Editas Medicine Inc (EDIT) 2017 Q3 法說會逐字稿

Good afternoon, and welcome to Editas Medicine’s Third Quarter 2017 Financial Result and Update Conference Call. (Operator Instructions). Please be advised that this call is being recorded at Editas Medicine’s request.

I would now like to turn the call over to the Editas Medicine team. Please proceed.

Good afternoon. This is Mark Mullikin, Senior Director of Finance and Investor Relations at Editas Medicine. Welcome to our third quarter 2017 conference call.

We issued a press release earlier this afternoon reviewing our third quarter 2017 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 & Media section of our website approximately 2 hours after its completion. After our prepared remarks, we will open the call for Q&A.

As a reminder, various remarks that we make during this 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 Factors section of our most recent quarterly report on Form 10-Q, 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 I will 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 third quarter of 2017. I'm joined today by several members of our executive team, including Andrew Hack, our Chief Financial Officer; Gerry Cox: our Chief Medical Officer; Charlie Albright, our Chief Scientific Officer; Vic Myer, our Chief Technology Officer; and Tim Hunt, our Senior Vice President of Corporate Affairs.

This has been a solid quarter of steady progress for Editas as we're continuing to drive against our 3 strategic imperatives: one, advancing our pipeline and technology leadership; two, building our business for the long term; and three, developing an outstanding organization.

I'd like to start with the area of engineered cell therapy. This has been an incredibly exciting quarter in the field of cancer immunotherapy with the first CAR T product approval and the release of more compelling clinical data. At Editas, we've made important progress working with Juno Therapeutics on the next-generation of engineered T cells for cancer and internally, we'll be presenting data at ASH on our engineered hematopoietic stem cell programs to treat sickle cell disease and beta thalassemia.

In our collaboration with Juno, we're combining Juno's T cell therapy with our gene-editing capability. This has the potential to substantially enhance the safety, efficacy and consistency of these medicines and it may also expand the range of cancers that can be treated. We've developed 3 essential capabilities to achieve this: one, editing genes and T cells with well over 90% efficiency; two, editing multiple genes and T cells at the same time with high efficiency; and three, inserting genes in a precise manner in T cells. We've accomplished all of this in primary human T cells, and this proficiency is key as this is the cell type that forms the basis for these therapies.

We and Juno has shared incremental progress along the way in this field, but we're taking the moment to look at the big picture. First, we've been able to knock out a wide range of genes, including the checkpoint inhibitor, PD-1, with greater-than-90% efficiency, and in each case, we've been able to achieve efficient editing with no detected off targets. Second, not only can we efficiently and specifically knock out individual gene targets, we can simultaneously knock out multiple genes. This capability significantly expands the range of products that address hard-to-treat malignancies with engineered T cells. Third, we've made major progress on targeted gene insertion. The targeted gene insertion has the potential to allow us to put any gene precisely where we want it in the genome, and with this approach, we believe we can create engineered T cells with capabilities that cannot be achieved with either gene editing or lentiviral transduction alone. Together, Juno and Editas will show data at the upcoming SITC and ASH meeting on this progress.

Specifically, at SITC, we'll show work on the intracellular protein, CBLB. This is an important intracellular signaling molecule that transmits repressing T cell signals through which can repress T cell function through CBLB to evade the immune system. We'll show, along with Juno, greater than 90% CBLB knock down in human primary T cells using CRISPR gene editing. And as a result, these edited T cells kill tumor cells more efficiently, have enhanced cytokine production and have greater proliferative capacity and survival rates in response to antigen stimulation. This knockdown of CBLB with CRISPR is particularly interesting since inhibiting CBLB with more conventional therapeutic modalities is very difficult.

Juno and Editas will also present data at the ASH meeting in December, and in these studies, we will report on the knockout of TGF-beta receptor 2 using CRISPR gene editing in BCMA-specific CAR T cells. This knockout prevented the development of the TGF-beta-induced gene expression phenotype, demonstrating its potential to block the well-known suppressive effects of TGF-beta in the tumor microenvironment. Taking all of this together, we believe that Juno and Editas have the leading platform for next-generation engineered T cells for cancer.

Turning now to our internal work on engineered cells. We're also excited about the data Editas scientists will present at ASH from our programs to treat sickle cell disease and beta thalassemia. At ASH, we will show high levels of gene editing in primary human hematopoietic stem cells and T cells with CRISPR/Cpf1. And recall, the CRISPR/Cpf1 is a CRISPR-editing system that's distinct from CRISPR/Cas9, highly efficient and highly specific, but has important and compelling distinctions from CRISPR/Cas9. CRISPR/Cpf1 is the only CRISPR DNA-editing system besides Cas9 that has been successfully engineered to work in eukaryotic cells, and Editas is the only company with access to Cpf1 and we've made significant progress with it since we integrated it into our platform nearly a year ago.

