CRISPR Therapeutics AG (CRSP) Earnings Call Transcript & Summary

Great. Good morning. Thanks, everyone, for joining us. I'm Salveen Richter, Biotechnology Analyst at Goldman Sachs, and we're really pleased to have Sam Kulkarni, CEO of CRISPR with us.

With that, Sam, maybe starting a picture on the strategy here. So you have cancer, ex vivo noncancer, regenerative medicine in vivo verticals. How do you think about capital allocation across these different verticals? And where you -- at this point, as you kind of derisk a vertical, how you kind of go deeper into it?

Yes. Thank you, Salveen, for having us. It may be hard to believe for many of you, but we're in the tenth year our journey in the company. And we follow the classic formula sort of, which is say, let's pick a very good indication where the technology can be derisked, where there's a great unmet need and there's an advantage or competitive advantage with the technology we are deploying. And we did that with sickle cell and thalassemia. And the next thing we did right after that is deploy those learnings to diversify into other platforms. So for those who are new to the story, we have 4 verticals right now. One is hemoglobinopathies where we have an autologous cell therapy. We have immuno-oncology where we not only have our first gen, but our next-gen programs. These are allogeneic CAR-Ts going after both heme malignancies and solid tumors. We then expanded to regenerative medicine, where we use iPS cells, edited iPS cells, to -- and apply that towards diabetes, particularly type 1 diabetes. And our fourth pillar that we've put together now in the last 2 years, the in vivo pillar where we hope to get into the clinic this year. And with our in vivo pillar, we're going after cardiovascular diseases to start with, but there are many other indications coming beyond that. And what that's done is given us a broad-based portfolio where we have, obviously, the technology linkage, but they're independent bets from a biological standpoint or a validation standpoint. And that gives us great confidence that we can not only expand in the area where we feel very good about right now with excel and hemoglobinopathies, but well beyond that and gives us tremendous upside potential in the next year or 2. So from a resource allocation standpoint, obviously, more of our spend right now is towards our more mature programs like Axi-Cel. But what's more important for me is the amount of time spent. And I think if you ask me where I spend a lot of my time, I spend a lot of my time with in vivo vertical, getting that up and running. The fifth pillar, if you will, is CRISPRX, which is our next-gen editing technology, and we're spending a lot of time there actually putting that forward. And that's showing all sorts of interesting data, whether it's correction, long-range insertion into genomes, et cetera. So all in all, we're very pleased with the breadth of our portfolio, and we feel like we have enough resources to do this in an efficient way and push all of them forward.

Maybe jumping into this in vivo vertical where you've chosen to go into cardiovascular disease. Help us understand why that was the first approach in the context of the risk reward profile, right, where this could be a population where people get -- wait a little bit longer and want to monitor off-target edits or any aspect that could play out there. And then it's also been a very difficult payer environment in that market. So what made you think this is the way to kind of start and go with this vertical?

