Applied Genetic Technologies Corporation
Q3 2021 Earnings Call Transcript

Published: 17 May 2021

[Operator:]

Good afternoon, and welcome to the AGTC Financial Results Conference call for the Third 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, financial guidance, its future business strategies and operations and its product development and regulatory progress, including statements about its current and planned clinical trials.

[Sue Washer:]

Good afternoon and thank you all for joining us. With me on today's call are Stephen Potter, Chief Business Officer; Mark Shearman, Chief Scientific Officer; and Bill Sullivan, our Chief Financial Officer. During today's call, we'll review our recent accomplishments and then we'll take your questions. We've had several notable accomplishments since our last quarterly call in February, all of which enhance our vision of using our gene therapy expertise to develop groundbreaking therapies for people with rare diseases. Notably in our X-linked retinitis pigmentosa, or XLRP program earlier this month, we reported new data from the ongoing Phase 1/2 XLRP clinical trial that further supports the best-in-class potential of our XLRP product candidates. The key takeaways are that we saw a 50% response rate for patients in Groups 5 and 6, who meet the inclusion criteria for both of the Skyline and Vista trials at month 12 and we also saw a statistically significant difference with respect to visual acuity in treated compared to untreated eyes for patients in Groups 2, 4, 5 and 6 at month 12 based on Best Corrected Visual Acuity, or BCPA data. Finally, we demonstrate a continued durability of response at month 24 – Group 4, available for evaluation at that time point. Last week, we announced that we have initiated plans to lease a build-to-suit 21,000 square foot current grid manufacturing practices, or cGMP manufacturing and quality control facility adjacent to our Florida location to prepare for late-stage development of our XLRP and achromatopsia programs as well as to support our preclinical pipeline. Build out of this GMP facility, which will support up to 500-liter scale manufacturing is part of our strategy to enable more rapid filing of a Biologics Licensing Application and commercial launch of our XLRP product candidate upon potential United States Food and Drug Administration approval.

[Stephen Potter:]

Thank you, Sue. Consistent with our commitment to improving patients' lives we have also launched three new initiatives to enhance the patient journey with guidance from a global advocacy community on low vision, which the foundation fighting blindness fighting blindness Canada and retina international. We improved our website to make it more accessible and welcoming. These enhancements to the website, which are intended to make information easier to find for patients with low-vision, include different font sizes and color options to make the pages easier to read and an option for the Page to be read aloud. Recognizing the increasing use of mobile devices by patients, these enhanced features are also designed for mobile compatibility. We also launched a new website that is dedicated to XLRP information and can be accessed at www.scenictrials.com.

[Sue Washer:]

Thank you, Stephen. Before Bill provides a review of the financials, I would like to thank him for his contributions to AGTC. As we announced earlier today, Bill has decided to pursue the same position at an early stage oncology company, one whose mission he is very passionate about. We would not be in our current position of strength without Bill’s vision and financial acumen that helped to fund the company. On behalf of the company, I sincerely wish Bill continued success and thank him for his many contributions to AGTC. With Bill’s departure set for June 9, Jerry Reynolds, currently our Vice President, Accounting, will serve as our Chief Accounting Officer and Treasurer assuming certain key financial responsibilities for AGTC including SEC reporting and Corporate Governance. A search for a new CFO is already underway.

[Bill Sullivan:]

