Applied Genetic Technologies Corporation
Q3 2019 Earnings Call Transcript

Published: 7 May 2019

[Operator:]

Good morning, and welcome to the AGTC Third Quarter Fiscal Year 2019 Financial Results Conference Call. Today’s call is being recorded. Before we get started, I’d like to remind everyone that during the conference call, AGTC may make forward-looking statement, 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 and other risks described in the Risk Factors section of AGTC’s annual report on Form 10-K for the fiscal year ended June 30, 2018, and quarterly reports on Form 10-Q for subsequent periods. For introductions and opening remarks, I’d like to turn the call over to Sue Washer, Chief Executive Officer of AGTC. Please, go ahead.

[Sue Washer:]

Thank you. Good morning, and thank you all for joining us today. With me is Bill Sullivan, our Chief Financial Officer; Matt Feinsod, our Chief Medical Officer, and Mark Shearman our Chief Scientific Officer. During today’s call, Matt will review the significant progress we have made enrolling patients in our three ongoing clinical programs. Bill will review our financial results for the third quarter of fiscal year 2019 and we will then be available to answer your questions. Throughout 2019, we achieved multiple clinical development milestones, which set us up to meet guidance on data release for all three of our programs in rare inherited retinal diseases. The successful attainment of these enrollment milestones reflects our commitment to developing breakthrough therapies and underscores AGT’s leadership in innovating gene-based therapies with the potential to address unmet patient needs. We are dedicated to advancing our programs in XLRP and achromatopsia in order to improve patient’s visual function. We would like to take this opportunity to commend the AGTC team, the investigators and coordinators, our clinical trial sites and most importantly, the patients and their families who have volunteered to participate in these trials, without whom this great progress would not be possible. While our overriding focus is on enrolling and completing our clinical trials in XLRP and achromatopsia, we know that our AAV-based gene delivery platform has broad potential to address a variety of diseases with significant unmet medical needs. We are continuing our work on several preclinical ophthalmology and otology programs as well as our preclinical program in adrenoleukodystrophy, a rare CNS indication. And we will provide more information as these programs move forward to IND-enabling preclinical studies. We are reviewing additional options to expand our pipeline further providing us the opportunity to create a broad pipeline and significant value for patients and shareholders. We recently presented a body of data evaluating immune response in primate eyes at ARVO, ASGCT and the Foundation Fighting Blindness’ 6th Annual retinal innovation summit and have previously presented on the enhanced transduction properties of our engineered capsid. It is by conducting these types of studies that we continue to leverage and expand our expertise in the design and application of AAV vectors to inform not just our future programs to – but to more carefully design pivotal studies for our lead indications. I will now turn the call over to Matt Feinsod to provide updates on our clinical programs.

[Matt Feinsod:]

Thank you, Sue. I’ll first start with an update on our XLRP program. We announced in April that we have completed dosing of both the escalation and expansion phase of the trial in line with guidance. We have now dosed 16 patients, 10 patients in the dose escalation portion of the trial and six patients in the dose expansion portion of the trial. We remain on track to report top line interim six-month data from the dose escalation group in the third quarter of 2019 and top line interim six-month data from the dose expansion group in the fourth quarter of 2019. In this trial, treatment is delivered via subretinal injection to either the peripheral or central retina depending on individual patient-specific baseline characteristics. We are committed to providing patients with optimal cure and this is reflected in our approach to basing the subretinal injection site on the need of each patient rather than a prespecified location that may not be optimal for all study subjects. As we have discussed previously, we are studying a wide range of potential clinical and functional endpoints, but given the nature of the disease, we anticipate that preservation of visual field will be the most relevant to patients. All data collected in the trial are delivered to a reading center to enable standardization across the clinical sites and to assure strong quality control and rigorous data analysis. For our 2 Phase I/II clinical trials in achromatopsia, we are actively enrolling patients with mutations in the two most common achromatopsia genes, CNGB3 and CNGA3. We announced in April that we have completed enrollment of the dose escalation phase of the B3 trial in line with guidance. To date, AGTC has enrolled 12 patients in the B3 trial and seven patients in the A3 trial. Over the past six months, we have added three new clinical sites and three new surgeons who have completed our comprehensive surgical training program. We believe this progress will continue to allow us to meet our guidelines for the remainder of the year. We expect to complete enrollment of the dose escalation portion of the A3 trial in the second quarter of 2019 and provide top line interim six-month data for the dose escalation portions of both the B3 and A3 trials in the fourth quarter of 2019. We are studying a wide range of endpoints, but based on our engagement with the patient community, improvement in visual function and photosensitivity are anticipated to be the endpoints most relevant to patients. The optogenetics program, which is being conducted in partnership with Bionic Sight continues to advance. Recently, Bionic Sight filed an IND for the program in advance of completing the final formulation and testing of the clinical trial material, CTM. The FDA has put the trial on hold pending review of the certificate of analysis of the CTM to assure the comparability of the CTM with the material used in the preclinical toxicology studies. Bionic Sight, which is solely responsible for vector manufacturing, testing and release as well as execution of the clinical trial is working to prepare the trial sites and obtain IRB approvals so that the Phase I/II trial can initiate when the FDA has cleared the IND. We believe that combining AGTC’s extensive experience in gene therapy and ophthalmology, with Bionic Sight’s patented neural coding device could open the door to improving care and outcomes for patients with advanced retinal diseases, and we’re excited about this program. I’ll now turn the call over to Bill who will review our financial results for the third quarter of our 2019 fiscal year.

