Dicerna Pharmaceuticals, Inc.
Q2 2018 Earnings Call Transcript

Published: 9 Aug 2018

[Operator:]

Good afternoon. My name is Sarah and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Q2 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. I would now turn the conference over to Mr. Glen Gorma [ph], Investor Relations. Please go ahead.

[Unidentified Company Representative:]

Thank you, operator. Good afternoon, and welcome to Dicerna's conference call to discuss the company's 2018 second quarter results. For anyone who has not had a chance to review the results, we issued a press release after the close of trading today, which is available under the Investors & Media tab on our Web site at www.dicerna.com. You may also listen to this conference call via webcast on our Web site, which would be archived for 30 days beginning approximately two hours after this call is completed. I'd like to remind listeners that management will be making forward-looking statements on today's call, including, for example, expected timelines and plans for development of DCR-PHXC and other pipeline programs, expectations related to the collaboration with Boehringer Ingelheim, expectations for discussions and possible opportunities with potential partners and collaborators, and guidance regarding cash usage. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important risk factors, including those discussed in the Risk Factors section of our latest Form 10-Q filed with the SEC today. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so if our views change. Now, I'd like to turn the call over to Dr. Douglas Fambrough, Dicerna's President and Chief Executive Officer. Doug?

[Douglas Fambrough:]

