Dicerna Pharmaceuticals, Inc.
Q1 2017 Earnings Call Transcript

Published: 9 May 2017

[Operator:]

Good day, ladies and gentlemen, and welcome to the Dicerna Pharmaceuticals First Quarter 2017 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 follow at that time. [Operator Instructions] As a reminder, this call is is being recorded. I would like to introduce your host for today’s conference, Paula Schwartz of Rx Communications Group. Ma’am, you may begin.

[Paula Schwartz:]

Thank you, operator. Good afternoon, and welcome to Dicerna’s conference call to discuss the company’s 2017 first quarter results. For anyone who has not had a chance to review our 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 will also be archived for 30 days beginning approximately two hours after the call is completed. I’d like to remind listeners that management will be making forward-looking statements on today’s call related to the company’s future expectations, plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of Form 10-Q filed with the SEC today. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. 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 would like to turn the call over to Douglas Fambrough, Dicerna’s President and Chief Executive Officer. Go ahead.

[Douglas Fambrough:]

Thank you, Paula. Good afternoon and thank you all for joining this afternoon. With me today are Jack Green, our Chief Financial Officer; and Bob Brown, our Chief Scientific Officer. Given that today’s call comes so closely on the heels of our year-end call on March 30, I will try my best not to repeat too much of what our listeners already know on the operational slide. At the same time, both Jack and I will provide a recap and update on where we are vis-à-vis our research and developmental programs, strategic goals, and financial position. I’ll begin by noting that having in 2016 successfully optimized the GalXC technology and optimized the GalXC molecules that we intend to develop in our prioritized programs for our core therapeutic areas of rare diseases, viral infectious diseases, cardiovascular diseases, and chronic liver diseases, the year 2017 represents a period of potentially substantial progress for Dicerna, as we move our subcutaneously delivered RNAi-based pharmaceutical candidates towards and into clinical development. Significantly strengthening our ability to execute on our goals is the recent $70 million convertible preferred stock financing, which closed on April 11, led by Bain Capital Life Sciences, the financing was comprised solely of a group of well-known institutional investors who specialized in the biotechnology space. Their participation reflects their confidence and the strength of our innovative gene-silencing GalXC RNAi technology platform, and Dicerna’s efforts today, as well as our going-forward plans for producing innovative class-leading therapeutics based on the GalXC technology. It bears repeating how pleased we are with the quality of the syndicate, which included both new and existing investors, we are also delighted to have welcomed Dr. Adam Koppel, a Managing Director at Bain Capital Life Sciences to our Board of Directors and look forward to leveraging his exceptional knowledge and expertise, as we move ahead. It is also worth noting that, as a private financing transaction, Bain’s investment was made only after an intensive due diligence effort under confidentiality into the performance of the GalXC platform and our GalXC-based clinical candidates, as well as of the intellectual property and legal landscape underlying the GalXC platform. Including the $69.4 million in net proceeds from the convertible preferred stock financing, we have approximately $102 million of cash and investments on a pro forma basis as of March 31. These funds should allow us to progress our first three programs into the clinic and human proof-of-concept testing, resulting in strong value creation for the company and its shareholders into 2018. Now, turning to a program update. During the first quarter, we continued to progress IND-enabling studies for our lead program DCR-PHXC, which is being evaluated for the treatment of Primary Hyperoxaluria Type 1. PH1, as you’ll recall, is an ultra orphan disease, believes to affect over 2,000 people in the U.S. The liver of a patient with PH1 produces excessive levels of oxalate, resulting in severe kidney damage, leading to end stage renal disease, which on average occurs when patients are in their 20s. At that point, patients require kidney transplantation accompanied by liver transplantation in order to ensure the survival of the transplanted kidney, and patients often spend years on intensive dialysis during this process. Unfortunately, these patients have no other FDA-approved treatment options. There is, therefore, an urgent need for an effective treatment for this patient population. At Dicerna, we have reason to be hopeful in preclinical studies a single five milligram per kilogram subcutaneous dose of GalXC molecules administered in a mouse genetic model of PH1, were shown to have silenced DCR-PHXC target gene expression by over 90%, reducing oxalate production to near normal levels. In monkeys, monthly GalXC dosing of two or four milligrams per kilogram results in 90% silencing of DCR-PHXC target gene expression, with full silencing persisting roughly three months after the final dose at the four milligram per kilogram level. We will be presenting more detail on the DCR-PHXC program at the Oxalosis and Hyperoxaluria Foundation’s 12th International Workshop on Primary Hyperoxaluria in Tenerife, Spain, in July, and we are on track to file an IND or CTA in late 2017. This timeline would allow us to commence Phase 1 clinical trials in the first quarter of 2018. During the first quarter of this year, we also initiated IND-enabling activities for our second GalXC clinical candidate, targeting an undisclosed rare disease program. As with PH1, the target gene and disease for this program need our R&D criteria. In that, there’s a solid therapeutic hypothesis and identifiable patient population with a high unmet medical need, a potentially predicated biomarker, favorable competitive positioning, and what we believe maybe an efficient projected path to approval. We plan to file an IND or CTA for this program in the second quarter of 2018. As part of our stated strategy, we intend to retain full or substantial rights to these rare disease programs. For our additional programs that address complex diseases with multiple gene dysfunctions and much larger patient population, including Hepatitis B Virus and hypercholesterolemia, we intend to secure partnerships most likely after taking these programs into human proof-of-concept studies. The first of our large market programs will be for the Hepatitis B Virus, where we have recently initiated formal IND-enabling work on our HBV clinical candidate. We would expect to file an IND or CTA approximately around the end of 2018. HBV is an extremely large market. According to the World Health Organization, there are over 250 million people worldwide living with Hepatitis B Virus, making this disease a major global health problem. The early stages of HBV are asymptomatic, and if left untreated, it can result in chronic disease, liver cancer and death. Current therapies for HBV rarely lead to a long-term immunological cure as measured by the clearance of HBV surface antigen making a more efficacious therapeutic option a top priority for the industry. Here again, based on our preclinical studies, we believe that the GalXC platform should be able to produce an experimental HBV targeted therapy that profoundly reduces surface antigen expression in patients and can be delivered in a commercially attractive subcutaneous dosing regimen. In preclinical experiments in mice carrying the HBV genome, both by transient transfection and adeno-associated viral transfection, we haven’t observed an approximately three log or greater reduction in viral S-antigenic expression after a single subcutaneous administration of our HBV clinical candidate. We believe that these results compare favorably to other subcutaneous RNAi-based approaches to HBV that have been tested in directly comparable experimental systems. Our second large population program DCR-PCSK9 for statin-refractory patients with hypercholesterolemia has the potential based on our preclinical studies to offer attractive pharmaceutical properties, such as small subcutaneous injection volumes and relatively in frequent dosing. We’re enthusiastic about the opportunity that DCR-PCSK9 represents and are positioned to move the program forward into formal preclinical development. Finally, we continue to explore collaborations with potential partners for our discovery stage programs in cardiovascular disease and chronic liver disease and look forward to keeping you updated. Before we discuss the financial results, I want to reiterate our enthusiasm for the potential power of the GalXC RNAi technology platform. This proprietary drug development engine has allowed us to identify innovative subcutaneously delivered RNAi-based pharmaceutical candidates, capable of silencing any disease causing gene in the liver. As such, we remain confident in our ability to develop a deep pipeline of compound with broad clinical utility and tangible competitive benefits. I’ll now turn over the call to our Chief Financial Officer, Jack Green. Jack.

