Applied Genetic Technologies Corporation
Q3 2020 Earnings Call Transcript

Published: 13 May 2020

[Operator:]

Good morning and welcome to the AGTC Third Quarter 2020 Financial Results Conference Call. Today's call is being recorded.Before we get started, I would like to remind everyone that during the conference call, AGTC may make forward-looking statements, including statements about the company's financial results, financial guidance, its future business strategies and operations and its product development and regulatory progress. Actual results could differ materially from those discussed in these forward-looking statements due to a number of important risk factors, including uncertainty inherent in the clinical development and regulatory process, the extent and duration of the impact of the COVID-19 pandemic, and other risks described in the Risk Factors section of AGTC's most recent filing -- filed annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC. AGTC undertakes no obligation to update any forward-looking statements after the date of this call.For introductions and opening remarks, I would like to turn the call over to Sue Washer, Chief Executive Officer of AGTC. Ms. Washer, please go ahead.

[Sue Washer:]

Good morning and thank you all for joining us today. With me on today's call are Bill Sullivan, our Chief Financial Officer; Matt Feinsod, our Executive Vice President of Global Strategy and Development; and Mark Shearman, our Chief Scientific Officer. I'll provide a brief overview of the third quarter of 2020, after which Matt will review our clinic programs. Mark will review our preclinical pipeline and then Bill will review our third quarter 2020 financial results. We will then take your questions.I would like to begin today's call by highlighting the significant progress we have made in advancing our ongoing clinical programs in X-linked Retinitis Pigmentosa or XLRP and achromatopsia caused by mutations in either the CNGB3 gene or the CNGA3 gene. We started 2020 with significant momentum announcing sustained improvements and visual functions for centrally dosed patients in our XLRP trial and encouraging preliminary signs of biological activity in our achromatopsia trials. We also completed enrollment in the XLRP trial, completed adult enrollment in both achromatopsia trials and strengthened our balance sheet with a successful financing in February that raised net proceeds of just under $35 million.We are fortunate to have completed enrollment in all dose groups for the XLRP Phase 1/2 clinical trial and in all dose groups for adult patients for both achromatopsia trials prior to the widespread implementation of COVID-19 related stay-at-home orders and cessation of non-essential medical care.Consequently, we remain on track to report data from all three programs in the second half of 2020, including top line 12 months data from both the peripherally and centrally dosed initial groups as well as data from the two new higher dose groups in the XLRP trial and additional data for all adult dose groups in both achromatopsia trials.We believe our industry leading XLRP data package has us well positioned for an End of Phase 2 meeting with the FDA in the second quarter of 2020. The sustained biological activity observed to-date in our XLRP clinical trial reinforces our optimism that the program will move forward into a pivotal trial by the end of 2020.At our R&D Day in late January, we provided an update on our preclinical pipeline, which now includes two ophthalmology programs, three programs targeting central nervous system or CNS indications, and partnerships in the areas of optogenetics and genetic forms of hearing loss. We will provide more information about these programs later in the call. But taken as a whole, they give us multiple opportunities for future growth and value creation.Our XLRP program is advancing toward a pivotal trial in 2020. And as Matt will discuss shortly, the sustained improvement and visual function in 4 of 8 patients dosed centrally in the Phase 1/2 trial gives us what we believe is an industry-leading position in this indication. We have also seen early evidence of biological activity in both achromatopsia trials. Our best-in-class technology platform, unmatched manufacturing productivity capable of addressing larger patient populations and higher dosing, and our extensive expertise and capabilities to support preclinical and clinical programs, we believe means that we have what it takes to develop game changing therapies that provide meaningful benefit to patients.I'd now like to provide an update on the steps we are taking to minimize the impact of COVID-19 on our clinical trials, our timelines and our business activities. AGTC is well positioned to manage through this crisis with minimal disruption to our operations and manufacturing. As I noted earlier, we have completed enrollment in all XLRP dose groups and in all dose groups for adult patients of both achromatopsia trials. We remain on track to provide multiple data readouts for both our XLRP and achromatopsia clinical programs in the second half of 2020.As a leader in gene therapy, we are taking innovative and creative approaches that seek to proactively address potential challenges. For example, we are exploring alternative methods of data acquisition, such as collecting data via mobile vision centers and using local ophthalmologists closer to the patient as we strive to maintain the existing timelines for our programs.We also have overlapping contracts at multiple CDMOs and GLP testing labs to manufacturer and test our clinical trial material. And as these organizations are identified as essential businesses, we do not currently expect delays. We will, however, continue to assess the potential impact of COVID-19 on our business.I will now turn the call over to Matt for an update on our clinical programs.

