Regenxbio Inc (RGNX) 2019 Q4 法說會逐字稿

Good afternoon and welcome to the REGENXBIO Fourth Quarter and Full Year 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the call over to Mr. Patrick Christmas, Senior Vice President and General Counsel for REGENXBIO. You may begin.

Good afternoon, and thank you for joining us today. With us are Ken Mills, REGENXBIO's President and Chief Executive Officer; Dr. Steve Pakola, our Chief Medical Officer; and Vit Vasista, our Chief Financial Officer.

Earlier this afternoon, REGENXBIO released financial and operating results for the fourth quarter and full year ended December 31, 2019. 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's discussion and analysis sections of REGENXBIO's annual report on Form 10-K for the full year ended December 31, 2019, which will be filed 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, February 26, 2020, 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 that may be provided is preliminary and does not report to project financial positions or operating results of the company. Actual results may differ materially.

I would now like to turn the call over to Ken Mills, President and Chief Executive Officer of REGENXBIO.

Thank you, Patrick. Good afternoon, everyone, and thanks for joining us on today's conference call. We will provide a recap of our recent progress, advancing and expanding the NAV Technology Platform as well as the expected future milestones. Steve will provide an update of our clinical programs, and Vit will provide an update on our financial results for the fourth quarter and the full year 2019. We'll then open the call for questions.

So over the course of the past decade, REGENXBIO's mission has remained clear to improve lives through the curative potential of gene therapy based on our proprietary NAV Technology Platform. We believe single administration gene therapy treatments can significantly alter the course of disease in many patient populations, and we are advancing and broadening our pipeline across 2 treatment modalities: AAV-mediated antibody delivery and AAV-mediated monogenic gene replacement. Both modalities utilize our NAV Technology Platform to develop potential treatments for those suffering from both rare genetic diseases, and potentially expanded treatment options for diseases broadly affecting public health.

In 2019, we made great strides broadening our internal gene therapy pipeline and advancing key programs. Last month, we announced updated data for our lead program, RGX-314, which is for the treatment of wet age-related macular degeneration, 6-month data for Cohort 5 of our Phase I/IIa trial. The data continues to demonstrate meaningful reductions in anti-VEGF burden as well as improved visual acuity following a onetime administration of RGX-314. We remain strongly encouraged by the program's clinical results, and we look forward to reporting longer-term data from all cohorts from the Phase I/IIa trial in 2020. Further data regarding the durability and efficacy of RGX-314 will help us plan for the next steps in this program.

Beyond RGX-314, we're excited to provide the recent interim data from the first 3 MPS II patients in our Phase I/II trial for RGX-121. Patients with MPS II continue to have significant neurocognitive difficulties despite availability of enzyme replacement therapy, which doesn't address manifestations of the disease in the central nervous system. The initial data from the first cohort showed that RGX-121 was well tolerated following onetime administration of gene therapy using a relatively new delivery approach through the cisterna magna to direct-to-CNS approach.

Equally importantly, we observed consistent and sustained reduction in a key biomarker as well as signs of neurocognitive stability. We've also completed dosing of patients in an expanded Cohort 2 in our Phase I/II trial of RGX-501 for the treatment of homozygous familial hypercholesterolemia or HoFH, and we plan to assess the LDLC levels after patients have completed steroid prophylaxis treatment. This interim data should be available in the first half of this year.

Across REGENXBIO, the R&D team is continuing important research and preclinical work on potential treatment for hereditary angioedema based on antibodies directed at plasma kallikrein, a key protein of the plasma contact pathway, which is left unregulated in patients with HAE. We also recently announced the expansion and exclusive collaboration with Neurimmune, to design and develop vectorized antibody therapies targeting alpha-synuclein and tau. We expect to provide an update on these programs in the second half of 2020.

