Applied Genetic Technologies Corp (AGTC) 2019 Q2 法說會逐字稿

Good morning, and welcome to the AGTC Second Quarter Fiscal Year 2019 Financial Results Conference Call.

Today's call is being recorded.

Before we get started, I'd like to remind everyone that during this conference call, AGTC may make forward-looking statements, including statements about the company's financial results, financial guidance, its future business strategies and operations and its product development and regulatory progress. Actual results could differ materially from those discussed in these forward-looking statements due to a number of important factors, including uncertainties inherent in the clinical development and regulatory process and other risks described in the Risk Factors section of AGTC's annual report on Form 10-K for the fiscal year ended June 30, 2018.

For introductions and opening remarks, I would like to turn the call over to Sue Washer, Chief Executive Officer of AGTC. Please go ahead, Ms. Washer. You may begin.

Good morning, and thank you all for joining us today.

With me this morning is Bill Sullivan, our Chief Financial Officer; and Matt Feinsod, our Chief Medical Officer. During today's call, Matt will provide a brief overview of our clinical and preclinical programs, and Bill will then review our financial results for the second quarter of fiscal year 2019. We will then be available to answer your questions.

AGTC's broad pipeline, combined with our strong financial position, affords us multiple opportunities for value inflection in 2019. And we remain confident in our ability to advance new treatment approaches for patients that today have few or no options. In December, we announced that we will regain rights to the X-linked retinitis pigmentosa or XLRP clinical program and 3 preclinical programs from Biogen effective as of March 8, 2019. We have received approximately $146 million from Biogen to date, all of which we will retain, and Biogen remains responsible for reimbursing costs related to our XLRP clinical program and certain other costs through March 8, 2019. We believe that regaining 100% control of these programs while retaining the progress that resulted from Biogen's investment will allow the company more control and optionality to create value for AGTC, patients and shareholders as we continue to move our programs forward.

As Bill will discuss in a moment, we have a strong balance sheet with $96.1 million in cash, cash equivalents and investments on hand as of December 31, 2018. This gives us the financial resources to execute on our current and planned clinical trials as well as research and preclinical programs for at least the next 2 years, during which time we will have multiple data readouts from the achromatopsia and XLRP programs.

Top line interim 6 months data from the X-linked retinoschisis or XLRS trial demonstrated that our gene delivery platform is generally safe and well tolerated but did not show evidence of clinical activity in either children or adults. While we were hopeful to see activity, the results of the study provide us with important insights that we believe are directly applicable to our other gene therapy trials. The results and the extensive work done reviewing this large body of data will enhance our ability to design and conduct ophthalmology clinical trials and analyze data from a variety of ophthalmic endpoints. Importantly, we do not believe that the XLRS activity results are predictive of what we may see in our ongoing trials in XLRP or achromatopsia and remain confident in their potential. This confidence is based on the ability of robust animal models for these diseases, which were not available for the XLRS preclinical studies; as well as the use of a subretinal injection, which delivers products directly to the target cells, rather than the intravitreal injection used in the XLRS trial. Based on these and other key differences, we remain confident in the potential for the XLRP and achromatopsia trials to demonstrate clinical activity. We are also on track to report top line data from all 3 of these trials in 2019.

At this point, I'll turn the call over to Matt, who will provide detailed updates on each of our programs.

Thank you, Sue.

For our Phase I/II clinical trial in XLRP, we are currently enrolling patients to evaluate the safety and efficacy of our product candidate. In this trial, treatment is delivered to either the peripheral or central retina, depending on individual patient-specific baseline characteristics. We are committed to providing patients with optimal care, and this is reflected in our approach to basing the subretinal injection site on the need of each patient rather than on a prespecified location that may or may not be optimal for all study subjects. We have now dosed 12 patients in the XLRP trial, including patients from the expansion group. We expect to report top line interim 6-month data from the dose escalation portion of the trial in the third quarter of 2019 and top line 6-month data from the expansion group in the second half of 2019.

