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Sangamo Therapeutics, Inc. (SGMO)

Q3 2013 Earnings Call· Wed, Oct 23, 2013

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Transcript

Operator

Operator

Good afternoon and welcome to the Sangamo BioSciences Teleconference to Discuss Third Quarter 2013 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 Communication.

Elizabeth J. Wolffe

Management

Thank you, Jaime. Good afternoon and thank you for joining Sangamo’s management team on our conference call to discuss the company’s third quarter 2013 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; Geoff Nichol, Executive Vice President of Research and Development; Dale Ando, Vice President of Therapeutic Development and Chief Medical Officer; and Philip Gregory, Vice President of Research and Chief Scientific Officer. Following this introduction, Edward will highlight recent activities and the significant events from the past quarter; Ward will then briefly review third quarter 2013 results as well as our financial guidance for the remainder of 2013; and Geoff will provide an update on our ZFP Therapeutic programs. Finally, Edward will update you on our goals for the remainder of the year and beyond. 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 will likely change overtime. By discussing our current perception of the market and the 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 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 contain 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 for our conference call to discuss our 2013 third quarter financial results, as well as recent events and plans for development of our ZFP Therapeutic pipeline. The last few months have been particularly busy and very productive for Sangamo on multiple fronts, and as you will hear on this call, we expect that trend to continue as we approach the end of the year. In particular, we have numerous data presentations from both our clinical and pre-clinical programs at major scientific and clinical meetings. But before going into more detail, let me recap the highlights of the past few months. A principal focus for Sangamo this year is the advancement of our lead clinical program SB-728-T, an autologous T-cell therapy designed to provide a functional cure for HIV/AIDS. Using our Zinc Finger Nuclease or ZFN technology, we specifically disrupt the gene in coding CCR5, a required co-receptor for HIV infection of CD4 T-cells. Disrupting both copies of this gene in a T-cell makes it resistant to HIV infection, thus providing a circulating population of HIV resistant cells that are able to fight the virus throughout the body. This is a critical feature and advantage of our approach versus conventional antiretroviral therapies and underpins our goal of a functional cure for HIV. In September, Dale Ando, our Vice President of Therapeutic Development and Chief Medical Officer presented new data demonstrating sustained viral control without antiretroviral drugs in a subject enrolled in our SB-728-902 Cohort 5 Phase 2 trial. The data were submitted as a late-breaking abstract to the 53rd Interscience Conference on Antimicrobial Agents and Chemotherapy or ICAAC. While we have previously observed a decrease in viral load to undetectable levels in two other CCR5 delta-32 heterozygote HIV-infected subjects, the data…

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, 2013, and I am pleased to review the highlights of those results. Revenues in the third quarter of 2013 were $5.7 million, compared to $4.9 million for the same period in 2012. Third quarter 2013 revenues were comprised of revenue from Sangamo’s collaboration agreements with Shire and Sigma-Aldrich, as well as approximately $900,000 of revenue from research grants. As we mentioned in the press release, the increase in collaboration agreement revenues was primarily due to our agreement with Shire. Total operating expenses for the third quarter of 2013 were $11.9 million, compared to $10.7 million for the same period in 2012. Research and development expenses were $8.7 million in the 2013 quarter and $7.6 million for the prior year quarter. The increase was primarily due to increased external expenses related to our pre-clinical programs, partially offset by lower clinical trial expenses for our SB-728-T HIV/AIDS program. General and administrative expenses were $3.2 million in the third quarter of 2013 and $3.1 million for the same period in 2012. Non-cash stock-based compensation expense was $1.4 million for the quarter, with $700,000 each in research and development expenses and $700,000 in general and administrative expenses. For the third quarter of 2013, we reported a consolidated net loss of $6.1 million or $0.11 per share, compared to a net loss of $5.8 million or $0.11 per share for the same period in 2012. Turning to the balance sheet, I am pleased to report we ended the third quarter of 2013 with a $133.1 million in cash, cash equivalents, short-term investments and interest receivable, including $69.5 million in net proceeds from our public offering completed…

Edward Lanphier

Management

Thank you, Ward. As you have heard, post our recent financing, we ended the third quarter with just over $133 million, which gives us a strong cash position as we advance our HIV Phase 2 studies and our ZFP Therapeutic pre-clinical pipeline with a goal of filing seven new INDs by the end of 2015. With that in mind, let’s turn to our lead clinical program in HIV/AIDS. I’d ask Geoff to provide more detail on the late-breaking data that were presented at ICAAC in September and outline our plans for the presentation of data from this program over the next two months. Geoff?

