Dicerna Pharmaceuticals, Inc.
Q3 2018 Earnings Call Transcript

Published: 6 Nov 2018

[Operator:]

Good day, ladies and gentlemen. And welcome to the Q3 2018 Dicerna Pharmaceuticals Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today’s conference is being recorded. I would now turn the conference over to Paula Schwartz with Investor Relations. Ma’am, you may begin.

[Paula Schwartz:]

Thank you, operator. Good afternoon, and welcome to Dicerna's conference call to discuss the company's 2018 third 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 Website at www.dicerna.com. You may also listen to this conference call via webcast on our Website, 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 Lilly and Alexion, the closing of the Lilly transactions, expectations for discussions and possible opportunities with potential partners and collaborators, and guidance regarding cash balances and expenditures [ph]. 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 Dicerna’s 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, Paula. Good afternoon and thank you all for joining us today. With me are Jack Green, our Financial Officer and Ralf Rosskamp, our Chief Medical Officer. It has been an exceptionally busy and exciting time for Dicerna with the number of extremely important milestone achievements. The third quarter and recent weeks have market a key turning point for Dicerna with the achievement of a number of significant clinical, pre clinical and operational milestones that put us in a strong position to become the leading RNAi therapeutics company that we aspire to be. With the achievement of clinical proof-of-concept data for our lead RNAi investigational candidate, DCR-PHXC, the recent announcements of two substantial collaboration and licensing agreements with Eli Lilly and Company and Alexion pharmaceuticals to discover and develop RNAi therapies using our GalXC technology platform and a $158 million follow on offering, we continue our progression to become a forward integrated rare disease company, which has long been our stated goal. We now have the GalXC proof-of-concept data and necessary capital resources to fully execute our strategy to develop RNAi therapies for patients with unmet medical needs. These two collaborations with over $235 million in upfront payments and equity investments combined have fortified our ability to further develop and expand our internal pipeline and clearly illustrate the industry's belief in the strength and inherent potential of our GalXC platform to address diseases involving the liver and other target tissues. Further, these latest collaborations demonstrate our ability to monetize our proprietary platform technology with what are now our second and third collaboration agreements with top biotech and pharma partners. Of particular note, regarding our internal pipeline, during the third quarter and subsequent period, we were pleased to announce clinical proof-of-concept for DCR-PHXC in adults with Primary Hyperoxaluria type 1 and type 2 and our clinical investigators presented interim data at ASN kidney week in October. The interim findings show that a single dose of DCR-PHXC demonstrated a clinically significant reduction in 24 hour urinary oxalate levels in all participants with PH1 and PH2. We have taken a key biomarker and, in the majority of patients brought it into the normal or near normal range with a single dose. The data is everything we hope for, as we head into a pivotal trial in the first quarter of 2019. In addition, we filed a clinical trial application in New Zealand to conduct a Phase 1 trial for DVR DCR-HBVS in normal healthy volunteers and patients with hepatitis B virus, and look forward to beginning this study pending regulatory approval. As recent collaborative activity in the HPV field suggests DCR HBVS has the potential to be a very valuable asset. We also made the strategic decision given the current strength of our balance sheet to keep our undisclosed rare disease program in-house as a wholly owned program of the company, and we'll no longer seek a risk sharing collaborator for this candidate prior to clinical entry. We continue to progress development of this program, which is IND enabling studies with an eye toward filing to initiate clinical development in the first half of 2019. In sum, we have made tangible progress advancing the development of our lead GalXC programs and expect to have three product candidates in clinical development in the first half of 2019, during which we expect to achieve a number of important upcoming clinical and regulatory milestones. Specifically, we intend to begin our pivotal Phase 2/3 registration trial for DCR-PHXC in the first quarter of 2019, pending regulatory feedback. We plan to initiate the Phase 1 clinical trial of DVR HBVS in early 2019, pending regulatory approval and intend to file additional regulatory clearances for this program and other countries. And we expect to submit regulatory filings for our undisclosed rare disease program to initiate clinical trials in the first half of 2019. Let's now turn to DCR-PHXC, our lead GalXC investigational candidate in PH. As most of you know, in September, we reported clinical proof-of-concept data for DCR-PHXC in participants with PH1 and PH2 in the ongoing PHYOX Phase 1 study and more recently updated results were presented during the late breaking clinical