Thank you, Glen. Good afternoon and thank you all for joining us today. With me are Jack Green, our Chief Financial Officer; Ralf Rosskamp, our Chief Medical Officer; and Bob Brown, our Chief Scientific Officer. It’s an exciting time for Dicerna as we continue to make steady progress advancing our lead molecule DCR-PHXC and our growing pipeline of GalXC product candidates. We achieved a number of important milestones during the second quarter and are continuing to build on this momentum as we progress through the second half of 2018. These milestones include; dosing primary hyperoxaluria patients with DCR-PHXC in the Group B portion of the PHYOX Phase 1 study, receiving Orphan Drug Designation for DCR-PHXC for the treatment of primary hyperoxaluria from the FDA, receiving a recommendation designating DCR-PHXC as an orphan medicinal product for the treatment of primary hyperoxaluria from the EMEA’s committee for orphan medical products. We have since received that designation. Advancing our preclinical work for DCR-HBVS for chronic hepatitis B virus and preparation for filing regulatory clearances later this year, advancing our preclinical work for our second rare disease drug candidate and our collaborative discussions around that program and additional GalXC pipeline programs, joining the Russell 3000 and Russell 2000 indices, and finally settling all litigation with Alnylam Pharmaceuticals. Our accomplishments in the second quarter have put in a strong position to hit milestones that drive value for the company over the coming months. As we look ahead to the rest of 2018 and into 2019, we are on track toward meeting our key year-end goals. These include; reporting interim results of our PHYOX Phase 1 clinical trial of DCR-PHXC in the third quarter and publicly presenting results in the fourth quarter, preparing to initiate a pivotal registration trial for DCR-PHXC in the first quarter of 2019, filing of regulatory clearances for our DCR-HBVS program in the fourth quarter and commencing human clinical trials shortly thereafter. We also anticipate additional news later in the year regarding our second rare disease candidate and with respect to corporate partnering activities. With that high-level summary, let’s now turn to DCR-PHXC, our lead GalXC investigational candidate which is in clinical development for primary hyperoxaluria, or PH for short. We are developing DCR-PHXC as a potential treatment for all forms of PH and we believe we have a differentiated and potentially best-in-class approach to treat the disease which currently has no pharmaceutical treatment options. There are multiple forms of PH, including PH1, PH2 and PH3 as well as PH for which no mutation has been detected in the three genes that categorize the three defined types of PH, a condition sometimes referred to as idiopathic PH. Our PHYOX Phase 1 study for DCR-PHXC continues to progress on schedule and we are well into the second phase of the study. In May, we began dosing PH patients with DCR-PHXC in the Group B portion of the study. We have dosed 10 out of 16 patients so far, including patients with both PH1 and PH2, and are very pleased with the pace of enrollment. I’ll elaborate on this further in just a moment. As a reminder, the PHYOX study is a randomized, single ascending dose study of DCR-PHXC in normal, healthy volunteers and patients with PH. The study is divided into two groups. Group A is a placebo-controlled, single-blind, single-center study that enrolled 25 normal healthy volunteers. This phase of the study is now complete. Group B is an open-label, multicenter study enrolling up to 16 patients with PH1 and PH2. The primary objective of the study is to evaluate the safety and tolerability of single doses of DCR-PHXC in both groups. The secondary objectives are to evaluate the pharmacodynamic effect of single doses of DCR-PHXC on urinary oxalate concentrations, as well as other biochemical markers, and to characterize the pharmacokinetics of single doses of DCR-PHXC. As reported on our last quarterly call, early results from the healthy volunteer phase are promising with no serious adverse events. Out of 25 participants, there were two mild-to-moderate transient injection site reactions lasting up to 36 hours at doses of 6 and 12 milligrams per kilogram involving erythema and tenderness. The study remains blinded to treatment assignment. The LDHA gene we are targeting in the liver with DCR-PHXC represents only minimal metabolic disruption. As a result, it does not induce changes in circulating or urinary biomarkers in healthy volunteers, unlike other approaches to PH. The Group B portion of the study consists of three cohorts of PH1 patients dosed at 1.5, 3 and 6 milligrams per kilogram. We added a fourth cohort of PH2 patients dosed at flexible dosing levels. As noted earlier, we have dosed 10 patients to-date; four PH1 patients in each of cohorts one and two, one PH1 patient in cohort three, and one PH2 patient in cohort four. We are encouraged by the top line safety and tolerability data in normal healthy volunteers and look forward to reporting interim Group B results later in the third quarter and publicly presenting results at a medical or scientific conference in the fourth quarter. Our goal is to block the production of most or all of the excess oxalate in patients with PH and again we’re investigating patients with PH1 and PH2 in the PHYOX trial. Reduction in urinary oxalate may be an approvable endpoint for our registration study given recent developments in the field. Assuming our proof-of-concept results are positive and that we receive regulatory clearances, we plan to initiate a pivotal, multi-dose Phase 2/3 clinical trial for DCR-PHXC in the first quarter of 2019. Now let’s turn to DCR-HBVS, our GalXC product candidate for the treatment of chronic hepatitis B virus, or HBV for short. As you know, HBV is a major global health problem with more than 250 million people around the world living with the disease according to the World Health Organization. We continue to advance DCR-HBVS toward clinical trials and are on track to file regulatory clearances for human clinical trials in New Zealand and Australia during the fourth quarter of 2018. Our plan is to take DCR-HBVS through proof-of-concept studies on our own and to seek a partner pending positive POC data. We are very optimistic about the potential for RNAi and specifically about our subcutaneously administered GalXC-based approach to treat HBV. Our preclinical data for the DCR-HBVS program are promising and show that DCR-HBVS targets HBV messenger RNA and leads to a greater than 99.9% reduction in circulating viral S antigen in mouse models of HBV infection. We believe that our results compare favorably to other RNAi-based approaches to HBV that have been tested in directly comparable research models. I would like to point out that due to the structure of the HBV genome, one GalXC molecule leads to the silencing of multiple viral genes, including the core antigen and the viral polymerase in addition to S antigen. RNAi-based therapy for HBV, even with a single GalXC molecule, is, in essence, combination therapy. This, along with the preclinical antiviral activity, makes us hopeful that RNAi-based therapy will one day be a key component of an effective therapy to treat HBV. We have yet to disclose our second rare disease program that targets a liver expressed gene involved in a serious disease. However, we continue to advance development activities for this candidate while we identify a risk-sharing partner. We are in active discussions with multiple parties and we plan to file regulatory clearances to initiate clinical trials once a partner is onboard. Switching gears fully to corporate partnering, our collaboration with Boehringer Ingelheim in nonalcoholic steatohepatitis, or NASH, is proceeding as expected according to the work plan for the collaboration. We look forward to sharing updates on the program in the future. BI retains an option to add a second gene target to the collaboration. In addition to BI, we are actively seeking collaborators to apply our GalXC technology platform to a wide variety of additional targets in our focus areas of cardiovascular disease, chronic liver disease as well as select opportunities in rare disease. The pace of discussions accelerated meaningfully after the settlement of the Alnylam litigation, which I will discuss next. As discussed in our first quarter call as a subsequent event, in April we announced that we resolved all ongoing litigation with Alnylam. This settlement allows us to advance all of our existing and currently anticipated pipeline programs while maintaining a strong balance sheet. The terms of the agreement include mutual releases and dismissals with prejudice of all claims and counterclaims in the litigation between Dicerna and Alnylam. Dicerna denies wrongdoing and did not admit wrongdoing as part of the settlement agreement. The settlement agreement does not include any licenses to any intellectual property from either party and does not include any royalties or milestones related to product development. We are pleased that the litigation is firmly behind us. Our Chief Financial Officer, Jack Green, will elaborate on the accounting for the financial terms of the agreement and impact to the financial results momentarily, as part of his discussion of our overall financial results. Jack?

