Editas Medicine, Inc. (EDIT) Q3 2017 Earnings Report, Transcript and Summary

Good afternoon and welcome to Editas Medicine’s Third 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 third quarter 2017 conference call. We issued a press release earlier this afternoon reviewing our third 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 2 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 provisions 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. Now 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 third quarter of 2017. I am joined today by several members of our executive team, including Andrew Hack, our Chief Financial Officer; Gerry Cox, our Chief Medical Officer; Charlie Albright, our Chief Scientific Officer; Vic Myer, our Chief Technology Officer; and Tim Hunt, our Senior Vice President of Corporate Affairs. This has been a solid quarter of steady progress for Editas as we're continuing to drive against our 3 strategic comparative; one, advancing our pipeline and technology leadership; two, building our business for the long term and; three, developing an outstanding organization. I'd like to service the area engineered cell therapy. This has been an incredibly exciting quarter in the field of cancer immunotherapy with the first CAR T product approval and a relief that more compelling clinical data. At Editas, we've made important progress working with Juno Therapeutic on the next-generation of engineered T cells for cancer and internally, we'd be presenting data ASH on engineered hematopoietic stem cell program to treat sickle cell disease and beta thalassemia. In our collaboration with Juno, we're combining Juno's T cell therapy with our gene-editing capability. This has the potential to substantially enhance the safety, efficacy and consistency of these medicines and it may also expand the range of cancers that can be treated. We've developed 3 essential capabilities to achieve it. One, editing genes and T cells with well over 90% efficiency; two, editing multiple genes in T cells at the same time with high efficiency and three, inserting genes in a precise manner in T cells. We've accomplished all of this in primary human T cells and this proficiency is key as this is a cell type that forms the basis of this therapy. We and Juno has shared incremental progress along the way in this field, but we're taking a moment to look at the big picture. First, we've been able to knock out a wide range of genes including the checkpoint inhibitor PD-1 with greater than 90% efficiency and in each case, we've been able to achieve efficient editing with no detected off target. Second, not only can we efficiently and specifically knockout individual gene targets, we can simultaneously knockout multiple genes. This capability significantly expands the range of product that address hard to treat malignancies with engineered T cells. Third, we made major progress on targeted genes insertion. The targeted gene insertion has the potential to allow us to put any gene precisely where we want it in the genome and with this approach, we believe we can create engineered T cells with capabilities that cannot be achieved with either gene editing or lentiviral transduction alone. Together, Juno and Editas would show data at the upcoming SITC and ASH meeting on this progress. Specifically, at SITC will show work on the intracellular protein, CBLB. This is an important intracellular signalling molecule that transmits repressing T cell signals through which can repress T cell function through CBLB to evade the immune system. We'll show, along with Juno, greater than 90% CBLB knocked down in human primary T cells using CRISPR gene editing and as a result these edited T cells kill tumor cells more efficiently, have enhanced cytokine production and have greater proliferative capacity and survival rate in response to antigen simulation. This knockdown of CBLB with CRISPR is particularly interesting since inhibiting CBLB with more conventional therapeutic modalities is very difficult. Juno and Editas will also present data at the ASH meeting in December and in these studies, we will report on the knockout of TGF-beta receptor II using CRISPR gene-editing in BCMA-specific CAR-T cell. This knockout prevented the development of the TGF-beta induced gene expression phenotype demonstrating its potential to block the well-known suppressive effects of TGF-beta in the tumor microenvironment. Taking all of this together, we believe that Juno and Editas have the leading platform to next-generation engineered T cells for cancer. Turning now to our internal work on engineered cells. We're also excited about the data Editas