4D Molecular Therapeutics, Inc. (FDMT) Earnings Call Transcript & Summary

I'm Tazeen Ahmad. I'm one of the Senior SMID biotech analysts here at Bank of America. It's my pleasure to have our next presenting company management with us, specifically 4D Molecular Therapeutics. With me for the next 30 minutes are a couple of members from the management team, Fred Kamal as well as CEO, David Kirn. So David, I think while we're getting the slides situated, I think it's probably good for us to get an intro with the company, if you could for a couple of minutes, and then we can go into more details either on the slides or on Q&A.

Absolutely. Well, thanks for having us today, and good to see you all. At 4D Molecular Therapeutics, we're harnessing the power of directed evolution, which is a Nobel Prize-winning technology to invent customized AAV vectors for any tissue in the body, and we think this translates into best-in-class products across multiple therapeutic areas. So we're very much a platform and a product company. We have a robust clinical stage pipeline with 5 products in the clinic, 3 of which are in ophthalmology, 1 in lung for cystic fibrosis and then 1 in cardiac. So it looks like the slides are teed up. So if you like, you can tap into that and just spend a few minutes on this and then move on to Q&A. And it's great to have Fred Kamal, our President, and COO here today as well. So I guess I don't actually have to stand up. So key takeaways on our recent 4D-150 data for wet AMD showed that very positive interim Phase I data from the PRISM clinical trial. This is a routine, simple, outpatient intravitreal injection, identical injection procedure to what's done literally 5,000 to 10,000 times a day in this country in outpatient clinics. 4D-150 was well tolerated with no significant safety signals or inflammation, and there was a high degree of clinical activity in a very high need anti-VEGF resistant population that we were treating. So we're thrilled with the efficacy that we saw. And the Phase II enrollment is well ahead of schedule and will be completed in Q3 this year. The lead product in our lung franchise is 4D-710 for cystic fibrosis lung disease. We have upcoming interim Phase I data from the AEROW Phase I/II trial coming up at the European Cystic Fibrosis Conference in June. So we're really excited to share that as well as a partial update on what we've shown already at ASGCT with our lead PI there. This is an aerosolized delivery product using a routine aerosolization process with an approved nebulizer device, which gives beautiful distribution of particles throughout the lung. And today, at the first dose level, we had on the order of 40% of the airway cells were transduced and expressing, which is really just -- really a landmark for the field. And we're looking forward to further clinical updates with safety and clinical activity later this quarter. So this is the pipeline I told you about ophthalmology. Each of these leverages a vector that we invented at 4D using direct evolution. So we have an intravitreal vector R100 for our [ optho ] program, including all 3 of our large market opportunities across wet AMD, DME and geographic atrophy. We have a lung program using an aerosol liver vector A101 for cystic fibrosis lung disease for patients with and without modulator therapy. And then alpha-1 antitrypsin deficiency is another target of virus with 4D-725 in preclinical development. And then 4D-310 leverages a cardiac-targeted vector for low-dose IV delivery to the heart in patients with Fabry disease. I'm going to skip over this other than to say that we have an incredible team and a really efficient product design and development engine. So I think 4D can go from the concept of a product, the design of a product all the way to clinical proof of concept, seamlessly, faster, better quality than I think anybody else in the genetic medicine space. And I think to date, the value of our novel vectors has proven out in all 3 therapeutic areas. This is a PRISM data introduction, 15 patients, the high-level summary is that we treated very advanced high-need patients. There was no inflammation of note, which is never before have been shown with an intravitreal gene therapy and there was a very high degree of activity in these high-need patients, 4 out of 4 patients in the high dose were injection-free at 9 months. There was also a meaningful improvement in the central subfield thickness which is an excellent biomarker for the disease. And then at lower doses, we still saw significant reductions in the need for anti-VEGF supplemental injections. We saw a 75% reduction on study compared to before study and 7 of those 10 patients actually had either 0 or 1 injection over the course of 6 months. And as I said, Phase II enrollment is well ahead of the expected cadence and should be done -- should be completed in Q3. This is a highly differentiated product versus aflibercept, which gives these kind of peaks and valleys, peaks and valleys and injection into vitreous with diffusion into the retina. And most patients are noncompliant and