Applied Genetic Technologies Corporation
Q1 2017 Earnings Call Transcript

Published: 9 Nov 2016

[Operator:]

Good afternoon and welcome to the AGTC First Quarter 2017 Financial Results Conference Call. Today’s call is being recorded. For introductions and opening remarks, I’d like to turn the call over to Larry Bullock, Chief Financial Officer of AGTC. Please go ahead.

[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, 2016. I would now like to turn the call over to Sue Washer, President and Chief Executive Officer.

[Sue Washer:]

Thank you, Larry, and welcome to all who have joined us on the call today. Today I will provide a company update, including recent developments and the progress of our current and pending clinical trials. I will then turn the call back to Larry to review our first quarter 2017 financial results. Following Larry’s remarks, we will take your questions. I’d like to start today by providing an update on enrollment in our lead clinical development programs, gene therapy candidates for treating X-linked retinoschisis and achromatopsia. X-linked retinoschisis or XLRS is characterized by abnormal splitting of the layers of the retina, resulting in poor visual function in young boys and can result in legal blindness in adult men. This program is one of the programs and is part of our collaboration with Biogen and is an ongoing Phase 1/2 clinical trial, where we anticipate enrolling up to 27 patients. To-date, we have enrolled a total of nine patients, six in the low-dose group, and three in the middle dose group. Dosing in both these of groups is now complete. As specified in the clinical trial protocol, safety data from the three patients in the middle dose group will now be reviewed by a Data and Safety Monitoring Committee, or DSMC, before enrolling three new patients in the highest dose group. We are in the process of screening an additional 12 patients, six have completed the screening process and we are pleased to report that three of these patients are eligible for enrollment in the high dose group, which would complete dosing in that group. We now have seven clinical sites participating in this study, all of which are centers specializing in inherited retinal diseases. We continue to evaluate additional sites to accelerate screening and enrollment. With the assistance of our partners, including patient advocacy group, we have identified approximately 22 individuals who meet the eligibility requirements for the expansion group, which will provide additional safety data at the maximum tolerated dose. The current protocol plans for a total of 15 patients in that expansion group. We continue our outreach and plan to screen patients in an ongoing way, both to support this trial and later-stage trials. The primary endpoint of this clinical trial is safety. And available data thus far have shown that our XLRS product candidate has been generally well tolerated. As we disclosed at our last conference call, we have observed mild to moderate ocular inflammation in the majority of treated patients, which resolved either without treatment or after treatment with topical or oral corticosteroids. We will continue to provide you with quarterly updates on patient enrollment and we expect enrollment of the 27 subjects planned for this trial to be complete by mid-2017. We expect to provide you with data from the dose escalation phase of the trial, which includes groups IA, 1D, 2 and 3, with at least six months of follow-up data by the end of 2017. Complete 12-month follow-up data on all patients, including the expansion group is expected in mid-2018. The results of this trial and the completed natural history study will guide us in finalizing the design of a pivotal Phase 3 clinical trial for our XLRS product candidate. AGTC is also developing two products to treat patients with a achromatopsia, caused by mutations in either the CNGB3 gene or the CNGA3 gene, which together account for approximately 75% of the total achromatopsia patient population. Individuals with achromatopsia have markedly reduced visual acuity, extreme light sensitivity, and complete loss of color discrimination. The Phase 1/2 clinical trials for our achromatopsia B3 product candidate is enrolling patients at four clinical sites. These sites are all center specializing in inherited retinal diseases. As of October 2016, we have enrolled three patients in the low dose group, which completes that group. As specified in the clinical trial protocol, safety data from these three patients will be reviewed by a DSMC, before enrolling three new patients in the middle dose group. We plan to enroll 20 of 24 patients in this study and currently have 55 patients identified from our natural history study for possible enrollment in this trial. All these 55 patients, three are enrolled, three have already been identified for enrollment in the middle dose group, six have been identified as eligible for enrollment in the high dose group, and approximately 20 haven’t been identified as eligible for enrollment in the expansion group, which will provide additional safety data at the maximum tolerated dose. We continue our outreach and plan to screen patients on an ongoing way, both to support this trial and later stage trials. We will continue to provide you with quarterly updates on patient enrollment and we expect enrollment of the 24 subjects planned for this trial to be complete by the end of 2017. Further, we expect to provide you with data from the dose escalation phase of the trial groups one, two and three with at least six months of follow-up data by the end of 2017. Complete 12-month follow-up data on all patients, including the expansion group is expected by the end of 2018. Completion of the Phase 1/2 clinical study and the natural history study will guide us in finalizing the design of a pivotal Phase 3 clinical trial for our achromatopsia B3 product candidate. For our achromatopsia A3 product candidates, we’ve recently filed an investigational new drug application or IND, with the FDA, and have begun working with each site to enable review by their institutional review board. Once the IND has cleared the FDA, as well as the individual site review board, we anticipate enrolling 24 of achromatopsia A3 patients in a Phase 1/2 clinical trial. The study design will be similar to the design of the achromatopsia B3 study. We currently plan to initiate the trial at four sites in the U.S. and one site in Israel. Through our natural history study and other efforts of the clinical trial sites, we have identified 36 subjects eligible for groups one, two, three and 11 additional subjects eligible for group four. We continue our outreach and plan to screen patients in an ongoing way, both to support this trial and later stage trials. I will now update you on our non-clinical programs and research efforts. Our fourth product candidate is a potential treatment for X-linked retinitis pigmentosa for XLRP. In our XLRP program, which is one of the programs that is part of our collaboration with Biogen, we are currently conducting IND enabling toxicology studies in two relevant disease models with mutations in the RPGR gene, a naturally occurring dog model and a mouse knockout model. A dose range finding study of our XLRP product candidate in dogs demonstrated expression of the RPGR protein and photoreceptors and improvement in structural and functional parameters associated with disease progression in this model. We expect to file an IND for XLRP in 2017. As an additional part of our collaboration with Biogen, we are also developing product candidates for three new indications; two of which are for ophthalmic diseases, and one for adrenoleukodystrophy for ALD a non-ophthalmic condition. ALD is an excellent genetic disorder that causes damage to the nervous system and adrenal glands, primarily in the young boys. We have other product candidates in preclinical development that are solely owned by AGTC. Earlier this year, we announced a research effort in blue cone monochromacy or BCM, as one of our ophthalmic indications and a new initiative in otology. We are also conducting preclinical research to develop new product candidates for the treatment of age-related macular degeneration, or AMD, by leveraging our experience, developing products in orphan ophthalmology and our work with a previous partner on a first-generation product for wet AMD. I will now turn the call back to Larry who will briefly review our first quarter 2017 financial results.

