Good afternoon, ladies and gentlemen and welcome to the Dicerna Pharmaceuticals’ Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer sessions and instructions will follow at that time. As a reminder, this conference is being recorded at the company’s request. I will now turn the call over to your host, Lauren Stival, representing Dicerna Pharmaceuticals. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining us for Dicerna’s Second Quarter 2019 Financial Results and Operational Highlights. For anyone who has not had a chance to review our results, we issued a press release after the close of trading today, which is available under the Investors & Media tab on our website at www.dicerna.com. You may also listen to this conference call via webcast on our website, which will be archived for 30 days, beginning approximately two hours after this call has been completed. Speaking on today’s call will be our President and CEO, Doug Fambrough, who will discuss our pipeline progress and key milestones for 2019, and provide an update on clinical and preclinical development activities. Then our CFO, Jack Green, will review our second quarter financial results. Following our remarks, we will open the call for your questions. I’d like to remind listeners that management will be making forward-looking statements on this call today, including, for example, expected timelines and plans for development, clinical trial and regulatory milestones involving DCR-PHXC, DCR-HBVS, DCR-A1AT and other pipeline programs, expectations related to our collaborations with Eli Lilly, Alexion and Boehringer Ingelheim, expectations for discussions and possible opportunities with potential partners, collaborators and guidance regarding cash usage. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our Risk Factors section of Dicerna’s latest forms 10-Q and 10-K, filed with the SEC. We may elect to update these forward-looking statements at some point in the future. We will specifically disclaim any obligation to do so if our views change. Now, I’d like to turn the call over to Doug Fambrough, Dicerna’s President and CEO.

Thank you, Lauren. Good afternoon and thank you for joining us. With me, are Jack Green, our Chief Financial Officer and Ralf Rosskamp, our Chief Medical Officer. In the second quarter and the period leading up to this call, we continued to grow from both a corporate and a clinical progress perspective. pursuant to our vision of building a fully integrated company, developing and commercializing innovative therapies for high unmet medical needs, while broadly capturing the value of our GalXC RNAi technology platform. We are pursuing this vision with a clear and focused dual strategy. The first aspect of the strategy is to go deep on select opportunities addressing high unmet medical need with what we believe is a high probability of clinical and commercial success. Our internal clinical pipeline reflects these choices including two rare diseases, primary hyperoxaluria and alpha-1 antitrypsin deficiency-associated liver disease, where we plan to drive development and commercialization either wholly or largely on our own and one prevalent disease, chronic hepatitis B virus infection, where we are seeking a development and commercialization partner, concomitant with Phase 1 proof-of-concept data. The second aspect of the strategy is to realize the potential of our technology against all remaining targets through collaboration and discovery stage licensing with therapeutic area leaders. Our collaborations with Eli Lilly, Alexion and Boehringer Ingelheim reflect this aspect of our strategy. It is our expectation and plan that we will expand on both aspects of the strategy in coming quarters, both expanding our internal pipeline and expanding our circle of corporate collaborators, funding for much will help us drive the internal pipeline. Today, this strategy has helped us build a strong balance sheet with cash in excess of $345 million positioning Dicerna well to continue funding our internal pipeline candidates and poised to continue…

Thank you, Doug. I’d like to briefly walk through the key financial results and direct you to our 10-Q filing for additional details. Net loss for the quarter ended June 30, 2019, was $23.8 million or $0.35 per share compared to $35.6 million or $0.68 per share in the second quarter of 2018. the decrease in net loss between periods was primarily due to the absence of litigation expenses along with increased revenues in the second quarter of 2019, partially offset by increases in R&D and G&A expenses. R&D expenses were $22.8 million for the second quarter of 2019, compared to $10.3 million for the same period in 2018. the $12.5 million increase year-over-year was primarily due to a $7.1 million increase related to manufacturing and clinical study costs tied to our DCR-PHXC and DCR-HBVS programs. research and development expenses were also impacted by a $4 million increase in employee-related expenses including stock-based compensation and benefits. We expect overall research and development expenses increase throughout 2019 and for the foreseeable future as we ramp up our clinical manufacturing activities continue other activities associated with our three proprietary product candidates and increase activities under the Lilly, Alexion, and BI agreements. G&A expenses were $8.8 million for the second quarter of 2019; compared to $4.8 million for the second quarter of 2018. the increase was largely driven by a $2.4 million increase in employee-related expenses due to increased stock-based compensation and headcount growth. We expect G&A expenses to increase in 2019 as compared to 2018 largely due to investments in staffing and market readiness activities. During the second quarter of 2019, we recognized $5.7 million in revenue from our collaborative agreements with Lilly, Alexion, and BI compared to $1.5 million from the BI collaboration in the second quarter of 2018. as of…