therefore, are underdosed and lose vision over time. There are subretinal approaches, which require quite a delicate surgery or suprachoroidal approaches that are being explored, which are novel, but still unclear proof of concept there. There's no doubt that intravitreal injection is the way to go in this disease, if you can do it, and 4D-150 is administered by intravitreal injection, is able to target 4 different VEGF family members. We think it's the only product that can do that. And we get high-level expression right in the macular right where it's needed. So we don't need that diffusion from the vitreous into the macular. We're actually producing it 24 hours a day, 7 days a week in the macula, which should result in better patient outcomes. Let's look at the safety data. So this chart actually shows in green every single one of the evaluations we did in the anterior and posterior chamber of the eye on the study looking for information, you can see out of 668 evaluations, we do not have a single episode of a grade 1 or higher inflammation. So Again, this is a game changer for this field that have a safe intravitreal injection. Next slide. This is data showing the actual -- on the left, the injections of anti-VEGF therapies prior to study, and then 12 months prior to coming on study. And on the right, what patients received afterwards. Anywhere where you see an open circle, it means a patient was evaluated and did not require an injection. And you can see, again, a high degree of activity at 3E10 out at 9 months. And then at the lower doses, you can see, again, those 7 patients who had 0 to 1 injections through 6 months. So very promising activity in high-need patients. This shows the dose response. So we were designed the study to try to find a dose response. If they really likes to see a dose response in your drug development to know that you're in the right dose range. And in fact, here, we did see a nice dose response. If you look at that number of mean annualized anti-VEGF injection rates going from 100% suppression to 75%, both highly active, but allowing us to show a dose response. And when you look at even the central subfield thickness on OCT as a biomarker, again, we see a minus 74 versus plus 21.So both dose ranges are active, but we did show a nice dose response, which is our goal. PRISM, again, will wrap up in Q3 for enrollment. We expect data release from this study in the first half of next year, and we will be discussing Phase III with FDA in Q4 this year. And then SPECTRA is our study for DME. This is a randomized Phase II study with a brief dose confirmation phase. And again, that we have an open IND for this. We believe we're the only gene therapy company in DME now, and we expect to treat the first patient there in Q3 and have data readouts in '24. Cystic fibrosis, I think we just probably have one or two slides here. This is an aerosol-delivered product, especially the CFTR transgene. You can see in the upper left, the problem with standard conventional vectors is they can't get through that mucus barrier to transduce the lung airways, whereas A101 was evolved as a customized vector to get through the mucus barrier to be resistant to antibodies in that barrier and give widespread transduction, which it did in nonhuman primates, which allowed us to go into humans in the Phase I/II AEROW study. This is a study designed for 2 different dose levels, standard 3x3 dose escalation followed by dose expansion. And importantly, at approximately day 28, generally between week 4 and week 8, we do, do a bronchoscopy and do extensive biopsies bilaterally and multiple lobes as well as airway brushings to look at gene expression in the lung of these patients. We've completed enrollment in Cohort 1, and we shared this data at the Cystic Fibrosis North American Meeting in the last fall in November, showing widespread transduction and gene expression lungs of these patients. This has never before been shown with any sort of gene therapy in the lungs let alone in cystic fibrosis patients who have thickened mucus and a higher barrier to get through to transduce. And you can see on the right that's the bar graph showing percent of cells expressing from patient-to-patient and lung-to-lung, just showing how consistent this is. And we believe the consistency in gene expression throughout the lungs is really a function not only of a great vector but also of this routine nebulization device that we use, which gives beautiful particle distribution throughout the airways and really drops the vector exactly where we want it throughout the airways. So current cash position after we were thrilled to have just closed a public offering where we raised a gross of $138 million that was upsized and Goldman exercise the greenshoe on that. And so we're sitting at $331 million in cash. We have cash out into the first half of '26, which gives us plenty of time to prosecute the 4D-150 program of wet AMD and DME, the 4D-175 in GA and the 4D-710 for cystic fibrosis lung disease. So with that, I think we're done. And now we look forward to your questions.