trials poster session at the ASN kidney week 2018 annual meeting. As a reminder, PHYOX has enrolled 25 normal healthy volunteers in the Group A portion of the study, which is complete. And 12 adult patients with PH, including eleven with PH1 and one with PH2 in the group B portion of the study, which is ongoing. Group B consists of three cohorts of PH1 patient’s dose that 1.5, 3.0 and 6.0 milligrams per kilograms and a fourth cohort of PH2 patients dosed at flexible dosing levels. We have enrolled for PH1 patients in each of cohorts 1 and 2, three PH1 patients in cohort three, and one PH2 patient in cohort four. We have recently been cleared by the FDA to enroll pediatric patients and have been holding the additional PH2 slots for pediatric patients. As of a data cut on October 1st 2018, data results show that a single dose of 3.0 milligrams per kilogram of DCR-PHXC brought urinary oxalate levels into the normal range defined as 24-hour excretion less than or equal to 0.46 mmol at one or more post dose time points in three out of four PH participants dosed at this level, including a mean maximal reduction in 24-hour urinary oxalate of 65%. The findings also show that a single 1.5 milligram per kilogram dose led to near normalization defined as 24-hour excretion between 0.6 and 0.46 mmol in three out of four PH1 participants dosed at this level, and led to a mean maximal reduction in urinary oxalate of 50% in the five PH participants dosed at that level including one PH2 participants. All participants demonstrated a clinically significant reduction in urinary oxalate, meaning a greater than 30% reduction. Follow up is ongoing in the study. Interim results also show that DCR-PHXC is safe and well tolerated in normal healthy volunteers and participants with PH. Again, as of the October 1st data cut, 27 participants have been dosed with DCR-PHXC in group A and group B. No severe or serious adverse events have occurred in the PHYOX trial and there have been no clinically significant changes in electrocardiography, vital signs and lab or hematology values. Five participants which is 19% experienced mild-to-moderate injection site reactions all of which were transient and resolved without intervention within 24 to 72 hours. We are highly encouraged by these findings. We believe that DCR-PHXC is a very competitive product for the treatment of PH1 given the clinically significant reduction of mean maximal 24 hour urinary oxalate levels following a single dose. In addition, and unique to DCR-PHXC, we believe the PH2 and PH3 populations form a foundation of value for the product given the significant unmet need in these patient populations, as the only company developing a therapeutic intended to treat all forms of PH, we believe, we are in a stronger position than those who only address a subset of the market. As I noted earlier, we expect to initiate a multi dose Phase2/3 registration trial in the first quarter of 2019, pending regulatory feedback and we plan to share details about the trial design and timeline at our R&D day on Friday this week in addition to some additional color on the Phase 1 data. Let's turn now to DCR-HBVS, our product candidate in development for the treatment of chronic hepatitis B virus. In October, we filed a CTA for DCR-HBVS with New Zealand Medicines and Medical Devices Safety Authority and with the Health and Disability Ethics Committee to initiate a Phase 1 clinical trial in normal healthy volunteers and patients with HBV. If the CTA is approved, we intend to begin the clinical trial in early 2019. We plan to file additional regulatory clearances in other countries in 2018 and 2019. The New Zealand clinical trial will be a three part study enrolling up to 30 normal healthy volunteers and 26 patients with chronic HBV. Group A will be a single ascending dose study in normal healthy volunteers. Group B will be a single dose study in NUC-naïve patients with chronic HBV. And Group C will be a multiple ascending dose study in patients with chronic HBV. The primary objective of the study is to evaluate the safety and tolerability of DCR-HBVS in normal healthy volunteers and patients with non cirrhotic chronic HBV. The secondary objectives are to characterize the pharmacokinetics profile of DCR-HBVS and to evaluate preliminary pharmacodynamics and antiviral efficacy of the compound on plasma levels of hepatitis B, surface antigen and HBV in blood. We are optimistic about the potential of RNAi for treating HBV and specifically about our differentiated GalXC based approach. As we have presented at scientific meetings and we'll discuss in our R&D day later this week, we have engineered our DCR-HBVS programs to target three of the four HBV open reading frames, which we have found reproducibly in preclinical models, gives both deeper and longer duration silencing of key viral antigens, than the simultaneous silencing of all four open reading frames. This ability to silence multiple viral genes simultaneously three or four and our case, highlights a mechanistic advantage of RNAi based therapies targeting HBV relative to many other approaches. RNAi based therapy is, in essence, combination therapy. In preclinical studies, 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, with 99% reduction persisting for more than three months after a single three milligram per kilogram injection. We are pleased with the antiviral activity