Sangamo Therapeutics Inc (SGMO) 2007 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to Sangamo BioSciences First Quarter 2007 Conference Call. [Operator Instructions] I would now like to turn the call over to Dr. Elizabeth Wolffe, Director of Corporate Communications. Please proceed, ma'am.

Thank you, Brandy. Good afternoon and thank you for joining Sangamo's management team on our conference call to discussion the Company's first quarter 2007 financial results. Also present during this call are several members of Sangamo's senior management, including Edward Lanphier, President and Chief Executive Officer, Dr. Dale Ando, Vice President of Therapeutic Development and Chief Medical Officer, and Greg Zante, Vice President of Finance and Administration.

Following this introduction, Edward will review first quarter activities, highlighting Sangamo's recent events, Greg will then briefly review first quarter financial results and finally, Edward and Dale will update you on our most advanced ZFP therapeutic clinical programs and goals for 2007. Following that, we'll open the call for questions.

As we begin, I'd like to remind everyone that the projections and forward-looking statements that we discuss during this conference 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 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 SEC, 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, and thank you all for joining us for our 2007 first quarter conference call. On this call I will briefly review our recent accomplishments and then Greg will review our first quarter financial results. After that, I've asked Dale to give you an update on the status of our clinical programs, particularly the new Phase II trial that we recently announced.

Dale will also discuss the presentation of our Phase I data at the upcoming meeting of the American Diabetes Association, or ADA. Finally, I will wrap up with a review of our recent business development activities, including our latest zinc finger nuclease (or ZFN) cell line engineering agreement with Genentech and our additional objectives for the remainder of 2007.

In the first few months of this year, we accomplished several of our clinical and business development goals. We initiated a second Phase II clinical trial, a repeat dosing study of SB-509 for the treatment of so-called "blocked nerves" in subjects with moderate to severe diabetic neuropathy (DN). This trial is in addition to our ongoing Phase II study of SB-509 in patients with mild to moderate DN. Dale will provide you with more detail about this new trial later in this call.

Early this week we announced a significant new research and commercial license agreement with Genentech in the area of protein pharmaceutical production. This non-exclusive agreement provides for an up-front license fee, ongoing technology access fees, and payments upon achievement of specific research milestones.

Additionally, this agreement provides for milestone payments based upon the development and commercialization of any products manufactured using any ZFN modified cell lines. This is an important and exciting new development for Sangamo.

Finally, in this quarter, the Michael J. Fox Foundation for Parkinson's Research awarded Sangamo a $950,000 dollar research grant to fund the development of a ZFP transcription factor activator of glial-derived neurotrophic factor (or GDNF) for the treatment of Parkinson's Disease (PD).

GDNF is a well-validated, potent neurotrophic factor that has shown promise in preclinical and clinical testing to slow or stop the progression of Parkinson's Disease. We believe that our ability to activate the endogenous GDNF gene may have significant advantages over infusion of the recombinant protein or expression of the cDNA.

So, at the close of the first quarter of 2007, we're off to a good start in achieving our list of goals for the year. Before we elaborate further on our progress, I would like to ask Greg to summarize the first quarter financial results. Greg?

Thank you, Edward. For the first quarter of 2007, revenues were $1.4 million, as compared to first quarter 2006 revenues of $2.1 million. Our R&D expenses were $5.4 million for the three months ended March 31, 2007, as compared to $3.6 million for the first quarter of 2006. G&A expenses were $2.0 million for the first quarter of 2007, compared with $1.8 million for the same period last year. R&D expenses in the first quarter of 2007 were higher than in the same period of 2006, due to increased expenses related to our ongoing and planned clinical trials.

Our consolidated net loss was $5.4 million or $0.15 per share. In the comparable quarter of 2006, our consolidated net loss was $2.7 million or $0.09 per share.

I'm very pleased to report that due to our continued careful management of our cash, we ended the first quarter of 2007 with cash, cash equivalents and investments of $49 million.

Edward?

Thanks Greg. As you can see from our first quarter financial results, we continue to maintain a firm hand on expenses in this quarter, even as we pursue our ongoing clinical programs and initiate new clinical trials. As we have previously discussed, we plan to end 2007 with approximately $35 million in cash and cash equivalents and we are on track to do this.

Turning to our clinical progress, I've asked Dale to update you on the new Phase II blocked nerve trial that we announced last week and to expand upon the topics that we expect to cover in our presentation of the Phase I data at the ADA meeting in June.

