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Sangamo Therapeutics, Inc. (SGMO)

Q3 2014 Earnings Call· Wed, Oct 22, 2014

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Transcript

Operator

Operator

Good afternoon, and welcome to the Sangamo BioSciences teleconference to discuss Third Quarter 2014 Financial Results. This call is being recorded. I will now pass you over to your coordinator of this event, Dr. Elizabeth Wolffe, Vice President of Corporate Communication.

Elizabeth Wolffe

Management

Thank you, Sam. Good afternoon and thank you for joining Sangamo’s management team on our conference call to discuss the company’s third quarter 2014 financial results. Also present during this call are several members of Sangamo 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 and Philip Gregory, Senior Vice President of Research and Chief Scientific Officer. Following this introduction, Edward will highlight recent activities and significant events from the past quarter. Ward will then briefly review third quarter financial results as well as our financial guidance for the remainder of the year and Jeff will provide an update on our ZFP therapeutic programs. Finally, Edward will update you on our goals for remainder of 2014 and beyond call for questions. As we begin, I’d like to remind everyone 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 over time. By discussing our current perception of the market and the future performance of Sangamo with you today, we are not undertaking any obligation to provide updates in the future. Actual results may differ substantially from what we discussed 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 include important factors that could cause the actual of the company’s operations to differ materially from those contained in our projections of forward-looking statements. Now, I would 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 2014 third quarter financial results as well as recent events and an update on the continued development of our ZFP Therapeutics pipeline. The third quarter has been particularly busy for Sangamo as we continue to move our ZFP Therapeutic programs forward, but before going into more detail let me recap the important events of the past few months. Starting with our clinical programs Dr. Dale Ando, our Vice President of Therapeutic Development and Chief Medical Officer present a new data from our autologous T-cell therapy for HIV SB-728-T at the 54th Interscience Conference on Antimicrobial Agents and Chemotherapy or ICAAC which was held in Washington DC in early September. In an oral presentation he described data from two of our clinical studies SB-728-902 Cohort 5 and SB-728-1101, both studies designed to maximize the engraftment ZFN modified CD4 T-cells in which both copies of the CCR5 gene have been disrupted making these cells fully resistant to HIV infection. And update on the status of the CCR5 delta-32 heterozygote subject in the 902 study who has controlled his viral load during a treatment interruption or TI from his antiretroviral medications for more than a year and two additional subjects enrolled in the 1101 study who have experienced a two log decrease in viral load from their peak measurement during TI which has been sustained in one subject for more than eight months as of the ICAAC presentation. These and several other subjects currently remain on extended TIs meaning longer than the 16-week period defined in the protocol. Needless to say these data have garnered a great deal of interest in the clinical and scientific communities and my colleagues and our collaborators have been invited to…

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, 2014 and I am pleased to review the highlights of those results with you now. Revenues in the third quarter of 2014 were $12.4 million compared to $5.7 million for the same period in 2013. Third quarter 2014 revenues were comprised of revenue from Sangamo’s collaboration agreements with Shire, Biogen Idec and Sigma-Aldrich enabling technology agreements and approximately $400,000 of revenue from research grants. The increase in collaboration agreement revenues was primarily due to our partnerships with Biogen and Shire. In the third quarter of 2014, Sangamo recognize $3.5 million of revenues related to research services performed under the collaboration agreement with Biogen. Sangamo recognized $6 million of revenues from Shire which included a $1 million milestone payment associated with the toxicology studies for our hemophilia B program. The remaining $5 million of revenues was related to research services performed under the collaboration agreement. In addition pursuant to the agreement entered into with Shire in January 2012 and Biogen in January 2014 Sangamo received upfront payments of $13 million and $20 million respectively. These payments are being recognized on the straight line amortization basis over the initial six year research term for Shire and 40 months for Biogen. The company recognized $500,000 of the Shire upfront payment and $1.6 million of the Biogen upfront payment as revenue for the third quarter of 2014. Total operating expenses for the third quarter of 2014 were $20.1 million compared to $11.9 million for the same period in 2013. Research and development expenses were $16.3 million in the third quarter of 2014 compared to $8.7 million for the third quarter of 2013. The increase was…

Edward Lanphier

Management

Thanks Ward. As you have heard, we ended the third quarter of 2014 with approximately $232 million, which gives us a very strong cash position as we prosecute our HIV Phase II studies and rapidly advance our ZFP therapeutic preclinical pipeline with the goal of filing multiple new INDs by the end of 2015. With that in mind let’s turn to our lead clinical program in HIV-AIDS. I’ve asked Geoff to provide more detail on the data that were presented at ICAAC in September and to outline the two new clinical trials in this program that are designed to provide critical data for the design of pivotal studies. Geoff?

