Applied Genetic Technologies Corporation
Q2 2021 Earnings Call Transcript

Published: 11 Feb 2021

[Operator:]

Good morning, and welcome to the AGTC Financial Results Conference call for the Second Quarter of Fiscal Year 2021. Today's call is being recorded. Before we get started, I would like to remind everyone that during this conference call, AGTC may make forward-looking statements, including statements about the company's financial results, finance, its future business strategies and operations and its product development and regulatory progress, including statements about the projected timing for its planned Vista and SkyLine clinical trials. The timing for reporting data in both of these trials and the potential of its ACHM clinical programs.

[Sue Washer:]

Good morning, and thank you all for joining us. With me on today's call are Mark Shearman, our Chief Scientific Officer; and Bill Sullivan, our Chief Financial Officer. During today's call, I'll briefly review our recent accomplishments. Mark will then provide an update on our achromatopsia and X-linked retinitis pigmentosa, or XLRP clinical programs, and Bill will review our financial results for the second quarter of fiscal year 2021. After our prepared remarks, we'll take your questions. With respect to our recent accomplishments, we are very pleased to have reported positive data from both of our ongoing clinical programs. Last month, we announced the first reported data to provide qualitative evidence of improvements in visual sensitivity in patients with achromatopsia due to mutations in the CNGB3 or CNGA3 gene. Mark will review the data in detail, but the key takeaway is that the visual sensitivity data supports the positive patient-reported outcomes that we presented in 2020, allowing us to focus on specific quantitative endpoints as we collect additional data that could support late-stage development products with the potential to change the lives of patients with achromatopsia. In November 2020, we reported positive data from an ongoing Phase I/II clinical trial in patients with XLRP. Mark will provide a more detailed review of these data in a moment, but there are two important conclusions

[Mark Shearman:]

Thanks, Sue. Let me begin by reviewing the progress in our achromatopsia clinical program. Overall, our ongoing Phase I/II clinical trials in achromatopsia continues to generate encouraging early data that support further clinical development. The product candidates are well tolerated across an 80-fold dose range and are demonstrating signs of biologic activity. Achromatopsia is a congenital disorder, wherein the gene mutations not only affect the function of the cone photoreceptors themselves, but also interfere with signaling to the developing visual cortex. This means that it may take additional time after function is restored in the eye for appropriate signaling between the retina and the brain to be fully reestablished. As we have previously stated, we believe that additional benefit may be observed by following patients for longer periods of time using higher doses and dosing younger patients. Last month, we were the first to report static perimetry data demonstrating improved visual sensitivity that exceeded the test, retest repeatability at patients last visits ranging from 3 to 12 months post-treatment for 7 of 16 patients in the 3 highest dose groups in the B3 trial and 3 of 16 patients in the four highest dose groups in the A3 trial. In the subset of B3 patients with a valuable multifocal electroretinograms, improvements in electrical signaling were measurable in the same treated area. We continue to analyze data from both the B3 and A3 trial and are on track to report 12-month post-treatment data for all adult subjects in the study in the second quarter of 2021.

[Bill Sullivan:]

Thank you, Mark. Slide 20 provides an overview of our financial results. For the second quarter of fiscal year 2021, we recorded a net loss of $15.5 million compared to a net loss of $8.6 million the second quarter of 2020. The increase in net loss was primarily due to a $2.5 million decrease in revenue, a $3.4 million increase in R&D expenses and a $300,000 increase in G&A expenses. The $2.5 million decrease in revenue was primarily due to $2.2 million of noncash bionic site collaboration revenue in fiscal year 2020 that did not recur in the current year. The $3.4 million increase in R&D expenses was primarily the result of increased XLRP spending associated with our planned manufacturing, clinical site preparation and other activities related to our Skyline and Vista trials. An increased employee-related costs, partially offset by a decrease in external spending for our achromatopsia trials. The $300,000 increase in G&A expenses was primarily due to higher legal fees, partially offset by a reduction in employee-related costs. Now I'll move on to our financial guidance. We ended the second quarter of fiscal year 2021 with total cash, cash equivalents and investments of $53.1 million. We believe these funds, along with net proceeds of approximately $69 million received from our February 2021 financing, provide AGTC with a strong balance sheet and will be sufficient to allow AGTC to generate data from our ongoing and planned clinical programs and fund currently planned research and discovery programs into calendar year 2023. That concludes the team's remarks today. Operator, you may now open the line for a question-and-answer period.