[Matt Feinsod:]

Thank you, Sue. I will highlight a few key data sets from the XLRP and achromatopsia clinical programs that were presented at the R&D Day. A full R&D Day presentation is available on the Events & Presentation page on the AGTC website.Let me begin with an update on our ongoing Phase 1/2 clinical program in XLRP, which as Sue noted, is moving toward a pivotal trial in 2020. The data we presented at our R&D Day in January demonstrated that our XLRP candidate provides early and sustained improvements in visual sensitivity that are supported by encouraging trends in visual acuity and corresponding quality of life survey results, suggesting that these improvements are noticeably impacting patients’ day-to-day life. Coupled with the product’s favorable safety profile, these data have the potential to provide meaningful benefits to XLRP patients and will help to design the XLRP pivotal trial.The graph on Slide 10 shows a sustained increase in visual sensitivity in the four of eight evaluable patients who were responders, with the treated eye shown in red and the untreated eye shown in grey. This increase in visual sensitivity was sustained through the six months time point.Slide 11 shows a sustained increase in visual sensitivity in 50% of the treated eyes shown on the left, compared with untreated eyes on the right. Again, this increase was sustained through the six month time point, and the responders are clearly separated from the non-responders.On Slide 12, the graphs show a positive trend in visual acuity in seven of nine patients with treated eyes shown on the left and untreated eyes on the right. Again, this is sustained through the six month time point. Some patients who improved in either visual sensitivity or visual acuity also anecdotally reported noticeable improvement in visual function, including clear vision, and reduced night blindness. Based on the publicly available information from our competitors’ XLRP programs, we are confident that we have a very strong competitive position in this indication.As shown in Slide 13, we're the only company to report improvements in visual acuity in our Phase 1/2 clinical study, and we have reported strong durable improvements in visual sensitivity. We've also demonstrated superior gene expression in side-by-side non-human primate studies, and a more extensive stability profile.Finally, we believe that we may have a safety advantage in that, unlike data reported in one competitor's study, we have not seen evidence of recurrent inflammation in any patients. The XLRP Phase 1/2 study is fully enrolled and 28 patients have been dosed. Slide 14 outlines our next steps in moving forward toward a pivotal trial. We are on track for our End of Phase 2 meeting with the FDA in the second quarter of 2020, in which we expect to discuss the potential pivotal trials design outlined here.We plan to report further XLRP data readouts in the second half of 2020, including 12 month data for groups one through four, evaluating extended durability of the improvement in visual sensitivity, and continued safety analyses as well as interim safety and efficacy data associated with the higher doses administered in groups five and six. These data readouts will help us build a robust data set to support our BLA filing, and to maximize the potential benefit for the broadest range of patients, create the strongest data package for potential FDA approval, and if approved, commercialization.Now let me turn to the achromatopsia program. As previously announced in both achromatopsia studies, we have seen early signs of biologic activity supported by patient reported outcomes with no dose limiting toxicity, as well as DSMC-approved dosing of pediatric patients to the highest dose. Enrollment of the adult cohorts is complete, and enrollment of pediatric cohorts is ongoing.The graph on Slide 16 shows change from baseline in light discomfort for treated and untreated eyes at three months post treatment. Collectively, both programs showed encouraging preliminary results of biological activity on light discomfort testing, with two patients in the middle dose group and two patients in the high dose group showing indications of improvement. These findings are very encouraging and support continued development of our achromatopsia clinical programs. Both achromatopsia programs show that the product is generally safe and well tolerated.It's important to highlight that for a majority of patients improvement in light discomfort is the most important outcome. Additionally, data in the published literature and input from our achromatopsia experts suggest that we may see improvements in additional outcome measures at later time points in younger patients and/or in higher dose groups. We look forward to sharing additional data with you in the second half of 2020.I'll now turn the call over to Mark Shearman for a brief review of our preclinical pipeline.

