Dicerna Pharmaceuticals, Inc.
Q3 2017 Earnings Call Transcript

Published: 4 Nov 2017

[Operator:]

Good day, ladies and gentlemen, and welcome to the Dicerna Third Quarter 2017 Financial Results 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 may be recorded. I would now like to introduce your host for today's conference, Glenn Garma [ph], Investor Relations. Please begin.

[Unidentified Company Representative:]

Thank you, David. Good afternoon, and welcome to Dicerna's conference call to discuss the company's 2017 third quarter results. For anyone who has not had the 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, 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 this call, including, for example, expected time line and plans for development of DCR-PHXC and other pipeline programs, expectations related to the collaboration with Boehringer Ingelheim, expected conditions for conversion of our preferred stock and guidance regarding cash usage. 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 Dicerna's latest Form 10-Q, which we 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, Glenn. Good afternoon, and thank you all for joining us today. With me are Jim Weissman, our Chief Business Officer; Jack Green, our Chief Financial Officer; Bob Brown, our Chief Scientific Officer; and Ralf Rosskamp, our Chief Medical Officer. I am very pleased to report today that since our last quarterly update in August, we have made considerable progress across the organization in both refining and advancing our clinical development programs while also strengthening our organization. The fourth quarter is off to a good start with the announcement of two key milestones that set the stage for a pivotal year for Dicerna in 2018. As I hope most of you saw, just this morning, we announced a strategic research collaboration and license agreement with Boehringer Ingelheim to discover and develop novel GalXC-based therapeutic candidates for the treatment of chronic liver diseases. This important collaboration will initially focus on nonalcoholic steatohepatitis, otherwise known as NASH. NASH, as many of you know, is a serious chronic liver disease in which the buildup of fat in the liver causes inflammation that can lead to cirrhosis and/or liver cancer, and there are currently no approved treatment for the disease. It has an especially high prevalence among obese and diabetic patients. Given the ability of our GalXC platform to produce therapeutics that can potentially silence specific disease-causing genes in the liver, we believe NASH is a logical first-target indication for this collaboration. And with Boehringer's strong capabilities in drug discovery and deep research expertise in cardiometabolic diseases, including NASH, we believe we have selected the ideal partner to advance development of promising drug candidates in this field. I'll let Jim Weissman review details of the collaboration later, but some key points are that the license is for a single target, and Dicerna will receive a nonrefundable $10 million upfront payment from Boehringer for the license. In addition, Boehringer receives an option to expand the deal to include a second target in the chronic liver disease field, which would provide for an option fee payment and additional success-based development and commercialization milestones and royalty payments to Dicerna. Suffice it to say that this is a very significant milestone for Dicerna. The collaboration provides an important non-dilutive source of financing, and perhaps more importantly, represents meaningful validation of our RNAi technology and our intellectual property position by one of the most well-regarded companies in the space. It is also consistent with our broader-stated strategy to partner our large population GalXC-based programs while continuing to internally develop and retain full or substantial commercialization rights to our lead rare disease programs. I also want to highlight the mid-October filing of our first clinical trial application, or CTA, with the Medicines and Healthcare products Regulatory Agency, or MHRA, in the United Kingdom for our lead program, DCR-PHXC. Once the CTA is authorized by MHRA and approved – and has approval of ethics committees, we expect to move this product candidate quickly into clinical development for the treatment of all forms of primary hyperoxaluria. Specifically, we anticipate initiating a first in-human proof-of-concept Phase 1 trial during the first quarter of 2018. For those listeners who may be newer to our story and to this indication, primary hyperoxaluria, or PH, is a group of severe, rare genetic liver disorders characterized by the 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. The trial will be a randomized, single-blind, placebo-controlled, single-ascending dose study enrolling up to 25 healthy volunteers and 16 patients with PH types 1 and 2. The primary objective of the study is to evaluate the safety and tolerability of single doses of DCR-PHXC with participants being enrolled into as many as five sequential cohorts of increasing doses. Secondary objectives include the pharmacokinetics of DCR-PHXC and its pharmacodynamic effects on oxalate biomarkers in plasma and urine. We will seek to move this program efficiently through the clinic. And to that end, we expect to report top line proof-of-concept data in the second half of 2018. Concurrently, we are also working on