The data we'll present at ASH on our HSC work show that CRISPR/Cpf1's capabilities as an efficient editing system to make medicines, and our confidence in Cpf1 continues to grow as a result of this and other internal work. We will also show efficient targeted insertion at the beta hemoglobin locus with CRISPR/Cas9. Targeted integration of a new beta globin gene into its native location in the genome has the potential to simultaneously eliminate production of sickle globin and replace it with a normal protein. Combined with our previously reported data showing up-regulation of fetal hemoglobin, we believe we have multiple opportunities to develop best-in-class therapies for hemoglobinopathy.

Moving on to our ocular pipeline. We have made significant progress with our lead products candidate EDIT-101 to treat LCA10. This program remains on track for an IND filing by mid-2018. We're building robust data package of preclinical data to support our IND filing and first-in-human studies. Last month at the ESGCT, we showed the treatment with EDIT-101 results in dose and time-dependent editing of the CEP290 gene in transgenic mice. CEP290 is the gene that is mutated in LCA10 patients. In these study, mice carrying the human CEP290 genetic mutation, the one that is targeted by our therapy, were administered EDIT-101. We then dissected out the retinas of these animals that are sent in for editing, and this now also shows that the editing was, first, rapid; second, durable through the 6 months of study; and third, well correlated with dose and also efficiency, and the editing machinery was only detected in photoreceptors, which is the target cell type for EDIT-101.

The results from these mouse studies are consistent with our previously reported results in non-human primates. Overall, the integrated preclinical pharmacology of EDIT-101 is robust. First, we showed that we can successfully edit the mutated CEP290 gene in human cells and restore functional protein expression. We've demonstrated this using fibroblasts from LCA10 patients. Second, we showed that we can successfully edit the target cell type photoreceptors in an eye that's anatomically similar to the human eye, the non-human primate eye. Third, we showed that we can successfully edit the target cell type photoreceptors in primary human cells. We demonstrated this in human retinal explant studies. And fourth, we showed durable dose and time-dependent and predictive therapeutic editing with EDIT-101 in transgenic mice carrying the human genetic mutation that we target.

We believe these results provide strong support for the clinical development of EDIT-101 for the treatment of patients with LCA10. In addition to building robust data package for the IND filing, we're developing and executing our clinical plans. And this quarter, we initiated the clinical natural history study of LCA10 patients. This expected study will evaluate patients to assess the course of the disease and to investigate potential clinical trial endpoints. We plan to enroll approximately 40 patients, ages 3 and above, at multiple sites in the United States and Europe and to follow patients for at least 1 year. Massachusetts Eye and Ear Institute is our first site for the LCA10 natural history study, and we plan to open additional sites over time.

On the regulatory front, EDIT-101 received advanced therapy medicinal products, or ATMP, designation from the EMA earlier this quarter and were recently, the EMA granted EDIT-101, orphan medicinal product designation.

Turning now to organizational development. We continue to build our team and made key hires in several areas, and I'd like just to note a couple of these. In the past quarter, Diane Balderson joined us as Vice President of Regulatory Affairs. She has over 25 years of experience at GlaxoSmithKline across a number of their therapeutic areas, including several gene therapy and ophthalmology programs. And we've also added senior team members in manufacturing and ophthalmology, including scientists who've worked on late-stage clinical programs for retinal diseases.

And now I'd like to hand the call over to Andrew Hack, our CFO, to review the financial results from the quarter.

Thanks, Katrine. We summarized our financials in the press release that we made available about an hour ago and we'll file our Form 10-Q shortly. It was a relatively uneventful quarter from a finance perspective and we'll quickly run through a couple of items.

Starting with the balance sheet and cash flow statement, we ended the quarter with approximately $296 million of cash, cash equivalents and marketable securities. Based on our current cash position and trends in the business, we believe we have at least 24 months of capital to fund our development.

Turning to the income statement, we recognized revenue of $3.2 million related to our Allergan alliance and $3.1 million related to of our alliance with Juno Therapeutics, including a $2.5 million milestone payment that we previously disclosed.

In research and development expense, it's worth noting in the quarter that we made a $7.2 million payment in -- a $7.2 million onetime payment to our licensers associated with Allergan upfront and the Juno milestone.

Finally, noncash stock-based compensation expense totaled $4.5 million in the quarter.

