Novo Nordisk A/S (NVO) Q2 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Dicerna Pharmaceuticals' Second Quarter 2016 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 follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I'd now like to turn the conference over to your host for today, Steve Silver. Sir, you may begin.

Thank you, Operator. Good afternoon, and welcome to Dicerna's conference call to discuss the company's 2016 second quarter results. For anyone who has not had the chance to review our results, we issued a press release after close of market today, which is available under the Investor tab on our Web site at www.dicerna.com. You may also listen to this conference call via webcast on our Web site, which will be archived just 30 days beginning approximately two hours after the call is completed. I'd like to remind listeners that management will be making forward-looking statements on today's call, related to the company's future expectations, plans and prospects that 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 Factor section of our Form 10-Q filed with the SEC today. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views 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 if our views change. Now, I'd like to turn the call over to Dr. Douglas Fambrough, Dicerna's President and Chief Executive Officer.

Thank you, Steve. Good afternoon, and thanks to all of you who have joined today's call. With me today are Bob Brown, our Chief Scientific Officer and SVP of Research; and Jack Green, our Chief Financial Officer. The second quarter of 2016 was an exciting period for Dicerna as we formally rolled out our GalXC technology platform as a fully optimized and enabled drug discovery engine. By that, I mean that our efforts over the last few years have created the capability to fully silence disease-associated genes in the liver using a single subcutaneous injection delivered once monthly or even less frequently, and that we can do this reproducibly and consistently across any liver expressed gene across multiple therapeutic areas. During our Investor Day in June, we illustrated these capabilities with examples of GalXC molecules silencing 12 different disease-associated genes, including six demonstrations in non-human primates. These demonstrations include inhibitors of disease targets that will populate our pipeline going forward, and others that we expect offer significant partnering opportunities to Dicerna. The GalXC platform supports our long-term strategy to retain a full or substantial ownership stake and invest internally for indications with focused patient populations, such as certain rare diseases, and we see such indications representing opportunities that carry high probabilities of success, have easily identifiable patient populations, and a limited number of centers of excellence to facilitate reaching these patients. For more complex diseases with multiple gene dysfunctions and larger patient populations, we plan to pursue partnerships that can provide the enhanced scale, resources, and commercial infrastructure required to maximize these prospects. We continue to engage in such discussions and believe that the data we have generated to-date and that which we shared at our Investor Day strongly positions Dicerna to attract interest, not just from any potential partner, but the right strategic partner. Also during the second quarter, we dosed the first patient in our Phase 1 interventional study of DCR-PH1, our lipid nanoparticle formulated IV-administered compound for the treatment of the rare metabolic disease, primary hyperoxaluria type 1 or PH1. During the quarter we also continued to enroll PH1 patients in our PHYOS study, which is gathering important information about PH1 that we feel will provide valuable insights as we map out a long-term development path for this rate genetic disease and key area of unmet medical need. Toward that end, we have selected our subcutaneously-dosed GalXC clinical candidate for PH1, and expect to file an IND or CGA in late-2017. Dicerna expects to launch GalXC-based development programs for three candidates in 2016, and be able to launch three additional programs annually, utilizing our current capacity. The first of these 2016 programs is our GalXC candidate for PH1, and the launch is already underway as I just mentioned. The second and third 2016 launches are for a PSCK9 inhibitor in cardiovascular disease, and for an undisclosed rare disease program. The progress we have made with the GalXC technology has enabled us to broadly examine disease-associated targets across multiple therapeutic areas, including notable chronic liver diseases like NASH. Our ability to generate GalXC inhibitors in rodents very rapidly, often just 30 days, has greatly facilitated our ability to validate potential disease targets. In total, to-date we have qualified 29 disease-associated genes where we believe an RNAi based inhibitor could provide substantial patient benefit. These targets span the therapeutic areas of rare diseases, chronic liver diseases, cardiovascular diseases, and liver infectious diseases. The common thread among these targets is the expression of disease-associated genes in the liver. We are truly excited about the possibilities ahead of us with the GalXC platform. In our view, the well of opportunity to deliver innovative RNAi therapies to the liver is deep, not only for Dicerna, but also for the broader biopharmaceutical industry as well. We view the RNAi market opportunity supporting multiple entrants and multiple winners. RNAi provides the potential to develop therapies with monthly or less frequent dosing, which we believe can significantly impact patient compliance and health outcomes, and therefore the healthcare system more broadly. We are confident in the technology, and believe that choosing the right programs to invest in and bring forward will be key for Dicerna in executing on our strategy. Moving to our work in oncology, our clinical stage DCR-MYC program is in a Phase 1 study in a Hepatocellular Carcinoma or HCC, and in a focused Phase 1 expansion cohort at maximum tolerated dose, and pancreatic neuroendocrine tumors or PNET, where we have observed two clinically significant responses during dose escalation. We expect to release data on both indications before the end of 2016 and we expect that these data will inform a go or no-go decision on this program. As you can see, we have laid out an extensive pipeline growth strategy for the coming years and we remain extremely confident in our freedom to operate in the space and in our ability to execute on this strategy. I'd now like to turn the call over to Bob Brown, our Chief Scientific Officer, for some comments on the progress we have made in advancing our GalXC platform to this existing stage. Bob?

