Editas Medicine Inc (EDIT) 2016 Q4 法說會逐字稿

Good afternoon and welcome to Editas Medicine's fourth-quarter and full-year 2016 conference call.

(Operator Instructions)

Please be advised that this call is being recorded at Editas' request. I would now like to turn the call over to the Editas team. Please proceed.

Good afternoon. This is Mark Mullikin, Senior Director of Finance and Investor Relations at Editas Medicine. Welcome to our fourth-quarter and full-year 2016 corporate update conference call. We issued a press release earlier this afternoon reviewing our fourth-quarter and full-year 2016 results and updates regarding the Company, which will be covered on this call. A replay of today's call will be available on the investors and media section website of our website approximately two hours after its completion. After our prepared remarks, we will open up the call for Q&A.

As a reminder, various remarks that we make during the call about the Company's future expectations, plans, and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factor section of our most recent annual report on Form 10-K, which is on file with the SEC.

In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to today. Now, let me turn the call over to our Chief Executive Officer, Katrine Bosley.

Thanks, Mark. Good afternoon, everybody, and thank you for joining us for our corporate update call for the fourth-quarter and for the full-year 2016. I am joined today by several members of our executive team, including Andrew Hack, our Chief Financial Officer; Alexandra Glucksmann, our Chief Operating Officer; Vic Myer, Chief Technology Officer; Charlie Albright, Chief Scientific Officer; Gerry Cox, Chief Medical Officer; and Tim Hunt, our Senior Vice President of Corporate Affairs.

2016 was a strong year for Editas Medicine and 2017 is shaping up to be transformative one. On this call, we will review the most important elements of the progress we've made and lay out our key goals for 2017.

As a Company, we have three strategic priorities. First, to rapidly advance our pipeline and extend our technology leadership; second, to build our business for the long term; and third, to develop an outstanding organization. So first, let's first discuss how we've extended our technology leadership in a number of different dimensions.

As part of our intellectual property foundation, we have an exclusive license for human therapeutics from the Broad Institute for our portfolio of CRISPR/Cas9 patents and patent applications. This portfolio includes patents that were issued to the Broad Institute that cover the use of CRISPR/ Cas9 to edit DNA in human cells.

A little over a year ago, the US Patent and Trademark Office declared an interference proceeding for several of these issued patents. This proceeding was initiated to determine who first invented the use of CRISPR/Cas9 to edit DNA in eukaryotic cells, or cells that have a nucleus. We are extremely pleased with the Patent Office's recent ruling of no interference, in fact, in this interference proceeding. This ruling ends the interference and it upholds the Broads patents. This is a highly favorable decision and it reaffirms the strength of our intellectual property foundation, and it has profound applications for making CRISPR medicines. I would like to put this ruling into a bit more context.

To quote from the patent office's decision, quote, specifically, the evidence shows that the invention of such systems in eukaryotic cells would not have been obvious over the invention of CRISPR/Cas9 systems in any environment, including in prokaryotic cells or in vitro, unquote.

In nature, CRISPR/Cas9 is a bacterial system. Enabling the system to work in eukaryotic cells is the fundamental requirement for making medicine. Notably, making medicines, it's not defined by any particular form of guide RNA or Cas9 enzyme, but rather it's defined by the ability to make a CRISPR/Cas9 system work in eukaryotic cells. It is an important distinction, and it is what is encompassed by the patents included in our license from the Broad Institute.

The strength of our overall intellectual property position is built both on our foundational patents to use CRISPR/Cas9 in eukaryotic cells, as well as our significantly expanded technology platform, which I will discuss shortly. With these two components, we believe our intellectual property position is unmatched by others in the field.

Beyond Cas9, we announced in December the addition of an exclusive global license to Cpf1, which is the only other CRISPR nucleus system that's been shown to work efficiently and specifically in human cells. Cpf1 meaningfully advances our ability to develop CRISPR medicine. It's both highly efficient and specific, at least comparable to Cas9's editing abilities, but it also has important distinctions from Cas9.

First, it substantially expands the number of genomic sites we can target. With both Cpf1 and advanced forms of Cas9, we can now reach 10 times more sites in the genome as compared to the most commonly used form of Cas9 alone.

Second, Cpf1 has a guide RNA which is much shorter than Cas9, and that potentially makes it easier to manufacture and deliver. Finally, Cpf1 could potentially increase the efficiency and accuracy for some forms of gene repair, because it makes a staggered cut to the DNA, which is different from how Cas9 cuts. And in addition, the intellectual property for Cpf1 is completely independent of the intellectual property for Cas9.

