Applied Genetic Technologies Corporation
Q2 2016 Earnings Call Transcript

Published: 9 Feb 2016

[Operator:]

Good day, and welcome to the AGTC Second Quarter 2016 Financial Results Conference Call. Today's call is being recorded. For introductions and opening remarks, I would like to turn the call over to Mr. Larry Bullock, Chief Financial Officer of AGTC. Please go ahead sir.

[Larry Bullock:]

Good afternoon and thank you for joining us today. Before we get started, I would like to remind everyone that during this conference call, we may make forward-looking statements, including statements about our financial results, our future business strategies and operations and our 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 our Annual Report on Form 10-K for the fiscal year ended June 30, 2015. I will now turn the call over to Sue Washer, our President and Chief Executive Officer.

[Sue Washer:]

Thank you, Larry. Welcome to those of you who have joined the call today. I will be providing a Company update, including recent developments and the progress towards this year's milestones for our lean product candidates. I will then turn the call back to Larry, to review our second quarter 2016 financial results. Following Larry's remarks, we will stay on the line to take your questions. The past 12 months have been a period of significant growth for AGTC. We made key additions to our team, expanded our footprint with our new Cambridge and Florida facilities, announced our strategic partnership with Biogen and took our lead development program for X-Linked Retinoschisis or XLRS, into the clinic. In the past few months alone, we achieved several important corporate and clinical milestones, all of which have laid firm foundation for our success in the year ahead. In December, we entered into a multi-target R&D collaboration with Synpromics, a leading developer of synthetic promoters. We believe that Synpromics' proprietary technology platform has the potential to broad application across our gene therapy platform. With them, we plan to develop and optimize synthetic promoters for multiple cell types that will be used in the development of new gene therapy candidates. In January, we announced an additional collaboration with the BCM Families Foundation, to develop an AAV-based gene therapy for the treatment of blue cone monochromacy or BCM, also known as X-linked achromatopsia. This collaboration complements the work we are already doing in achromatopsia and we strongly believe that our combined resources and expertise have the potential to make a significant difference in the lives of BCM patients. We are continuing to advance the development of our lead product candidates for XLRS achromatopsia and X-linked Retinitis Pigmentosa or XLRP. These rare diseases of the eye are caused by mutations in single gene that significantly affect visual function and currently lack effective medical treatment. In addition, we continue to seek opportunities to expand our portfolio of treatment for genetic diseases with our adaptable gene therapy platform in both, ophthalmic and non-ophthalmic conditions. AGTC has several research stage gene therapy programs under active development, including alpha-1 antitrypsin deficiency and age-related macular degenerations. Today, we are pleased to announce that Biogen has selected adrenoleukodystrophy or ALD as the first publicly announced of the three discovery programs under our collaboration agreements. ALD is a rare and progressive X-lined disorder of fatty acid metabolism that leads to accumulation of very long chain fatty acids in tissues throughout the body, but mainly in the central nervous system and the adrenal gland. Clinically, ALD is a heterogeneous disorder with several distinct phenotypes, including rapidly declining neurological function and early death in young boys or progressive muscular weakness leading to lower limb paralysis in adults. ALD is a condition without satisfactory treatment options and represents a clear unmet medical need. There has been interesting work done by several academic researchers suggesting AAV vectors may be able to address certain forms of this stabilitating disease. Our XLRS program, which is one of our partnered programs with Biogen, is currently in an ongoing Phase 1/2 clinical trial, with the planned dose escalation is continuing through multiple cohorts. We expect to enroll a total of 27 XLRS patients across seven clinical sites and we will release initial clinical data from this trial once we have a substantial body of data that allows for rigorous technical analysis and an accurate interpretation of the results. We anticipate reporting this data at an appropriate scientific conference in calendar year 2016. As part of our collaboration, Biogen has obtained worldwide commercial rights for the XLRS program, while AGTC maintains [ph] responsibility for the clinical development of the program through product approval in the United States. Biogen will support the clinical development cost, such as to certain conditions following the first in human study, but we also have an option to share development costs and profit following the analysis of the complete Phase 1/2 clinical trial data and an option to co-promote the second of either the XLRS or the XLRP product to be approved in the U.S. Our pipeline includes two programs for the treatment of achromatopsia based on the gene mutations known as CNGB3 and CNGA3, both of these programs are being developed internally and solely by AGTC. For our CNGB3 product candidate, we filed an IND application with the U.S. Food and Drug Administration this past fall. We anticipate reporting data on this clinical trial at an appropriate scientific conference in calendar year 2016. Earlier this month, we announced pre-clinical data evaluating cone specific promoters for use in gene therapy of achromatopsia and other retinal diseases. These data public in the January issue of Human Gene Therapy in formed the design of both, the CNGB3 and the CNGA3 expression cassettes that we are developing. Also in November, we announced that the FDA granted an orphan drug designation for our second gene therapy product for achromatopsia, caused by mutations in the CNGA3 gene. The European medicines association of orphan drug designation for this indication was received this past fall in October. We expect to file an IND for the CNGA3 program in calendar year 2016. We are conducting IND-enabling study for our XLRP product candidate, which is another program partnered with Biogen. We are developing treatments for three additional indications together with Biogen, one of which is ALD as mentioned earlier. Lastly, for our gene therapy product candidate for the treatment of Alpha-1 Antitrypsin or AAT deficiency, we have recently announced data that showed sustained expression of AAT protein in patients 12 month after intramuscular injection, suggesting that a one-time AAV-based intramuscular injection can have a durable response. Ongoing work in non-human primate is evaluating multiple delivery methods to increase the circulating protein levels obtained in the human clinical trials. As we augment our pipeline both, internally and with our partner Biogen, we continue to employ a careful and rational approach to the selection of our product candidates. In doing so, we are executing on our ultimate goal of becoming a leading gene therapy company developing life-changing products for patients with rare diseases. I will now turn the call back to Larry, who will briefly review our second quarter financial results.