Thank you, Doug. It was gratifying to be able to present what we view as robust and compelling dataset at our Investor Day in June. That event marked the culmination of the process that saw Dicerna make significant advances in optimizing the GalXC platform, and arriving at a point where we believe the platform is fully enabled and will allow the execution of our mission to deliver novel RNAi therapies to patients with diseases that need new treatment options. We believe the key features of the GalXC platform are its ability to potently silence targeted genes with long durations of action and to do so with the strong safety and tolerability profile. We are encouraged by our progress on all fronts. As described during our Investor Day presentation, our GalXC molecules consist of two strands of RNAi. One strand has been extended, a unique property of our Dicer substrate RNAi structures that provides additional space on the RNAi duplexes for elements that provide enhanced pharmaceutical functions. This extended strand is the origin of the X in GalXC and the C represents the Conjugation to GalNAc with the Gal of course referring to the GalNAc amino sugars that direct GalXC molecules to the liver. In one of our GalXC configurations, the conjugation to GalNAc occurs on the extended region of the RNAi on a folded motive known as a Tetraloop. Tetraloop serve as the stabilizing structure that are ideally suited to provide multiple independent conjugation points for the GalNAc sugars and for potentially conjugating targeting agents for delivery to different tissue types in the future. Tetraloop's are evolutionarily conserve sequences present in many natural RNAis that have very high melting temperatures and high resistance to nucleuses and other degradative activities found inside cells. In addition, the Tetraloop sequence in our GalXC leads is a constant. It does not need to be optimized as we move from one gene targets over next. This standard sequencing structure allows a constant manufacturing scheme and facilitates the rapid development of GalXC-based inhibitors against multiple targets. Using these proprietary elements of our RNAi technology we've created a differentiated and independent platform for effective subcutaneous delivery of RNAi-inducing molecules to the liver. During our Investor Day, we showed the application of our GalXC platform to numerous gene targets. We believe that these studies demonstrated equal or superior potency compared to some competitive subcutaneously-administrated inhibitors designed to knock out gene targets, including HAO1, which is the target gene on our PH1 program. In PH1, we were able to show melting dosing regiments that were highly effective at around 90% knock down and sustained RNAi silencing as long as 77 days. In studies in Alpha-1-antitrypsin, or AAT, we saw single-dose duration of action as long as 84 days, which we believe is class-leading data for this target. In addition to these impressive efficacy and duration profiles, we have achieved these results with high safety profiles. Using exaggerated pharmacology studies, meaning very high doses that are many multiples higher than those anticipated in clinical studies, that administrated more frequently than one would anticipate using in any clinical setting, we saw no evidence of liver, kidney or injection site toxicities. In fact, we are only minimal to mild observations and no assays at all including none in the liver or the kidneys. We are pleased by the progress we've made towards enabling Dicerna to rapidly generate GalXC duplexes and complex disease stage representing by mouse models. Dicerna's proprietary process features in its silico design steps that select sequences to be made into GalXC duplexes based on rules that we determine by applying thousands of sequences to a learning computer algorithm and an application of GalXC chemistry design rules. We then go directly to synthesis of the duplexes and testing in vivo. This straight-forward or robust process to produce our molecules does not require any challenging chemistry or procedures. Our in vivo screen process uses only a single subcutaneous dose. We target for an ED 50 of less than one milligram per kilogram for this test molecules and then go directly into disease models. The origins of the extended GalXC platform date backs to patent applications as early as 2008. In 2014 we were able to develop our first in vivo examples of GalXC activities starting with a high dose of all those being administered greater than 10 milligrams per kilogram to get 50% target knock down and then advancing that to 2 and to less than 1 and now to often less than 0.3 milligrams per kilogram today. Results such as these support our confidence in developing innovating therapies with simple clinical treatments regiments based on in-frequent single side subcutaneous injections for effective liver gene knockdown in patients with significant unmet medical needs. I will now turn the call back over to Doug, who will provide an update on the clinical stage DCR PH1 and DCR-MYC programs.

