Applied Genetic Technologies Corporation
Q1 2018 Earnings Call Transcript

Published: 8 Nov 2017

[Operator:]

Good day and welcome to the AGTC Financial Results Conference Call for the First Quarter of Fiscal Year 2018. Today's call is being recorded. Before we get started, I'd like to remind everyone that during this conference call AGTC may make forward-looking statements, including statements about the Company’s financial results, its future business strategies and operations, and product development and regulatory progress. Actual results could differ materially from those discussed in the forward-looking statements due to a number of important 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, 2017. 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 afternoon and thank all for joining us today. Bill Sullivan our Chief Financial Officer; Stephen Potter our Chief Business Officer and Matt Feinsod, our Interim Chief Medical Officer are also with us on the call. During today's call Matt will provide a brief overview of our clinical and pre-clinical programs and Bill will then review our financial results for the first quarter of fiscal year 2018. The team will then be available to answer any specific questions you may have. Let me begin by saying that the first quarter was a productive period for AGTC with a high priority focus on identifying and including patients, expanding awareness of our trials, adding additional sites for existing trails and preparing for initiation of our XLRP trial with Biogen. As we just had our fourth quarter conference call a few weeks ago we do not have significant update to record at this time, but we will provide you with the status of our trials and financial results. I will now turn the call over to Matt, who will summarize the status with our three ongoing clinical trials as well as the X-linked retinitis pigmentosa program which will begin enrolling patients in the coming months and our pre-clinical program and optogenetic.

[Matthew Feinsod:]

Thank you, Sue. Our most advanced clinical program a potential treatment for X-linked Retinoschisis or XLRS is in an ongoing phase 1, 2 dose ranging clinical trial and which we anticipate enrolling up to 27 patients. The XLRS is characterized by abnormal splitting of the layers of the retina, resulting in poor visual function in young boys that can ultimately result in legal blindness in adult men. This program is one of our programs in collaboration with Biogen. As of today, we have dosed a total of 17 adults and one patient under the age of 18 across three dose groups bringing the total number of patients up to 18. Our active trial sites continue to screen new patients for eligibility and we've expanded the number of sites and regional referral practices to complete enrollment in a timely fashion. Our clinical sites and patient advocacy partners remain committed to supporting and advancing our enrollment goals for this study, keeping us on track to complete full enrollment in the trial by the first quarter of 2018. We will present complete data after the last patient has been followed for six months. Our next most advanced clinical programs are those targeting achromatopsia, an inherited retinal disease in which 75% of the patient population has a visual function loss caused by mutations in either the CNGB3 or CNGA3 gene. Individuals with achromatopsia have markedly reduced visual acuity, extreme light sensitivity and complete loss of color discrimination. As most of you are aware AGTC is developing two distinct product candidates for achromatopsia. One to treat patients with the CNGB3 mutation and another to treat patients with the CNGA3 gene mutation. Our phase 1/2 dose ranging clinical trial evaluating our B3 product candidate has enrolled four patients in the first dose group. As we previously announced after the first three patients were treated we decided to select a single surgeon to treat patients going forward in order to minimize differences in surgical technique, [this surgeon] treated the third and fourth patient. While we were reviewing the data from the first four patients in detail we also analyzed an extensive and growing body of data generated across several different diseased animal models. There we found evidence of biological activity at lower vector doses using sub retinal injections, than those originally proposed for the CNG for the achromatopsia B3 study. We have therefore adjusted downward in this dose ranging study. This new reduced dose also applies to the A3 study. As is true in all dose ranging first in manned studies we will continue to evaluate emerging clinical and preclinical data in collaboration with our investigators and scientific advisors to help guide future dosing decisions. Turning to our other program in collaboration with Biogen, we are also developing a potential treatment for X-linked retinitis pigmentosa the fourth product candidate in our pipeline. XLRP is an inherited retinal disease caused by mutations in the RPGR gene. Children are born with four visual function that significantly affects daily activities and worsens over time. In early August of this year the FDA granted an orphan drug designation for our XLRP product candidate. The IND for this study has been cleared by the FDA and we are completing site initiation of four clinical sites with plans to begin a phase 1/2 clinical trial in the coming months. In addition to the above programs we also continue to work with bionic site on the development of an optogenetic product candidate for patients with advanced retinal disease. This product would introduce genes for light-sensitive proteins into retinal cells in order to control their activity using light signals and thus potentially allow patients without functional photoreceptors to regain visual function. We plan to complete the necessary preclinical work over the coming months and expect the bionic site will file an IND for this product candidate in 2018. We also continue to make substantive progress in our discovery programs with Biogen as well as our own research programs both in ophthalmology and otology. I'll now turn the call over to Bill Sullivan who will briefly review our first quarter of fiscal year 2018 financial results.