additional CTA filings in other European countries this year and plan to file an IND in the United States in the first quarter of 2018. We believe we are developing a differentiated and best-in-class approach to the treatment of this debilitating disease as we have identified a novel target that we believe will allow us to treat all known forms of PH and not just PH type 1. This past July, at the 12th International Workshop on primary hyperoxaluria in Tenerife, Spain, we revealed that we – 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 achieved a durable and consistent knockdown of LDHA and a reduction of oxalate production 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 oxalating-reducing activity because LDHA is the final common pathway by which the liver creates oxalate in PH. The data suggests a simple, direct and 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 non-GLP preclinical studies, DCR-PHXC appeared to be well tolerated. Specifically, administration of multiple supratherapeutic doses of DCR-PHXC in rodents and nonhuman primates showed no observable adverse liver effects and minimal metabolic disruption. LDHA deficiency in humans is not associated with any liver dysfunction, which gives us increased conviction in the safety profile that we observed in these animal studies for this liver-targeted therapy. Our formal long-term chronic animal toxicology studies are ongoing. Also during the third quarter, we presented data from our recently completed PHYOS study, which is an international, multicenter, observational study in patients with a genetically confirmed diagnosis of PH1. The purpose of this study was to collect data on key biochemical parameters, including changes in oxalate, glycolate and other metabolites implicated in the pathogenesis of the disease. 20 patients were enrolled in the study with a median age at screening of 21 years and a range of 12 to 61. Over the six-month observation period, the variability or coefficient of variation between 24-hour urine measurements of oxalate at different time points was 28%. Our observations allow us to better understand the baseline PH1 disease state and will assist us towards designing future clinical studies using 24-hour urinary oxalate excretion as a surrogate marker for clinical benefits. We expect to publish the data from PHYOS during 2018. Turning now to the next candidate in our GalXC-based pipeline. During the third quarter, we continued to advance IND-enabling activities for our second, undisclosed rare disease candidate. As with PH, the target gene and disease for this program meet our R&D criteria and that there is a strong therapeutic hypothesis and identifiable patient population with a high unmet medical need, a potentially predictive biomarker, favorable competitive positioning and what we believe may be an efficient, projected path to approval, assuming our clinical trials yield positive results. We remain on track to file an IND or CTA for this program in the second quarter of 2018. Our strategy for these rare disease programs, as I've previously noted, is to retain full or substantial commercialization rights while pursuing partnerships for our larger population programs, such as the Boehringer Ingelheim collaboration for NASH that we discussed earlier. We may also look to partner our HBV and PCSK9 programs most likely after advancing these programs through human proof-of-concept studies. Regarding our HBV program, DCR-HBVS, which targets HBV directly, it continues to go – to undergo formal IND-enabling activities. Our focus is on leveraging our GalXC technology to investigate the potential for a subcutaneously delivered experimental HBV-targeted therapy that meaningfully reduces expression of the HBV surface antigen, or HBsAg, as the ability to do so could potentially lead to a long-term functional 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 living with the virus according to the World Health Organization. Left untreated, this can lead to chronic disease, liver cancer and death. Our preclinical studies have been highly encouraging. In particular, in preclinical studies of mice carrying the HBV genome, both by transient transfection and adeno-associated viral transfection, we have observed and approximately three-log or greater reduction in viral S 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 [indiscernible] indirectly comparable experimental systems. We aim to file an IND application or CTA for this program approximately at the end of 2018. Finally, during the quarter, we continued 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 should be further investigated to establish whether it has the potential to produce a PCSK9-targeted therapy with attractive commercial properties, including small subcutaneous injection volumes and less frequent dosing. We have now selected a provisional candidate for potential preclinical development, but we are continuing to explore ways to further optimize the program. And lastly, we are eager to commence our collaboration work with Boehringer Ingelheim, and we continue to explore collaborations with additional potential partners for our other discovery-stage programs, including cardiovascular disease. We look forward to keeping you updated on our progress. I'd now like to turn the call over to our Chief Business Officer, Jim Weissman, for some additional details on our Boehringer Ingelheim collaboration. Jim?