Thanks Bob. As I previously mentioned, we plan to retain rights and invest internally in rare diseases as we believe that rare diseases offer an ideal opportunity to leverage our RNAi technology. In rare diseases, and particularly monogenic disorders, that is diseases caused by a single gene acromegaly. The patient population is usually easily-identifiable, and are often associated with centers of excellence for treatment facilitating clinical development. In addition, many of these patients have supported advocacy organizations that can help in drug development efforts. Since in many cases the disease ideology is clear, one can have a higher confidence that a given treatment will provide benefit. The clinical program is often more focused and more rapid than average and also less expensive. All of these characteristics make rare diseases particularly attractive to Dicerna. Our initial focus in rare diseases is primary Hyperoxaluria Type 1, which has the beneficial characteristics I just described. As a brief reminder primary Hyperoxaluria Type 1 or PH1 is a severe rare generic disease where a single gene error in liver metabolism causes patients to have high levels of oxylate in the urine resulting in progressive and severe damage to the kidneys and other organs. As the existing standard of care does not halt disease progression, most PH1 patients experience complete renal failure by their early 20s. Aside from combined liver kidney transplant there are no FDA approved therapies or effective treatments from most PH1 patients. Dicerna's first experimental treatment for PH1 dogged DCR PH1 is a lipid nanoparticle encapsulated DsiRNA-EX-Molecule targeting the HAO1 gene that is administrated via IV infusion. To-date, the compound has shown a profound ability to reduce urinary oxylate levels in the mouse genetic model of PH1 and is now the subject of two clinical trials. The first is an abbreviated dose escalation trial in healthy volunteers in the U.S. Dosing in that trial is ongoing. The second is a patient dose escalation trial in Europe. The first patient in this trial was dosed during the second quarter of 2016. In addition to DCR PH1 we remain on track to advance our first clinical candidate using the subcutaneously administered GalXC technology in PH1 into clinical development in late 2017. In addition to the healthy volunteer and patient-focused clinical trials at DCR-PH1, we are enrolling an observational study of PH1 patients called PHYOS for patients with genetically confirmed diagnosis of PH1. Today, we have enrolled 18 patients. This study is expected to provide key data such as the baseline variability of and factors that influence changes in urine and plasma levels, help the biomarkers oxalate and glycolate. These two biomarkers are critical measures of efficacy by which we may validate the mechanism of action of DCR-PH1 and help guide future development plans for PH1. We believe that these studies will be invaluable to Dicerna as we prepare our PH1 efforts for later stage development. As we mentioned on our last earnings call we plan to advance development of our current DCR-PH1 clinical program, as well as development of our GalXC subcutaneously administered candidate in parallel for the time being. We will valuate clinical and market data to determine the optimal fast forward for our long-term development plan in PH1. We expect our strategic decisions to be driven by the experience we are gaining in working with patients and their families, understanding the metrics that biomarkers used in treating PH1 as well as building relationships with center of excellence that treat PH1 patients and serve as the sites for clinical administration of these new investigational therapies. Turning to our second clinical stage product candidate DCR-MYC is our DsiRNA based therapeutic targeting the MYC oncogene, developed using Dicerna's proprietary tumor-centric EnCore lipid nanoparticle formulation. DCR-MYC is currently being tested in two ongoing clinical trials. The first is a Phase I all comers trial for which we have initiated two additional cohorts. One, focusing on pancreatic neuroendocrine tumors or PNET, a tumor type for which we have already observed clinical responses; and the second being an expansion cohort for enrolling patients who will undergo pre and our post treatment biopsies allowing us to directly observe molecular markers of DCR-MYC activity in tumors. The second, clinical trial of DCR-MYC is a Phase 1b/2 trial in patients with hepatocellular carcinoma, which is in the dose escalation phase. As we disclosed on our last call, the dose escalation phase of our all-comers study established safety at the 1.0 milligram per kilogram dose level. This dose level should provide relevant knock down of MYC in human tumors based on extrapolation from animal liver, cancer models. DCR-MYC has been well tolerated at this dose. During dose escalation antitumor activity was seen in two out of three patients with low to intermediate grade, treatment refractory PNET. Specifically evidence of a complete metabolic response based on FDG-PET imaging was seen in one patient. And it confirms partial response based on resist 1.1 criteria was seen in the second patient. Both patients had failed standard and experimental therapies for PNET prior to starting the study. Since our last earnings call we have enrolled multiple patients in the PNET expansion cohort. The second expansion cohort is enrolling patients who will undergo pre and our post treatment biopsies which will allow us to assess the direct effects of DCR-MYC increasing the MYC transcript in tumors. We believe that a direct molecular demonstrating of RNAi activity against MYC in tumor biopsies could potentially establish proof-of-concept for DCR-MYC when coupled with the already demonstrated resist and FDG responses in patients. We continue to expect to make this determination in the second half of 2016. We plan to enroll patients in both expensive cohorts to the end of August and to release preliminary data from both cohorts in 2016. Turning to the second clinical trial of DCR-MYC we are conducting a Phase 1b/2 study in patients with advanced Hepatocellular Carcinoma, or HCC, who have either failed or are intolerant to Sorafenib or who don't have access to other therapies for HCC. HCC is one of the most prevalent cancers worldwide. Patients with advanced HCC have limited treatment options, and there are no approved therapies for those who have failed standard of care treatment with Sorafenib. As of July 22, 2016, 20 patients have been dosed with DCR-MYC five cohorts, from the starting dose of 0.125 milligram per kilogram, to the current dosing level of 0.85 milligram per kilogram. While we have not yet observed an objective response by RECIST criteria, we have observed reductions in circulating alpha-fetoprotein levels in one patient treated in the dose escalation cohorts. Alpha-fetoprotein is an HCC tumor marker for which reductions have been associated with anti-tumor activity. We expect to have preliminary data from this study by the end of the year. I will now turn the call over to our Chief Financial Officer, Jack Green, for an update on our financial progress. Jack?

