Regenxbio Inc (RGNX) 2016 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q2 2016 REGENXBIO earnings conference call.

(Operator Instructions)

I would now like to introduce your host for today's conference, Ms. Sara Berl, REGENXBIO General Counsel. Ma'am, you may begin.

Good morning and thank you for joining the call. With me today are Ken Mills, REGENXBIO's President and Chief Executive Officer, and Vit Vasista, our Chief Financial Officer.

Earlier this morning REGENXBIO released financial and operating results for the quarter ended June 30, 2016. The press release reporting our financial results is available on our website at www.REGENXBIO.com.

Today's conference call will include forward-looking statements regarding our financial outlook in addition to regulatory and product development plans. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from those forecasted and can be identified by words such as expect, plan, will, may, anticipate, believe, should, intend and other words of similar meaning.

Any such forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties. These risks are described in the risk factors and the management discussion and analysis section of REGENXBIO's annual report on Form 10-K for the fiscal year ended December 31, 2015 and quarterly report on Form 10-Q for the quarter ended June 30, 2016 which are on file with the Securities and Exchange Commission and available on the SEC's website.

Any information we provide on this conference call is provided only as of the date of this call and we undertake no obligation to update any forward-looking statements we may make on this call on account of new information, future events or otherwise. Please be advised that today's call is being recorded and webcast.

In addition, any unaudited or pro forma financial information is preliminary and does not purport to project financial positions or operating results of the Company. Actual results may differ materially.

I will now turn the call over to Ken.

Thank you, Sara, and good morning everyone. Thanks for joining us on our first conference call as a public Company.

Our goal this morning is to provide an overview of the Company and our programs, the review of recent milestones, financial results for the second quarter and discuss what lies ahead for the remainder of 2016. After that we will look forward to answering some of your questions.

Since this is our first earnings call I'd like to take a moment to review our key areas of focus that we believe establish REGENX as a leader in the AAV gene therapy space. Our guiding vision is to develop our proprietary NAV Technology Platform to realize the potential of gene therapy to improve lives of patients suffering from severe diseases. Our strategy to accomplish this mission includes both internal product development efforts and third-party NAV Technology Licenses to companies in the gene therapy space who share our vision.

As of June 30, 2016, the NAV Technology Platform was being applied in the development of 29 product candidates including five internally developed product candidates at REGENXBIO and 24 candidates being developed by our NAV Technology Licensees. Our NAV Technology is a proprietary AAV gene delivery platform that consists of more than 100 novel AAV vectors including NAV vectors like AAV7, AAV8, AAV9 and AAVrh10. These NAV AAV vectors have demonstrated higher gene expression, longer-term gene expression, broad and novel tissue selectivity, lower immune response and improved manufacturability when compared to earlier generation AAV vectors. These unique attributes have enabled our vectors to demonstrate clinical efficacy in severe genetic central nervous system and hematological disorders to date.

At REGENXBIO our internal focus is on metabolic, retinal and neurodegenerative diseases. We select programs for internal development by identifying therapeutic areas where we believe our vectors are uniquely suited to address mechanisms of disease and where we believe that there are patient populations with significant unmet medical need. We have selected four programs as our lead indications at REGENXBIO: homozygous familial hypercholesterolemia, wet age-related macular degeneration, mucopolysaccharidosis type I and type II.

I will now provide an overview of these four programs and highlight some key R&D, regulatory, product development milestones we've achieved over the past year. Beginning with the metabolic diseases, our lead clinical candidate is RGX-501 for the treatment of homozygous familial hypercholesterolemia or HoFH. HoFH is a metabolic disease caused by a defect in the low density lipoprotein receptor or LDL receptor gene.

Patients with defects in the LDL receptor gene have little to no LDL receptor function. When LDL receptor function is lacking it leads to a buildup of LDL cholesterol in the bloodstream, causing coronary artery disease at a young age that is severe and ultimately fatal. Our gene therapy approach for the treatment of HoFH differs from other current therapies available to patients in that these therapies do not address the underlying cause of the disease.

Instead, existing treatments seek to reduce cholesterol by opening up compensatory pathways. The use of existing HoFH therapies is often also limited due to difficult tolerability profiles or a limited ability to meaningfully lower cholesterol levels to safe ranges. RGX-501 uses our NAV AAV8 vector to deliver the LDL receptor gene to liver cells.

We believe AAV8 is an optimal delivery for the gene because of the propensity of preclinical data showing highly efficient and durable expression mediated by NAV AAV8. The NAV AAV8 vector is the same vector used in the first-ever demonstration of efficacy in a study for hemophilia B using gene therapy.

