Sangamo Therapeutics Inc (SGMO) 2003 Q1 法說會逐字稿

Good afternoon. My name is Katie. I will be your conference facilitator. At this time I would like to welcome everyone to the Sangamo BioSciences first quarter teleconference. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question and answer period. If you would like to ask a question during this time, simply press star and the number one on your telephone keypad. If you would like to withdraw your question, press star then the number two on your telephone keypad. Thank you. Ms. Wolfe, you may begin your program.

Thank you. Good afternoon. Thank you for joining us for our quarterly telecon. Joining me are several members of Sangamo's senior management team including Edward Lanphier, our President and Chief Executive Officer; Jan Nibel, our Vice-President of Finance and Administration; and Dr. Tyler Martin, our Vice-President of Development. Edward plans to update you on our recent activities and review some of the first quarter's accomplishments. Jan will briefly review this quarter's financial results. Tyler will update you on our leads to the ZFP therapeutics programs. After our prepared remarks we will have time for questions. As we begin, I'd like to remind everyone that the projections and forward looking statements we discuss during this conference call are based upon the information we currently have available. This information will likely change over time. By discussing our current perception of the market and the future performance of Sangamo with you today, we are not undertaking an obligation to provide updates in the future. Actual results may differ substantially from what we discuss today. No one should assume that at a later date, our comments from today are still valid. We alert you to be aware of risks that are detailed in documents that the company files with the Securities and Exchange Commission, specifically our quarterly reports on form 10Q and our annual report on form 10K. These documents include important factors that could cause the actual results of the company's operations to differ materially from those contained in our projections or forward looking statements. Now I'd like to turn the call over to Edward.

Thank you Liz. Hello and welcome to our first quarter 2003 conference call. On this call I would like to summarize briefly this quarter's activities and financial results and in more detail provide you with an update on progress in our ZFP therapeutic programs. As you've heard me say in recent calls, we have begun to take the first steps in the path towards establishing our ZFP transcription factor technology as the first therapeutic product development platform of the post-genomics era. We are increasing our investment in new therapeutic programs and driving our existing ZFP therapeutics towards human clinical trials.

One very tangible example of this commitment was the successful recruiting of Dr. Tyler Martin to spearhead our pre-clinical and clinical development efforts. Tyler joined the Sangamo management team in February of this year as Vice-President of Development and as you will hear in a moment, has already made significant contributions. For those of you who have met Tyler, you know that he has worked in our industry for over ten years and has held senior management positions in clinical research at several biotechnology companies engaged in human clinical trials and therapeutics for cardio-vascular disease, cancer, and infectious diseases.

During the course of his career he has filed 11 INDs and overseen 47 clinical trials. Prior to joining Sangamo, Tyler held various senior management positions at Valentis, where he directed all aspects of their research and development activities including their plasma and base gene delivery technology and regulated gene expression systems. He was also responsible for filing several INDs for therapeutic products including the dell-one peripheral arterial disease product. Before joining Valentis, Tyler was executive director of clinical research and development at the Systemic's GTI now Novartis and led their meta-poetic stem cell gene therapy clinical programs. Before that he was director of clinical research at Chiron Vaccines. As you will hear later, he has hit the ground running and is leading the Sangamo effort in the preparation of the pre-clinical data package for our first IND filing along with our partner, Edwards Life Sciences.

Another significant highlight of this quarter was the granting of the United States patent entitled Regulation of Endogenous Gene Expression in Cells Using Zinc Finger Proteins. The patent includes claims covering the activation or repression of any endogenous gene in any cell type using zinc finger DNA binding proteins. We have similar patents that have already [been] issued in the United Kingdom and Australia. With the issuance of this patent in the United States, we further consolidate our preeminent intellectual property position. The ability to regulate endogenous genes is a major technical and commercial advantage of our technology. Genes, as they occur in their native state within the cell, cannot be patented. Thus, by using zinc finger transcription factors to regulate endogenous genes, we and our partners are not encumbered by CDNA patent restrictions that increasingly exist for genes of important commercial or clinical value.

