Dicerna Pharmaceuticals, Inc.
Q2 2017 Earnings Call Transcript

Published: 11 Aug 2017

[Operator:]

Good day, ladies and gentlemen, welcome to the Q2 2017 earnings conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to turn the call over to Glenn Garma [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 2017 second quarter results. For anyone who has not had the chance to review the results, we issued a press release after the close of trading today, which is available under the Investors and Media tab on our website www.dicerna.com. You may also listen to this conference call via webcast on our website, which will 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, including, for example, expected timeline and plans for development of DCR-PHXC and other pipeline programs and potential therapeutic benefits. 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 which we filed today with the SEC. 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 to turn the call over to Dr. Douglas Fambrough, Dicerna’s President and Chief Executive Officer.

[Douglas Fambrough:]

Thank you, Glenn. Good afternoon and thank you all for joining us today. With me are Jack Green, our Chief Financial Officer, Bob Brown, our Chief Scientific Officer; Ralf Rosskamp, our newly appointed Chief Medical Officer. As most of you are aware, Dr. Rosskamp joined Dicerna in early June, bringing to the company a wealth of highly valuable experience. As a brief reminder, Dr. Rosskamp has more than 20 years of research and development expertise across all phases of drug development from preclinical through commercialization and across diverse therapeutic areas, including large population indications such as diabetes, cardiovascular, respiratory as well as orphan drugs. Moreover, during his career, he has been directly responsible for a number of high-profile product approvals, including Natpara, Amaryl, Lantus, Apidra and Simcor. We are very pleased to welcome Dr. Rosskamp to the team and we look forward to his insights and contributions as we prepare to advance first our lead product candidate DCR-PHXC into, to be followed by additional GalXC-based product candidates. Turning to our other key highlight from the second quarter, and as I'm sure the majority of our listeners this afternoon will recall, in mid-April, we successfully closed a $70 million offering of redeemable convertible preferred stock with a syndicate of new and existing investors, led by Bain Capital Life Sciences. Additional investors include Cormorant Asset Management, Domain Associates, EcoR1 Capital, RA Capital and Skyline Ventures, among others. Concurrent with the transaction, we also welcomed Dr. Adam Koppell, Managing Director of Bain Capital Life Sciences, to our board which was expanded to nine seats. The addition of Dr. Rosskamp as CMO, coupled with the completion of the offering and addition of Dr. Koppell to the board, go a long way toward ensuring that we have the expertise and resources necessary to achieve our development goals, while striving to create meaningful value for our shareholders. Now, moving on to an update of our lead programs. Let me start by recapping the most recent news surrounding our most advanced program, DCR-PHXC for primary hyperoxaluria. PH is a group of severe, rare, genetic metabolic disorders of the liver, characterized by overproduction of oxalate in the liver, which causes significant and irreparable damage first to the kidneys and then to other organ systems. There are currently no approved treatments for the condition. For those of you who may not have seen the press release or been able to join our call on July 17, we announced important program updates that Dicerna scientists gave in a series of key presentations at the 12th International Workshop on Primary Hyperoxaluria in Tenerife, Spain. During the workshop, we revealed what we believe to be an optimal target for PH, the gene known as lactate dehydrogenase A or LDHA. Specifically, we presented new preclinical data demonstrating how DCR-PHXC inhibits LDHA resulting in a consistent significant reduction in urinary oxalate to normal or near-normal levels in multiple animal models of PH, including type 1, type 2 and ethylene glycol-induced hyperoxaluria, which is a model for idiopathic PH. We believe LDHA inhibition has this broad oxalate-reducing activity across models of multiple forms of PH because LDHA is the final common pathway by which the liver creates oxalate in PH. The data suggest a simple, direct and near-linear relationship between LDHA inhibition and oxalate production, which may translate into consistent therapeutic activity even in the event of a missed dose. In these preclinical studies, DCR-PHXC appear to be well tolerated. Specifically, administration of multiple supra-therapeutic doses of DCR-PHXC in rodents and non-human primates showed no observable adverse liver affects and minimal metabolic disruption. This is not altogether surprising given that there are numerous case reports of LDHA deficiency naturally occurring in healthy humans. Our formal animal toxicology studies are ongoing. We believe that LDHA inhibition represents a potentially important approach to treating PH with substantial benefits compared to alternative approaches, such as targeting the glycolate oxidase, or GO, enzyme. Most significantly, DCR-PHXC has the potential to provide a treatment option for patients with all forms of PH, which we look forward to investigating in future