Earlier this year REGENXBIO initiated our first clinical trial, a Phase I/II study of RGX-501 in collaboration with partners at the University of Pennsylvania. This trial is an open-label, single-site study evaluating the safety and efficacy of RGX-501 in up to 12 patients.

The primary endpoint is to assess safety of a single administration of RGX-501. The secondary is to determine the change from baseline of cholesterol at 12 weeks. This is the dose-escalation study with patients receiving a single dose of either 2.5x1012 or 7.5x1012 genome copies per kilogram.

Penn is actively recruiting and screening patients to enroll in the trial both from its own patient population and at other centers that treat HoFH patients. We expect to enroll the first patients in this study in the second half of 2016.

Next, we are going to discuss our retinal disease platform. The second program in our pipeline is RGX-314 for the treatment of wet age-related macular degeneration, also known as wet AMD. It's estimated that nearly 600,000 patients in the US alone suffer from vision loss due to wet AMD. Wet AMD is characterized by the formation of excess blood vessels in the retina which results in fluid leakage that ultimately leads to vision loss.

Current standard of care for wet AMD is the treatment with one of several VEGF inhibitors available to physicians which help impede excess blood vessel formation. The standard use of these therapies, however, requires frequent, as often as monthly, physician-administered injections into a patient's eye.

RGX-314 is being developed as a potential one-time administration for wet AMD. RGX-314 also uses our NAV AAV8 vector, in this case to encode a gene for a protein that binds to VEGF and inhibits VEGF activity. It's intended to treat wet AMD according to the same mechanism and well accepted standard of care of the other VEGF inhibitors.

Preclinical studies have shown that NAV AAV8 is a very high-performing vector targeting cells in the back of the eye and has demonstrated in animal models durability and expression levels that are substantially better than what has been seen with previous generation vectors. In this past April we presented data at the American Society of Gene and Cell Therapy Annual Meeting, showing high levels of expression of RGX-314 in the back of the eye. These preclinical concentration levels suggest high potential for VEGF inhibition with RGX-314.

Also during this past quarter, we've held the pre-IND meeting with FDA for RGX-314. At this meeting we engaged in a constructive dialogue with various divisions of FDA about our RGX-314 clinical design. We are currently completing preclinical studies recommended by FDA's Center for Drug Evaluation and Research that are related to optimizing enrollment criteria for RGX-314.

We are encouraged by these interactions and look forward to working with FDA through the clinical development of RGX-314. We expect to file an IND with FDA for RGX-314 in the first quarter of 2017 for a Phase I trial.

Finally, I will move on to our neurodegenerative disease platform. Our two lead CNS programs are RGX-111 and RGX-121 for the treatment of mucopolysaccharidosis type I and type II or MPS I and MPS II, respectively. MPS I and MPS II are genetic diseases caused by a deficiency of enzymes required for the breakdown of waste products inside cells. Ultimately, most MPS I and all MPS II patients exhibit severe cognitive decline due to their condition.

Our internal programs utilize the NAV AAV9 vector to deliver genes to the central nervous system and are designed to address significant unmet needs by preventing or stabilizing neurocognitive decline.

NAV AAV9 has demonstrated some very unique properties, including a strong affinity for cells throughout the central nervous system and an ability to cross the blood-brain barrier, which we believe makes the NAV AAV9 vector an excellent candidate to target the central nervous system to treat neurodegenerative disease.

Existing treatments for MPS I and MPS II include enzyme replacement therapies that are only able to address the non-CNS symptoms of these diseases since they themselves do not cross the blood-brain barrier. Because MPS I and MPS II involve defective genes in cells throughout the central nervous system, we believe a global delivery throughout the CNS is critical for therapeutic efficacy.

Therefore, we plan to administer RGX-111 and RGX-121 directly into the fluid in the central nervous system to help achieve global delivery. We believe this route of administration has the potential to achieve optimal therapeutic efficacy.

At a recent ASCCT Meeting we presented data for a preclinical study of RGX-121 showing that a single administration of RGX-121 provided broad distribution and sustained enzyme delivery to the central nervous system in animals with the disease. This demonstration suggests that the NAV AAV9 vector may have broad potential in the treatment of many diseases affecting the CNS. We're encouraged by these data and excited about the potential of building a pipeline based on this approach.

But we're currently completing preclinical studies of RGX-111 and RGX-121. We expect to file INDs with the FDA for Phase I/II trials in both programs in the first half of 2017.

Now I want to take a few minutes to touch on some of the regulatory and manufacturing strategies that we're applying against the lead development programs at REGENXBIO. As the gene therapy field continues to evolve, we're committed to devoting resources toward the appropriate regulatory pathways. The FDA has granted orphan drug designation to three of our programs: RGX-501 for HoFH, RGX-111 for MPS I and RGX-121 for MPS II. And we've also received rare pediatric disease designations for the RGX-111 and RGX-121 programs.