[Jim Weissman:]

Thank you, Doug. As Doug stated in his opening remarks, this morning, we were pleased to announce that Dicerna has entered into a significant research collaboration and license agreement with Boehringer Ingelheim to jointly research and develop novel GalXC-based therapeutics targeting chronic liver diseases, beginning with NASH. Under the terms of the agreement, Boehringer will make an initial, nonrefundable, upfront payment to the company of $10 million. Dicerna is eligible to receive up to $191 million in potential development and commercial milestones as well as royalty payments on potential global net sales subject to certain adjustments, tiered from high single digits up to low double digits. As Doug also noted, Boehringer has an option to add a second chronic liver disease target to the collaboration. The triggering of that option would result in an exercise payment to Dicerna and additional success-based development and commercialization milestones and royalty payments to Dicerna. In both cases, Boehringer is primarily responsible for development activities after formal candidate selection. We're very pleased to be beginning this collaboration with Boehringer and represents the first of what we hope will be multiple partnerships applying our GalXC technology and intellectual property to diseases affecting large patient population, such as chronic liver diseases, as in this collaboration, and in cardiovascular disorders. With that, I'll now turn the call over to Jack Green, our Chief Financial Officer. Jack?

[Jack Green:]

Thanks, Jim. There's another important attribute to the Boehringer Ingelheim collaboration that should be noted. This collaboration qualifies as a milestone event to the purpose of reducing the dividend rate from the redeemable convertible preferred stock, which we issued in our financing in the second quarter of this year. As a result, the dividend rate on the redeemable convertible preferred stock is subject to a reduction from 12% to 8%. To remind you all of the structure of the redeemable convertible preferred stock, we have the option to convert that stock into common stock, following the achievement of three milestones

[Douglas Fambrough:]

Thanks, Jack. In closing, I want to reiterate that we are very encouraged with the progress we have made so far this year, including the achievement of two very key milestones

[Operator:]

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

[Stephen Willey:]

Yes, good afternoon guys, and congratulations on the progress here. Maybe kind of a big-picture question for Doug. I mean, there's obviously been a bit of a tailwind here in the RNAi space, post the disclosure of the top line APOLLO data. And I guess maybe just wondering, one, how that may have impacted the pace of discussions with Boehringer; and then just maybe, two, whether or not that's kind of resulted in some noticeable shift in perhaps the level of inbound interest that you're seeing with potentially interested collaborative partners on other programs?

[Douglas Fambrough:]

Hi, Steve, I don't think that the APOLLO data had any direct impact on the pace of our discussions with Boehringer. We were already very deeply engaged with them. And as you are well aware, APOLLO is – the patisiran program is a – the lipid nanoparticle-based program. All our work is based on the GalNAc program, so there are some fairly significant differences in how those drugs are delivered. So I don't think there was any direct change in pace there. We were – when that data came out. I haven't – I wouldn't say I've seen any direct results of an uptick in the RNAi sentiment in the community of potential pharmaceutical partners. They are generally – have generally been increasing in interest as there has been more data available in our GalXC programs, particularly toxicology data and the increasing body of preclinical pharmacology across a number of targets. I do think that there is this – a good opportunity for us to do additional partnerships of this ilk, and it's certainly part of our strategy to do these discovery-stage partnerships. A lot of the tailwind that we have seen from the good data in the RNAi space has more shown up in terms of additional discussions with investors who are turning to the space and educating themselves.