Yes. So I think it was a counterintuitive bet at the time. If you think about 2017, 2018, a lot of pharma companies were getting out of cardiometabolic. Now that's reversed. You're seeing every pharma company jumped back with the success that we've seen with GLP-1s and some of the obesity and weight loss drugs. But it was an environment where people thought that the investment profile didn't make sense, the large clinical trials were needed. While the PCSK9 story is a fantastic story from a science standpoint, there was a lot of resistance from payers initially. But what people need to realize about our portfolio, we have ANGPTL3 as a target, and I'll talk more about it, LPA as a target, that we're not trying to go directly into the broad population with tens of millions of patients. We're trying to go out, develop a strategy where we go into the rare populations. Let's say, it's HoFH, familial hypercholesterolemia, whether homozygous or heterozygous. There are certain populations that have refractory to statins and all sorts of medicines. In fact, there are patients who are refractory to PCSK9 antibodies that would need something else, like ANGPTL3 or LPA. And so to find the right mix here is biological validation. At this point, ANGPTL3 is very well validated. In fact, there was a recent data from Arrowhead, showing the effect, the cause effect of ANGPTL3 silencing or down regulation. The second part is their development path that's somewhat lean and efficient that allows a biotech to take it all the way to label and then allow us to expand beyond that. And the third is, is there a competitive advantage and a onetime gene-editing approach will have a huge competitive advantage. The compliance within this population, whether it's a 6-month injection or a 3-month injection, is very low, because the disease is not visible. You're not seeing it like you're seeing in the obesity situation. It's -- looking in the mirror every day and saying, "Oh, my arteries are clogged." So the compliance is very low. So onetime down regulation or deletion of the gene is very advantageous in the long run. The second thing is the payer environment. If you think about pharmacoeconomics, it will benefit the payer tremendously do a one-shot gene-editing approach because, let's say, it cost $250,000 for a onetime edit for one of these genes. The benefits are great, and the value is there. But the second thing is you're not paying tens of thousand dollars per year for an antibody or something that -- or an siRNA -- and so there's a pharmacoeconomic benefit as well for the system. So all in all, I think it's a complex calculation, but we feel very good about the approach that we have with ANGPTL3 and LPA. We'll follow that with PCSK9. It is a little more complex because the number of agents that you have with PCSK9 is many more and it's more competitive. But at least for ANGPTL3, we have a pretty clear path. We'll get more regulatory feedback as we go along. But right now, we're focused on getting into the clinic and dosing patients.

And then help us understand with regard to your toolkit, right, CRISPR Cas9, clearly, you've deployed it across all these different programs. But how are you adapting to the dynamic landscape just in terms of the future when you think sustainability? And what I mean is, we've seen base editing, we've seen gene writing and -- how do you think about matching the tool to disease and then the need to evolve for bringing other technologies?

We're seeing everything play out very similar to what happened in the late '80s with antibodies. We had the original antibody technology and IP and then people had improvements on it, whether it was humanization of the antibody, it was fully human antibodies, smaller fragments, all that were improvements upon the original antibody technology. And it wasn't like one platform was better than everything else that was going to take over. It was just what was applicable in a certain setting. And over time, what we've seen is value ultimately accrues to the company that can actually develop drugs effectively and use whatever tools are available. And that's our approach. All these forms of editing that are -- that you're seeing there, whether they're target prime editing or whether it's large insertion of RNA-based editing -- using RNA-based editing, they are all improvements upon the fundamental concept, which is that you can take a Cas9 protein, put it together with the guide RNA, and direct it to any particular region on the genome, like one locus on the genome. So you're targeting it there. So you have like a carrier of sorts on the genome and then you can put any effective protein on top of it, whether you want to do a nick, whether you want to do a double standard break, whether you want to do something else. So I think those are all improvements. And for us, we espouse all of them. In fact, that's one key aspects of establishing CRISPRX. We established as a company within a company. They're incentivized differently. They're -- they operate differently. And they're doing short corrections now with -- using RNA. They're developing new donor templates. They have new delivery technologies. And all that with the notion that we don't want to get disrupted. I think the classic, the 2Ds of biotech, death by disruption, and death by dilution. And we've seen that time and time again with companies that were high-flyers in the space. And we want to avoid both. That's why we have a very strong balance sheet. But from a disruption standpoint, we want to be far ahead. All that said, I think you're getting to a point of marginal improvements in technology. I don't see something coming along that's going to do to us what CRISPR did to zinc fingers or TALENs. I just don't think that kind of step change disruption is going to happen. You're going to see marginal improvement that make it more applicable across different disease areas, and that's great for the entire space.

And just remind us where you stand in terms of optimization around delivery. I mean, there's been a ton of work there for different tissue targets.

