Dicerna Pharmaceuticals, Inc.
Q3 2014 Earnings Call Transcript

Published: 6 Nov 2014

[Operator:]

Good day, ladies and gentlemen, and welcome to the Dicerna Pharmaceuticals Q3 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded. I'd now like to introduce your host for today's conference, Ms. Yolanda Taylor. Ma'am, you may begin.

[Yolanda Taylor:]

Good morning, and welcome to Dicerna's conference call to discuss our 2014 third quarter financial and operational results. For anyone who has not had the chance to review our results, we issued a press release this morning outlining today's announcement, which is available under the Investor tab on our Web site at www.dicerna.com. You can also listen to this conference call via webcast on our Web site, and it will be archived there for 30 days beginning approximately two hours after the call is completed. I'd like to remind listeners that we'll make forward-looking statements on today's call, therefore, I'd like to remind you that today's discussion will include statements about 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 our 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 even if our views change. Now, I'll turn over the call over to Dr. Douglas Fambrough, Dicerna's Chief Executive Officer. Doug Fambrough Thank you, Yolanda. Good morning, and thanks to all of you who have dialed into the call today. Joining me to present on the call are Jim Dentzer, our Chief Financial Officer; and Pankaj Bhargava, our Chief Medical Officer. Also in the room are Bob Brown, our Chief Scientific Officer; and Jim Weissman, our Chief Business Officer to help answer questions as needed. We're pleased to be able to provide you with this third quarter update, now our third reported quarter as a public company. Dicerna continues to make positive progress in line with the guidance we've given, and with the development timelines we've laid out for our development programs for two key product candidates; DCR-PH1, our program for Primary Hyperoxaluria Type 1 or PH1, which is a rare inherited liver metabolic disorder; and DCR-MYC, our oncology program targeting the MYC oncogene. As a reminder, Dicerna is a biopharmaceutical company focused on treating specific indications in rare genetic diseases and oncology with a unique approach to RNA interference or RNAi, using Dicerna's proprietary RNAi molecules, known as Dicer Substrates or DsiRNAs. They're termed Dicer Substrates because they're processed by the Dicer enzyme, the initiation point for RNAi in the human cell cytoplasm. We're pursuing targets that have historically been difficult to inhibit using conventional pharmaceutical approaches, but are accessible via RNAi, and where connections between those targets and diseases are well understood and documented. On DCR-PH1, we continue to expect to initiate a Phase 1 trial of DCR-PH1 in PH1, in 2015. And by year end 2015, provide initial proof-of-concept data in patients for the key clinical parameter of urinary oxalate levels, as well as for other disease relevant biomarkers. PH1 is a rare disease, where an error in liver metabolism causes patients to have high levels of oxalate in the urine, resulting in progressive and severe damage to the kidneys. Existing disease management practices for PH1 may slow, but they do not stop disease progression. And most patients eventually experience complete kidney failure. Aside from dual liver-kidney transplant, there are no FDA approved therapies for most patients with PH1. Two aspects of PH1 make it particularly attractive as a program for Dicerna. First, PH1 is a natural application of Dicerna's technology, based on the diseases' clear genetic basis and the fact that the disease metabolism seems to occur exclusively or nearly exclusively in the liver. In addition, PH1 presents a clear and easily assayed biomarker, urinary oxalate level, a marker that is a direct readout of the mechanism of pathology in PH1. Second, we've demonstrated a significant beneficial impact on this disease biomarker in the main animal model of Primary Hyperoxaluria Type 1. In this model, mice have been genetically engineered to carry the same metabolic defect found in PH1 patients. As with patients, these mice have elevated levels of urinary oxalate roughly three times the normal background levels. That level of elevation is similar to the elevated levels commonly observed in patients. Using our DsiRNA technology, targeting the HAO1 gene in these mice, we've shown reductions in urinary oxalate levels to background levels or near background levels. We believe that similar results, if observed in PH1 patients would have a significant beneficial impact on disease progression. During Q3, we presented additional preclinical data for our PH1 program at the Oligonucleotide Therapeutics Society Conference in San Diego. Specifically, we presented long-term tolerability data in mice after four months of treatment, as well as presenting duration of effect data, showing that 30 days after a single dose of DCR-PH1 we observed both 75% reduction of HAO1 gene expression and suppressed levels of urinary oxalate. While we're not in a position to predict an effective dosing interval in patients, we find these results to be encouraging. At the same conference, we noted that our success in PH1 has recently attracted a fast-follower program from an RNAi competitor. The data they presented further validates the approach we have pioneered for PH1. We believe our development timeline supports both a first in patients and a first-to-market advantage for our DCR-PH1 product candidate for patients in this well-organized disease community. I'd now like to turn the call over to Dr. Pankaj Bhargava, our Chief Medical Officer, for an update on our second drug candidate.