[Jack Green:]

Thank you, Doug. As Doug noted earlier, the key financial highlights for the first quarter was the $70 million convertible preferred stock purchase agreement that we announced with a high-quality syndicate of existing and new investors led by Bain Capital Life Sciences. The financing, which closed on April 11, together with cash on hand provides us sufficient runway into 2019, and will allow us to advance our first three development programs into proof-of-concept studies. This cash guidance assumes no funding from new partnership agreements for – from additional financing events. I’ll now briefly summarize the key financial results for the first quarter and direct you to our 10-Q filing for additional details. In the first quarter of 2017, the company generated a net loss of $14.2 million, or $0.68 per share, compared to a net loss of $15.7 million, or $0.76 per share for the same period in 2016. Research and development expenses were $8.9 million for the first quarter of 2017 compared to a $11.3 million for the same period of 2016. The decrease was primarily due to a reduction in clinical and manufacturing activities, related to our discontinued DCR-PH1 and DCR MYC programs, both of which will be fully wound down before the end of 2017. This was offset by an overall increase in manufacturing activities related to our new candidates under the GalXC platform, a decrease in platform-related expenses, and a decrease in employee-related expenses, due chiefly to an overall decline in headcount from the prior year, as well as slightly lower stock-based compensation expense. General and administrative expenses for the first quarter of 2017 totaled $5.5 million compared to $4.5 million for the same period in 2016. The increase primarily – was primarily attributable to higher legal costs, partially offset by a slight reduction in stock-based compensation costs. As of March 31, 2017, we had $32.9 million in cash, cash equivalents and held to maturity investments, compared to $45.9 million as of December 31, 2016. In addition, we had $1.1 million of restricted cash equivalents, which reflects collateral securing our operating lease obligation. In the first quarter of 2017, we utilized $13 million of cash in operations. With that, I’d now like to turn the call back over to Doug for closing remarks.