thank you, jack. We’ve had a great first half and move into the rest of 2019 with a strong balance sheet enabling full execution on our corporate strategy. It should be a noteworthy second half of the year as we look forward to dosing the first patient in our PHYOX2 pivotal trial as well as providing first look at multiple dose results for patients in our PHYOX3 open label extension study as well as reporting proof-of-concept data for DCR-HBVS in patients with chronic hepatitis B virus infection and initiating our phase 1/2 trial of DCR-A1AT. We will be presenting at a number of investor conferences this fall and look forward to providing updates as they materialize. Thank you again, for joining us. Now, operator, please open the line up for Q&A.

[Operator Instructions] First question is from the line of Mani Foroohar from SVB Leerink. Your line is now open.

Hey, thanks for the question and congratulations on all the progress. I just have really lots of nuance questions on study design, but I want to take a step back when you think about A1AT in a distribution of patients broadly, are there specific founder mutations or higher prevalence communities in various countries globally that we should keep in mind as places, where you can potentially more rapidly, accrue patients and/or may have an outsize impact on the commercial opportunity as [indiscernible] et cetera?

Yes. And this is Ralf, Chief Medical Officer, yes, it’s predominantly a genetic mutation and found gene in Caucasian population. So, in the U.S. mostly from European ancestry and we had a high prevalence for instance in some European countries and Ireland, and Germany, and Spain, and Italy. So, it’s mostly a Caucasian population, if it’s virtually unknown in Asian countries.

Great. thanks. I’ll hop back in the queue.

Next question is from the line of Jonathan Miller from Evercore. Your line is now open.

Hi guys. Thanks for taking my question. I have a handful here. Could you talk to us a little bit about why the A1AT trials are entirely ex-U.S., why you’re enrolling and trialing in European sites? And as you know, your competitors have had some delays or a bit of a rocky road here. How is your approach to this disease a little bit different from theirs and how will you avoid those same delays?

Hi, Jon. Thanks for the question. So, we’re doing the trial in Europe, because the European regulators are allowing us to run the cohorts in parallel, such that when we clear an early safety hurdle and one dose cohort, we can then move to the next escalation dose and initiate subsequent cohort as opposed to waiting for the full completion of a cohort before initiating the next cohort. So that compresses the timeline for the phase 1/2 study, doing it in Europe compared to the U.S. the data is the same that comes out at the end. It’s just done more quickly and it provides the same data package, which kind of gets us into the second part of your question. We had spent an – had an extended dialogue with the FDA initiated by our original pre-IND meeting, where we had proposed our view on a full development program through approval for discussion at that point. And we received, I think very interesting feedback from the FDA that reflected their thinking on the disease that did – how does make some changes those to our clinical program as well as our non-clinical toxicology program that we subsequently went back and included and performed, and we believe that we are now very much in alignment with the FDA on what will be required to move expeditiously from this phase 1/2 trial into registrational cohorts, without any undue delay or long negotiation associated with that. Is there anything you’d like to add Ralf?

No. I just want to add that we are also contemplating at finishing our healthy volunteer part to also continue the dialogue with the FDA and actually think that we have all the non-clinical and then also clinical requirements to open up an IND in the U.S.

Great. That makes sense. I suppose one on the HBV program, is there a particular bar for S antigen reduction? You specifically mentioned that as being a crucial component of any regimen. Is there a bar that we should be looking for when we see phase 1 data?

I don’t think that one should go into looking at the data, targeting one specific number for a variety of reasons. So, there’s variability in the patients. So, there’s variability in the measurements and the N is small. So, really what we’re looking to see is a substantial effect on S antigen. And I think we can define that as you know, we got to be here, notably more than one log. With this number of patients and given the underlying variabilities, I don’t think there is a real statistical difference between, for example, 2.2 versus 1.7. And so holding to a particular defined number, I think is unwise. But we are looking for a powerful greater than one log effect in this initial cohort.