scientists will present at ASH from our programs to treat sickle cell disease and beta thalassemia. At ASH, we will show high levels of gene editing in primary human hematopoietic stem cells and T cells with CRISPR Cpf1. I recall the CRISPR Cpf1 is a CRISPR-editing system that is distinct from CRISPR/Cas9. Highly efficient and highly specific but has important and compelling distinctions from CRISPR/Cas9. CRISPR Cpf1 is the only CRISPR DNA-editing system, besides Cas9, that has been successfully engineered to work in eukaryotic cells and Editas is the only company with access to Cpf1 and we made significant progress with it since we integrated it into our platform nearly a year ago. The data we'll present at ASH on our HSC work show that CRISPR Cpf1 capabilities as an efficient editing system to make medicines and our confidence in Cpf1 continues to grow as a result of this and other internal work. We would also show efficient targeted insertion at the beta hemoglobin locus with CRISPR/Cas9. Targeted integration of a new beta globin gene into its native location in the genome has the potential to simultaneously eliminate production of sickle globin and replace it with a normal protein. Combined with a previously reported data showing up-regulation of fetal hemoglobin, we believe we have multiple opportunities to develop best-in-class therapies for hemoglobinopathy. Moving on to our oculus pipeline, we have made significant progress at their lead product candidate EDIT-101 to treat LCA10. This program remains on track for by mid-2018. We're building a robust data package of preclinical data to support our IND filing and first inhuman studies. Last month, the EFGCT we showed the treatment with EDIT-101 results in dose and time-dependent editing of the CEP290 gene in transgenic. CEP290 is the gene that is mutated in patients. In these studies, life carrying the human CEP290 genetic mutation, the one that is targeted by our therapy, were administered EDIT-101. We then for these animals for editing and is now to show that the editing was first rapid, second durable through the 6-month study and third, well correlated with dose and also efficiency and the editing machinery was only detected in photoreceptors, which is the target cell type for EDIT-101. The results from these now studies are consistent with the previously reported results in nonhuman primates. Overall, the integrated preclinical pharmacology of EDIT-101 is robust. First, we show that we can successfully edit from mutated CEP290 gene in human cells and restored functional person expression, we demonstrated this through the. Second, we show that we can successfully edit the target the price photoreceptors in an eye that is anatomically similar to the nonhuman primate eye. Third, we show that we can successfully edit the target cell type photoreceptors in primary human cells. We demonstrated this in human retinal study. And fourth, we show durable dose and time-dependent of predicted therapeutic editing with EDIT-101 in transgenic mice carrying the human genetic mutation that we target. We believe these results provide strong support for clinical development for EDIT-101 for the treatment of patients with LCA10. In addition to building robust data package for the IND filing we're are developing and executing our clinical plan. In this quarter, we initiated a clinical natural history study of LCA10 patients. This study will evaluate patients to assess the course of the disease and to investigate potential clinical trial endpoints. We tend to enroll approximately approximately 40 patients, ages 3 and above at multiple sites in the United States and Europe and to follow up patients for at least 1 year. Massachusetts Eye and Ear Institute is our first site for the LCA10 natural history studies and we plan to open additional sites over time. On a regulatory front, EDIT-101 received Advance Therapy Medicinal Products, or ATMP, designations from the EMA earlier this quarter and recently, the EMA granted EDIT-101 medicinal product designation. Turning now to organizational development. We continue to build our team and make key hires in several areas and I'd like just to note a couple of these. The past quarters, joined up as Vice President of Regulatory Affairs. She has over 25 years of experience across a number of therapeutic areas, including several gene therapy and ophthalmology program. We have also added senior team members in manufacturing and ophthalmology, including scientists who've worked on late stage clinical programs for retinal diseases. And now I'd like to hand the call over to Andrew Hack, our CFO, to review the financial results from the quarter.