[Larry Bullock:]

Thank you, Sue. Total revenue for the three months ended September 30, 2016 was $11.8 million compared to $11.1 million during the same period in 2015. Revenue recorded in 2016 resulted primarily from the amortization of upfront fees received under AGTC’s collaboration with Biogen. Revenue recorded during the same period in 2015 was primarily comprised of the amortization of these upfront fees amounting $6 million and milestone revenue of $5 million that was earned following achievement of a patient enrollment-based milestone under the terms of the collaboration with Biogen. Research and development expense for the three months ended September 30, 2016 decreased by $11.9 million to $5.6 million over the same period in 2015. The year-over-year decrease was largely driven by the impact of $12 million of collaboration-related license fees and other costs incurred by the company in 2015 as a result of its entry into and receipt of fees and payments under the collaboration with Biogen. In addition, outside program costs decreased by $800,000 to $2.3 million in 2016 compared to the same period in 2015, due largely to temporary delays encountered during the conduct of Phase 1/2 human clinical trials for the company’s XLRS and achromatopsia B3 product candidates. The impact of these decreases was partially offset by the higher employee-related and share-based compensation expenses and increased laboratory supply costs driven primarily by the hiring of additional employees and the incremental impact of new share-based incentive awards in 2016. General and administrative expense for the three months ended September 30, 2016 increased by $59,000 to $2.8 million over the same period in 2015. The year-over-year increase was primarily driven by higher employee-related costs from the hiring of additional employees to support the company’s continued expansion, partially offset by lower legal and professional fees. The higher legal and professional fees incurred in 2015 were largely attributable to professional consultations associated with the company’s negotiation and entry into its collaboration arrangement with Biogen. For the three months ended September 30, 2016, the company recorded net income of $3.6 million, compared to a net loss of $9.1 million in the same period of 2015. At September 30, 2016, the company’s cash, cash equivalents and investments amounted to $166.8 million. The company believes that these cash, cash equivalents and investments will be sufficient to enable it to advance planned preclinical studies and clinical trials for its lead product candidates for at least the next two years. Company expects that as of June 30, 2017, as cash, cash equivalent and investments were between – will be between $100 million and $120 million. With that, I will close my remarks. We thank you for your interest and support of the work we are doing here at AGTC. Operator, you may now open the line for questions.