Elsewhere, the R&D team, led by our Chief Science Officer, Olivier Danos, has also recognized the utility of our NAV Technology in treatments targeting muscle cells, specifically our AAV8 vector, as evidenced in work by some of our partners like Audentes, for the treatment of X-linked myotubular myopathy. As a result, we've had ongoing work in our research pipeline focused on a number of neuromuscular indications. Some of this work is now starting to mature, and it's approaching a stage of candidate selection. We believe we have the opportunity and the potential to treat patients suffering from certain neuromuscular diseases who currently lack treatment options or are currently underserved by existing therapies. We feel that we've developed a strong understanding of the AAV biology, specific evidence of the application of AAV in neuromuscular disease models, and a deep in-house knowledge of AAV production and manufacturing to the scale that's necessary to develop potential treatments for these types of indications. I look forward to providing further updates on this work as we continue it in the second half of the year.

Related, construction of our cGMP production facility here in Rockville, Maryland continues as planned. The site is expected to provide us the ability to strategically scale production while ensuring quality for patients. We expect to be capable of supporting early and late-stage programs, including those which may require a large-scale vector supply, and we're on track to be operational in 2021.

Before turning it over to Steve, I'd like to take a moment to express our gratitude, especially to the physician and patient communities. While our appreciation for work and the work that we do for patients is year round, February is rare disease month, and this is a big week related to activities associated with Rare Disease Day, and we're participating in that worldwide effort to raise awareness of devastating rare diseases. Just yesterday, we had an all-staff event in recognition of rare disease month, where we heard from patient groups and physicians who treat patients with rare diseases, including those that are at the center of our work. We continue to believe in the promise of NAV Technology for rare diseases, and remain committed to continuing working with the community to address unmet needs and find curative treatments.

With that, I'd like to turn the call over to Steve for clinical and regulatory update.

Thanks, Ken. I'll begin with our RGX-314 program for the treatment of wet AMD. Last month, we reported 6-month data for Cohort 5 of the subretinal RGX-314 Phase I/IIa dose escalation trial in subjects with wet AMD. Patients continue to demonstrate a meaningful reduction in anti-VEGF treatment burden at 6 months following administration of RGX-314, with 73% of patients remaining anti-VEGF injection free while maintaining or improving vision and retinal thickness. We expect to initiate a pivotal program for the subretinal delivery of RGX-314 for the treatment of wet AMD in the second half of 2020.

We plan to finalize the design of a trial based on the 12-month assessment of patients in Cohort 5 in the Phase I/IIa trial. This will allow us to evaluate further characterization of RGX-314 treated patients, enhancement of the trial design and the potential to accelerate the clinical program. The trial is expected to investigate the onetime administration of RGX-314 at a single dose compared to anti-VEGF injections which is the current standard of care for patients with wet AMD.

Primary efficacy endpoint in the trial will be the mean change in visual acuity from baseline assessed at 12 months after treatment with RGX-314. We intend to submit the design of the trial to the FDA in mid-2020, and begin dosing patients in the second half of 2020.

Meanwhile, we continue to plan to initiate clinical trials using SCS Microinjector for the in-office delivery of RGX-314 to the suprachoroidal space. This route of administration could potentially allow for the treatment of an expanded population of patients with wet AMD and DR by providing access to gene therapy treatment in all settings of patient care. We expect to initiate a Phase II trial in wet AMD using the SCS Microinjector in the first half of 2020. The trial will build upon data from the ongoing Phase I/IIa trial of RGX-314, and is expected to evaluate patients in 2 dose cohorts of the RGX-314 versus a control arm. Interim data is expected from Cohort 1 by the end of 2020.

We also expect to submit an IND in the first half of 2020 for the treatment of diabetic retinopathy using RGX-314 delivered via sub -- suprachoroidal injection, and plan to initiate a Phase II trial in the second half of 2020. This trial is expected to evaluate patients in up to 3 doses of RGX-314 versus a control arm. Enrollment of Cohort 1 is expected to be complete by the end of 2020 with interim data expected in 2021.

Beyond RGX-314, we have made exciting advances with our CNS-targeted gene therapies. As Ken mentioned, we recently reported meaningful interim data from our RGX-121 program for the treatment of MPS II. In Cohort 1 of the Phase I/II trial, 3 patients were dosed intracisternally and RGX-121 was reported to be well tolerated with no drug-related serious adverse events assessed. Per protocol, patients received a 48-week immunosuppression regimen to minimize the potential for immune-mediated reactions, and importantly, patient 1 has completed the immune -- immunosuppression regimen.