clinical trials. After presenting and discussing our DCR-PHXC data with the PH community at the recent workshop, it goes without saying that we remain very enthusiastic about the possibilities for this novel compound. Our near-term development plans for DCR-PHXC remain unchanged and on track. Specifically, we plan to file a clinical trial application, or CTA, with European regulators in the fourth quarter of this year and aim to initiate a Phase I clinical study in the first quarter of 2018. The trial will be conducted at multiple sites in Europe and will include both healthy volunteer and patient cohort. Participants will receive a single ascending dose of DCR-PHXC via subcutaneous injection, transitioning, as appropriate, to multiple ascending doses. The endpoints will include safety and tolerability, urine and plasma biomarkers, and pharmacokinetics. Also, during the workshop last month, we presented data from our ongoing PHYOS study, an international, multicenter, observational study in patients with a genetically-confirmed diagnosis of PH1. The purpose of this study is to collect data on key biochemical parameters, including changes in oxalate, glycolate and other metabolites implicated in the pathogenesis of the disease. Our observations will allow us to better understand the baseline PH1 disease state, which will help guide long-term development plans for DCR-PHXC. For those of you looking for additional detail, the posters from the workshop are available under the Events and Presentations tab of the Investors & Media section of our website. Turning now to the next candidate in our GalXC-based pipeline. During the second quarter, we continue to advance IND-enabling activities for our second undisclosed rare disease candidate. He As with PH, the target gene and disease for this program meet our R&D criteria, in that there is a strong therapeutic hypothesis, an identifiable patient population with a high unmet medical need, a potentially predicted biomarker, favorable competitive positioning and what we believe may be an efficient projected path to approval if clinical trials yield positive results. We plan to file an IND and/or CTA for this program in the second quarter of 2018. Our strategy for these rare disease programs, as we have previously stated, is to retain full or substantial commercialization rights, while pursuing partnerships for our larger population programs, including hepatitis B virus and hypercholesterolemia, most likely after taking these programs through human proof-of-concept studies. Regarding our HBV program, DCR-HBVS, which targets HBV directly, our formal IND-enabling activities are ongoing. Our focus is on leveraging our GalXC technology to generate a subcutaneously-delivered, HBV-targeted investigational therapy that meaningfully reduces expression of the HBV surface antigen, HBsAg, as the ability to do so could potentially lead to a long-term immunological cure for this patient population, something that current treatments are rarely able to achieve. As a reminder, HBV is an extremely large market, with approximately 250 million people globally currently living with the virus, according to the World Health Organization. Left untreated, this can lead to chronic disease, liver cancer and death. As I noted on our Q1 conference call, in preclinical studies of mice carrying the HBV genome, both by transient transfection and adeno-associated viral transfection, we have observed an approximately 3 log or greater reduction in viral as antigen expression after a single subcutaneous administration of our DCR-HBVS clinical candidate. We believe that these results compare favorably to other RNAi-based approaches to HBV that have been tested and directly comparable experimental systems. Our goal is to file an IND application or CTA for this program toward the end of 2018. Finally, we continue to develop our hypercholesterolemia candidate DCR-PCSK9, which targets the PCSK9 gene and is being evaluated for the treatment of statin refractory patients with hypercholesterolemia. Based on our preclinical studies, we believe our GalXC RNAi platform has the potential to produce PCSK9 targeted therapy with attractive commercial properties, including small subcutaneous injection volumes and less frequent dosing. Activities continue with the goal of moving this promising candidate into formal preclinical development. Meanwhile, we are continuing to actively explore collaborations with potential partners for our discovery stage programs in cardiovascular disease and chronic liver disease and look forward to keeping you updated on our progress. Before I turn it over to Jack, I want to reiterate the potential of LDHA as an optimal target for the treatment of all forms of PH with DCR-PHXC. This is a novel approach to this disease that we believe positions DCR-PHXC as a potential best-in-class treatment option for patients with PH regardless of type. We believe this also speaks to the broader potential of the GalXC platform as a foundational gene silencing technology that offers a number of competitive advantages, including highly specific targeting to hepatocytes, while sparing other cell types, long duration of action and a simple, infrequent dosing regimen. Given these potential attributes, we believe GalXC-based compounds have the potential to be used to address a broad range of complex conditions with unmet medical needs. I will now turn the call over to our Chief Financial Officer Jack Green. Jack?