Dale?

Thank you, Edward. As many of you know, we have initiated our second Phase II trial of SB-509 in diabetic neuropathy or DN. In this trial we will evaluate the treatment of subjects with a more severe stage of DN, subjects that present with so-called "blocked nerves". Blocked nerves are nerves that in response to electrical stimulus have no measurable induced nerve conduction velocity (or NCV), but are still functional.

The genesis of our interest and enthusiasm for this trial is that, based upon a surprising observation from our initial Phase I results, we observed that a single treatment with SB-509 was sufficient to restore a measurable NCV in the nerves of all three subjects that presented at the start of the trial with immeasurable NCVs. In addition, improvements in total neuropathy score (or TNS) and quantitative sensory testing (or QST) were also observed.

These were unanticipated results, as we were initially interested in evaluating the SB-509 for its ability to protect nerves from further damage due to diabetes. But these anecdotal clinical data suggest that there may be also some degree of nerve regeneration or nerve regrowth.

However, in such a small number of subjects, it is difficult to draw any hard conclusions. After discussions with our academic and clinical consultants and their shared positive responses to this data, we decided to investigate and confirm these observations in a larger clinical study. We plan to enroll 45 subjects with blocked nerves and in a randomized, placebo-controlled, single-blind study, treat approximately 30 subjects with two doses of SB-509 at three-month intervals.

Our primary objective in the Phase II study will be to determine the effect of treatment with SB-509 on the clinical profile of neurologic damage associated with DN, and particularly in light of our preclinical data and Phase I observations, the potential effects on nerve regeneration or regrowth.

We will assess subjects' symptoms over the period of the study by measuring NCV, the rate at which a nerve conducts an electrical signal; QST, which measures perception of vibration, and improvements in average Total Neuropathy Score or TNS. A composite of several measurements including neurologic exam, QST, electrophysiologic testing and neurologic symptoms.

The trial will take place at several of the centers that we already have up and running for our Phase II trials of SB-509 in subjects with mild-to-moderate DN. Importantly, many of the subjects that do not qualify for that trial because their symptoms are too advanced may qualify for inclusion in this new trial.

To update you on our first Phase II trial that we initiated late last year, we now have eight sites open and are actively recruiting, screening, and treating subjects. As we have stated before, we expect to complete the accrual of this trial by the end of 2007 and have data from both our Phase II DN studies in the second half of 2008.

Meanwhile, our Phase Ib study on SB-509 in subjects with mild-to-moderate DN is nearing completion and we will present data from this trial at the scientific sessions of the ADA that will be held in Chicago in late June. Specifically, Dr. Mark Kipnes, our lead investigator on this study, will make a podium presentation on Friday, June 22nd.

In brief, he will present six-month follow-up placebo-controlled data from a number of subjects with mild-to-moderate DN that have been treated with SB-509. We have been assessing changes in the neurologic status of these subjects using the same broad scope of measurements that I've previously described for you - TNS, NCV and QST, as well as assessments of pain. We will also present the data from the original three subjects with blocked nerves that I previously discussed.

As you know, mechanistically, SB-509 is intended to generate neuroprotective and potentially neuroregenerative effects. These potential clinical effects of this drug will be the focus of the presentation at ADA. This will be an important update on our program and I look forward to seeing you there.

In addition to the ADA meeting, our collaborator, Dr. Michael Fehlings, will be presenting data from preclinical animal models with spinal cord injury at two upcoming meetings - the American Society for Neurotherapy and Repair meeting on May 3rd and the World Spine Fourth Interdisciplinary Congress on Spine Care in July.

Dr. Fehlings, the [principle] chair in neurorepair and regeneration at the Toronto Western Research Institute and the University of Toronto, is also a Christopher Reeve Foundation Scientific Advisory Counsel member and a leading expert in the molecular mechanisms and treatment of spinal chord injury (or SCI).

We are very excited by his early data in animal models with spinal chord injuries using the same VEGF activating ZFP Transcription Factor that we are assessing in our DN clinical trials, as again, mechanistically we believe this drug is quite unique. He has tested our ZFP Transcription Factor in models that assess both nerve integrity and health and more directly, recovery of nerve function. The isoforms of VEGF-A have been shown to have direct neural growth and neuroprotective properties.

