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Sangamo Therapeutics, Inc. (SGMO)

Q3 2012 Earnings Call· Wed, Oct 24, 2012

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Transcript

Operator

Operator

Good afternoon, and welcome to the Sangamo BioSciences Teleconference to Discuss Third Quarter 2012 Financial Results. This call is being recorded. I will now pass you over to the coordinator of this event, Dr. Elizabeth Wolffe, Senior Director of Corporate Communications.

Elizabeth Wolffe

Management

Thank you, Steve. Good afternoon and thank you for joining Sangamo’s management team on our conference call to discuss the company’s third quarter 2012 financial results. Also present during this call are several members of Sangamo’s senior management, including Edward Lanphier, President and Chief Executive Officer; Ward Wolff, Executive Vice President and Chief Financial Officer; and Geoff Nichol, Executive Vice President of Research and Development; Philip Gregory, Vice President of Research and Chief Scientific Officer; and Dale Ando, Vice President of Development and Chief Medical Officer. Following this introduction, Edward will highlight recent activities and the significant events from the past quarter. Ward will then briefly review third quarter financial results, as well as our financial guidance for remainder of 2012. Geoff will provide an update on our ZFP Therapeutic clinical program, and Philip our preclinical programs and finally, Edward will update you on our goals for the rest of 2012. Following that, we will open up the call for questions. As we begin, I’d like to remind everyone that the projections and forward-looking statements that we discuss during this conference call are based upon the information that we currently have available. This information would likely change over time. By discussing our current perception of the markets and future performance of Sangamo with you today, we are not undertaking an obligation to provide updates in the future. Actual results may differ substantially from what we discuss today and no one should assume at a later date that our comments from today are still valid. We alert you to be aware of risks that are detailed in the documents that the company files with the Securities and Exchange Commission, specifically, our Quarterly Reports on Form 10-Q and our Annual Report on Form 10-K. These documents include important factors that could cause the actual results of the company’s operations to differ materially from those contained in our projections or forward-looking statements. Now, I’d like to turn the call over to Edward.

Edward Lanphier

Management

Thank you, Liz, and thank you all for joining us on our call to discuss our third quarter results for 2012, as well as recent events and our plans for the rest of the year. It’s been an important quarter for data from both our clinical and preclinical programs and we’re pleased to have an opportunity to provide you with more details on this call. Our lead clinical program SB-728-T, which we are developing as a potential functional cure for HIV is currently in two Phase II studies that are progressing on plan. Both trials are designed to maximize the engraftment of SB-728-T or ZFN-mediated CCR5 disrupted autologous T-cells. We anticipate having preliminary data from these trials in the first half of 2013 and final data in the second half of the year. Meanwhile, we continue to learn from our previous Phase I trials as we analyze data and conduct long-term follow-up on subjects who participated in these studies. In September, we and our collaborators presented immunologic data from these studies at the 52nd Interscience Conference on Antimicrobial Agents and Chemotherapy or ICAAC. The data suggests that SB-728-T treatment has the potential to reconstitute the immune system in HIV infected individuals and gives us further insight into the unprecedented positive effects that we have seen on the levels of CD4 T-cells in treated subjects. I’d ask Geoff to provide you with more details later in the call. We also recently presented data from our preclinical pipeline specifically our program to develop ZFP Therapeutics for Huntington’s disease with our partner, Shire. The presentation was given last week at the Annual Meeting of the Society for Neuroscience and was chosen by the meeting organizers as a hot topic of the conference. Without going into details now, the data demonstrated that we have generated very specific and selective ZFP Therapeutics that can be used to address genetic diseases such as Huntington’s. I would ask Philip to provide you with the details of the presentation and to explain the rationale for our approach later on the call. Before I hand the call over to my research and development colleagues to provide more details on our ZFP Therapeutic programs, let me ask Ward to summarize our third quarter 2012 financial results as well as our financial guidance for 2012. Ward?

Ward Wolff

Management

Thank you, Edward, and good afternoon, everyone. As you know, after the close of the market today, we released our financial results for the third quarter ended September 30, 2012, and I’m pleased to review the highlights of those results. Revenues for the third quarter of 2012 were $4.9 million, compared to $1.9 million for the same period in 2011. Third quarter 2012 revenues were comprised of revenues from the company’s collaboration and license agreement with Shire to develop ZFP Therapeutics for hemophilia, Huntington’s disease and other monogenic diseases, existing collaboration agreements with Sigma-Aldrich Corporation and Dow AgroSciences, as well as approximately $700,000 of revenue from research grants. As we mentioned in today’s press release, the increase in collaboration agreement revenue was primarily attributable to the company’s agreement with Shire. We are amortizing the $13 million upfront license fee over the initial six-year research term resulting in a $0.5 million recognized as related revenue in the third quarter. In addition, collaboration agreement revenue included $2.7 million recognized as revenue from Shire for research services. The increase in collaboration agreement revenues was also partly attributable to increased royalty revenue from Sigma. Total operating expenses for the third quarter of 2012 were $10.7 million, compared to $11.4 million for the same period in 2011. Research and development expenses were $7.6 million for the third quarter of 2012 and $7.8 million for the same period in 2011. General and administrative expenses were $3.1 million for the third quarter of 2012, compared to $3.6 million for the same period in 2011. Non-cash stock-based compensation expense was $1.4 million for the quarter with approximately $800,000 in research and development and $600,000 in general and administrative. For the third quarter of 2012, we reported a consolidated net loss of $5.8 million, or a $0.11 per share,…