Thanks, Sue, and thank you for those kind words. I’ve certainly enjoyed my time at AGTC, working with you, working with Steven, Mark and all my fellow colleagues at AGTC. I believe the future is bright for AGTC and I look forward to following your future success. And again, thank you. With that said, I’ll now turn to our financial update. For the third quarter of fiscal year 2021, we recorded a net loss of $14.9 million, compared to a net loss of $11.2 million for the third quarter of 2020. The increase in net loss was primarily due to a $2.7 million increase in R&D expenses, a 400,000 increase in G&A expenses, and a 600,000 increase in other expenses. The $2.7 million increase in R&D expenses was primarily the result of increased external XLRP spending for planned manufacturing, clinical site preparation and other activities related to the Skyline and Vista trials, partially offset by decreased external achromatopsia spending. The $400,000 increase in G&A expenses was primarily due to higher legal fees, partially offset by a reduction in employee related expenses. Following the completion of our successful $75 million financing in February, yielding net proceeds of approximately $69 million, we ended the third quarter of fiscal year 2021 with total cash, cash equivalents and investments of $111 million. We believe these funds, in addition to the $10 million of proceeds that we recently received from our amended loan agreement with Hercules, will be sufficient to allow AGTC to generate data from our ongoing planned clinical programs, build out our new cGMP manufacturing facility 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:]

Thank you. Our first question comes from Joe Pantginis with H.C. Wainwright. Please state your question.

[Joe Pantginis:]

Hi, everyone. Good afternoon. Thanks for taking the question and Bill best of luck to you in your new endeavors. So, first, I would just have a quick logistical question and that's just, I guess, XLRP patient availability as the competitive landscape just shrank a little bit and there are other studies ongoing as well.

[Sue Washer:]

Well, thank you for that question, Joe. And I think it is a question that would be on the top of everyone's mind. What we have done and Stephen really talked about this is really done a great deal of work reaching out to patient organizations and our partnership with Serva Health has really been wonderful. And we are really at the point where it's not patient identification and patient interest that is any kind of rate limiting factor on our trials moving forward. So we're very proud of the efforts of patient advocacy, patient enrollment, our partnership with Serva Health that have really put us in a positive position.

[Joe Pantginis:]

You know that's helpful. Thanks. And then my question is a little broader, it first starts with Biogen, but then links to your own initiatives. So, I guess, obviously, we saw the clinical data around Biogen. We know some of the safety history obviously from their publications out of Nightstar. So maybe can you just discuss some of the safety differentiations, but I specifically want to link it to – as you've said already in your prepared comments, your proprietary capsids, your manufacturing that you've had in place and your new manufacturing. And specifically also what have you learned from others, your current manufacturing that you've had in place for quite some time now that you can apply to this new facility?

[Sue Washer:]

So I'm going to go ahead and ask Mark Shearman, who is on the line to address the differentiation, the product and the safety profile. And then I'll go ahead and follow up with manufacturing differentiation. Mark?

[Mark Shearman:]

Yes. Thanks for the question, Joe. So, the primary difference between our products and that of Biogen Nightstar is the capsid. And if you recall, we did a fairly detailed comparison of the ability of the different capsids, meaning our own Nightstars or Meira to penetrate into primate photoreceptors and expressive transgene showing that our capsids have about a two to threefold improvement in that ability, so a greater expression level. So I think that's important, but I think as Sue referenced in her comments selecting the appropriate dose is key both from a safety perspective as well as an efficacy perspective. And we did exhaustive studies in non-human primates as well as in the natural occurring dog model to really match efficacy with safety. And so that's allowed us in the clinic to essentially reach the maximum tolerated dose in a safe way, and one which is controlled by concomitant use of steroids and allow us to determine and show activity at multiple doses even at doses five and six, which was the latest the data we shared recently. So I think that puts us in a great position to be able to really know what the most effective dose is and know and how confident that that can be administered safely. And then on top of that, the improved manufacturing process allows us to have an enrichment of full to empty, so would use the total capsid load as well as process residuals. So I think overall lots of things in our favor in that regard.

[Sue Washer:]

And then Joe, just to follow up on the manufacturing facility and what we've learned, I think the big thing we've learned is that to have control of your timeline and have control of your manufacturing and quality control analysis is critically important. And without having some measure of internal manufacturing capabilities, it is very stressful on the organization. And so bringing that manufacturing and keeping in-house as we're now moving into late-stage development, we thought was a very important strategic decision to make and we're very excited about that prospect. And I think what we've learned by watching others build facilities is that you need to be flexible. You need to have the ability to have many different products work in your facility at different scales. As I said, this facility has been designed to have up to 500-liter batches, but certainly we can do smaller as well. And we've really been able to bring on board consultants and experts that have already built multiple facilities. So this is we're able to use other's expertise and kind of have been there, done that set of people to help us be successful.