[Jack Green:]

Thank you, Dough. As Doug noted earlier, the key financial highlight for the second quarter was the $70 million convertible preferred stock financing that we closed with a strong 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 sufficient runway into 2019 and will allow us to advance our first three development programs into proof of concept clinical studies and a fourth program into formal preclinical development. This cash guidance assumes no funding from new partnership agreements or from additional financing events. I’ll now 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 $24 million for the three months ended June 30, 2017 as compared to $15.6 million the same period in 2016. Basic and diluted net loss per share attributable to common stockholders for the quarter was $1.15 versus $0.75 for the comparable period in 2016. Our reported net loss attributable to common stockholders in the second quarter includes $8.8 million in non-cash preferred stock dividends, which includes a one-time deemed dividend charge of $6.1 million. R&D expenses for the three months ended June 30, 2017, $9.3 million, as compared to $11 million the same period in 2016. The decrease was due primarily to a reduction in platform-related expenses resulting from the timing of activities related to discovery and early development programs, including supply and external study costs. The decrease was also due to a decrease in employee-related expenses, including non-cash stock-based compensation costs, and a reduction in clinical and manufacturing activities related to the company’s now discontinued DCR-PH1 and DCR-MYC programs, both of which are essentially wound down at this time. These decreases were partially offset by an increase in our manufacturing activities and toxicology study costs, related to our GalXC candidates. Looking towards the back half of the year, we expect our overall research and development expenses to increase, primarily as we complete clinical manufacturing activities, advanced preclinical toxicology studies, and initiate clinical activities associated with our lead product candidates. General and administrative expenses were $6.3 million for the three months ended June 30, 2017 compared to $4.7 million for the same period in 2016. The increase was primarily due to higher litigation related expenses and to higher salaries, benefits and other employee -related expenses. As of June 30, 2017, we had $88.7 million in cash, cash equivalents and held-to-maturity investments compared to $45.9 million as of December 31, 2016. The increase was chiefly due to the $70 million private placement. In addition, we had $1.1 million of restricted cash equivalents, which reflects collateral securing our operating lease obligations. We utilized $13.9 million of cash in operations during the second quarter compared to $11.2 million during the same period in 2016. With that, I’d like to now turn the call back to Doug for closing remarks.

[Douglas Fambrough:]

Thanks, Jack. In closing, we are very pleased with the progress we've made so far this year. We look at 2017 as a pivotal year for Dicerna and we are pleased to say that we are on track to achieve our goal of reentering clinical development using our GalXC technology, while declaring multiple clinical candidates for clinical entry in 2018 and beyond. As a reminder, we have the capacity to launch up to three programs annually and intend to advance five programs into the clinic by the end of 2019. Our first CTA application will be filed in late 2017 for DCR-PHXC, followed approximately six months later by a regulatory filing for our second undisclosed rare disease. Additional filings will follow on the same approximate schedule thereafter. With that, let's open it up to questions. Operator?

[Operator:]

[Operator Instructions]. Our first question is from Stephen Willey with Stifel. Your line is now open.

[Stephen Willey:]

Yeah, good afternoon, guys. Thanks for taking the questions and congratulations on the progress. Doug, maybe just one on the PH program, I guess, the initial Phase I will be conducted in PH1 patients, but how do you then think about bringing additional genotypes into the mix and maybe even idiopathic PH into the mix and how do you think about the potential timing of those additional patient subtypes moving into the clinic as you move PH1 down a separate path.