[Stephen Willey:]

Got it. And then I guess on the hep B program, I mean, it looks like you're seeing some really interesting preclinical responses with respect to the three-log reduction in S antigen. Just wondering if you're, I guess, may be willing to theorize with respect to whether or not you think that's kind of a GalXC technology-specific phenomenon. Or do you think there's a transcript angle here with respect to the target that you're going after within the viral genome?

[Douglas Fambrough:]

Steve, are you referring to the ability to get multiple logs of reduction there when we don't normally talk about multiple logs of reduction with endogenous genes?

[Stephen Willey:]

Correct.

[Douglas Fambrough:]

Well, that's an insightful question. When we report the log reductions in S antigen, we are, of course, reporting protein levels in serum. And you do not see that the sort of quantitative difference reflected in mRNA levels inside the liver cells, so we achieved the sort of mid-90% reduction in S antigen mRNA levels or really their genome transcript levels from the HBV genomes inside the cell. But it does show up differentially as a much lower S antigen-circulating level than you would expect to see for a simple secreted protein. I think it's more likely to do with the fact that there is some assembly of particles that have to come together, and that's – there may be a concentration-dependent effect because it is a notable difference. I don't think we have a full understanding of what the phenomena is, but it may have to do with the fact that the S-antigens come together to form particles with other proteins. Bob, do you want to add anything on this?

[Bob Brown:]

Sure, Steve. Doug's touched on significant aspect to the HBV virology. That's a significant component. I do believe that there is a GalXC performance aspect to it as well. And of course, our target site selection has had big impact on the magnitude of effect. We think we've landed in a particularly good area of the viral genome.

[Stephen Willey:]

Okay. That's helpful. And maybe just a housekeeping question. Have you guys determined how the upfront payment is going to be treated just from an accounting perspective? Should we expect this is going to be amortized over some period of time?

[Jack Green:]

Yes. I think you should assume that it will be amortized over some period of time, but we have not completed the – the analysis is still ongoing. So we will obviously report that as part of our fourth quarter results.

[Stephen Willey:]

Understood, thanks for taking the questions.

[Jack Green:]

Thanks Steve.

[Operator:]

Thank you. And our next question comes from Ed Arce with H.C. Wainwright. Your line is now open.

[Ed Arce:]

Great. Thanks for taking my questions. And congratulations on the deal announced this morning. So a couple, as you had mentioned, Doug, the primary internal program on PH, it looks like it's gearing up for the first quarter. And you did mention 16 patients as part of this protocol with both PH1 and PH2, which obviously affords you the opportunity to measure the LDHA levels. Wondering if this is really more of our Phase 1/2 program because of that. And would that be able to accelerate development into a more proof-of-concept or pivotal program given the orphan nature of this indication?

[Douglas Fambrough:]

Thanks for the question, Ed. To clarify, actually we're not going to directly measure LDHA levels. That is a cytoplasmic enzyme, which would require biopsies in order to measure the enzyme levels, and we are not doing biopsies as part of the program and may not do biopsies at any point during the program for development. However, we will be able to measure the levels of plasma and urinary metabolic biomarkers that are relevant to the pathway and our inhibition of LDHA and its effect on the pathway. Specifically, and most importantly, we'll be able to look at oxalate levels. Now in our discussions with the FDA so far, they – we believe that there is a fairly clear path to achieving an agreement that reduction in oxalate levels could be the approvable endpoint. And as much as we will be able to assess this approvable endpoint, urinary and plasma oxalate levels, during the patient dosing in the Phase 1 trial, that does make it, in a sense, like a Phase 1/2 trial, and that will get a look at the – what we believe will be the approvable endpoint. And so it should set us up effectively for later-stage studies. As you pointed out, as an orphan indication, which has a high unmet medical need, there is the potential of moving very rapidly after our initial Phase 1 studies into more advanced studies that could potentially support registrations with the FDA and other authorities. We have not laid out publicly our development strategy. And I think later in 2018, as data from the Phase 1 trial is coming out, we'll be in a position to talk about what we believe the proper path for a thorough and as rapid as possible development pathway from there, what that would look like.

