Sangamo Therapeutics Inc (SGMO) 2004 Q1 法說會逐字稿

Good afternoon and welcome, ladies and gentlemen, to the Sangamo BioSciences Inc. first-quarter 2004 conference call. At this time I would like to inform you that all participants are in a listen-only mode. At the request of the company, we will open up the conference for questions and answers after the presentation. I will now turn the conference over to Dr. Elizabeth Wolffe. Please go ahead, ma'am.

Good afternoon and thank you for joining us for our quarterly teleconference (technical difficulty) joining me and several members of the Sangamo senior management team including Edward Lanphier, our President and Chief Executive Officer; Greg Zante, our Senior Director of Finance and Administration.

Edward plans to review our recent activities and some of our first-quarter accomplishments; Greg will briefly review our first-quarter financial results; and finally Edward will update you on our ZFP therapeutics program. After our prepared remarks we will have time for your questions.

As we began a begin I would like to remind everyone that the projections and forward-looking statements that we discuss during this call are based upon the information that 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 and no one should assume at a later date that 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 Security and Exchange Commission, specifically our quarterly reports on Form 10-Q and our annual report on Form 10-K. 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. Let's cut right to the chase. 2004 is off to precisely the start we had hoped for. First and foremost, the first clinical trial of the ZFP therapeutic is now open and patients are being accrued at the National Institutes of Health.

Secondly, I'm very pleased to announce that our partner Edwards Lifesciences is planning to initiate a second clinical trial in the more severe form of peripheral artery disease, critical limb ischemia, later this year.

Third, we have completed the initial animal efficacy studies for our diabetic neuropathy program and remain on track to initiate what will now be the third clinical trial of ZFP therapeutic in 2004.

Additionally, our gene correction program has literally made exponential advances in the past few months with successful targeted correction at the endogenous gene that causes X-linked SCID in both cell models and, most importantly, in the target therapeutic cell type CD34+ hematopoietic stem cells.

Finally, we have done all of this and burned less than $2.5 million in the quarter, a pretty good start to a very important year. Before we move on to discuss these accomplishments and our ZFP therapeutics programs in more detail, I've asked Greg Zante to summarize our first-quarter financial data. Greg.

Thank you, Edward. For the first quarter of 2004 our consolidated net loss was $2.9 million or 12 cents per share; in the comparable quarter of 2003 our consolidated net loss was $2.9 million or 12 cents per share.

Our research and development expenses were $3 million for three months ended March 31, 2004, as compared to $2.7 million for the first quarter of 2003. General and administrative expenses were $997,000 for the first quarter of 2004, compared with $878,000 for the same period last year.

Revenues for the first quarter of 2004 were $811,000 as compared to first-quarter 2003 revenues of $551,000. For the first quarter of 2004, revenues were from Sangamo's partnerships in the areas of the human therapeutics, enabling technology agreements, and federal government research grants.

Finally and most importantly, we ended the quarter with cash, cash equivalents, investments, and interest receivable of $42.1 million, a net burn of only $2.3 million for the quarter. You can find additional detail on our first-quarter financial data in the press relays that we distributed earlier this afternoon. I will be to answer any questions that you may have in the Q&A portion of this call. Edward.

Thanks, Greg. As you have heard our expenses for the first quarter of 2004 were slightly higher than for the same period in 2003. This is a direct result of the fact that we have entered into the development phase for several of our programs. However, even with these increased expenses, I would like to reiterate that we remain on track to end 2004 with at least $28 million in cash and cash equivalents.

Now let me update you on the progress of several of our therapeutic programs. As I mentioned the ZFP therapeutic peripheral artery disease or PAD trial is now open and currently screening and accruing patients. This trial, a Phase I/II double-blind, placebo-controlled dose-escalation study, is being held at the Warren Grant Magnuson Clinical Center of the National Institutes of Health and is being conducted by Dr. Robert Lederman of the National Heart Lung and Blood Institute, in collaboration with our partner in this program, Edwards Lifesciences.

As we have discussed in the past, this study is designed to evaluate the safety of our ZFP transcription factor in patients suffering from PAD and, more specifically, the stage of the disease known as intermittent claudication. I would like to emphasize two important points about this trial.