Thanks, Katrine. We summarized our financials in the press release that we made available about an hour ago and we'll file our Form 10-Q shortly. It was relatively an uneventful quarter from a finance perspective and we'll quickly run through a couple of items. Starting with the balance sheet and cash flow statement, we ended the quarter with approximately $296 million of cash, cash equivalents and marketable securities. Based on our current cash position and trends in the business, we believe we have at least 24 months of capital to fund the development. Turning to the income statement, we recognized revenue of $3.2 million related to our Allergan alliance and $3.1 million related to of our alliance with Juno Therapeutics, including a $2.5 million milestone payment that we previously disclosed. In research and development expense, it's worth noting in the quarter that we made a $7.2 million one-time payment to our licensers associated with Allergan upfront and the Juno milestone. Finally, noncash stock-based compensation expense totaled $4.5 million in the quarter. To summarize our balance sheet remains strong, we believe we have the capital needed to fund a robust pipeline of transformative medicines and to extend our technology leadership in the field. With that, I'll turn it back to Katrine.

Thank you, Andrew. A couple of closing comments before we turn it up the Q&A. 2017 isn't quite over yet. Looking back, it has really been a tremendous year of progress for Editas. We significantly advanced lead product candidate, EDIT-101, with robust preclinical data across multiple species, initiation of preclinical study and important regulatory decision. In addition, we think the progress that we've made with EDIT-101 sets us up well to move rapidly with additional product candidates in the eye. We established a critical partnership with Allergan which provided substantial capital to expand our pipeline of product candidates and diseases and a program done in this area benefited from Allergan's expertise and the technical capabilities. Our property strength substantially. We secured highly favorable decision from U.S. Patent and Trademark Office in the earlier year and in addition, we had the first issuance of patent in both the U.S. and Europe for CRISPR Cpf1. Our engineered cell therapy for cancer for blood diseases had advanced significantly and we look forward to sharing continued progress and the upcoming ASH meeting. And finally, we substantially grown and matured our organization. We take pride and the strengths of our team and culture. The people at Editas are what drives all of these accomplishments and they are exceptional. With that, we'd like to thank you for your continued interest and support and open it up to questions and answers. Operator?

[Operator Instructions]. Our first question comes from Cory Kasimov from J.P. Morgan.

This is Sean on for Cory. Maybe just one on the genome collaboration and some of the data you're presenting so for either the p1 one knockout or the cb lb knockout, when might you expect kind of just a ballpark we could see the programs entering the clinic?

Sure. Thank you, Sean. As you know, we work on these programs in collaboration with Juno and so we haven't -- with them we haven't yet put -- externally put timelines on these programs, we certainly will keep folks updated on progress but we don't have specific dates on this program externally just yet.

Okay, got you. Again, it's still very, very early days but any color you can provide will be much appreciated for the PD-1 knockout. Do you guys anticipate that cells could behaves similarly to say for example CAR T PD-1 or any concerns with talks here because some of the stuff that we've seen so far, companies have been kind of sequencing the PD-1 after the CAR T infusion, so the PD-1 is absent during the expansion. But with the knockout, you really don't have that option. Kind of what are your thoughts here?

Sure. I'll actually ask Vic Myer, Chief Technology Officer, to speak. He's deeply involved in our genome alliance.

Our prices speculate on the ultimate sort of clinical output. Do you think it's important to note that the PD-1 for us will not be systemically administered over localize to the CAR T cells so I think that will be an important clinical difference between our approach and a systematic administration of antibiotic therapeutic.

Our next question comes from Phil Nadeau with Cowen & Company.

First, one question on the program that you discussed for sickle cell and beta cell. You talked about the CRISPR Cas9 working on integration into the beta hemoglobin focus. I'm curious how much progress you've made on reducing the frequency of the when you're doing a targeted integration?

So I will actually ask Charlie Albright, our Chief Scientific Officer, to speak to those programs. Charlie, do you want to take that one up, please?

Sure. We've a good success with target integration and so we're getting integration rates in multiple primary cell types and from the order of about 50%. It will be disclosing some of the data at the upcoming meetings.

Great. Can you give us some idea of how problematic are? are they a solvable problem? or are they still a technical challenge?

Charlie, go head and then Vic will comment on that as well. Charlie?

Sure. I think it depends on the specific therapeutic application exactly where you're cutting is where they are problematic or not. We're not going into a lot of details at that right now. We'll show some of that in our post represented case but clearly depends on where those are as to if they are problematic or not.

I think those are the key points on it.

Okay, great. One question on the IP. Can you give us an update on the date you are hearing of the appeal here in the U.S. and then also the timing of any milestones in the European IP disputes?