[Jack Green:]

Thank you, Doug. I’d like to briefly summarize the key financial results for the second quarter and direct you to our 10-Q filing for additional details. Net loss attributable to common stockholders was 35.6 million and 51.2 million for the three and six months ended June 30, 2018, respectively, as compared to 24 million and 38.2 million for the same periods in 2017. The increase is attributable to higher operating expenses, including the $21 million in litigation settlement expenses, partially offset by higher revenues, interest income and a decrease in dividends as a result of the conversion of the redeemable convertible preferred stock in December 2017. Basic and diluted net loss per share attributable to common stockholders for the second quarter was $0.68 versus $1.15 for the comparable period in 2017. Research and development expenses were 10.3 million and 20.2 million for the three and six months ended June 30, 2018, respectively, as compared to 9.1 million and 17.8 million for the same periods in 2017. The increase was due to higher direct research and development expenses, partially offset by a reduction in platform-related expenses. The increase in direct research and development expenses in the three months ended June 30, 2018 was primarily due to an increase in clinical study costs and an increase in research and development salaries due to increased headcount compared to the same period in 2017. The increase in the six months ended June 30, 2018 was primarily due to an increase in toxicology studies and an increase in clinical studies. The decrease in platform-related expenses for the three and six months ended June 30, 2018 was primarily due to lower lab material and supply costs and contract research costs associated with applying the company’s GalXC platform against gene targets. General and administrative expenses were $4.8 million and $9.1 million for the three and six months ended June 30, 2018, respectively, as compared to $4.1 million and $8.2 million for the same periods in 2017. The increase is predominantly related to higher consulting and corporate legal expenses. Litigation expenses, all related to the litigation with Alnylam and which we are reporting as a separate line item in our operating costs, were 22.2 million and 25.4 million for the three and six months ended June 30, 2018, respectively, as compared to 2.2 million and 3.6 million for the same periods in 2017. The increase is predominantly due to the $21 million settlement expenses related to the litigation settlement recorded in the second quarter of 2018. The settlement expenses consist of the following items. An upfront payment of $2 million paid in cash, issuance of 983,208 shares of common stock to Alnylam which was recorded at fair market value of $10.3 million as of the settlement date, and a future cash payment of $13 million which was recorded as a liability at its discounted present value of $8.7 million. This liability will be paid as 10% of any future upfront or year-one milestone payments from new partnering transactions with any remaining balance payable in April of 2022. As of June 30, 2018, we had $82.3 million in cash and cash equivalents and held-to-maturity investments as compared to $113.7 million as of December 31, 2017. Additionally, we had $700,000 of restricted cash equivalents as of June 30, 2018 and December 31, 2017, which reflects collaterals securing our operating lease obligation. We used $32.3 million of cash in operations for the six months ended June 30, 2018 as compared to $26.9 million for the same period in 2017. The increase of 5.4 million was primarily due to litigation and research and development expenses. As of June 30, 2018, we recognized 1.5 million and 3.1 million of revenue associated with the Boehringer Ingelheim agreement during the three and six months ended June 30, 2018. This amount represents partial amortization of the $10 million nonrefundable upfront payment from BI as well as certain reimbursable third-party research expenses, which are billable to BI. We expect to recognize the remainder of the initial transaction price on a straight-line basis through June 30, 2019. We do not expect to generate any product revenue for the foreseeable future. We expect that our current cash balance is sufficient to fund the execution of our current clinical and operating plan through 2019, which includes advancing DCR-PHXC through proof-of-concept trials and into late stage clinical development, and initiating proof-of-concept studies for DCR-HBVS in HBV patients. This estimate assumes no new funding from additional collaboration agreements or from external financing events. With that, I’d like to turn the call back to Doug for closing remarks.