First, it is powered to be a safety study. The primary objective of this trial is to determine the safety and tolerability of our engineered ZFP. Secondly, while this is a safety trial, because the study is being conducted in patients with the disease Dr. Lederman will be assessing whether the VEGF ZFP therapeutic increases regional or limb vascular perfusion. Specifically he will employ real-time MRI to determine if there are increases in the number of blood vessels around the site of injection.

Additionally, patients will be tested for improvements in treadmill walking time, quality of life, and ankle brachial index, a measurement of the blood pressure in the ankle compared to the blood pressure measured in the arm. Collectively these measurements may provide an initial indication of efficacy, but in no way will they be statistically significant. Additional information on the trial can be obtained on the NIH website at the link included in the press release we put out earlier this afternoon.

Accrual for the trial is expected to be completed in approximately one year with data available six months later. We look forward to keeping you updated on the progress of this study; however, the vast majority of future information will come from our partner, Edwards Lifesciences.

In addition to the NIH trial in intermittent claudication Edwards is now planning a second clinical trial of our VEGF therapeutic. The second study will be in patients with the more severe form of PAD, critical limb ischemia. As these clinical indications may be new to you let me give you some background.

Patients suffering from peripheral artery disease have insufficient blood flow in their legs. This is generally due to atherosclerosis or blockage in their arteries. Functionally this means that in the early stages of the disease, when patients exercise they experience leg pain due to poor circulation. This stage of the disease is described as intermittent claudication.

However, the disease can progress to the stage where patients experience pain in their legs even when they are resting, aptly named resting pain. In other patients the disease can progress to the point where the blood flow in the leg is so severely compromised that any trauma or injury to the limb may generate nonhealing ulcers and eventually amputation. This condition is known as critical limb ischemia.

Edward is planning to initiate this new VEGF ZFP therapeutic clinical trial in patients with critical limb ischemia later this year. The decision to undertake this second trial is, I believe, indicative of the enthusiasm that Edwards and the vascular medicine community have for this novel approach to the generation of functionally normal vessels in highly compromised and ischemic tissues. Needless to say, we are very pleased with this development.

As we discussed at the beginning of this year, one of our goals for 2004 was to initiate two ZFP therapeutic clinical trials. You have just heard about the first at NIH, and now a second clinical trial in PAD with Edwards Lifesciences. I'm also pleased to say that we remain on track to initiate what will now be the third ZFP clinical trial in 2004, for the treatment of another significant unmet medical need, diabetic neuropathy. This is a program we will take into clinical trials ourselves.

Diabetic neuropathies represent a family of nerve disorders or damage caused by diabetes. Of the 14 million people in the United States with diabetes, half are believed to have some form of neuropathy. We are focused initially on peripheral neuropathy, which starts as tingling in the hands and feet, progresses to burning pain, and is gradually replaced by a loss of sensation and numbness in the affected area.

The resulting nerve damage puts these patients at risk for injury, infected lesions and ulcers, gangrene, and ultimately limb amputation. In fact, diabetic patients account for over half of all limb amputations in the U.S., over 86,000 amputations per year.

While there are currently no therapeutic options for these patients, in preclinical studies VEGF has been shown to have positive effects on the maintenance of nerve function and for the restoration of nerve integrity. Additionally, VEGF has been shown to stimulate nerve cell migration and to protect nerve cells from cell death or apoptosis. We believe that stimulation of VEGF expression could address the underlying biology of this disease and are therefore moving forward to evaluate our VEGF VFP therapeutic in patients with diabetic neuropathy.

On our last call we reported that we had begun preclinical efficacy studies using a rat model of diabetic neuropathy. These studies were recently completed by Professor David Tomlinson, a highly regarded researcher in the diabetes field from the University of Manchester in the United Kingdom.

In summary, the data from these preclinical animal efficacy studies showed a statistically significant increase in both motor and sensory nerve conduction velocity, the primary endpoints of the study. Dr. Tomlinson concluded that our ZFP therapeutic "clearly reduces the deficit in motor and sensory nerve conduction values in diabetic rats." Put simply, our VEGF therapeutic reduced the nerve damage caused by the diabetes. This is precisely what we hope to achieve in human clinical trials.

Based on these data we are now proceeding with our development plan and are on track to initiate the third clinical trial of a ZFP therapeutic in the second half of this year. To that end we have begun GMP production of the VEGF ZFP plasmid and have submitted a pre-IND package to the FDA.