[Bill Sullivan:]

Thank you, Matt. Our first quarter fiscal year 2018 financials are included in our press release which we distributed a short while ago. For the three months ended September 30, 2017 the company incurred a net loss of 1.4 million compared to net income of 3 million for the comparable period in 2016. These 4.4 million changes in net income was primarily due to a 3.6 million increase in operating expenses, a 1.5 million decrease in revenue [260,00] decrease in income tax expense. The 3.6 million increases in operating expense consisted of a 2.7 million increase in R&D spending, the 900,000 increases in G&A spending. The increase in R&D is primarily driven by increased spending on general, research and discovery programs, increased spending on XLRS and XLRP key clinical program and increase employee related expenses associated with hiring additional employees to support clinical trial execution and research and development activities. The increase in G&A expenses of 900,000 was primarily driven by increased corporate infrastructure and employee related expenses associated with our continued expansion and hiring of additional employees. The decrease in revenue of 1.5 million was primarily due to extending the affiliated service period and associated amortization of non-refundable upfront fees recognized as revenue under our collaboration with Biogen. There is no income tax expense for the three months ended September 30th 2017. The income tax expense of 600,000 for the three months ended September 30th 2016, was due to the recognition of revenue related to the Biogen agreement for tax purposes which is accelerated compared to GAAP revenue, resulting significantly more taxable income than GAAP net income. Now turning to our balance sheet and financial guidance. We ended fiscal year 2017 with a strong balance sheet. Total cash, cash equivalents, investments amounted to $129.6 million. We believe these funds will be sufficient to allow AGTC to generate data from our ongoing clinical programs to move our pre-clinical optogenetic program in collaboration with Bionic Sight into the clinic and to fund currently planned research and discovery programs for at least the next two years. We expect total cash, cash equivalent, and investments as of June 30, 2018 to be between 85 million and 100 million. Importantly any milestone payments from Biogen that exceed before June 30, 2018 will increase these projected cash balances. Lastly due to our recently filing of IND of XRLP program and therefore completing our revenue recognition service period on our XLRP limited accounting, we expect non-cash amortization of non-refundable upfront fees into our collaboration with Biogen will decrease 5.8 million on a quarterly basis moving forward compared to our revenue for the three months ended September 30, 2017. Related to this please note short-term deferred revenue on our balance sheet as of September 30, 2017 was 14.7 million. This represents non-cash amortization revenue under our Biogen collaboration that we expect to recognize into revenue for the 12-month following September 30, 2017. In addition to non-cash amortization revenue AGTC will recognize revenue upon the triggering of future cash payments from Biogen. Upon the filing of the XLRP IND in August 2017, Biogen begin reimbursing AGTC for 100% of the XLRP development expenses. In addition, following completion of the ongoing phase 1 class 2 XLRS clinical trial, Biogen will reimburse AGTC to 100% of XLRS development expenses. Following any future cash milestone payments received from Biogen will be recognized as revenue for now. That concludes the team remarks today. Operator you may now open the line for a question and answer period.

[Operator:]

[Operator Instructions] We will take our first question from Matthew Luchini of BMO Capital Markets.

[Matthew Luchini:]

So just couple for me, first on XLRS obviously recognizing that the last call wasn't long ago it looks like there hasn’t been any change in the enrolments since our last update and I was wondering if you could put some color around the reason for that has been have an expected to be failures lack of sites, something else and then for achromatopsia you previously indicated that you are expected to treat a fifth patient at, I guess would now be originally the low dose and so I guess I'm just wondering how we should think about the timelines when that patient will get treated in the new low dose, should we expect any kind of update out of that dosing cohort, may be one to three and if you could put, little bit of additional color around the type of biological activity you saw that gives you confidence of this lower dose is worth perusing. Thanks.

[Sue Washer:]

Thank you, Matt, I’ll kind frame two questions and translate from up a little bit, first was the question about the enrollment. And really the issue there is only just the close timing of the events and the time it takes to complete the screening process, we have multiple patients in that screening process and it's just there is been a short period of time between the last call and this call and we aren’t changing our guidance at all for XLRS in that we still expect to complete enrollment in our first quarter of 2018. As far as term of achromatopsia, I will start that answer and then I will ask Matt to provide a little bit more detail. But as we will be reviewing all of the data from the patients as we do on a regular basis in the clinical group and also as we have more and more of the data being analyzed and filing our IND for XLRP and reviewing all of the work that still ongoing in these models, we did note that in these animal models, we were seeing logical activities at a lower dose. And it's always a very good thing and we're doing dose range, finding study to find the lowest dose at which you can see from biological activity and that’s how we made the decision to both go to a lower dose. And it's not is true that the low starting dose, the lower dose that we're using in a achromatopsia matches much more closely to the low dose that we’re going to start with in XLRP but I'm going to turn it over to Matt to may be provide little bit more detail on some of the signs of biological activity that we saw in the animal models.

