Applied Genetic Technologies Corporation
Q4 2015 Earnings Call Transcript

Published: 9 Nov 2015

[Operator:]

Good day ladies and gentlemen and welcome to the AGTC First Quarter 2016 Financial Results Conference Call. As a reminder, today's call is being recorded. For opening introductions and opening remarks, I’d like to turn the call over to Larry Bullock, Chief Financial Officer of AGTC. Please go ahead sir.

[Larry Bullock:]

Thanks, Eric. Good afternoon everyone and thanks for joining us today. Before we get started, I’d like to remind everyone that during this conference call we may be making 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’d now like to turn the call over to Sue Washer, our President and Chief Executive Officer.

[Sue Washer:]

Thank you, Larry, and welcome to those of you on the call with us today. I will be providing a company update, including the progress of our current and pending clinical trials, and then we’ll turn the call back to Larry to review our first quarter 2016 financial results. Following Larry's remarks, we will stay on the line to take your questions. The past few months have been represented a period of rapid growth and progress for AGTC. Continuing to employ a careful, rational approach to the selection of our product candidates, we expanded our pipeline of products developed both internally and with our partner Biogen. We continue to execute on our ultimate goal of becoming a lead gene therapy company developing life-changing products for patients with severe eye diseases. As a reminder, our lead product candidates are treatments for X-Linked Retinoschisis or XLRS, Achromatopsia or ACHM and X-linked Retinitis Pigmentosa or XLRP. These rare diseases of eye are caused by mutations in single genes significantly affect visual function and currently lack effective medical treatment. We are currently enrolling patients in a phase 1/2 XLRS clinical trials and we expect to enroll a total of 27 XLRS patient at four clinical sites. We recently announced that we received our first milestone payment from Biogen based on meeting certain enrollment criteria in this trial. As part of that collaboration, Biogen has obtained worldwide commercial rights for the XLRS program, while AGTC remains maintains responsibility for the clinical development programs to product approval in the United States. Biogen will support the clinical development cost, subject to certain conditions following this first in human study. We have an option to share the development cost and therefore 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. We are pleased to report that the phase 1/2 XLRS clinical trial is progressing well and the planned dose escalation is continuing through multiple cohorts. In terms of releasing data from our XLRS clinical trials, we intend to do so in a way that is in the best interest of the trial and the enrolled patients. After careful consideration and consultation with our partner Biogen, we think it is best to do so when we have a substantial body of data that will allow for rigorous technical analysis and accurate interpretation of the results, and we would expect to do so in an appropriate scientific conference in 2016. We expect to utilize this same approach as our standard protocol for reporting data within the framework of scientific change for all of our current and future clinical trials. In addition to the ongoing XLRS clinical trial, we recently announced publication of results from two additional XLRS preclinical studies, evaluating safety and bio-distribution profiles of our product, a recombinant AAV vector expressing retinoschisin in both S1-deficient mice and in normal male cynomolgus macaques. The data demonstrated that intravitreal administration was well-tolerated in all groups and resulted in RS1 expression. Also XLRS natural history study data was presented at the Retina Society 48th Annual Scientific Meeting in Paris. This study informed the design of our ongoing phase 1/2 clinical trials. For our first achromatopsia product candidates, we filed an investigational new drug application last month and expect to initiate a phase 1/2 clinical trial subject to the FDA's review and approval by the institutional review board at each of the foresight participating in the clinical trial. In addition, we received orphan drug designation from the European Medicines Agency, EMA, for our investigational gene therapy product for the treatment of achromatopsia caused by mutations in the second gene, which we are also developing as a product candidate for patients with achromatopsia, both these programs are being developed internally and solely by AGTC. Going forward, we will continue to seek opportunities to take advantage of the adaptability of our gene therapy platform to address a range of genetic diseases, both within and beyond our initial focus area of orphan ophthalmology. To that end, we are conducting IND-enabling studies for our XLRP product candidates and developing new treatments for three additional indications, all in collaboration with Biogen. Additionally, we are conducting internal work on developing new treatments for age-related macular degeneration or AMD by leveraging our experience developing products in orphan ophthalmology as well as our past work on a first generation product for wet AMD. We are evaluating potential targets in both in vitro and in vivo animal studies. We have several additional internal research programs under asset development for other orphan ophthalmic indications. We’re continuing to expand our talent pool with recent appointments of three new employees, among these hires, Jonathan Sparks, Ph.D. will join us as Vice President of Legal Affairs. The company also announced the appointments of Ellery Mangas as Senior Director of Regulatory Affairs, and Eric Olson as Senior Director of Strategic Corporate Development. Jonathan, Ellery and Eric bring considerable experience and expertise to our company and we are excited to welcome them to the AGTC team. Overall AGTC currently has 43 employees with a plan to expand to 60 employees by the end of our fiscal year. It has been an exciting quarter for all of us at AGTC, initiating our activities with Biogen, successfully executing on our XLRS clinical trials, filing our first achromatopsia IND, growing our teams, expanding our pipeline of site saving product candidates, planning for consolidation of our fluid operations into a new state-of-the-art office and laboratory facility, and opening our office in Cambridge are all activities that a blade a firm foundation for our success in 2016. I’ll now turn the call back to Larry, who will briefly review our first quarter financial results.