[Pankaj Bhargava:]

Great. Thank you, Doug. Our second candidate, DCR-MYC, which is our announced oncology candidate targeting the MYC oncogene continues to be on track for a top line readout from our Phase 1 trial in the second half of 2015. DCR-MYC entered Phase 1 clinical testing in April of this year in patients with solid tumors, multiple myeloma or lymphoma. This Phase 1 trial will affect safety and tolerability, and will identify the maximum tolerated dose, pharmacokinetic profile, pharmacodynamic effects and anti-tumor activity of DCR-MYC. We're pleased with the progress of the trial so far, including our patient enrollment rate. We have escalated through several dose levels, and we're continuing with the dose escalation process. We have not yet identified a maximum tolerated dose. Dicerna selected MYC as a high priority target to silence with our DsiRNA technology, because of it's oncogene that is frequently amplified or otherwise up regulated in a wide variety of tumor types. Because MYC is a protein which lack a good small molecule binding site, it has been a challenging target for small molecule therapy. It has been an elusive target for drug developers for decades. We believe our Dicer Substrate RNAi platform overcomes the limitations of these small molecules, because we don't target a protein, we target the RNA transcript that creates it. Our preclinical data for DCR-MYC demonstrates specific and significant MYC transcript level reduction that is target knockdown in multiple tumor-bearing mouse models. We expect data from our first clinical study by the end of 2015 that shows whether we can replicate this success in patients. We expect to initiate by the end of this year a second Phase I study of DCR-MYC in patients with advanced Hepatocellular Carcinoma or HCC. We selected HCC as an initial focus indication for DCR-MYC both due to the observation that the MYC gene is frequently amplified in HCC patients, and due to the commercial and competitive profile of the HCC market. HCC is one of the most prevalent cancers worldwide. Yet, there is currently only one FDA approved therapy for HCC. We'll have sites for the HCC Phase I trial both in the U.S. and in Asia due to the high prevalence of this disease in the Asian population. Now, I will turn over the call to our CFO, Jim Dentzer, for an update on our financial progress. Jim?

[Jim Dentzer:]

Thank you, Pankaj. As Doug mentioned, and as many of you had seen, we filed our 10-Q today. There is a great deal of detail contained in that document. I'd like to focus on the main financial metrics that we believe are important to us, and to use when evaluating the efficiency of our business. In the third quarter of 2014, Dicerna had a net loss of a $11.2 million compared to a net loss of $4.2 million for the same period in 2013. Dicerna had research and development expenses of $7.5 million for the third quarter of 2014 compared to $2.4 million for the same period in 2013. This increase was due primarily to the initiation of the clinical trial related to DCR-MYC, and an increase in research activities related to DCR-PH1, as well as non-employee stock-based compensation of $0.7 million, and an increase in expenses related to discovery and early development of future programs. General and administrative expenses for the third quarter 2014 totaled $3.7 million compared to $1.3 million for the same period in 2013. This increase was primarily from stock-based compensation, and an increase in headcount as well as the transition and increased cost associated with operating as a public company. As of September 30, 2014, the company had a $111.9 million in cash and cash equivalents and held-to-maturity investments as compared to $46.6 million in cash and cash equivalents and held-to-maturity investments as of December 31, 2013. In February 2014, the company completed its initial public offering of common stock, raising net proceeds of approximately $92.7 million. Based on our current cash position and operating plan, the company expects it has sufficient cash to fund operations through the end of 2016. This estimate assumes no additional funding from new partnership agreements, and no new debt or equity financing events. More detailed financial information and analysis may be found in the company's quarterly report on form 10-Q filed today with the SEC. With that, I'll turn the call back to the operator, so that we can take questions.

