Editas Medicine, Inc. (EDIT) Earnings Call Transcript & Summary

All right. Thanks for joining us, everybody. I'm Terence Flynn, the U.S. biopharma analyst here at Morgan Stanley. Very pleased to be hosting Editas. Today from the company, we have Gilmore O'Neill, who is the company's CEO; and Erick Lucera, the company's CFO. Before we get started, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. Thank you so much for joining us. I don't know if you guys want to make any prepared remarks, you want to go right into my question.

I think it goes straight into the question. Great to be here. Very excited to be here and talk about what we're doing. And both what we've achieved over the last couple of years and what we're going to be sharing over the next 6 months from a catalyst point of view.

Great. Sounds good. So, last year, there was a reprioritization of the pipeline. Maybe just give us a mark-to-market on kind of where we stand with that update and then the overall strategy and direction for the company.

Absolutely. For -- just to set it, the refocusing of the company, focused on 3 pillars: the strategy one was to Drive Reni-cel, a differentiated autologous EdiTHAL ex vivo approach to sickle cell disease. We actually also rebuilt our discovery to focus on in vivo, which we believe is really the future of editing, and I'll come back to that in a second. And the third pillar really was to exploit the IP that we have as an alternative source of nondilutive financing. And we've actually made a lot of progress against all 3 pillars. On the Reni-cel side, we do have a clearly differentiated profile, an incredibly exciting efficacy. And something I think is worth pausing sometimes because sometimes we forget -- I certainly forget because they look at it so often. But in my career in drug development, I've never seen efficacy like that in the history of therapeutics, we haven't seen efficacy like we've seen with edited, you know Gene-edited products where essentially, we are taking patients in and in our case with multiple severe vaso-occlusive events from their sickle cell disease. And after treatment, they have no vaso-occlusive events. In addition, these patients are profoundly anemic. And after treatment, all the patients have corrected their anemia. They're actually in the normal range of hemoglobin. So this is incredibly potent efficacy. We don't -- we use the word. We're very cautious using more curative, but this is essentially where certainly that disease process is arrested completely, and their anemia is corrected. So we've shared data on 18 patients at EHA from an efficacy point of view, just 3 months ago, we announced that we had dosed more than 20 patients. We announced that we had fully enrolled the adult cohort since then. We have dosed more patients, and we announced it at our second quarter call that we completed enrollment of our adolescent core actually ahead of schedule. Again, a reflection, I think, of the enthusiasm excitement around this therapy. So that's kind of Reni-cel, then from the point of view of in vivo, where actually -- we've made a lot of progress -- we have made a progress both in-house and with external collaborations on delivery, which is a critical element of in vivo editing. We are focused on a number of tissues which we want to deliver, extrapathic with one that we've disclosed, which hematopoietic stem cells for obvious reasons, it builds on the promise of Reni-cel and then actually tissues looking beyond that. And I can return to that more, but we've actually a particularly robust philosophy around how we select the diseases that we do and also how we approach it from an editing point of view. We want to use a very differentiated approach to editing. We're not knocking things down. We actually focused on functional upregulation. That's a key differentiator in 2 ways. First, it differentiates from what siRNA and antisense approaches can do, which are largely almost entirely focused on and only able to knock things down. And then within our space, it's really an area where others really have chosen not to go so far. So that's really important because it essentially allows us to go to white space. And then finally, from a target selection point of view, we're very much focused on the curative potential of these even therapeutics where being first to market or best-in-class he's going to be critical. And in that context, we are making a number of important choices beyond just a function of regulation. We actually are focusing on diseases where the standard of care is either poor or nonexistent either within the char population or a refractory subpopulation, that's because we want to be clearly differentiated from a commercial and efficacy point of view. In addition, we are particularly interested in areas where there are biochemical markets and give you a rapid readout. And then finally, we're very much focused on derisking from a regulatory benefit risk point of view to ensure that by focusing on orphan population or size populations, we can make sure that regulators are confident about the benefit risk and the use of new technologies as we go into therapeutic space. However, we also have to balance that very realistically with the impact in public health and frankly, the commercial value. And so in many ways, an ideal sweet spot is to focus on target indications where a subsegment of a population is refractory. And once you've actually developed and optimized or declared your benefit risk, you can actually life cycle into a larger population without necessarily developing new molecules. And of course, finally, the beauty of the technology is that when you have your delivery and your editing tool combined and maximized or optimized for a particular tissue or cell type, the beauty of CRISPR editing is you change 20 nucleotides on the guide and you've moved to a new target. Now it's not as quite as simple as that. I don't want to disrespect the side. There's a lot of important elements in electing, but it's certainly a lot simpler than building a new antibody or building a new small molecule framework or structure. So overall, that is really where we are driving for and for in vivo. And I think very importantly, we are on track for that in vivo proof of concept by the end of the year. And then finally, on the IP side, from that third pillar of IP and monetization, we did a very nice deal with Vertex. And actually, I'll let Erick, our CFO, tell you more about that.