Turning then to our scientific progress, our scientists have made a number of critical advances in 2016. Our team developed novel methods to create covalently coupled dual guide RNAs that are distinct from approaches others have taken, and our approach has the potential to improve the manufacturing of CRISPR medicines and also provide opportunities for unique intellectual property.

In addition, our scientists developed a novel approach to characterize specificity, an approach that is called UDITAS. We believe overall, we applied the most rigorous approach to analyzing the specificity of CRISPR medicines in the field.

Shifting gears then to the pipeline, in our program to treat Leber congenital amaurosis, or LCA10, we have successfully edited cells in the retina of non-human primates in vivo. We accomplished this using sub-retinal delivery of our all-in-one AAV product configuration. We are very excited by this important step towards the clinic, and we remain on track with this program to achieve the goal of filing an IND by the end of this year.

We also plan to initiate a clinical natural history study of LCA10 in the middle of this year, which will help us identify patients as well as refine our clinical development strategy. Our progress in LCA10 provides the fundamental building blocks for developing therapies for other diseases in the eye, as well as other systemically administered therapies.

Turning to other programs in our pipeline, we've also made significant progress in our ex-vivo editing programs in hematopoietic stem cells and also in T cells. We believe editing hematopoietic stem cells is a gateway to developing multiple medicines for diseases of the blood and bone marrow, including sickle cell disease and immunological diseases.

To develop medicines in this field, it's critical to reconstitute the blood system with edited hematopoietic stem cells. To accomplish this, the edited HSCs must engraft long term and give rise to progeny cells that faithfully carry the therapeutic genetic edit. And that's exactly what we've shown we can do with HSCs, and it positions us to develop a broad range of differentiated therapies with a strong and durable effect.

In other areas of the blood system, editing T cells provides a foundation for products to treat a number of cancers as well as immunological and infectious disease. In our collaboration with Juno in cancer, we successfully edited several targets in T cells, including PD-1, with greater than 90% efficiency and with no detected off-target activity in our specificity assays. In our wholly owned T-cell work outside of cancer, we've achieved similar high levels of editing, and this provides a foundation for potential therapies for a broad range of diseases.

Overall, 2016 was a productive year in expanding the platform and advancing the pipeline, and we believe it provides us a strong momentum going to 2017. I'd also like to comment on how we're building the business for the long term.

Last year got off to a great start, with our initial public offering in February, where we raised $109 million in gross proceeds. This added to a strong investor base that we had developed as a private Company. We also established important strategic alliances to advance the pipeline of medicines and treating diseases of the eye and the bone and the blood marrow (sic) through collaborations with Adverum, and with the San Raffaele Telethon Institute for Gene Therapy in Italy. Our business development strategy will remain focused on forming collaborations that accelerate, enable, and expand our pipeline.

Finally, we are continuing to focused on developing an outstanding organization. We made several important additions to our team in 2016, including the addition of Charlie Albright as our Chief Scientific Officer, Gerry Cox as our Chief Medical Officer, and Tim Hunt as our Senior Vice President of Corporate Affairs. We also added vice presidents to lead pre-clinical science, technical development to manufacturing, program and alliance management, human resources, and information technology.

I would also like to personally thank Sandra Glucksmann, our Chief Operating Officer, who will be moving on from Editas at the end of this month. She has been an incredibly important part of these first few years of building Editas, and her talents in Company formation are exceptional. Her contributions have been critical to building the organization to this point. She will be missed, but her impact to Editas' success is long-lasting.

The lifeblood of our Company is exceptional scientists and Company builders, and we couldn't be more pleased with the colleagues who joined us in 2016. With that, I'd like to turn the call over to Andrew Hack for some remarks on our financial position.

Great, thanks, Katrine. As you may have seen, we filed our 2016 Form 10-K late last week and have summarized our financials in the press release that we made available roughly an hour ago. As we have done on previous calls, I will review the most important components of our financials, and we'll walk you through all the detailed results that can be found in our 10-K and in our press release.

Our net cash used in operations in 2016 was approximately $50 million and our spending on capital equipment was roughly $3.5 million. Key non-cash items recorded in our income statement include roughly $16 million in stock-based compensation, a $10 million issuance of notes payable, and roughly $12 million of accrued expenses.

Over the course of the year, we have increased the size of our organization by roughly 50% from a bit under 60 team numbers at the close of 2015 to nearly 90 at the end of last year. Our team advanced all of our programs successfully in 2016, including the critical achievement of gene editing in the retina in non-human primates. In addition, we consolidated our operations into a single new facility in the fourth quarter, providing us with an outstanding home to develop and discover important medicines for many years to come.