For our 2 Phase I/II clinical trials in achromatopsia, we are actively enrolling patients with disease caused by mutations in the 2 most common achromatopsia genes, CNGB3 and CNGA3. As in the XLRP trial, both of the achromatopsia trials utilize subretinal injections as the route of administration. In the B3 trial, we have enrolled 10 patients, and in the A3 trial, we have enrolled 5. We expect to complete the dose escalation phase of the B3 and A3 trials in the first quarter and second quarters of 2019, respectively; and are on track to report top line interim 6-month data from the dose escalation phases of both trials before the end of 2019. Additionally, we expect to complete enrollment of the expansion groups of the B3 and A3 trials in the second half of 2019 and to provide top line interim 6-month data in the first half of 2020.

Our diverse product development pipeline also includes several preclinical programs, the most advanced of which is our -- is part of our optogenetics collaboration with Bionic Sight, which is on track to file its IND for this product candidate in the first half of 2019. We are excited that our partner will begin clinical testing of a very innovative optogenetic therapy that combines AGTC's gene therapy expertise with Bionic Sight's innovative retinal coating that replicates the signaling that photoreceptors would normally provide. Early proof-of-concept animal studies suggest that Bionic Sight's technology, in combination with AGTC's advanced AAV gene delivery system, may provide patients with better visual function than other optogenetic approaches.

I will now turn the call over to Bill Sullivan, who will briefly review our second quarter fiscal year 2019 financial results.

Thank you, Matt.

Our second quarter 2019 financials were included in our press release, which was distributed a short while ago.

For the 6 months ended December 31, 2018, we generated a net loss of $3 million compared to a net loss of $6.6 million for the comparable period in 2017. The decrease in net loss was primarily due to a $4.8 million increase in revenues, a $0.8 million decrease in G&A expenses and a $0.8 million reduction related to income taxes, partially offset by a $1.6 million increase in R&D expenses. The $4.8 million increase in revenues was primarily due to recognizing revenue of $8.3 million associated with the receipt of a $10 million milestone payment from Biogen, partially offset by decreased revenues associated with the adoption of the provisions of ASC Topic 606.

The $1.6 million increase in R&D expenses is primarily due to incurring sublicense expense of $2.3 million associated with receiving a milestone payment from Biogen and increased employee-related costs, partially offset by decreased preclinical R&D spending. The $0.8 million decrease in G&A expenses was primarily driven by decreased employee-related and share-based compensation expenses. The $0.8 million decrease in income taxes was primarily due to certain tax credit carryforwards becoming refundable under the Tax Cuts and Jobs Acts of 2017, which resulted in a income tax benefit for the 6 months ended December 31, 2017.

Now move on to our financial guidance.

As Sue mentioned earlier, we ended fiscal Q2 2019 with a strong balance sheet. Total cash, cash equivalents and investments as of December 31, 2018, were $96.1 million. We believe these funds will be sufficient to allow AGTC to generate data from our ongoing clinical programs, to move our preclinical optogenetics program in collaboration with Bionic Sight into the clinic and fund our currently planned research and discovery programs for at least the next 2 years. We expect total cash, cash equivalents and investments as of June 30, 2019, to be between $70 million and $75 million.

That concludes the team's remarks today. Operator, you now may open the line for a question-and-answer period.

(Operator Instructions) Our first question today is coming from Matthew Luchini from BMO Capital Markets.

So just, I guess, a big picture one for me. Obviously, there's a number of data sets expected this year. And I was just hoping you could put some color around the -- both the sort of -- if you're in the fortunate position that both the XLRP and the achromatopsia programs are successful, how -- the relative prioritization of those in terms of moving forward into the larger trials and also the company's internal capacity or bandwidth to take and manage what would presumably be larger studies to the next phase. And then I have one follow-up.

Thank you for the question, Matt. And I like the idea of looking forward with positive outcomes. That's what we've been doing here at the company, and we have done a rather extensive review of the programs and how we would move them forward and what resources would be required. And we are continually adding to our clin ops group so that we have capacity internally; as well as we have done a complete strategic review of the vendors we're using in the clinical trial, with the eye toward how can we efficiently manage them and have the right skills in our vendors as well as our internal staff to be able to move the programs forward. We -- if we were in the fortunate position of having positive results in both XLRP and achromatopsia, we would plan to move them forward in parallel, and that is the review and the resource analysis that we have done in order to support that.