Well, thanks, Gilmore. We're really excited about the opportunity to get non-dilutive financing for the company via the licensing business that we have. We believe that Cas9 patent that we've licensed from Harvard MIT Broad is a foundational necessary for freedom to operate, and there's a lot of companies out there that are in development, and we believe this is something that we should be able to collect a Cabilly like royalty. If you remember, Cabilly, it was a low single-digit antibody royalty that everybody paid back in the day. So we're really excited about this as a way to help fund our business and we're interested in working with anybody, and we can create sort of a bespoke way to do this based on each company and where they are in development.

Okay. Great. I think there's a lot to unpack there. Maybe the first one I had as a follow-up is just you touched on this a little bit, Gilmore is just the differentiation. So focused on upregulation, not knockdown. So as we think about your platform versus others, is that the key feature? Are there other features that -- whether it's delivery or whether it's the size of the edit, like what other distinguishing features do you think you're focused on as we think about the forward year?

Well, I think the way to think about it is that ultimately, the products that we will make and the therapies made for patients really require a combination of technology, but actually also philosophies. And so if you look at the in vivo, it's about your targeted delivery. It's about the tool that you use to edit. And it's also about your philosophical approach. Do you upregulate or not. Now obviously, upregulation is something we can actually do with an Indel technology, which is what we have not only very robust expertise in, but we've actually clinically validated. We're talking about using ASK1 enzyme, which we have clinically validated. We have human data for that enzyme in the editing of genomes in humans. So that's the second part. And then the philosophy of our regulation is an area that we really embraced. And that's because, one, we believe that's a way where you can truly differentiate. And 2, because we've actually validated. We've actually shown that you can do that in humans. In Reni-cel, that's exactly what we've done. We've actually created an edit in a sort of suppressor element of the HBG1/2 promoter. That is the gene or genes that actually generate Gamma-Globin. And by upgrading Gamma-Globin, we're using it as a functional Humalog or a compensator for -- in the context of sickle cell disease, aberrant or dysfunctional beta-globin or the context of thalassemia missing or absent our under expressed beta global. So that's essentially what you call sort of almost like the validation of this approach.

What are some other areas in terms of disease areas where that approach you might be able to take that approach? Or what's that opportunity set look like where both you have an opportunity to do a knock-in but also you have the ability to deliver the machinery?