Taking all of this into account, the primary drivers of our growth and spending in 2016 were our expanding pipeline, advances in our platform, and legal expenses. We expect these to continue to be the primary drivers in 2017.

As of December 31, 2016, we had approximately $185 million of cash and cash equivalents. Based on our year-end cash position, as well as research support under our collaborations, we believe we have at least 18 months of capital to fund the advancement of multiple therapeutic programs in parallel and to further extend our technology leadership. With that, I will hand it back to Katrine

Thanks, Andrew. 2016 was clearly a strong year for Editas, and I'd like to comment briefly on our goals for 2017 as well. As we noted a few minutes ago, in our lead pipeline program for LCA10, we plan to initiate a clinical natural history study in the middle of this year. Our goal is to submit our IND to the FDA by the end of this year for that program.

Next, we are working to achieve preclinical proof of concept for additional programs and to disclose data from these programs publicly. We're also pursuing focused partnerships and alliances that will help us accelerate, expand, and enable our pipeline and platform. Finally, we'll work to continue to build an outstanding organization culture to attract the best and brightest people to pioneer a class of transformative genetic medicines.

We thank you for your interest and support, and with that, we would like to open up to questions and answers. Operator?

(Operator Instructions)

Gena Wang, Jefferies.

Thank you very much for taking my question. I first wanted to add my congratulations on the recent progress, especially (inaudible) My first question, you mentioned that you worked with three upcoming scientific and medical conferences. Should we expect the non-human primates, the AB data to be reported in one of the meetings?

Thanks, Gina. We haven't disclosed exactly where we first planned to present the data and/or publish the data. But we definitely appreciate everybody's interest in it, and that is our goal to present it this year.

Certainly, for all of these meetings, as you know, the abstract get published at a certain amount of time in advance. And so, we'll make sure that folks understand when we are planning to disclose it, when that becomes public, and we definitely appreciate everybody's eagerness to see it. We certainly will present it.

Okay. Great. My second question is regarding the Cpf1. Since clinical development, that's too early for both Cas9 and then Cpf1, how would you plan moving forward with these two systems for clinical programs?

So I will comment on this briefly, and then I'll also ask Vic Myer, our Chief Technology Officer, to comment. Because for any given program, our goal is to make the best medicine, make the best molecule. And both Cpf1 and Cas9 afford compelling opportunities, and Vic can comment on how we're working with both of them through our platform.

I think as Katrine mentioned in the overview piece, we see these two systems as very complementary to one another. As we mentioned, Cpf1 is a really interesting enzyme. It increases a number of sites that we can cut within the human genome quite significantly. I think with Cpf1 and all of our other license variants, we're now able to cut it 10 times the number of sites you can cut with the standard, if you will, S pyogenes enzyme.

Second, it's got a single short guide RNA that directs the protein to its cleavage site. So this short guide RNA should provide some advantages on the manufacturing and delivery side.

Finally, it leaves a staggered cut, which engenders a different cellular response than a blunt cut. So it's going to be potentially more useful for achieving different kinds of repair outcomes.

Thank you. If I may just please, one last question. For this LCA10 program, just wondering if you can walk us through the steps you need to achieve in order to file IND by the end of this year? Thank you.

Sure. I will comment on that, and then Gerry Cox, our Chief Medical Officer, can also comment. In many respects, it's all the normal preclinical work that any program has to complete preclinical safety, to complete all of the manufacturing work. And so, in some respects, there's nothing deeply different than, for example, the gene therapy program where you have to do all of the appropriate CMC work as well as preclinical work. Gerry, do you want to add on the clinical preparation?

Sure, I will just add to that a bit. With the genome editing, certainly we want to make sure that we're cutting at the appropriate on-target sites and not at the off-target sites. So that's part of the develop program. We're also initiating a natural history site this year to better characterize patients that may benefit from treatment and to make the clinical trials more efficient.

Thank you very much.

Mike King, JMP Securities. Mr. King, your line is now open. Due to no response, we will go to the next question.

(Operator Instructions)

Corey Kasimov, JPMorgan.

Hi, guys. This is Whitney on for Corey. I just wanted to ask a G&A question and how we should be thinking that in 2017, post the PTAB decision, just given that presumably, some of the legal spend will be wrapping up, but also there's the potential for the other side to file an appeal. Any color on how we should be thinking about that?