we have seen in preclinical studies and believe that RNAi based therapy will one day be a part of the HBV treatment paradigm. We look forward to beginning human clinical trials of DCR HBVS and plan to share more details about this program at our R&D day. I'd like to turn briefly to our undisclosed second rare disease program. As I alluded to in my earlier comments, given our expanded clinical resources with the Lilly and Alexion collaborations and our recent financings, we are no longer seeking a risk sharing collaborator to develop this product candidate prior to clinical entry. We plan to develop this product candidate as a wholly-owned program of the company and expect to submit regulatory filings in the first half of 2019. We plan to disclose the program and the development strategy at that time. Let's turn now to corporate partnering and our recently announced strategic collaboration agreements with Lilly and Alexion to discover, and develop GalXC based RNAi therapeutics. These collaboration agreements are significant for by Dicerna and provide us with necessary capital to drive our internal development programs forward while expanding our GalXC technology platform into new disease areas and targets of interest. The power and performance of our GalXC platform and the strength of our team have enabled us to enter these collaborations with the field leaders in the respective therapeutic domains. Let me begin with the licensing and research collaboration with Lilly for the discovery, development, and commercialization of potential new GalXC based RNAi therapeutics. This agreement is an exceptional opportunity for Dicerna, in that it both leverages our current GalXC platform to generate new medicines for cardio metabolic diseases, and seeks to go further, and extend the GalXC platform to other tissues relevant the cardio metabolic diseases and to neurological tissues for the treatment of neuro degeneration and pain. This collaboration to extend our GalXC RNAi technologies to tissues beyond the liver will be a joint research effort that draws on Discerna’s nucleic acid expertise and Lilly’s field leadership in cardio metabolic diseases and in neuro degeneration and pain. In this way, we expect this collaboration to be transformative for us as it significantly expands our horizons. Dicerna will work with Lilly exclusively in the neuro degeneration and pain fields, with the exception of mutually agreed upon orphan indications, and we will work exclusively on select targets in the cardio metabolic field. The agreement contemplates collaboration on more than 10 targets in total. Under the terms of the agreement, Dicerna will receive an upfront payment of $100 million at closing, with Lilly making a concurrent $100 million equity investment at a premium in Dicerna. We expect to close the transactions within about a month following the satisfaction of customary closing conditions, such as Hart-Scott-Rodino Antitrust clearance. Following closing, Dicerna is also eligible to potentially receive up to approximately $350 million per target in development and commercialization milestones. The agreement also includes potential royalties on product sales. Turning now to Alexion, our collaborative research and license agreement with Alexion draws on our current GalXC platform, and will expand our pipeline programs to include complement related diseases, enabling us to dive into this new and exciting area. And RNAi based approach to blocking the production of complement pathway factors offers the potential to inhibit the uncontrolled complement activation that drives many serious diseases. Given Alexion’s more than two decades of complement leadership and deep expertise and resources in the field, we are pleased to partner with Alexion to discover and develop promising new RNAi therapies, using our GalXC platform. The agreement is for development and commercial rights for two of our preclinical GalXC RNAi programs, directed to complement pathway targets, with options for the discovery and development of candidates against two additional complement pathway targets. Dicerna will lead the joint discovery and research efforts through the preclinical stage and Alexion will lead development efforts beginning with Phase 1 studies. Under the terms of the agreement, Dicerna received an upfront payment of $22 million as well as a $15 million equity investment at a premium. The collaboration agreement also provides for potential additional payments to Dicerna of up to $600 million, which is comprised of the option exercise fees of up to $20 million, development milestones of up to $105 million for each product, and aggregate sales milestones of up to $60 million. Dicerna will also potentially receive royalties on product sales. These two new collaborations alongside our existing collaboration and chronic liver disease with Boehringer Ingelheim and our proprietary programs help us realize our strategy of applying our GalXC technology across the fields of rare diseases, liver infectious diseases, cardiovascular diseases and chronic liver diseases, while also providing a path to an even wider array of indications. These partnered programs fall outside of what we would have advanced on our own, and serve to broaden and add value to our pipeline. I will now turn the call over to Jack Green, our Chief Financial Officer to discuss the financial results. Jack?

