program I'd like to highlight as well. We are pleased to announce today that we received institutional review board approval for the first site in our LCA10 clinical natural history study. This is a prospective study that will evaluate patients with LCA10 to assess the course of the disease and it will also assess potential endpoints and aspects of the trial design for interventional clinical studies with EDIT-101 down the road. We anticipate this natural history study will enroll approximately 40 patients, ages three and above at multiple sites in the U.S. and Europe, and will evaluate and follow patients for at least one year. We are currently finalizing logistical details at their clinical trial sites and will then proceed to begin patients' enrollment. In the second quarter, we received advanced therapy medicinal product or ATMP designation from the European Medicines Agency for EDIT-101 as well. The classification is reserved for new potentially revolutionary medicinal products based on genes, cells or tissues, and it's an essential step in commercializing products effectively across the European Union, and it's an important step for this program. As you know, we presented data from a nonhuman primate study in our LCA10 program in May at ASGCT. In this study, we demonstrated efficient editing of the CEP290 gene, which causes LCA10 in the retina of nonhuman primates. We showed that we productively edited 15% of the total CEP290 wheels in nonhuman primate retina, and this translates to a projected 50% editing of the CEP290 wheels in photoreceptors, the target cells in the retina. This significantly exceeds our prespecified therapeutic threshold of 10% editing. We also sought to understand how EDIT-101 performs in mature human photoreceptors. And to do this, we developed a human retinal explant system. And in this system, we obtained human eyes three to five hours postmortem, isolated retinal tissue and exposed the retina to EDIT-101 in tissue culture. After four weeks in culture, we then performed tissue staining and we quantified the editing. That tissue staining showed the Cas9 expression was limited to the photoreceptor layer as we anticipated. We then used our proprietary UDiTas technology to quantify the editing. Similar to our nonhuman primate studies, we measured editing directly in the entire retinal sample and then calculated projected editing in the photoreceptors themselves. Similar to nonhuman primates, photoreceptors represent only about a 0.25% of the cells in human retinal explants, and the EDIT-101 gene-editing machinery is only expressed in photoreceptors. Our preliminary data from these studies showed productive editing as high as 16% across the entire retina, and based on this, we estimate that we productively edited approximately 50% of the CEP290 wheels in mature human photoreceptors. This data is consistent with what we've seen in experimental animals and was recently presented at the Cold Spring Harbor Genome Engineering Conference. In addition to achieving potentially therapeutic levels of editing, we aim to create therapies that minimize risks from off-target editing. Developing and applying robust methods for setting specificity has been a fundamental component of our platform from the very beginning. For this reason, it is encouraging that neither our biased nor our unbiased methodologies have detected any off-target editing in the human genome from EDIT-101. Taken together, these results reinforce our confidence in the therapeutic potential of EDIT-101. Beyond our LCA10 program, we achieved an important technical milestone in our work with Juno Therapeutics. As a reminder, we're working with Juno on three programs combining our genome editing platform with Juno's CAR and TCR technologies to create engineered T-cells to treat cancer. This most recent milestone arises from the program to overcome the tumor microenvironment. Enabled -- enabling T-cells to overcome the tumor microenvironment has the potential to expand the range of cancers that these therapies may be able to address. This program is distinct from the program to improve T cell persistence, in which we previously achieved a technical milestone, and we'll receive a $2.5 million milestone for this achievement from Juno Therapeutics. Over the course of the quarter, we also presented progress in multiple other programs at scientific conferences. In our discovery program to treat sickle cell disease and beta thalassemia, we demonstrated a substantial increase in fetal hemoglobin protein with a novel genome-editing strategy that has the potential to be more potent than the approaches reported by others in the field. We think this data is a promising foundation to advance a best-in-class therapy for these patients. We also reported high-efficiency editing using our proprietary CRISPR Cpf1 system in both human T-cells and adult hematopoietic stem cells. Cpf1 is a new CRISPR genome-editing system that substantially expands the range of genomic sites we can target, and it may also have advantages in terms of specificity, manufacturing and delivery. In addition, Cpf1 may enable us to achieve more efficient gene repair relative to Cas9. It's separate and distinct from Cas9, and is underpinned by completely separate intellectual property, which is exclusively licensed to Editas. We believe the properties of Cpf1 have the potential to expand the reach of our genome-editing medicines even further. Together with our portfolio of multiple Cas9 species and proprietary engineered variance of each, as well as the broad range of propriety platform innovations that we have shown publicly, we believe we have an unparalleled CRISPR platform and product engine, which has the potential to deliver the best and widest range of genome-editing medicines. Overall, this year, we've demonstrated the productivity of our team and platform through more than 20 presentations and posters at a wide range of scientific and medical conferences and across a range of programs and technical advancements. We expect to present additional progress in multiple programs and platform advancements through the remainder of this year. Outside of our progress on advancing our pipeline of CRISPR medicines, we have also further strengthened our business and our organization. We have further matured our intellectual property portfolio with the issuance of the first patent for CRISPR Cpf1, which we have exclusively licensed. As a reminder -- Cpf1 is the only CRISPR system in addition to Cas9 that has been made to work in human cells, and although this is only one of many positive patent developments in the quarter, we thought it was worth specifically calling out because we do anticipate Cpf1 will be an important contributor to our pipeline of products and in the field of genome editing broadly. We continue to further develop our organization by adding key capabilities to our team, including important hires in pharmacology, manufacturing and operations. And we also welcome Andrew Hirsch to our Board of Directors, where in addition to his roll of an independent director, he will serve as the chair of the Audit Committee. He is currently the Chief Financial Officer of Agios Pharmaceuticals. And now, I'd like to hand the call over to Andrew Hack, our Chief Financial Officer, to review the results from the quarter.