We have also completed a very successful clinical advisory meeting and are incorporating the thoughts and suggestions of the experts on this panel into our clinical protocol. We look forward to sharing the preclinical data with you and to keeping you updated on our progress as we move the first Sangamo-sponsored ZFP therapeutic into the clinic.

Finally, I would like to update you on our gene correction program, an area of major focus for us for the past year. This group led by Michael Holmes, has made very significant progress over the past few months. As you may recall, last May there were two papers on this topic published in the journal Science, one from Matt Porteous and David Baltimore at Caltech and the second out of Dana Carroll's lab at the University of Utah.

Without retracing all of their work, let me summarize their findings with a quote from an editorial in Nature Biotechnology that stated, "ultimately these zinc fingered nucleases also raise the tantalizing possibility of gene correction as a realistic therapy for human disease." We agree.

In the past year we have gone from tantalizing to definitive proof of concept. In just the past few weeks, scientists at Sangamo have demonstrated high-frequency targeted homologous recombination in endogenous gene that causes X-linked SCID and have very recently extended that work into the target therapeutic cell type CD34+ hematopoietic stem cells.

While there is still much work to be done in order to bring this therapy into the clinic, needless to say we are very excited about this progress. Data from this program as well as progress in gene correction of sickle cell anemia will be presented in much more detail in the first week of June at the American Society of Gene Therapy meeting.

On that subject, the ASGT meeting will once again be a major event for Sangamo. In addition to the 16 scientific presentations by Sangamo scientists and two that our collaborators will deliver during the meeting, we are also sponsoring a major scientific symposium that will highlight the breadth and power of our technology and describe in more detail ZFP therapeutic applications in cardiovascular disease and gene correction. During the regular meeting we will present data on our programs in congestive heart failure, neuropathic pain, and cancer immunotherapy. We will also present data on our work in stem cells and continued developments in our ZFP core technology.

However, the highlight of the meeting for Sangamo will be our symposium on the evening of June 3. Sir Aaron Klug, Nobel laureate, a founding father of the field of engineered ZFPs, and a member of our scientific advisory board will chair the symposium. Sir Aaron will provide an overview on ZFPs and their therapeutic potential. The session will also include a presentation on the potency and specificity of our ZFP transcription factors by our senior director of research Dr. Philip Gregory.

Data will be presented from our ZFP therapeutic cardiovascular programs in peripheral artery and ischemic heart disease and congestive heart failure by Dr. Frank Giordano, assistant professor of cardiology at Yale University School of Medicine. Finally, progress in our gene correction program will be presented by Matt Porteous, an author of the recent Science gene correction publication and now assistant professor of pediatrics and biochemistry at the University of Texas Southwestern Medical Center in Dallas, and by the president of the ASGT Dr. Don Kohn, head of the division of research immunology and bone marrow transplantation at Children's Hospital Los Angeles.

This symposium should be a highly visible and comprehensive review of our science, and I invite you and sincerely encourage all of you to join us in Minneapolis on June 3. However, if you cannot make it to the twin cities, the symposium presentations will be recorded and available on our website; and summaries of the data presented in both the regular meetings and the symposium will be made available in press releases on the day of the presentation.

So, a pretty good start to a very important year. For the rest of the year and into 2005, you should expect more of the same. We are focused on rapidly and cost effectively establishing clinical proof of concept for our ZFP therapeutics both in gene regulation and gene correction and thus validation of our technology as a major new therapeutic platform in the post genomic era.

I look forward to updating you on our continued progress at the Rodman & Renshaw Techvest Global Healthcare Conference, which is being held in London during the first week of May; at ASGT in the first week of June; and on our second-quarter conference call in July. This concludes our prepared remarks, and now we would like to open it up for your questions.

(OPERATOR INSTRUCTIONS) Winton Gibbons of William Blair.

First, congratulations, Edward, on the third clinical trial.

Thanks, Win. Just so you know, the whole team is here. So if you don't mind I'll just edit that and say congratulations to everybody here. Because it's least of all me and most of all the group that is here.

Congratulations to the team; I should have said that. A couple questions. First, after you're done with the three trials that you will start this year, how big will your safety database be? And what sorts of parameters are you looking for relative to the ZFPs?