Geoffrey Nichol

Management

Thanks, Edward. Good afternoon, everyone. As most of you know, our HIV program employs our ZFN technology to disrupt the CCR5 gene in T-cells of HIV infected individuals. CCR5 is the major co-receptor for HIV entry into CD4 T-cell and a well validated clinical target for ZFN approach to HIV. We noted there is a natural mutation CCR5 delta-32, which makes the CCR5 protein non-functional. This enables individuals, who carry that mutation on both copies of their CCR5 gene, to resist HIV infection despite repeated exposure to the virus. The aim of our ongoing clinical program, SB-728-T is to generate a population of modified T-cells in HIV infected individuals that will be both protected from HIV infection and capable of mounting an effective immune response against the virus throughout the patient’s body. As Edward mentioned, we have two ongoing Phase 2 clinical trials in this program to follow-up on our observation made in an earlier Phase 1 trial, in which we saw a very clear effect on viral load after SB-728-T treatment. One subject in these earlier studies, who underwent an interruption of antiretroviral drug treatment or so called treatment interruption or TI, experienced a viral load drop to undetectable levels at the very end of the TI period. This subject was put back on their antiretroviral drugs per the clinical protocol, the transplant of this individual is a delta-32 heterozygote and so already had one disruptive copy of the CCR5 gene. ZFN modifications of such cells results in approximately twice the number of cells, in which both copies of the CCR5 gene is disrupted, so-called biallelic modification. Our analysis of the data from all subjects in this study revealed a statistically significant relationship between the estimated level of engraftment of cells that had undergone biallelic modification and reduction from…

Edward Lanphier

Management

Thanks, Geoff. As we guided earlier this year, we expect the fourth quarter that is rich in data presentations. As Geoff has outlined, we will present data from our SB-728-T clinical trials, including all cohorts from our ongoing Phase 2 studies at the 6th International Workshop on HIV Persistence, Reservoirs and Eradication Strategies in early December as well as updates at several meetings in the next few weeks, including the ESGCT meeting in Madrid next week and The Lancet meeting in early November. We will also present Phase 1 clinical data from the Alzheimer's disease program that we acquired from Ceregene in mid November at the 6th Clinical Trials Conference on Alzheimer's Disease. Those of you who follow this field will be interested in these data. In addition, we will make presentations of pre-clinical data from our Shire partnering programs in hemophilia and Huntington's disease, and our proprietary program in hemoglobinopathies. Data from our Huntington’s disease program will be presented at the Annual Meeting of the Society for Neuroscience in mid November and data from our hemophilia and hemoglobinopathies programs and our T-cell cancer immunotherapy program will be presented at the Annual Meeting of the American Society of Hematology or ASH in early December. As the flow of this data would suggest, we are very focused on our ZFP Therapeutic developmental goals and aim to file INDs in 2014 for hemophilia A and Billion, Beta-thalassemia and our HIV application in stem cells. To that end, our HIV stem cell program was reviewed and received unanimous approval by the NIH Recombinant Advisory Committee or RAC in September. Looking further forward, in 2015, our goal is to file INDs for our Huntington’s program with Shire and up to two proprietary programs in Lysosomal Storage Disorders. We also expect our Phase 2 program in Alzheimer's disease will read out in 2015. All in all, a lot to look forward to and we look forward to providing you with more information on specific timing of these events on future calls. Needless to say, we have an exciting few weeks and months ahead of us, and we look forward to keeping you informed of our progress. To that end, we will be making presentations at the 25th Annual Piper Jaffray Healthcare Conference on December 4 and at the 32nd Annual JPMorgan Healthcare Conference in mid January, 2014, both of which will be webcast and available on the Sangamo website. This completes our prepared comments. I would now like to open up the call for your questions.