In January we announced our first enabling technology agreement of the year. This was with Purdue Pharma, one of the fastest-growing pharmaceutical companies in the United States and a company known for its research interests, onoc pain. [inaudible] provides Purdue with proprietary zinc finger transcription factors for use in its research and drug discovery programs. We also continued to make every effort to broaden the appreciation of our technology through publications of our science in original articles and reviews and through presentations at scientific and industry meetings. In this first quarter we had papers published in PNAS and Gene Therapy and were invited to contribute a major review on ZFP gene regulation by the editors of Nature Drug Discovery. This article, first authored by Sangamo scientist Andrew Jamison, will appear in next month's issue of the journal. It is currently featured as an advance online publication on the journal's website. I should also mention for those of you who have not yet seen it, we launched a completely new website earlier this month. We are very pleased with it and encourage you to visit it at www.sangamo.com or www.expressinglife.com.

With that quick summary of the quarter, I will now turn things over to Jan Nibel, our Vice-President of Finance, who will briefly summarize our first quarter financials. Jan.

Thank you Edward. For the first quarter of 2003, our consolidated net loss or [GEB] loss, which includes non-cash charges, was $2.9 million or 12 cents per share. In the comparable quarter of 2002, we reported a consolidated net loss of 4.5 million or 18 cents per share. Excluding the non-cash charges, the consolidated core operating loss, or pro forma loss, in the first quarter of 2003 was $2.8 million or 11 cents per share. In comparison, pro forma loss and loss per share for the same period last year were 3.1 million and 13 cents per share.

Non-cash charges in the first quarter of 2003 were $108,000 all of which were related to stock-based compensation expenses. Revenues for the first quarter of 2003 were $551,000 as compared to first quarter 2002 revenues of 501,000. The principle components of first quarter revenues were revenues from Sangamo's partnerships in the areas of human therapeutics, enabling technology, and government research grants. Our research and development expenses were $2.7 million for the three months ended March 31, 2003 and compared to 4.3 million for the first quarter of 2002. General and administrative expenses were $879,000 for the first quarter of 2003 as compared to 950,000 for the same period last year.

We ended the quarter with cash, cash-equivalents and investments of $49.5 million and are on track to deliver our principal 2003 financial objective to end the year with at least 40 million in cash. You can find additional detail on our first quarter financial data in the press release we distributed earlier this afternoon. I will be happy to answer any questions that you may have in the Q&A portion of this call. Edward.

Thanks Jan. As you just heard, total operating expenses were reduced 33 percent quarter-over-quarter with the actual cash cost-savings, which was approximately $600,000 for the quarter. Most were attributable to the consolidation of our Gendaq operations. In these difficult financial markets, we continue to look for opportunities to streamline our operations and to preserve our cash while still aggressively investing in our core science and therapeutic product development programs.

Let's turn to our therapeutic product development programs. As you have heard me say many times, our number one objective is to move our ZFP therapeutic programs forward and into human clinical trials. We have invested a significant amount of time, effort, and resources in these programs and we are very enthusiastic about the potential to use our ZFP transcription factors as highly effective and differentiated therapeutic agents. We look forward to updating you on all of our ZFP therapeutic programs at the sixth annual meeting of the American Society of Gene Therapy that will be held in Washington, DC in early June. We will say more about our ASGT presentations closer to the time of the meeting.

Working with our partner, Edwards Life Sciences, we are aggressively prosecuting our lead therapeutic program, the VEGF specific ZFP therapeutic. We anticipate that the initial clinical indication for this product will be peripheral arterial disease or PAD. In line with this indication, I am very pleased to inform you that we have successfully completed the initial animal efficacy studies in the lab at ischemic hind limb model PAD.

These initial studies were very encouraging, actually compelling is the word that our collaborator used to describe the data. We have now initiated expanded efficacy studies in the same rabbit ischemic hind limb model and anticipate that the primary endpoint data from these studies will be available in the next few months. The vast majority of Sangamo's contribution to the VEGF program have been completed. We are now focused on assisting Edwards. They have already begun the establishment of master cell banks for the vector encoding of the VEGF-specific construct. We are currently assisting Edwards in the analysis of manufacturing sliced GMP requirements, evaluation, and finalization of delivery formulations and planning for bio distribution and toxicology studies. These are all critical path events.