[Ed Arce:]

Okay, great. One other question, just as we look at the other programs and particularly your second undisclosed program, and you had mentioned some key criteria that you consider when deciding on a particular target, gene target, and you had mentioned strong therapeutic hypothesis as one of several of them. And I was wondering if you could help us remind us what those are go through that list again.

[Douglas Fambrough:]

Sure. I'm happy to do that. I think I'll start by sort of taking a step to the general and saying that our pipeline prioritization is really based on a philosophy that a company like ours needs to view its clinical development slots or programs as a very precious thing, and they're only going to be a limited number of them. And we need to maximize their probability of success and our ability to execute on them efficiently, and I mean efficient in terms of time to make them rapid and efficient in terms of capital to be able to conduct them with a relatively small amount of capital for a drug development program. So we have tried to set up by prioritization of our pipeline that is based on maximizing probability of success and efficiency. So we look for indications where the ideology of the disease is very clear, and that – it is most clear in infectious diseases and in genetic diseases, which are two classes of diseases that are generally monocausal. There's one thing that's wrong and you know exactly what it is. In those cases, you also have a definitive diagnostic that allows you to see exactly what the patient – who it is, a genetic test in the case of genetic diseases, and similarly, a test for the pathogen in infectious diseases. Many of the genetic diseases are very severe, and so there is a high medical need. And many of them are untreated currently, so there's a high unmet medical need. So you can see the various elements of our prioritization coming through. We want a well-defined patient population with high unmet medical disease, a mechanism of action that we believe we understand well. There are a few more. We want a good competitive positioning. Part of that is unmet medical need, but we do want to be certainly either best in class or first in class or ideally both associated with an indication. And then finally, to make the efficiency of development as great as possible, we have looked for indications where there is a biomarker that will allow us to assess the activity of our drug early in clinical development. In the case of primary hyperoxaluria, that biomarker is the oxalate itself. In the case of our second undisclosed rare disease, obviously I'm not going to say what it is, but there is similarly a biomarker that is directly related to both the mechanism of action of our drug candidate and the disease ideology. So I hope that answers your question. I didn't want to just reread what I read earlier from my script in this call but give you a little bit more context for how we think about prioritizing programs and why we do it that way.

[Ed Arce:]

No, great. That's perfect, Doug. And then perhaps just one last one on modeling this deal with BI. If you could, perhaps, give us at least qualitatively the likelihood of some of the remaining $191 million of development milestones. And how likely is that – some of that to occur, perhaps next year or the year after?

[Douglas Fambrough:]

Well, we haven't broken down what the milestones are related to, going forward. But to some extent, it's very logical and follows industry standards.This is a discovery-stage collaboration, so there is a need to – the first success milestone, if you will, under the collaboration will be to select a clinical candidate. And after that, Boehringer will be responsible for development, and we'll – after IND-enabling studies, make the regulatory filings and then progress to the clinic. And while we haven't broke down when the milestones – what the milestones are exactly or when they will occur, I'd say they're fairly standard for collaborations of this type. The collaboration involves a target that we have been working on for sometime and that Boehringer had an interest in for some time, and we have molecules within Dicerna today that are excellent GalXC-based inhibitors of the target gene. It is possible that we already have the clinical candidate made within our company, and there will be a process of choosing it. However, we will be doing additional screening for potentially even better-performing GalXC-based molecules. I say that just to indicate that we're not starting from scratch as we work towards the first milestone of clinical candidate selection, but that we're already fairly far down the path. Certainly, for Dicerna's purposes, we find that from start to clinical candidate declaration is something we can do in a three quarter type time frame.

[Ed Arce:]

Great, thanks again. Appreciate it.

[Operator:]

[Operator Instructions] Our next question comes from Paul Matteis with Leerink. Your line is now open.