[Douglas Fambrough:]

Yeah. Thanks for the question, Steve. I’m going to pass over to Ralf to answer the question.

[Ralf Rosskamp:]

Yes. Hi, Steve. Thank you for the question. Actually, Phase I study will already include PH1 and PH2 patients. So, we are already expanding beyond what we recently have done in PH1. And in further studies, it is our plan to also include the other types of primary hyperoxaluria, knowing that the pathophysiology and the clinical picture could be a little different, but we think that PH1 and PH2 actually are close enough, so that we can combine those in our initial trial.

[Stephen Willey:]

Okay. And is that something that you have guidance on from regulators at this point?

[Ralf Rosskamp:]

We have discussed a program with regulatory agencies and there is – the overall disease is primary hyperoxaluria and treatment options are non-existing for all of them. So, that wasn’t a particular discussion around specific forms of hyperoxaluria. But since all of these diseases have the same underlying pathophysiology of increased oxalate excretion which we’re, hopefully, going to reduce. I wouldn’t think that there are any particular concerns.

[Stephen Willey:]

Understood. So, I guess, as you think about the Phase I which will have both healthies and also PH patients, will there be some proactive attempt on your part to get some kind of equal representation of PH1 and 2 patients within the Phase I?

[Ralf Rosskamp:]

Yes. We will actually do some kind of stratification in our patient part of the study that we will have both PH1 and PH2 patients, so that at the end of the day we have a more or less equal representation off both groups in our trial.

[Stephen Willey:]

Understood. And just on the undisclosed rare disease candidate, I know that we’re talking about am IND or IND equivalent in 2Q 2018, should we expect to get maybe a disclosure around the nature of that target prior to the filing?

[Douglas Fambrough:]

Sorry. No promises on that, Steve. It’s not that we don't talk about it. It’s our assessment that the competitive nature of the field means that it is important to maximizing the value for the company that we keep it confidential as long as possible. When we no longer feel that there is a competitive value to keeping it confidential, then we’ll make it public. But it's possible that will go to the last moments, which are really until the clinicaltrials.gov filing. So, there's no sort of scheduled time where we’re planning to discuss that.

[Stephen Willey:]

Completely understood. Thanks for taking the questions.

[Operator:]

Our next question is from Paul Matteis with Leerink Partners. Your line is now open.

[Benjamin Burnett:]

Hey, this is Ben Burnett on for Paul Matteis. Thank you very much for taking our questions. I guess I had two questions. First, I just wanted to ask about the preferred stock private placement you guys issued back in April. I believe this entitled holders to a 12% dividend, but could be reduced to 4% stock dividend depending on milestones. And I was just curious if you have an update on the cadence at which you think you would hit these milestones or any color on those?

[Douglas Fambrough:]

Hi, Ben. We don’t have a particular guidance on when we expect to hit the milestones. There is a business milestone and a development milestone, both of which that we anticipate hitting in the coming quarters relatively near-term, but we don’t have a specific guidance on that. Each milestone would reduce the coupon by 4% each, bringing it down to 4%. And of note, both milestones combined with stock price that is twice the conversion price allows the company to convert all that convertible preferred back to common.

[Benjamin Burnett:]

Okay, okay. Thank you. Let me just ask one more question, if I may. I was wondering, going to PH, if you could maybe talk about the cost of caring for PH patients. And in particular, is there a difference in the economic burden to payers for the different types of PH?

[Douglas Fambrough:]

Sure. There is definitely a difference in the cost of treatment inasmuch as there are differing rates and types of transplants and different indications. I’m going to defer to Ralf to talk a little bit about the patient journey and the different forms of PH.