Thanks, Katrine. We filed our Form 10-Q after the close today and have summarized our financial statements in the press release that we made available one hour ago. Starting with the balance sheet and cash flow statement, we ended the quarter with approximately $325 million of cash, cash equivalents and marketable securities. Our net cash used in operations was approximate $26 million. Based on our current cash position as well as research support under our collaborations, but excluding any assumption for future business development transactions or milestones, we believe we have at least 24 months of capital to fund the business. Turning to the income statement, we began recognizing revenue from the Allergan upfront payment with a total of $2.4 million being recorded in the quarter. In addition, we recognized $0.7 million of revenue related to our Juno collaboration. Moving down the income statement to research and development, it's worth noting that the results in the quarter include a $5.1 million payment to our licensors related to the Allergan upfront. Key noncash items recorded in our income statement in the quarter includes $5 million of stock-based compensation. Overall, our financial performance so far this year has been in line with our expectations, and we expect that we have the capital we need to fund the advancement of multiple therapeutic programs in parallel, while also further extending our technology leadership. And with that, I'll hand it back to Katrine.

Thank you, Andrew. As we're at the midpoint of 2017, I'd like to close by reviewing where we stand with respect to our most important corporate goals. Through our strategic alliance with Allergan, we have achieved our goal of establishing a significant additional alliance which is in line with our business development strategy. Pipeline progress includes demonstrating preclinical proof-of-concept and high specificity for our LCA10 program, achievement of a technical milestone in one of our Juno programs and data presentations from several other early programs. We remain on track to initiate our LCA10 clinical natural history study as planned and to submit an IND for EDIT-101 by mid-2018. And finally, we continue to build an outstanding organization and culture that we believe will enable us to drive the creation of this new class of medicines. We're actually approaching the 4-year anniversary of the founding of Editas, and I've been in this industry a long time. And reflecting on these four years, it's hard to compare it to any other company or fields that I know. The implications for medicine and for patients who have, as yet, untreatable diseases; the scientific intensity as we work to overcome challenges translating the science into medicines; the intensity of the public spotlight from many directions, given the profound implication for this the technology, we bear great responsibility to patients, to their families and to society broadly. We take that very seriously. We're here for the long term, and I think we are very well-positioned to take the next steps in this revolutionary field. So we thank you for your continued interest and support. And with that, we will open it up for questions and answer. Operator?

[Operator Instructions] And our first question comes from Marc Frahm from Cowen & Company. Your line is open.

Hi, thanks for taking my question. First is -- one question just on the -- going back to the delay that happened last quarter; I mean, has the -- at the time of the last call kind of the precursor molecules had been -- products had been made. Has the AAV now been made? And if so, is that set of technological studies waiting on that AAV the only thing that needs to be done to get the IND ready or are there other kind of modules that you need to work on still?

So I'll ask Vic to speak to the manufacturing timing and with regard to the work between us and the IND. You're sort of pointing to the right point, it's the normal work to get to an IND, which is completing the preclinical safety studies. Other things go alongside that, but that's -- here, as pretty much with any other drug, the critical path to the IND is usually the safety and that's the case here too.

Yes. So not much here to add beyond the fact that we're on track for our mid-2018 and so all the production is moving forward as planned.