Yes. So you go back to 2 elements. One is the ability to deliver to that particular cell type. We've articulated interested in a number of tissues. Liver is obviously one that people have shown they can deliver too. The differentiation approach there is by functionally upregulating. You differentiate from people where most other -- in fact, almost all other approaches are knocking down in the liver. So that really opens a whole new white space, and I'll return to that in a second. The other is if you look at someone like the hematopoietic stem cell, which is an area that a particular interest for us. So that's the first piece. I think from the point of view of the diseases that you could approach beyond those tissues, obviously, you can target hematologic diseases with HSCs in the context of the liver, you have a broad sway of diseases that you can approach. More importantly, what do we know genetically. So one of the focuses we have had in the rebuilding and refocusing our discovery group has actually building and incorporating statistical genetics. The power of human genetics, I think, sometimes is underappreciated. And its true value from a de-risking point of view and identification for One of the things that's happened over the last 10 years that really enables us to truly use human genomics has been the explosion of our computing capacity even without including machine learning AI, just computing capacity. And the second has been the creation of really very large, nicely, really superbly curated genotype, phenotype biobank data sets, not just in the United States but around the world, which enable us to interrogate them not just for interesting diseases, but very importantly, to interrogate them and identify natural variants that can actually give you ascension an allelic dose response, which substantially de-risks the selection of a target. In other words, put another way, it essentially replicates what we've done or leveraged to select our target for Reni-cel, that is an example where we essentially -- well, others actually in decades before identified a condition called Hereditary Persistence of Fetal Hemoglobin, then 3 or actually 4 decades ago, the mutations or variants genetic variants that actually caused a persistent expression of fetal hemoglobin were identified. And then at the same time, the coincident inheritance of persistence of fetal hemoglobin with the sickle cell genotype results in a recognition that patients or warriors who had that co-inheritance, had either minimal manifestations disease or substantially reduced manifestation the disease. That's an example of how a natural variant driving upregulation of a functional Humalog led to a therapeutic strategy and massively de-risked it. So I think that's a wonderful case study of what we're actually doing. And I would say, as we interrogate the data business, what I'm trying to say is that very long widely my apologies, is that there are functional Humalog and frankly, they're also in the context of diseases of haploinsufficiency where one disease gene copy and another has a normal gene copy, you can actually upregulate the normal copy to compensate for the loss of the disease copy. So there are many examples across a multiplicity of diseases that enables to take a very broad approach. So with the right targeting strategy and with that approach, we can actually zero in on sort of a range of diseases, which gives us the chance to essentially optimize our selection from a public health point of view and really to find that sweet spot that on headline before.

Before your Reni-cel what -- when will we know more about that selection process and where you guys are in that kind of choice of next candidate and seeing kind of some of the efforts from the in vivo and the genetic work you guys are doing?

So we haven't specified a forum or a specific date or format for sharing that. But we are on track for human -- or not human, sorry, excuse me, in vivo PoC by the end of the year. What we would plan talk about is the degree of editing we're seeing. And probably, just to enable modeling, describe -- without actually explicitly identifying the genetic target, talk about the size, the prevalence of the population, the TAM, the total addressable market and other critical elements. So people can actually why not share the specifics of the target or the actual genetic target largely because we do want to maintain some competitive advantage for the time being and make sure that we have the opportunity to really progress that to create value for our patients and our investors.

Yes. Can you -- is this a primate model? Is it a mouse model can you...

We haven't specified species, but obviously, we have a number of different in vivo models at our disposal that we're actually using.

Yes. And is that -- you can't say anything about the delivery is at LNP or you aren't seeing...

Well, I think we can talk a bit about that. We really have sort of taken a very focused approach to delivery. We have -- I think LNPs have really been, what I would say is the key lead validated nanoparticle for delivery. And so that's an area that we actually have doubled down internally and externally. And then in addition, we obviously are looking -- we have a weather eye to future and promising nanoparticle technologies. But that's where we're focused on. We did have AAV 2 years ago, but we decided that really from a point of view of focus, building that core expertise, we should actually leave that aside.

Okay. Great. So LNP and again, it's liver maybe hematic panic stem cells, those are like the 2 potential organs. And then again, animal species is not disclosed.

But functional regulation -- regulation is a very critical distinction. We're not knocking things around.

Yes. Okay. And what would be -- how much like what would be a typical development time line then to advance that to an IND filing, like post seeing this proof of constant year-end?

It's interesting to use the word typical considering that the evolution of in vivo editing is really right up it's happening as we speak. I think some of the factors that will impact it, obviously, are the scaling up. At a manufacturing side, I think that's probably the critical thing on the critical path. And obviously, this kind of thing that we would disclose at an appropriate time when we have those elements that we're working on really nails down.

So is it again months or is it years?

As I say, it's not months. It's something that we would actually say one of the things -- one of the rules that we've adopted here over the last couple of years is that if we actually say we're going to do something, we have a greater than 85% probably delivering on that. So when we actually have much more clarity and are ready to share that, we'll share that right time.

Okay. Fair enough. So going back to Reni-cel here, kind of the initial proof of concept of the platform. Again, you mentioned the data that we got at EHA, you've now dosed over 20 patients. Again, I think one question out there in the investment community is just differentiation versus CASGEVY and Lyfgenia here. And so just remind us, as you think about that target product profile and differentiation, what are you pointing people to as kind of the key points as we think about evaluating Reni-cel versus these other products?