However, it is important to note the decisions on the timing on the submission of the IND application as well as submissions to the recombinant advisory committee or RAC and requests to the FDA for a pre-IND meeting will be made by our partner and are to a great degree out of our hands. Obviously we are doing our best to help them move this process along in a timely fashion. It is not moving as expeditiously as we had expected. I'd like to ask Tyler to update you on some of the specific issues affecting the timeline for the submission of the VEGF DFP therapeutic IND. Tyler.

Thank you Edward. As you mentioned the work on the VEGF project has resulted in a compelling investigator observation in the rabbit hind limb model. This model is the standard used for pre-clinical evaluation for treatments of PAD. We expect the results of this study will be presented by Dr. Brian Anex (ph.) from Duke University at the American Society for Gene Therapy meeting in Washington, DC. In collaboration with our partner, Edwards Life Sciences, we have initiated a study to verify and expand the original efficacy observations that were made last year.

As you are aware, Edwards is responsible for the manufacturing, toxicology, clinical protocol, and regulatory activities on this project. Typically if a significant positive result is observed in the standard pre-clinical model, it causes a program to be transitioned into a multi-task development project with manufacturing, toxicology, clinical and regulatory activities occurring in parallel in order to file an IND efficiently. However, in this case a decision was made to evaluate additional delivery approaches prior to the initiation of focused development activities that would lead to the efficient filing of an IND. These additional experiments will delay the filing of the VEGF IND by at least one quarter. Specifically we believe we are on track to file this IND in approximately 12 to 14 months.

I'd like to make two points. First, this is not the strategy that we would have preferred. While the effects of this decision are several, perhaps the most disappointing aspect is that it results in a delay to the clinic, however modest, when investigational agent whose pre-clinical efficacy demonstration is felt to be compelling by experts in the field, an observation with which I wholeheartedly agree. Secondly and consistent with these data, our VEGF CFP is performing very well and we remain very optimistic about its future as a novel and efficacious human therapeutic. I look forward to keeping your apprised of our progress on this program as well as other ZFP therapeutic initiatives. Edward.

Thanks Tyler. Our other program in the cardio-vascular area is for congestive heart failure or CHF. We have designed the ZFP transcription factors to down regulate the expression of phosphor lam ban, a well characterized and validated gene target that has a key role in the regulation of calcium flux in heart muscle and is believed to be directly involved in CHF. These are underway in both rat and human cell culture systems to test and optimize the efficacy of these VFPs in preparation for advancing into animal models of the disease. You may recall that we were working towards a $250,000 milestone payment from Edwards Life Sciences that we expect to obtain later this year, but even more importantly towards moving our technology yet again in human clinical trials. We will continue to update you on this exciting new program as more data are available.

Our program to co-develop an in vivo cancer vaccine with Onyx Pharmaceuticals remains an important program for both companies. We have generated ZFP transcription factors that significantly up-regulate the expression of the gene encoding GMCSF. GM has been shown to be an important factor in stimulation of the immune system to antilogous tumor-specific antigens. We are currently engaged in cloning the genes encoding the GMCSF specific ZFPs into Onyx's adeno-viral vector in order to prepare ZFP-armed therapeutic vectors for testing. When fully developed, these vectors will be used as a therapeutic vaccine against metastatic and micro-metastatic cancer. We expect to have more to tell you about this program in the second half of this year.

To update you briefly on our collaboration with Apogent, we have identified ZFP transcription factors that regulate the expression of two unique channels or receptors that have been shown to be associated with neuro-tropic pain. We are currently setting up studies to test and optimize these ZFPs for the repression of these target genes in the primary nerve cell cultures as well as in animal models. You should expect to see more data out of this program in the second half of the year.