[Larry Bullock:]

Thank you, Sue. Total revenue for the quarter ended September 30, 2015 was $11.1 million compared to $705,000 generated during the same period last year. The increase was largely due to the recognition of revenue from a portion of the nonrefundable upfront fees received from our collaboration with Biogen, as well as milestone revenue of $5 million that was recorded during the quarter following achievement of a patient enrollment milestone under our collaboration with Biogen. Grants and other revenue generated during the quarter decreased year-over-year largely as a result of reduced research and development activities on grant-funded projects. Research and development expense for the quarter increased by $12.6 million to $17 million compared to the same period last year. The increase was primarily driven by $12 million of incremental cost associated with our collaboration with Biogen. The receipt of upfront fee from our collaboration with Biogen and achievement of the patient's enrollment milestone under the Biogen collaboration triggered sub-license and other payments to some of our research partner under our existing agreements with those particular institutions. These agreements obligate us to pay to each research partner amounts that range from 5% to 10% of certain proceeds received under collaboration and other arrangements, including milestone payment receivable under such agreements. We’ve recorded these sub-license and other payment obligations to our partners as an expense when incurred. In addition, employee-related and share-based compensation costs pertaining to R&D were higher year-over-year due primarily to the hiring of additional employees. The company’s continued growth has seen a total number of employees increased to 40 as of September 30, 2015, up from 20 employees at the end of the same period a year ago. General and administrative expense for the quarter increased by $1.6 million to $3.2 million over the same period last year. The increase was primarily driven by the hiring of additional employees, as I mentioned a moment ago, which resulted in higher share-based compensation and other employee-related costs, combined with an increased level of business development activities which resulted in higher legal, license maintenance and other related expenses. We incurred a net loss of $9.1 million for the quarter, up from a loss of $5.4 million during the same period in 2014. As of September 30, 2015, our cash, cash equivalents and investments amounted to $199.3 million. Based on the strong cash position, as we stated in our 10-Q and press release, we expect to have sufficient cash for at least the next two years which is the time period we expect to complete the ongoing phase 1/2 human clinical trial for XLRS and to complete our plan phase 1/2 human clinical trial for achromatopsia. We should also be able to fund preclinical research and the initiation of the complete enrollment of our anticipated human clinical trial for a second form of achromatopsia, and also for our partner and program to treat X-linked Retinitis Pigmentosa. This assumes of course that we do not answer into any material transactions that are not currently planned that we’ll remain within our development timelines and estimated budgets that we don’t exercise any of our options to participate in cost and profit share with Biogen under the XLRS or XLRP programs as that there are no other unexpected events. With that I will close by saving we are very much appreciate your interest and in support of the work we are doing here at AGTC. Operator, you may now open the line for questions.

[Operator:]

[Operator Instructions] We’ll take our first question from Joe Pantginis with ROTH Capital Partners.

[Joe Pantginis:]

Hey, guys. Good afternoon. Thanks for taking the question. First, Larry, do you think you can add a little more color with regard to the R&D line? First, I guess simplistically does this number represent the run rate and is it possible to break out the Biogen contributions?

[Larry Bullock:]

So you mean in terms of R&D expenses?

[Joe Pantginis:]

Yes.

[Larry Bullock:]

Yeah. So the $12 million is a onetime expense related to the upfront fees that we received from Biogen as well as the milestone payment that we received from Biogen. So that is not an ongoing expense, the remainder is our normal R&D burn rate as of this first quarter.

[Joe Pantginis:]

Got it. I just wanted to confirm, and thanks for outlining. You know what really are you looking for with regard to the amount of data you want to have for data presentation? So, you know, we have a better sense of what to look for with regard to potential conferences in 2016. More of a little bit of a macro question somewhat hot off the presses, as you're looking at target selection for your AMD product, it was just announced that Regeneron decided not to exercise its first right for negotiation for Avalanches AVA-101. So I was just curious how that might impact the field or any of your decisions going forward?