[Larry Bullock:]

Thank you, Sue. For our second fiscal quarter ended December 31, 2015, total revenue was $12.2 million compared to $652,000 generated over the same period in 2014. The revenue recorded during the current quarter was in large part the result for the amortization of upfront fees received under our collaboration with Biogen during our first fiscal quarter ended September 30, 2015. Research and development expense for the quarter increased by $3.8 million to $7.2 million compared to the same quarter in the prior year. The year-over-year increase was largely the result of higher outside program costs, the license and related fees due to the increased activity associated with the development of our product candidates. In addition, employee-related and share-based compensation costs increased year-over-year, due primarily to the hiring of additional employees in support of this increased level of research and development activity. General and administrative expense for the quarter increased by $200,000 to $2.1 million compared to the same period last year. The increase was primarily driven by higher employee-related expenses resulting from the hiring of additional employees to support our continued growth and expansion. As a result of these revenue and expense drivers, we generated net income of $3 million during the quarter compared to a net loss of $4.7 million that was generated during the same period of last year. As of December 31, 2015, our cash, cash investments and equivalents amounted to a total of $190.6 million, which includes $40.6 million of investments classified as non-current on our balance sheet. Our investment policy seeks to maintain an appropriate level of liquidity while also limiting our exposure to high risk in volatile instruments. As a result, we generally invest our excess cash in certificates of deposits and investment grade debt securities that mature within 24-month period. We believe that our existing cash, cash equivalents and investments at December 31, 2015 are sufficient to enable us to advance planned pre-clinical activities, clinical trials for our lead product candidates for at least the next two years. With that, I will close my remarks. We thank you for your interest in support of the work we are doing here at AGTC. Operator, you may now open the line for questions.

[Operator:]

Thank you. [Operator Instructions] We will now take our first question from Jim Birchenough with Wells Fargo.

[Jim Birchenough:]

Hey, guys. Congrats on all the progress. Just a couple of questions, on XLRS, I am wondering if you could just maybe review the endpoints that you are looking at in the Phase 1/2, and maybe describe hierarchy of what we should see and I guess maybe situations on what would be success for you guys in that study. Then just wondering I know Bluebird is looking at TCLB [ph], which was in the younger kids. Is there a stock price that Biogen and yourselves are particularly interested in? Thanks.

[Sue Washer:]

For XLRS, as we said, in Phase 1/2 trial, we are actually are looking at a very wide range of clinical endpoint, so that we are gathering in as much data on what may be indicative of a change in the clinical phenotype, but we have indicated and given guidance that we think there are four important clinical endpoint for XLRS. One being visual acuity, one being visual fields and both of those endpoints would be approval of endpoints if we had a statistically significant improvement in either one or both of those endpoints. Then we are also looking at electroretinogram or ERG, so that we can see if there is improvement in electrical activity through the back of the eye as well as OCT to see if there is an improvement in the [ph] in the back of the eye. Of all the endpoints we are looking at, it as those four endpoints that we think are the most improvement and specifically that either significant improvements in visual acuity or visual field or both would be approvable endpoints. Then for ALD, we are in a very - this is a discovery program as defined under the collaboration, so we are in a very early stages of research work in this area and we have not given any guidance on any specific sub-type we may be focused on.

[Jim Birchenough:]

…to get a better sense of the relative timing of the achromatopsia data and XLRS data?

[Sue Washer:]

No. Both of them, we have to say no, but we will be releasing date of this calendar year, but we have not been specific about a specific date or month.

[Jim Birchenough:]

Okay. Great. Thanks for taking the questions.

[Sue Washer:]

Thank you, Jim.

[Operator:]

We will now take our next question from Mara Goldstein with Cantor Fitzgerald.