[Bill Sullivan:]

Great. Well, thank you, Matt. Our third quarter 2019 financials were included in our press release, which was distributed a short while ago. For the nine months ended March 31, 2019, we generated a net income of $8.5 million compared to a net loss of $14.7 million for the comparable period in 2018. This was primarily due to a $22.5 million increase in revenues is primarily due to recognizing revenue of $22.4 million associated with the termination of the collaboration agreement with Biogen effective March 8, 2019. Going forward, no additional collaboration revenue related to the Biogen agreement will be recognized. The $1.5 million increase in R&D expenses is primarily due to incurring sublicense expense of $2.3 million associated with receiving a milestone payment from Biogen and increased employee-related costs, partially by decreased preclinical R&D spending. The $1.7 million decrease in G&A expenses was primarily driven by decreased employee-related and share-based compensation expenses. Now move on to financial guidance. We ended fiscal Q3 2019 with a strong balance sheet. Total cash, cash equivalents and investments as of March 31, 2019, were $89.2 million. We believe these funds will be sufficient to allow AGTC to generate data from our ongoing clinical programs, to move our preclinical optogenetic program in collaboration with Bionic Sight into the clinic and fund our preclinical programs for approximately two years. We expect total cash, cash equivalents and investments as of June 30, 2019, to be between $75 million and $80 million. This concludes the team’s remarks today. Operator, you may now open the line to the question-and-answer period.

[Operator:]

[Operator Instructions] Our first question today is coming from Matthew Luchini from BMO Capital Markets. Your line is now live.

[Matthew Luchini:]

So just two from me, I think and congrats on all the progress. So as we look out in the second half of the year, we have multiple – we have a couple of programs with a couple of different data readouts expected in both the third and fourth quarter. And I was just hoping if you could put a little bit more color on how we should expect the cadence of some of these data sets to readout? I know there is a preference, obviously, for medical meetings, so should we think that, perhaps, these data sets will be held for medical conference? Should we expect that both achromatopsia A3 and B3 programs will be released together? Just anything else that you could put around that to help us understand what will be coming and when? And then I have a follow-up after that.

[Sue Washer:]

Matthew, thank you for the questions. I think that, as you said, we always prefer to release data at medical meetings because there is such a richer opportunity to interact with people and address questions and help people with interpretations. What we have always stated that we would not hold the data for an extended period of time to wait for a medical conference. So in lieu of a closed medical conference to when we have the data finally analyzed out of the reading centers, we would issue a press release and have a conference call, such that we could explain the data and people could ask questions about it. So it’s probably one of those two modalities, and we would not hold B3 data before A3 data. We would treat these as three separate data releases.

[Matthew Luchini:]

Okay. Great. That’s helpful. And then on the optogenetic program, can you just give us a little bit more color on the hold? Was FDA – did FDA see something that gave them pause? Is there something in particular that they’re looking for? I recognize that there is some comparability work that needs be finessed, but I’m just wondering if there is anything that was seen that perhaps triggered this and is sort of the impetus for the hold overall.

[Sue Washer:]

Yes, we don’t believe there was anything specifically outstanding or untoward that the FDA was asking for. It was definitely that, as you might imagine, it’s fairly common to make slight tweaks and improvements in purification formulation between toxins and CTM, you’re always trying to make the best product possible. And so it’s not unusual that the FDA would want to see the final to make sure that the material you generated your safety data with was fully comparable to the material you are moving in the clinical.

[Operator:]

[Operator Instructions] Our next question is coming from Joe Pantginis from H.C. Wainwright. Your line is now live.

[Joe Pantginis:]

I was wondering if you could add a little more color. In your prepared comments, you obviously talked about in the achromatopsia program with regard to adding new sites and surgeons and their comprehensive training that’s needed. So I was just wondering if you could add a little more color with regard to the overall training, but even also how it applies to the XLRP program where you talked about being very patient-specific in the delivery areas whether it’s subretinal, peripheral or central retina delivery, and does they require any additional training or it’s just the procedures that the physicians are very well attuned to?

[Sue Washer:]

Joe, thanks for the question. Certainly, surgical delivery, we’ve always noted is a very, very important in these products and is really not just patient-specific but also disease-specific. And we have worked really hard because we’ve got such a large number of sites and ongoing programs on our surgical training program. I’m going to ask Matt to kind of walk through the training program and the specific parts of the training program and how we’ve been rolling that out, and some of the things we do to make sure that the surgeons share information going forward.