[Matthew Feinsod:]

Thank you Sue, as Sue mentioned we looked at not only the animal data that we had from the achromatopsia preclinical models but also from other disease models as well, because there are similarities between vectors and what we found especially looking at other models were it was administered sub -retinally, is that it was we did see biological activity vis-à-vis ERG responses which in many of these models is really the primary indicator of biological activities, so Matt you asked specifically about what the measure was and that's what it was, it was in ERJ.

[Operator:]

[Operator Instructions] The next question is from the line of Mara Goldstein with Cantor Fitzgerald. Please go ahead with your question.

[Mara Goldstein:]

Just I guess may be just a little bit of clarification and in terms of just the dose reduction and understanding how that you will start on the A3 trial, but does that mean that you're starting any cohort as a lower dose, so can you just kind go through that for me.

[Sue Washer:]

For the A3 we will start the trial with a low dose [indiscernible], but the study design will then be the same and three dose cohorts and we will continue to evaluate the data and make decisions about dosing up, dosing down as you would normally do on a dose ranging study. B3, it means we’re going to dose the next patients at a lower dose and review that data with DSMC and be able to make a decision about dosing in the future.

[Mara Goldstein:]

Can we share with us just the order magnitude difference between that does versus the cohort of four patients that were already treated?

[Sue Washer:]

We're not providing guidance on exact dose.

[Operator:]

Our next question is from the line of James Birchenough with Wells Fargo. Please go ahead with your question.

[Unidentified Analyst:]

Thanks for taking the question, this is Yana in for Jim. Just to follow up on the lowering of the dose in ACH] and [indiscernible] study, just wanted to ask whether is there any safety issues with the current low dose being studied, what that part of any motivation for lowering of dose at all.

[Sue Washer:]

So, Yana thank you for your call and for your interest in our program. What we have told you about the first mutations in achromatopsia trial is that we were seeing just the inconsistent results. And we move to a single surgeon because of the inconsistent result. And so, I think as we develop data that shows that we could get biological activity at a lower dose we thought that was an additional step to take to align with data across -- align the plan for the trail across all the data that we have.

[Unidentified Analyst:]

Got it, got but lower activity, biological activity seen at lower dose that was from the animal studies not from any human.

[Sue Washer:]

Correct.

[Unidentified Analyst:]

Got it right, and just also curious whether in animal study when you look at higher dose does that give you any diminished efficacy or higher dose, lower dose looks the same.

[Sue Washer:]

So that’s a very good question and a detailed question, and I think that what we see across our different animal models is that we do see changes in magnitude of biological activity across doses but I think as we discussed before Yana, in these disease model because they are lower mammals and don’t exactly replicate the primates, while we use it to guide our dosing and we were pleased to see activity at a lower dose, it's not an exact science and it's not exactly replicable. And so, until we have a human data, we can't make one to one comparison.

[Unidentified Analyst:]

And then last question is more of a clarification on timing for data redial for XLRS. I think I heard enrollment completion first quarter '18, and then six months follow-up. Could you just give a little more color on when do you expect data from the XLRS program?

[Sue Washer:]

So, what we have guided is that we will provide dose and update on safety and then an update on biological activity and then file efficacy six months after we go to the last patient in the completed enrollment. So, it will be the exact date would depend on exactly when in that period we dose that last patient and we will be provide an update as we move forward.

[Operator:]

[Operator Instructions] At this time I'll turn the floor back to Sue Washer for closing comments.

[Sue Washer:]

Thank you for your time today and for your continued interest in our efforts to advance the care and treatment outcomes for patients living with serious inherited retinal diseases. As we focus on clinical development we also keep a keen eye trained on building the other resources and assets we need to provide high quality products to patients over the long term. Our highest priority however is successful enrollment of our four clinical trial programs. And we continue to expand our investment in patient awareness and outreach to support these trials. As we bring our fourth clinical trial into active enrollment we have pursued a number of activities to expand our clinical themes both internally and externally. We have tremendous support from our growing group of clinical sites and patient's efficacy partners all of whom continue to identify additional ways to connect with sessions who could meet the entry criteria for these trials. While everyone in AGTC has a passion for improving the lives of patients with inherited retinal disease we know that we cannot feed in this endeavor on our own and we welcome support of the many groups and individuals who are equally dedicated to the successful development of treatments for these indications. Once again, I take this opportunity to thank the patients who participate in our trial, even though who don’t qualify for treatment after the screening process do provide valuable insight into the characteristics of the disease and the potential therapeutic benefits that would be most helpful to patients. Thank you again to everyone on the call for participating.

[Operator:]

And that concludes today's call. all parties may now disconnect.