Heparan sulfate, or HS, is a key biomarker of I2S enzyme activity, and in MPS II patients, high amounts of HS accumulate in the CNS and closely correlated -- correlate with neurocognitive decline. Data from the 3 patients in Cohort 1 demonstrated a mean reduction of 33% for baseline to week 8. And patient 1 demonstrated consistent decreases in HS levels in the CSF over time, with a 27% reduction from baseline at week 8 and a 44% reduction from baseline at week 48.

For the 2 patients who have progressed beyond week 24, preliminary data indicated stability of neurocognitive development which supports our expectations that decreased HS levels correlate with benefits of neurocognitive development. We've seen this with both preclinical models as well as other clinical approaches. We plan to provide additional data for Cohort 1 of this study in mid-2020. Meanwhile, enrollment in Cohort 2 continues and is expected to be completed in the first half of 2020 with interim data expected to be reported in the second half of 2020.

Based on the clinical experience with the intracisternal delivery approach and accumulating data from the RGX-121 program, we recently amended the RGX-111 IND for our Phase I/II trial for the treatment of MPS I. At the direction of the FDA, recruitment in this study was previously focused on an initial patient over the age of 18. But under the recent amendment, we can now enroll patients as young as 4 months of age. We expect to provide a program update in the second half of 2020.

In our liver-directed program, RGX-501 for the treatment of HoFH, we have completed dosing of subjects in Cohort 2 of the Phase I/II clinical trial, evaluating RGX-501 with prophylactic corticosteroids, as previously announced. We plan to assess LDLC levels, or cholesterol levels, after all patients have completed steroid prophylaxis treatment and expect to provide interim data in the first half of 2020. We will continue our diligent work to drive these programs forward, and we look forward to providing you with updates on our progress.

With that, I turn the call back over to Ken.

Thank you, Steve. REGENXBIO has an extensive footprint in the gene therapy space, and our scientific innovation could potentially bring many breakthrough gene therapy treatments to market through our own product candidates as well as product candidates developed by our licensee network. The technology is currently being applied in 1 marketed product, ZOLGENSMA, more than 20 partnered product candidates. 15 of those partnered product candidates are in active clinical development. Novartis' ZOLGENSMA for the treatment of spinal muscular atrophy, which uses the NAV AAV9 vector, has had a strong launch in its first 2 quarters in the U.S. market, which has provided validation of the NAV Technology Platform's utility. Novartis has reported that ZOLGENSMA is currently under regulatory review in Europe with an anticipated regulatory decision in the first quarter of 2020. And also in Japan, with an anticipated regulatory decision in the first half of 2020.

Our partnerships with groups like Novartis and other cutting-edge gene therapy researchers, allow us to invest in programs that we think could ultimately help patients based on the broad applicability of the NAV Platform. We're always active and purposeful in developing partnerships with the goal of realizing the potential of NAV Technology in the interest of patients.

With that, I'd like to turn the call over to Vit for a review of our financials.

Thank you, Ken. REGENXBIO ended the year on December 31, 2019, with cash, cash equivalents and marketable securities totaling $400 million compared to $470.6 million as of December 31, 2018. The decrease was primarily attributable to cash used in operating activities during 2019, partially offset by gains on our marketable equity securities of Prevail Therapeutics.

Revenues were $11.8 million and $35.2 million for the 3 months and year ended December 31, 2019, respectively, compared to $40.8 million and $218.5 million for the same periods in 2018. The decreases were primarily attributable to nonrecurring revenue recognized in 2018 under our amended license agreement with AveXis, for the development and commercialization of treatments for SMA as well as nonrecurring revenue recognized in the fourth quarter of 2018 under our license agreement with Abeona. The decreases in revenue in 2019 were partially offset by $10.7 million and $20.8 million of royalty revenue from the net sales of ZOLGENSMA recognized during the fourth quarter and year-end December 31, 2019, respectively.

Commercial sales of ZOLGENSMA commenced in the second quarter of 2019, and we are eligible to receive a milestone payment of $80 million from AveXis upon the achievement of $1 billion in cumulative net sales of ZOLGENSMA.