[Matt Feinsod:]

Sure. Thanks, Sue. And thanks, Joe, for the question. And agreed this is a really crucial part of any subretinal surgery clinical trial just because even though this is a procedure that is becoming increasingly familiar especially after the launch of Luxturna, it’s still one that requires a lot of expertise. And so what we’re doing, and for us the most important is not only that the procedure be conducted in a safe way but in a standardized way so that there aren’t surgeon-specific techniques that are influencing outcomes at the end of the day. So what we’re doing is

[Joe Pantginis:]

That’s really, great. Thank you very much for that walk through.

[Operator:]

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

[David Nierengarten:]

Just a quick question on clinical sites for as we look forward even to the [indiscernible] results, but are you satisfied with the number of clinical sites or – for potential Phase II/III study or do you expect [indiscernible] new sites or any or all the programs assuming success [indiscernible] success.

[Sue Washer:]

Good morning. David, your line was breaking up a little bit, but I just want – I think I understood what you were asking. So you’re asking about the number of clinical sites we have. Whether we think that, that’s enough for an additional trial or potentially a pivotal trial, our next steps, and how we think about clinical site enrollment? So Matt might be able to give a good idea of the number of sites we have per program, but we continue to increase it. It’s upwards, it’s – I think our target goal is between 10 and 14 sites per clinical trial program. And the reason even as we’re getting towards the end of enrollment in these Phase I/IIs that we continue to bring new sites on is exactly for the purpose of making sure we have the right number of sites, and importantly, that they’re distributed geographically to make it easier logistically for the patients as we would anticipate rolling into our – the next steps in each program.

[David Nierengarten:]

Got it, thanks.

[Operator:]

Thank you. The next question today is coming from Jim Birchenough from Wells Fargo. Your line is now live.

[Yanan Zhu:]

Hi, thanks for taking the questions. This is Yanan in from Jim. So how many surgeons have you now included in your program to date? And how many have operated on patients? Could you give some color on that?

[Sue Washer:]

Good morning. Yanan, thanks for the question. And Matt can probably give you the number of surgeons across the three programs that we’ve trained, and I think all that – I’m pretty sure that all that have been trained have now dosed. But, Matt, can you provide that information for Yanan?

[Matt Feinsod:]

Yes, so we’re right now at five. Five surgeons who have operated on at least one patient.

[YananZhu:]

I see. And for the achromatopsia B3 and A3 program, are all the patients dosed to date dosed by the same surgeon?

[Matt Feinsod:]

No, no, they have not been.

[YananZhu:]

Okay. Okay, great. And for the – I’m not sure if you have – you are able to disclose this, but for the achromatopsia A3 program, how many more patients do you need to enroll to complete the dose escalation portion of the trial?

[Sue Washer:]

Yes, we can disclose that. Under the protocol filed with FDA, we have two more patients to dose to complete the three different doses.

[YananZhu:]

Great. And last question is on the endpoint for the XLRP program. So you – I think you mentioned visual field preservation. Is that – could we expect any – should we expect any improvement as a potential outcome or we should – should we expect just…

[Sue Washer:]

So, Yanan, that’s – yes, sorry, you were breaking up there at the end. Wasn’t sure if that was the end of your question or not, my apologies. But that’s a good question. And the – going into XLRP, as I’m sure all of you remember is we were originally describing the data and the plan for XLRP. It is a degenerative disease and in the naturally occurring dog model that we worked with, and we’re the only commercial entity that worked with that dog model extensively, we – the dog model shows preservation of field. It does not show improvement of vision. It shows preservation of function and localization of the proteins, et cetera. There is always the chance to see improvement, but our goal with XLRP was always to stabilize vision and that’s what we have always talked about, and the fact that for patients, this is really very, very important because their vision declines so rapidly over time such that they are completely blind in their later years and so preservation of the function remaining for each patient is critically important. But there is always the chance to see improvement, but that’s not what the preclinical data supports.

[YananZhu:]

Got it, that’s very helpful. Thank you Sue.

[Operator:]

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

[Sue Washer:]

I noted during our last call that 2019 was going to be a busy and potentially transformative year for AGTC. And our accomplishments in just the first few months of the year reflect the success of our efforts and position us to report multiple data sets. Achieving these milestones is the clear demonstration of our ability to design and implement clinical trials that have the support of the medical and patient communities, and their support is critical to our success. The expertise we have gained in site administration, patient advocacy and surgical delivery is an important foundation for the future expansion of our clinical pipeline. We are also leveraging the knowledge gained from our XLRP and achromatopsia programs to inform our strategy going forward. And I believe we are very strongly positioned to create innovative new therapies that create value for patients and for investors. Importantly, we believe we have the financial resources, expertise, talent and commitment to realize the potential of our AAV technology platform and to create new therapies with the potential to truly transform patients’ lives. The data that we will present in 2019 will be important for validating our progress towards this critical objective. I look forward to updating you on our progress in the months ahead. Thank you for your time.

[Operator:]

Thank you. That does conclude today’s teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.