[Operator:]

Thank you. Today’s question-and-answer session will be conducted electronically. [Operator Instructions] We’ll take our first question from Matthew Luchini from BMO Capital.

[Matthew Luchini:]

Hi, thank you so much and good afternoon. So a couple, if I may. First, I want to follow-up on the the observations with ocular inflammation, specifically were the observances that you referenced in your prepared remarks, are those new or were those – is that just a repeat of what was previously reported? I know that you were going to implement prophylactic steroids into the protocol. So maybe with any of the patients that have been dosed under that new protocol, were there any observations of information observed? And then secondly, I appreciate all the color around the number of patients that have been identified and potentially eligible to participate with XLRS and achromatopsia. So, now that, it seems like the trials or the operational issues are seem to be largely resolved. Can you talk about maybe anything around screen failure? Are the rates, at least, now in line with expectations? And is there any opportunity, given all the patient identification work you’re doing to maybe move the timelines up relative to what you’ve talked about? Thanks.

[Sue Washer:]

Thank you, Matthew. So I’ll address the information first and the comments in my prepared remarks were really just a repeat in a refresh for everybody’s mind and what we had been seeing. I can say that the patient that has been dosed with prophylactic, the change in the protocol that we discussed at the 10-K call, does that patient has experience just trace cells initially going to know information after that. So, at least, thus far the prophylactic steroids have done what we discussed at the 10-K call. And then as far as patient screening, yes, we have really ramped up the screening. I don’t think that I can predict what future screening will look like. As I said in my remarks, we are currently screening through 12 patients. Six of them have completed screening. And of the six that completed screening three were eligible and three were not. This is a slight increase. If you crunch the numbers from our last call, this would be a slight increase in what we have seen previously. But we really think it’s a matter of just getting out to as many patients as possible and bringing them in. As we talked about it just because some of the patients are not eligible for this clinical trial, does not mean that they won’t be eligible for the expansion group, or they won’t be eligible for the pivotal, because we expect that as is normal and first in man trials that we have set very tight criteria now and that that will open up in the future. But we’re very encouraged by where we are now in the patient screening.

[Matthew Luchini:]

Okay. Thank you.

[Operator:]

Your next question comes from the line of Mara Goldstein from Cantor Fitzgerald.

[Mara Goldstein:]

Thank you very much for taking the questions. I have two. And the first is, as it relates to just the disclosures around enrollment that you’ll be providing, do you anticipate also that you might be providing interim data not necessary to us, but at conferences throughout the next two years as these trials run through?

[Sue Washer:]

Thank you for the question, Mara. And as we’ve said many times, we do things that scientific conferences are the right place to disclose data and be able to discuss data in a robust scientific atmosphere. And so over the next – over the time period, certainly that would be our primary goal of discussing the data at those conferences. The additional guidance that we gave you today was meant to give you kind of a border. In that we have said that we will provide data on the dose escalation phase of XLRS by the – in 2017, and that with achromatopsia by the end of 2017.

[Mara Goldstein:]

Okay. And if I – thank you for that. If I could just ask a question on the XLRS and the natural history studies and enrollment. So based on the natural history studies, have your – have the screening criteria changed either in relation to either patient age or severity or diagnosis, and how should we think about that?