What was the second part of the question? I got the first part, big will our safety database be.

I am just wondering what sorts of critical safety issues do you think and have you discussed so far with the FDA relative to ZFPs? Because it is an entirely new class. So I just wondering where their concerns lie and maybe where your concerns lie, just to validate the safety?

Two points. One, we have had one real formal discussion with the FDA, and that was a function of the pre-IND meeting that was held -- what, Casey, six months ago, now? -- with regard to the NIH intermittent claudication trial.

At that time the issues were primarily around the clinical trial design. There were really very few questions if any, and I am looking at Casey to comment further, around the therapeutic agent or the mechanism of the therapeutic agent itself.

That's true. There was not a lot of concern about the safety. They were concerned about design and some concerns about our tox (ph) plan. Those have all been taken care of.

The other piece sort of regulatory data that we can speak to is that the RAC submission that Edwards made was approved without public review or comment. The RAC certainly didn't look at this and say, hm, this looks pretty unusual; let's bring it in and have this discussed in public. Those are the facts in terms of formal interactions.

Just taking a more conservative view, I view every new IND, every new Phase I clinical trial as an opportunity and a need to address the safety at that particular compound, that particular reagent, that particular population. I don't anticipate anymore than a recombinant protein or a small molecule might collect a broad safety profile and reduce or minimize the safety requirements in Phase I trials.

Okay. We had traded some e-mails on this, the fact that you are still in the Center for Biologics although some recombinant proteins and antibodies have been moved to the drug side. Can you comment a little bit on that?

As you know there has been a significant reorganization at FDA and many of the historic departments that were in CBER are now in CDER. However, the office or center for cell and gene therapy remains in CBER; and that is the group that at least the initial programs that we are pursuing, both in the area of gene regulation and in gene correction, will be governed.

In spite of the fact that there is no introduction of genes nor no viral vectors?

There is introduction of genes. There is introduction of the gene that encodes the zinc finger transcription factor. But in the initial indication, as you know, these are plasmid-based formulations. So no viral vectors.

Can you talk a little bit -- I'll just fill both these questions into one, and then get back into queue and listen to the other Q&A. But can you talk a little bit both about the ongoing development of your development organization, of your clinical trial organization, and the capabilities there?

And also talk -- maybe I missed it -- that you didn't kind of reiterate or discuss your plans for 2005 and so? So could you again talk about how the department and the capabilities will be further developed? And then what your plans are past 2004?

Sure. The development group is a main area of growth and emphasis for us. We have recently filled positions for director of preclinical development, director of regulatory affairs, and director of manufacturing and process development.

We have open positions right now for director level in clinical affairs and in quality. As I think you also know, we are currently recruiting for a head of the development group. That's the status on the development team side, and if you like I would be happy to go into more detail on people's backgrounds.

In terms of 2005, where we've given formal guidance before this call was that we expected to file two INDs and initiate two clinical trials of ZFP therapeutics this year; and as you know from this call we now expect that to be three clinical trials, with the addition of the new critical limb ischemia trial that Edwards plans to sponsor.

Into 2005 and through 2004 you will continue to see quite a bit more visibility on several programs. One that Edwards is pursuing in ischemic heart disease, those preclinical studies are ongoing, and I think they will have more to say about that.

We certainly have growing or increasing, I should say, enthusiasm about our program in congestive heart failure. That is a program for repression of phosopholambin (ph). We have selected lead ZFP repressers for that; and that work is in preclinical studies with Frank Giordano at Yale. I hope and expect that Frank will be presenting some of the preliminary work in that program at ASGT.

We also have ongoing gene regulation efforts in neuropathic pain and in the cancer immunotherapy program, incorporating the activation of GM-CSF with the oncolytic vector systems that we acquired -- or licensed, I'm sorry, from Onyx. So that is really the pipeline of programs on the gene regulation side that again you'll see much more data around and then visibility for in the second half of '04 and into '05.

Finally, in the gene correction space, again you'll see much more data on our progress in gene correction at ASGT this year. But our goal is to file the IND for the X-linked SCID program in 2005 and continue to move forward as aggressively as we can on the application of gene correction in sickle cell anemia.

Great. Thank you.

David Wood, Rodman & Renshaw Inc.