[Douglas Fambrough:]

Thank you, Jack. In closing, we view 2018 as a pivotal year for the company as we continue to execute our product development strategy and work toward achieving our business objectives. With the momentum that we have sustained during the second quarter and subsequent period, we’ve set the stage for a number of value-creating milestones in the coming months and remain on track to have three GalXC programs in clinical development in the first half of 2019. We are pleased with the strong interest we are seeing from potential partners and the pace of those discussions. And we are well financed to execute on our strategy with a cash runway through 2019. It’s an exciting time for Dicerna and we look forward to providing updates on future quarterly calls. With that, let’s open it up to questions. Operator?

[Operator:]

[Operator Instructions]. Your first question comes from the line of Stephen Willey from Stifel. Please go ahead.

[Stephen Willey:]

Good afternoon. Thanks for taking the questions. Doug, I was just wondering if you could provide a high level characterization of what we should expect to see in a top line data release later this quarter, specifically given like it sounds like you’ll be preserving complete results for some venue in the fourth quarter?

[Douglas Fambrough:]

Yes, I think you interpreted that correctly. You are – we’ve laid out where we are in dosing having fully dosed the first two cohorts and into dosing of the 6 milligram per kilogram cohort three. The time course of RNAi is such that it is four to eight weeks to see maximum RNAi effect, maybe even longer than that. So we need to collect that data and we should be able to talk about time to maximum effect and certainly give a quantitative sense of what levels of oxalate reduction we’re achieving. We will not be able to talk about full duration of effect because based on all the preclinical work we won’t have enough time in the third quarter to talk about full duration of effect. But we are expecting to give a quantitative sense of the performance of the molecule.

[Stephen Willey:]

Okay, that’s helpful. And then I guess your competitor recently made some positive comments about the biological viability of LDH inhibition to lower oxalate but also seemingly insinuated that there were some preclinical data demonstrating that there’s a concomitant elevation in liver pyruvate levels which I think could prove to be problematic from a safety perspective. So just curious what your thoughts are around these comments, whether you’ll be monitoring and perhaps even disclosing liver pyruvate levels as part of either a top line or complete data release and if this is something that you would theoretically expect to see, if at all, with either acute or longer-term treatment? Thanks.

[Douglas Fambrough:]

Yes, let me make some opening comments about the LDHA target versus the GO target. Then I’m going to pass to my colleagues to talk about the pyruvate question that you just raised. So I think everyone understands LDHA is a target that has the potential to treat all forms of PH or GOs limited to PH1. But there is some data reflecting deeper biochemistry. As you know, we announced LDHA as a target in 2016 and maybe I should just talk to other people’s data. In 2017, Alnylam presented a poster on LDHA and it showed a couple of I think important things, all of which are consistent with the data that we’ve collected as well. One is that in mice that have PH1 and LDH inhibition, the level of urinary oxalate is quantitatively identical to wild-type mice. So it appears that elimination of LDHA gives you complete normalization. Consistent with that, the poster also showed that in liver extracts in the absence of LDH activity, because it was inhibited by RNAi, there appeared to be no ability, zero ability to convert glyoxylate into oxalate in the liver extracts and no other – no pathway it seems to exist other than LDH for the generation of oxalate. So that suggests that LDH should be a very effective target and essentially be unbeatable, right, for oxalate reduction. Interestingly, if you look back at publications, for example, from Eduardo Salido on the GO gene or HAO1 gene that encodes GO and if you look at the double knockout mice, the mice that have a knockout were the PH1 gene and of HAO1. So there are protein null [ph] for the GO protein in a PH1 background. The oxalate levels there are about 25% above wild-type baseline which is consistent with all the preclinical data and I think the emerging clinical data as well that there is no really full oxalate inhibition with that target. In addition to the broader breadth of LDHA, there is a reason to expect that quantitatively LDHA also may offer superior absolute reduction. We obviously will all be interested in what the clinical results show when they’re fully in. As to some biochemistry, I think I’ll pass to my colleague Bob Brown to address that.