Research and development expenses were $33.8 million and $124.2 million for the 3 months and year ended December 31, 2019, respectively, compared to $24.3 million and $83.9 million for the same periods in 2018. The increases were primarily attributable to personnel costs as a result of increased headcount, laboratory and facilities costs, clinical trials for our lead product candidates, and externally sourced services for preclinical, regulatory and manufacturing-related activities.

General and administrative expenses were $14.5 million and $51.8 million for the 3 months and year ended December 31, 2019, respectively, compared to $11.1 million and $36.9 million for the same periods in 2018. The increases were primarily attributable to personnel costs as a result of increased headcount and professional fees for advisory and other services.

Net loss was $26.5 million and $94.7 million for the 3 months and year ended December 31, 2019, respectively, compared to net income of $4.3 million and $99.9 million for the same periods in 2018. Net loss in 2019 includes realized and unrealized gains of $37.8 million recognized during the period related to our marketable securities of Prevail Therapeutics.

As of December 31, 2019, we had approximately 37 million common shares outstanding. Based on our current operating plan, we expect the balance in cash, cash equivalents and marketable securities of $400 million to fund the completion of our internal manufacturing capabilities and clinical advancement of our product candidates into 2022. Sorry to disappoint but I've given up funds for the year.

With that, I will turn the call back to Ken to provide final thoughts.

Thanks, Vit. We're building on strong progress we made in 2019 by broadening our internal gene therapy pipeline and advancing key programs. After more than a decade of steadfast effort and focus, we remain dedicated and committed to improving lives through the curative potential of gene therapy.

With that, I would like to open the call for questions, operator.

(Operator Instructions) Our first question comes from Gena Wang with Barclays.

I have two regarding 314 gene therapy program and one regarding the IP question. So for the 314, Ken, you mentioned that Cohort 5 data will help inform your pivotal trial, your final design. So what kind of data would change your thoughts on trial design dramatically? And the second question regarding the diabetic retinopathy, suprachoroidal Phase II initiating second half this year. Will you wait and -- to see the data from the wet AMD suprachoroidal data? And on what dose will you start?

Gena, thanks for the question. So your first one on what will we take from our 12-month data for our 5 cohorts from the ongoing study. So I certainly don't foresee anything dramatically changing based on this. But with this onetime therapy where we're seeking to have good durability and achieve visual acuity, at least stability and maybe even improvement, and also anatomic benefits with decreased injection burden, certainly having a full 12 months is very favorable compared to the 6 months. So I think it's really more to, as we said, help enhance and fine-tune the design in terms of things like powering, et cetera, based on the actual change from baseline values that we see out to 12 months. And also, in wet AMD, that longer duration is also what is generally accepted from a pivotal standpoint. So actually having real data from wet AMD patients out to that on which we're basing our final protocol on is very comforting for us.

Your second question around suprachoroidal delivery for diabetic retinopathy. We will take advantage of the data that we have from the ongoing subretinal AMD study. Yes, it's a different route of administration and even a different VEGF-driven disease. But we do know anti-VEGF works for all of the -- as named VEGF-driven retinopathies, including wet AMD and diabetic retinopathy. So both from a safety and tolerability as well as response to anti-VEGF in terms of vascular leakiness. We think that will also help us in terms of the SCS delivery and also for diabetic retinopathy as well. We haven't announced or finalized our plans there, including where we would actually start, what starting dose we would utilize there. So again, we'll take full advantage of all of the 12-month data that we have for that.

Just one quick follow-up question regarding the IP. Could you give us a little bit more color regarding the IP dispute between you and the passage?

Gena, this is Ken. Thanks for that question. We have acknowledge that we sent a letter in sort of the normal course of business related to looking to maintain and protect our intellectual property rights for shareholders to passage, as well as in normal course, to other companies that we view may have come into our understanding of using science related to the NAV Technology patents that we have. And the communication that they provided through their SEC disclosure is, I think what we have right now in terms of what that response is. So if there's been nothing on our part that we viewed was material with respect to providing any more guidance or update, as you know, we have a strong and broad intellectual property portfolio that we take very seriously for the purposes of developing treatments for patients in our own pipeline as well as license to a lot of other companies that are investing in the development of a number of treatments.