Excellent. Thank you very much.

Your next question is from the line of Yigal Nochomovitz from Citi. Your line is now open.

Hi, this is Victor on for Yigal. Thanks for taking our questions. I’d like to switch over to PH for a little bit. We are wondering for which of the PH types do you theoretically think your approach could have the greatest impact on oxalate levels. Thanks.

Hey, Yigal, thanks for your question. We – based on preclinical data and looking at patient data from the Phase 1 trial, it is our expectation that patients with both PH type 1 and PH type 2, can be normalized via the LDHA mechanism. based on understanding of the disease, we think this is also likely in PH type 3, although there is no accurate reflective animal model of PH3 and we have not yet dosed any PH3 patients. So, we don’t have any data to back that up. But for PH1 and PH2, data suggests the effect will be comparably strong in both types.

Great. Thank you and one last one from us, why are the diagnosis rates significantly lower in PH type 2 than PH type 1? Thanks again.

Well, we don’t know the actual – of course, the actual, but knows is great in those cohorts. But there are 10% of patients diagnosed with PH2 in both registries; U.S. registry and the European registry. Now when you look at the PH2 data, especially, in the European registry, where do they come from, they come to 60%, 70% from the UK and we know that especially, one investigator in Birmingham and Dr. Sally Hutton is very active in researching this disease. So, when you look for PH2, he is able to find those patients. So, we believe that actual – the diagnosis rate of PH2 as well as PH1 will increase over the future. Does that answer your question?

Yes, it does. Thanks again.

Your next question is from the line of Steve Willey from Stifel. Your line is now open.

Yes. Good afternoon. Thanks for taking the questions. Doug, can you maybe just remind us, of the preclinical data that gives you confidence regarding this substantial reduction in S antigen that you’re going to be seeing at this 1.5 mg/kg dose. And again, just given the small patient numbers here, I think there’s only going to be four patients that are on active therapy. How do you interpret something that I guess is sub a log as being just kind of a statistical anomaly that’s attributable to variants that is patient specific as opposed to this being some kind of indictment on the X transcript exclusion hypothesis?

Hey Steve, thank you for your question. and certainly, I am concerned that there may be a temptation for people to over-interpret data, which maybe, like cuts in our favor and maybe, it cuts against us. When you have such a small number of patients and you have variability in disease expression as well as variability and measurement. What we do have from animal models though is a very consistent signal, where we have looked at both strategies I think in under discussion for using RNAi against the HBV viral genome, one strategy, whereby you reduce the expression of all four viral proteins and second strategy, the one, where we employ, where we reduce three out of the four viral genes and we leave the so-called X gene unperturbed if you will. We had found very consistently and we’ve reproduced this not just multiple times, but with independent sequences that are being targeted within the virus that when you use an animal model, where the viral gene regulation is driven solely by the viruses owned regulatory elements as opposed to a model, where you’ve been, for example, embedded the virus and another gene therapy vector and the control sequences associated with that other vector are involved in the expression of the HBV genome. When you just focus on models, where its HBVs own regulatory elements driving expression, we’ve consistently found that the X gene acts if you will, as a negative regulator of S expression. There’s a pretty clear mechanism we see for that, whereby it – X involved in excluding core protein from the nucleus and core protein in the nucleus as a transcriptional activator. So, when you get rid of X, core protein goes to the nucleus, it upregulates transcription of the very danger trying to suppress. So,…

That’s helpful. Thank you. And then just in terms of the nature of the dissemination, is this – is this something we should expect to see in a press release? Or are you guys, actually targeting, say for instance, the liver conference for some kind of presentation?

It’s our expectation at this time that we’ll host a Research Day event late in the year and we’ll likely present the data there. the conference schedule or more specifically, the abstract submission deadline schedule for the conferences is not aligning well with our access to the data.

Okay. And then maybe just lastly, can you maybe just elaborate a little bit around your comments regarding the directionally positive interpretation of FDA’s acknowledgement regarding PH2, PH3 is being a life-threatening condition. and then maybe, how that may or may not change the ongoing narrative around endpoint selection? Thanks.