Yes. What I would say is that's the space where we're seeing a lot of progress right now. Delivery using LNP to the liver, I think, is solved. I think there are many different LNPs you can use, and they're available out there, whether you develop yourself or you can license it in. And I think we can get genetic material to deliver for RNA-based delivery or double standard donor templates or double -- for DNA delivery, there's still some work to do. For all the other organ systems, you're seeing a rapid improvement in the technology because there are ways now to sort of barcode or identify the LNPs and just try a different mix, and empirically see what's going to which organ systems. So you're going to see LNPs get to other organ systems in the near future, including, let's say, hematopoietic stem cells or whatever else. But again, there's work to do. It's not -- these things don't happen within -- all of a sudden, they don't fall off a cliff and all of a sudden you have fruits of all the work you've done. It takes time to optimize and you're going to see more and more opportunities emerge. There's also work being done with all the AAVs. There's -- I know the investor sentiment is soured on AAVs a little bit, especially given some of the regulatory challenges. But you're getting these second and third gen AAVs now that are very tropic to the brain, for instance, to the -- to certain -- to muscles. And so for neuromuscular indications, I think it may still be in the AAV realm that we see the next breakthrough.

Let's jump into the portfolio here. And so with Axi-Cel, your gene-edited cell therapy for beta thalassemia and sickle cell, congrats on the progress. I know when we talked almost 10 years ago, I didn't think it would be this fast in the context of competition. But help us understand the economics and commercial agreement in place with Vertex. And how you're thinking of approaching the launch in the United States in partnership with them from a payer standpoint, but then just a division of effort.

Yes. I think the Axi-Cel story is quite remarkable. In fact, one of the senior R&D leaders came out of big pharmas, he's writing a book about the 3 or 4 drugs that were developed that have -- that are the most astounding to him, and one of them is Axi-Cel, and we went through the history of Axi-Cel. And -- the reason Axi-Cel moved this quickly, one is obviously the execution from both Vertex and us, but also it builds upon years of evidence. There were studies in the '80s done around population genetics that showed that elevation of fetal hemoglobin could render a patient or a person with sickle genetics normal, right? I think these are people walking around and same with thalassemia. So you start with that basis. And then there is the basis of genetics that's happened over the last 15 years with various entities like Boston Children's and other labs that said, could you make a precise change in the genome to elevate fetal hemoglobin. And that theory is proven out as well, and that's shown to be able to be recapitulated in the lab, but also now in humans with Axi-Cel and other programs. And -- but ultimately, I think for us, that -- what allows us to move Axi-Cel quickly was starting with a clean slate on CMC. I think all the programs you've seen that have had delays with regulators has been around CMC issues. And I think that's mostly because it's been academic processes that are ported into companies that then have to be optimized and you're starting -- you're putting Band-Aids on a lot of things versus starting off clean and saying this is a robust process from the get-go. And so we did that and allowed us to dose patients very quickly and get to this I would say, historic point in time with Axi-Cel, where we're in a position to be the first approved CRISPR-based therapy in the world. And for a platform to go from elucidation to fruition with an approved drug in the span of a decade has been unheard of in biotech or biomedical research before, but we are in that position. but work is not done yet. I think the work is only done when we get this therapy to patients across the world in a very scalable and smooth manner. And we're pleased that Vertex is leading the charge on commercialization. They have incredible experience, commercializing rare diseases. They have experienced payers not just in the U.S. but in Europe. They have experienced establishing these centers and a very high-touch model around these qualified treatment centers. So we feel very bullish about how this could all play out. I think a lot of people are underestimating the level of demand there could be for a therapy like Axi-Cel. And it just highlighted, underscored by our recent EHA data presentation, and the amount of interest there was at EHA. The number of people who showed up for the Q&A later, it just tells you that there is tremendous excitement from the investigator community, but also just from a general physician community around an approach like Axi-Cel.

And remind us what the regulatory filing. Do you -- have you provided enough follow-up and patient numbers in terms of what the FDA may require for a novel technology?