We view our intellectual property as an investment, we're building this Company for the long term, and there is a broad portfolio that we're investing in. That includes some of the things that you mentioned, with regard to, obviously, historically, there has been the interference of this past year. But there's a broad portfolio and the prosecution of that portfolio is a critical component of that spend as well. Andrew, do you want to comment on how we're thinking about that going forward (inaudible) externally?

There are a wide range of scenarios, so I can't comment in more detail on what we're anticipating spending and investment more broadly in IP to look like going forward. But IP is a critical [add] for the Company. And so when we source it appropriately for that investment, we feel like it's provided a really strong returns on the investment with the success that has come to date. We look forward to continue to invest in that.

Got it. And then just looking beyond LCA10, you mentioned that this year you hope to achieve some preclinical POC for additional programs. So are you expecting that we could, or you could determine the next program this year/ Or how should we be thinking about when we could learn more about part B?

We definitely appreciate that you're eager for us to begin to articulate timelines for additional programs. We look forward to reaching the point where we do that. We haven't done that just yet externally, but we certainly have consistently presented data on a regular basis, and we'll continue to do that.

As you look at the data we're focusing in on a bit more, the ex-vivo work that you see us discussing here and in a number of our scientific presentations with regard to the hematopoietic stem cells and T cells, it's a really important area where we've made significant progress. We're working on all the programs that we articulated in our pipeline, but certainly, those are programs where I think that we'll see the progress emerging next.

And there's a number of different specific programs within the capabilities of editing those two different cell types. So as those specific programs emerge, we'll certainly keep everybody posted.

Great. Thanks for taking the question.

Yes.

Mike King, JMP Securities.

Hey, guys. Sorry about the call fail there before.

No worries.

I was asking if you guys can confirm or not confirm whether Cas9 is going to be the enzyme in the LCA10 program, Cpf1, or would you rather not specify?

We've talked about this before. The enzyme that we're using in that particular product configuration is Staph aureus Cas9.

Okay, and I know you were asked a question about Cpf1, but just wondering if -- do you have any estimated timelines to when that's going to be clinic ready?

Maybe a slightly different way to the about it is that it's part of our platform at this point. We only announced the deal in December, but obviously, we've have been working with it, understanding it, making sure we have familiarity with it in advance of that so that as we brought it on board and then announced the license, it's part and parcel of the platform at this point.

So for any given program we're working on, it's really a question of what's the best way to solve that target. And there may be targets where you could use either Cas9 or Cpf1. There may be targets where one is better or the other's better.

Overall, having both of them gives us a much broader and deeper platform. But we really want to be data-driven in defining for any given therapeutic target, what's the best approach. We'll try this molecule, and we'll make sure we're finding the best solutions based on empirical data.

Right. Okay. Thanks for the additional color. If I can just ask a quick question about IP, and again, I understand the sensitivity about commenting in public about it.

Obviously, UC was not happy with the outcome on their part. They plan to appeal the PTAB decision. They're also upbeat about their ability to prosecute their IP. If we want to use Jennifer [Galna's] metaphor of tennis balls, if they are granted IP claim on single guide, is that an eventuality you guys are prepared for? And how would you view that under those circumstances?

We certainly appreciate people are thinking about a lot of different theoretical future scenarios, but there's a couple things. One thing that's clear is that the Broad patents have been upheld. There are a number of patents, multiple claims in those patents that have broad implications for the field.

I do think it's worth reiterating the making a CRISPR/Cas9-based medicine, it's to defined by a particular form of guide RNA or a particular form of an enzyme; it's really defined by the ability to make the CRISPR/Cas9 system work in eukaryotic cells, so that's the fundamental requirement to make the medicine.

Obviously, we can't speculate on what the other parties may or may not choose to do going forward. Certainly, we'll continue to invest in our portfolios. There's a lot of things one could speculate about, but we'll be prepared for all those scenarios.

As we've said ever since we founded the Company, we want to make sure we're building a Company for the long term. Part of that means that from a business standpoint, we have a path and a strategy forward that's strong and works in every scenario.

Certainly, some scenarios are more favorable than others, and we're very pleased to be in those scenarios where these patents have been upheld because we think they're really important. But we're prepared for every scenario. I think that's just part of building the business for the long term.

Thank you very much.

Thank you, and I'm not showing any further questions at this time. I would now like to turn the call back to Katrine Bosley, Chief Executive Officer, for any closing remarks.

Great. Thank you. With that, we thank you all for participating in the call today and also for your support as we build the Company and we work to bring new medicines forward to patients. Have a great evening.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.