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

To this session of the Morgan Stanley Global Healthcare Conference. I'm excited to welcome the team from 4D Molecular Therapeutics. Let me just get through a quick disclosure before we get started. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

So with that, we have Dave and Chris here representing the company. Maybe we can just start out with -- for those less familiar with 4D, could you provide a brief intro to the company and the gene therapy platform?

Sure, Judah. Thanks for having us. It's great to be here. So at 4D, we're a next-generation genetic medicines and gene therapy company. Our fundamental platform underlying our products is the use of directed evolution and Nobel Prize winning technology to invent customized vectors for any tissue we want to target, which we believe then gives us better safety, lower cost of goods and allows us to go into large markets. So our lead product 4150 is basically a gene therapy AAV-based medicine that expresses aflibercept in a sustained fashion for, we believe, multiyear durability for wet AMD and diabetic eye disease. And we're currently in Phase III, two Phase III trials that are enrolling very, very well. So I think there's a huge commercial opportunity here. And then we also have a cystic fibrosis program with an inhaled agent that expresses the CFTR transgene, and we've shown very high level of expression and early signs of clinical activity there. So that's currently moving into Phase II.

Okay. Great. And if we start with wet AMD and diabetic macular edema. From a high level, how would you describe unmet need in these conditions? We often hear about injection burden reduction or injection freedom, but what are patients and physicians looking for versus what maybe we're hearing from investors?

Yes, it's a great question. Chris, do you want to take that?

Yes, I can start on that for sure, it's a great question, Judah. So I think the unmet need -- there's two levels of unmet need when you think about it. First is what you just referenced, it's extended durability so that you lessen the burden of injections or needles in the eye, right? That's pretty obvious. And I think every asset that's been in development recently that's come to market or in development, they're all pursuing this additional durability without sacrificing efficacy and, of course, ensuring that safety is consistent with what we've seen in standard of care today. The other unmet need that's probably less talked about, but I think is very important is with these incredibly efficacious anti-VEGF agents today, you gain vision largely. Most patients will gain 5, 6, up to 8 to 10 letters of vision upon initiation of therapy. Sadly, a lot of those patients by the time you get to year 1, if not a little bit further out, have lost that vision gain. So the other important unmet need is to holding on to that vision gain for the life of the patient, if you can. That requires an agent, we believe that has years of durability and sustained expression so that you keep that disease in control for years as opposed to months or weeks. Okay.

And you've shared a good amount of data across both indications. So maybe just from a high level, can you share what the data look like kind of on the most important metrics that you would say kind of resonate with physicians and with patients for 4D-150 in terms of both safety and efficacy?

Yes. So at a high level, we've treated well over 100 patients with 4D-150 safely. So it's a large market indication like this and like diabetic eye disease, safety is paramount. So at the Phase III dose, we have 80 patients who received Phase III regimen. And there, we've had 90 -- more than 97% of patients with 0 inflammation or toxicity. So that's really a remarkable safety profile. And the couple of patients who did have some cells detected in the eye, it was mild and very, very transient in results. And no patients had to remain on steroids for inflammation. So very well tolerated. So that's job one. I think that gets a lot of physicians excited because they weren't sure that was going to be the case for the gene therapy. In terms of injection burden reduction, we've looked really at three distinct populations. One is the kind of highest need treatment recalcitrant patients with fibrosis atrophy. So most of them treat -- we started there for safety purposes. It's good drug development to start the patients with highest need. We showed really nice reduction there from their prior year of therapies. Patients were getting 10 injections. We brought that down to less than two on average. So it was roughly 80%, 85% reduction there. And 50% of those patients went from 10 injections down to 0 or 1. So that was pretty exciting. And then in the broad population, we saw a very similar reduction, 83% reduction in treatment burden versus on-label aflibercept. And there, we had roughly 80% of patients either had 0 or 1 injection. I think 57% had 0 injections. What's interesting then as we moved into the patient population of that broad population, we looked at the patients been diagnosed in the last six months, where perhaps their retina was healthier, less fibrosis atrophy. And what we saw there was really remarkable. So 94% reduction on average, patients had 0.3 injections over the course of a whole year, and we had 80% injection-free at 1 year and 87% of patients had 0 to 1. So it's interesting. We've shown this broad activity across this very diverse patient population. We see pretty -- very consistent safety and activity. The exact percent who are injection-free or get 0 to 1 injection is going to depend on the exact population you're looking at. But it's broadly active in a very reproducible way. Last thing I'll add is we saw a very strong clear dose response in every population we've looked at, both in wet AMD and in DME. So again, a consistent dose response is what you want to see as part of good drug development.