[Operator:]

Our first question is coming from the line of Jim Birchenough with Wells Fargo.

[Jim Birchenough:]

Thanks for doing your call away from 40 other biotech companies at the same time. So with that said, just on achromatopsia, could you maybe talk about the changes that patients are experiencing visually and quantifying that this is useful vision, number one. And I guess -- and how do you capture kind of the usefulness of the changes in their vision? And then so it seems pretty clear that you're turning back on cones. So would you expect improvements in photophobia? And have you started to hear that kind of anecdote? And when would you expect to see that dynamic?

[Sue Washer:]

Well, good morning, Jim, and thank you for joining us today. We definitely are seeing that the achromatopsia patients are reporting improvements in vision. And I'll turn it over to Mark, so he can kind of tie and quantify these changes in visual sensitivity and how that is being reflected in the patient's functional vision in their comments. Mark?

[Mark Shearman:]

Yes. Jim, thanks for the question. So as we showed in the presentation, there are examples now of patients whose fulfilled perimetry is increasing by an average of 10 decibels, which represents a tenfold increase in light sensitivity. We've also indicated that we have evidence from patient-reported outcomes feedback from the investigators that this is -- the patients are experiencing benefits to their vision. We gave one example, to your point about photophobia, where the patient was able to see things without the use of tinted contact lenses or goggles. And so we feel that as we've said, that the perimetry is the first indicator of the current being reactivated, and we feel that a lot of the benefits will now emerge as a consequence of the cones re-functioning because many of the symptoms of achromatopsia are a consequence of both the interaction of cones and rods in the retina together with the signaling of those photoreceptors to the visual cortex. And so we're very hopeful that as we continue to collect data for a longer trip periods of time higher doses and importantly, the younger pediatric patients that more and more of these benefits will emerge.

[Jim Birchenough:]

And Mark, maybe just on the younger patients that you're looking to trade down to the age of 4. Could you talk about -- it seems like earlier is better, but at the same time, is there high -- do you expect higher retest variability? And how do we think about testing kids for things like visual sensitivity at that young age?

[Mark Shearman:]

Yes. Again, a good question. We don't have a lot of data to date on the younger pediatric patients. We are being guided by the principal investigators who have seen most of these patients before are aware of their abilities and their deficits and how they may perform on the test. And so I think this is another reason why we want -- we're eager to start -- restart enrollment of the pediatric patients to get a better handle on their performance in these tests. And we won't enroll a patient, a young patient in this trial if we feel they can't complete the test as required. And as I mentioned, we'll be guided by the investigators on that.

[Sue Washer:]

And I'm just going to interject also that we have modified the study manual to modify how the test takers are being interacted with. And so we did modify things like the ERG and the static perimetry to account for the younger age. So we've really worked very hard with the pediatric ophthalmologists to make those tests as easy to complete for the younger patients as possible.

[Operator:]

Our next question comes from the line of Joe Pantginis with H.C. Wainwright.

[Joe Pantginis:]

So I was wondering if we could just step back a second here with achromatopsia and your endpoints. And I don't think I'm overstating it when I say you are sort of really blazing new territory here with regard to assessing efficacy in these patients. So can you talk a little bit to the evolution of the clinical endpoints that you might bring forward? Obviously, you're looking more towards static perimetry now and how this might impact your regulatory discussions?

[Sue Washer:]

I think you bring up a very good point because we have had discussions with people about how in our XLRP program we concentrated very much on the MAIA microperimetry. And I think that initially, we also thought that potentially the MAIA microperimetry because it was more precise and had a little bit less variability that, that might also be important in achromatopsia. And that has not turned out to be the endpoint has shown us the biggest difference and has been really able to be measured. And I'm going to turn it over to Mark, so he can really explain why there's been this evolution in how we measure visual sensitivity in the achromatopsia patients. Mark?

[Mark Shearman:]

Yes. So just to make a further point. So the MAIA perimetry, the reason why the patients -- this endpoint hasn't proven to be useful is because of the particular details, the technical details of taking that test. So for example, the MAIA perimeter uses a smaller target than the octopus perimeter and the achromatopsia patients, because of their poor visual acuity, cannot detect that target well, so they don't perform the test. So I think the point is that we continue to evaluate a number of different tests that will interrogate the patient's response to treatment, whether it be acuity, sensitivity, light discomfort, as we indicated in the presentation. We've also introduced functional MRI and a new color brightness test. We feel that both of these in response to the feedback and the data that we've seen so far and may help us better quantify what the patients are clearly -- the manifestations of the improvements that they're experiencing.