Okay, got it. And for the optogenetics program, can you just talk a little bit about what's left before that IND can actually be filed?

Yes. So we are quite confident in the filing of that IND. It's in the writing and compilation stage. And it is important to remember that filing the IND is rarely the gate or the hurdle for dosing patients because the sites have to conduct their internal review board, their site initiation activities. And that is all things that we are planning with our partner, Bionic Sight. And Bionic Sight is responsible for conduct of the clinical program.

(Operator Instructions) Our next question today is coming from Natalya Gertsik from Chardan.

This is Natalya Gertsik calling on behalf of Gbola Amusa. My question is, now that the Biogen collaboration is over, is there a shift in the way you intend to allocate resources among your programs, both clinical and preclinical?

Well, thank you for that question, Natalya. And that's a very good one, as we did receive back full rights to the programs we were working on with Biogen and obviously had our own internal programs. And what we're doing now is that we do plan, as I discussed with Matt, to fully move forward all of the clinical programs, both achromatopsia programs and the XLRP program; and then add wholly owned assets; completing the clinical trials; and analyzing the data. As for the now increased set of preclinical assets that we have by combining the Biogen programs and the AGTC programs, we're undergoing a strategic analysis now to prioritize those. And we'll be deciding over the next few months which of those to really push forward as we sort the relative probability of success and the commercial attractiveness of the combined set of programs.

Got it. And another question: given the recent partner news for Voyager and Neuro, are you looking to partner on any of your current clinical or preclinical programs?

So I think we're always open to strategic options if they make sense for the company and create value for the shareholders of AGTC, but as we've stated today and on several other occasions, we do have all the resources we need to move these programs forward to the next value inflection point. And that would need to be taken into consideration in any strategic relationship.

One more question. What learnings from the XLRS program are being applied to your ongoing clinical programs? You mentioned earlier that there were a lot of learnings from the endpoints, et cetera.

Well, that's a good question, Natalya. And I'll take an overview shot at that and then maybe have Matt speak up, but I think one of the major points that we've learned is many of the endpoints that we're using in these trials, such as microperimetry, OCT analysis, are endpoints that are quite novel in the ophthalmology space that really haven't been used extensively for regulatory approvals. And we've learned a lot about how to analyze the data, how to summarize the data, how to clean the data and become very efficient at understanding these quite novel endpoints. And so I think that was a key learning for us that we can apply to our other trials. And Matt, did you want to provide any color on that?

Yes. That -- you summarized that well, Sue. I think the only other point that I would add is that there's overlap between the studies in terms of the trial sites. And so I think the XLRS program has given us a great opportunity to develop and cultivate relationships with the PIs and the study site staffs so that we have really efficient working relationships with them as well.

(Operator Instructions) If there are no further questions, I'll turn the floor back over to management for any further or closing comments.

Thank you, operator.

The progress we have made across our clinical programs in our second fiscal quarter of 2019 and, actually throughout the past year, positions us for a busy and potentially transformative year ahead. There is strong preclinical data in robust large animal models supporting our clinical programs for XLRP and achromatopsia that increase the likelihood that we will see clinical activity and benefit in the trials that will readout in 2019. We are also excited for Bionic Sight to file the IND for our optogenetics program and are eager to explore how this novel approach could expand the potential uses of our gene delivery technology beyond the treatment of inherited retinal diseases and into other forms of vision loss. We have the financial resources to continue executing our development plans and generating clinical data that patients, physicians and the investment community can use to measure our progress.

As I do on all our calls, I would like to thank the patients who volunteer to participate in our clinical trials. They are truly our partners as we work to transform the treatment of retinal diseases and the driving force for everything we do at AGTC. I also thank you for all your time this morning.

I look forward to updating you on our progress throughout the course of 2019.

Thank you. That does conclude today's teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.