[Sue Washer:]

So our patient eligibility inclusion and exclusion criteria have not changed for the active trial since they were initiated. And they are purposefully tied as we discussed at the last conference call. So that we are trying to manage as much as possible, having patients in the dose groups that are as similar to each other as possible. So that as we’re going through that dose escalation phase, we’re as much as possible comparing apples-to-apples when we’re looking at clinical endpoints.

[Mara Goldstein:]

Okay. And I apologize, if I could just ask you one more question. I believe are there any – also had a natural history study in XLRS? And are there data available and do they – are they consistent with that you’re seeing if they have been made available?

[Sue Washer:]

To my knowledge the data has not been made available.

[Mara Goldstein:]

Okay.

[Sue Washer:]

The NEI is conducting a combined natural history/Phase 1 trial. And the only information that I have on that trial is what’s included on clinicaltrials.gov. That is a different product candidate. In that, it has a different capsids, different manufacturing method, a different study design, different doses. So I would encourage you to learn about the trial by looking at clinicaltrials.gov. I have no other information about the trial.

[Mara Goldstein:]

All right. Thank you. I appreciate it.

[Operator:]

[Operator Instructions] Your next question comes from the line of Stephen Willey from Stifel.

[Stephen Willey:]

Yes, good afternoon. Thanks for taking the questions. I think you had mentioned in the last call that within the XLRS study, you had looked at some of the preliminary secondary efficacy endpoint data, I think in the first six patients in the low dose cohort. And I think it also indicated that patients from the two middle or the two patients in the middle dose cohort were enrolled thus far newer, I guess, not far enough along to draw any meaningful conclusions. So just wondering if there’s any update you can provide in that regard?

[Sue Washer:]

We don’t have an update to provide at this time. We have now completed enrollment in that middle dose group and we don’t yet have sufficient data on all those patients to provide an update.

[Stephen Willey:]

Okay. And then just with respect to the achromatopsia B3 study, I don’t know and how long the farthest along patient is, I guess, perhaps only about six months at this point. But just wondering how long you think a follow-up might be needed in order to see a detectable benefit from an efficacy perspective?

[Sue Washer:]

Our previous statements on follow-up people – the time periods has been based on what we saw in the animal study. So when we look at a wide range of inherited retinal diseases in a wide range of animal models from mice to sheep to dog, et cetera, we would expect based on those animal studies, many of which have been published that we would see some kind of signal that would be reliable around the six-month time period. And I think that’s why, in my opening remarks, I guided that we would release data after six months of follow-up from the full dose escalation group.

[Stephen Willey:]

Understood. Thanks. And just respect to the preclinical wet AMD program, I know, I think there would have been perhaps some prior commentary around getting some more clarity around the lead candidate that you will be selecting for further development perhaps even I think maybe this calendar years. Is that still information that could be communicated before CARs or is that also the timeline that is a little bit flexible at this point?

[Sue Washer:]

We haven’t provided any further guidance on the wet AMD program.

[Stephen Willey:]

Okay. Thanks for taking my questions and congrats on the progress in terms of enrollment.

[Sue Washer:]

Thank you, Stephen.

[Operator:]

Your next question comes from the line of David Nierengarten from Wedbush Securities.

[David Nierengarten:]

That’s a new one. Thanks for taking the question. Just a quick one two questions actually. First off, are there any timing around when the data, safety and monitoring committee will wrap up on the review, so you can move on to the next cohort? And then on the A3 achromatopsia, are you – if you could maybe refresh our memory, are you still pausing after each of dose cohort in order to evaluate safety? Thanks.

[Sue Washer:]

Yes. So for the first question on the data, safety and monitoring committee, we expect that the data safety monitoring will wrap up their review in the fourth quarter of this year. And then we will be able to move on to the next dose in each of the trials XLRS and achromatopsia. For achromatopsia A3, yes, we do expect that we will – the way the protocol is set up is exactly the same as the B3 protocol. So there is a dose group data, safety and monitoring committee and dose group in a data, safety and monitoring committee, as we go up through those groups. So it’s exact same trial layout.