[Jack Green:]

Thank you, Doug. I'd like to briefly summarize the key financial results for the third quarter and direct you to our 10-Q filing for additional details. Net loss attributable to common stockholders $19 million and $78.2 million for the three and nine months ended September 30th 2018, compared to $19.1 million and $57.3 million for the same period in 2017. The decrease for the three month period was driven by $4.1 million dividend on the redeemable convertible preferred stock, we recorded in the third quarter of 2017. Offset by a $3.2 million increase in research and development expenses, and $1.2 million increase in general and administrative expenses. The increase in net loss attributable to common stockholders for the 9-month period was primarily driven by an increase of $23 million in litigation expense, all related to the Illinois island litigation, which was settled in the second quarter of 2018, partially offset by the twelve point nine dollar dividend on the redeemable convertible preferred stock recorded in the nine months ended September 30th 2017. The redeemable convertible preferred stock was fully converted into common stock in December 2017. Basic and diluted net loss per share attributable to common stockholders for the third quarter was $0.35 per share versus $0.92 per share for the comparable period in 2017. Research and development expenses were $11.7 million and $31.9 million for the three and nine months ended September 30th 2018 respectively, as compared to $8.5 million and $26.3 million for the same periods in 2017. The increase of both the three and the nine month period was primarily due to increased direct research and development expense. The increase in direct research and development expense in the three months ended September 30, 2018 was primarily due to an increase in clinical study costs reflecting increased activities associated with DCR-PHXC program and an increase in consulting cost associated with the various clinical development activities, as well as higher employee related expenses associated with increased headcount necessary to support the company's growth, partially offset by lower platform related expenses. The increase in direct research and development expenses in the nine months ended September 30, 2018 was primarily due to higher clinical study costs due to increased activities associated with DCR-PHXC, an increase in toxicology studies for other product candidates into higher employee related expenses associated with increased headcount, again partially offset by lower platform related expenses. We expect overall research and development expenses to continue to increase during the fourth quarter of 2018, and for the foreseeable future, as we -- as compared to the three months ended September 30 of 2018, primarily as we complete clinical manufacturing activities, advanced preclinical toxicology studies, continued clinical activities associated with our lead product candidate, and as we initiate activities under the recently signed Lilly and Alexion agreements. General and administrative expenses were $5.4 million and $14.4 million for the three and nine months ended September 30th, 2018 compared to $4.1 million and $12.3 million for the same period in 2017. The increase was primarily due to increases in consulting costs, or compensation expense primarily stock based compensation, and corporate legal expenses. Litigation expenses, all related to the now settled litigation with Alnylam, increased year-to-year primarily due to $3.7 million and $24.7 million of little litigation settlement expenses recorded in the three and nine month period ended September 30, 2018. In the second quarter of 2018, we recorded $21 million of litigation settlement expense upon signing the settlement agreement with Alnylam. This included a $13 million payable to Alnylam, which according to the terms of the agreement was to be repaid from upfront and first year payments from new partnering agreements over the next four years. This liability was recorded in the second quarter at discounted present value. Due to the closing of the Alexion and the expected closing of the Lilly collaboration agreements, this payment will be accelerated and as a result, we recorded $3.7 million of litigation settlement expense in the third quarter of 2018. This will complete the litigation settlement payments to Alnylam. We recognized $1.5 million and $4.6 million of revenue associated with the Boehringer Ingelheim agreement during the three and nine months ended September 30, 2018. The revenue represents periodic amortization of a non refundable upfront payment of $10 million for the first target, and $300,000 in 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. And we not expect to generate any product revenue for the foreseeable future. As of September 30, 2018, we had $180.4 million in cash and cash equivalents and held-to-maturity investments, compared to $113.7 million as of December 31, 2017. Additionally, we had $700,000 of restricted cash equivalents as of September 30, 2018 and December 31, 2017, which reflects collateral securing our operating lease obligation. As Doug mentioned, in September we completed a follow-on offering of 8.8 million shares of common stock with gross proceeds of $115 million strengthening our balance sheet. We used $43.3 million of cash in operations for the nine months ended September 30, 2018 compared to $39.4 million for the same period in 2017. The increase of $3.6 million was primarily due to increased operating expenses. As I mentioned, we had $180.4 million of cash, cash equivalents and health maturity investments as of September 30, 2018. We have received the proceeds from the Alexion collaborative research and license agreement and equity investment, and combined with the upfront cash and equity investment we expect to receive from the Lilly collaboration and license agreement upon completion of customary closing conditions and achievement of Hart-Scott-Rodino act clearance. We expect to receive an aggregate of $224 million in combined net proceeds. We expect that our current cash, cash equivalents and health and maturity investments in addition to the upfront cash and equity investments from the Alexion and Lilly collaborative research and licensing agreements will be sufficient to fund the execution of our current clinical and operating beyond 2020, which includes advancing DCR-PHXC through late stage clinical development regulatory filing. Initiating proof-of-concept studies, DCR-HBVS in patients with HBV and advancing our undisclosed rare disease program into clinical development. This estimate assumes no new funding from additional collaboration agreements or from an external financing event, no significant unanticipated changes in costs and expenses. With that, I’d now like to turn the call back to Doug for closing remarks.

[Douglas Fambrough:]

Thank you, Jack. In closing as you can see it has been an exceptionally busy and exciting time for Dicerna with a number of extremely important milestone achievements. We believe our efforts put us in the strongest position yet to achieve our goal of becoming a leader in the development of RDAi therapies. As we look ahead we are well financed with a cash runway beyond 2020 and we have a robust pipeline of GalXC programs. We are excited to embark on our registration trial for DCR-PHXC as we work to bring this promising RDAi medicine for patients with PH and to advance our DCR-HBVS into human clinical trials. Our new collaborations with Lilly and Alexion provide significant opportunities to expand our pipeline programs into new disease areas, organs and targets, and we are eager to begin our work together. We hope you will join us for our R&D day this week on Friday, November 9th in New York City where we will provide a corporate update and take a more in-depth look at our lead pipeline programs, advancements to our GalXC technology platform and our go forward strategy. We look forward to providing updates on future quarterly calls. With that, let's open the call up to questions. Operator?

[Operator:]

[Operator Instructions] And our first question comes from line of Robyn Karnauskas of Citi. Your line is open.

[Unidentified Analyst:]

Hi. Good afternoon. This is Nicole on for Robyn. How are you guys?

[Douglas Fambrough:]

Hi, Nicole.