Yes. I think one of the benefits of having RMAT designation early on is that there was a lot of fluid exchange with the U.S. FDA, but also European agencies. And I think we've been trying to make sure that we have everything we need on the CMC front, but also what we need from a package standpoint. But the data are irrefutable. If you look at the data, every patient has benefited. Every single patient. Now there were one patient who had a case of Paulo virus or something like that. But again, that was only a temporary VOC. And every patient has had benefit. The data are very clear. These are patients coming in with several VOC episodes a year, and they're completely free of all the symptoms. Same with thalassemia. These are patients who are coming in with so much transfusion requirement, coming in not acquiring that anymore. And people underestimate and say, a transfusion, you can just get a transfusion. But for those who've gone through a surgery and had to get transfusion, it's pretty complex. You're getting someone else's blood in your system. There's all sorts of side effects that happen like inflammation, vasculitis, et cetera, et cetera. It's no joke that these patients live through that, and then they have iron overload. And if you can get -- take these patients and get them free of all those symptoms and requirements, that's a pretty big deal for these patients. And hence, we're excited about the -- not just the prospects of the drug for us, but the prospects and what it means for the patients and this patient community.

And where do you stand from a manufacturing capability and capacity standpoint to address the demand?

Yes. What we've done with Vertex is created enough capacity, so we're not in a situation at least in the early going, where we're supply constrained. And we've seen that happen with some of the CAR-Ts where there were supply constrained. And not only a lot of capacity but have some buffers so that we can expand beyond where we are with how we utilize existing capacity as well. So we feel good about that. Now if we're completely surprised and we -- the demand is beyond what we've built, I think it will be a good problem to have, but it's easy to add modularly with more suites and more capacity along the way.

And then just talk about where you go from here in terms of going after the larger pool of patients. So where does work stand with regard to more benign preconditioning regimen or just even to an in vivo approach?

Yes. I mean both of those are priorities for us. We're working quite diligently on creating these conditioning agents. Our approach is based on [ SCD ] as a target with a toxin that's not as toxic as some of the other clinical trials we've seen out there. And with the different PK/PD profile, where you get a quick hit. You want the conditioning agent to go in there, eliminate the stem cells from the bone marrow but then not have any effect on the cells that are infused, which are the edited cells. So it's a different PK/PD profile, and we feel good about our approach because a lot of the other agents that were developed were developed with AML in mind or oncology indication. So it's a different profile than built for purpose around sickle cell. So we'll continue to move that forward. I think we'll provide updates along the way. Now Vertex have their own independent efforts not just with [ SCD ] with other targets as well and a relatively large effort. And so between the 2 of us, if any of those work, I think that will be a -- have pretty big implications for the penetration of the market in sickle cell and thalassemia.

For these severe patients and, in particular, the women of child-bearing ability, are they pushing back on the ability -- on the willingness to take this drug? Or are they going to -- or how are you addressing that?

If the interest in our clinical trials is any indication, I think these patients are saying, "I can't live with this disease anymore. I will take a chance and I want to see a ray of hope around being normal and living like everybody else." And I think everything has risk. The transplant procedures have some risk. But compared to what they go through on a day-to-day basis and the life they live -- in fact, I mean, we -- I got to see a couple of -- we hired a couple of -- a couple of our employees had sickle cell disease, and got to see what they live through every day. Every day they come into work could be the day you end up in a hospital. And it could be the day you end up in a hospital where you're treated like an addict and not get the opioids. And so they would carry these doctors certificates and letters with them everywhere they went because should they end up in a hospital, they want to say, "Look, this is a legitimate need for pain killers and opioids." And I think these patients go through that and they -- when they see this chance that they could be normal, they're going to spring for it.

So let's transition over to oncology. It has been complicated when you look at what's been playing out in the allogeneic CAR-T space. CD19, it seems like companies are there. But beyond that, there's optimization that's required, and you've talked about going to the second-generation approach. So just to level set, help us understand where you're comfortable with the portfolios, which one -- which assets need more optimization and when we could start to see more data over the next 12 months?