Yes. And when we got all breakthrough designation for PH type 1, the FDA acknowledged in that letter that PH2 and PH3 are serious and life-threatening disease and conditions, but they felt at this time, we were not giving them enough data, clinical data. And at the time, when we had submitted our breakthrough designation to the FDA, we had only data from one PH2 patients and we didn’t have data from any PH3 patients, because we had not – a dose that PH3, PH2 patients, PH3 patients. Now, meanwhile, and we have reported this in June, we have data now for three PH2 patients are replying to those also PH3 patients. So, the FDA wasn’t per se saying in their letter, this disease is not life-threatening and serious. So, they were pointing to the missing clinical data, which we were submitting. So, we hope by generating those data that this piece missing to make the FDA decisions easier, potentially or also to give us a breakthrough designation for the other forms of PH.

Okay. And then just one more quick one if I may, and I think this has been probably discussed before. but of the 36 patients that you’re targeting for enrollment in PHYOX2, is there some minimal representation of PH2 patients that you’re specifically seeking in that study?

No. We have not specified or there is no stratification with respect to PH type. Our experience from the PHYOX1 study is that we have around 15% of PH2 patients and looking at the projected enrollment for the PHYOX2 studies, right, we go back to the sites and ask them, which patients they want to bring into the patient – into the study. Whether that PH1 and PH2 patients would expect the same number around 10% to 20% PH2 patients, which reflects well about the natural prevalence of the diseases.

All right. That’s helpful. I’ve just taken all the questions.

Your next question is from the line of Yaron Werber from Cowen. your line is now open.

Hi guys. Thanks for taking my call. This is Brandon on for Yaron. kind of going off of what was just asked here, about the HBV study. Thanks for all the color on the actual mechanism that it’s actually very, very helpful. I was wondering if you could give us a little bit more detail on kind of the patient numbers that we can expect for the date of release at the end of the year. and then what you guys are thinking in terms of a subsequent date of release for the other cohorts moving forward and how many patients you are planning to enroll for each of those things?

So, it’s pretty clear for the end of the year, we’ll have completed a cohort 1, all those patients are on study and have been dosed. There are six patients total in that cohort. Two of them are placebo; four of them are on drug. So, it’s going to be four patients who have received active drug. So, a small number of patients, that subsequent cohorts are the same size as cohort 1. So, there are eight more treated patients associated with groups C that multiple, sending dose part of our Phase 1 program. And we have not planned what the data release associated with the subsequent cohorts are, but it is our inclination as a company that once we have data, we seek to efficiently communicate that.

Okay, great. Thank you.

Your next question is from the line of Ed Arce from H.C. Wainwright & Co. Your line is now open.

Great. Thanks for taking my questions and congrats on all the continued progress.

Thanks, Ed.

First, just a question on – your first initial data, you’re expecting in the fourth quarter from PHYOX3. Obviously, you could – report some data around urinary oxalate reductions, but what exactly can we expect with that first release from PHYOX3?

I’ll pass to Ralf at the moment. But similar to with HBV, we do anticipate hosting a research update event around the end of the year and doing a data cut from the open label study and presenting where we are at that time. So, Ralf?

So, we just announced today that we start at dosing the first patients in the 301 study. So, it is August, so by the end of a year, there are another four months. So, what you can expect three to four-month data of not the full readout, how six months would translate to give us an indication how the people could study would look like. But it will be multi-dose data at the dose level, which we haven’t studied, because as you know, we use 1 milligram per kilogram regimen and the PHYOX study and here we are using a fixed dose regimen, a monthly regimen. So – and in addition, you can also expect additional safety data, because we have not reported multi-dose safety data. And I want to add this as well, for the HBV program by the end of this year, we’ll also have additional safety data. So, we complete at the dozing off the highest dose cohort in the healthy volunteers and we’ll have a multi-dose data there as well. So, from a platform perspective, I think it will be very important to inform us, about the safety of both the HPV and the PHXC components.

Okay, great. That’s, that’s helpful. So just to clarify this Research Day that you’re planning for later this year would have both the initial cuts from PHYOX3 as well as those first four HBV patients have 1.5 milligram dose.

That’s right. We’ve anticipated we would be at the same forum.