From a point from a key point of view, we would point to the absence of the OEs we've seen to date. But very importantly, and I think we think it's a critical differentiation, we have seen correction of anemia in all patients and not just scraping across the lower limit of normal. All patients with 5 months or more a follow-up have shown a durable correction of their anemia, which is well within the normal range. I think that's a very important differentiation. When we talk to our hematology colleagues, they say it's kind of a no-brainer that this makes a difference. So the choice is do you have a patient who has their VOEs controlled, but remains anemic or you have a patient who is VOE controlled and actually has a normal hemoglobin. So those are critical elements. I think the other elements that we're actually very pleased with from a CMC point of view, we are well advanced and have made a significant progress when it comes to successful manufacturing. Indeed, that has exceeded our expectations, and we believe that certainly is going to be a very important potential element when we talk to prescribers at treatment centers, there are a number of things that they think are important beyond just the efficacy parameters such as anemia but actually also support and frankly, the success and confidence in the successful manufacturing are very important elements that they will consider.

Yes. Okay. I'll come back to the CMC side on a follow-up. But the one I just want to get a sense as what -- in terms of this year-end update, I'm assuming ASH is the target venue. -- what -- like how much data, how much more follow-up like maybe help level set expectations for what we'll get in this year-end update.

Yes. So we haven't shared the exact forum, obviously, abstracts, et cetera, et cetera. But from a point of view that we're sharing, we will be sharing data both from our Ruby sickle cell study as well as from our thalassemia EdiTHAL study. We presented data at EHA for 25 cumulative patients, 7 from EdiTHAL, 18 from Ruby. As I said, we already, at that time, dosed more than 20 patients. We've continued to dose. And so, when we're closer to the end of the year, we'll be able to share exact numbers of public. But we're certainly in a very good place when you actually compare or look at the benchmark for a BLA that we use from Vertex, who basically filed with 20 patients and then a supplemental 10 patients. So that -- so we're very good about that. And then from the EdiTHAL point of view, we will have more patients to present as well. More importantly, I'd say as importantly, we will have longer follow-up for our patients, and we anticipate to continue to see a very durable effect, both on fetal hemoglobin expression as well as the maintenance of correction anemia.

Yes. And what month -- EA was in June?

EA was in June.

So, you have another 6 months to effectively follow-up?

Yes.

Okay. Got it. Okay. Great. And on the follow-up side, I know, again, we have the benchmark for the CASGEVY from the BLA filing side. I think they had 16 months of follow-up from their filing.

It's 16 to 18 months is their minimum follow-up time. Obviously, cohort...

Right. You'll be in a similar benchmark in terms of duration of follow-up when we see this -- you see your end update?

Well, some patients will certainly have more than exceeded that. Some will be at that level. And obviously, we will be very close for a benchmark probably for the number of patients as well. And then there's just a matter of following the month.

Okay. So, at what time point would you have about a similar amount to follow-up?

Well, if you're thinking about -- if the benchmark was 30 patients with 18 months of follow-up, I think people will be able to infer from what we present at the end of the year?

Okay. Got it. I guess the other question we get is just commercial strategy here, just given Vertex and Bluebird have kind of are building the market right now. I think there's still ongoing work, but how do you think about kind of navigating that as being kind of the third to market here in the space? What are some of the things you can leverage? And what are going to be some of the challenges as you think about bringing in another product?

Great question. I've done a lot of talking. I'm going to let Erick...

Thanks, Gilmore. We're really excited to be a fast follower. I mean, I've spent 15 years on the buy side. This is a classic fast follower business. If you look at some of the things that Vertex and Bluebird are doing, which have taken time. You have to contract with the centers that has been taking one to 2 years and that time will shrink as the contracts become standardized. You have to get the therapies included in the state Medicaid budgets that obviously the first time you go through that, it takes some time by the time we get to market, that should be a repeat process. There's patient education they need to learn about the therapy and so on and so forth. So, all of those things are happening right now, and we're really excited to kind of come in with hopefully a better product, and we'll see how that goes. We have said many times we're open to OUS partnerships, and those discussions can go lots of different ways. So we're -- I'd say, in terms of the commercial launch, the most important thing is putting the patients and the shareholders first. We're going to make sure we get the drug to as many people as possible and the best way to generate returns for the shareholders. So, I'd say we're evaluating all options with respect to the structure of that launch, but we're really excited to be a fast follower with a differentiated molecule and build that in a capital efficient way.