Edward Lanphier

Management

Thank you, Ward. Our business model for developing our ZFP technology platform has enabled us to partner not only selective therapeutic programs as we have with Shire, but also non-therapeutic applications of our technology. These non-therapeutic partnerships with Sigma and research reagents and transgenic animals and Dow AgroSciences in plant agriculture have brought significant resources into the company, approximately $87 million to-date. The amortized upfront payment and ongoing research funding from our alliance with Shire as well as the ongoing revenues from our collaborations with Dow and Sigma, enable us to aggressively move our ongoing clinical and both our partnered and Sangamo owned preclinical therapeutic programs to points of significant value inflection, while maintaining a very modest burn rate. As you have heard, we have significantly increased our year-end revenue guidance, we have a very solid cash position and we are on track to meet our balance sheet guidance of ending 2012 with at least $75 million in cash. So, with that foundation on to our clinical and preclinical development programs, first, I would ask Geoff to update you on the data that we presented at ICAAC in September and the impact of these positive data on the product that we are developing as a functional cure for HIV AIDS. Geoff?

Geoff Nichol

Management

Thanks Edward. Our Zinc Finger Nuclease Technology allows us to specifically modify and disrupt or knock out any gene of our choosing. In the case of our HIV program, we are targeting the CCR5 gene which encodes the major co-receptor for HIV entry into CD4 cells. CCR5 is a good target for ZFN approach to HIV as we know that there is a well characterized natural mutation, CCR5-delta32 which makes the CCR5 protein non-functional. This enables individuals who carry it on both copies of the CCR5 gene to resist HIV infection despite repeated exposure to the virus. In our ongoing clinical program, we are disrupting CCR5 in the CD4 T-cells of HIV infected individuals with the aim of generating a population of these cells that will be both protected from HIV infection and capable of amounting an effective immune response to the virus. If successful, the ZFN approach would enable a functional cure in these patients such that they could control their HIV without taking antiviral medications. Our therapeutic product, ZFN CCR5 Modified Autologous CD4 T-cells is called SB-728-T. Results from our Phase I studies have been very encouraging. The data demonstrates that the modified cells engraft well once infused back into the body, appeared to act in traffic like unmodified cells and are persistent. We can still detect modified cells in all of the subjects that we have treated, some of whom were infused over two years ago. Consistent with the biology and the original hypothesis of this program, we have shown that there is a statistically significant relationship between the level of engraftment of ZFN-modified cells in which both copies of the CCR5 gene are disrupted, so called biallelic modification and the level of virus in the blood in HIV infected subjects during a treatment interruption from their…

Edward Lanphier

Management

Thank you, Geoff. As you have heard, these data are very encouraging and add to our confidence in the potential of SB-728-T to provide a functional cure for HIV. As Geoff mentioned, we expect that future updates on the program of our clinical studies will take place at major medical or scientific meetings. Now I’d like to ask Philip to provide you with details of our approach to cure Huntington’s disease and the data that we have recently presented at the Society for Neuroscience. Philip?

Philip Gregory

Management

Thanks Edward. As you know, as part of our Shire collaboration, we are developing a ZFP Therapeutics to treat Huntington’s disease, an inherited neurodegenerative disease for which there is no treatment or cure. It is a devastating disease that has a high prevalence for inherited disorder effecting approximately 30,000 people in the United States according to the National Institute of Neurological Disorders and Stroke or NINDS. The disease is generally fatal within 10 to 20 years of the initial onset of symptoms. The symptoms commonly become noticeable between the ages of 35 and 44 years, but it can start earlier. The most obvious early symptoms are jerky, random, and uncontrollable movements which progresses to rigidity and riving movements. Gradually, as the disease progresses any action that requires muscle control such as speaking or eating is adversely affected. In addition, there is a progressive impairment of cognitive ability and memory. The NINDS estimates that at least an additional 150,000 patients, beyond that stated 30,000 U.S. symptomatic HD patients have a 50% risk of developing the disease. So why is Huntington’s disease a good candidate for a ZFP Therapeutic approach? It had been known for a long time that the disease is caused by a specific type of mutation in a single gene called huntingtin or HTT which encodes the protein with the same name. This mutation is very well characterized and is specifically an expanded section of a repeated DNA sequence within the gene. Each repeat DNA sequence is three basis long reading CAG which is the code for the amino acid glutamine in the final HTT protein. The HTT gene normally have somewhere between 18 and 25 copies of the so-called CAG repeat, but individuals with Huntington’s disease have many more generally greater than 40 CAG repeats which leaves to…