[Sue Washer:]

I don’t think there has much of an impact as we stated before what we have been doing is really taking a step backward in the AMD space, and looking at all the progress that's been made in the understanding of the multiple underlying factors in AMD, and looking at potential methods of actions certainly in [indiscernible] that also in other areas, and also applying all that’s now known about targeting with capsids and promoters and formulation. And so, we’re focusing on developing a second generation product, so I don't believe that that information changes our forward pass.

[Joe Pantginis:]

Great. Thanks a lot.

[Operator:]

We’ll go next to Mara Goldstein with Cantor Fitzgerald.

[Mara Goldstein:]

Thanks very much for taking the question. To follow-up just on that Biogen, rather the revenue Biogen question. To the extent that you have been able to forecast that when you might be booking the rest of or additional Biogen payments in 2016 and 2017, I don’t know if there is anything you can share with us as it relates to that when they have to be recognized?

[Larry Bullock:]

We haven’t gone into a great amount of detail there obviously, but in general the revenue will probably recognize over the next two to three years the upfront revenue.

[Mara Goldstein:]

And then, if I could just ask maybe the Cambridge facility, I mean open that earlier this year. Can you just speak to the work that's being done there and where headcount is being added in Florida versus Cambridge?

[Sue Washer:]

Yeah. So, in Cambridge we currently have four employees and business development, legal and also in the scientific research areas. We expect to over time have as many as 12 employees in the Cambridge area. They will be heavily focused on business development, patient advocacy and clinical operations that we will maintain a small basic research lab there as well. So the bulk of the employees will remain in Florida.

[Mara Goldstein:]

Okay. All right. Thank you.

[Operator:]

[Operator Instructions] We’ll take our next call from Steve Willey with Stifel.

[Unidentified Analyst:]

Hi. This is [indiscernible] for Steve today. Thank you for taking my question. So, previously you’ve guided that you would presentable 7 to 9 patients’ worth of data from XLRS program. So now that you will announce data in '16, can we expect to see data from all 27 patients or do you have a cutoff?

[Sue Washer:]

So, what we are saying is that we simply determine that we will release data only when we have a substantial body of data that is sufficient in order to make strong scientific conclusion. So, we don't have a specific cutoff. I think we’re driven by the data in the science, but we certainly want to have enough data that were certain of a affecting, we can make robust scientific decisions.

[Unidentified Analyst:]

Okay. So, regarding ACHM, do you still plan to do in term of data in '16, first half of '16 from the ACHM trial?

[Sue Washer:]

We do plan to release data on ACHM in 2016, following the same rubric that we outline for XLRS and that we’re going to wait to have a substantial body of data from which we can make strong scientific conclusions.

[Unidentified Analyst:]

Okay. And just lastly, can you talk about the type of vector subtype that you use in CNGA3 and CNGB3, for those two do they use the same vector subtype?

[Sue Washer:]

So they are using the same vector subtype, both A3 and B3 are diseases that affect the exact same cell type, which are cone, photoreceptors, and so we previously announced that we have a proprietary promoter that is cone specific and allows for expression solely in cone photoreceptors. And so, the two vectors for those indications will be virtually identical as will be the delivery which will be subretinal.

[Unidentified Analyst:]

Okay. Thanks for taking my question.

[Operator:]

And this does conclude the Q&A session of today's call. At this time, I’d like to turn it over to Sue Washer for any comments and closing remarks.

[Sue Washer:]

Well, thank you again to everyone who participated in today's call. AGTC has experienced significant growth and progress this past quarter and we laid a firm foundation for AGTC's success over the next two years in which we believe we will generate significant data on the process of gene therapy in ophthalmology. Going into 2016, we expect to continue focusing on key objectives, including advancement of our clinical programs, continuing our productive collaboration with Biogen, and presenting and publishing new data. We look forward to ongoing discussions with all of you about our programs in XLRS, XLRP, AMD, and are two achromatopsia programs. We will be presenting at the Stifel Healthcare Conference on November 18th, as well as the Piper Jaffray Healthcare Conference on December 1st, where we will also be participating on a panel discussion. We will also be participating in Investor Meetings with Cantor on December 14th in Boston. We look forward to seeing many of you at those events. Thank you again for your participation today.

[Operator:]

And this does conclude today's conference. Everyone, again we thank you for your participation. You may now disconnect.