[Mark Shearman:]

Thank you, Matt. Before discussing our preclinical pipeline, I'm pleased to report that the optogenetics program conducted by our partner Bionic Sight continues to advance. The Phase 1/2 clinical program has been initiated and the first patient has been treated.Slide 18 shows the updated preclinical pipeline that we presented at our R&D Day in January. We are advancing the multiple important pipeline candidates in ophthalmology, otology, and central nervous system indications.One of our ophthalmology programs target the dry form of age-related macular degeneration, AMD, which represents a compelling and large market opportunity, given that the disease affects over 24 million people globally, and the other targets Stargardt disease, which is one of the larger inherited retinal disorders with an estimated 70,000 patients.In collaboration with Otonomy, we are targeting the gene responsible for the most prevalent form of genetic hearing loss. We also have three programs targeting central nervous system disorders, which include our previously announced program in adrenoleukodystrophy or ALD as well as two additional rare genetic CNS indications; frontotemporal dementia, FTD; and amyotrophic lateral sclerosis, ALS, that has essential patient populations and well-defined clinical phenotypes.Our pipeline programs build on our industry leading AAV manufacturing technology and expertise, while enabling us to expand into a broader array of indications that have substantial unmet clinical need. For example, a 50 liter manufacturing run using the process that will provide material for our pivotal trials will produce an estimated 2,000 ophthalmology doses. Based on data generated at our facility and by our CDMOs, our manufacturing processes are not only more productive than other methods, but also producing material with greater purity and that the percent of vectors containing the desired gene of interest is nearly 90%.I will now turn the call over to Bill who will briefly review our fiscal results for the third quarter of 2020.

[Bill Sullivan:]

Thank you, Mark. Slide 21 provides an overview of our financial results. For the third quarter of 2020, we recorded a net loss of $11.2 million compared to net income of $11.5 million for the third quarter of 2019. The increase in net loss was primarily due to $21.3 million in revenue in the third quarter of 2019 and a $1 million increase in R&D expenses. The $21.3 million in revenue for the third quarter of 2019 was primarily due to recognizing revenue associated with the termination of the collaboration agreement with Biogen. The $1 million increase in R&D expenses is primarily the result of increased achromatopsia spending due to patient enrollment and new site activations and increased XLRP spending associated with patient enrollment. G&A expenses were about the same compared to the same quarter a year ago.Now I'll move on to our financial guidance. We ended the third quarter of 2020 with a strong balance sheet, supported by the successful February financing totaling net proceeds of just under $35 million. Total cash, cash equivalents and investments as of March 31, 2020 were $84.5 million. We believe these funds will be sufficient to allow AGTC to generate data from our ongoing clinical programs, initiate a pivotal trial on XLRP and fund and prioritize preclinical programs we just discussed into the second half of 2021.That concludes the team's remarks today. Operator, you may now open the line for a question-and-answer period.

[Operator:]

[Operator Instructions]. Our first question today is coming from Jim Birchenough from Wells Fargo. Your line is now live.

[Jim Birchenough:]

Thanks for taking the questions and congrats on staying focused through the pandemic. I guess first just getting more right in the second quarter, should we assume that a meeting date has been set with FDA for End of Phase 2? And just wondering how you'll share the results of any such meeting? And then I have a follow-up.

[Sue Washer:]

So we have provided guidance that we are confident that we'll have the End of Phase 2 this quarter. And based on our interactions, we are -- we remain confident. And as we've talked about before, once we have that meeting and are able to digest the recommendations from the FDA, we do plan to communicate publicly more information about the pivotal trial, when it will start and what the design will be.

[Jim Birchenough:]

And then just -- so if you could just touch on -- as you're adapting to the COVID-19 environment and potentially having to evaluate patients more in local settings, how does that affect sort of intra-observer variability and test measures, if at all. If you could just touch on how you're adapting and if it has any effect at all on sort of test measures?

[SueWasher:]

Well, I'll start this and then I'll ask Matt to provide a little bit more color. But the machines that we would use even locally are the same machines that have been used at the trial sites, and they are calibrated by our reading center. And we feel that the physicians, ophthalmologists that we're using are well trained in these matters. Matt, do you want to provide a little bit more color on that?

[Matt Feinsod:]

Yes. Sure, Sue. I think you basically said it though that, Jim, as Sue mentioned, the machines are run by techs. And we confirm and validate that the techs are sufficiently qualified to operate the machines, for example, on the microperimetry and the visual acuity is being tested in a standard clinical trial, rigorous fashion, et cetera. So we're taking measures there to confirm that standard testing is conducted.

[Jim Birchenough:]

And maybe just one final question going earlier in the pipeline, just on the CNS programs and things like FTD and ALS. There are other programs a little further ahead. I was just wondering how your AAVs compare if you've got any side-by-side comparisons of your AAVs or anything that suggest you might have an advantage with the AAVs you're using?

[SueWasher:]

That's a good question, Jim. And I'm going to ask Mark to provide some more detail, but we did do extensive analysis to make sure our products were differentiated. Mark?