[David Nierengarten:]

Okay. So there’s no hope to maybe speed it up and drop one of those safety meetings that’s been set?

[Sue Washer:]

It has been set.

[David Nierengarten:]

Yes. Okay, all right. Thanks.

[Operator:]

Your next question comes from the line of Jim Birchenough from Wells Fargo Securities.

[Yanan Zhu:]

Hi, thanks for taking the question. This is Yanan in for Jim. Just first of all to the follow-up with the previous question on DMC timing, because it looks like you have made progress in screening and the enrolling patient and patient are ready to be enrolled into the higher dose cohorts, but it looks like the DMC review now looks like more of a late limiting step. So just trying to understand typically for this review at what time point after dosing of the last patient does the DMC coming into review safety data?

[Sue Washer:]

Set a minimum, we have to compile data from, at least, two weeks follow-up from the last patient dose in each group. And then we have to pull together the whole body of data generated on all patients of that group and schedule the committee meeting, have them have the meeting, ask their questions, and have any follow-up. And so with this scheduling and compiling of all the data that they need to review, it can take several weeks.

[Yanan Zhu:]

So several weeks from the time the last patient cohort is both?

[Sue Washer:]

Correct.

[Yanan Zhu:]

Got it. That’s very helpful. And also just to confirm what I heard, I think, you said that you will release full dose escalation data. In terms of efficacy, you will release data with the full escalation of doses. So that means that, for example, we won’t hear about the mid dose for XLRS just by itself when it’s ready, or that’s still possible?

[Sue Washer:]

Our guidance is that, we are going to release data on all of the dose escalation groups together with, at least, six months follow-up on all patients for both XLRX and achromatopsia, so that is our current guidance.

[Yanan Zhu:]

Got it, that’s helpful. Lastly, a question on pipeline, regarding the ALD program. I’m just wondering at a high-level, is this – in terms of a delivery to the brain, is this going to be a intravenous delivery – [would that] capsids that can cause the blood brain barrier, or is there some more of the direct injection through a brain. And also whether your collaborations for the molecular therapeutics will be utilized to address the delivery of that product candidate?

[Sue Washer:]

So we haven’t given any guidance on the specific design characteristics of the ALD program, that’s part of our collaboration with Biogen and it is in the early stages. As a research discovery program, part of all of the work that we’re doing with Biogen is to define the product whether that would be capsids promoter delivery method et cetera. So we are still in the research phases there and we haven’t given anyone any guidance on exactly what the product characteristics are. As far as our relationship with 4D molecular, it’s a very broad collaboration, in that, we’re screening through their library for many indications and the indications that we’re working on with 4D have not been disclosed.

[Yanan Zhu:]

Got it. That’s very helpful. Thank you.

[Operator:]

[Operator Instructions] Your next question comes from the line of Joe Pantginis from ROTH Capital Partners.

[Joseph Pantginis:]

Hi, good afternoon, Sue and Larry. Thanks for taking the question and also thank you very much for the visibility you provided today. I wanted to also just move forward to the pipeline, you mentioned otology, I was wondering, you have the ability to join an extremely limited group from massively unmet medical need in otology gene therapy. Can you provide any insight into the programs, or genes you are looking at? I know you might not be able to provide the targets, per se, but maybe an overview of what you might be looking at?

[Sue Washer:]

Yes, thank you for that question, Joe. We really are very excited about the otology space and do feel that it’s a high unmet need that we have some specific capabilities to address. And you’re right, we’re not quite prepared to disclose specific indications. But one of the reasons we’re excited about the otology space is the similarities to the ophthalmology space. And we will apply the same kinds of criteria to the otology space that we have described to you that we’ve applied to ophthalmology and then we will look at significant patient populations. Obviously, we’ll be looking at the indications, where the gene fits in AAB, we’ll be looking at indications, where the disease is as stable as possible. So that we can treat and make a difference to a wider percentage of the prevalent population, where there’s animal models available that we can work on to screen our product. So you can think about it as is applying that same funnel of selection criteria that we’ve described many times for ophthalmology in our selection of the specific indications that we’ll work on in otology.