[Joe Pantginis:]

Got it. Thank you very much.

[Operator:]

Our next question comes from Dae Gon Ha with Stifel. Please state your question.

[Dae Gon Ha:]

Great, good afternoon and thanks for taking our questions and congrats on all the progress. Maybe I'll start with my first question on the XLRP side, the point of differentiation as part of the follow-up to the earlier question. And then second, maybe touch on the logistics and timeline for the manufacturing. So Mark, if I heard you correct, and also Sue in your prepared remarks you'd laid out the number of differentiation between your product and Nightstar Biogen. But I guess going to the point about BCVA improvement that you saw in your data, I wanted to kind of get your take on the GRK1 promoter that's currently in use in your construct. Perhaps if you can talk a little bit more about what's specifically unique about this promoter? Why you selected it? And what gives you confidence as we go forward that not only are we getting the BCVA, but also whatever we saw on the visual sensitivity will turn out to be robust in the Skyline and Vista trials? And then secondly, on the manufacturing side, in your press release and also in your prepared remarks, you mentioned it's going to be online or coming online in the second half of 2022, which I guess would coincide with the six month interim data from your Vista trial. So once it does come online, can you walk us through what would need to be done in that new facility such that by the time you have the 12 month data from Vista that the filing would actually be done in a sort of concurrent manner and without any supplemental submission that would potentially lead to a delay if you will. So any detail on that would be great. Thank you.

[Sue Washer:]

Well, thank you, Dae Gon Ha for those digging a little bit deeper into the information and allowing us to expand on what it is we're doing and what it is we're planning. So, Mark, I think that you can address both the statistically significant improvements we're seeing in BCVA and attributes of the product that could contribute to that.

[Mark Shearman:]

Yes. So I think your question was on the GRK1 promoter, but I'll also expand it to the codon optimized transgene itself. So the GRK1 promoter in our hand outperformed another promoter, which was known in the literature to support expression in both rods and cones and that was IRBP. Within our hands, the GRK1 promoter was superior and we showed that in non-human primates the direct head-to-head comparison. The GRK1 promoter is known in the literature. There are versions of it and always includes the co-promotor plus an additional regulatory element. So that may be a difference between ourselves and the competitors. And then yes, each company has used – well, two of the three companies have used codon optimized RPGR, the third company has used a truncated version. The two codon optimized versions are somewhat similar, but I believe we are the only company that has really done in-depth characterization of the stability of our version of the codon optimized RPGR and that means both sequencing DNA as well as protein in vitro and in vivo, as well as through the manufacturing process itself. So I think a combination of that sort of exhaustive scrutiny and testing of the constructs gives us confidence that we've chosen the right dose and that the transgene is being effective and that seems to be playing out in the efficacy both in terms of the perimetry, but also as you referenced the BCVA. And so as of now we have 12 months data, all dose groups showing us a statistically significant difference between the treated eye and the untreated eye relative to baseline. Obviously, we have limited access to what Biogen and – Biogen Nightstar and Meira have in their clinical trials. But as far as we know based on what's published, they're not claiming using the sort of standard BCVA approach, any difference between the treated and untreated eyes.

[Sue Washer:]

And then just following up on the manufacturing timeline, yes, you're correct that we're saying it will be online in the second half of 2022. And by online, we mean that the facility will be validated and we'll have done shakedown runs and what will need to be done at that point is true engineering runs and comparability studies before we could be ready to file the BLA. So we think the timing is really right on point to be able to have no delay going forward.

[Dae Gon Ha:]

Great. Thanks for taking the questions.