[Mark Shearman:]

Yes. We haven't done direct head-to-head comparison with competitor compounds because we don't know all the details. But as Sue mentioned, we -- as part of our ALD program, we did do a comparison study with across a number of classes to select the one that we thought was most suitable for intra- cisterna magna dosing. And then from a differentiation perspective, we pursued the usual sort of customization and optimization of promoters and genetic concepts. So that's been our approach.

[Operator:]

Thank you. Our next question today is coming from David Nierengarten from Wedbush Securities. Your line is now live.

[David Nierengarten:]

Maybe just a follow up on measurements of patients. Yes, I guess, are there patients who have missed measurements or delayed measurements to-date in the study and kind of what are your contingency plans for data analysis on those patients if they did? Thanks.

[Sue Washer:]

Good morning, David. And happy to clarify that one of the things that we think is an advantage of the gene therapy method of action is that the patients have been dosed and the medication continues to be active in the patient through long periods of time. That's obviously one of the advantages of gene therapy. So even if the date at a local ophthalmologist or potentially back at the site, as sites reopen is not exact, we still have the ability to collect data. And so that is what our focus is, is to get as close to the exact time point as possible. But because of the long-term nature of the follow up, we are able to still collect appropriate data. And I think that the FDA guidances have said that they understand the challenges and that they'll be cooperative and interactive with developers on how that data gets analyzed.

[Operator:]

Thank you. Our questions recently from Matthew Luchini from BMO Capital Markets. Your line is now live.

[Unidentified Analyst:]

Hi, Sue. This is [Nola] on for Matt. Just looking at COVID-19 impact, noticed that you’re saying that the enrollment of new patients is being impacted. And looking at your studies, this seems to imply that pediatric patient enrollment for ACHM studies might be slowing down. Just thinking ahead, do you need more data from the pediatric patients to make a decision about going into the pivotal trials in the second half? And does this mean like there will be a -- still longer to make that decision? And then also for the optogenetics program, congratulations on first patient being initiated. Can you give some guidance on when we might see preliminary data from that program? Thank you.

[Sue Washer:]

And speaking to the -- our patient enrollment for our three lead programs, all of the adult patients in XLRP -- and that's complete enrollment for XLRP and all the adult patients in achromatopsia have been enrolled. So, obviously, no further issues with enrollment there.With regards to pediatric patients, those have always been challenging to enroll, as you might imagine. It's kind of a family decision and a family travel situation. So the enrolling in the pediatric patients group -- dose groups continues to be challenging and it’s independent of the coronavirus situation. We have said that to make decisions about moving forward in the corona tops here, we need longer follow up, higher dose groups and/or pediatrics younger patient information. So we're well on track for two out of three of those. And as the data rolls in, we will be analyzing that data in the second half of the year making decisions about moving that forward.When it comes to the optogenetics program, we did initiate that trial with Bionic Sight, they were able to do dose the first patient. That clinical trial site for optogenetics does happen to be in New York. So there will be some challenges to reopening that site and proceeding with enrollment in that trial. And as we get more information, we will provide guidance on timing.

[Operator:]

Our next question today is coming from Yun Zhong from Janney. Your line is now live.

[Yun Zhong:]

So the first question is a follow-up question on the End of Phase 2 meeting with the FDA is going to be in the second quarter. But you're also guiding towards data readouts updated date in the second half. Does it mean that you would have data that you haven't announced to be included in the data package to be submitted to the FDA?

[Sue Washer:]

Thanks for the question Yun. And it does follow-up from our Research Day as well as this earnings release. We had stated that in the End of Phase 2 package and the discussions with the FDA that we would provide them all the data that was in hand, even if that was interim, very early data on dose groups, and that's certainly what we are planning to do is to discuss with them the full amount of data we have. And since we had completed dosing on all does groups, including the too higher, whatever earlier interim data we have, we have included in our discussions with the FDA. However, we have guided that we won’t release all of that group five and six in later stage data into the second half of the year, so that we have a more complete data package that has been fully analyzed. So the information that we're sharing with the FDA is quite complete.

[Yun Zhong:]

And on the Phase 3 study design. Are there any details that needs to be finalized upon discussion with the FDA? And did I see it correctly that two eyes will be dosed sequentially. And if that's the case, how long is the interval and is there any information that you're going to collect between the two dosings?