Okay. And then I guess another kind of question longer term in the pipeline. Maybe, now that you're getting closer to this IND, when do think you'd be in a position to name what the next official candidate would be? I mean, you made some presentations in hemoglobinopathy, also previously some alpha-1 antitrypsin, which ones are kind of coming to the fore? And is there really more preclinical work that needs to be done to make a selection? Or is it kind of market research and making sure that you know kind of the path forward that's going to determine which one you choose?

Yes. So let me ask Charlie Albright to speak to the question of our pipeline and how that is emerging.

Thanks for the question. We do have -- we are active -- quite active on other programs in the portfolio. As you've already mentioned, we made presentations at the ASGCT meeting on our sickle cell program and our alpha-1 antitrypsin program. And in both cases, we made significant advances. In the sickle cell program, we have identified new sites that allow us to achieve levels of fetal hemoglobin expression that we're quite excited about. And then the alpha-1 antitrypsin program, we showed we're able to efficiently edit liver cells in a mouse -- in a mouse model of the disease and effectively reduced the circulating levels of alpha-1 antitrypsin. So both of these programs have made significant progress. They remain in the preclinical stage, as do our other programs, but we have a portfolio that's defined and not -- and is not limited by market research, it's limited by scientific progress.

Great, thank you.

Thank you. And our next question comes from Cory Kasimov from JP Morgan.

Good afternoon guys, thank for taking my questions. So I guess first with regard to the differentiation in potential advantages you discussed for Cpf1 over Cas9. Can you talk about how you see this system being used over time? And do you plan to use both or -- and keep both going indefinitely? Or would your expectation be that you eventually transition over to Cpf1? And I have a follow-up.

Yes. So I'll ask Vic to talk about this in a bit more detail, but broadly speaking, we're here to make genome-editing medicines, and we want to have the most robust toolkit to do that, so that for any given gene we can find the best solution. Vic?

Yes. As I think you've pointed out, there's a couple of differences with Cpf1 that we think make it a really interesting enzyme. We do think it complements Cas9 and it's not necessarily going to supplant Cas9, and it's going to ultimately be sort of a case-by-case edit-by-edit sort of question. What we're really set up to do now is to test multiple enzymes for any given program and then pick the one that looks the most active and the most specific. Cpf1 is distinct from Cas9 in that it's got a very different PAM recognition motif so that it greatly increases our genome targeting space. Secondly, it's got a small single-guide RNA. So as we think about RNP-based manufacturing, it's got some definite CMC advantages. And the third thing that we know about the enzyme is it leaves a different cut. So it's not a blunt cut, it's actually a staggered cut, and that leads to a different resolution by the cells. So you actually get a different editing outcome using Cpf1. And so for any given program, we'll often test both enzymes side-by-side and pick the one that looks the best.

Okay, great, that's helpful. And then the follow-up is, is there anything else that you can say on the milestone achieved in the Juno collaboration? I guess, what comes next there? And how close is this technology to be implemented in the clinic when you think about the combination of the genome editing with CAR-T?

Yes, so we haven't disclosed further details about the specifics of the technical milestone, although, we and Juno do work together to share data at scientific meetings. We've done that in the past and I would anticipate we'll continue to work together to do that where it makes sense going forward. We haven't -- with them, we haven't disclosed specific timelines on those programs yet, but our work with them continues to reinforce. The reason we wanted to work with them in first place was that they really do have that broad expansive mission and view of how CAR-T and engineered T-cells can be made into therapies on a broader basis, and how genome editing can further enable that. So the reason we started the collaboration continues to really to ring true through the two years we've been working together. We've made nice progress together. And I know everybody is always eager for timelines and we are too, but we'll have to share those in due course.

Okay. Thanks for taking the questions.

Thank you. Our next question comes from Matthew Harrison from Morgan Stanley. Your line is open.

Hi, thanks. This is Vikram on for Matthew. So just one question from our side. For the LCA10 program, do you expect to provide a new additional disclosure before filing the IND in mid-2018? And for the program, do you envision needing an RSA -- RAC meeting?

Sure. So I think that we try to be pretty transparent about our programs and how they're moving forward. Certainly, you've seen us regularly present at scientific meetings and that's the best first forum for new data. So I'm not projecting what specific data we'll present at which meetings. I think we certainly want to continue to be communicative about our science in LCA10 as well as our other programs. With regard to the RAC at the NIH, we do anticipate that, that will apply here. Certainly if you look at how the RAC provides the way of working a year or so, with that incorporated, understanding the genome editing -- anticipated genome editing programs and the way that they revise their rules, we would anticipate that these programs would go to the RAC, yes.