Finally, I'd like to take this opportunity to introduce briefly a new and very exciting ZFP therapeutic program - ZFP-mediated gene correction. The technical approach is consistent with everything we already do. The clinical opportunities are brand-new. We have constructed and engineered ZFP link to an enzyme that can cut DNA. By making a very precise cut in DNA, we can facilitate the replacement of a sequence of DNA with a different sequence of DNA. So what, you say? What if the original DNA sequence contained a mutation that causes a disease and you could literally replace that mutation with the correct version of the gene. You would have enabled ZFP-mediated gene correction. Using this approach, we may be able to correct permanently a gene sequence and thereby restore or perhaps for the first time provide normal gene function. This is a novel use of our ZFP technology, but one that leverages the same basic principles we have always employed: the ability to engineer ZFP that will specifically bind to a chosen sequence of DNA and target a functional domain. In this case, a restriction endo-nuclease or DNA cutting enzyme to that exact sequence. This approach could be used for a number of gene mutation based diseases including severe combined immuno-deficiency disease, otherwise known as SCID, gao-chaise (ph.) disease, sickle-cell anemia, and potentially many others.

Where does the science stand? You can expect to see publication of some of the early data on this approach in a major scientific journal in the next few weeks. While these data were generated by a collaborator, we plan to present internally generated data as the ASGT meeting in June. We will have more to tell you about this new and very exciting initiative then.

Before closing I want to reiterate some of the comments Tyler made earlier regarding our VEGF CFB therapeutic program. We find ourselves in a somewhat awkward situation. While we are very enthusiastic about the data that have been generated, we are frustrated to see a timeline slip, even marginally. Therefore it is important for me to emphasize that this delay is not for technical, efficacy, or safety reasons. We remain committed to moving our ZFP therapeutics into human clinical trials and reiterate our objective of filing at least three INDs by the end of next year.

In conclusion, during this quarter we focused on two major objectives: moving our ZFP therapeutics programs forward towards human clinical trials; and continuing to manage our expenses to maintain a strong cash position. We believe that this is the path that will lead us toward our mission of building a substantial and sustainable business as the world leader in therapeutic gene regulation. We have demonstrated the advantage of our technology in multiple model systems and we continue to make important progress in establishing ZFP transcription factors as the first new therapeutic product development platform in the post-genomics era.

This concludes our prepared remarks. Now I'd like to open it up for your questions.

At this time I would like to remind everyone that if you would like to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Winton Gibbons.

Hi. A little bit disappointing there.

You're looking at, or listening to, or speaking with half a dozen people who would agree.

A couple things. With Edwards are you just going to go after PAD at this point? Would that open up other indications with other potential partners?

Good question. Let me try to give you the answer. Then I'll ask Tyler to add anything if I haven't covered it. The pointy edge of the sword or the tip of the sword is PAD. With the resources that are currently being allocated by our partner, PAD is the program that is getting pushed forward now. We have initiated, along with Edwards, initial evaluation in a CAD model. While those data are not efficacy data-they are more just delivery and formulation experiments, we remain enthusiastic about the mechanism of our program and its utility or application in CAD. In longer term, although I am not going to give you any specific guidance in terms of timelines for IND filing on CAD, we think that both Sangamo and Edwards have an interest in pursuing that.

Let me pause and see if anyone else has anything to add to that.

I think you covered it, Edward.

Did that cover your question, Winton?

Yes, it does. So at this point you are sticking with them for the VEGF and seeing how things progress?

Let me be clear about that. We are, and are pleased to be, partnered with Edwards with our zinc fingers, with regulation of VEGF for cardio-vascular and peripheral vascular disease. I think it's ischemic cardio-vascular and peripheral vascular disease. That is the scope. To the extent that there are therapeutic opportunities where our VEGF zinc finger activator of VEGF can be applied-and we think there might be, we own that.

Like wound healing or something.

That would be an example, yes.

OK. Can you give some clarity. It sounded the last time I heard you speak that even if this were to happen, which it sounds it has if this gets pushed off to early '04, you still thought you might even do another two INDs in '04. Can you give some clarity around that? You talked about which were the leading programs and firm up as much as you can at this point when these things are going to happen next year.

Sure. I'll repeat that guidance. Despite this slip-modest - characterize it however you like - this slip in the VEGF IND timeline, we reiterate our guidance that we expect to file at least three INDs by the end of 2004. That is consistent with what we've said before. We're happy to reiterate that.

OK is this also phosphor lam bam for CHF? Are you thinking that might be one of them?