[Douglas Fambrough:]

Thanks, Jack. I want to conclude our remarks by welcoming the new investors who participated in our recent financing and thank each of our existing investors for their continued support. We are grateful for your confidence, both in our management team and in the GalXC platform. As I noted earlier, 2017 will be an important year for Dicerna, as we build on the successes we achieved in 2016 and worked toward attaining a number of key value creating milestones going forward. As a reminder, we have the capacity to launch up to three programs every year and intend to invent five programs into the clinic by the end of 2019. Our first IND application or CTA will be filed in late 2017 for DCR-PHXC, followed by regulatory filing for our second undisclosed rare disease in 2018, additional INDs will follow in 2018 and 2019. With that, let’s open it up to questions. Operator?

[Operator:]

Thank you. [Operator Instructions] And our first question comes from Paul Matteis. Matteis, your line is open.

[Paul Matteis:]

Hey, good afternoon. Thanks for taking my questions. Doug, could you expand a little bit on what kind of data you’re planning on presenting this summer on PH1? And on that point, I know you’ve kind of alluded to your view that, this could be a best-in-class compound. When should we expect to see more granular details on the differentiated profile this asset versus other RNAi candidates in the pipeline? Thanks.

[Douglas Fambrough:]

Thanks for the question, Paul. We intend to present at the 12th Meeting of the Primary Hyperoxaluria Workshop, which is being held in Tenerife, Spain, as I mentioned. And during that conference, we intend to talk in detail about why the DCR-PHXC program we believe will be best-in-class. I’m not going to preempt that discussion with any detail that that as very much, there is quite a bit of work that does go into some of the basic Primary Hyperoxaluria biology, which I don’t think is adequately appreciated broadly that we have been able to exploit in order to create a best-in-class program. That data has drawn from actual human Primary Hyperoxaluria experienced –experiments with human tissues, as well as animal models across multiple species means that, we believe we have a substantially better understanding of the disease state now than we did a few years ago when we launched our original DCR-PH1 program. In addition, we will be presenting the data to-date from our observational study in PH1, so-called, FIRES trial during the workshop in Tenerife.

[Paul Matteis:]

Okay, thanks. And I guess, Doug, maybe can you talk a little bit about some of the data you’re collecting from that study and maybe your current perspective on outside of biomarkers, what sorts of clinical endpoints do you think could be reasonable for further drug development and for just kind of expanding the clinical value proposition of your candidate?

[Douglas Fambrough:]

A lot of what FIRES is targeted towards is understanding the baseline levels of the biomarkers in these patients that provide a key competitor for our Phase 1 and later stage testing of DCR-PHXC. With respect to the clinical endpoints, we will have to in discussion with the FDA determine what those are going to be for later stages. However, we have already had conversations with the FDA regarding the use of biomarkers, specifically the oxalate biomarker and potentially use as an approvable endpoint. And in those discussions, the perspective that the FDA brought with respect to the kinds of supporting data that we would need to bring, I think, we’re very productive and have given us guidance for things that we believe are very much achievable that could result in the FDA’s agreement with the use of oxalate as an approvable endpoint. That said, the other types of endpoints one would use would be kidney function types of endpoints, such as GFR or kinds of transplant. And potentially, there is a stone formation endpoint, all of those endpoints represent what would very likely be a longer clinical trial period than the oxalate biomarker. So we’re quite motivated to develop the supporting data set for the use of the oxalate biomarker. Bob, do you want to add anything?

[Bob Brown:]

There are some other potential endpoints like reduction in dialysis, intensity, and frequency or even prevention of liver transplant.

[Paul Matteis:]

Okay, thanks. That’s – that will make lot of sense. And then maybe just on PCSK9, what are the kind of rate-limiting steps and what needs to be done for that to get into the clinic? And do you have any updated timing there? It sounds like the way you’re framing it right now, it’s – I don’t want to say priority, but it sounds like it’s kind of the fourth priority or fourth in line program. So it’s a 2019 IND filing, a realistic expectation, or how you think about that, Doug?