Okay. And then a question around that first look clearly the lowest dose, as you continue with 3 mg/kg and then 6 mg/kg. And with a view towards potentially partnering this after the conclusion of Phase 1, perhaps the initial low dose, not the best benchmark. Maybe to patients, or excuse me, the potential partners may want to look at what you have for three and six as well.

Thanks for pointing that out, Ed, that – it may in fact, be the case that we are not at the top of the dose response curve with the first cohort, although it would point out this is a multiple dose study with four doses administered to the HBV patients. So, even at 1.5 milligrams per kilogram, we should have dose additivity, and given the duration of effect that has been observed generally in the field of GalNAc-mediated RNAi delivery and specifically with GalXC in the PH program, you would expect a near full additivity in those four doses, such that the single dose equivalent if you will, is going to be more like five or six milligrams per/kg, which by and large, is we would expect to be a fairly high dose. So, I don’t think we would be low on the dose response curve there. I would just point out from a partnering perspective that I think it’s accurate to say that there is a lot of excitement about the use of RNAi in establishing functionally curative combination therapy for HBV. And at this point, there is quite a bit of precedent that RNAi-mediated suppression of genes in the liver, including viral genes is quite robust. So, we do, it may be that potential partners don’t see the phase 1 data as all that risky. I think the bigger question is what combination is going to generate a functional cure and how long do you have to administer that combination whether RNAi works against HPVs is less of a question that needs answering.

Great. That’s helpful perspective. Thanks, Doug. And then if I may, perhaps more for Jack, just a couple of questions on the financials, I’d even get this quite clear earlier and I apologize, but first, the $182 million of deferred revenue, I think you said that that was expected to be pretty much fully recognized by the fourth quarter of 2021. Just wanted to confirm that?

Yes. That’s correct.

Okay. And then the other aspect I missed was a guidance of a $110 million to $120 million. What was that exactly?

Yes. So, if you back out the $94.5 million that we’ve got from upfront payments, net in Q1, if you take that out of our cash flow for the year, our cash operating cash used would be expected to be between $110 million and $125 million.

Okay.

Like 2019.

That’s great. Thanks, Jack.

You’re welcome.

Your next question is from the line of Joon Lee from SunTrust Robinson Humphrey. your line is now open.

Hey. Thank you for taking our question. This is Fang-Ke on for Joon. A quick question on the A1AT programs, can you mention what’s the key differentiations of your program compared to the two competitors program?

From a mechanistic perspective, the RNAi approaches to A1AT deficiency are very similar to each other. And I don’t think that there is differentiation to point to at this point in time. They may differentiate themselves based on efficacy. We have made choices in PH as you know that differentiates the dosing regimen and all of the A1AT programs are before a point when a final commercial dosing regimen selected. So, I think it’s an open question right now whether what the level of differentiation is going to be and we’ll see how that develops.

Got it. And second question is so apparently, the PH2 and PH3 endpoint has not been finalized by the agency. and I’m just wondering what other sticking points that have been raised by the FDA regarding the endpoints?

Well. All three diseases are characterized by overproduction of oxalate in the liver resulting into an increased excretion of urinary oxalate in the urine. So that’s the same. The clinical picture is different from PH1 to PH2, PH3 with PH1 the most severe and PH3 and most PH1 patients and they’re not on a dialysis or kidney, liver transplant, whereas PH3 patients are milder with multiple stone events. So, it is not just the discussion around the primary endpoint, where I think, most people believe urinary oxalate is a very good market. but how then are you going to show that this actually predicts clinical benefit? So, for PH1, the FDA is very clear. This is a clinical endpoint, you do not have to show confirmatory trials or you’re in Europe, so-called an accelerated or conditional approval, I think that’s a discussion we’re having with the FDA around how could we use a Zurich Cantonalbank as an endpoint knowing that some of the clinical outcomes would be taking years to show and the FDA also understands that in these ultra rare diseases that’s not possible. So, the discussion goes around clinical endpoints in the confirmatory trials and whether it’s a full approval or an accelerated approval. So, it’s around the regulatory path and what the final clinical endpoints could be.

Got it. That’s very helpful. And just on that point, and so when you are going PH1 and the PH2 patients in the PHYOX2 study, are you going to enroll them in parallel, where you’re going to wait until you have an endpoint for PH2, and then you start taking well into PH2 patient in the PHYOX2.