[Ralf Rosskamp:]

It’s clear that when you look at all of forms of PH that the PH1 disease patients, 50% of patients actually are ending up in end-stage renal disease by their 30s. And in Tenerife, there was a presentation from the UK actually showing that in 20% of patients with PH2 also ending up in end-stage renal disease. For PH3, there's only one report so far, but we have to realize that the disease has only been described in – the genetic disease has been described six years ago and the data in these diseases, especially in the rare diseases, are accumulating. So, we clearly know that these patients also have frequent stone formation. We have the first case of end-stage renal disease. And I wouldn't be surprised in couple of years from now we’re also learning that a certain percentage more of these patients ending up in end-stage renal disease. I hope that answers your question.

[Douglas Fambrough:]

Yeah. Let me add a little bit more color. There are a number of cost drivers associated with treatment of the population, but I'm not aware of a pharmacoeconomic study, which begins to quantify annualized cost of treatment averages across the different indications. End-stage renal disease, obviously, requires the initiation of dialysis and it's often a very intensive dialysis regimen, generally daily with parenteral at night. And frequent stone formation, while perhaps less medically serious than end-stage renal disease, is often associated with multiple surgical procedures for stone removal as well as pharmacologic treatment – symptomatic pharmacologic treatment. And the cost associated with that can be quite high as well. Those two things I mentioned are in addition to the high cost of transplant for kidney and for liver, with liver transplant being reasonably common as a treatment for PH1 and certainly known in PH2 as well. So, overall, this is an expensive disease to treat and we would – are hopeful that an effective pharmacologic treatment like DCR-PHXC – or, like, we hope DCR-PHXC will become – will reduce a number of those costs associated with the disease and make for compelling pharmacoeconomic argument for the therapy.

[Benjamin Burnett:]

Very interesting. Thank you, guys, for the color. Appreciate it.

[Operator:]

Our next question is from Ed Arce with H.C. Wainwright & Co. Your line is now open.

[Ed Arce:]

Hi, everyone. Thanks for taking my question. Just wanted to follow up on your planned Phase I for the first quarter of next year in Europe. Understand, it’s a fairly typical satnav study, looking at safety and tolerability. But just wanted to ask around the plasma urine biomarkers that you’re looking to assess. I’m wondering how those – how you view those in terms of helping you design your next Phase II study and, in particular, if there is any insights that you may glean from that with regard to the LDH target versus the GO target.

[Ralf Rosskamp:]

Yeah, this is Ralf. We know from our animal model studies that a single injection of DCR-PHXC reduces urinary oxalate to near-normal levels. So, we would expect in the single-dose study, which is a dose ascending study, to see the same effect on urinary oxalate. So, from a development perspective, this is a pretty straightforward trial because we’re looking at this primarily on one marker, which is urinary oxalate, and we expect to see the same as we’ve seen the disease model animals that actually we see a dose-dependent decrease in urinary oxalate. Of course, we’re measuring additional biomarkers like glycolate or glyoxylate and we’re also looking on plasma levels. But that’s more to the effect to really understand the whole pathway and to see how it’s been affected by LDHA. But from the clinical point of view to make the decision, with which does to go into the multiple dose study, we will primarily look at the urinary oxalate excretion.

[Ed Arce:]

Okay, that’s helpful. And then, just in terms of timelines, I recognize it’s probably a bit early. But given that you’re looking to start the second program probably six months later, wondering if there would probably be, at some point, an overlap towards the end of next year as you begin to think about entering Phase II for this lead program.

[Ralf Rosskamp:]

Yes. You’re correct. There will be some overlap between these two programs by the end of the year, and that’s all been accounted for in our planning in terms of resources and budget.

[Douglas Fambrough:]

In addition to bringing the HBVS program online, not so long after that, we look forward to a very active set of programs in the clinic in the coming quarters and years.

[Ed Arce:]

Okay, great. Thanks. And congrats on the progress.

[Douglas Fambrough:]

Thanks, Ed.

[Operator:]

[Operator Instructions]. Our next question is from Madhu Kumar with Chardan. Your line is now open.

[Madhu Kumar:]

Hi. Thanks for taking my question. I guess, the first one I have really relates to, what are the key clinical end points in primary hyperoxaluria? The biochemical ones, what beyond the biochemical ones, do you think that we’re going to see functional, pathological readouts for primary hyperoxaluria that are kind of key to assessing function and clinical benefit?