[Joe Pantginis:]

Got it. Got it. And then my second question, I guess -- if my first question was a step back, I guess, Mike, for my next question is a step forward. And Mark, you mentioned in your prepared comments about improved manufacturing protocols and processes that you guys have been putting in place. I was wondering if you could share any specifics around that? Obviously, there's a competitive landscape to consider here, but how this improves your overall processes and how it could be translated to it across your pipeline?

[Sue Washer:]

Yes. I'll take the first answer to that, and then Mark can talk about some of the details. But we've focused on two main things

[Mark Shearman:]

Yes. I think it's really productivity and quality. The productivity improvements have come from a couple of different aspects, one of which is weak cloning of some of the cell lines that are used for packaging and the virus, which gives higher yields as well as an improved proportion of full to empty capsids. And then we've modified the downstream processing of the virus to change the column systems that they use again, enriching for full captive and at the same time, reducing the overall process residuals. And in many cases, the process residuals are now at the limit or below the limit of detection of the revised and improved analytical assays. So, we feel that threefold higher improvement in full to empty, which helps with dosing and safety and the immune response to the capsid and then improvements in the overall quality through the changes to the downstream processing.

[Operator:]

Our next question is coming from the line of Matthew Luchini with BMO Capital Markets.

[Matthew Luchini:]

Maybe first on XLRP. Can you just help set expectations a little bit around the 12-month group 5, 6 data that's coming next quarter? And how should we think about this data set, particularly in the context of the Skyline data that's going to come at the end of the year with the new endpoints? And then on achromatopsia, just, like, to get your latest thinking on sort of the go/no-go perspective on this program. Do you feel like with the data that you've now generated, you have what you need, how critical I guess, really is the data that's going to come from the 4 year olds? And then -- yes, just those two for now.

[Sue Washer:]

So thank you, Matt, for joining us this morning. And first, on the XLRP, the 12-month data from groups 5 and 6, I think that what our expectations would be based on what we've seen so far is that we see the same durability of responder rates from the 6-month time period to the 12-month time period. And so we would consider that consistency and durability of the product to be a very positive sign. What differs from the 3-month data we expect from Skyline is that, that 3-month data from Skyline will be our first opportunity to see how the mobility maze that we're instituting corresponds to those improvements in sensitivity because we believe one of the conundrums or one of the kind of stumbling blocks with the visual sensitivity endpoint is that a lot of people have trouble getting kind of their brain wrapped around, what are those changes in visual sensitivity really mean? Whereas when you see someone perform on a maze test, it's much easier to understand. And so that's why we added the maze task. We're working with ORA, a third-party provider, who's developed a very sophisticated maze that are multiple tests at the baseline with different high and low obstacles, color contrast, a very fine indication of light levels. So we feel we're using a very sophisticated maze. And it's that 3-month data, we're very hopeful based on other products that have used maze before that, that maze will support and help to explain to people and make real to people these improvements in visual sensitivity. So that's really one of the main purposes we had for expanding the Phase I/II, adding more patients, adding that maze test and also randomizing into dose groups. So patients won't know whether they're in a low or high dose. So hopefully, that addresses your XLRP questions. And then I'm going to turn it to Mark to talk about what is the -- what have we seen so far in the achromatopsia without visual sensitivity improvement and then what we hope to learn from the pediatric patients. Mark?

[Mark Shearman:]

Yes. So, we have examples of both adults and pediatric patients improving in the full field static perimetry. I think people who work in this area all agree that the achromatopsia indication results as a consequence of both direct effects on the cone photoreceptors, but also on the communication of those photoreceptors with the target field, individual cortex of the brain. And the development of various aspects of visual function to adulthood levels takes place from early birth through to about age 12 to 14, depending on the individual. And so I think what we're doing is a very logical progression to move to younger patients where there is more opportunity to correct the deficits that those patients have by treating them younger. So I don't think there's any debate that, that's the right thing to do. And so we're very hopeful that in doing so, the benefits that we've already seen in the older patients will be potentially greater in those younger patients.

