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

Great. Good morning, everyone. Thank you so much for joining us. I'm Salveen Richter, biotechnology analyst at Goldman Sachs. I'm really pleased to be joined today by the 4D Molecular Therapeutics team. So with me is David Kirn, Co-Founder and CEO; and Julian Pei, Head of IR.

To start here, David, could you just give us an overview of where your directed evolution gene therapy platform stands here, the pipeline progress that you've made and what we should really be focused on over the next 12 months with regard to that?

Sure. Well, thanks for having us. So I think when we started over 10 years ago, we had a thesis that better vectors were important to be able to open up the full potential of gene therapy with AAV and particularly to be able to open up the opportunity of large sustainable markets. And we look 10 years later, we believe we've achieved that opportunity. So we have a best-in-class vector for intravitreal delivery targeting retina, a best-in-class aerosol delivered vector and then we believe a best-in-class IV vector for heart delivery. So the platforms played out the way we had hoped. And with that, we have 2 large market opportunities, both with 4D-150 in wet AMD and DME and then 4D-710 in cystic fibrosis lung disease. So over the next 12 months, really, it's all about execution on the Phase IIIs for 4FRONT-1 and 4FRONT-2 Phase III trials in wet AMD and then reading out the initial kind of Phase III dose data from the Phase I/II cystic fibrosis program and then interactions with FDA about to design the Phase III for cystic fibrosis.

Let's start here with your ophthalmology asset. So at this point, you've reported 52-week Phase II. You've initiated your first Phase III for wet age-related macular degeneration. What do you believe is being underappreciated by the Street on this asset? Or where the debates lie with regard to a gene therapy in an ocular disease?

Yes. I think people start with this premise with gene therapy that it has to be perfect. And I think the reason that has arisen is because there have been challenges in the field with traditional standard non-evolved vectors where very high doses are required, leading to potential safety issues and high cost of goods, meaning high prices. So we put that on his head and said with better vectors, we can get very low doses, low cost of goods. For example, in wet AMD, we think our cost of goods is on the order of $500 or so, which gives us pricing flexibility. So we think that people are underappreciating the real commercial opportunity here for 4D-150 and for 710 in cystic fibrosis. We think these have a bit potential to be multiyear, durable, safe therapies administered by routine routes of administration, and we're addressing the highest unmet needs in these populations.

What has the feedback been from physicians on the Phase II data here? And based on your discussions, how are stakeholders thinking about the value of gene therapy beyond the potential to be injection-free? You touched on that a little bit.

Yes. I think the feedback from physicians has been phenomenal. Physicians say this is the #1 thing that they want and what their patients want is better durability. So they don't ever think about the need to be injection-free. What they want to see is injection burden reduction. So if we think about Vabysmo, which has had a real rapid launch, rapid market uptake, they are reducing the injection burden by about 20% versus Eylea. We're getting data where we're reducing injection burden by 80% to 90%. So given our safety production, we've had incredibly high interest from physicians to participate in Phase III. We're thrilled with the way enrollment is going, and we think patients really want this.

Do you believe that tolerability and durability at this point has been derisked?

Yes. We always have to be cautious. You can never say that you're out of the woods with safety at any time really. But so far, the safety has been phenomenal, both in wet AMD and in DME, where DME, we haven't seen any inflammation whatsoever. No front-of-the-eye issues as has been seen with other programs. So we're thrilled with the safety profile. It's critical in large markets like wet AMD and DME. And I think that's why the physician interest and patient interest is so high is not only the efficacy, but that safety profile. So yes, as best as we could derisk it to this point, we think we have.

And help us frame -- or if you could frame expectations for the 1 to 5 -- 1.5 to 2-year data update that's expected in the fourth quarter?

Yes. We hope to show ongoing injection burden reduction and great safety. We've shown durable expression out to 2 years in some patients who have been followed that long in terms of the aqueous humor levels of aflibercept. We've shown ongoing stable efficacy. And so we would expect that to continue. By definition, the injection-free rate can only go down over time. But again, physicians and patients are thrilled. If they get -- patient gets one dose a year or one dose every 2 years, they're thrilled. So we would hope to be able to show that per unit time, consistent efficacy that is not waning based on our data to date and based on other data in the field. We would expect lifelong expression from the retina.

Yes. I think an important nuance to add, Dave, to what David just said is kind of the 2 populations we're looking at in that Q4 update. So we had the severe population that despite 10 injections, they were coming in with 400-plus CST. So this is very recalcitrant, not well-controlled patients, and we're kind of -- that population, the disease waxes and wanes much more severely that will influence the injection-free rate much more than the other population, which is a broad population, which includes patients who are better controlled coming into study and a lower anti-VEGF, and we expect a higher injection free rate in those patients.