And we've said for a while that it's our primary interest to be able to enable and support people with licenses to help achieve the goal of the company for curative potential of gene therapy to reach as many people as possible. In those circumstances where we have found that there could be something that would risk that, we're going to take appropriate action.

Our next question comes from Matthew Harrison with Morgan Stanley.

This is Connor Meehan on for Matthew. So we were also just wondering about the suprachoroidal delivery, and I guess, how you plan to start the subretinal in Cohort 5? And what maybe the doses are going to look like for that? And if possible, how close you could get to what you've been using thus far?

So for the Cohort 5 dose given -- subretinally, that we feel very good about in terms of the subretinal delivery, we think it also gives us a good reference point for thinking of the alternative route, suprachoroidal delivery, based on preclinical bridging work that we have. So we do -- we are in a position to, I think, think of a narrower dose range than what we needed to use going into starting our subretinal delivery. So we have the benefit of having learned a lot about response to RGX-314 given subretinally, and with our bridging work, that will give us some more comfort in terms of where we start. But again, we haven't announced exactly what we're going to -- what dose we're going to start with for suprachoroidal. So we'll give that update later in the first half of this year.

Great. And then just one quickly on 121. I guess, how should investors generally think about what's going to be necessary for approval? And then, I guess, what you guys see as your path forward in terms of registration, or I guess, potential registration?

We love the enthusiasm. As we've updated just our first data at the end of the year on 121, we do think that we're really encouraged to see changes in biomarkers, and have a strong feeling and understanding from our work with the community, both the physicians, the scientists who've worked in diseases like MPS II and MPS I, of the importance of changes in heparan sulfate in their connection to changes, clinical changes in neurocog and neurological development in the kids. We just dose escalated though, Connor, and we're continuing to explore the pharmacology and response here. So I think we've been exploring things in the trial that we think are going to be informative for establishing what the pathway is to getting this treatment to patients as quickly as possible. And both inside and outside of the study, we'll continue that work.

We're looking by the second half of this year to have the second cohort fully enrolled and additional data from that first and second dose will put us on a path that we think we'll be able to be more communicative about the specifics of what those next steps are. But it certainly derives from some of the things we've already talked about that biomarkers and the clinical assessments, we view as part of the picture of how a rare disease like MPS II needs to be considered in drug development.

Our next question comes from Gbola Amusa with Chardan.

I have 3 questions on the internal pipeline. I'll start later stage and go early. First is also on 314 and wet AMD. Since you're heading towards pivotal studies there, can you discuss whether you would see utility in an ex-U. S. partner? And whether establishing such a partnership makes sense before or after you've run the pivotals. Second is on MPS II and RGX-121. And I'll ask maybe a similar question but in a different way. We saw the data at world and you have biomarker data. Can you talk about how, at this point, based on natural history studies or whatever we have, we can interpret the potential for future clinically meaningful outcomes there? And then the third question is on the neuromuscular product that you announced. Is that decision to pursue neuromuscular more a function of improved or differentiated science you're exploring? Or a function of potential manufacturing constraints elsewhere? And obviously, it's not mutually exclusive.

Yes, I think sort of back to front, Gbola, I mean, we take pretty seriously when we get to a point. Olivier and the team, along with our technical operations group, and Curran and Steve about deciding to move into new areas of science, and ultimately, development for treatment candidates. And it means we have to see benefit and have to feel like we can support development and commercialization. In the case of neuromuscular disease, which involves, from our view, an approach that is requiring high quantity of virus in many cases for treatment. As well as a good understanding of the biology of advantages for targeting muscle with different AAVs. This is something we've been looking at for a while, and feel quite strongly that the AAV8 vector has some really special properties that we think are important for advancing treatments in that area. And that certainly, from a manufacturing perspective, having an understanding of a process, quality and scale that can take you into some of these market spaces is important.