[Douglas Fambrough:]

It’s certainly a realistic expectation. What we’ve been working with Paul, as you know, as a small company, managing what I like to call the firing order of our programs. We have been able to produce more clinical candidates than we can develop. And our capacity to do multiple programs is limited and does require there would be an offset in time. In addition, we are managing GMP manufacturing slots with the external cGMP providers. We put DCR-PHXC into slot number one and the second undisclosed rare disease into slot number two, and quite recently made a decision between the HBV and PCSK9 clinical candidates that HBV would be the – in the third slot in the firing order. That piece number four, as the next one to come up, it also gives us another opportunity to see if we can improve on our current PCSK9 clinical candidate. In any event, that – there was a challenging decision. We’ve got two great programs in HBV and PCSK9 and looking at all the data. We decided that position number three would go to HBV and we’ve got position number four for PCSK9. And we’ve got ideas for what goes beyond that, but those are for discussion at a later date.

[Paul Matteis:]

Okay. And maybe just one more quick one, Doug. Do you think this undisclosed target, I understand for competitive reasons, keeping it close to invest. Do you think we’ll know more about that program when it enters the clinic, or is this something that you’d actually wait for proof-of-concept data to further expound upon exactly what it is and what the approach is?

[Douglas Fambrough:]

Paul, we don’t have a clear decision on when to disclose that. At some point, we will view the benefits of disclosure is exceeding the benefits of frequency, which we think are actually the greater benefit right now. I’m not really quite sure when that’s going to be. I would observe though that when we enter the clinic certainly in the United States, we are going to have to post on clinicaltrials.gov, at which point, it will be default by the public by that mechanism. Okay. Okay, fair enough. Thanks so much. Congrats on a progress.

[Douglas Fambrough:]

Thank you.

[Operator:]

And our next question comes from Stephen Willey. Your line is open.

[Philomena Kamya:]

Hi, this is going to Philomena Kamya on for Stephen Willey. Thanks for taking our questions. Just in terms of the data coming of the bio study, can we expect additional results from 20 patients that were enrolled in the trial?

[Douglas Fambrough:]

I believe, we will report results from all the patients that are rolled in the trial. There’ll be more data points, of course, from the earlier patients, but I have that. I believe, at least, two data points from each patient.

[Philomena Kamya:]

At least, two data points per patient, right?

[Douglas Fambrough:]

At a minimum.

[Philomena Kamya:]

Okay, brilliant. And just part of the second question, so it looks as though the oxalate biomarker has already been flagged as a potential clinical biomarker, what about glycolate? Are you able to give us any color with respect to know the status of using that as a clinical biomarker-embedded study?

[Douglas Fambrough:]

We have not been discussing the use of glycolate as a approvable endpoint biomarker with the FDA. We’ve only discussed oxalate. I think, there’s a much stronger case for the use of oxalate than there is for glycolate. As oxalate is, in fact, the mechanism of pathology and Primary Hyperoxaluria. However, glycolate is one of the additional biomarkers we will be tracking.

[Philomena Kamya:]

Understood. Thank you for taking our questions and congratulations on the quarter.

[Douglas Fambrough:]

Thanks.

[Operator:]

And our next question comes from Madhu Kumar. Your line is open.

[Madhu Kumar:]

Thanks, guys. So thinking about the data that’s been out there for PH1 and oxalate levels at this point, what do you think is a necessary amount of knockdown to achieve a clinically meaningful level of oxalate suppression?

[Douglas Fambrough:]

The key opinion leaders in Primary Hyperoxaluria, I’d like to talk about a 30% reduction in oxalate is being clinically meaningful and a 50% reduction in oxalate as being a stretch goal, if you will, that they would like their patients to be able to achieve. We believe it will take greater than 50% knockdown to achieve 50% reduction in oxalate, and I realize that’s a very vague answer. However, this topic is one of the topics we will cover in our data disclosure at the workshop in Tenerife in July. Your question, I guess, these are very deep issues in the disease perhaps deeper than it’s apparent on the surface. And there’s a fair amount of work that will be presenting that speaks to that question at that time.

[Madhu Kumar:]

Okay. And so then how you also think about the data from Zhou and others discussing quartiles of oxalate suppression, where it seems like when do you get out of that like highest quartile of oxalate be effect on end stage renal disease seems [ph] recently, is that kind of consistent with the numbers you just gave that level of suppression at 30% to 50% oxalate suppression?