It's a really good point. When we look at the subset of patients in Phase II who had been diagnosed within the last 6 months. There, we had on the order of 70% injection-free at 1 year and injection is over 90%. So we again expect to continue to see that kind of efficacy in that population. And that's much more closely aligned with who we're treating in Phase III.

What are your thoughts right now about the translation of the Phase II data to the Phase III data and where the risks may lie if that doesn't translate? Like if you break the thesis where the concerns and risks? And how confident are you on the success here?

Well, we're very confident. We don't take that lightly. I think the program has really been -- the Phase I/II program is very broad. We looked in the hardest to treat patients, as Julian said, plus more recently diagnosed. We've seen the spectrum of activity across that. We've seen great safety, the topical steroid drops have worked very well. So I think coming into this, we really understand the product and we've derisked it as much as possible. We have a phenomenally good group internally and externally that we work with to design the Phase III and make sure that the criteria for disease activity, injection burden, injection -- supplemental injections that needed closely aligned with what we used in Phase II, so there shouldn't be any surprises there, but also is set up in a way to make sure we protect BCVA as a primary endpoint in the Phase III. So I think if you look at the breadth of our data, the number of patients we treated coming in, the design of the Phase III and the fact that all we have to hit is non-inferiority on BCVA visual acuity. I think it was about as derisked as you could possibly be. And enrollment, we're very excited about enrollment. We're now up over 70 sites open. So very rapid site opening, excitement about enrollment. So we think we'll quite easily hit or probably beat our 15-month recruitment expectations there. So we don't view enrollment as a risk, which -- just one final point on that. It's quite remarkable. I mean this is a gene therapy study, intravitreal. I mean think about that. Who thought that was possible just 5 years ago. And yet enrollment is off the charts and in frontline patients.

What about the -- I guess, when you speak to physicians, the real-world relevance of what you're measuring and the outcomes that are going to play out from the Phase III with regard to not just physicians, but also payers?

Yes. I think highly relevant. Physicians essentially in the real world, they treat and extend. So they'll give upfront treatment, which we do in our Phase III as well. And then they try to see how far they can extend patients before they need another dose and give them longer and longer follow-up. So I think our study design in terms of watching patients over time, seeing when they need supplements, if ever, should closely mirror what they do in the real world. And I think our cutoffs for injection based on CST and BCVA are consistent with what people would do in the real world. So we think it will be very relevant. For commercial, obviously, proving out that durability, which has been proven by others with AAV in the retina, and we're now out to 2 years, and we'll continue to follow. That will be important for pricing.

Maybe speak to the commercial dynamics here. So there's been some change in the space with the entry of biosimilar Eylea, but also these longer or less frequent injection options, as you've noted with both Roche and even Regeneron. How do you -- and then emerging options with TKIs. So maybe we could just, one, understand how you think of positioning in that current environment, but how you think TKIs will then come in and impact this?

Yes. I think if you look at every survey that's been done and the ASRS does a survey every year on patient interest and needs, Durability and extending the treatment duration is by far and away the #1 desire for patients and physicians. When you look at -- if you ask a question, which agent out there has the potential to have the longest duration, I don't think that's a debate. It's gene therapy with AAV full stop. That's not controversial. So will TKIs have a role? Probably, maybe in better control patients who don't have a severe disease. And maybe they can extend to 4 to 6 months, which is similar to Vabysmo. So I think the battle there will be Vabysmo versus high-dose Eylea versus TKIs, and there's probably room enough for everybody. But I don't think there's any question that the only game in town when it comes to multiyear durability, a foundational background suppression of your VEGF levels and the potential for a functional cure, that's uniquely gene therapy. And I think when you look at gene therapy, there's the REGENX subretinal program has promised. But again, subretinal is really not directly competitive with us with the intravitreal. So we think we're kind of the best-in-class longest acting opportunity out there.

And any comments you want to make on the pricing aspect because you've talked about how this is a case where you can be competitive based on just your diligence and the overall cost constructs here?

Yes. So we have a really outstanding Chief Commercial Officer, Chris Sims, who joined us last year, and he ran the Beovu launch, the Izervay launch. So he's very experienced. And I think the #1 thing he loves about our situation is the pricing flexibility where given a cost of goods that's on the order of $500, that means we can titrate that price to benefit the system, patients and ultimately, our shareholders. So people usually, as you know, think about some multiple of the annual cost of standard of care might be the way that gene therapy is priced, and we would assume the same. But we have a very healthy margin regardless of where we price it.

Great. What is your strategy at this point for diabetic macular edema, just noting that the FDA is allowing you to proceed directly into a single Phase III study. So help us understand when such a trial could be initiated? And then is there -- is this the area where you could think of partnering?