Geoff 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 CD4T cells and the well validated clinical target for ZFN approach to HIV. We know that there is a natural mutation CCR5 delta-32 which makes the CCR5 protein non-functional. This enables the roughly 1% of the U.S. population who carry that mutation in both copies of the CCR5 gene so called CCR5 delta-32 homozygotes to resist HIV infection despite repeated exposure to the virus. The aim of our ongoing clinical program in HIV AIDS is to replicate this phenotype in any HIV-infected individual by generating a population of modified T-cells SB-728-T then we’ll be protecting from HIV infection and they’re capable of mounting an effective immune response against the virus throughout the patient’s body essentially providing functional control of the viral infection. The data that we’ve generated thus far are very promising. We’ve demonstrated that SB-728-T treatment is associated with a reconstitution of the immune system, seen most visibly in an increase in the overall numbers of CD4 positive T-cells and the decrease in the all-important viral reservoir. This last point is critical feature and advantage of our immunologic approach versus conventional antiretroviral therapies which do nothing to address the reservoir. And underpins that goal of a functional cure for HIV. Data presented at ICAAC provided a possible explanation for these and other clinical observations such as the durability of our modified cells as I would explain later. In addition, in some subjects we’ve noticed a sustained decrease in viral load during the treatment interruption from anti-retro viral medication. The new Phase II study that is ongoing is designed to use all that…

Edward Lanphier

Management

Thanks, Jeff. As you have just heard in considerable detail we and many others are intrigued and very impressed by the potential for SB-728-T to generate a functional cure for HIV and we look forward to presenting data from these new studies in 2015. In the very near term, we expect to present data from our Huntington’s disease program at the annual meeting of the Society for Neuroscience which is being held from the 12th to the 15th November in Washington DC. Phil Gregory, Sangamo’s Senior Vice President of Research and Chief Scientific Officer and I have also been invited to present at a Genetic Therapy Meeting at Harvard on December 3rd and in early December Fyodor Urnov, a senior scientist of the company is an invited speaker at a session at the Annual Meeting of the American Society of Hematology or ASH called taking it to the clinic genomediting for blood disorders. Also in the very near term we will file the IND for our Biogen partner beta-thalassemia program and will initiate our Phase 1 clinical trial at the City of Hope for our HIV stem cell program. Looking further ahead, in 2015 our goal is to file INDs for both of our Hemophilia programs and our Huntington’s program partnered with Shire, although as I have said before ultimately we don’t control that timing. We also remain on track to file two INDs for our proprietary in vivo protein replacement program, LSDs as well as our sickle cell disease program partnered with Biogen by the end of 2015. We also expect that the data from our Phase 2 Alzheimer’s disease study that we acquired from Ceregene will read out in 2015. That’s a lot of moving parts and we look forward to providing you with more information on the specific timing of these events on future calls. Finally, we look forward to keeping you informed of our progress at several upcoming investment banking conferences to that end we will be presenting at the 25th annual Piper Jaffray Healthcare conference on December 2nd and at the 32nd Annual JP Morgan Healthcare conference in mid-January 2015 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

Thank you, sir. (Operator Instructions). Our first question comes from Charles Duncan of Piper Jaffray. Your line is now open.

Charles Duncan - Piper Jaffray

Analyst

Hi. Edward, thanks for taking my question and congrats on the earned scientific distinctions to your colleagues as well as the very good year-on-year revenue optics.

Edward Lanphier

Management

Thanks Charles I appreciate that.

Charles Duncan - Piper Jaffray

Analyst

So first of all Geoff did a great job outlining what’s going on with HIV, and as the Phase II that you’re running is an open label study, could you imagine that you might be in a position to release some of the progress and say the spring or even or at least the fall of 2015?

Edward Lanphier

Management

I will give you a short answer and say yes, I mean that’s reasonable. But I do expect it will have I guess what I’ll say is a complete dataset from the 1401 mRNA study by the end of 2015. Geoff you all right with that?

Geoff Nichol

Management

Yes, that’s fine, obviously the data will, as you point out Charles we’ll be coming in on the earlier patients, a little earlier but in order to complete all of the patients we’ll ultimately go towards the later part of 2015. So those opportunities are there, obviously they will be driven by the data itself.

Charles Duncan - Piper Jaffray

Analyst

It sounds like the goal is to in early 16 to be designing pivotal program around what you might move that program forward?

Edward Lanphier

Management

Yes, I think that’s right I think the goal is to use the existing 1401 mRNA study and the repeat dosing that protocol offers to generate the kind of definitive Phase II data that we need to design pivotal studies, number one. And number two, as we’ve said before our plan is before moving into pivotal studies to partner this program for pivotal studies and commercialization.