No. We enrolled them in parallel, because we have agreement with the FDA in general on our endpoint for this trial or PHYOX2. So, we asked the FDA, are you in agreement with this endpoint and they agreed knowing that we enrolled PH1 and PH2 patients.

Got it. Got it. Thank you for taking all questions.

Your next question is from the line of Mayank Mamtani from B. Riley FBR. Your line is now open.

Thanks for taking my question and congrats on the progress. Just three from me mostly follow-ups, on A1AT, I was just curious since you have thought of an adaptive design and we know that a biopsy would eventually be required for later stage study. Is there a possibility you could study that as well as an extended cohort in the current Phase 1? Is that something that has been talked about maybe in the ongoing FDA dialogue?

We have not published details of the patient part of the study. But it is fair to say that yes, we had the discussions with regulators in Europe and as Doug mentioned with the FDA and that we will be employing a liver biopsy in the patient part already. So, we will not just look at A1AT levels in patients, but we plan to also assess the hepatic C protein and the liver as part of a general proof of concept. Because I think there is no doubt if you lower A1AT in healthy volunteers, you’re able to lower A1AT also in patients. I think one has to be shown in the proof of concept that the knockout of the A1AT gene in the liver X results in improvements of liver histology and we plan to incorporate this already in this trial. Therefore, we are calling it a Phase 1/2 studies whereas HBV study and PHYOX studies, we call them Phase 1 studies. But since we have a different meaningful endpoint, we think that that’s adequate to a Phase 2 study, which then could lead to the registration study.

Okay. That’s very helpful. And then on hep B, I think something, someone just pointed this out and I might be reading the protocols wrong. but on clinicaltrials.gov, the highest dose is listed as 12 mg/kg. I’m just curious, is that just a protocol, where you included all the dose and you’ll probably go up to 12 if it’s needed. Could you maybe comment on that?

The 12 milligram per kilogram cohort is in the single-dose healthy volunteers’ portion of the trial and it’s designed as part of the safety assessment. We’re not including that dose level in the patient group C part of the protocol, group C is as three dose levels; 1.5, 3.0, and 6.0 milligrams per kilogram. So, it’s correctly part of the protocol, but only for group A healthy volunteers single dose and in fact, we have – we’ve dosed that cohort.

Yes. 12 milligram per kilogram cohort.

And maybe on the same study, would you be able to comment anything on the baseline characteristics of some of these? I know it’s only four patients anything around E positive, E negative genotype status? Any color there?

We don’t have anything to say about that at this time.

Okay. And then lastly, on the collaborations, I understand that mostly led by the bigger companies, bigger partners. When do you think we could learn anything around the target or maybe plans on clinical development from any one of the three Lilly, BI, and Alexion?

Yes. Obviously, we are constrained to what we can say, because of our need to protect the confidentiality of our partners. So, there isn’t a lot that I can say about that. These are discovery stage programs. So, they start with literally, the discovery of the GalXC molecules that will then subsequently be developed in given the time course of discovery and then preclinical work leading to an IND or CTA filing. You’re probably looking at a minimum time there that is a little greater than two years and that’s a minimum, before things would appear on clinictrials.gov. So, we’re in the early phases with both Lilly and Alexion with those partnerships or collaborations being less than a year old at this point about three quarters in designing. BI has gone on a little longer than that. So, it’ll be – it’ll be a little bit of time before I think there’s any news and information coming out about how they’re going. I can tell you just from our perspective and I think our partners share those perspectives as well the discovery phase has gone very well. It’s a very robust technology. We’re targeting both liver targeted – liver genes, and all of these collaborations. But also CNS genes in the Lilly collaboration and we have been very pleased with our ability to target both pain targets and our degeneration targets. The two therapeutic areas in the CNS that, that we’re collaborating with Lilly. So, all report that I think they’re off to a great start, but from a news perspective, you’re probably looking more into the latter parts of next year before they’re going to create a lot of news.

Excellent. Thanks for taking my questions. [Operator Instructions] No further questions at this time. Presenters, please continue.

I want to thank everyone for participating today and we look forward to the next quarter’s call.

That does conclude our conference for today. Thank you for your participation in today’s conference. You may now disconnect.