Thank you, Doug. I'd like to briefly summarize the key financial results for the quarter ended June 30, 2016, and direct you to 10-Q filing for additional details. In the second quarter of 2016 the company had a net loss of $15.6 million or $0.75 per share, compared to a net loss of $16.2 million or $0.86 per share for the same period of 2015. Research and development expenses were $11 million for the second quarter of 2016, compared to $11.9 million for the same period of 2015. The year-to-year decrease was primarily due to the timing of manufacturing and preclinical activities related to our PH1 IND filing. And the decrease in platform related expenses due to lower spending in discovery and early development. These decreases were partially offset by an overall increase in clinical activities from initiating additional clinical sites, and patient enrollment in our clinical studies, as well as increased employee-related expenses primarily due to additional hiring. General and administrative expenses for the second quarter of 2016 totaled $4.7 million as compared to $4.5 million for the same period in 2015. The increase was primarily due to an increase in employee-related expenses, including an increase in headcount to support our operations. As of June 30, 2016, we had $69.2 million in cash, cash equivalents, and held-to-maturity investments, as compared to $94.6 million as of December 31, 2015. In addition, we also had $1.1 million of restricted cash on the balance sheet, which reflects collaterals securing our facility lease obligation. Finally, based on our current cash position and operating plan, we continue to expect that we have sufficient cash to fund operations through at least the next 12 months, excluding any additional partnership funding, debt or equity financings. More detail of the financial information and analysis may be found in the company's quarterly report on Form 10-Q, which we filed with the SEC today. I'd now like to turn the call back to Doug.