To summarize, our balance sheet remained strong, and we believe we have the capital needed to fund a robust pipeline of transformative medicines and to extend our technology leadership in the field.

And with that, I'll turn it back to Katrine.

Thanks, Andrew. A couple of closing comments before we turn it over to Q&A.

While 2017 isn't quite over yet, looking back, it really has been a tremendous year of progress for Editas. We significantly advanced our lead product candidate, EDIT-101, with robust preclinical data across multiple species, initiation of a clinical natural history study, an important regulatory decision. In addition, we think the progress that we've made with EDIT-101 sets us up well to move rapidly with additional product candidates in the eye.

We established a critical partnership with Allergan, which provided substantial capital to expand our pipeline of product candidates in ocular diseases, and our programs in this area benefited from Allergan's expertise and deep technical capabilities.

Our intellectual property position has grown in strength substantially. We've secured a highly favorable decision from the U.S. Patent and Trademark Office in the Cas9 interference earlier this year, and in addition, we had the first issuance of patent in both the U.S. and Europe for CRISPR/Cpf1.

Our engineered cell therapies for cancer and for blood diseases have advanced significantly and we look forward to sharing continued progress at the upcoming SITC and ASH meetings on these.

And finally, we substantially grown and matured our organization. We take pride in the strength of our team and culture. The people at Editas are what drives all of these accomplishments, and they are exceptional.

With that, we'd like to thank you for your continued interest and support and open it up to questions and answers. Operator?

(Operator Instructions) Our first question comes from Cory Kasimov from JPMorgan.

This is Shawn on for Cory. Maybe just one on the genome collaboration and some of the data you're presenting at SITC. So for either the PD-1 knockout or the CBLB knockout, when might you expect, kind of just a ballpark, we could see these programs entering the clinic?

Sure. Thanks, Shawn. As you know, we work on these programs in collaboration with Juno and so we haven't -- with them, we haven't yet put -- externally put timelines on these programs. We certainly will keep folks updated on the progress, but we haven't put specific dates on these programs externally just yet.

Okay, got you. And with the understanding that this is still very, very early days, but any color you could provide would be much appreciated. For kind of the PD-1 knockouts, do you guys anticipate these cells could behaves similarly to, say, for example, a CAR T-PD-1 combo or any concerns with the tox here, because some of the stuff that we've seen so far, companies have been kind of sequencing the PD-1 after the CAR T infusion, so the PD-1 is actually absent during the expansion. But with the knockout, you really don't have that option so kind of what are your thoughts here?

Sure. I'll actually ask Vic Myer, our Chief Technology Officer, to speak to this. He's deeply involved in our genome alliance.

Yes, so good question. Thank you. Well, honestly, our place to speculate up the ultimate sort of clinical output, it is, I do think it's important to note that the PD-1, for us, will not be systemically administered or be localized to the CAR T cells themselves. And so I think that will be an important clinical difference between our approach and a systematic administration of an antibody therapeutic.

And our next question comes from Phil Nadeau with Cowen and Company.

First, one question on the program that you discussed for sickle cell and beta cell. You talked about the CRISPR/Cas9 working on integrations into the beta hemoglobin locus. I'm curious how much progress you've made on reducing the frequency of indels when you're doing a targeted integration?

So I will actually ask Charlie Albright, our Chief Scientific Officer, to speak to those programs. Charlie, do you want pick that one up, please?

Sure. We've had good success with target and integration and so we're getting integration rates in multiple primary cell types in -- from the order of about 50%. And we'll be disclosing some of that data at the upcoming meetings.

Great. And can you give us some idea of how problematic indels are? Is that -- is a solvable problem or still a technical challenge?

Yes, Charlie, go head and then -- and we'll ask Vic to comment on that as well. Charlie?

Sure. I think it depends on the specific therapeutic application, exactly where you're cutting, is whether the indels are problematic or not. So we aren't going into a lot of details at that right now. We'll show some of that in our poster as a representative case. But clearly, it depends on where those indels are as to whether they are problematic or not.

Yes, I think those are the key points on it.

Okay, great. And then, one question on the IP. Could you give us an update on the date for the oral hearing of the appeal of the interference here in the U.S.? And then also the timing of any milestones in the European IP disputes?