Okay. Great. And maybe just in terms of 4D-150's mechanism, can you tell us a little bit more about the contribution of the VEGF-C siRNA? We've seen some data from a VEGF CD trap. There's some literature out there on these targets. But can you help us understand what role this component might be playing in the design?

Yes. So when we thought about the design of 4D-150, we said what's the market-leading anti-VEGF and it's clear, it's aflibercept. So let's take an agent that's been in over 60 million eyes safely and effectively. So that was an easy decision. But we have more room. And we asked the question, are there any other targets that are emerging that seem to play a role in resistance over time. And VEGF-C sort of percolated to the top. And so we elected to put in an siRNA to knock out VEGF-C as well. There's no good model to prove that, that is improving efficacy. We just can't do that. What was interesting is when we did that, the way we engineered it, it actually boosted aflibercept expression by two or threefold based on how we did the genetic construct. So at a minimum, that's adding aflibercept expression. And there may be some patients out there where VEGF-C is an important target.

Okay. Great. And you touched on it earlier, but the safety profile, I would say, regardless of modality is highly important for retina specialists. There's some precedent in the space in gene therapy that I would say even in GA, right? It's just an area that these specialists are highly focused on. Like you said, so far, the 4150 safety profile has looked encouraging even after the prophylaxis steroid regimen. So I guess how has that safety conversation evolved with practitioners? Are they waiting for more data? Do we have enough at this point? What are they looking for on the safety front?

Yes. I think the short answer is they're there -- they support and believe in the safety. I think that's reflected in two ways. One is the enrollment rate. So what's remarkable to me is how quickly we went from a situation where Avalanche and Vir program had some real concerning safety issues, particularly in DME, partially corrected when they dropped the dose. But coming into this, that's one reason we started in the most severe recalcitrant patients. And in the span of 4 to 5 years, we're now in a position where FDA, our advisory board and the community at large said, yes, you cannot only go into wet AMD in a large 400 patients, two 400-patient trial. You can go frontline. So think about that. This is a gene therapy for not only a large market, but frontline large market. And it's enrolling like gangbusters. So I think if you look at that, you say, yes, they believe in the safety profile.

And maybe just on that topic, you guys were at ASRS earlier this year. It seems like the tone changed on gene therapy for VEGF-driven disease. Was that your sense this year?

Yes. And I mean, Chris is the expert he talks to hundreds of these guys. Chris, you want to answer that question?

Yes, I think you're spot on, Judah. We definitely believe the tone has changed. We actually believe we've been a big part of helping that shift as well, to be honest. And what you may be alluding to is the ASRS every year conducts a survey, they call it the PAT survey, their preference and trend survey. I think about 900-plus U.S. retina specialists respond to that. So a pretty representative sample size out of roughly 3,000 doctors in the U.S. And we asked them along -- a wide variety of questions. Of course, two areas that we paid particular attention to. One was what continues to be unmet need. And for the this year, and I think every year since it's been done, durability, extended durability still comes up as the one unmet need that's still the greatest. So that's consistent. But there's another interesting question that says, of all the new modalities and novel treatments that are in development, what are you most excited about? I think that was a new question. And they listed all the options you could choose from. Roughly 50% of them selected gene therapy as their first choice as what they're most excited about. And then, of course, there's other agents by the second choice was TKIs. There's two that I think are widely known as being in development and about 17% chose TKI. So we think that is certainly a very relevant data point that validates the excitement around our program and gene therapy at large.

Okay. Great. And just getting into a little bit of kind of retina specialist practice dynamics. When we talk to those that are in high-volume practices, it seems there's certainly interest in greater patient capacity kind of freeing up work time. They also seem to prefer a predictable workflow. So I guess, how does 4D-150, if approved, fit into that mentality? It seems like there could be sort of a paradigm shift in terms of workflow, but how are you communicating with practitioners on that front?