Thanks, Jack. To summarize, we are enthusiastic about our progress during the second quarter, and believe that our fully-enabled GalXC platform positions Dicerna to build one of the most dynamic pipelines in the biotech space over the coming years. We remain focused on moving forward with programs of high value, which we plan to develop both internally and with collaborators. We think the well of opportunities is very deep. And we believe we have the right team in place to execute on this strategy. We look forward to updating you on future calls, and thank you for your interest in Dicerna, and for your attendance today. We will now open the call to questions. Operator?

Thank you. [Operator Instructions] And our first question comes from Stephen Willey from Stifel. Your lines are open.

Hi, this is Philomena Kamya in for Stephen Willey. Thanks for taking our questions, and congratulations on the progress made this far. With respect to the DCR mixed trial, how many patients have been enrolled in the PNET expansion trial, and is there a target enrollment number in mind?

So, as you noticed, we didn't disclose the number of patients. There's quite a few patients in the trial. I don't think we have the exact number for you. It's an actively enrolling trial. We do have a soft target of 20, but it is -- will be in part a function of what's observed during the conduct of the trial. We are enrolling through the end of this month, and been pleased with the enrollment rate.

Thank you. If I could just ask one more question. With respect to the DCR-PH1 trial, you said that you would be, if I understood you correction, you'd be pursuing both the GalXC and the DCR in parallel, and if you wouldn't mind providing the rationale for evaluating both of them in parallel?

We are actively engaged with the key investigators in the PH1 space in multiple countries, U.S., Netherlands, U.K., France, Germany. And in a rare disease like PH1 there is not a long track record of exactly how trials should be conducted, how data should be evaluated. And based on the history of this particular disease indication, it's clear one needs to be very careful in the conduct of how these studies are conducted. Thus, what we're learning with DCR-PH1 is really critical in understanding how to effectively operate in this space. We believe DCR-PH1 could be an effective treatment for PH1. And between what we're learning while we do it, and the fact that we believe it to be effective, that provides a rationale for continuing to work even though the GalXC-based molecule may ultimately provide a more convenient patient solution for PH1 patients. We'll continue to assess whether it makes sense to develop both programs in parallel or whether it makes sense to consolidate our efforts around one of those programs. And we'll communicate our decisions as we make them.

Okay, sounds great. Thank you so much.

Thank you. And this does conclude our question-and-answer session. I would now like to turn the conference back over to Dr. Fambrough for any further remarks.

I want to thank everyone for your participation today. It was an exciting quarter for Dicerna to be able to formally rollout GalXC, which will underlie much of the future pipeline of the company, and I think provides a profile of a therapeutic platform technology that is about as good as you can get in this industry, so very pleased with it. Thanks very much.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.