[Operator:]

Thank you. (Operator Instructions) Our first question comes from the line of Michael Schmidt from Leerink. Your line is open.

[Michael Schmidt:]

Hey, good morning. Thanks for taking my question. I guess for the PH1 program, I was wondering as you mentioned the 75% knockdown in mice, do you know what knockdown percentage you need in humans potentially to achieve a therapeutic benefit? Does it have to be in our 90% plus or is there lower knockdown sufficient to achieve any effect on that metabolic pathway? Doug Fambrough Michael, thanks for the question, and thanks for dialing in. The first thing I noticed that 75% knockdown is the percent knockdown at 30 days, but to your question about the urinary oxalate effect and it's relationship to gene knockdown, that is something that is under active exploration. And I wouldn't say we have a clearly defined relationship at this point. I'd note that once you're down to levels on the order of 50% knockdown, you do see a return to the urinary oxalate levels that one associates with no knockdown at all. That's really not surprising. Most enzymes are not haploinsufficient, 50% of activity tends to be adequate for full metabolic effect.

[Michael Schmidt:]

Right, okay. Doug Fambrough At 75% knockdown, there is still significant level of urinary oxalate reduction compared to disease levels, but it's not back down at baseline. So I think we can bracket 75% to 90% as being, somewhere in between there, as being a dose level where you really want to be to achieve the adequate levels of urinary oxalate reductions in patients. Now, whether we're going to end up targeting, saying, higher than 80% knockdown or 85% or 75% remains to be seen, and frankly, when we get into humans, because HAO1 is peroxisomal enzyme in hepatocytes, we could only assess knockdown from a liver biopsy. We're not proposing to subject the patients to liver biopsy. So we'll only be measuring urinary oxalate levels and other easily accessed biomarkers in patients, and won't know what level of HAO1 gene knockdown we see in patients. In any event, I think the mouse data we presented at the OTS conference is consistent with the projection of once-monthly dosing of DCR-PH1 therapeutic; assuming the translation from mice to patients is consistent with what has been observed with other programs in the field.

[Michael Schmidt:]

Yes, okay. And on the MYC program, can you just remind me, so the Phase 1 study in all-comers that's [setting] (ph) the data that you will have in the second half of 2015. Will that be the dose escalation, or does that include some potentially some expansion cohorts in there? And then the second part of the question is for the HCC study that you will launch later this year, would you have to redo a dose escalation and in that particular indication, or can you use some information that you gained from the first study to start patients that are potentially the therapeutic dose in that study?

[Pankaj Bhargava:]

Yes. So, Michael thanks for your question. So, for the all-comer trial, by the end of 2015, we'll have data through our dose escalation cohorts. We'll have safety, tolerability data. We'll have pharmacokinetic data, and we also expect to have preliminary efficacy data coming from that trial. It's the all-comers trials, so it's obviously going to be a mixed bag of patients, but we'll have data coming out, including data from metabolic imaging in these patients that we feel is important as a one potential pharmacodynamics market for MYC. Regarding the HCC study, yes, we are going to use the information that we have gathered in our learnings from the all-comers trial to inform our dose escalation steps in the HCC study. So we'll have some dose escalations steps in the HCC trials, but we hope to optimize that phase of the study based on information we learn from the all-comers, and then once we're through the dose escalation steps in the HCC study, then we go into a Phase 2 single arm portion of the study to look at the antineoplastic activity. Doug Fambrough Thank you, Pankaj; just to add one additional element to answer your question, Michael. We don't know what MTD is going to be. So we don't know with any certainty when the dose escalation part of the Phase 1 trial will finish and the expansion cohort will begin. It's reasonable to expect based on precedence in lipid nanoparticles in oncology that we'd be in the expansion cohort in probably by the middle of 2015, but it's not possible for us to really guide that. That's just a reasonable expectation based on past observation.