Yes, it's a great question. You touched on a lot of really important points there. So first of all, when we talk about treatment burden reduction, that clearly has a benefit for the patient and their caregiver. It has the similar benefit for a practice in theory, right? It's like you have less injections that you need to administer to maintain the disease. So most retina practices, you know, are high throughput. They're seeing 50, 60, 80 patients a day per doctor in some cases, and they have capacity constraints. And all evidence would suggest even from the AAO, they've shown evidence that the growing prevalence and incidence rate of AMD based on the aging population versus the supply of retina specialist that divide is going to get greater over the next 10 years. So you need innovation to help solve for that. So we think 4D-150 could solve for that in a really meaningful way as opposed to a couple of weeks. The other important part is these practices are kind of like well-oiled machines right now with how they run injections. And if you introduce a therapeutic into that, that is disruptive to their flow, it's going to, I believe, result in adoption barriers. What's nice about our profile is how it's stored, how it's shipped, how it's inventoried, all of that is pretty much the exact same as an anti-VEGF is today. So there's no disruption to that practice flow. The mode of distribution, how you inventory in the fridges, all very consistent. So we think we can tuck seamlessly into that process that's so important to them.

Okay. And can you touch on kind of learnings from the steroid regimen that you've implemented thus far? You've got studies where there is a shorter regimen in place. What have you been able to take from, I guess, across all studies, both kind of patient preference and practice, along with how practitioners are thinking about implementing the steroid regimen?

Yes, I can speak to the data, and Chris can kind of speak to uptake in the clinics. We -- safety is paramount. And with a gene therapy, you really need to cover patients for the first 4 to 8 weeks or so while that capsid is being degraded and the protein goes away. And so just to be safe, we started with a 20-week taper where it's four drops a day for a month and then three, two, one. And so that was very well tolerated and accepted from patients. In DME, we asked the question, could we drop that to 16 weeks, and that was successful. There was no evidence of no incidence of inflammation whatsoever in that population. So in the future, once we're on the market, we can pull around with shorter regimens. But for now, we just don't want to rock the boat that safety profile is so important for the age. We just keep it as is. Do you want to speak the uptake of...

Yes. It's -- I mean the steroids are used are widely available, relatively inexpensive, covered pretty much on every insurance plan that you could imagine. So we don't think there's a limit in terms of access and certainly not availability. It's as simple as writing a prescription for the patient and having it sent to a local pharmacy and these patients -- unfortunately, they're older and they have a lot of other things happening. So that's not an uncommon thing for them to have to administer. And a lot of them have taken drops for other conditions in the past. So we think that's a fairly seamless thing to integrate. And as importantly, I think when you ask patients around, hey, what is your openness to taking a steroid regimen prophylactically for the benefit of treatment burden reduction, we have yet to have a patient say that wasn't a very worthwhile trade-off.

We've gotten the question, is there anything in the trial protocol that ensures drops are taken as needed that might not translate to the real world? Or is that kind of real-world barrier lower than maybe people perceive?

I think certainly on the trial, good drug development would say you put in whatever you can to make sure everyone is consistently taking the drops. Patients are taking drops actually on both arms just to make sure that's even. But do you want to speak to real world?

Yes. I mean I think part of the design is, and David has alluded to this before, I think that the breadth of steroid coverage probably is more than you probably need. So part of the design is to have buffer there against I think patients sometimes that may lapse occasionally in terms of the frequency of taking the drop. So in the real world, if you get to -- we obviously suggest to replicate what you do in the clinical study and what's in our label. But if that's not followed precisely, we still believe that patients would have some pretty healthy coverage from a steroid perspective.

Okay. Great. And you touched on here, but 441 is tracking ahead of expectations on enrollment. What can we look forward to in terms of enrollment updates? I guess, what would be the cadence of providing those updates?

Yes. We haven't given formal guidance on that, but we do expect to give updates. What we've been doing to date is just sort of giving a guidance on timing of data. And so we brought it from second half of '27 into the first half. Now we've given an update to say not only that, but we'll have enrollment completed in Q1 of '26. And the next step would be to update the timing of data when we're comfortable with that. And -- but we do expect to get periodic updates, we haven't formally signaled a specific number or time point for that yet.

Okay. That makes sense. And just in terms of trial design and registrational path for 4FRONT, it seems like it's fairly similar to other trials we've seen in the wet AMD space. I think investors are just always concerned that changes at FDA could be impacting regulatory pathways for anybody in this space. What would you say are some of the important considerations in terms of trial design and how confident you are in U.S. and maybe also ex U.S. regulatory pathways?