Sure, in the United States, with regard to the CRISPR/Cas9 issued patent as you'd recall the U.S. patent office issued very favorable results for the. Patents that we'd like in February this year that was then appealed by the other party and there are number of procedural steps that have been ongoing since then. The other side filed a brief and then had a response brief recently that was filed. So there were couple of more procedural steps we'd anticipate hearing in late Q1, early Q2 transferring and then a decision which is going to settle through the court sometime in the Q2 or summer timeframe. In a particular proceeding, it doesn't have a hard specific date, the way some other client's proceedings can have, a bit of a general time frame. As a frame of reference, looking to keep in mind it here is the Federal Circuit Court doesn't really the hash all of the questions that the patent office has examined so thoroughly. The questions is whether the patent office made a mistake in law and so there's really very specific and discrete question of that the Circuit Court is focused on in this appeal. With regards to Europe, I'm sure everybody knows that the profits in Europe overall is quite different in a number of different dimensions and so anybody who has a patent issued there after issued then faces a 9-month period during which other parties can file opposition and then at the end of that 9 months, when people file them, then it's the profit if patent offices are responding et cetera etcetera. Funds, the patent office can make decisions they make other decision that can be appealed. So this is a fairly profits that will take some time. As you may recall, has had a very early and broad patent issued in Europe and sort of earlier issued and further along in that process of oppositions having and filed not being in responsive, other patents issued in that jurisdiction are not to file on that process instead they haven't gone through as much as having opposition and such. So there's plenty of steps and processes to that but given the nature of oppositions and responses and appeals in Europe, it will add over some time period.

Our next question comes from Matthew Harrison from Morgan Stanley.

This is Cyrus on for Matt. I wanted to ask about the sickle cell and beta cell program. What work has been done on cell viability when you guys do electrification? And then also how does this program differ from CRISPR therapeutics sickle cell?

Sure. Let me ask Charlie, our CFO, to speak to sickle cell viability question. Charlie?

Sure. We think that good viability from electrification and we've shown some of that data in post over the last several years. We showed that record we could electroporate and stem cells and had them reconstitute animals and thereby establish that the editing was not detrimental to the viability or to the ability of the cells to be

And with regards to the question of the competitive landscape, the way we actually think about it, and this is for any product not just our working mix, this particular disease, competition isn't defined by technology, it's really defined by how you can help that patient and so the competitive set for any given program is going to be a bit different. Sure in this case we noted that another gen-editing company is working on it and we also have over working at gene therapy approach working at that so all of those working to treat this disease are a part of -- when to think about, we think about what is our target profile and when we to say -- frankly, if those other products are successful then its fantastic sickle cell patients and therapeutic patients that we lost many decades, that's reason for all of us to celebrate. I think what we think about in terms of an Editas stage product, what can we do that will of the potential to surpass what we've seen from there's and so I'm sure there's been work that will be showing it at but we're looking for the editing strategy what if achieve it better, expression of fetal hemoglobin and as we talked with a targeted insertion work, that's a fully different approach than up regulation fetal hemoglobin studies. Two different strategies, give it three different ways we think we have the potential to achieve a best-in-class profile and the goal there is to really deliver the best results for patients. Again, it's really that full competitive landscape and we think about when we think about what's our target product profile goal.

Our next question is from Gina Wang from Barclays.

This is Parag on for Gina. The first one is a quick detailed question on the ESGT data that was presented. We saw that expression of Cas9 and RNA decreased over time, just wondering what the mechanism for the decrease was?

Sure. Charlie, do you like to speak to these data?

Sure. We thought that observation was interesting as well and we're investigating the mechanism now.

Great. One for the D&D program. I believe you have on with collaboration with Dr. Duke, can you give us an update on that and wondering if you have exclusive rights given that's recently also announced collaboration with Duke?

I think we've noted this with a number of some of our early discovery programs. As we work in areas where it's a tougher technical challenge, there are other targets where we have seen some early work that are tougher. Those are -- we call the preference because there is a higher cell decline. D&D, for example, the delivery in looking at the mass of we have to deliver to is a technical challenge that is more significant than some of the other tissue that are easier to reach. So you see programs would be more quickly in our pipeline from the ophthalmology and the blood and bone marrow areas even so they're more straightforward technically and we've always said that the D&D is the program that is going to have a much longer path because of the technical challenges. As part of some of the early days at Editas and in building the company, we did include a license of technology from Duke, so that is part of our overall intellectual property portfolio and I think Charlie has been a great collaborator and advisor over the years, he's a great scientist. There's lots of people working in this field of D&D and I think they obviously have been there for a while and I think that there will be a number of opportunities to create really important medicines editing in DMV and other serious diseases. Where we have great confidence is in the depth and capabilities of our platform. We know how hard we've had to work to daily get to this point of making CRISPR medicines. It's not the same thing as doing interesting and important biology in basic recent studying. So we're quite confident about our ability to translate that biology into medicine and the unique capabilities in our platform to do so.