[Paul Matteis:]

Great, thanks a lot and congrats on the deal you announced this morning. Doug, I have a few questions for you on the PH study. The first is can you clarify something from the press release or a couple of things? One of them refers to the study you described, the single blind. I'm wondering if you could talk about why single blind and why not double bind. And then, two, it says that patients can receive up to five different doses or I guess – yes, five different dose levels. And – but the study you described is a single-ascending dose study. So maybe can you just talk about the degree to which the study can allow you to evaluate multi-dose PK-PD as well? And I have one follow-up.

[Douglas Fambrough:]

Sure. I'm going to pass to Ralf to address these questions.

[Ralf Rosskamp:]

Paul, this is Ralf. It's a single-blind study in a sense that the pharmacist will prepare the drug for injection and the study gene as well as the sponsor and the normal healthy volunteer part will not know which the placebo will be and what the drug will be. And we've done this for the purpose because we had regular safety reviews where we're going to look at the safety of the first patients – first healthy volunteers, and then we're going to decide whether we can dose-escalate or not. So we call this a single blind because not everybody is blinded. And the reason why it's single blind because we don't have a real placebo. The color of the drug product is a little different than the saline solution. Your question – your second question with dose level. So it's – a single dose ascending means you start off with one dose. And then after you assess safety and tolerability of this dose, then you go to the second to the third and to the fourth dose. So we start off with a very, very low dose, and then we make our way upwards toward the highest dose. And this runs in parallel after the healthy volunteers have been tolerated. This dose – the protocol allows us to then go immediately into the patients with the same dose, which has been tolerated at this time in the healthy volunteers. So it's – both cohorts are running in parallel.

[Paul Matteis:]

And how long is that period between doses?

[Ralf Rosskamp:]

Pardon me?

[Paul Matteis:]

No. That's helpful. How long is the period between doses in the study? And does this allow you to evaluate multi-dose PK-PD for potentially a future pivotal study?

[Ralf Rosskamp:]

That's a single-dose study. But we will follow up, both the healthy volunteers and the patients, until their urinary oxalates comes back to within 80% of baseline. So we will have a good understanding going into our next study what the pharmacodynamic duration of action of our drug will be.

[Paul Matteis:]

Okay. I'm sorry. I just want to clarify. So a patient gets a single dose and then you evaluate safety, and then the patient gets another dose. Is that right? Or is that – or is a given patient only getting one dose in this study?

[Ralf Rosskamp:]

No. We dose within one cohort. So I give you an example, so we have a cohort. In the healthy volunteers, we have cohorts of five. So the first two subjects, one of them will get placebo. The other will get the drug. After all – after this has been deemed safe and tolerable, then we go to the next cohort. The next cohort will receive the higher dose. So the dose escalation is not – these are different subjects and different things and different cohorts at different dose levels.

[Douglas Fambrough:]

So it's not multi-dose for any particular...

[Paul Matteis:]

Yes. No. I understand. The way we were reading it in the press release was – we were a bit confused. Okay. I understand. That's really helpful. And then just one other question. Starting in the beginning of next year and you're expecting data later next year, are you guys assuming that a decent number of patients from your natural history observational study are going to roll over into this?

[Ralf Rosskamp:]

Yes. We do, and we hope so. And that was one of the reasons why we initiated the PHYOS study is to identify patients at certain sites, and we had conversations with some of the investigators in our study who will actually have those patients who participated in our natural observation study then participating in the study.

[Paul Matteis:]

All right. Okay, thanks very much, guys.

[Ralf Rosskamp:]

Thank you, Paul.

[Operator:]

And I'm showing no further questions in queue. I would now like to turn the call back over to Dr. Fambrough for any further closing remarks.

[Douglas Fambrough:]

I want to thank everyone for listening today and joining in, and we look forward to addressing you again next quarter.

[Operator:]

Thank you, ladies and gentlemen. Thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.