Our data from several different models are very encouraging from the perspective of treating both nerve trauma and the nerve damage and significantly influenced our decision to expand our DN trial into the blocked nerves. Again, I look forward to discussing these new SCI data with you after they are presented.

In conclusion, this has been and will continue to be a very busy year for Sangamo's Diabetic neuropathy and nerve regeneration programs, with several presentations from both our preclinical and clinical development efforts. I look forward to keeping you abreast of our progress and giving you specific details after the presentation.

Edward?

Thank you, Dale. Over the past two years we have made significant progress in translating the technical advantages of our ZFP technology platform into a highly differentiated therapeutic pipeline.

We now have two ongoing Phase II trials in Diabetic neuropathy and an ongoing Phase I study in intermittent claudication, with much more to come. Later this year we plan to initiate our first two zinc finger nuclease Phase I clinical trials in HIV/AIDS and Glioblastoma. While we don't have time today to provide you with an update on these pre-IND programs, let me simply say that we remain on track to accomplish our goal of filing these INDs and initiating these trials by the end of 2007. We plan to provide you with much more information on both of these programs on future calls.

Shifting to our business development activities, we remain very active in our efforts to monetize our technology and intellectual property. Our extremely productive relationship with Dow AgroSciences (DAS) is an excellent example of our success in this area. Our collaboration with DAS continues to go very well and we intend to provide further updates on our progress as more milestones are achieved during 2007.

In our cell line engineering business, we announced yesterday a significant commercial license agreement with Genentech, obviously one of the pioneers in the protein pharmaceutical and development and manufacturing space. Under this agreement, we will provide Genentech with zinc finger nucleases for the generation of novel cell lines for use in the production of any protein pharmaceutical.

Under the terms of this nonexclusive agreement, Genentech will pay Sangamo an up-front fee, ongoing technology access fees, and additional payments upon achievement of certain milestones relating to the generation of ZFN modified cell lines. Additionally, Genentech will make payments to Sangamo for the clinical development and commercialization of any products manufactured using any ZFN modified cell lines.

Improved production cell lines is an area of increasing importance in the pharmaceutical and biotechnology industry, as more and more therapeutically active proteins come to market. We expect significant growth in this area, as the unique capabilities of our zinc finger nucleases to reliably achieve outcomes that have a significantly positive impact on the economics of making these types of therapeutics becomes more widely appreciated. This Genentech commercial license agreement is an important step in that direction. You should expect to see further activity on this front throughout the rest of 2007.

From a financial perspective, you can expect us to continue to carefully manage our expenses, while working hard to build value through clinical data and thoughtful strategic partnerships. As we have said before and as you have seen reflected in this quarter's financial results, we expect our clinical development costs to increase significantly in 2007. However, we remain on track to end 2007 with approximately $35 million in the bank.

Finally, I look forward to providing you with additional updates on our progress at the Sixth Annual JMP Securities Research Conference in San Francisco on May 21st. In addition, on June 1st at the Annual ASGT meeting in Seattle, we will host a major scientific symposium that will cover progress in our zinc finger technology platform as well as several of our preclinical and clinical programs.

We will make all of these presentations available on the "Investor Section" of our website. And again, I look forward to seeing many of you on June 22nd at ADA. This completes our prepared comments. I would now like to open the call up for your questions.

[Operator Instructions] Your first question comes from the line of Pamela Bassett with Cantor Fitzgerald. Please proceed.

Hi everyone, thanks for taking my call. I actually have a few questions. I'd like to start with the Genentech agreement. Can you give us some idea about the level of - is it a royalty or a payment on a per-product basis?

Sure, Pamela. Thanks for the question and if we can, on the first round, if we can keep the questions to one or two so that others can get it, that'd be great.

Okay.

So Pamela, thanks for the question. The Genentech agreement really is a very important event for the Company and Eric Rhodes, our Senior Director of Business Development is here on the call today and was really the principle person in Sangamo who worked on that deal. So why don't I ask Eric to give you a little bit more color on the agreement?

Great. Thank you.

Hi Pamela. I really can't say enough about the deal. I'm really excited about what this means and I think you've hit on at least one important part of it. To more specifically address your question, this is not a specific product that we're working on.

This is an agreement that contemplates the use of the cell line across any number of products that Genentech would like to make. And what we're doing is building a cell line, or several cell lines, with them that I really believe are going to blow all of the other cell lines out of the water.