[Matthew Luchini:]

Okay. So just to make -- I guess, just to make the point, explicit, further progress in this program is contingent upon -- continued and improved benefit in the younger patients? Is that the take on message of all that?

[Mark Shearman:]

Well, as we indicated, we will have the month 12 adult data. The data that we disclosed recently was a combination of between 3 and 12 months for different patients as they are progressing through the dose escalation paradigm we're going to see how that looks at month 12, and there could be some changes, even greater improvements from what we've seen already, plus dosing the remaining 2 groups in both A3 and B3 in the younger pediatric patients. So I think collectively, that entire data set will give us a better sense of the optimal path forward for the achromatopsia programs.

[Operator:]

Our next question is coming from the line of Kristen Kluska with Cantor Fitzgerald.

[Kristen Kluska:]

The first one I have here is on achromatopsia. And I was hoping you could remind us about the age that these patients start to lose the brain plasticity? And at what point during the course of their lives, does this become severe? And I guess I'm just curious here, as 2 of the 3 individual patients that you reported today, they were adolescent. So wondering if this at all supports the rationale of evaluating the pediatric patients?

[Sue Washer:]

Yes. Kristen, thank you for joining us today. And your questions really do kind of follow-on Matthew's questions and distinguishing between what we can expect in adult patients and pediatric patients. This is the first time in the achromatopsia patient population that there's ever been seeing a quantitative improvement in an endpoint of this magnitude. And so I think one of the messages here is that we're still learning about what is possible to improve in these patients. We saw such great results in our preclinical studies, which were naturally occurring dog and sheep models that were we've always been very hopeful for this patient population. And some of the patients that improved by that tenfold improvement in visual sensitivity, were the older patients. And so by collecting the additional data, we'll learn is it possible to get even better improvements in the pediatric patients. Because these patients have these symptoms and this deficit from birth. And the -- I'll pass to Mark, the question about neuroplasticity. I think it's important to point out that in the data we've seen to date, we've seen really good improvements in some older patients as well as the adolescent patients. But turning it to Mark.

[Mark Shearman:]

Yes. Kristen, it's a good question. I think the short answer is that there's not a fixed point in time where you go from development to no development, it progresses through infanthood through to young children then into teens. And even in some cases, such as faith perception continues to mature into young adulthood. So I think at this point, we have some guidelines on when these different facets of visual development change or are completed. But the bottom line is we're going to be doing the study, generating the data to allow us to define how this occurs in achromatopsia patients because a lot of the evidence and the information that I'm quoting is basically based on just development of the cortex, not in the context of a disease where you're trying to correct it. The closest we know about is something called Amblyopia, where if you have disturbances in vision that can affect development, but we know that, that can be corrected to some extent, even in adult later childhood and adulthood. So I think we're still finding eggs basically. And that's why we're very excited to enroll the remaining pediatric patients to basically generate the data.

[Kristen Kluska:]

And then I noticed in your February corporate presentation that you highlighted partnering efforts for some of your IND-enabling candidates. So with that, could you help us understand the company's strategy beyond the XLRP and ACHM programs? Specifically, which indications here you might be looking to take forward yourself versus where to partner? And again, if these partnerships are something you're looking to establish ahead of running trials? And then lastly, this is a pretty extensive pipeline, so what should we expect this year in terms of maybe some additional preclinical data?

[Sue Washer:]

So we are, as a company, as you might imagine, very focused on XLRP and achromatopsia as the most advanced programs and the programs most able to provide value to all of our stakeholders in the near-term and the programs that can get product to patients in the near term. Given that, we are very excited about our preclinical pipeline. And there are many programs there that we think have tremendous value such as our CNS indications, which can reach an even larger patient population than some of our ophthalmology indications. And we're interested in partnering them because we can't -- with such an extensive pipeline in a smaller company, you can't do everything independently. And so we would expect over the course of 2021 to have additional data. We've mentioned that the most important meetings of the year, for our industry, both ARVO and ASGCT, are coming up in the spring. We expect to participate fully. And so we would have more guidance and information about these programs throughout the course of 2021.

[Operator:]

Our next question is coming from the line of Zegbeh Jallah with ROTH Capital Partners.