[Joseph Pantginis:]

No, thank you. And I guess, I’m pushing a little bit, is there any sort of guidance and the types of cells you might be targeting within the ear?

[Sue Washer:]

So I think it is pretty well understood that the important cells in the ear are similar to the important cells in the eye. I mean, in the eye, retinal ganglion cells and photoreceptors are important, as the photoreceptors convert that light wave into electricity and the retinal ganglion cells take it back to the brain. Similarly in the ear, it’s the hair cells that convert sound waves into electrical signals and the basal ganglion cells that take that electrical signal back to the brain to be interpreted as hearing. So again another – those cell types we’re targeting, it feels comfortable to us because of the same types of cells we’re targeting in the eye.

[Joseph Pantginis:]

Great. Thank you, Sue.

[Operator:]

Your next question comes from the line of Debjit Chattopadhyay.

[Debjit Chattopadhyay:]

Hi, good evening. So just – could you just remind us in terms of dosing, in terms of the vector copy numbers between, not the vector copy numbers, but vector dose for dose group. Does it scale by a log, as you move higher, and in terms of efficacy how does that compare with the animal studies? Did you see any efficacy in the intimate comparable low to intermediate dose groups in animal studies versus what you’re seeing in the humans?

[Sue Washer:]

Right. So when we selected the doses to move forward within both of the trials the XLRS and achromatopsia trial, we were taking two sets of data and overlaying them. So as you probably remember, none of the animal models of disease are in primates. They are all in lower mammals, where the eye is one sufficiently – significantly smaller, and two physiologically and anatomy wise it’s not exactly the same. So we did dose ranging studies in the animal model seeing over what variety of doses did we see efficacy And then – and the primate study was purely looking for safety, since there’s no model. And so we overlaid those two sets of data and selected a dose range that was safe in the primates and had some possibility of overlaying with the doses that provided a signal in the – in the lower mammals But we’ve always talked about the fact that’s an experiment we’re doing now in a human patient, since we had no primate model of the disease and since the anatomy of the eye changes as you work your way up to the mammal species, is to identify the dose in this primate – in the human primates that will provide the efficacy signal. But we did overlay those two sets of data and put a range of doses to go into the clinic with a further recognition that would – this was the first in man study, and that safety was the primary endpoint.

[Debjit Chattopadhyay:]

So do you think there is a risk even in the highest ever score that this may not be sufficient in terms of what you need for therapeutic benefit?

[Sue Washer:]

Well, we’re moving forward with these programs, because we very much believe that the data we have and that has been published in the animal models and the safety and the primate supports clinical development of these programs. So we very much believe in these programs and are moving them to forward through the dose escalation to reach a safe and efficacious dose.

[Debjit Chattopadhyay:]

And let’s – do you actually see, you hit the efficacy markets six month out with the highest dose cohort, given that you’re one year behind roughly in terms of where you had thought you would be. Is there a – are there plans, or is there any flexibility on part of the agency to modify the dose expansion part of the study. So it’s bigger and could then serve as some sort of a pivotal or study for a conditional approval? Thank you.

[Sue Washer:]

Yes, I think, there’s always the possibility based on what data you generate to go back to the agency and modify your clinical trial design. And I think that that is a common way to deal with data as it emerges. So based on the data we develop, we would always entertain and take the opportunity to go back to the agency to talk about clinical trial design to bring products to patients in as expeditious way as possible.

[Operator:]

At this point, I’m showing there no further questions. I would turn the line back to Sue Washer for closing remarks.

[Sue Washer:]

Thank you, operator, and thank you all for the attention that you had today. We are enthusiastic about the progress that we’re making with our current programs and we work to develop novel and innovative products for our ocular indications that are – that currently have no effective treatment. As always, we’re grateful for the hard work and support from the AGTC team, our investigators, and especially the patients that are participating in our trials. As a reminder, we will be presenting at the Stifel Healthcare Conference on November 15, in New York, and we look forward to seeing many of you there. Thank you to everyone on the call for participating.