Operator

Operator

(Operator Instructions) The first question comes from Charles Duncan from Piper Jaffray. Charles C. Duncan – Piper Jaffray, Inc.: Hi, guys. Thanks for taking my question and congratulations on all the progress in the quarter.

Edward Lanphier

Management

Thanks, Charles. Charles C. Duncan – Piper Jaffray, Inc.: First question is either for you, Ed, or Geoff. I’m wondering ICAAC was in mid September, weeks are going by. I am kind of wondering what the disposition is of that patient who you saw the reduction in viral or the improvement in viral control during the treatment interruption, can you share with us whether or not that has been sustained and if the person is still on that treatment interruption?

Edward Lanphier

Management

So, great question, Charles, and this is one I don’t even have to pass over to Geoff. So we’re not going to update on this call beyond the data that we presented at ICAAC, but as guided, we will be updating at upcoming meetings and you should expect a complete data update in early December at the meeting in Miami. But I’m sure you can imagine on this call, we don’t plan to update past the ICAAC data. Charles C. Duncan – Piper Jaffray, Inc.: Okay, that makes sense. And then, with regard to the three of seven responders, if you will, for evaluable patients, which is, in my view, pretty decent for this type of treatment, I’m wondering if you have any insights – further insights on what would comprise a responder and thoughts on how to target patients?

Edward Lanphier

Management

Well, I think, and Geoff, I’ll lead off here and certainly ask you to comment. I mean, in terms of responders, Charles, the critical issue on both the Cohort 5 delta-32 trial as well as on the 1101 Cytoxan study is really focused in the TI period, where we’re evaluating viral load. Obviously, on top of that, we’re looking at other parameters, the expansion or maintenance of the modified cells, the overall CD4 counts, but the principal issue there is impact on viral load and some immunological function control as Geoff talked about. Geoff, do you want to comment further on that?

Geoffrey Nichol

Management

Yes, Charles, as you know, we continue to evaluate the profile of our patients using a wide range of immunological parameters in collaboration with [indiscernible] and other investigators and those evaluations continue. We have published that some of the effects of SB-728-T appeared to be affected by the underlying sort of inflammatory state of the patients, which is well known to have a significant affect on mobility and mortality outcomes in – even in treated HIV. But it will be a little while, yet the full – we can really come out with absolutely final conclusions about that. But both those evaluations continue and our companion evaluations to the viral load and other protocol measures that we are making in these studies. Charles C. Duncan – Piper Jaffray, Inc.: Okay. And I guess a follow-up to that the question is, would we anticipate you being able to come up with patient profiles and incorporate those into the next steps and would you anticipate that next step to be perhaps a Phase 2b perhaps to start in 2014?

Edward Lanphier

Management

Well, again, I'll start and Geoff can comment, I'll take the latter piece. We're not going to, at this point, comment on what next steps might be. That’s obviously a data-driven event and the timing of that would be, again, dependent upon what the next step is and what the data are. In terms of baseline profile of these patients, Geoff, is there anything you want to add to what you’ve already said?

Geoffrey Nichol

Management

Yes, Charles, it's pretty much what I’d said before. I mean, this is an ongoing clinical investigation, and clearly, we’re investing on a lot of things. I agree with you that trying to identify profiles that would help us to focus the therapy on the right patients, that’s a – that's an aim across the entire industry at this point and obviously we will be continuing to follow that, but it would be simply premature to guide for anything at this point. Charles C. Duncan – Piper Jaffray, Inc.: Thanks for the added color.

Edward Lanphier

Management

Yep. Thanks, Charles.