Sure. In the United States, with regards to the CRISPR/Cas9 issued patents, as you recall, the U.S. Patent Office issued very favorable results for the Broad patents, which we've licensed in February of this year that was then appealed by the other party and there are number of procedural steps that had been ongoing since then. The other side filed the brief and then the Broad had to response to this brief recently that was filed. So there's a couple more procedural steps. We would anticipate oral hearing in the sort of late Q1, early Q2 time frame, and then a decision, this is in a Federal Circuit Court, sometime in the sort of Q2 or summer time frame. Just as a frame of reference, one thing to keep in mind here is that the Federal Circuit Court doesn't really kind of rehash all of the questions that the patent office has examined so thoroughly. The question front and center is whether the patent office made a mistake in law and so there is really very specific and discrete question that the Federal Circuit Court is focused on in this appeal. With regard to Europe, as I'm sure everybody knows that the process in Europe overall is quite different in a number of different dimensions. And so anybody who has a patent issued there, after it issued then faces a 9-month period during which other parties can file opposition. And then at the end of that 9 months, when people file, then there's a process with patent office of responding, et cetera, et cetera. You respond, the patent office can make decisions. They may make another decision. That can be appealed. So this is a fairly iterative process that will take some time. As you may recall, the Broad has had a very early -- and Broad's patent issued in Europe, and so it's sort of earlier -- being earlier issued means it's further along in that process of oppositions having been filed and now being in a responsive phase. Other folks who've had patents issued in that jurisdiction are not as far along that process and so they haven't had -- haven't gone through as much as having oppositions and such. So there's plenty of steps and processes to that but given the iterative nature of oppositions and responses and appeals in Europe, it will play out over some time period.

Our next question comes from Matthew Harrison from Morgan Stanley.

This is Cyrus on for Matt. So I wanted to ask about the sickle cell and beta thall program. What work has been done on cell viability when you guys do electroporation? And then also, how does this program differ from CRISPR therapeutics sickle cell program with the (inaudible)?

Sure. Let me ask Charlie, our CSO, to speak to particularly the cell viability question. Charlie?

Sure. We've seen good viability from electroporation and we've shown some of that data in posters over the last several years. We showed that we could electroporate and edit hematopoietic stem cells and had them reconstitute animals and thereby establish that the editing was not detrimental to the viability or to the ability of those cells to be (inaudible).

And with regard to the question of the competitive landscape, the way we actually think about it, and this is for any product, not just our work in this particular disease, competition isn't defined by technology, it's really defined by how you can help that patient. And so the competitive set for any given program is going to be -- going to be a bit different. Sure, in this case, we know that another gene-editing company is working on it. You also have Bluebird working on a gene therapy approach, Global Blood working on it. And so all of those folks who are working to treat this disease are part of the landscape we think about when we think about what is our target profile. And when we prejudice to say -- yes, frankly, if those other products are successful and it's fantastic for sickle cell patients and given that this terrific therapy through those patients over the last many decades, that's reason for all of us to celebrate. I think what we think about in terms of an Editas-stage product is to say, "What can we do that would have the potential to surpass what we've seen from others?" And so I'm sure there's been, in prior posters and there's piece of this in our work that we'll be showing at ASH, what we're looking for is the editing strategy that let us achieve a better expression of fetal hemoglobin and/or as we talked about the targeted insertion work, that's a wholly different approach than up-regulation of fetal hemoglobin. So these 2 different strategies give us 2 different ways that we think we have the potential to achieve a best-in-class profile. And the goal there is to really deliver the best results for patients. So again, it's really that whole competitive landscape we think about when we think about what's our target product profile goal.

Our next question comes from Gena Wang from Barclays.

This is [Parav] on for Gena. The first one is just a quick detailed question on the ESGCT data that was presented. We saw that expression of Cas9 mRNA in guide RNA decreased over time. Just wondering what the mechanism for that decrease was?

Sure. Charlie, do you like to speak to these data?

Sure. We thought that observation was interesting as well and we're investigating the mechanism now.

Great. One for the DMD program. I believe you have one with -- collaboration with Dr. Gersbach in Duke. Can you give us some update on that? And wondering if you have exclusive rights, given that Sarepta recently also announced their collaboration with Duke?

Sure. I think we've noted this with a number of some of our early discovery programs. As we work in areas where it's a tougher technical challenge, DMD is one, there are other targets where we've done -- and continue to do early work that are simply tougher. Those are, we call, the discovery-stage programs because there is a higher hill to climb. DMD, for example, the delivery in looking at the mass of muscle we have to deliver to is a technical challenge that is more significant than some of the other tissues that are easier to reach. And so you see programs moving more quickly in our pipeline from the ophthalmology and the bone and the blood marrow -- the blood and the bone marrow areas because those are more straightforward technically and we've always said that the DMD is a program that is going to have a much longer path because of the technical challenges. As part of some of the early days of Editas in building the company, we did include a license of technology from Duke, so that is part of our overall intellectual property portfolio and I see Charlie has been a great collaborator and adviser over the years. He's a great scientist. There's lots of people working in the field of DMD and I think that, obviously, Sarepta's been there for a while. And I think that there will be a number of opportunities to create really important medicines using editing in DMD and other serious diseases. Where we have great confidence is in the depth and capabilities of our platform. We know how hard we've had to work to really get to this point of making CRISPR-based medicines. It's not the same thing as doing interesting and important biology in basic research setting. So we are quite confident about our ability to translate novel biology into medicines and the unique capabilities we've built into our platform to do so.