They're going to end up using these modified cell lines to then produce all of their biologics. The agreement that we have actually contemplates that broad of a use, so I think that's an important step too. And takes it beyond the concept of research into a commercialization phase as well.

To answer the other part of your question, you won't see the term "royalty" specifically. But let me point out that not only do we receive milestones on clinical development for each product, but we're also in line to receive "milestones" - and note that that's a plural - on the commercialization of each product.

I think what's really important here is taking note of who we're doing this with. This is Genentech and I think Edward alluded to the fact that these were the early entry into the whole field of biologics. I think we all know that they are on of the key suppliers of antibody products right now to the market. And so I think it really speaks a lot to the technology that they had the foresight to look ahead and get a commercial license to this technology.

So Pamela, that should give you some color on the deal.

Well, just to be clear, we're talking about this includes products that are currently marketed as well as product candidates as well as research candidates, anything that's being researched. So it's the whole spectrum here. Do I understand correctly?

It can cover the whole spectrum. That's correct. There's no limitation in that respect.

Okay. So, in that case, then, the new cell lines would be shown essentially to be equivalent to existing cell lines and then could be substituted in the biomanufacturing of current products like Avastin or Herceptin?

So, Pamela, let us stick to the terms of the license. Let us let Genentech guide to what their intended uses are. That would be not right on our scope of [multiple speakers].

Right. Yes. I didn't mean to ask specifically, but rather in terms of what the regulatory process might be if it's for a current product.

Yes and you're exactly right in the generic. But we should leave it to Genentech to comment on that.

Okay.

But before we do go on, Pamela, let me ask. Because since this is an important agreement for us. It's an opportunity, I think, to step back for a moment and say, why does Genentech want to do this? Why are we working with Pfizer and Amgen and Medarex and others in this space. And Philip, maybe you can comment just a little bit on the opportunity that I think Genentech and others see here.

Sure. So this is a perfect example of these truly enabling applications of both the ZFN technology and ZFP technology to protein production. The ZFP technology provides specific, rapid, and unique outcomes in this space, with broad applications across the field of cell engineering, not limited actually just to protein production. And this deal really shows us an expanding business for us.

I mean, for example, we're able to create knock-outs of specific genes in mammalian cells in both a timeframe and with a precision that really doesn't exist by any other technology and I think that's really been on of the key drivers behind this particular deal. But, as I said, that's something that isn't limited to the interests of Genentech, as is already reflected in the Pfizer collaboration that we have and I hope in many more to come.

So that should hopefully cover that part of your question, Pamela.

Yes and just if you don't mind reminding us all of the list of current partners in this biomanufacturing area?

Sure. I'll go and then I can be corrected.

Thanks very much.

So Genentech, Pfizer, Amgen, Medarex, Medimmune, Novartis, Novo Nordisk and that's where Eric says I should stop.

We have an evaluation agreement with Kirin.

And Kirin. And there are others, Pamela, but we're not going to announce them. We haven't announced them.

That's a nice long list. That's quite an impressive list right there. Thank you very much and I'll save my other questions.

Thanks, Pamela. Thanks very much, I appreciate that.

Okay. Thank you.

Charles Duncan with JMP Securities.

Hey, folks, congratulations on a great quarter and a nice recent deal with Genentech.

Thanks, Charles.

Pamela asked some great questions and many of mine on the terms of that deal. I guess one question that I might follow-up on is do you have any sense of the visibility or the timelines with which we could see some additional visibility from that program and from, for example, the Dow Ag program?

I'll give you my shot at it and then I'll ask others here to comment, starting with the Dow AgroScience program.

I'm comfortable saying, Charles, that as major milestones are met, both Sangamo and DAS are interested in communicating that and I think you'll see those type of milestones and announcements of those milestones in 2007 for sure. So you should expect and I think that it's reasonable to expect fair increasing visibility as more and more progress is being made, but quite a bit of progress is being made on the Dow program.

On the Genentech program, again, I think we'll leave for now those kinds of guidance in terms of their use and expectations of visibility on that to Genentech. We might have more to say about that next year, but at this point we'll leave that up to them.

Okay, that's fair. And then the second question that I had is relative to the upcoming data that you expect at ADA. You did a great job kind of running through what could be presented. Was it my misunderstanding or are you thinking about expanding the diabetic neuropathy trial? What are some of those kind of lessons that you hope to take away from the 509 data? Not of course saying what that data is, but what would you like to see at ADA?