[Unidentified Analyst:]

Hey. Just referring to the PH data recently presented at ASN. I was just curious as to why multiple doses were not explored? And if you did, do multiple doses for the mid-year has been even more than what we’re seeing. And what does this – need to do in order to be differentiated compared to Alnylam and what do you need to do in order to achieve more preferential share in PH type 1?

[Douglas Fambrough:]

I miss some words at the beginning of that question. I'm sorry Robyn, can you repeat the first part of it?

[Unidentified Analyst:]

Sure. Referring to the PH data recently presented at ASN, I was just curious as to why multiple doses weren’t explored. And if you did your multiple doses for mid-year [ph] has been even lower than what we’re seeing?

[Douglas Fambrough:]

So, I’ll start the answer and Ralf if you want to weigh in, please do. There were a couple of reasons for starting with a single dose. And first amongst them was to observe the full duration of affect and rebound characteristics of single-dose, so we could understand in more detail the dynamics associated with multiple doses, the rebound curves if you will. We also as a means to move as rapidly as possible went straight to chronic dosing toxicology studies with are rather long and take a long time to read out and which were not complete before we initiated our single dose study. That’s the first part of the question.

[Ralf Rosskamp:]

Yes. And we have not done any multiple dose study so far. So the data we have is that referring to single-dose data. And as Doug said, we follow every participant up until they return to 80% of their baseline.

[Douglas Fambrough:]

We will be enrolling the Phase 1 patients into an open-label extension. We expect that to begin in the first quarter of 2019. That will provide an open-label cohort of patients that we will report on periodically on an ongoing basis.

[Unidentified Analyst:]

Okay, great. Thanks. And then also what things they need to do in order to be differentiated compared to your competitor and what you need to do in order to achieve more preferential share in PH type 1?

[Douglas Fambrough:]

Well, certainly wish we have the definitive answers to those questions. We will go into more detail on those competitive issue on our R&D [ph] day on Friday. Suffices to say, we do believe that having a product that is for all PH patients where there is no need to segregate one group of patients out from another, does provide I think an inherent advantage in the perception of the product in the field than in the community, and we are also seeking to provide the most convenient injection experience to our patients and we’ll talk more about that on the Investor Day.

[Unidentified Analyst:]

Great. Thank you so much.

[Operator:]

And our next question comes from the line of Stephen Willey of Stifel. Your line is now open.

[Stephen Willey:]

Yes. Good afternoon. Thanks for taking the questions and congrats on all the progress. Doug, I’m not sure how much of this you want to save for Friday or not, but just curious as to when you think we might actually see this remaining PH2 patient cohort. I know that you mentioned that I think some of those enrollment slots have been now designated for pediatric patients. And I guess second to that, can you just remind us what your current thinking is around the distribution of PH1/2 patients that will need to be represented within a Phase 3 program. I know your competitor as I believe about 30 patients that are PH1 specific. Just curious if you think that's a number from PH1 perspective that you'll need to check the check the box on?

[Douglas Fambrough:]

Sure. Do you want to address that latter part of the question right away Ralf?

[Ralf Rosskamp:]

Well, the PH2 patients make about 10%, and PH3 patients make around 10% of diagnosed patients, so we’ll see on that the majority of the patients in our study will be PH1 patients, but I’m assuming that the potential end point will be urinary oxalate reduction, they all characterized by elevated during urinary oxalate level. So I don't think from a regulatory standpoint of view that somebody will ask us for [Indiscernible] how many patients will go into the study with the different types. It just five because they are more PH1 patients really out there would have been diagnosed. Therefore I would assume we’ll see more PH1 patients in our future program than PH2 and PH3 patients.

[Douglas Fambrough:]

So, to address the first part of your question Steve. We had expected to receive the pediatric designation a bit before we did. And we did not want to be enrolling the pediatric patients in the 6.0 milligram per kilogram cohort. So that has laid to some detail in enrolling the PH2 cohort because the pediatric patients are going to go in there. From a physiological perspective we do not expect there to be any difference in the way patients with PH1 and PH2 respond to this treatment. In both diseases it is understood that it’s the overall production of glyoxylatets from a different tissue compartment or sub-seller compartment in the case of two diseases, but the overall production of glyoxylate that is transformed by LDHA into oxalate and inhibition of LDHA should work identically across the diseases. I also would like to return to one question of Nicole, which I did not address, which was our expedition about whether multiple dose would lead to a lower oxylatet level, and it is our expectation that effective silencing of LDHA as our drug has achieved in preclinical models, non-human primates and rodents. Effective silencing of human would result in normalization of oxalate levels in all patients treated. And since we had not observed that yet in the trial while we do observe as we have said, three of four PH1 dosed at 3.0 mg per kilogram having at least one data point, sometimes multiple data points in the normal range. We would all patients to go to normal levels with multiple dosing. So we are expecting an increase in activity associated with multiple dose paradigm.