[Ralf Rosskamp:]

Yeah. That’s a very good question. We believe that actually urinary oxalate is not only a [indiscernible] or a chemical marker, but is a surrogate marker for clinical outcome. And there are several reasons why we believe that is the case. The first one is in registry data – large registry database, there is a clear relationship between your oxalate excretion and the time you are developing end-stage renal disease. So, if you start off with very low levels of – relatively low levels of oxalate excretion, it will take you longer to end up in end-stage renal disease and need dialysis. If you have a high value, it will take a shorter period of time. We also know that patients who receive so-called preemptive liver transplantation to correct the liver disease actually normalize their oxalate levels and at the same time stabilize or improve their renal function. So, there is a good biological explanation why a normalization in urinary oxalate levels should result in less calcification and, to some degree also, in the reversal of the clinical complications. There are also patients with so-called secondary hyperoxaluria not caused my liver, but by an increase of plasma oxalate through the absorption by the gut. Patients who underwent a gastric bypass and if this procedure is reversed, the oxalate excretion returns to normal, their kidney function also returns to normal. So, I think that is a good argument to make that a reduction in urinary oxalate levels is likely to predict clinical benefit. And in our initial discussions with regulatory agency, we feel that at least there is, I would say, some sympathy towards this. And we think that it will be patent, of course, on the effect size. Greater the reduction in oxalate excretion is, the stronger your argument will be that this likely predicts clinical benefit.

[Madhu Kumar:]

So, that’s an interesting point. So, kind of following from that, would the kind of intended population for the drug be patients who have very high-level of urinary oxalate, i.e. closer to end-stage renal disease because, as you said, you get a big drop off. There is a potential clear benefit there. Versus patients who have low levels of oxalate currently where the drug is being given to kind of prevent the accumulation in the first place. How do you kind of segment them and how would a possible trial segment those two groups?

[Ralf Rosskamp:]

Well, if your endpoint is urinary oxalate, you will always have a range of baselines. And we saw this in our PHYOS trial that we have a wide range of patients with high to very high oxalate levels. I think that this will be through the natural selection of patients into your study. By saying that this is a good surrogate marker, I also believe that in smaller exploratory studies, we will be looking into patient populations who have already end-stage renal disease or are very severely renally impaired, like, for instance, patients with so-called infantile oxalosis. These are infants who present within their first couple of months of life with acute renal failure and have mortality associated with this disease. So, we will look at the urinary oxalate levels as a surrogate marker Look at the urinary oxalate levels as a surrogate marker to predict, but at the same time we will also generate in certain high-risk populations clinical data.

[Madhu Kumar:]

Okay. And I guess one last simple question, what is the distribution of patients with primary hyperoxaluria? Do they all go to a discrete set of kind defined treatment centers or are they all over and would any nephrologist potentially have the chance of seeing a – have you seen primary hyperoxaluria patient?

[Douglas Fambrough:]

Hi, Madhu. Most countries have a center of excellence for the management of patients with primary hyperoxaluria. In the US, the Mayo Clinic is that center of excellence. That said, it's not the case that every family moves to Minnesota. Rather there's a relationship – a consulting relationship with the center of excellence and the patients are generally managed locally by the nephrology community. Often, a pediatric nephrologist is the first to get involved. Similarly, in the UK, there's a center of excellence, in Germany and Amsterdam and France. So, there is a clear set of sites for clinical development to access the patients in geographic regions. Does that address your question?

[Madhu Kumar:]

Yeah, that is great. Thank you, guys, very much.

[Douglas Fambrough:]

Sure. Thanks for calling, Madhu.

[Operator:]

I’m showing no further questions. I would now like to turn the call back to Doug Fambrough for any further remarks.

[Douglas Fambrough:]

I want to thank all of you for listening to our quarterly earnings call today and we look forward to speaking with you again soon.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. You may all disconnect. Everyone, have a good day.