[Operator:]

Our next question comes from Kristen Kluska with Cantor Fitzgerald. Please state your question.

[Kristen Kluska:]

Good afternoon, and thanks for taking the question. The first one is on otology in-light of some of the recent findings you presented with your collaborator autonomy. Could you discuss any synergies you see with some of the ophthalmology conditions for gene therapy approach? And then on the flip side, how do you start to think about some of these gene therapies for congenital indications, where the effects in this case, the ability to hear could be completely apparent from the time of birth?

[Sue Washer:]

So, Kristin, thanks for joining us today, and thanks for highlighting a program that we're really quite proud of and excited about and the relationship with autonomy is so strong. And I'm sure you're picking up on the data that's just been presented at ASGCT. I'm going to move this to Mark to discuss the similarities that we saw in working in the ear and working in the eye. Mark?

[Mark Shearman:]

Yes. So thanks for the question. Yes, so basically there are a lot of similarities in terms of known cell types, the anatomy of the ear, the ability to introduce the virus to the appropriate place. But on top of that, we really apply that discipline in the trade craft that we've developed in ophthalmology for autology. And by that, I mean prior to the recent data announcement we've over the last several years and time and assets in both rodents as well as non-human primates identify the optimal capsid for expression and support cells. So it's a novel capsid variant that we're using in this program. We're using the ubiquitous promoted, but that's coupled to a cogen optimized GJB2 transgene, which again we tested multiple variants and selected the best one. And so we spent time coming up with an optimized construct and then our colleagues at autonomy have in-house set up the appropriate animal models and demonstrate the very encouraging and promising data showing rescue of the phenotype. So we were really pleased with the data. We had some anticipation or expectation that they should work based on how we designed the construct and the fact that we knew that we were able to express the transgene in the appropriate cell types, including in non-human primates.

[Sue Washer:]

And then Kristin, just speaking to your question about the time of onset in some of these genetic diseases of hearing loss and being apparent from birth, one of the reasons and Mark can speak more to this. One of the reasons we chose GJB2 is one, it's one of the most common causes of genetic onset hearing loss, but also there is a longer window of where you can potentially intervene and maintain hearing before you really have to go to that kind of end-stage solution of a cochlear implant. So, Mark, I don't know if you have a few words to expand on that.

[Mark Shearman:]

Yes. So that was a consideration. I think we feel that we can administer this product to obviously very young patients ahead of when the rescue surgery would be needed to be done for a cocoa implant, which would be prior to speech development. So there is a window of opportunity here where we feel that we can correct the deficit and give ourselves time to determine if that's happening before these children would have to be treated with a cochlear implant. That's not the case with all genetic mutations, particularly some of the ones that are manifest in hair cells, but GJB2 was one of them. And as Sue mentioned, this is also the most prevalent genetic mutation. So we feel that it'll give us a, an advantage in terms of being able to select and access appropriate patients.

[Kristen Kluska:]

Great. Thank you.

[Operator:]

Our next question comes from Matthew Luchini with BMO Capital. Please state your question.

[Matthew Luchini:]

Hi, good afternoon, everyone. Thanks for taking the questions. So I think first for me on achromatopsia, you've talked in the past about the importance of getting the pediatric data to the program, and I'd appreciate if you could provide your latest perspective on the importance of the data from these patients, given sort of everything that you've seen from the other cohorts thus far, and kind of as the immediate follow-up to that, are you in a position to provide any preliminary color on when you think those missing those remaining patients might be actually enrolled? And then I have one follow-up from there. Thanks.