Yes. I don't think we would partner out 4150 for different indications. We do expect to eventually have an ex U.S. partnership or 2, but really retain U.S. rights. I do think, to our knowledge, we believe we're the only product that has not only RMAT and Prime for wet AMD in U.S. and Europe, but also RMAT for DME as well in the U.S. And that single patient study with roughly 300 to 350 patients is a great opportunity for us. It's not currently in our cash runway. We think it's important to fully fund both wet AMD trials. So right now, the conservative readout is second half of '27, we hope to beat that. We have cash in '28, but that does not include funding for the DME study. So at some point, we're going to look at alternative financing opportunities or BD opportunities to try to fund the DME. I do think we're -- that's a unique opportunity for us with a single trial. And again, there's not much in the way of competition there right now.

And help us understand the benchmark for the 32-week Phase II data that we're going to see in the third quarter?

For DME?

For DME.

Yes. So Julian and me, kind of speak to what we can expect with that? Yes, sure. So this -- as a reminder, SPECTRA was a kind of really early trial. It was kind of essentially a Phase I safety trial and kind of efficacy finding. We're looking for a dose response between the 3E10 dose and the 1E10 dose, and we also want to continue to follow for durability. So the primary endpoint is at 52 weeks, we shared 32-week data early in the year where we saw after the 3 loading doses we gave the patients, they were able to see 8.4 iter gain and kind of maintain that through that 32-week period after gene therapy. CST was also dramatically improved, and we maintained that with kind of a very low injection burden and several patients were injection-free. So it's small numbers. We have 9 patients at the 3E10 dose 11 patients at the 1E10 dose, and we want to continue to see that dose response over time, continue to see the maintenance of vision, the maintenance of anatomy and without an increase in the rate of injections. So I think if we can see that, that's kind of just, again, proving that 4D-150 as a backbone therapy would be beneficial to these DME patients who are not very compliant on therapy today.

Got it. Okay. Just moving over to the pulmonology franchise here. So in cystic fibrosis, could you walk us through the regulatory and clinical updates that you've provided and the next steps for this program?

Sure. So the Phase I study, aerosol delivery, the design of the study is to look at biopsies at 1 to 2 months and brushing. So we get both large airway and small airway. CFTR expression from the transgene. And then we're also looking at safety, FEV1 over time, lung clearance index over time in the more recently treated patients and then quality of life. So in this study, to date, what we've shown is a beautiful dose response in terms of -- as we come down on dose, we see more physiologic range of expression early on. We overshot actually, which, again, no one ever thought that was possible in gene therapy, especially in the lung, where no one had shown expression. So we actually overexpressed and actually, we're getting into cells in the interstition that we didn't think we needed to be in. So we're actually able to decrease the dose, decrease the cost of goods, give ourselves an even larger safety window. And then anecdotally, we've seen as we dropped the dose and got into more sick patients who have a lower baseline FEV1, we've been able to show some anecdotal improvements in that. That's encouraging. And we're also collecting data on LCI, which is called lung clearance index, more reproducible than FEV-1 and also quality-like. So we've seen anecdotal evidence of benefit. We're now in a range where we think we're at the right dose range. And so we're treating a total of 6 patients there, and then we can expand and treat even additional patients at that dose level, sort of a Phase II dose prior to having conversations with FDA about Phase III. So we're excited about where it's going. We think we've honed in on the right patients, the right dose range and the right endpoints.

And then we will see interim data in the second half. Which of these measures could we expect to have further elucidation on? And how are you thinking about establishing the relationship of protein expression to functional and quality of life benefit and durability?

All of the above. Yes, absolutely. We will make those correlations. I think as I said, this is sort of a unique problem in 4D that our vectors are so efficient that we oftentimes find that we actually have to decrease the dose or really not require large dose escalation. So here, as we've dropped the dose, we're still overexpressing CFTR compared to normal, but more in a physiologic range as we do that, we think we're going to see even better clinical outcomes. And so that's something we'll be sharing. But to date, we've shown highly reproducible results on these biopsies and brushings very -- it's remarkable, really, how consistent it's been as you drop the dose, you just see a proportional drop in that protein expression. And again, we think we're now at the right dose level to really maximize benefit for patients.

Is there an ability for you to go back to the FDA now given you've got a new head of CBER and see if there's some flexibility here with this pathway versus what was offered prior and whether you could have an accelerated approval pathway or maybe a non-placebo-controlled study, I guess, how are you thinking about this?

Yes, all of the above. Again, we have had those discussions with FDA. We have a great relationship there. We're getting pretty frequent interactions as the data evolve. Obviously, we want to come back to them with even more follow-up from this low dose level later this year. But initial discussions on that possibility have been very productive. And certainly, if you look at other programs in rare diseases with no available therapy, which is the case here, we're focusing on the patients with no available therapies. The single-arm studies have certainly been allowed. And despite the initial concerns about changes at the FDA, we haven't seen a material change in at least so far in terms of their messaging around rare diseases and potential for accelerated approval or even full approval based on single-arm studies. Anything to add there, Julian?