Well, let me see if I can reiterate and then ask Dale if he wants to expand. But ADA is going to be a comprehensive update of our Phase Ib work across the kind of clinical end points that Dale outlined in his prepared remarks. Dale, do you want to add anything to that, or --?

The Phase I trial was expanded and the topic of the presentation will be the expansion. The data is very neurologically-oriented and we'll be focusing on the more objective end points in the neurologic evaluation, such as the quantitative sensory testing, which is a blinded way of testing whether or not the patients can detect a certain vibration unit, using a machine.

The second is looking at electrophysiologic tests, which are basically tests that measure the speed of nerve conduction, which is like taking a wire and trying to measure the speed of electricity as it goes across circuits.

So these are the types of data that we are presenting, and in a general sense, the reason we expanded the study was because we saw some positive effects, such as we mentioned these three patients that had return of nerve conduction velocity. Which is quite a surprising result. So, as we move ahead, we're really going to try to understand and document the potential for nerve regeneration.

And that, Charles, I think, is really the bottom line for ADA for us this year, is to try and communicate what we know thus far in the clinical setting about nerve protection and nerve regeneration.

My understanding that kind of data has really never been seen with drugs that have been developed in this indication. Is that true or am I missing something in the literature?

So I think that's correct. Most of the treatments for DN are generally symptomatic, so antidepressants or antiseizure medications. There have been a lot of attempts to try to improve nerve health through various strategies, such as aldose reductase inhibitors or protein kinase C inhibitors such as the recent Lilly Ruboxistaurin, which actually failed in a large DN trial, similar to the type we're doing.

So, I think using growth factors, especially VEGF, really represents a whole new strategy of trying to not only prevent worsening, but to actually try to improve nerve regrowth.

Okay. That's helpful. I'll step back in the queue. Thank you.

Thank you, Charles.

Brian Rye with Janney Montgomery Scott.

Well, good afternoon and thanks for taking my question.

Sure, Brian.

I'm curious, Edward, with SB-509 now in the midst of a broad Phase II program with data potentially coming out sometime in 2008, thinking about the next step, the potential pivotal program in 2009. If you could maybe refresh us on the Company's current thinking in terms of a commercialization strategy, if you'd like to have a potential partner in place before pre-Phase III discussions with the FDA for what I presume would be a fairy sizable pivotal Phase III study? Or just in general terms, where the Company is right there?

Sure, good question. So Brian, there are two basic approaches that we believe are available to us post Phase II data and obviously that assumes reasonably positive Phase II data. On of those is to look for a partnership with a major pharmaceutical or biotechnology company on a geographically specific, exclusive basis. And that's certainly with solid Phase II in a market like DN, something that we think is very achievable.

The other opportunity is to look carefully at those data and determine whether we want to move forward ourselves into a Phase III trial and to do that with some form of financing. But we expect to make that kind of judgment when we have a lot more visibility on the Phase II data.

Sounds good. That's helpful. Thank you, Edward.

Sure. Thank you.

Your next question comes from the line of John Sullivan with Leerink Swann. Sir? Mr. Sullivan? Mr. Sullivan, your line is now open. Please proceed. Okay.

Your next question comes from the line of Pamela Bassett with a follow-up with Cantor Fitzgerald. Please proceed.

Thanks very much. Just I wonder if you might be able to remind us of the revenue guidance. If you've given any revenue guidance and how we should think about ramping up the R&D expense for the year?

Sure, Pamela. Let me just reiterate the financial guidance that we gave on the call and that is we're on track to end the year with approximately $35 million of cash and cash equivalents. If I go back to the guidance that we gave at our analyst briefing in December, I think we gave the same cash guidance and gave a little more granularity on the expense side.

But I think the only specifics that we discussed there was really the significant increase in clinical development expenses. So we have not given any formal guidance or any guidance for that matter on the revenue side of things, or on the specific R&D expenses, except to say that the major part of growth in our expenses are a function of our increased clinical development activities.

And if I heard correctly, any announcements or more information regarding DAS might be in conjunction with meeting a milestone and therefore milestone payment this year?

Yes, Pamela. Those are the most likely near-term triggers for visibility around the program or more communications around the program.

Okay, great. Thanks very much.

Sure, thank you.

At this time there are no more questions.

We'd like to thank you for joining us on this call and we look forward to speaking with you again when we release our second quarter financial information. We'll be available later today if there are any follow-up questions. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.