Yes. If you don't have a partnership at the time of launch, would you wait on the OUS launch? Like would you focus on the U.S. or?

Yes, you would focus on the U.S. because obviously, we need someone to do the development and regulatory to meet the certain requirements of EMEA or wherever else.

Okay. So, there's going to be additional...

There would be additional work. Yes. I mean some of that can be leveraged and Gilmore knows more about that than I do.

So, I work across these spaces, we actually made the determination to focus in the U.S. very soon after I joined Editas and that's been our focus. There is no doubt that most of the information we can leverage, there will be some elements that you have to create for U.S., but bottom line is that we have focused on U.S. states.

And then obviously, the pricing side, there was some differential between these 2 products. Just strategically, how do you think about that in the aspect of again being a fast follower in?

Yes. I mean, I think the ISR guidance was around $2 million. I think that's a pretty good proxy. Obviously, have Bluebird at $3 million in Vertex-2. We don't know what the gross to net is, but I don't think there's any reason to really go outside of that range just given the health economic benefits that we have from sort of third-party people.

Yes. Okay. And then in terms of like, again, let's assume U.S. build, what is that sales force infrastructure investment look like as you think about that requirement? Because obviously, that's something you guys start planning for here if you're getting close to the BLA filing?

Yes, that's something we've thought very carefully about. I mean I think there are a couple of things worth saying is that management at Editas is not filled with a bunch of star idealist. I think Erick has said it very well. We're very conscious about getting the optimal balance for getting the medicine to patients, but actually also with the context of our shareholders. So, we're being very careful about how we spend. The interesting thing about this kind of space and is highly specialized space. is that the commercial model may not be kind of your typical model from a sales force planning point of view. So, we're very conscious about that. We're thinking very creative about that. We're learning from the experiences of Vertex and Bluebird. We're actually franking not only just going to learn from them, we're going to leverage what they're doing. And as I say, keep a very close eye on the optimal way and it was a creative way to ensure that we get the spend to value balance correct.

And from a market standpoint, I think there's about 75 centers in the U.S. that are 80% of the volume. And I think a lot of those centers are in the states that you would expect them to be in based on the demographics. So this is not sort of the Super Bowl advertising mass market, but it's...

It's closely targeted.

It's a highly targeted specialty pharma.

So you're going to get like tens of reps.

It's closer to that than thousands, yes. But we're still working on the details of that. And again, being a fast follower, we can watch all that. And I think we're not only going to learn from the sales forces that they have, but are there better ways to provide service. There's going to be a service component to this. These patients have a long journey, and we think that there are ways to differentiate what we do and we're going to watch and learn. It's really TBD.

Okay. Maybe one other follow-up is, Gilmore, you mentioned the CMC side, you've been pleased with what you've seen. Does that imply that you think you can have a shorter than 6-month turnaround time? I know that's something that CASGEVY has kind of from what we've heard, it's about a 6-month turnaround time. Is there room to improve upon that.

Actually, we've actually done a lot of measure to turnaround time. I would say the key variables now that drive turnaround times are yield from Forese. Actually, we've actually had very good success when you actually ally that to what we need in the context of Cas12. So, we're actually very pleased with that. Another element is of these patients, these warriors in our trials are actually very ill. These are patients who, on average, have had prior to treatment for serious vaso-occlusive events per year each year for the 2 years prior. So, when you think about that, when you're -- during pheresis and even during editing, it's likely that they could have another vaso-occlusive event. And obviously, going through the rigors of transplant, you want patients, these warriors that be in the optimal state of health. So, they need to recover from the vaso-occlusive events. So those are kind of variables. It's probably more host I'd say, or the variance around the patient that actually impact. And obviously, they also want to go through fertility preservation where they want to where this new hope presents -- so they have a medicine which suddenly says, hang on a second, this could transform my life. Now I can think about things like having a family. And obviously, maybe something that they had given up on, but suddenly now this hope is there. So that preservation. So those are probably the key drivers. I would actually say from a CMC and manufacturing point of view, we've really brought those time lines very tightly down, and that includes also the QC a elements.