Operator

Operator

The next question comes from Ryan Martins from Lazard Capital Markets. Ryan S. Martins – Lazard Capital Markets LLC: Hi. Just a few questions. Just to start out with, obviously ASH abstracts coming up in little over two weeks. You certainly are going to have something hopefully at the end of the policies A and B. Are we to expect this is going to be in non-human primates or dogs, if you can talk about that? And maybe some of your latest thinking on how you – how you’re thinking about incorporating the Factor VIII gene, which obviously is much larger than the Factor IX gene in doing AAV construct? And one another on the ASH is did you say you will not have any LSD data of ASH?

Edward Lanphier

Management

So, I’ll start off and Philip, you can certainly chime in. I don’t think I’m going to comment at this point or run in front of the ASH abstracts in terms of what those cover. As you point out, those will be out shortly and I think we’ll cover that. Maybe Philip, you can speak to the loading capacities around AAV-8 and AAV-9. And at this point, Ryan, I don’t think we’ve commented on when and where we’ll be presenting new LSD data. So Philip, do you want to comment on in terms of loading capacity on Factor VIII?

Philip Gregory

Analyst

Sure. So, Ryan, you are absolutely right that the Factor VIII gene is a very large gene relative to the some average sized – a human gene. And there is a substantial difficulty in getting that gene packaged into a classical AAV vector and one of the features that makes that difficult, of course, is that if you think about a standard cDNA approach, it’s necessary to also include promoter sequences that not only – they’re not only with cDNA itself, but also the sequences necessary to drive the expression about cDNA. And that’s really where our approach is different, we don’t need to include the promoters, because we’re going to target this – the coding sequence of the Factor VIII gene into our In Vivo Protein Replacement landing pad, if you will, which is the albumin locus. And the albumin locus itself provides that promoter sequence. That’s a relatively small change, but that change actually is quite substantial in giving you the flexibility to load the Factor VIII cDNA into an AAV vector without any special tricks and it really comes down to that ability to eliminate the promoter sequences. Ryan S. Martins – Lazard Capital Markets LLC: Again, thanks for that color. just a question on zinc fingers I look at the abstract list – in the abstract [indiscernible] neurosciences. It seems like there is clearly some correlation between delivering the pressure and the impact on the medium spiny neurons in the straddle of a brain. Can you maybe talk about that and what that [indiscernible] something with that maybe?

Edward Lanphier

Management

Sure. Philip, you want to take a first shot at that?

Philip Gregory

Analyst

Sure. So no, I did not want to get too far ahead of the data that will be presented. But sort of sticking to what’s in the abstract. I think it’s clear that in Huntington’s disease the medium spiny neuron is one of the critical neurons that sort of selectively left in response to the expanded CAG-repeat. And so this a particular class of neurons that we track, because that’s selectively a loss, if we’re having an impact on the presentation of disease and hopefully on the phenotype of disease, we would expect to molecularly preserve the medium spiny neuron population. And so, we’ve tracked – using numerous markers, we’ve tracked this population of cells and in mouse brain that has been exposed to our zinc finger protein repress of the large CAG-repeats found in the mouse model. And we’re very encouraged by the retention of these medium spiny neuron markers that indicates that we’re having a functional preservation of the relevant sulphides. But there will be a lot more data on that presented at SFN, but that’s sort of the – that’s the basis of why we’re interested in that particular class of neurons. Ryan S. Martins – Lazard Capital Markets LLC: Okay, thanks, again. And yes, maybe one final, I guess, a broad question. I think in your prepared comments, it was mentioned that the use of the cash from the [indiscernible] expansion of the pipeline, we do have abstract, as you mentioned on T-cell cancer immunotherapy approach at ASH, and of course, with the Ceregene acquisition, there’s some expertise there on the ophthalmology side. And so maybe, if you can just talk a little more broadly on other approaches you may – maybe disease areas you may go after outside what we already know about that you’ve already committed to?