[Sue Washer:]

Thank you, Matt, for the question. As far as I'll start backwards, as far as enrollment we are actively enrolling patients in both the achromatopsia B3 and A3 trials in that age group of between four and eight years old. So that enrollment is ongoing and we have not changed our guidance, but having three months data by the end of the year. So far that's going well, despite the pandemic. And we're hopeful that we can continue in that way. We do still feel it's important to get the pediatric data, to have a fulsome understanding of what's going on in the interaction of activating cone cells and being able to get communication back to the visual cortex. And also because we added for the pediatric groups, the additional tests of functional MRI and the additional color brightness tests. We are very encouraged and that's why we released the data earlier this year. Very encouraged by what we're seeing in the octopus perimeter the static full field perimetry in the adult patients. But we believe that the pediatric data might give us a more fulsome picture due to the neuroplasticity in younger patients.

[Matthew Luchini:]

Okay, great. Thanks. And one sort of bigger question is what is the company's latest position or view on partnering the lead programs? Is that something that's actively under consideration, something that is sort of ongoing, or do you feel perhaps you want to wait? I know there's been comment's in the past, taking our licensing partner to some of the earlier programs would appreciate your perspective on the later ones? Thanks.

[Sue Washer:]

Yes. I think that we're in the same position as we've guided before, especially with the recent financing and our ability to move forward and generate the data from the Skyline and Vista trials. I think we would at this point want to have that data in hand before entertaining any particular partnering offering. We are actively looking for partners for our preclinical programs though. So guidance hasn't changed there.

[Matthew Luchini:]

Okay, great. Thank you for taking questions.

[Operator:]

Our next question comes from Yanan Zhu with Wells Fargo. Please state your question.

[Yanan Zhu:]

Hi, thanks for taking my questions. So first I wanted to follow-up on earlier question regarding manufacturing. I think you mentioned that you look forward to conduct – compare, then do the study before you file the BLA. My question is; do you foresee a possibility that patient dosing might be required for the compatibility study? And – so that's my question on manufacturing. And then I have a question on the – on the progress made with, in terms of the pre is the best indication of loci in a primary endpoint analysis for the XLRP study. So could you characterize your current protocol, the one that you developed with a vendor? How many loci do you plan to prespecify? And when we hear about the Skyline trials data at year-end, three months data, would that data be in a form of – reported under the prespecified loci method? And lastly, in terms of Skyline data, because you mentioned you're doing masked analysis at month three. Are we going to get to the pooled response rate from Group 2 and Group 5? And is that going to be a 50% response rate that you’ve been looking forward to? Or could Group 2 have a lower response rate therefore the blended response rate might be lower? Thank you.

[Sue Washer:]

Well, Yanan, thanks for joining us today and thanks for your questions. I’m going to address the comparability question on manufacturing. And then Mark, I’m going to have you talk about the pre-specification algorithm and then how we’re going to apply that to Skyline and how the data will be reported. So as far as the comparability test, we are already conducting or have been conducting comparability between the process we use for the Phase 1/2 trial and the process that’s being used in the pivotal trial. And that’s a comparability plan was discussed and reviewed with the FDA and did not require patient dosing. The comparability study we would have to do with the new facility, it will be the exact same process. But the pivotal material was made at a contract manufacturing with that process and the commercialization materials, and the engineering ones would be done in our new facility. So we’re really only comparing the exact same process at different facilities. So while we cannot say for sure because this will depend on FDA interactions, we would not imagine that study – patient dosing. And now, I’ll turn it to Mark on the question about pre-specification?

[Mark Shearman:]

So I think as you know the pre-specification exercise utilize the patient data from the Phase 1/2 dose escalation that satisfied the criteria for inclusion. And basically, the algorithm that was developed allows us to select those loci which, most likely to respond by the decibel data that we set as a cut off. And they also validated this approach by removing certain subsets of that data and rerunning the algorithm. So this is being applied and has been applied to patients that are being enrolled in Skyline correct. At month three we'll have 12 patients worth of data, we will be blinded to that data, we’ll just have group a Group A, Group B – whether A is Group 2 or Group 5, we won’t know. But it will allow us to determine the response rate in the groups now. We will be collecting all types of data. So all of the perimetry data from the central 68 various other analysis on that plus the secondary endpoints, we have not yet fully decided, which data we will release or the format in which that data will be released. But we will be performing all of the analysis that we’ve committed to including the pre-specification exercise.