Edward Lanphier

Management

Thank you, Philip. As you have heard our ZFP platform provides a range of powerful gene regulation and gene modification product development approaches and importantly, can be designed to target any DNA sequence with singular specificity. We are focusing this technology on a range of diseases for which a single gene target has been identified and where ZFP Therapeutic intervention can have a major even disruptive clinical benefit on the disease and question. For HIV, the CCR5 receptor is an essential co-factor for HIV entry and we are making CD4 T-cells resistant to infection using ZFN to disrupt the CCR5 gene and thus eliminate expression of this protein in these cells. In hemophilia, we know that a mutation in the gene encoding the factor eight or factor nine protein means that blood does not clot fast enough. We can use ZFN to provide a corrected functional factor eight or factor nine gene and restore normal clotting times. Huntington’s disease is another classic example of a monogenic disease that is unambiguously correlated with a DNA mutation which takes the same form in all affected individuals. We know that affecting the level of expression of the mutant gene and thus the protein that it encodes can have a therapeutic effect. And we have generated ZFP’s to selectively repress the expression of the mutant protein. All of these and more are ideal targets for our ZFP technology. Development of ZFP Therapeutics for monogenic disease is a major focus for us in both our internal programs and our collaboration with Shire. Independently we are also applying the technology in other monogenic diseases including hemoglobinopathies such as sickle cell anemia, and beta-thalassemia, lysosomal storage diseases and gene-based immune disorders. Our goal is to develop disease modifying therapies that can provide a genetic cure. As you…

Operator

Operator

Thank you. (Operator Instructions) Our first question comes from Liana Moussatos from Wedbush Securities. Liana Moussatos – Wedbush Securities: Congratulations on your progress.

Edward Lanphier

Management

Thanks Liana. Liana Moussatos – Wedbush Securities: Based on the Phase I data, I thought it was very interesting about the treatment resulting in kind of normalizing the immune system in HIV infected patients where the virus had destroyed part of it. Is this, I mean in your discussion with the FDA if SB-728-T treatment just restored the immune system and say reduces the strange cancers that result or the infections but maybe doesn’t reduce viral load to nothing. Would that still be a viable treatment that could get approved?

Edward Lanphier

Management

Liana that is a very, very good question. It’s actually I guess I’ll characterize it as a hotly contested kind of question because there is significant value in immune reconstitution and keeping the CD4 T-cell counts above 500 which is arguably one of the trigger points for going on HAART. With that said however the president [ph] for antiviral approvals in the HIV space is viral load and that is very much the focus of our ongoing Phase II trials and very much the strategy in our development plan but let me pause and see if Geoff wants to add or subtract any of that.

Geoff Nichol

Management

Yes, I mean the idea of postponement essentially of the ultimate appearance of (inaudible) or the postponement of HAART is obviously hotly discussed area and has been the subject of some development programs in the past but yes, I just would like to confirm we are protecting these CD4 cells in order to try to actually have a normal if you like recall memory response against with essentially normal CD4 health against the virus itself. And really induce a functional cure, so we are aiming at rendering patients saved biallelic [ph] without HAART. Liana Moussatos – Wedbush Securities: Thank you very much.

Edward Lanphier

Management

Thanks Liana.

Operator

Operator

Thank you. (Operator Instructions) We have a follow-up from Liana Moussatos. Liana Moussatos – Wedbush Securities: Can you go through a little bit more detail about what we would expect on December 6th in terms of clinical expectations for 2013?

Edward Lanphier

Management

Let me try and repeat it and happy to go into more detail if it’s not sufficient. Our goal in December is to provide a really more of a near and mid-term overview of our clinical and preclinical development programs. And so going through the data around the targets that we’re pursuing, the rationale we’re pursuing those, the product development strategy, delivery strategies, timelines for in the case of the preclinical programs to IND. In the case of the clinical programs, Liana, we’ve guided certainly to data in 2013 out of our ongoing Phase II programs in the first half and then the complete datasets in the second half and then it’s on the December 6th just to round that out overlaying all of those development plans with the financial projections that we believe are associated with the goals and the accomplishments that we have. So I think it’s a little bit of an incremental step for us in terms of looking forward beyond just that next year’s financial guidance to really looking at the rationale and timing of our development plans and again the financials associated with that. Liana Moussatos – Wedbush Securities: Okay, thank you.

Edward Lanphier

Management

Sure.

Operator

Operator

Thank you. I’m showing no further questions at this time. I’d like to hand the call back over for any closing remarks.

Edward Lanphier

Management

Great. Thank you very much. We’d like to thank you for joining us. We look forward to speaking with you again when we release our fourth quarter and year-end numbers for 2012. We’ll be available later today if you have any follow-up questions. Thanks very much.

Operator

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This concludes our program for today. You may all disconnect and have a wonderful day.