Yes. If I zoom back out 20,000-foot level and say, if someone told me in 2017 that in 4 or 5 years, we'll have data which shows that there's durable CRs in the heme malignancy with an allogeneic CAR-T, first generation, obviously, that's a pretty good result. If you look at the history of some of the bispecifics, it's taken 15-plus years, if you remember the early BiTE data and the BiTE trials, a lot of work to get to this point. and allogeneic CAR-T is moving at twice the speed of bispecifics. And I think it's going to be better. The limit of improvement of an allogeneic CAR-T is a lot higher than the limited improvement that you have with the bispecific or trispecific. And so we're pretty excited about what we've seen with the first gen programs, 110 and 130. We're seeing a lot of interest in enrollment. In fact, at the EBMT conference recently, we had the presidential symposium with CTX110, with CTX130. We continue to see these stories where patients are wheelchair ridden, they can't even stand up because there's cancer all over their skin, including their foot, and all of a sudden they're walking normally. And so the interest is there for the first gens already and they, I think, can be their own valuable products in their own right. But then we're incredibly excited about the next gen. We came upon these 2 edits, Regnase-1 and TGFBR2. TGFBR2 is more obvious. It has been published before. But the synergy between Regnase and TGFBR2 was something that we saw in our empirical study that was -- that struck us immediately, and we said, this is quite powerful. This is better than any other pairwise edit we can make in these CAR-Ts and they're 10, 20x better than the first-gen CAR-Ts. And if that plays out to any extent in the clinic, all of a sudden, we have not only best-in-class allo, but best-in-class products in DLBCL, let's say. And we also have the potential to make a dent in solid tumors. We were excited 2 years ago when we saw the first complete response in a solid tumor with an allogeneic CAR-T. That was the first complete response with any CAR-T, not just an allogeneic CAR-T. And so I have to put all this in the context of scientific advancements, and I would say I'm pretty happy with how well allogeneic CAR-Ts are going. And I know investor sentiment may be at an all-time low, but what's very encouraging to me is pharma is catching up, steadily. All of a sudden, the level of interest from pharma has gone up in allo CAR-T because everyone feels like even the players that are not in cell therapy feel like they have to make a play in cell therapy eventually. They don't want to do an autologous therapy because it's just not their bailiwick. And they want to be in a gross margin profile of 90% just like small molecules. And the only way to do this is allogeneic cell therapies. In fact, we think that we can get the COGS down to a level that's so much lower, the second gens, that we can make this an attractive product in China and India, for instance, and bring CAR-Ts over there in a scalable fashion. So overall, I feel very encouraged by what I'm seeing on the allo CAR-T front.

And when might we see data from the portfolio across the year?

Yes. So we'll see continuing data for CTX110 and 130 that are targeted towards CD19 and CD70. But right now, I think what we're very excited about seeing is the data with our next gens. Now we may not disclose the data this year. But even with the early dose levels, what we're going to see is a difference in the PK/PD dynamics. In fact, we have a lot of pharma companies tell us, don't wait for the data disclosure, just call us when you see expansion data and PK/PD dynamics because these -- that's -- you're going to see very quickly is this different from what you start with the first gens. Are you seeing what you predicted in terms of expansion or the kinetics of the cells, but also what the phenotype of the cell is. Let's say, you're at day 20, and you see a lot more memory phenotype CAR-T cells, that's a very encouraging sign. So we're waiting to see all these data, and we're accruing and collecting the data, and we feel good about it.

Great. Regenerative medicine. So a lot of interesting development there with regard to type 1 diabetes and your partnership with Vertex on the ViaCyte side. How do you kind of compare and contrast that program versus the gene-edited Semma program? And where could -- when could we get some early proof of concept from that portfolio?