Great. And then if I can squeeze in one last one, just to trying to understand the recent base editing methods that were reported from abroad and MIT, just wondering if you have access to the license? And if you can give us a little color about what you're thinking, whether you would want to go on that route?

Sure. David is one of our founders and fantastic and very creative and excellent scientist. We've been familiar with his work in the base editing area as well as other for some time. It's very cool science, no question about that and I think that there could be important therapies that could come from that. As we think about how we build Editas and what do we think we would include in our platform versus what might better fit in either or in other context. Sometimes the answer will be yes we want to bring it in, some times the answer will be it might be better away from that to move forward. So we do have some base editing. Intellectual property is part of our overall IP but we don't currently have active base editing work ongoing. I think there could be exciting opportunities to come from that but it's not something we're actively incorporating into our platform right now. But I think that we're huge fans of data and huge fans of the science, it's definitely very cool science.

Our last question comes from Peter Lawson from SunTrust.

This is Shamit on for Peter Lawson. I just had a quick question, I kind of got confused. The hemoglobin program so there are like -- you can do either by gene deletion for hemoglobin expression? Or targeted insertion of the corrected gene and you can go by using either Cas9 or Cpf1? And at ASH data would give us an understanding which approach are you expecting an IND the by '18? Did I get that right?

I am not sure where your IND estimate has come from. We haven't projected specific timeline for that program as of yet in timeline and you certainly look forward to sharing it and I think the data returned up to support that but we haven't disclosed any timelines for that program as of yet. I think you're correctly pointing to there are different ways we can approach making a product in this area and our view is on which is very beta-driven, you can Cas9 , you can use Cpf1, you can use couple of different editing approaches and part of what we've been doing in our explorations is to figure out through data what the best -- which approach has the best possibilities from when we think about it clinically. You'll see data at ASH that does support part of that works. Not sure what kind of you can say and therefore, we shall reveal the answer, I think you'll see more of the progression and the program is continuing and obviously, the work we have internally going advanced from what we're putting in a publication. But I think the ASH will help you see the trajectory that we're on.

And then last question. Should we be expecting like a RAC meeting? Or do you have an idea when we should be expecting it? Is it after the National History Study is over? Or while...

The RAC meeting advisory committee meeting in the United States is assessed in addition to the FDA IND profit. So with regards to the RAC, it's not really key national history study per se, it's really much more related to the preclinical package of the program and think of it as essentially running roughly in parallel with the IND. There's not a date set at this point in time and certainly as we get closer to that we'll let folks know when that is. As you probably know, that is a public process of it's also an opportunity for folks to get an additional window into the overall data package and I think that it's actually the benefits of the RAC, certainly for investors but I think the clinical community, the patient community and more broadly because often times at that IND stage there is somewhat limited data that's available publicly, we've published a lot but the RAC package will be available and we would anticipate an oral presentation probably as well. So that will be a good window into the date that point of time. Again, we'll let folks know if scheduled, it's not on the books yet but think of it running roughly in parallel with the IND. They're not connected, so there's not like a As, Bs and Cs, they're actually unlinked prophecy. Both can happen before into the clinic but they're not linked to one another explicitly.

Thank you. And I'm showing no further questions in the queue at this time. I'd like to turn the call back over to CEO, Katrine Bosley, for any closing remarks.

Thank you, everybody. We really appreciate your participation in the call and your support as we work to advance this company and advance our medicine and please do call if you have any questions you couldn't think about this afternoon. Thank you, everybody.

Ladies and gentlemen, this does conclude the call for today and you may our disconnect. Everyone, have a great day.