[Michael Schmidt:]

Okay, great. Thank you, and congrats on the progress. Doug Fambrough Thank you.

[Operator:]

Thank you. Our next question comes from the line of Stephen Willey of Stifel. Your line is open.

[Unidentified Analyst:]

Hi, this is (indiscernible) on for Steve. Thanks for taking my questions. So I was wondering, with competitors now seemingly taking a fast-follow approach to target selection, just wondering if that impacts in the manner in which you decide to reveal new candidates? Doug Fambrough That's an insightful question. And I think it does impact our willingness to share with the broader community what programs we're working on prior to [substrate] (ph) closure being absolutely necessary. If competitors are going to be looking for us for product candidate ideas, it does behoove us to protect our business as much as we can.

[Unidentified Analyst:]

Okay. Second question, do you have any updates from the KRAS program? Do you have any of updates from Kyowa Hakko Kirin on that one? Thank you. Doug Fambrough We do not have a material update on the KRAS program. We recently visited our colleagues at Kyowa Hakko Kirin on a trip to Tokyo, and they continue to assure us that this is a priority program for Kyowa Hakko Kirin, and they are proceeding towards clinical development, but they have not guided us to the initiation of actual IND filing or clinical development.

[Unidentified Analyst:]

Okay. Can we assume the program will begin in 2015, sometime 2015, by mid-2015? Doug Fambrough I don't think it's possible to make a timeline assumption right now.

[Unidentified Analyst:]

Okay, thank you.

[Operator:]

Thank you. (Operator Instructions) Our next question comes from the line of Chris Raymond from Robert W. Baird. Your line is open, sir.

[Laura Chico:]

Good morning. This is Laura Chico in for Chris Raymond today. Congrats on the progress. I might switch gears here a little bit and ask the question about intellectual property. I think that right now the number one question we're getting from investors is kind of since Alnylam had a recent patent issuance. How are you thinking about the competitive landscape from that regard and your path forward for your program? Doug Fambrough Sure, Laura. Thanks for dialing in and asking the question. I think that a little historical perspective is useful in answering this question. For the last decade, actually, slightly more than a decade, there's been a clear distinction in the IP round between shorter RNAi duplexes, which do not require Dicer processing and longer duplexes which do require Dicer processing. This is a distinction that flows very naturally out of the patent specifications that underlie the so-called Tuschl estate covering shorter RNAi molecules. And that estate we believe will expire in 2021. And the Rossi patent family, where Dicerna is the primary licensee, which covers the longer duplexes in which, we believe will expire in 2027, the recent patent issuances announced by Alnylam derived from the Tuschl estate covering the shorter molecules. And these issuances run contrary to prior interpretations of the underlying specification. It's our belief that these results from an overly aggressive patent prosecution strategy and for a variety of reasons that these claims would fail to withstand legal scrutiny. We have several opinions to this effect, and we're prepared to defend that decision as needed. In any event, these issuances cover only a fraction of Dicerna's DsiRNA technology portfolio. We do not see a reason to alter any of our development strategies in light of these issuances, and we do not expect these issuances to have a major effect on our business in any scenario.

[Laura Chico:]

Very helpful. Thanks, Doug.

[Operator:]

Thank you. And at this time, I'm showing no further questions. I'd now like to turn the call back to management for closing remarks. Doug Fambrough Well, I want to thank everyone for dialing in today, and following the progress of Dicerna. It is an exciting time for us. We laid out a path of development milestones when we went public that will culminate on what we hope are very successful proof-of-concept data announcements in 2015. And we're reiterating our guidance that we're on the track that we indicated we'd be at that time. So with that, I want to thank you all for your attention.

[Operator:]

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