[Bob Brown:]

Sure. Thanks, Doug. First, I’ll note that the poster is being referred to – while it does report modest increase in pyruvate levels in the liver, the poster also reports no physiological consequence of that observation and that is fully consistent with what we would expect both from our own work and the literature and literature on animals and humans. In our informal and extensive preclinical evaluations of the safety in LDHA reduction in mice including studies not required for this early stage development like embryo fetal studies, we’ve seen no adverse observations from knockdown LDHA in the liver either physiological or molecular marker observations, and this is repeated in all of our IND and CTA enabling formal tox studies including with convention histopathology and other detailed assessments. And again this is all consistent with the natural biological experiment of LDHA-deficient humans. Humans with complete LDHA deficiency systemically in their bodies are born and reproduce [ph] completely normally. So it doesn’t get – we’re not sure about the repeatability of this observation but if it is real, is seems to be of no physiological consequence.

[Stephen Willey:]

Great. Very, very helpful. Thanks, guys.

[Operator:]

Your next question comes from the line of Jon Miller from Evercore. Please go ahead.

[Jonathan Miller:]

Hi, guys. Thanks for taking the questions. I suppose first thing is just really, really quick question. You mentioned the PHYOX [ph] and on the call you expect to have three clinical programs in the first half '19. Does that count PH, HBV and NASH BI collaboration or does that count the mystery target as well?

[Douglas Fambrough:]

That’d be mystery target. The BI collaboration is – we signed it in October and launched it shortly thereafter to at first discover a clinical candidate that BI would subsequently develop, so its timeline to the clinic is certainly not a first half 2019 event.

[Jonathan Miller:]

Sure, okay. And your cash guidance through '19 there, you said it contemplates specifically HBV and PH but it doesn’t count the third clinical candidate, the mystery candidate?

[Douglas Fambrough:]

We are assuming a collaborative venture in our financial planning for the third candidate.

[Jonathan Miller:]

Okay, fair enough. Then I suppose I want to ask about PHYOX. I noticed that you seem to be doing very well with the enrollment on PH1 but PH2 seems to be a little bit slower and we’ve only got the one patient so far. And obviously there were fewer PH patients around, but is there any reason to expect that there will be trouble enrolling those patients through the rest of the setting?

[Ralf Rosskamp:]

This is Ralf Rosskamp. No, we’re not expecting difficulties in enrolling PH2 patients. As you know, there aren’t many other companies around who can enroll those patients. And it reflects right now what the prevalence of the disease is. But we have many subjects in this study who previously had been in our observation study, a natural observation study PHYOX. This was a study in around 20 PH1 patients. And many investigators had designated those patients for the next Dicerna program and I think this is why we had this rapid identification of patients and mostly PH1 patients getting into the study because they were already identified to get into the study. But as Doug said, we expect at least four PH2 patients to be enrolled in PHYOX.

[Jonathan Miller:]

Okay, great. And I suppose the last one. Looking forward to the Phase 2 and 3 study, would you anticipate enrolling PH3 and idiopathic PH patients in that study as well?

[Ralf Rosskamp:]

Right now our plan is to enroll only PH1 and PH2 patients and conduct a separate study in PH3 patients. So our current experience as you know is PH1 and PH2 and we want to do a smaller separate study in PH3 patients and in patients where no mutation has been detected.

[Jonathan Miller:]

All right, great. Thanks very much.

[Operator:]

Your next question comes from the line of Ed Arce from H.C. Wainwright & Company. Please go ahead.

[Ed Arce:]

Hi, guys. Thanks for taking my questions and congrats on the progress with PHYOX Group B.

[Douglas Fambrough:]

Thanks, Ed.