It may be. We're moving forward on several programs - the GMCSF cancer vaccine, two maybe even three pain targets, the targeted Molex recombination gene correction work is also moving very, very quickly. Our intention is to talk about that in more detail as ASGT. We'll also cover some of the opportunities at the William Blair conference in June. What is going to drive that decision is going to be data. You should expect and we will continue to keep you updated. I can't give you any insight into those data because I don't have them yet. It is those data on all those programs that will drive the selection of the additional IND candidates.

I have just two more brief questions. Even though you are doing this additional hind limb work, that is the final animal model. Is that correct?

Yes. That's right. Why don't I ask Tyler to comment on that.

That would be the completion of the efficacy portion of animal work that would be done. One would still need to do toxicology. That is additional animal work that will be done.

As far as cash goes, you did another great job for the quarter for cash. At some point, I would think that to get these additional two INDs out in '04, we're going to see some sort of acceleration in the use of cash. Is that going to be balanced out by other revenues? Are you holding back and going to weigh-how should we think about the timing of the asset cash versus the additional two INDs going into '04?

The premise of the question is correct. These objectives-the filing of three total INDs by the end of '04 will not come for free. The VEGF programs, both PAD and CAD, are funded by Edwards. We don't have to bear those costs. Moving forward we will aggressively prosecute these other clinical programs. That will increase our expenses. We have also given guidance that we expect to announce at least one new therapeutics collaboration this year. If we are successful in that it is our hope and expectation in that deal that that will offset much, if not all the pre-clinical and clinical costs of at least one of those programs. Its' a balance. You've heard me on this theme before relatively recently of accelerating our development of these programs with the management of our cash position. I think we're doing a good job of balancing those things. We are aggressively prosecuting the ZFP therapeutic programs.

OK, great. Thanks.

Once again, I would like to remind everyone if you would like to ask a question press star and the number one on your telephone keypad. Your next question comes from John Sullivan.

Hi. How are you? I'm with Dave Warren. I want to make sure I understand all the moving parts of this Edwards situation. Can I ask you, have any of the decision-makers at Edwards changed since you signed the collaboration with them?

The answer is yes and no. We originally signed this agreement in January 2000 with Baxter. Then Edwards spun out of Baxter in April of 2000. That is the yes answer. The no answer is that it was driven with the principals at what is now Edwards now anyway. It's the same group of decision-makers.

OK. Is the filing of the IND a milestone payment event for you?

Yes it is. There are two VEGF milestones that are out there. One is a significant completion of the large animal efficacy work that is required. The other is the IND filing coming up.

OK. I'm not trying to get you to say something you don't want to say. Regarding your guidance to shoot for at least one new therapeutic collaboration this year, I know that those agreements can take a long time. Would you have to already be in negotiations with somebody in order to get something like that signed for 2003?

No, I don't think so. They do take a long time. I'm not going to comment on whether we are or whether we are not. Would I think it would be required that we be in negotiations now in order to have it done in '03? I don't.

OK, fair enough. You are in good shape from a cash burn standpoint. You are specifically reiterating your former-your previous guidance regarding cash burn, right?

Cash burn ending the year with at least 40 million in cash.

OK, understood. Thanks very much.

Thanks for those questions - very good to clarify.

Your next question will come from John Loth.

Good afternoon. Could I speculate a little bit? It would seem to me that the economic value of a CAD indication with Edwards might be somewhat higher than a PAD indication. Could you play the role of the Edwards team to provide us some sort of insight as to why the PAD would take a higher priority than the CAD?

The presumption of the question is accurate. The market size for a CAD indication and unmet medical need is, from a present value perspective, I think significantly greater than PAD. I think the issue is how quickly one can move investigational therapy into and through proof-of-concept and into clinical trials.

The strategy-and it is one that we agree with, is one where we're going after an indication where the pre-clinical development is a little more straight-forward, a little more direct than it is in a CAD application. Remember this is the first time-we expect this to be the first application of ZFP going before the FDA.

So it's more a function of trial design and troubleshooting what possibly could go wrong systemically?

I think there are components of that. These are getting into the development issues. That is why Tyler is here. Let me ask him to comment.