Edward Lanphier

Management

Well, you’re absolutely right, Ryan, the one of the reasons for doing the financing is to allow us to more aggressively invest in pipeline expansion and we specifically included in the prepared remarks today and highlighted the abstract that is going to be presented at ASH and the T-cell immunotherapy space and you’re also right that they were some pretty significant AAV ophthalmic assets as part of the Ceregene acquisition. And there’s probably another three or four programs that are ongoing here that I could add to that list just to round that out. But I don’t think at this point, we’re going to be highlighting any of those beyond the four INDs that we’re working towards next year and the three additional INDs, in 2015, plus the Phase 2 Alzheimer’s data. but I think it is fair to say that that both of those things that you’ve mentioned plus, several others are very much a part of what we are working on and as time goes by again, in a data driven way, we’ll be – things that we will highlight and talk about. but at this point, I’d say the investors should stay focused on the pipeline that we’ve discussed. Ryan S. Martins – Lazard Capital Markets LLC: Okay, thanks, Edward.

Edward Lanphier

Management

Sure, thank you.

Operator

Operator

Your next question from John Newman from JMP Securities.

Edward Lanphier

Management

Hi, John. John L. Newman – JMP Securities LLC: Hi, Edward, thanks for taking the question, guys. So I’m wondering if you could talk a little bit about what type of data we might see on your Phase 1 Alzheimer’s program, what you might discuss and if you could remind me what the endpoint is that you’re looking at there?

Edward Lanphier

Management

Sure, I’ll start off and Geoff, maybe, you can talk a little bit about this. This is obviously the program that came in through the Ceregene acquisition. I think the expectations in terms of the Alzheimer’s data or Phase 1 data, so first safety and that’s the primary endpoint in Phase 1 trial. But also, I think the real issue is in this program is gene expression and durability of gene expression and those are critical elements in any kind of CNS delivery. Geoff, you want to comment any further in terms of the clinical trial or endpoints of the Phase 1?

Geoffrey Nichol

Management

Sure. So John, as Edward said that primary outcome really for this very early stage program is safety. Nevertheless, a pretty broad range of exploratory endpoints were included, looking at efficacy, the ADAS-Cog and a variety of other rating scale driven sort of approaches, as well as scanning data and as Edward mentioned, there is unfortunately sadly some patients die in these programs and it’s therefore possible to obtain postmortem evaluations of the expression of the actual [indiscernible] itself. So that’s giving you a little bit of color, but I don’t want to get too far ahead of the actual presentation in a few weeks time. John L. Newman – JMP Securities LLC: Okay, great. And just in terms of the SB-728-T program going forward, could we expect to hear some news regarding, perhaps an electroporation technique during 2014, or is that something that you’re still sort of deciding on?

Edward Lanphier

Management

Well. I’ll go first and either Dale or Geoff, you can comment further and even Philip, because we’ve done a lot of work at this end, but I think there’s a couple of things that we’ve talked about in this point, John. One, our collaborator Carl June, we’ve talked about him from a process development perspective moving towards our electroporation in the trial that he is going to initiate. And we’ve had an awful lot of success with electroporation of RNA in the stem cell environment and that’s certainly what we’re employing in our HIV stem cell protocol. But there are significant advantages of RNA electroporation in both T-cells and stem cells and it’s certainly, an important piece of process development, technology development that we’ve been working on. Geoff or Philip, anything else you want to add to that?

Geoffrey Nichol

Management

Geoff, unless Philip has or Dale has any other comments, I think that’s pretty much it, John, in terms of – we’ve become very enameled of the electroporation approach and we’ve worked with Carl to adapt that beyond the setting that we’ve used in stem cells to look at T-cells as well. So you will be seeing more of that data exactly when and where it remains to be determined. John L. Newman – JMP Securities LLC: Okay, great. Thanks very much, guys.

Edward Lanphier

Management

Thanks, John.

Operator

Operator

(Operator Instructions) And I am showing no further questions.

Edward Lanphier

Management

Great. All right, we’d like to thank you for joining us and we look forward to speaking with you again, when we release our fourth quarter financial information in early 2014, we’ll be available later today if there are any follow-up questions. Thank you.

Operator

Operator

Ladies and gentlemen, that does conclude the conference for today. Again, thank you for your participation. You may now disconnect. Have a good day.