[Ed Arce:]

Looking forward to seeing that data. So I have three questions. First is sort of similar along the lines of the previous question. Characterizing that interim data that you expect later this quarter, just wanted to make sure I heard it correctly. It’s basically looking at the time to RNA effects as well as some sort of quantitative amount of oxalate reduction that you’re looking at, perhaps if there’s anything else that you could share so we know what to expect ahead of time. Second would be just in the landscape, the space with the – not only Alnylam but Allena Pharma and I think another recent IP, if you could just share just general thoughts about the increasing interest in this space and perhaps how that might impact future enrollment going forward. And then third question on your HBV program, perhaps if you could elaborate ongoing collaborations there? I’ve seen a notable increase in your active discussions. Thanks so much.

[Douglas Fambrough:]

Ed, you broke up a bit in question three. Could you repeat question three for us?

[Ed Arce:]

Yes, sure. Sorry about the background noise. Third question was just on your HBV program, if you could just further elaborate ongoing collaborations, characterize where that’s going especially given that you’ve noted an increase in active discussions.

[Douglas Fambrough:]

Okay, I think I remember them. The first question had to do with kind of give any more characterization of the data that we may – that we’re guiding that we’ll talk about in the third quarter, certainly time to effect and a quantitative amount of oxalate reduction, certainly safety parameters as well. There are things that one would interpret, for example, dose response. But we know that people who follow the company are rather interested in where this trial is going and we’re going to be sitting on some results. And so we want to release – it’s pretty much what I just said. And the second question was – about our landscape for PH, certainly we’ve looked at the Allena approach and we think it has a role, particularly for patients that have a high body burden of oxalate already that they need to clear. It certainly also has a role for enteric hyperoxaluria where oxalate is absorbed excessively from the diet in contrast to being made in the liver. But other than targeting GO and LDHA, we’re now aware of a physiological approach that gives the kind of quantitative reductions in the very high levels of oxalate present in PH1 and PH2 and some PH3 patients. So I think that when you combine that with the remarkable convenience and really sparkling safety record of GalNAc targeted RNAi molecules, I think they are clearly looking like they’ll have the most – the superior commercial profile as pharmaceuticals in the disease space. Don’t really worry too much about the competition outside of RNAi for GO. And the third question that’s to do with partnering, I want to be careful not to give any specific guidance around partnering because those are always sort of complex answers in negotiations. I think it’s important given that we articulate partnering as a key part of our strategy to communicate that we’re very pleased with the pace and nature of the discussions that we’re having. And that makes me optimistic that things will continue to go well and reach interesting conclusions. But it’s risky and I’m not going to give anymore guidance that’s clearer than that. With respect to HBV, we really aren’t trying to engage with partners at this point. We believe that RNAi is quite likely to be a very important part of a much better therapeutic regimen for HBV and that the value of this program will be substantially enhanced by showing strong human proof-of-concept data for at a minimum S antigen reduction and maybe more than that. And it is our plan to fund that work and conduct that work and really engage in partnering discussions once that data is in hand, not now. So when I talked about accelerating pace of discussions and things like that, I’m not talking about HBV. I’m talking about – I’m not talking about any of the announced programs, PH or HBV. Really our goal is to do – most of the discussions that we’re having, our goal is to deals that look a lot more like the Boehringer Ingelheim transaction but bring more targets into the fold, things where we apply the GalXC technology against a target that we would not have otherwise applied to – we would not have done program for ourselves and that we get well paid for that work in a way that facilities our driving ourselves – our internal programs like HBV and PH. So I hope that clarifies partnering. I think I probably said as much as I can on that topic.

[Ed Arce:]

Yes, Doug, fair enough. That does clarify it and that’s quite helpful, so thanks again.

[Operator:]

Your next question comes from the line of Keay Nakae from Chardan. Please go ahead.

[Keay Nakae:]

Hi. Doug, I’m wondering if you can expand a little bit on what do you think the design of the first HBV study will look like. I guess maybe specifically, do you anticipate having multiple ascending dose arms in this study? Thanks.

[Douglas Fambrough:]

Thanks for the question. I’m going to pass to Ralph to describe that.