These orphan drug designations allow for additional marketing exclusivity, financial benefit and the rare pediatric disease designations create potential to receive priority review vouchers from FDA on approval. They can be redeemed to both obtain priority review for a subsequent marketing application or may be sold or transferred.

On the topic of product manufacturing, it's also a key internal focus area and we are investing in the people, technology and capabilities across our programs. We've built a team with deep experience in biologics manufacturing at REGENXBIO in order to accomplish this. To enable our product manufacturing, we've also obtained rights to intellectual property that encompasses areas including scalable AAV production methods, methods of increasing packaging yields of AAV and methods of purification of AAV vectors.

We've also prepared and characterized the proprietary HEK293 master cell bank and other components including plasma DNA banks required for clinical vector production. Our master cell bank and our components are being used by us and certain of our NAV Technology Licensees for the production of NAV vectors under current good manufacturing practice for use in clinical studies.

Our manufacturing team is working with a number of leading biologics manufacturers to produce current batches and scale-up our manufacturing processes for use in future clinical trials. By the end of 2016, we expect to have initiated or completed manufacturing of materials for the initial studies for all four of our lead program indications.

In addition to our internal development efforts, REGENX also is advancing through our NAV Technology Platform along with efforts from our NAV Technology Licensees. Most of our partnerships are structured as licenses to a single one of our NAV vectors for the indications the licensee is pursuing, for example a NAV AAV8 vector for the treatment of hemophilia A with Shire or the NAV AAV9 vector for the treatment of spinal muscular atrophy with AveXis.

This partnering strategy allows us to focus on our core therapeutic areas internally while retaining the flexibility to sublicense treatments for other areas of unmet medical need. As licensee programs move into the clinic and demonstrate safety and efficacy, they validate the strength of the NAV Technology Platform for developing gene therapy treatment. As of June 30, 2016 our technology has been licensed to a total of nine partner companies with four programs currently in the clinic.

We are encouraged by the achievement of clinical proof-of-concept as reported by our NAV Technology Licensees and including the AAV8 vector for the treatment of hemophilia and more recently the use of the NAV AAV9 vector for the treatment of spinal muscular atrophy.

In addition, this past quarter in May we entered into an exclusive license agreement with Biogen for the development of gene therapy product candidates based on the NAV Technology Platform. Under the terms of this agreement we granted Biogen a worldwide license to our NAV AAV8 and AAV9 vectors for the treatment of two rare inherited vision disorders.

We continue to see significant and strong interest in our vectors across a wide range of therapeutic applications, and we plan to further grow the pipeline of products based on our NAV Technology Platform through both strategic and licensing and sublicensing of new programs.

So in summary overall I'm pleased to report that the first half of 2016 has been highly productive for REGENXBIO. Operationally we've continued to build our infrastructure across all areas of the Company to support our mission and vision.

As of August 5, 2016 we had 81 full-time employees and have made important additions to our leadership team throughout the year. In addition, we have an expert and dedicated Board of Directors which includes many highly regarded members of the pharmaceutical and biotechnology industry. Of recent note on last Friday, August 5, we appointed Daniel Abdun-Nabi, President and Chief Executive Officer of Emergent BioSolutions, to the REGENXBIO Board of Directors.

With that I will turn it over to Vit for a review of our financials.

Thank you, Ken. REGENXBIO ended the quarter on June 30, 2016 with cash, cash equivalents and marketable securities totaling $198.7 million as compared to $216.4 million at December 31, 2015, a decrease of $17.7 million.

REGENXBIO continues to expect full-year 2016 cash burn to be between $60 million and $70 million and we believe that our cash, cash equivalents and marketable securities will fund our operating expenses and capital expenditure requirements into 2018.

Research and development expenses were $10.7 million for the quarter ended June 30, 2016 compared to $4.0 million during the same period in 2015. The increased R&D expenses in the 2016 period were primarily due to increased headcount of research and development personnel and increases in preclinical research and development, manufacturing and clinical trial expenses.

General and administrative expenses were $6.2 million for the quarter ended June 30, 2016 compared to $3.4 million during the same period in 2015. The increased G&A expenses were primarily due to the growth of the G&A organization in establishing infrastructure to meet the requirements of a public company and our business objectives.

REGENXBIO reported a net loss of $14.4 million or $0.55 a share -- or $0.55 net loss per basic and diluted common share for the quarter ended June 30, 2016 compared to a net loss of $6.3 million, or $3.24 net loss per basic and diluted common share for the same period in 2015. As of June 30, 2016, we had 26.5 million common shares outstanding.