Great. And then if I can squeeze one last one. Just to kind of try and understand the recent base editing methods that were reported from Broad in MIT, just wondering if you have access to the license? And if you can give us a little color about what you're thinking, whether you would want to go on that route?

Sure. So David Liu, who's one of our founders, and is fantastic and very creative and excellent scientist. We've been familiar with his work in the base editing area as well as others' work in base editing for some time. It's very cool science, no question about that, and I think that there could be important therapies that come from that. As we think about how we build Editas and what do we think we would include in our platform versus what might better fit in either a NewCo or another context, sometimes the answer will be, yes, we want to bring it in, and sometimes the answer will be, there might be a better way from that science to move forward. So we do have some base editing intellectual property as part of our overall IP but we don't currently have active base editing work ongoing. I think there could be exciting opportunities to come from that but it's not something that we're actively incorporating into our platform right now. But I think that -- like I said, we're huge fans of David, we're huge fans of the science and it's definitely very cool science.

Our last question comes from Peter Lawson from SunTrust.

Hi this is Soumit for Peter Lawson. I just had a quick question I kind of gone confused. So the hemoglobinopathy program -- so they're like you can do either by gene deletion from a fetal hemoglobin approach expression or targeted insertion of the corrected gene and you can go by using either Cas9 or Cpf1. And ASH data would give us understanding which approach is better and are you still expecting an IND the by year-end '18? Did I get that right?

So I'm not sure where your IND estimate has come from. We haven't projected a specific time line for that program as of yet. Definitely appreciate that folks are eager to hear dates and timelines and we certainly look forward to sharing it when we think the data are mature enough to support that. But we haven't disclosed any timelines for that program as of yet. With regard to -- I think you're correctly pointing to there are different ways we can approach making a product in this area and our view is we want to be very data-driven. You can use Cas9, you can use Cpf1, you can use a couple of different editing approaches, and part of what we've been doing in our exploration is to figure out through data what the best -- which approach has the best possibility in terms of the level we think to deliver it clinically. So you'll see data at ASH that does support part of that work. I'm not sure we're kind of -- be at the point where you can say, "And therefore, we shall reveal the answer." It's, I think, you'll see more the progression and the program is continuing. And obviously, the work we have internally has always advanced from what we're putting in a publication. But I do think that the ASH work will help you see the trajectory that we're on.

Okay. And the last question. Should we be expecting like a RAC meeting? Or do you have an idea when we should be expecting it for LCA10? Is it like after the natural history study is over? Or while it's ongoing?

The RAC meeting, so this is the NIH's Recombinant DNA Advisory Committee meeting that in the United States is a step in addition to the FDA's IND process. So with regard to the RAC, it's not really keyed off as a natural history study per se, it's really much more related to the preclinical package of the program. And think of it as essentially running roughly in parallel with the IND. There's not a date set at this point in time and certainly, as we get closer to that, we'll let folks know when that is. As you probably know, that is a public process, so it's also an opportunity for folks to get an additional window into the overall data package, and I think that's -- it's actually one of the benefits of the RAC's for -- certainly for investors, but I think the clinical community, the patient community more broadly because oftentimes at that IND stage there is somewhat limited data that's available publicly. We publish a lot but -- but yes, the RAC package will be available and we would anticipate an oral presentation probably as well. So that will be a good window into the data at that point in time. Again, we'll let folks know if scheduled. It's not on the books yet, but think of it running roughly in parallel with the IND. They're not connected, so there's not like a As and Bs and C. They're actually unlinked processes. Both have happened before you go into the clinic, but they're not linked to one another explicitly.

Thank you. And I'm showing no further questions in the queue at this time. I'd like to turn the call back over to CEO, Katrine Bosley, for any closing remarks.

Thank you, everybody. We really appreciate your participation in the call and your support as we work to advance this company and advance our medicines. And please do call us if you have any questions you didn't think about this afternoon. Thanks, everybody.

Ladies and gentlemen, this does conclude your call for today and you may all disconnect. Everyone, have a great day.