[Ralf Rosskamp:]

Yes, our post study design right now will be and which is – we are proposing is a single ascending dose study in normal healthy volunteers which will overlap what multiple ascending dose study in a wider range of patients with chronic hepatitis B, different e-antigen levels and NUC-experienced and NUC-naïve patients across a wide variation of chronic hepatitis B patients.

[Douglas Fambrough:]

So to clarify, the multiple doses for patients, single dose for healthy volunteers.

[Keay Nakae:]

Very good. Thanks for the clarity.

[Operator:]

[Operator Instructions]. Your next question comes from the line of Madhu Kumar from B. Riley FBR. Please go ahead.

[Madhu Kumar:]

Hi, guys. Thanks for taking my questions. So thinking about the hepatitis B program, this is – we kind of deal with a lot of the companies in this space. What does clinical proof-of-concept in hepatitis B mean to you guys?

[Douglas Fambrough:]

Hi, Madhu. That’s a really interesting question and I think one could define two levels of proof-of-concept that involve somewhat different levels of clinical assessment, if you will. Certainly, the simplest level is just are you seeing the reduction in the viral transcripts in their encoded proteins. And frankly with respect to RNAi, it’s sort of a gimme [ph] at this point in time. I think there’s very little doubt that there’s going to be a reduction in S antigen. So proof-of-concept is more about the power of the suppression. Are you seeing multiple log reductions? Are you seeing long duration reductions? So with respect to sort of Tier 1 proof-of-concept, it’s really about the quantitative depth and duration of the suppression of the viral antigen. And a second level of proof-of-concept would be are you seeing immune flares? Are you seeing suppression of S antigen beyond the pharmacodynamic effect of RNAi? And are you seeing evidence for zero conversion? That’d be a very strong proof-of-concept. It’d be a proof-of-concept that maybe possible to be observed in a Phase 1 or maybe more likely to come out of a Phase 2 program. And I think it’s an open question right now whether at the end of the Phase 1 program that Ralph just described, whether that’s the right time to partner or whether doing a subsequent Phase 2 level of clinical work that establishes the strong POC and is the right time to seek a partner. And that’s something that I think we can’t answer now. We’ll see how the field evolves. We’ll see how other mechanisms of action are preceding and obviously we’ll have to be interacting with the potential partner. So right now, I wouldn’t say that we’re fixed on a single proof-of-concept definition but we do contemplate that it may be the case that we’re going for the strong form of proof-of-concept. It may be the case that we’re going for the simpler, more straightforward depths and duration of antigen suppression. So long answer to a short question and I hope informative.

[Madhu Kumar:]

That’s interesting. So do you think kind of the consensus in the hep B community around RNAi has changed kind of based around the work from [indiscernible] accidental discovery that when – they discontinued one of your competitors’ program, it continued to see declines in viral biomarkers. Do you think that’s any change in the grades of that Tier 1 level of proof towards more like the Tier 2 that’s really showing clinical proof-of-concept for RNAi and hep B?

[Douglas Fambrough:]

Yes, that’s certainly an insightful concept. I think that observation has had a pretty powerful effect on the perception of RNAi in the field and has raised the very enticing possibility I referred to that you may start to see that in the Phase 1 itself. And so that of course has the implication. If you don’t see it in the Phase 1, then people begin to question whether you would ever see it at all. I can only speculate about that but I certainly think that the observation that you referred to of prior RNAi clinical work showing an effect on viral antigens longer than pharmacodynamic effect of RNAi has had an important effect on the view of RNAi in general for the treatment of HBV and has raised the profile and expectations for the potential of RNAi in the treatment of HBV.

[Madhu Kumar:]

Okay, great. Thanks.

[Operator:]

I am showing no further questions at this time. I would turn the conference back over to Mr. Doug Fambrough for closing comments. Please go ahead, sir.

[Douglas Fambrough:]

Well, thank you very much for everybody attending the call today. I look forward to speaking again at the end of next quarter.

[Operator:]

Ladies and gentlemen, that does conclude today’s conference. Thank you for your participation and have a wonderful day. You may now disconnect.