[Sue Washer:]

One of the main purposes of the End of Phase 2 meeting is to talk with the FDA, get their recommendations as to the design of the trial. And that's the very important purpose of the End of Phase 2 meeting. And I'm going to ask Matt to comment more on how that interaction occurs and what our current thoughts are about that pivotal design. Matt?

[Mat Feinsod:]

Sure. Thanks Yun for the question. As you saw and just noted, it is in fact a bilateral study design, where we'd be dosing both eyes. We would not be operating the both eyes on the same day, of course, but there would be a standard and accepted interval that the surgeons are comfortable with, which is usually a couple of weeks at a minimum between the eyes.And the reason why we believe that bilateral dosing is important is because the FDA historically has preferred to see data in a clinical trial setting in a way that the product ultimately would be commercialized and used in the real world setting. And of course, should the product prove to ultimately be safe and efficacious and be commercialized, patients would certainly elect in many instances to have both eyes dosed. And so, that's why this dose design is proposed as you saw.

[Operator:]

[Operator Instructions]. Our next question is coming from Zegbeh Jallah from ROTH Capital Partners. Your line is now live.

[Zegbeh Jallah:]

Just had a quick question since you were mentioning the impact of that longer timeframes, younger patients and higher dose on the achromatopsia patients, are these endpoints are more likely to be influenced by time? And then, just had a quick question about potential timing of INDs for the Stargardt and adrenoleukodystrophy studies?

[SueWasher:]

Zegbeh, thank you for the questions. I'll start with the preclinical programs. We have not provided any guidance on the timing of the IND and/or clinical trials on those programs as of yet. As those programs mature, we'll provide more visibility on exact timing. When it comes to the achromatopsia program and endpoints that would be potentially become more important over time. I'm going to ask Matt to address that question.

[Matt Feinsod:]

Sure, thanks. So, right, as you mentioned, we did and Sue just stated again that the three factors that we believe might influence ultimately the outcomes are the extended follow-up on the patients’ higher doses and the younger patients. And to-date as you saw in the presentation, we've seen some early evidence of improvements in light discomfort, which as we mentioned, is a key symptom for patients and in many instances when surveying patients this is something that they'd most be interested in having an improvement with the therapy. There's some other end points that we'd be following, those would include visual acuity and perimetry, which is measuring retinal sensitivity as well as color vision, and because those are really three of the other primary symptoms that patients present with.

[Operator:]

Our next question is coming from Emanuela Branchetti from H.C. Wainwright. Your line is now live.

[Emanuela Branchetti:]

I was just wondering, given your current results and projected timelines for XLRP, can you help us putting in your therapy in context with competition, like do you see -- given your current position, do you see any competitor in the space for the XLRP program? Thank you.

[Sue Washer:]

So thank you for the question Emanuela. And we certainly understand that there's competition in the XLRP space. We were able to complete full enrollment of our Phase 1/2 trial as we mentioned, and we feel that the data set that we've presented in January is very broad, very robust. We're the only company as Matt stated to show not just improvements in visual sensitivity, but also significant trends in visual acuity for the patient, as well as a quite favorable safety profile. So we think we're very well positioned to be moving this product forward. We're very well positioned from a timing standpoint to complete that End of Phase 2 meeting and move into a pivotal trial.

[Operator:]

Thank you. We reached the end of our question-and-answer session. I’d like to turn the floor back over to Sue Washer for any further or closing comments.

[Sue Washer:]

Thank you. We believe that our achievements in the third quarter of 2020 and our continued progress toward a pivotal trial for XRLP position us for success with our current clinical programs, and for continued leadership in the field of AAV based gene therapy. Based on published data, we believe we have an industry leading XLRP clinical data and endpoints that are meaningful to patients and differentiate us from competitors. Although many of our employees are working remotely, the entire AGTC team remains committed to advancing our programs and are keenly aware that the COVID-19 pandemic does not reduce, minimize or obviate the significant unmet need that patients with XLRP and achromatopsia still face every day.We are eager to maintain momentum in our ongoing clinical trials. But as always, the safety of the patients and physicians who participate in these trials remains paramount. And we will move forward with our programs accordingly. As I always do, I'll close today's call by thanking the patients, physicians and the AGTC team for their dedication to our cause and their support of our efforts to transform the treatment of rare ophthalmic, otology and CNS diseases.I would also like to thank all of the healthcare workers and first responders who are carrying tremendous burdens in order to protect our health and care for our friends, families and colleagues. I look forward to making additional progress and sharing our joint achievements with you in the months ahead. And I hope you and your families are safe and healthy.

[Operator:]

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time. And have a wonderful day. We thank you for your participation today.