Good afternoon, Edwards and the team. Edward, I was wondering if you could talk a little bit about the Phase I/II in PAD? Could you give us a sense of how many injections there will be and where on the leg they will be? And will it be on one or both legs?

David, I will give you a couple of answers here. But I'm going to say the same thing I said on the first-quarter call. The vast majority of detail on the clinical trial will come, and really has to come, from our partner Edwards Lifesciences. I'm quite sure that you and others on the call find that frustrating; but that's the facts.

The second thing I will point you to is the link that was included in the press release that we just put this afternoon, to the NIH website. That will give you -- I think it's about 5 pages of information on the clinical trial. In particular a summary of the trial; but in detail the patient accrual criteria and exclusion criteria.

With that said, the trial itself will begin initially in a single leg, and then as the doses go up they will go bilaterally and evaluate some of the performance and efficacy trends in those patients that are receiving injections bilaterally.

Okay, thanks. I will take a look at that website to get more detail. The other question I had is, is real-time MRI to look at blood vessel growth, is that more of a research tool? Or is this something that we should look at increasingly as something that can be used as, maybe, a secondary clinical endpoint or some sort of surrogate endpoint?

I'd say again, both because this one I will just admit my ignorance and say I don't know if it's a surrogate endpoint. I would really defer that question to the Edwards people. If you made me guess, I'd say no. But I would defer that to Edwards.

One quick question, if I may, one last one. For the diabetic neuropathy trial you had mentioned you would be using a VEGF ZFP plasmid again. Is the formulation similar to the one that Edwards is using, where it has the polymer coating?

Yes, the formulation is very similar but not identical. It will be formulated in a poloxymer, but the poloxymer is a slightly different structure.

Great. Thank you.

John Sullivan, Leerink Swann.

Congratulations on the progress.

Thanks, John. What was the name of that firm again?

Leerink Swann.

Congratulations.

Thanks so much. Let me ask you a couple quick questions over in the gene correction side of your work. You had talked about just within the last few weeks achieving some targeted homologous recombination. I was wondering if you could give a little bit more detail on that. Is there a degree of success metric that we can talk about relative to your expectations? I don't know if it is percentage of sales; or is there some way to put a little bit more granularity to that?

There is. Everybody in the room is grinning, because the concern is we don't want to steal anybody's thunder, quite frankly, in front of the ASGT meeting which is the first week of June. What I will say is that people around here are very enthusiastic about the progress that has been made over the last literally couple of weeks.

And that we are seeing frequencies of homologous recombination in model systems that are targeted to the IL-2 gama receptor gene that are very, very encouraging, and at least in model systems at or actually above the kinds of efficiencies that we think we need ultimately in CD34 cells.

A caution to say that there is a big gap between the lip and the cup in terms of translating what we have now into human clinical trials. But that's the data that we intend to go into in detail at ASGT.

This gene correction program is generally intended to be ex vivo delivery, is that right?

Initially that's exactly right. The focus initially is on hematopoietic stem cells, and looking at indications where there is a monogenic disease that, where corrected in hematopoietic progenitors, could be in the case of SCID potentially curative; in other indications certainly a very important therapy.

Ultimately, and I want to really differentiate between what I just said, which we think is very achievable and where we are now, versus what I'm going to say next. But ultimately if we are able to really increase the frequencies and efficiency of this approach, it is something that might be well done beyond just stem cells on an ex vivo basis. But where we contemplate things in the near and mid term is on an ex vivo basis initially focused on a hematopoietic stem cells; maybe into mesenchymal stem cells.

As far as these programs are concerned, delivery of the genetic material must be relatively straightforward, right?

Actually delivery of the genetic material is a critical component here that is -- probably when I say there is a lot of work to be done to move from where we are in model systems to the clinic -- is probably one of the critical next steps for us, is optimizing delivery. But again I am going to leave that to the scientists to talk about at ASGT.

Thanks very much and congratulations on the progress.

(OPERATOR INSTRUCTIONS) If there are no further questions I will now to the conference back to Mr. Edward Lanphier. Please go ahead, sir.

Thank you, and thank you all for the questions. We would like to thank you for joining us and we look forward to speaking with you again when we release our second-quarter results. We will be available later today if there are any follow-up questions. Thanks very much.

Ladies and gentlemen, this concludes the conference call for today. Thank you all for participating and have a nice day. All parties may now disconnect.