And the clinical team is highly supportive as well as we've been doing work in the background about how we can execute in the development of -- just in these disease areas. So we're excited to expand into an area like this. We understand how meaningful it is, and also understand that we need to be prepared for it, which we feel like we are with science, plan and capabilities.

On MPS, 121, that's a great question. I think the area of endpoint assessment in rare diseases, even when you're talking about deterministic measures like biomarkers, which are great to have but aren't available in all rare diseases is always a complicated one. I don't think that I've often found in our work with experts in the field, scientists, our own internal groups, clinicians, even the regulators. But there's is one simple answer or always one sort of clear line for a single biomarker or sometimes even a group of biomarkers. It's because of the small populations. And sometimes, the heterogeneity on top of those small populations that create more of a range, I would say, more of a spectrum. And I think that's the case with something like heparan sulfate across the MPS is. I think there is a strong belief in understanding, and I think they're scientific evidence in some of the literature that heparin sulfate does correlate. If you were searching for a really small p-value and 1 number to say above or below this, this is the difference. It doesn't exist. But I think what does exist is enough of an understanding and support to use it as part of the measures that we'll be collecting for advancement of these programs as well as other clinical assessments. And other types of endpoints like evolving the patients themselves and families in the advancement of this. We haven't made a final decision yet, Gbola, on what sort of that plan is going to be, as I said, Connor asked the question. We're happy to be in a place where we've advanced to another dose center continuing to explore pharmacology here. But we're going to be ready to move quickly, and I think we've built really good knowledge around the MPS diseases to be able to do that. I'll let Steve maybe address the 314 wet AMD pivotal question.

Yes. So certainly, we're by design, ready to move forward and advance a full Phase III program. We have the internal expertise to move forward in that way, and we'll be ready to expand ex-U. S. as well. So certainly, that's our default. I'd leave it to Ken in terms of any strategic considerations.

I think I support, Steve. And our approach here is, Gbola, we feel like we have the capabilities to take this program into the next phases of development. And continue to explore it and set it up for what the next steps are in terms of achieving success. And we're also always open and aware of that if we did have any sort of gaps or deficiencies in our capabilities, we would look to augment that. But we have a great team, and we're ready to go.

And our next question comes from Mani Foroohar with SVB Leerink.

I do not have 3 questions and a series of follow-ups. So I'll stick with a quick suprachoroidal question. So the level of immune privilege in the subretinal state, obviously, is a tremendous advantage for you guys in that approach. I think the [bild] is a little less clear in terms of immune privilege between suprachoroidal versus subretinal. How do you guys think about that as you move forward to suprachoroidal approach? Does it influence whether or not steroid eye drops, systemic or topical steroids are relevant? And as a follow-up, would you consider limiting future calls to 1 question per person?

Especially when you're last in the queue, I respect that.

So on your prior question to that one, Mani, yes, it's a great point. And certainly, one of the great benefits of subretinal delivery is how much we know about that space and delivery. And that's why it's become the gold standard, not only because of the excellent transduction that you get and the actual excellent protein expression that we've seen from our own program, but also because of the relative immune-privileged status of the subretinal space, which has led to the fact of no immune reaction or clinical inflammation that we've seen based on delivery of subretinal, RGX-314, just to give one example. You're exactly right, that much less is known about the suprachoroidal space when it comes to the immune-privileged status or lack thereof.

What we do know is from our work and the work that's -- the joint work between Olivier Danos' Group and Peter Campochiaro's work is that with suprachoroidal delivery, we've seen good transduction without significant inflammation. And that's very different than, of course, what we know happens with intravitreal injection where as soon as you get to effective doses, you hand-in-hand, get the inflammatory response due to the lack of immune privilege of that space. So at least based on our work with our particular vector, we seem to have much less of a risk of an inflammatory reaction. Having said that, of course, we have to go into the clinic and see what we see there.

As it relates to your second question, Mani, we acknowledge and we'll certainly consider it.

And I'm showing no further questions in the queue at this time. I'd like to turn the call back to Ken Mills for any closing remarks.

Thanks, operator, and thanks, everyone, for joining us. We look forward to following up with you all in providing further updates as the year goes on and in the near future. Have a great night.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program. You may now disconnect.