Excellent. Yes. So there's a lot going on at this company. All of the indications that you talked about are potential blockbuster indication. So it's been our view, and continues to be our view, of course, that your stock is undervalued. So okay, so maybe let's talk about wet AMD. So I think part of the -- I don't want to call it confusion, but part of the questions that we were getting initially and maybe because the first data update that you provided in the fall was so impressive that maybe people thought, hey, maybe the lower doses would be just as effective. But clearly, this was a dose exploration study. And if you didn't see efficacy changing at the different doses that might actually be a point of a problem or concern. So you actually answered the question of, yes, there is a dose response. Yes, you do actually see efficacy at the lower dose. So I guess in your conversations that you've had with investors since the initial data set came out, how do you think people have been able to kind of understand what the goal of that particular readout was? And do you still think that there's a misinterpretation of what was supposed to happen?

Yes. I think some of the initial misinterpretation has been corrected. I think people get it now, and it's clear when we talk to potential investors. We did this round that there was a lot of conviction in what we were seeing. So I think sophisticated investors got it, independent of what happened acutely with day traders. We do think it's important in drug development to show a dose response. FDA wants to see it. And in fact, for us, to us, this increases our conviction of the activity of the agent. If you saw no dose response, you could say, is this something funny about the way we're assessing for need for injections or something. So in a way, it's an internal control that gives you better conviction at both dose levels. And certainly sets us up for a really nice Phase II and then eventual Phase III where we can look at 2 different dose levels and give FDA that dose ranging that they want. So no, I think we're there now, but to be fair, I think, to some of the investors and traders, it was a lot. It was 15 patients, 3 different dose levels. It was CST. It was BCVA. It was supplemental injections. So to be fair, it was a lot. And we did have, as any Phase I study has. We had some very advanced patients who, frankly, were not evaluable for efficacy and some who -- one of which had a massive cataract right in the visual field that really weren't evaluable. But I think some -- in the acute timing around the data release, those were misinterpreters of what's going on there. So I think we've been able to correct that, and I think we're in great shape now.

Okay. So the next data set is going to be an interim look in the first half of '24. So maybe it will help to kind of set expectations now on what you're going to show, if you're going to show all these same data points and maybe give people a certain range of expectation on what to expect for these data points. So I guess my first question to you is, should we expect to see the same level of data at this first interim look of that study as we did at this most recent data dump that you did?

Yes. I think the way we think about the enrollment rate is by end of this year, we'll have 6 to 12 months follow-up on at least 75% of the patients in the Phase II, which is a pretty robust data set. So that's what we're starting at. We certainly would, again, look at -- these are still very advanced patients. These are patients who are not newly diagnosed, who've had a couple of injections and where you're going to see a BCVA increase. This is -- these are patients still just like Phase I where they've had the disease for several years, where there are high need of anti-VEGF anywhere from 6 to 13 injections in the preceding 12 months. So we would hope to see again a significant reduction in supplemental injections. We'd like to see a dose response. We'd love to confirm the incredible safety we've seen to date. And then we will also share individual patient data where we can on CST and BCVA. But I think the number of patients here will be even more robust and will give us greater certainty of the sample size necessary for Phase III.

How are you as a team thinking about just safety because I think that seems to be a recurring theme, not because of anything that was shown in your program, but because of events that occurred with other gene therapy companies focused on the eye that had, had safety observations come as a surprise to people. So is 12 months enough time, do you think to flush out a proper safety profile for wet AMD gene therapy?

Yes. And the reason I say that is because there have been late toxicities in certain programs that had chronic inflammation, [ ad valorem ] pops to mind, where they -- it was the 7, 8, 9 months. But that didn't pop up out of the blue. They knew -- well, it was clear to investigators that there was a lot of inflammation, especially in the front of the eye. So there were predictive factors early to predict that. It wasn't like patients were totally fine and then it popped up with a toxicity later. In fact, I think in gene therapy, I'm not aware of any studies ever showing kind of late toxicity where you have some signal early. So we think that -- we're good drug developers. We'll get more data, we'll get more follow-up. But I think it's very, very unlikely you'd see some sort of new toxicity pop up at this point.