With that I will turn the call back to Ken for a discussion of our expected 2016 milestones.

Thanks, Vit. So as we look to the remainder of 2016, we expect to enroll our first patients in the Phase I/II clinical trial for RGX-501 during the second half of the year. Our preclinical studies for RGX-314 continue and we plan to file an IND for the treatment of wet AMD in the first quarter of 2017.

Following that we plan to file INDs for RGX-111, RGX-121 in the first half of 2017. Lastly, throughout the remainder of the year our focus remains on executing on our clinical programs and optimizing our preclinical development strategies to best prepare us for success in the clinic. We believe we are fundamentally sound with strong science, an excellent team and a robust, diversified program plan in gene therapy.

Thanks to the support of a strong investor base we're well-capitalized and therefore well-positioned for continued momentum moving forward. With that, happy to open up the call to questions. Operator?

(Operator Instructions) Matthew Harrison, Morgan Stanley.

Hi, yes, this is Cyrus on for Matt. So specifically with your gene therapy INDs, what do you believe are the most important key issues when it comes to filing? And then do you understand what the RAC and the FDA want specifically?

Hi, Cyrus, this is Ken. Yes, great. So we've obviously gotten to the point in many of the programs where we've already initiated dialogue with regulators about our plan.

And so we feel confident and believe that through those discussions that we're in alignment with what we're trying to achieve with early discussions with regulators. And now we're executing on the plans for finalizing preparation of those INDs. I think it's really blocking and tackling work here where we're looking to complete manufacturing and prepare that section for the INDs as well as get some of the final work done for study reports that need to be put into the preclinical documentation of the IND packages.

Okay. Thank you.

Gbola Amusa, Chardan Capital.

Hi, thanks for taking my call. You've got 29 programs, I think 24 of which are external.

Just given that breadth, I was interested on your views on the progress of AAV-based gene therapy since your IPO whether it's preclinical or human data or regulatory processes, scale-ups for manufacturing, etc. So just your gestalt view on the progress of the industry. And then secondly given the 24 external programs I was just wondering if you do comment on which ones you think are more interesting to follow for investors in terms of assessing the power of your platform?

Hey Gbola, this is Ken again. Thanks for the question.

So I think since the time of the IPO to now we've been very happy and believe that there's been a lot of progress that's been made throughout the AAV industry. And specifically with respect to the use of NAV Technology, both the pipeline that REGENX has where we've stood up our first clinical study with Penn for RGX-501 as well as the advancement of other programs to be able to say now with clarity what our expectation is in terms of getting four clinical programs online by 2017.

But in addition there has certainly been progress in the NAV Technology landscape by some of our licensees who have also reported clinical data. And I think by and large the early signals of clinical data from the use of the NAV Technology Platform have been significant, showing both robust safety as well as we believe early indications of potential efficacy across some pretty significant areas of disease with unmet need.

So I think in general it's probably a little early to comment about all 24 of our preclinical and clinical stage programs that are managed by our NAV Technology Licensees. I think some of the best we can offer to continue to provide investors with a lens toward evaluation of NAV Technology is some of the clinical data that's been emerging from partners like AveXis, for instance.

Great, thank you.

Daniel Wolle, Piper Jaffray.

Yes, good morning. Thanks for taking the questions. So regarding the HoFH indication, what percent of normal LDLR expression do you think you need to correct the disease and what percentage of the liver hepatocytes need to be expressing the vector?

Yes, hi Daniel. Thanks for the question and this is Ken Mills again.

So the HoFH patient population is certainly characterized historically by significantly high levels of LDL cholesterol. We can see patients certainly above 500, maybe close to 1,000 in certain cases. And we believe that, therefore the LDL receptor function in these patients is really low in terms of measurable activity, let's say less than 5% and in some cases zero.

We know that there are genotypically people that have been characterized with biallelic null mutations, so we're expecting that they literally have no LDL receptor function. That's why we think that this program is really an excellent initial target for gene therapy because by putting perhaps even a small amount of LDL receptor function back into these patients we can expect I think to see significant clinical improvement.

So the way that we've established how to achieve that and achieve the best outcome has been to use animal models and do dose-ranging studies to see where we can achieve significant reductions in LDL cholesterol. When I alluded to the two doses that we'll be exploring in the Phase I/II study, the preclinical data has supported that those doses can achieve greater than 50% reduction in LDL cholesterol in the animals and approaching 90% reduction. So that's really the best surrogate we have for establishing what type of impact RGX-501 may have in this patient population.