No, I think you covered it all. I think just the one thing in terms of the data release in second half, we'll also have some additional biopsies kind of from longer-term follow-ups. So that paints the durability picture of what lung gene therapy can achieve.

That's a very good point. We -- coming into it, we knew retina is stable, which should be lifelong expression. It was really unknown in lung, what that turnover rate was going to be. Even experts, our partners at the CF Foundation really had no idea. Mice, it looks like it's 1.5 years. So we thought maybe in humans, it's 2 to 3 years. But the data we're now getting on those late biopsies, I think really landmark data for lung therapeutics generally.

And you've also demonstrated your platform has broad utility, including in cardiology, but you've prioritized at this point, these 2 indications, the 2 disease areas we talked about. How are you thinking of capturing platform value while balancing spend? I know it's a difficult question, but...

No. I mean that's why we -- it's what we get paid to do. I think the platform has borne out incredibly well. Our team not only has discovered great vectors, but our translational development has been phenomenal. We have 6 products with open INDs. And it's been really an IND engine. Once you have one of these vectors, you can very efficiently build out a whole portfolio of products in modular fashion just by swapping in and out different transgenes. FDA has been very open to more accelerated development pathways when you have multiple products using the same vector, same manufacturing techniques. So long term, we think there's a real opportunity for a whole lung franchise, a broad retina franchise and others. We just have to be disciplined and focused now, given the market conditions. Fortunately, we're very well funded, but we have to stay focused on our lead products. But over time, for sure, there's a potential there. And certainly, for products that we can't develop that have still a promise, then partnership is a logical thing to explore.

How would you think about partnerships in that context? I mean, is it the thought here that you keep ophthalmology and you look to partner on other aspects?

Yes. I think -- well, we'd certainly like to keep large market ophthalmology in the U.S. as much as possible, but we'd be open to ex U.S. And then in lung, we think we really have a potential for a major franchise and portfolio there as well. So again, I think we probably think about it the same way as maybe partner ex U.S., but keep U.S. for ourselves.

Maybe remind us where you stand from a balance sheet standpoint with regard and cash with regard to funding these programs.

Do you want to speak to that, Julian?

Yes, sure. So we ended Q1 with $458 million of cash, so a very healthy balance sheet. That's primarily allocated to kind of run the Phase III trials for wet AMD. So really fully funded through the primary readout in second half of '27, runway stretches into 2028. We hope to kind of bring those time lines forward. But as of now, kind of second half ' 27 is the Phase III guidance. In addition to that, there's kind of early development for DME and kind of CF, continue to follow patients and take that into kind of Phase II. But we don't have Phase III funded yet for DME or for CF. So base case is we're going to kind of continue to work on this wet AMD program. If we can find these alternative means of financing BDE or other alternative nonequity vehicles at this time, we can then consider opening up those other kind of projects.

The directed evolution platform has allowed you to create these vectors, right, that have really worked with your tissue targets here. And how is -- how are optimization efforts playing out here? There have to have been since you went public or even prior to that, just learnings that have played out and could enable you to kind of create maybe potentially better drugs on the forward. So how are you bringing that know-how into your platform?

There have been extensive learnings. We've been doing this for more than 10 years. We were the first to start a company around this. There are now a number of companies trying to do this. But if you look at kind of delivering on products and getting products in the clinic, again, 6 open INDs with products from our platform. I don't think there's another company out there that has a single one from their platform. So I think we still are the market leaders there based on the work of our phenomenal team. And I'd say in terms of the learnings, there's a lot of learnings around there's not only a huge patent portfolio around the vectors we've discovered to date, but a lot of learnings around how to construct the library. We use machine learning now to kind of predict which vectors are going to package well, which is obviously important for cost of goods. So there's learnings around designing and building your libraries that go into the selections. And then there's a lot of learnings that we've had around identifying sources of bias when it comes to isolating and pulling out the sequences from different vectors over time. So I think every year, we've been doing this, we've been getting better and better in reducing areas of bias and increasing the diversity of our library and increasing the robustness of the results.

Great. Is there anything else that you want to touch on here with regard to the overall platform or the data sets that we're going to see coming up?

I just think that just -- I think probably the biggest disconnect we see is this idea that gene therapies are all the same. They're not. And so to -- while there have been difficulties and even tragic deaths on IV programs for very severe childhood fatal diseases, what we're doing is incredibly different. We're doing large markets, local application, intravitreal local application in the lung. So we get away from the high cost of goods, we get away from the safety issues and we get away from the commercialization questions. So we hope over time, people will come to realize that our model, our technology, our opportunities are very, very different from some of these other programs in gene therapy.

Great. Well, with that, thank you so much.

Thanks for having us. Thank you very much. All right.