Charles Duncan - Piper Jaffray

Analyst

Okay, that’s helpful. And then I know that you can’t speak much about Shire and the interaction there, although it surely has been an interesting time for that company recently. I guess I’m wondering if you folks were solely in charge of filing those INDs if you think that you’d be in a position to do that in terms of the Hemophilia B program i.e. are there any additional, I’ll call it technical or scientific studies that need to be done to prepare for those INDs?

Edward Lanphier

Management

I know what my answer is to that Charles, Geoff do you want me to answer the question or do you want to answer.

Geoff Nichol

Management

You better start.

Edward Lanphier

Management

I’ll be happy to start, the answer is no, we are from a technical perspective and from other perspectives as it relates to the Hemophilia B program we are making great progress. There are no technical issues, there are no fundamental issues scientific or otherwise that would prevent us from doing that. Geoff, you want to dive in here or should I just take the bullet here?

Geoff Nichol

Management

Charles, it’s a provocative question, I think we’re moving forward very closely working with Shire and they remain very committed to the program and that’s because it’s making good progress and achieving its objective. So that’s all that I will say.

Edward Lanphier

Management

I think to use the term the surrogate marker for that is the continued progress we make on the LSD programs for own account. And we look forward as I said in the script to presenting data around that in the not too distant future.

Charles Duncan - Piper Jaffray

Analyst

And then last question and then I’ll hop back in the queue is on the beta-thal program, I know we’ve discussed this a little bit in previous around previous [Inaudible] meetings, but wondering why you would use a BCL11A knockout approach versus a gene replacement or a correction approach just fundamentally what your thought is on that?

Edward Lanphier

Management

Well, there is one very kind of overwhelming reason and then there are lots of other reasons, but the overwhelming reason is that the approach that we’re taking, we believe is curative for both beta-thalassemia and sickle cell, whereas a single replacement or correction of the beta-globin gene would not be. Now, there are lots of other reasons and Philip is on the call and Geoff is here, so they can add or subtract from that, but the overwhelming reason is that from a product development and target product profile perspective, it’s a potentially curative outcome for both beta-thal and sickle. Geoff or Philip, you want to add anything?

Geoff Nichol

Management

Philip?

Philip Gregory

Analyst

Yes, this is Philip. Charles I guess the other thing to point out is that with CCR5 program having pioneered ZFN based gene disruption that was a technology that was sort of ripe if you will, to apply directly to the thalassemia and sickle applications, and so it was also sort of ready for prime time if you will, and I think the second point is the one that Edward has made which is that if we’re successful as we hope to be with BCL11A being a way of activating fetal sufficiently, it should do that for both thalassemia and for sickle cell disease whereas correction of the betaglobin defect in sickle is by design only capable of fixing sickle disease.

Operator

Operator

Thank you. Our next question comes from Cory Kasimov of JPMorgan. Your line is now open.

Whitney Ijem - JPMorgan

Analyst

This is actually Whitney on for Cory. Most of my questions have been asked. I guess I'll just ask on the HIV program, if you can just remind us of how you're thinking about that program and moving it forward into pivotal? And how you're thinking about that on the partnership front, will you wait for all the Phase II data to roll in or will you entertain those conversations ahead of that?

Edward Lanphier

Management

So let me use that question and I’ll try to be complete, but let me use that question about timing on data and the length of these studies. So the key endpoint in the 1401 study and the same in pivotal study is acute viral load control. And the way we evaluate that is during a treatment interruption which is initiated 6 to 8 weeks after the infusion of the modified cells. And then subjects go off their antiretroviral therapy. And the goal of the trial is within this 16-week treatment interruption period, to evaluate the control of acute viral load based upon or by these modified CCR5 negative CD4-T cells. And so that period of time, 16 weeks post infusion, really gives us a clear sense of this and so while formally we follow patients and the studies are formally open for follow up of these subjects for several years. We’re going to be able to make a very data driven judgment about the outcome of the studies. And in the 1401 study, we’ll be doing mRNA modifications plus repeat dosing in these studies. We’ll be able to make a judgment about that as I discussed earlier in the 2015 timeline or timeframe or early 2016. So our plans are as mentioned is to use those data to design pivotal studies. We would do that in the context or with the consultation with a partner around us. We have active discussions most recently around ICAAC. And the new data that came out with multiple parties that are following this program. We keep them up to speed. They certainly know our intentions and the design of this work and so the goal would be as mentioned earlier to be in a position to partner this program and initiate pivotal studies data driven, data dependent, in 2016.