[Stephen Willey:]

Okay. And then you talked a little bit about what preliminary Phase 1 trial design of HBVS. I know, I think you mentioned you will have a single ascending dose cohort and then NUC-naïve chronic patient population. Do you care at all with respect to what the antigen status is in this – in these patients whether or not there the single ascending dose NUC-naïve or the multiple ascending dose cohort?

[Douglas Fambrough:]

No. We are not stratifying. We are just recording rather then see and take this positive and negative and then follow them up whether they have a reduction in their e-antigen levels, but we are not stratifying.

[Stephen Willey:]

Okay. And then maybe just lastly for Jack, can you just perhaps provide a little bit guidance around how the Alexion and Lilly upfront just might be handled from accounting perspective?

[Jack Green:]

Yes. We’re still working through the accounting analysis on that. We anticipate though that they will be spread -- there will be spread over the initial part of the agreement, so it would be over a few years over multiple years and we believe also that the premium on the equity will be lumped in to that as well.

[Stephen Willey:]

Okay. Thanks for taking the question.

[Jack Green:]

Sure.

[Operator:]

And our next question comes from the line of Jonathan Miller of Evercore. Your line is now open.

[Jonathan Miller:]

Hi, guys. Thanks so much for taking the question. You mentioned looking at oxalate rebound in the PHYOX study and some of the durability there. Having not yet looked at multi-dose cohorts what are the implications there for going into multi-dose regimen in terms of your dosing schedule, so what are doing for Phase 1? Secondly also on the multi-dose, potentially registration study, have you discuss yet with the regulator going into registrational multi-dose study with only single dose Phase 1 data available?

[Douglas Fambrough:]

So, the first part of your question is that the single dose data provides a nice dataset for modeling and stimulation around how a multiple those cohort data would rollout. And so that is what is -- that informs us in coming up with the regimen, and we’ll discuss the regimen on Friday. But important to note that we're trying to achieve normalization of oxalate levels and create a situation where patients can no longer have the need to actually manage their disease. There's a very onerous disease management process that patients follow in PH and being able to eliminate that disease management process is a huge benefit to patients and so we need to ensure that we stay in the in the normal range and modeling what rebound would be an important part of that.

[Jonathan Miller:]

Okay. And we have you discussed with regulator?

[Douglas Fambrough:]

So, we’ve had preliminary conversations with the regulator and there is not an issue associated with going from a single dose initial study to a chronic study. The first few doses of the chronic study would be considered the multiple dose phase which without interruption would go into the chronic phase, so it's for all of intensive and purposes chronic from the beginning. We have submitted our protocol to the FDA and we have a meeting scheduled with the FDA but it is not this week. So it will not be before the R&D day.

[Jonathan Miller:]

Fair enough. In the collaborations, the recent collaborations you announced, congrats by the way, those are obviously very important. You mentioned that both of these are centered on the GalXC platform and the potential utility of that broader set of target, but you’ve also mentioned some ex-liver tissue targeting and do see the GalXC platform implies to be the GalNAc conjugated platform is a liver targeted platform. So, can you clarify for me what you’re looking at specifically in the ex-liver tissue setting and if you've made any progress or have anything you want to share on what those targeting against may look like?

[Douglas Fambrough:]

So I see a couple of questions there. One was on our [Indiscernible] and whether if we go, use something other than GalNAc we can call it GalXC. And it seems like maybe on the one hand we should change the name. But at least for now we’re referring to our platform we’re at large as GalXC. And we’ll just have to see how sonorous the ligands are for whether we want to change it to something else. But right now as I use the term in this presentation, when we talk about extending GalXC to other tissues that was not meant to imply that GalNAc would necessarily be part of those molecules for additional tissues. We have done exploratory work in other tissues but to-date the experimental work is fairly modest. We’ve done a lot of thought work. So we have not presented any data and we’ll not be presenting data on Friday that actually shows knockdown in other tissues. We have not achieved a level that is clinical candidate acceptable, but we have seen knockdown in multiple other tissues. We have not been doing work internally in the neuro space, so that is not one of the tissues that our internal work has involved. So that gives a little bit more color perhaps not as much as you like, but some additional color on where we stand.

[Jonathan Miller:]

That’s great. Thanks so much, guys.

[Operator:]

And our next question comes from the line of [Indiscernible]. Your line is now open.

[Unidentified Analyst:]

Hi, guys and thanks for taking the question and congrats on all the developments. I wanted to follow-up quickly on one of the earlier questions regarding the mix of PH1, 2 and 3 or PHP patients that you might need just I think in order to secured broad label for PH. Do you expect having to run the PH3 study before initiating the pivotal? Or will they run in parallel? How should we think about that? Then I’ll have one more.

[Douglas Fambrough:]

Yes. I think our anticipation is that we start off with the PH1 and PH2 patients in the first quarter of next year and soon thereafter we’ll start with a separate PHP patient study. So at the time filing we will have comprehensive data for all types of PH.