Yes, it's something we take very seriously. So first of all, we work with a large number of world-class advisers who have been there and done that for EYLEA, high-dose EYLEA, VABYSMO, brolucizumab, Lucentis. So -- we have a great network who helped to design the study plus our internal expertise. We also have the RMAT kind of breakthrough designation with U.S. FDA, and we have Prime in Europe. I think we're probably the first gene therapy to have that certainly in a large market. And so we've had -- and then I guess the last point is that we've used a study design that's just straight down the middle, same study design that's used for all these other blockbuster agents in the field. So randomized controlled trial, BCVA non-inferiority and frontline patients. These other studies, although commercially, they get used in the more severe patients initially, but the approval studies have historically been frontline. And so our safety profile allowed us to do that. So we think we're about as kind of conservative and straight down the middle as we possibly could be. And so we wouldn't expect changes at the FDA to impact us. And so far, they certainly haven't. Anything to add?

No, I think that's right. I mean the only other regulatory comment I would make is based upon the data we've shown so far from our wet AMD program, both the FDA and EMA said, "Hey, when you're ready to go into DME, we think we just need one Phase III confirmatory trial. So we see that as strong support for the data we've generated.

That's great. And maybe just circling back one on enrollment that we get. Like you said, there's a lot of active development in kind of extending duration of treatment in wet AMD. You've got the TKIs, you've got other gene therapies. I think folks would have thought that maybe everybody would be competing for patients. How much emphasis would you put on demand specifically for your program and what might be differentiating for you in terms of enrollment versus just a focus on the entire space and investigators looking to enroll patients in any trial they can?

Yes. I think -- look, we -- for clinical trial enrollment, we're thrilled with the enrollment rate. But other novel agents have enrolled well as well, if that's what you're getting at. But I think what's uniquely differentiated here is we have quite a robust database of, again, over 100 patients in total, 80 at the Phase III dose across a broad range of populations. So some of the TKIs, they focus more on kind of the patients with much lower treatment necessity, much less severe disease, and that's a smart strategic move for them. But I think for us, we have a robust data across the most severe all the way to the more recently diagnosed. And then I think the incremental benefits, whether it's VABYSMO or a TKI of a few weeks, maybe a few months, it's just fundamentally different from something that has multiyear probably expression for the rest of the patient's life. It's just fundamentally a different category. So we feel we're kind of complementary to the short-acting bolus or even long-acting bolus therapeutics.

I mean that's -- we're fortunate. I think we all are in this space to develop medicines in a -- with a retina community that's highly engaged, right? I think that's -- and for sure, the sites -- our top sites are also the top sites for, I would suspect the other programs as well. And that helps tremendously. So that plays into it. But I think what is also very true is that if the -- if those physicians and their patients didn't believe in the potential and the profile of your medicine, it doesn't matter that the ecosystem is conducive. Like you have to believe that what you have is something that could be super meaningful for a patient. And we hear that for sure. Honestly, going into it, the question I had was, naive patients, gene therapy, how is that going to play out? And we've been thrilled. It reflects what we heard from physicians anecdotally before we started 4FRONT-1 because they said, yes, their patient demand is certainly there. It's really good to see it in the enrollment numbers that we're seeing come through.

I guess as you continue to prove out the safety profile like you did with updated DME data, is that resonating in the AMD trial? Or do you get a sense that, that data is appreciated by investigators in forefront?

So if you're asking, does the DME safety help to get even more confidence in AMD. I think given the history of gene therapy with the Adverum Avalanche intravitreal product, it does resonate because they are -- they had chronic inflammation in wet AMD, but then when they went to DME, they had some pretty big kind of patient disasters. And so for us to come in there, we went in very cautiously with, okay, DME, we got to be careful. There's maybe something different about this disease. And to come out of that study, albeit it's a small -- it's a Phase I/II it's small, but 0 toxicity, 0 inflammation, 0 front of the eye issues. I think that's really compelling to the physicians, and that's what we saw at ASRS this year.

Got it. Got it. And I think in Q4, you'll be giving us some more data from the PRISM wet AMD study. Can you just remind us of what's coming on that update and what you'll be looking for?

Yes. So we'll be showing all three wet AMD populations. So the broad population we will have 1.5 years. The subset of that, those patients that had kind of six months or less, which is half of those patients, we'll have a subset analysis around that. And then we'll also update out to two years, the recalcitrant most severe population.

Okay. Okay. Great. And then I just want to make sure we touch on 4D-710 in CF. What's -- what are the latest developments in that program? What should we be looking for in terms of updates there? Where are you directing investor attention on CF?