[Yanan Zhu:]

Thanks Mark. Thanks Sue. Just a quick clarification, for the pre-specification, have you decided whether you will prespecify 5 loci or more than 5 loci and looking for the responding loci within that greater number?

[Mark Shearman:]

It’s a minimum of 5 to align with the FDA guidance, 7 decibel 5 loci. It depends a little bit on the projections from the algorithm as to how many of the loci could change by 7 decibel based on the training set from the Phase 1/2, but it will be a minimum of 5.

[Yanan Zhu:]

Got it. Great, thank you.

[Operator:]

Our next question comes from Zegbeh Jallah with ROTH Capital Partners. Please state your question.

[Zegbeh Jallah:]

All right, thanks for taking my question. I think I just have questions about manufacturing. And the first is just to clarify that there are no concerns about manufacturing for the Skyline and the Vista study, the steps you're putting in place now is really just to be prepared for commercialization and then further development as well.

[Sue Washer:]

Yes, the manufacturing – thank you, Zegbeh, for the question. The manufacturing facility is being planned for the future. It’s really a long-term strategic play. And that it could, as we talked about, produce the engineering ones and commercial material for XLRP, it could produce the pivotal phased material for achromatopsia. And certainly, we would be able to utilize it for our preclinical programs as they move into the clinic, but it is not intended to be available or be used for the Skyline and Vista trials.

[Zegbeh Jallah:]

Thanks. And it certainly makes sense at this step. Because I think what you’ve shown so far is that the platform is well validated and certainly unique relative to competitors. So I think it’s exciting that you guys are now putting in place the manufacturing plans. I think for me, since you also mentioned that the manufacturers for the clinical or preclinical programs, just wanted to get a better sense of where you are with some of those programs and what you’re thinking might be the next one out of the pipeline, because we are kind of getting excited now to see what more is coming up?

[Sue Washer:]

Yes, we haven’t provided specific guidance yet, Zegbeh, on which programs we’re prioritizing ahead of others or what the specific timelines are as we move throughout the year and really complete our plans on achromatopsia and XLRP will provide further guidance. But we’re really excited about the Otonomy program and as you saw from the date of release that’s moving forward very well. And our ACHM progranulin programs moving forward very well and excited about some of the technologies we’re putting in play with the other programs. So, we’ll have more information as we work our way through the year.

[Zegbeh Jallah:]

Thanks and congrats again on all the progress.

[Sue Washer:]

Thank you, Zegbeh.

[Operator:]

At this time, there are no further questions. I’ll turn the call back over to Sue Washer for closing remarks. Thank you.

[Sue Washer:]

Thank you. So we have accomplished a great deal already in 2021. And we’re committed to translating this momentum into additional progress across all aspects of our business in the months ahead. The growing body of clinical data gives us confidence that our XLRP product candidate has best-in-class potential and we are matching this progress with critical advances in our manufacturing capabilities, as we chart a path to our commercializing and potentially transformative treatment for this disease. We’re also proud that we have identified licensing opportunities that will allow our technologies to support other organizations that share our commitment to improving outcomes for patients in their efforts to develop ocular disease therapies. We have multiple data readouts in our XLRP and achromatopsia clinical programs expected later in 2021 and in 2022 that we believe will further solidify our position as a leading ocular gene therapy company, support our efforts to commercialize transformative therapies and provide additional opportunities for value creation. Our continued progress is only possible with the arms going support of the patients and physicians who participate in our clinical trials. And as I always do, I express our profound appreciation for their willingness to take this journey with us. I hope all of you stay safe and healthy as we emerge from the pandemic and return to more normal routine. And I look forward to updating you on our achievements in the months ahead. Thank you again for joining us today.

[Operator:]

Thank you. This concludes today’s conference. All parties may disconnect. Have a great evening.