And I think you alluded to this, but the profile of the patients that are in Phase II, are they similar to what you had in Phase I?

They are in terms of being heavy need patients because, again, early in development, we really want to treat the hardest patients because the risk benefit is right for early development. And we want to show that there's clear activity here. We did shift up the BCVA, which is typically done when you move to Phase II and Phase III. So we brought it up from 25 to, I think, 34. And then the higher [ band ] went from something like 78 into the 83 range. So -- and that's very standard. But otherwise, we're still treating advanced patients who require a lot of anti-VEGF. We're not going for the easy patients just yet. We will eventually get there and broaden this out to early-stage patients as well.

And what's your view about needing to completely eliminate injections for patients who have already received your gene therapy, reducing their use of anti-VEGFs versus completely eliminating it, does it matter?

Yes. I think you want to reduce the burden on the patients, for sure, right? This is one benefit of gene therapy is that these are older patients. Compliance is always an issue with older patients and wanting to get the injection, needing to get the injection. So I think that's one area. And percentage-wise, about what really becomes a product, whether it's 50% reduction, 75% reduction. I think any reduction in patient burden is a promising drug. So -- and since it's expressed in aflibercept, if a patient also needs to get an injection and they will get an injection. So once you commercialize the product, you have to imagine that it doesn't work for every single person in the population. So on the patients that would need further injections, they could get further injection. But we believe that this product is going to be extremely helpful with lowering that burden for the patients.

Okay. Now obviously, we're just now waiting for Phase II interim data. But if we were to jump ahead a few steps, I think another question people often have when talking about gene therapy for the eye is how would that end up being priced because most of -- of all of the experience that people have had right now with gene therapies is for ultra-rare indications. And those price points to a lot of people seem a little bit scary because they're very high. But this is that rare disease. This is going to be heavily Medicare. What is your very early market data research telling you about that sort of elasticity of demand?

Yes. Well, Fred can speak to the pricing. I think the demand is very, very high from what we can see. I mean, the enrollment rate at these sites is off the charts. And I think that's a reflection of patients wanting something like this and physicians having -- they're already overburdened with these injections. They have more than enough injections with the GA approvals, they are going to have even more. And so they told us like, if you could do a [ depot ] injection like this and then follow up patients as needed, that would be a big benefit to the physician's clinics. Fred, do you want to speak to pricing?

I think we've done very early work on the pricing. I think there's definitely a space there with the standard of care being around [ $14,000 ] annually, and that's for 6 injections only. I think there's definitely a space. And also because we're in such a low dose that our cost of goods is amenable to having a product that is actually commercializable and you can actually have that space. So just early look, seems promising. We haven't done the work in Europe yet, but certainly, within the U.S., we've done that due diligence.

I think one of the exciting things about these markets is they're high incident markets. There's a couple of hundred thousand new patients every year. So it's not like you have to recoup all your costs by charging $1 million a patient like a rare disease where you treat them. And then that population is gone and now you have no market. We're going to have a recurring high incidence market every single year. And so we don't have to charge $1 million to have a very robust pipeline of cash flow there.

And depending on what source is by 2028, 2030 or somewhere, say, 35% to 45% increase in the market size. This is age-related disease so...

Okay. Got it. Okay. So maybe moving away from wet AMD, you're starting DME. That seems like a natural progression of indications to want to pursue. Is there anything that's particularly different about DME that you need to account for as you move forward with that program?

Well, the great news is that so far, every anti-VEGF that worked in wet AMD also works in DME. So that's been derisked. We're at very low doses compared to the doses where others ran into trouble in DME. So we think of our doses that are sort of 1% of those doses. So it's very, very unlikely given the safety we've seen in these dose levels that we're going to see toxicity. And if anything, DME patients seem to be a little bit more sensitive to the therapy. It sometimes require lower doses than wet AMD. So we think we're really well positioned. And again, to our knowledge, we're the only gene therapy company in DME now, which is a real opportunity for us.

How big is DME relative to wet AMD?

It depends who you talk to, but it's -- some estimates, it's quite close or even on par certainly and with the rapid rise in diabetes in this country, then DME is going to increase rapidly as well. So I think it could be just as big an opportunity for us as wet AMD.