[Douglas Fambrough:]

I’m not sure of the exact reference that you’re citing.

[Madhu Kumar:]

Okay, never mind. So then – and so I want to mention ADR [ph] I mentioned you have transplants in renal failure. But as I understand that PH1 is a relatively indolent disease in terms of renal failure. So is oxalate going to be the kind of preapproval endpoint of focus, because it’s so – it’s predictive and needing to require you to wait a decade to see what the people want to go end stage renal disease?

[Douglas Fambrough:]

Well, we certainly believe that oxalate is the – well, it has a number of benefits. One is directly related to the mechanism of pathology. It is easily measured and one of the datasets the FDA asked for speaks to in various ways the relationship between oxalate and disease. And those datasets are available not necessarily fully correlated in the public literature. PH1 in some patients is controllable with high fluids and vitamin B6 and citrate and it progresses slowly, in other patients, it progresses a much more rapidly. However, it’s certainly viewed by the community as a disease with an inevitable progression and all patients would benefit from a reduction of oxalate. Bob, if you want to add color?

[Bob Brown:]

Yes. So certainly, some patients are diagnosed already in stage of disease and certainly could be considered to be indolent.

[Madhu Kumar:]

All right. So indolent by using – do you have any evidence in the animal model that if you treat that late, you can achieve benefit in those animal models.?

[Douglas Fambrough:]

Let me breakdown your question a little bit Madhu, so…

[Madhu Kumar:]

Sure, please.

[Douglas Fambrough:]

I think by benefit you may be referring to a restoration of renal function. There is a data in the literature on the behavior or performance of kidneys after liver transplant. So that in essence, fixes the oxalate problem, at least, after the systemic oxalosis has been washed out of the system. And the data on restoration of kidney function is equivocal. There are patients for which restoration of kidney function is reported and there are other patients from which no restoration of kidney function is reported. So we are hopeful that there will be patients once we block oxalate production who may have improvements in renal function from their existing kidneys. But we believe the primary benefit is going to be to remove the need for liver transplantation.

[Madhu Kumar:]

Okay, cool.

[Douglas Fambrough:]

More onerous and operation and there is a limiting supply of livers for transplant.

[Madhu Kumar:]

Okay, great. Thanks very much for taking the question looking forward to this data this summer.

[Operator:]

And our next question comes from Ritu Baral. Your line is open.

[Ritu Baral:]

Good afternoon, everyone. Thanks for taking the question. Could you speak, Doug, into a little bit about why HBV associated number three spot and PCSK9 has fallen to your number four spot? Doug, is it something you made it to the compound, or the profile of the compounding question, or the programming question, or is it more of a reflection of what you see is the competitive landscape in those indications?

[Douglas Fambrough:]

Ritu, it is a synthesis of those things, but we’re particularly excited about our HBV clinical candidate in part because of its performance and standard industry models for which other companies have published their data or presented their data in public formats. And we see the performance of our HBV molecule as we believe likely to be a class-leading in its performance. And HBV being an area, where we’re likely to see a combination therapy and a lot of fulfillment in the industry to bring things forward into the clinic to try to address HBV, it felt very timely to move that forward. In the broader sweep of drug development, which as you know, is a decadal undertaking. We are talking about a handful of months in time. So I wouldn’t read too much into the firing order of being one way instead of the other.

[Ritu Baral:]

Was potential partnership interest also a factor in the order?

[Douglas Fambrough:]

For the HBV program and the PCSK9 program…

[Ritu Baral:]

Yes.

[Douglas Fambrough:]

...it is our business plan to fund those through proof-of-concept. So they are neither of those programs are one, where we are actively seeking partnering. So it’s not a big factor, because we’re really looking at a partnering environment once we have human data, and I think it’s going to be strong for both of those compounds.

[Ritu Baral:]

Understood. And so I will look forward to ASLDs and [indiscernible] going forward. Will there be potentially starting from this fall additional data roll out on the HBV program?

[Bob Brown:]

Yes, this is Bob. We would expect to be presenting more on our HBV program this fall, and we just presented on it last week in San Diego.

[Ritu Baral:]

Great. Thanks for taking all the questions.

[Operator:]

And there are no further questions. I’d like to turn the call over to Mr. Doug Fambrough, the CEO for any closing remarks.

[Douglas Fambrough:]

I want to thank, everyone, for their attention and for the questions today, and I look forward to a very productive 2017.

[Operator:]

This does conclude the program. You may all disconnect. Everyone have a great day.