[Unidentified Analyst:]

Okay. Thank you. And then regarding the recently present data, the optical trend seem to suggest that maybe the response might be a bit delayed when comparing with the Rodent data. And I was wondering if this was any fact that you expect it given the fact that your target is obviously upstream of those? And do you expect this to be reproduced with more patients or upon redosing? Thank you.

[Douglas Fambrough:]

The DCR-PHXC molecule is the first of our GalXC platform to enter humans. Based on looking at our Rodent data and non-human primates data and looking at dosing curves from other companies we were not expecting different time of onset but it does appear that in the trial so far our nadir has achieved by six weeks and four weeks is been achieved in the GO trial at least looking at those data curves that appears to be up when the nadir has achieved. We do not have a hypothesis that we have confidence is the correct hypothesis for why this is the case whether it has to do with the biology of the target or the biology of Dicer Substrate based GalNAc conjugated molecules being processed on a slightly different time frame. We don't believe this has any implications in our multiple dose context and uncertainly no basis for thinking that the onset of effect would change in multiple dosing. The -- it's just the data that we’ve seen so far.

[Unidentified Analyst:]

Great. Thank you so much.

[Operator:]

And our next question comes from the line of Ed Arce of H.C. Wainwright. Your line is now open.

[Ed Arce:]

Hi, Doug, thanks for taking my questions and may have my congrats on all the progress lately with the company.

[Douglas Fambrough:]

Thanks Ed.

[Ed Arce:]

Few questions have already been asked, but I did want to get back to – I think it’s probably the first time you’ve discussed in some degree of detail your design plans for the Phase 1 study of the HBVS program. And so, I was wondering if you could go over that again the three groups vis-à-vis not only your ongoing program for PH and how you proceed through that as a design that looks to be flexible as you go through the different groups, but how that might've been -- that design might have been influenced by designs from other competitors and HPV specifically in RNAi compounds?

[Jack Green:]

Yes. I’ll take this question. Thank you very much Ed. The trial will be a single ascending dose in normal healthy volunteers, so this will be fairly normal healthy volunteers and we’ll talk about this on Investor Day even little more in detail as Doug said. And then in the patients with chronic hepatitis B, we have two groups. One group is a single dose in NUC-naïve patients. So they receive only one dose of DCR-HBVS not in the present of NUCs. And then there is a second group, which are patients who are NUC experience and these patients will have multiple ascending dose. And the reason why and I think that’s as far as I can see different form what our companies are doing is having the single dose group in NUC-naïve patients because it helped us enormously in the PHXC program that we had this single dose study because it really allows us as Doug said to nicely characterize the time course of the oxalate reduction and here’s as well after a single dose and here's as well we hope that we nicely able to characterize what this HBVS do after a single dose and we’ll follow them up until they have reached their baseline HBS antigen levels. It helps enormously from a modeling and stimulation perspective, if you have a clear understanding what the drug and the single dose so you can actually then model much better what a multiple dose regimen looks like. So to some extent we learned from the PHXC program in this design.

[Douglas Fambrough:]

And course that allows us to look at the effect of the RNAi therapeutic without any other therapeutic in presence, so there’ll be no NUC there to muddy the waters of what the actual drug response is.

[Ed Arce:]

Great. That’s helpful. Second question just around your undisclosed rare disease program now that you have decided to keep that in-house at least for the initial clinical portion of development; is that something you can discloses is also a liver directed program or is that the outside the liver?

[Douglas Fambrough:]

That is a liver program and it has a biomarker that we can follow and that we expect to have a rapid path to approval roughly akin [ph] to PH and its development strategy, but we’ll get into the details. As a rare disease we intend to keep it as a wholly-owned program throughout development and through marketing there is a question as exists with PH today about how geographically broadly we will maintain 100% ownership rights. But with the second program there is current time and intention to drive that program fully as an in-house program.

[Ed Arce:]

Great. Thanks for that clarification. And then just perhaps one last one for Jack, just wanted to make sure I hear this correctly. You said in your prepared remark that the all obligations under the Alnylam settlement are now completed?

[Douglas Fambrough:]

With the closing of the Lilly transaction we will owe Alnylam the balance of the $13 million payable that is due to them that we record in the second quarter. Upon paying that amount we will have no further obligations relative -- payment obligations relative to Alnylam, that we paid in the stock, we paid them the $2 million up front and then we had a $13 million note which will be completely paid after that transaction has done.

[Ed Arce:]

Got it. Thanks again.

[Douglas Fambrough:]

You’re welcome.

[Operator:]

And our next question comes from the line of Edward Nash of SunTrust. Your line is now open.

[Unidentified Analyst:]

Hey, good afternoon. This is [Indiscernible] for Edward Nash. Congratulations on the progress so far. And I have two questions. First question is regarding the PH program. As we are moving from self-study to the mass study and given the existing preclinical and clinical data have presented how to think about safety? My second question related to the upcoming meeting with FDA. And could you share what are key topics you’re going to discuss with FDA? And is there any internally -- is there any push back you anticipate? Thank you.