Okay. So -- but it's 6 months, it sounds like there's variability, but you're not confident it's going to be meaningfully below that at this point, I guess.

No. We can -- I mean, it depends really very much on -- basically, I would say it depends very much on the patient. From a turnaround point of view at the manufacturing point of view, we have the time line is actually really quite tight.

Okay. Got it. Okay. The -- I guess the -- Erick, you mentioned some of the third pillar, the IP monetization strategy. And again, I remember Cabilly started off covering PDLI back in...

Yes. I remember that, yes.

And so, you know that pretty well. I mean as you think about -- obviously, you have the one license already but how many potential...

We have several.

I was going to say like what's the opportunity set out -- because again, like there was visibility on a lot of companies that are leveraging the monoclonal antibody technology. But as we think about how many companies are out there looking to access this technology.

Right now, we've identified about 100 different programs. Half of those are about at 10 companies, which I'm sure you all know the name of who they are. So that's the kind of market that we're talking about here.

Okay. And if you said like how many of those companies you've already had discussions with or can you give any details on that?

Yes, we haven't disclosed that yet. I mean all I can say is we're open to discussions. We're very interested in creating a win-win deal for all the companies that are out there. If you look at what we did on one end with Vertex, that was something that was really designed for a large multinational public company on the eve of launch. And what we did on the other end of the spectrum with VoraBiotech, which was an earlier company, not as large as Vertex less cash less resources that we structured something that met the needs of both of those. But as you think about what is the economic value of these? Think about that Cabilly royalty rate. Think about the consensus revenues that may exist for any product. And then as you probability adjust that for technical success and time value of that in terms of where they are in development, it's very easy to get to kind of what the economic value is from there. And there's no real debate over the Cabilly rate sort of is what it is. That's the standard freedom to operate, license. And everything else is just time value of money. So it's fairly easy.

Okay. Great. The other thing I want to touch on is you recently announced this 2-year extension to your collaboration with Bristol-Myers. Maybe just any more details on that? And what are the milestones that we should think about in terms of that collaboration?

I think there are no real new elements of the extension. It's very similar. Essentially, we just extended what we already have and has been a very successful collaboration. Just last year, when BMS updated their R&D, they had an R&D Day announce sits on their R&D web site, they actually shared 6 targets. Which actually represents 6 of 13 opt-ins that they work on. And indeed, we've had out of that collaboration to DCs, and we have one at least that's in IND-enabling tox. So we're very happy where that collaboration has worked. I think they're very happy with it. I think that extension reflects that. And I think it creates opportunity for both of us to maximize value. I think it actually also highlight something else that I didn't touch on when I was talking about our approach to in vivo. We actually have consciously stepped away from oncology, but BMS is a wonderful example of how we can use our technology, enable its use in the oncology sphere, even if we're not actually focusing that ourselves. And the reason I highlight that is because when we look at in vivo, we -- I have really probably bored to tears in continuously emphasizing our differentiated approach to upregulation. However, there are many organizations out there that maybe have franchises that are in particular areas where there is a knockdown strategy being used today and where they have a desire to protect that franchise or explore or have skin in that game. We are certainly very able to do something along the lines with ovens where we can create a package and give a license. And some know-how for building that maybe a knockdown. But where we're going to direct our capital is on upregulation, but we're actually also going to ensure that we maximize the use of our technology across other elements or other, I should say, areas of opportunity for gene editing.

And those packages can be developed inexpensively by us and give us a 20-year composition to matter.

Okay. And is that -- so it sounds like -- and again, I don't remember if the target was disclosed for the first IND that has not...

No, and that really sits -- BMS will disclose that.

But it sounds like it's oncology in vivo knockdown.

Yes. I mean I think that and you can see that on their...

Yes. Okay. Got it.

It's not in vivo. So these are examples I'm just trying to use as an example forgive me, I was just using that as an example. Forgive me If I confused you, this as an example of how we can ensure that even in areas where we're not playing ourselves, the technology is there for others to use.

Okay. Well, I think we're up against time. But thank you very much, guys. I appreciate that comment. Thank you.

Thank you very much.

Thank you.