Yes, sure. So just to remind folks, so 4D-710 is an aerosol delivered product that delivers a copy of the CFTR transgene to airway cells. And historically, that had been the Holy Grail for cystic fibrosis to replace the missing gene, but nobody could get gene expression in the lungs and they failed repeatedly. So we used directed evolution to invent an aerosol delivered customized vector for the lung airways. And then we use a nebulizer device that's commercially used called the ARO-ECLiPSE 2. And this creates a particle list of droplets that distribute from the largest airways all the way down to the alveoli. So that part of the delivery, we didn't fix. That was kind of inherent on the delivery device and the nebulization. So with that product, we went into the clinic at a dose that we thought could have some transduction, and we did biopsies within a month or two after dosing. We found really kind of off the chart expression. So we were up at sort of 500x -- 500% of normal protein levels, and we were targeting over 90% of the cells. So we were super physiologic. It was safe and well tolerated at the first dose level. And so ultimately, we elected to dose de-escalate. And so now we have nine patients at the lower doses, three at dose level III and then six at dose level IV, which is 2.5E14. And so that's the data we're going to be -- the most important data update at the end of this year is those patients more in the therapeutic range. We're still super physiologic but not nearly as much. So we're going to be looking at continued safety. It's been incredibly well tolerated. No evidence of toxicity or inflammation on these lung biopsies at 1 to 2 months out. We'll also be looking at lung airway function, and there's a couple of ways to do that. One is with FEV1, which is quite crude and difficult to reproduce in small numbers of patients, but it kind of looks more at the large airways. And then there's something called lung clearance index, which is much more reproducible, less effort dependent. This has been used for product approvals now in pediatrics. And so we'll be looking at that to look at kind of smaller airway function. We'll be using high-resolution CT scanning to look at lung architecture, and then we'll continue to look at quality of life where we've seen some pretty dramatic improvements. So that will be the totality of that data. The other thing we'll be sharing is the first data on late biopsies. So anywhere from a year to three years out, -- are we still expressing the transgene? What's the expression duration in lung? And going into this, we thought we would probably have gene expression out to at least 1.5 years to 2 years, at least based on animal modeling, and that would allow us to re-dose every year to two years. So we'll be sharing that long-term follow-up data as well.

Okay. Great. Maybe just to wrap up on the company-specific questions before we do kind of a mini survey that we're doing with all management. Can you remind us of cash runway and the development milestones that are supported by the runway?

Yes. So we're thrilled to be -- have a cash balance of $417 million at the end of last quarter. This funds both 4FRONT-1 and 4FRONT-2 and all of the company operations all the way out into 2028. So with data coming in the first half from 4FRONT-1, we think we have the ability to run the company without bringing in additional capital until that reads out. So if we do bring in capital, it will be to fund the DME study. But we'd be very opportunistic with that. But we're well capitalized and we can get out beyond the 4FRONT-1 and 4FRONT-2 data. The cystic fibrosis program historically has been funded by the Cystic Fibrosis Foundation. So we'd be looking to continue that.

Okay. Great. Now just transitioning, like I said, to kind of three questions we're asking everybody, no pressure here. Biotech seems to be more exposed to external and macro factors of late. So we're asking each management team three questions. The first is on China's rise in biotech innovation. How are you or are you thinking about competitive position here? And will this influence R&D or business development strategy?

I mean, listen, we -- it's not lost on us for sure. We are watching developments in that market for a number of potential opportunities. And we talk a lot about 4D-150 and 4D-710, but we have other assets that we looked at developing as well. And I think we're open to multiple scenarios, be it partnership for that market or looking at, could that market be used for development purposes.

Got it. Maybe a little closer to home. AI, does 4D Molecular leverage AI in any way in whether it's drug discovery or clinical processes or something else?

We use it for the vector discovery platform. So as you might imagine, we have 1 billion vectors. We put them into animals by different routes of administration, identify customized vectors for any tissue in the body. And so you might imagine that's a very rich database to kind of have AI go in there and ask a question, what features of capsids make them go this direction or that direction, this tissue versus that tissue. And so that's where we apply it.

Okay. Great. And then maybe a little bit closer to home, just on the regulatory side of things. What's been most impactful to your business on the regulatory side, changes at FDA, pricing debates, I don't know if we're there yet for you guys, tariffs, someone else that I didn't call out just regulatory consternation, if there is any.

I guess we're -- we have consternation that everyone else has. We haven't seen it. So we're thrilled that we have the RMAT and prime designations for our lead assets and nothing has changed there. Our interactions on both the wet AMD and the cystic fibrosis program have not changed. So we haven't seen it. It hasn't been evidenced us, and I think it hasn't changed our development plans at this time.

Okay. Great. All right. Well, I think we'll leave it there, and thank you very much for the thoughtful insights here.

Thanks for having us.