[Douglas Fambrough:]

So Ralf, do you want to take this, safety.

[Ralf Rosskamp:]

Yes. This is ultra-rare disease as you know. The numbers starting so far are 12 patients, we expect to have another four patients to be dose, but it's a small study and as you know our competitor has announced that their registrational study will be around 25 patients with 2

[Edward Nash:]

Great. And any thoughts on the potential meeting with FDA?

[Ralf Rosskamp:]

Well, at this stage you can assume what the kind of questions you ask the FDAs, it’s a kind of questions you guys are asking us. So whether to presenting overall the welcome plan and you discuss specific details about endpoints primary, secondary endpoints. What your safety data based will look like? So we expect to come out of this meeting with a clear understanding of our clear agreement with the FDA on this program. As Doug mentioned we had already preliminary meetings with other regulatory agencies than I can say that overall the guidance became is very consistence from what we were thinking the program would like, so I don't expect any major hiccups at this meeting.

[Edward Nash:]

Okay. Thank you so much and congrats again.

[Ralf Rosskamp:]

Thanks.

[Operator:]

And our next question comes from the line of Keay Nakae of Chardan. Your line is now open.

[Keay Nakae:]

Thanks. Doug, for the HBVS trial, the groups, did you say how many doses they are give and how long you would follow them up for?

[Douglas Fambrough:]

No. We haven’t said this, but if you listen in Friday to our Investor Day we’ll provide more details around this.

[Keay Nakae:]

Okay. And then just a question for Jack on again the treatment of the upfront payment from Axelion, Lilly for now would be best to simply straight line amortize it over three years?

[Douglas Fambrough:]

As I mentioned we haven’t worked out the accounting for that. So as a proxy that’s probably is good as anything right now.

[Keay Nakae:]

Okay. Thank you. That’s all I have.

[Douglas Fambrough:]

Yes. As soon as we have, we have it work out. We will provide guidance to you as how to hand it.

[Keay Nakae:]

Okay. Thanks.

[Operator:]

And our next question comes from the line of Madhu Kumar of B. Riley FBR. Your line is now open.

[Unidentified Analyst:]

This is Jennifer on for Madhu. Thank you for taking my call. I have just two questions for you this evening. The first is based on your balance sheet changes coming from the recent financing from Lilly and Alexion. How far would you internally pursue the HBV program? And then second question, can you provide any visibility on the development of PCKS9 program specifically to what degree our external factors versus internal factors limiting for this asset? Thank you.

[Douglas Fambrough:]

Sure. So the first part of your question was about how far we plan to take the HBV as asset and to what extent our balance sheet was determining that. It’s actually not something that our balance sheet is going to be determinative of. The endgame is of course to have an effective widely used therapeutic and what is clearly going to be a competitive market. And it is more likely that the drug will be used in combination and less likely they'll be used, but can't rule out certainly if that will be used as a single agent therapeutic. But given that we view it is more likely in combination perhaps with the host factor directed compounds. It is important to get those collaborations, this clinical combination study collaborations going. There are multiple formats in which one can do that collaboration. It doesn't have to be an out license. And at prime time there is certainly discussion with the future collaborative partners and a little hard for us to say where that's going to go. This is not going to be something that we commercialize on our own assistant practical. But whether it would be an out license after the Phase 1 program which is described here or whether we would engage in the combination studies in a nonexclusive fashion is still a strategic element to work out. So I don't have firm guidance on that right now, but ultimately because we view it is more likely that will be in combination we do -- we will be seeking to work with other parties, but the when and exactly what form it take it remains to be seen. Now with respect to PCSK9, this is a program that I’m sure those have you on the phone have followed the company have noted has kind of decline in our amount of time and energy that we devote to the program. We have articulated a strategy where we would take certain assets to our large populations through proof-of-concept before out licensing and HBV as we’ve been discussing falls into that category and PCSK9 also falls into that category. It’s [Indiscernible] to have some confidence that there is a license store the end of your data. And with PCSK9, the fact of the matter is we have found there is very little appetite in the industry for a PCSK9 molecule and it gives this great pause in investing the additional millions of dollars and the opportunity cost associated with taking PCSK9 through to clinical data. I would consider that an external factor and not an internal factor, and that has been what has led us to be thinking a little bit differently about that asset at this point in time. It’s something that we want to see, proceed but moving it forward as a program that will take to POC as we are doing with HBVS is something that with current time, we don’t see as a good use of resources.

[Unidentified Analyst:]

Great. That was really helpful. Thank you.

[Operator:]

I’m showing no further questions at this time. I would now like to turn the call back to Dr. Fambrough for closing remarks.

[Douglas Fambrough:]

I’d just like to thank everyone again for joining us today and we look forward to speaking again soon.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day.