Yes. We're excited about expanding our partnership with Vertex into the regen med area as well. If you recall the history of this is Vertex had a 50-50 partnership with ViaCyte. Vertex had a partnership with Semma, they acquired Semma and CRISPR had a partnership with ViaCyte. And last year, Vertex acquired ViaCyte. So they now have their portfolio Semma products. Effectively, the approach is the same, but the starting material different. They have a cell line from Semma where they have 3 approaches. One is naked cells without any edits where you acquire immunosuppression. They have the cells in a device where you may not need immunosuppression or may need it. And then they have the edited cells. And the holy grail here is to have these cells be infused into the patient without immunosuppression. And then all of a sudden, you have the cure. You effectively have pancreas off the shelf that you've put into a patient that could render them free of diabetes, right? And on the edited cell side, we're -- the ViaCyte program that we've been working together with them on is far ahead. We've dosed a number of patients now to see what the data look like. We recognize that Vertex is going to have its own programs through the Semma partnership. We actually licensed some of our IP around the edits to Vertex in the deal that we did earlier this year with the notion that this is a high-risk venture, but the more shots on goal you have, the more you're going to learn. And eventually, there's going to be -- there's so much value at stake here with the notion of curing diabetes with artificial pancreas that we'll figure out a way to give you up the value or find the value ascribed to each party. But the more important thing is how do we make this work for patients. And that's the single-minded goal that we have as CRISPR, but also I sense the same goal from the Vertex side.

And where are the risks with your program right now to kind of not achieving that today and needing more optimization?

Yes. So we did our VCTX210 trial early on with various low cell doses to alleviate some of the concerns that we perceive regulators may have, which is are the cells coming out of the device, is there anything else happening to the cells from a phenotypic standpoint, are they fully differentiated, what are you seeing. So we did some of that. We got -- we have the data necessary to say we are confident moving forward 211, VCTX211, and we're dosing patients here. So we feel good about the clone. We feel good about the edits we made in VCTX211. The device engineering always needs more optimization, but ViaCyte had done a lot of that. This was their Gen 5 device in a way. So we're -- we hope that it just works with what we have right now and would not need any more configuration or optimization.

What are you most excited about coming out of CRISPRX?

The ability to correct genes, but also to insert long genes into the genome in a specific fashion is going to be very powerful. What we've seen with the in vivo set of disease is that they can -- diseases they can approach with -- address with in vivo approaches. There is about 20 or so indications you're going to do a gene knockdown right now, that's right in front of us. There may be more over time. But if you can correct genes or insert genes, that's like 100 or so indications you can go after. So the size of the prize in a way is much larger, the unmet need is also there in a lot of the indications. But I think we're pushing both forward and parallel. I think there's more biological validation happening. So if you take NASH as a disease, for instance. Now you have markers and edits, which are directly implicated in NASH. And you can just turn off those genes, you may have a potential cure for NASH, right? So that's all being validated through some of the clinical trials with siRNA and we can quickly follow with gene-editing if that proves to be positive. And then with gene correction, there are tens of diseases. There's still -- there's the enzyme replacement type of indications like Fabry and Gaucher, there's hemophilia, there's PKU, there's so many indications you go after if you can correct or replace genes. You can do that largely with liver delivery. So that's all exciting. So with CRISPRX, the mandate we have is, let's be very smart consumers. We're going to look at all the technologies developed out there. Whether they're RNA based or DNA-based, we're going to look at all the donor templates out there. And what we want to see is correction levels that are meaningful for the indications we're going after 20%, 30%, with the appropriate delivery. We want to see insertions at a reasonable efficiency as well. And all these are data that we'll put out there at some point. I don't know if this year we'll do an innovation day or not. But at some point, we want to say here's our approach in vivo holistically with our advanced programs and everything else behind it and here's the technology that's going to support 10 more programs in the future. So it's very exciting.

Any questions from the group?

For your diabetes program, you mentioned the different starting materials that you use and -- versus Vertex. And I just wanted to see if you could walk through exactly what those differences in cell state is and the puts and takes of those 2 approaches.

It was just a different cell line. It's -- they had a starting cell line that Semma was using. That's, again, they're pluripotent stem cells, but it's just a different cell line. And you start with a different cell line and then you make your edits, and you differentiate to whatever state you wanted to differentiate too. So that's the difference in substrate.

Well, with that, Sam, thank you so much. We appreciate the time today.

Yes. Thank you very much.