[Mara Goldstein:]

Thanks very much for the question. Just a follow-up on the ALD collaboration, I understand there are just sort of limited things that you can speak to, but is there any possibility you could kind of just give us an idea of sort of what the critical task kind of big bucket items are and what you may be participating in that?

[Sue Washer:]

We are responsible under the collaboration agreement for early discovery work in these three different programs as we have outlined and that early discovery work is to provide Biogen with enough data such that they can make a reason decision about optioning that program, so you might imagine that there would be data about activity of a vector, there would be data in an animal model or and cell culture, so we are responsible for providing them with a body of data as defined in the collaboration agreement such that they can review that data and decide to option or not on the program.

[Mara Goldstein:]

Okay. Are there any internal time guidelines according to sort of when that has to occur by as you begin this activity? Are these activities…?

[Sue Washer:]

The collaboration allows for joined development of a full development plan. The development plan includes the agreed upon activities and agreed up timeframe and now that this program has been identified the very first step is for Biogen and AGTC to formally adapt to development plans.

[Mara Goldstein:]

Okay. All right, thank you very much.

[Operator:]

We will now take our next question from David Nierengarten with Wedbush Securities.

[David Nierengarten:]

Hey. Thanks for taking - I have two questions actually if you could outline today. First, have you began recruiting or has indications been dosed on the achromatopsia study?

[Sue Washer:]

We have not been providing any guidance on patient-by-patient activity and enrollment.

[David Nierengarten:]

Okay. Then with the ALD study. Is it fair? - Do you have any - I know it is at a development stage, but are there any plans that is developing intrathecal formulation or do you think you be using IV. Just I am curious and then that would speak to Biogen's confidence in being able to use their technology, manufacturing technology to produce potentially different forms of product for administration?

[Sue Washer:]

Thank you for that question, David. I think that we have been pretty consistent in talking to people especially the last six months that we really believe that part of developing any gene therapy product is looking at the capsids, the promoter, the expression cassettes, the formulation and the delivery. To be consistent with our normal development process, we will be looking at all of those factors as we conduct research and delivery data to Biogen and what may be their final product concept.

[David Nierengarten:]

Okay. Thanks, guys.

[Operator:]

[Operator Instructions] We will take our next question from Steven Willey with Stifel.

[Steven Willey:]

Yes. Thanks for taking the question. I am just wondering, I guess, I am not too familiar with ALD. Just wondering if you could maybe share with us, I guess, how robust is the natural history data that exists for a lot of these different subtypes of the disease. I guess, I know we are obviously a long way from thinking about clinical endpoints, but with something I guess as exploratory as just looking for these launching fatty acids in the serum, be kind of enough of the surrogate biomarker to give a sense around clinical activity?

[Sue Washer:]

There is fairly well developed clinical ophthalmology on some of those subsets of ALD, and it is more severe form, it is severely life-threatening, so I think life expectancy would be an important part of what you would look at. As in any very earlier stage development, one of the aspects we will be looking at is biomarkers that can be developed to help enable future developments.

[Steven Willey:]

Okay. Then I guess just on the logistic of the Biogen collaboration, so this is a program that has been moved into discovery phase. I guess if Biogen chooses not to obtain on ALD, are they then allowed to nominate another discovery program non-ophthalmic to move forward?

[Sue Washer:]

The terms and agreement as we have outlaid is that they have three discovery programs that they can chose to move forward. The further details of what those, how those development plans are developed and what the option triggers are have not been disclosed.

[Steven Willey:]

Okay. Then maybe just a housekeeping question. I guess, close to $12 million that was recognized this quarter from prior payments from Biogen upfront, should we expected to be kind of the level of amortization that we should expect for the remainder of '16 and then going forward?

[Larry Bullock:]

Yes. It is basically street line for the first several years here, so, yes.

[Steven Willey:]

Okay. Thanks, guys.

[Operator:]

It appears there are no further questions in the queue at this time. I would like to turn the conference over back to Ms. Sue Washer, Chief Executive Officer of AGTC, for any additional or closing remarks.

[Sue Washer:]

I want to thank everyone again for participating in today's call. As I mentioned at the beginning of this call, 2015 was a year of considerable growth and exciting developments here at AGTC. We expect this growth and development trend to continue into the upcoming year as we advance our clinical programs, continue our productive collaboration with Biogen and present and publish new clinical data. We look forward to updating you on the achievement of many more milestones throughout 2016 as we continue to execute on our mission to developed innovative gene therapies to treat rare diseases. In the coming months, we will be presenting at the RBC Global Healthcare Conference on February 23rd in New York City, as well as at the Roth Conference in March in Orange County, California. We hope to see many of you at those events. Thank you and good evening.

[Operator:]

Ladies and gentlemen, that concludes today's conference call. We thank you for your participation.