Thanks Edward. I would add that there are two other variables that are important. One is from a safety standpoint when one is evaluating new investigational agents. The traditional path has been to go to PAD first because the safety implications of an adverse effect on skeletal muscle are much less important than it would be if you had a safety issue that developed in the context of a heart trial.

Certainly.

Lastly, the issues around delivery of the gene - that is the technical risk around the program is lower for PAD than it is for CAD because for PAD it is a direct inter-muscular injection. You know that you're getting the therapeutic agent to the site where you want it. It's a little bit more complicated for CAD. That is one reason why the approach has traditionally been PAD first and CAD follow-on in spite of the fact that CAD does represent the larger commercial value.

OK. In the rabbit hind limb model that you are discussing as the final pre-clinical model, are you using the same mode of administration?

The same mode of administration is being used that will be used in the clinic. That is inter-muscular injection.

OK. Thank you.

Your next question comes from Skip Klein.

Hi there. I have a couple questions today - more for Tyler. I know it would be unfair to ask you to talk about Valentis. Could you talk about learning from the Gendaq experience and the Aventis gen (ph.) cell experience using IM injection in PAD. Is there anything we've learned or Edwards has learned that will guide what you do?

There is definitely one thing that was learned from the recent data gen deck data that was presented at the ACC meeting. That is that expression of only a single iso-form is not going to be sufficient to generate an efficacious result. That is, the VEG-121 construct did not generate an efficacious result. That would be consistent with our thoughts around this program and differential advantages that our approach has over a CDNA approach with a single iso-form.

Will your approach just be limited to VEGF? Will you potentially also FGF or HIF or something else?

At this point, we believe-at least the initial efficacy data suggest that we're getting a very, very robust vascular response with histologically normal vessels with VEGF activation. As Tyler just said we think that mechanistically that is a function of getting all the normal iso-forms in their normal ratios. At this point, we have no reason to think we need to do anything outside of a VEGF activation.

OK. Then there is a follow-up from one of the questions earlier. You said very clearly that your relationship with Edwards concerned VEGF for ischemic cardio-vascular and peripheral vascular disease. What would happen if someone like Genzyme came to you and wanted you to express multiple iso-forms of HIF?

We have freedom to operate to regulate any gene.

OK, so you could do that with or without them in a PAD setting? It wouldn't be terribly partnerly (ph.) though, right?

If we were going to do FGF or Ange-one (ph.) or any number of targets that we have shown that we can regulate in cell cultures, we could independently pursue those. As I suggested-at least what we've seen in animal models suggest that the VEGF target is a very good one.

Finally for Tyler, is the ball changing at all-or the rules of the game changing at all at the FDA relative to the endpoints that they want to use for PAD walk test? Do they want to see something more than that?

From the standpoint of registration for product for PAD, one would have to differentiate between intermittent claudication and the critical limit ischemia. For intermittent claudication the position of HC has been and continues to be that a walking test will be required for approval of an intermittent claudication application.

For CLI what do they want?

For CLI, first of all, no one has been able to get a successful approval in that indication. There have been discussions about diminished rest pain. That is fewer patients have rest pain at the end of their observation period or lymph salvage.

OK and then final, final. Do you envision using imaging to guide how you do the studies in other words to understand where anatomically some of the issues may be as you do the trials?

We're currently in the midst of discussions about to best design the clinical trial of the antigen and gene therapy approaches that have gone before it. Some have used imaging to a greater extent than others. It would seem to me that state-of-the-art would require at least important consideration of imaging issues. Their ultimate role has not yet been determined.

Are you doing imaging in these animals? Or some of the additional hind limb things that you are going to do, will that help you figure out some of the imaging and anatomical issues or how many injections sites - that type of thing? Or no?

Yes. Some of the previous studies that have been conducted have included imaging as their endpoint. In the IND enabling study that is being performed in follow-up, Doppler flow is the primary endpoint. Histologic analyses are being included as the secondary endpoints. Doppler flow is the primary endpoint.

OK. Thanks.

At this time there are no further questions. Are there any closing remarks?

Yes. We'd like to thank you for joining us. We look forward to speaking with you again when we release our second quarter results. We'll be available later today if there are any follow-on questions. Thank you very much.

This concludes today's Sangamo BioSciences first quarter teleconference. You may now disconnect.