That's helpful, thank you.

Thank you. And our next question comes from Peter Lawson from SunTrust Robinson Humphrey. Your line is open.

Katrine, just thinking about natural clinical history data. Is that going to be a mid-2018 event?

In terms of the results, we haven't projected a specific timeline externally of when we think we'll be able to present the results. Certainly, it will be important data not only for the ultimate results, but I think also in real time as we see how that study evolves, it will be supportive of the broader clinical program because it will also be a program through which we can identify patients that may be candidates for the interventional clinical study. So doing a natural study like this is actually a pretty common way to develop drugs in rare diseases like this, whether it's gene editing or anything else. And there's sort of a number of natural synergies between this and then the interventional part of the clinical program. So it's an important study for the overall development strategy and premature to say when we'll present results on it.

And just maybe a question around how you think about R&D spends, balancing between discovering different editing systems like Cpf1 and balancing it towards your own pipeline and moving that forward?

Andrew?

Yes. We maintain the substantial investment in the core technologies as well as in the pipeline and product candidates that we're developing. And we haven't broken down the spending between those two categories, but we do invest in both of them quite substantially. So can't give you the color that you want on the subsegment between the two, but I think qualitatively, you can think about it that we maintain two substantial groups that represent both of those activities.

And philosophically, we think they're both really important to the future of the company and to making the full spectrum of medicines that we can envision. I think the benefit of bringing Cpf1 as well as other platform investments we've made, we're already beginning to see the benefit of that investment, and there is a lot more going on there.

Thanks for taking the questions.

Thank you. [Operator Instructions] And our next question comes from Madhu Kumar from Chardan.

Hi, this is Christine [ph] on for Madhu, thanks for taking my questions. Regarding the Juno partnership, does it only cover CRISPR Cas9 programs or would it also cover the CRISPR Cpf1 technology?

We haven't talked about the fine details of the fields at the level of granularity of your question, but we're certainly committed to helping Juno be successful in their programs. The goal is to make medicines, and we want to make these CAR-T and engineered T cell medicines for oncology with Juno.

And then my last question, more broadly, how should we think about these partnered programs relative to internal programs in terms of the company's platform strategy?

With regard to our business development strategy overall, we're pretty specific about what kind of business development makes sense. We do really want to work with partners where we have clarity on their commitment to a field, Juno in the CAR-T area; of course, Allergan in ophthalmology, really clear that these are companies that are long-term committed to those fields. We want to make products together in these partnerships. And where working with the partner really increases either the probability of success on this products because they bring a lot to the table and expertise that we may not have built yet and/or because we can do things in a broader sense than we couldn't have possibly done on our own. So both of our key collaborations meet all of those criteria. And in any collaboration like that, we expect that there will be platform advancements that happen through the lens of the programs we work on together. Those platform enhancements, we can then apply to any program internally. So the advancement of the platform occurred in part through programs advancing, in part through just investing in the platform. And where it occurs through a program with a partner, that platform advancement stays part of the Editas platform.

Great, thank you.

Thank you. And we do have a follow-up from Peter Lawson from SunTrust Robinson Humphrey. Your line is open.

Katrine, just some thoughts around human embryo editing, and how and if that would ever kind of be incorporated into your pipeline?

Well, to be clear, our focus at Editas is 100% on somatic cell editing not germline editing. And that's all of the products that we're focused on making and we'll focus on making will be somatic cell editing. We have no plans to work on anything germline related. Obviously, a topic very much in the news, particularly with a paper that was published last week, and for the next several years, basic researcher on germline editing will likely be regulated on a country-by-country basis. What works for one society, one country might not work in another. We are certainly committed at Editas to being thoughtful, respectful and transparent with all the stakeholders no matter what their views and to be a thoughtful engager in the public discourse on this point. But, again, to be clear, our work is focused on trying to translate this really promising research into real therapies for patients.

Would you return to ex-U.S. and countries like germline editing [indiscernible]?

I'm sorry, I couldn't -- could you repeat the beginning of your question? I couldn't quite hear it.

Just in -- would you be -- would you consider using germline editing elsewhere, kind of ex U.S.?

Our focus is 100% on somatic cells.

Got you. Thank you.

Thank you. And this does conclude the question-and-answer session for today's conference. I would now like to turn the conference back over to management for any closing remarks.

With that, thank you for participating in today's call. Thank you for your support as we work to bring these genomic medicines to patients. Have a great evening.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, you may all disconnect. Everyone, have a wonderful day.