Could you remind me what the dose numbers are? Thank you very much.

Yes, absolutely. So the low dose for this study is 2.5x1012 genome copies per kilogram. The high dose in this study is 7.5x1012 genome copies per kilogram.

I'm sorry. The last one?

2.5 and 7.5, both of them times 1012.

Okay, thank you very much. I will come back with the queue with a follow-up if there isn't anyone else question. Thanks.

Ying Huang, Bank of America.

Hi, good morning, thanks for taking my questions. So just have a quick follow-up to the last one. Ken, are you going to run the two different doses in parallel or you test the low dose first and then progress into the higher dose for the HoFH trial?

And then also I saw you guys obtained this definition from FDA for rare pediatric disease. Do you have any plans to monetize the voucher from FDA?

And then, lastly, I don't know if you foresee some sort of liver enzyme issues because we did see that from the BioMarin hemophilia A gene therapy program. Would you have something like a prophylactic treatment of steroid written in the protocol for the first trial or not? Thanks.

Hi Ying, great, thanks for the question. Yes, the Phase I/II study for RGX-501 is a dose-escalation study, so we'll start by dosing patients with the low dose 2.5x1012 and then progress to the 7.5x1012 based on the current study design.

With respect to the pediatric rare disease designation, this is an acknowledgment by FDA that we are eligible for that voucher upon approval of that product. So we've just received that and we felt compelled and as we did for RGX-111 when it was received to make a material announcement about it and we certainly believe that it's a valuable designation to have for the Company going forward. And then your last question related to --

Prophylactic treatment with steroids.

In other studies. Certainly the protocol is designed to explore dose escalation of RGX-501, and we are working with the clinical investigators to make sure that anything that's observed clinically is managed in these patients.

So at this point we haven't dosed a patient, so we haven't had an opportunity to report on data with respect to RGX-501 in patients. But we do expect that this will be well tolerated and that we'll be able to manage it in ways that other companies have with respect to liver-directed AAV gene therapy.

Great, thanks. And then Ken also, lastly, on the trial protocol for again 501, so now you're allowing PCSK9 inhibitors patients to be in the trial. Would you stratify based on whether they are on PCSK9 inhibitors in the trial?

So that's right, so we're now allowing PCSK9 inhibition without a washout period, which was a clinical protocol amendment that we implemented within the last few weeks or months. And I think right now, so a priori we won't do any patient stratification. We're going to enroll based on the study design that was intended with that changing. On a going forward basis, I would imagine that as we intend to collect and report data on this study going forward that we would certainly identify the background of patients as they were coming into the study.

All right, thank you.

Daniel Wolle, Piper Jaffray.

Thanks again. So for the 314 and the 111 programs are you going to be following the same dose levels or is it going to be a change in the dose level?

And one more question is what percent of normal LDLR expression or number of hepatocytes can you come up with that you think that is going to achieve the clinical testing? You said minimal but is there a specific number? Thanks.

Sure, thanks, Daniel. So for RGX-314 and separately RGX-111, those are different diseases and they are different also routes of administration for delivering our NAV vector.

And in the case of RGX-111 it's also a different vector AAV9 versus NAV AAV8. So we've run a completely separate set of studies to support dosing and clinical trial planning for those two programs. And when we file the IND and subsequently initiate the studies we will give more clarity about the doses that are planned to be used once we have approval to initiate those clinical studies.

With respect to the question about the targeting of liver cells for achieving clinically meaningful benefit in HoFH patients, again the natural history of HoFH patients is that we expect that they have significantly low LDL receptor function. And that can be both a consequence of them having no LDL receptor or perhaps even having receptors that are partially functional. So I don't think that there is a simple and linear correlation to completely understand how taking LDL receptor that is fully functional and putting it into X number of cells is going to completely explain exactly the response that we're going to see.

But I think we have a degree of confidence with RGX-501 and the use of the AAV8 vector that we are achieving transduction in the liver at a significant rate. And that certainly by targeting more cells and getting more LDL receptor into cells we're going to increase the possibility of reducing LDL cholesterol in these patients.

I think the thing that we're most pleased about with respect to be able to achieve that is that AAV and NAV AAV8 in particular is very safe. And so we think that we can achieve significant levels of LDL receptor based on the doses we're using and be in a very safe place.

Thank you very much.

I am showing no further questions at this time. I would now like to turn the call back over to Mr. Ken Mills for any closing remarks.

That's great. Well, we're happy to have had our first quarterly conference call as a Company today.

Thanks everyone for participating in the questions from the people who called in. And so everyone have a great day and we will talk with everyone soon.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program.

You may now disconnect. Everyone have a great day.