[Zegbeh Jallah:]

Just a few questions for me. The first two being about the ACHM program. Just curious if you expect to see a difference in efficacy between B3 and A3 patients as you continue to accumulate data? And then the second one, just kind of being about the new endpoint for ACHM. I know you plan to meet with the FDA after you get more data from that program, but any feedback about KOL's thoughts on the endpoint as well as expectations from the FDA regarding efficacy endpoints for ACHM?

[Sue Washer:]

Well, Zegbeh. Thank you for joining us today. And I'm going to pass this question to Mark to talk about what our current thoughts are. On whether we would expect any differences between A3 and B3 and then the collection of data points and interaction with FDA. Mark?

[Mark Shearman:]

Yes. So the B3 and the genes are two sub units of an ion channel. And we don't feel since those general -- those subunits and associate . We don't see any reason why B3 or A3 should be different for one another. Clearly, the phenotype of the disease is the same. So at this point, we feel that the difference in numbers that we're seeing is just a -- because it's a small number of patients and we haven't progressed the A3 trial as far as the B3 trial yet. So we're going to just wait and see how that plays out before reaching any conclusions as to whether B3 or A3 is more readily corrected than the other. And to your second point, I think the full fuel static perimetry is a very well-known and established endpoint technique for measuring visual sensitivity. It is used or has been used in other indications as a primary endpoint. So we feel that the FDA has quite a lot of familiarity with the octopus perimeter and the changes that they would expect to see as being clinically meaningful. So I think right now, that's a great starting point for us. As a primary endpoint that's quantifiable in these patients. And as we're collecting more and more data, as we always do, we'll continue to see what emerges and see if there's any adjustments to that. But right now, we feel this is a good point to move forward with.

[Zegbeh Jallah:]

And then the final one here for me is you are seeing success with ACHM now you've presented really positive results with XLRP and now with these two programs, just curious if this has any read-through to the rest of the pipeline in terms of things that you accomplished here exactly make things easier from a process perspective as well as -- in terms of making sure the other gene therapies are efficacious?

[Sue Washer:]

Yes, it's a good question, Zegbeh. And certainly, these -- the success we've seen in these two programs do give us great hope and confidence in our two other ophthalmology programs, which are the CFH program for dry MD and the Stargardt program because in those programs, we're targeting the same types of cells, photoreceptors. And our manufacturing process, our product construct, screening process, would all be directly relatable and read through to those programs. In the same way for the CNS indications, our manufacturing process is really agnostic which serotype we're using. And so we would be using the exact same highly productive and characterized manufacturing process in the way that we go about screening for capsids, promoters and designing the gene cassette, is exactly the same in those indications. We screen in nonhuman primates, so that we're sure that we're screening for the right specificity. We go through and all the way through to monitor biological activity and animal models for each component. And so our philosophy and methodology are really carried through to those indications as well. And the same can be said in otology. And otology is really very, very similar in the different kinds of cells and the actions of the different kinds of cells and the ears in the eye. And so we are gaining more and more confidence that how we design, construct and manufacturing these vectors are really in a very solid foundation.

[Operator:]

It appears we have no additional questions at this time. So I'd like to pass the floor back over to Sue Washer for any closing comments.

[Sue Washer:]

Well, thank you, everyone, for joining us today. And we believe that the recent advances in our XLRP and achromatopsia trials and the added proceeds from our recent public offering, put us in a very strong position to work through all the multiple milestones in the months ahead. We expect to report 12-month data from group's 5 and 6 in the ongoing XLRP trial and all the adult patients from the ongoing achromatopsia trials in the second quarter of 2021. And to report that 3-month data from the Skyline trial in the fourth quarter. We're currently focused on completing the pediatric patient enrollment in the 2 highest dose groups in both of our achromatopsia trials, as Mark mentioned. And following all the patients through 12 months with the 3 months of data expected in the fourth quarter of this year. We're also looking forward to additional Vista and Skyline readouts in the calendar year 2021, 2022. And finally, we intend to continue advancing the prioritized preclinical programs as we discussed today, towards the clinic. Despite the challenges in the world around us today, I've never been more optimistic about our potential to make a meaningful difference in the lives of our patients. And I'm especially thankful to the entire AGTC team, our clinical partners and the patients in our trials, enabling us to achieve important milestones and put us on a path toward continued growth and progress during an unprecedented global pandemic. Our recent achievements give us additional motivation to do the work needed to realize the potential of our technologies and programs. I look forward to sharing our progress with you in the months ahead. Thank you.

[Operator:]

Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time.