Operator

Operator

Thank you. (Operator Instructions) Our next question comes from Ryan Martins of Jefferies. Your line is now open.

Ryan Martins - Jefferies

Analyst

Hi, thanks for the questions. So I wanted to ask about Shire. When did they select two additional targets or do they have any kind of timelines or do you have any information?

Edward Lanphier

Management

They do, Ryan. The research period, the time for selecting the last two targets is within the research period, which was a six-year period which began in January of 2012. So they’re around numbers another three and half years to select those targets.

Ryan Martins - Jefferies

Analyst

Okay. And then just to clarify on your prepared comments and your follow-up, so on hemophilia B, are you saying you're committing to getting that IND filed into 2015 or you’re targeting it 2015?

Edward Lanphier

Management

So are we committing or targeting? Is that the distinction and the question?

Ryan Martins - Jefferies

Analyst

Yes, on non-hemophilia B?

Edward Lanphier

Management

I'm targeting, thank you. If you were, I don't know that I would be as black-and-white as you just were, but if you're talking about a program that was solely under our control, I would be, you know, more definitive. But as I mentioned, these are partnered, this is a partner program and we do not have, what I either would like to say as ultimate control or specifying influence over the final timing or the final filing of the IND. It's ultimately a Shire's decision.

Ryan Martins - Jefferies

Analyst

Okay. And then a question on hemophilia, we’ve heard from some docs, they would like to see clotting factor levels of 15% or more.

Edward Lanphier

Management

Yes, I mean, do you say that you’ve heard from docs that they’re looking to get levels sort of double digits, low double digit levels of normal Factor VIII or Factor IX, is that the question or statement?

Ryan Martins - Jefferies

Analyst

Yes, low double digits versus, I guess, just taking patient from severe less than 1%.

Edward Lanphier

Management

Yes, I heard the same thing at the conference that you guys hosted as well. I don’t know what to say about that except I am sure that’s the ambition, that’s the objective that would be great and so on. But I will say that if you look at current therapies, they’re well-well-well below that at least on average. So, I heard the same thing, I think it’s, if I was a KOL treating subjects and have an opportunity to raise the bar for companies I would probably do the same thing.

Ryan Martins - Jefferies

Analyst

Okay. And then on the issue of inhibitors that typically developed in the hemophilia patients, especially hemophilia A, is that something you can do in advance by enrolling patients where you could try to minimize the issue of inhibitors or you think gene therapies maybe don't have that particular issue inhibitors would develop?

Edward Lanphier

Management

: Yeah, I don't have a response on, Philip do you have a point of view or Geoff?

Geoff Nichol

Management

Yeah, this is Geoff here. So, I mean as you know inhibitors do develop in people who get recombinant plotting factors and typically we gene therapist try to move forward with things that have, that either the complete wild type approach or somewhere close to it will closed indeed to what has been used successfully with the recombinant therapy. So, those are some of the guiding principles that we’ve used. And those are the principles we’ve used as we’ve move forward.

Edward Lanphier

Management

Philip anything to add?

Philip Gregory

Analyst

Yeah, just a point there, there is certainly no reason to imagine the gene therapy based approaches, the genome editing based approaches will have any higher propensity for inhibitor generation then the same peptides that are generated ex-vivo and then injected, but a fact you could argue based on some data that endogenously produced proteins that may be more toleragenic than those given in boneless direct injection for although that’s obviously speculation at this point.

Ryan Martins - Jefferies

Analyst

And any strategy that implies in appropriations to try to minimize the risk of that happening? Is there anything that exists?

Geoffrey Nichol

Analyst

Its Geoff here, I mean it's very typical in these studies to ensure that the patients who are enrolled have been well exposed to recombinant clotting factors and have not developed and have not actually developed the inhibitors. So, we’ve already started with demonstrating the immunologically responding to the recombinant protein.

Ryan Martins - Jefferies

Analyst

Okay. And then finally just last one on ASH, are we expecting updates on the partner program, generally on ASH is that the plan?

Edward Lanphier

Management

I think the guidance at this point Ryan is what we know that will be presenting and that’s the invited talk that Fyodor Urnov will be fiving on taking, moving from bench to clinical for blood disorder. So that’s the one and I think you should expect to see that’s will cover certainly the hemoglobinopathies were, but I guess I would say stay tuned as time goes by.

Ryan Martins - Jefferies

Analyst

Okay. Thanks for the color.

Operator

Operator

Thank you. At this time I am not showing any further questions. I would like to turn the call back to management for any closing comments.

Edward Lanphier

Management

Great. We would 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 2015 will be available later today after any follow up questions. Thank you very much.

Operator

Operator