Precision BioSciences, Inc. (DTIL) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Precision BioSciences in vivo gene editing collaboration with Lilly conference call. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Alex Kelly, Chief Corporate Affairs Officer. Please go ahead.

Okay, thank you. And good morning, everyone, and welcome to the Precision BioSciences webcast to announce our genome editing research collaboration and license agreement with Eli Lilly. I'm Alex Kelly, and I'm the Chief Corporate Affairs Officer of Precision BioSciences. And before we begin, I'd like to remind you that some of the statements regarding Precision's future expectations, beliefs, intentions, goals, strategies, plans or prospects are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. [Audio Gap] forward-looking statements, including without limitation statements regarding the expected benefits of the collaboration, that the collaboration will yield commercially successful products and the expected milestone payments and royalty payments. The forward-looking -- such forward-looking statements involve known and unknown risks and uncertainties and other important factors, including without limitation the risks referred to under section Risk Factors in Precision's quarterly report on Form 10-Q for the quarterly period ended September 30, 2020. As such, factors may be updated from time to time in Precision's other filings with the SEC, which filings are accessible on the SEC's website at sec.gov and also on the Precision BioSciences investors and media page of our website at investor.precisionbiosciences.com. All forward-looking statements speak only as of this date. And as except required by applicable law, Precision has no obligation to update or revise any forward-looking statements contained herein whether as a result of new information, future events, changed circumstances or otherwise. By now, you've seen the news released this morning. And we want to give Matt Kane, our CEO; and Derek Jantz, our Chief Scientific Officer, as well as 2 of our -- and 2 of our co-founders, the opportunity to speak with you about the Lilly in vivo gene editing collaboration and what it means to Precision BioSciences. You probably also know that we have more news coming this year on our lead allogeneic CAR T cell therapy PBCAR0191. We will be sharing the data soon, so today's call and our Q&A, we will focus on the collaboration with Lilly and on our in vivo gene editing portfolio. With that said, let me turn the call over to Matt Kane, our President and CEO and a Co-founder of Precision BioSciences.

Thank you, Alex. Again, my name is Matt Kane. I'm CEO of Precision BioSciences, a leading genome editing company. I'd like to start by welcoming all of you joining us early this morning as we review this exciting new partnership with Eli Lilly; and as Alex mentioned, update you on some of our in vivo gene correction programs. So let's turn now to Slide 5. So at Precision BioSciences, we are intensely focused on delivering on the vast potential for genome editing to revolutionize our ability to overcome devastating diseases. [ Another ] foundation is a wholly proprietary therapeutic-grade genome editing platform called ARCUS that we developed right here at Precision. The ARCUS genome editing platform offers us numerous technical advantages for the development of potentially curative human therapeutics. And leveraging these advantages, we've developed one of the industry's leading allogeneic or donor-derived CAR T platforms; and now have a deep pipeline of CAR T programs, 3 of which are currently in human clinical studies. And to date, allo CAR T is where we have invested the vast majority of our resources and are looking forward to updating the market on our lead CD19 targeting program later this quarter, but we've also quietly built what is arguably the leading in vivo gene correction platform as well. We were the first to publish successful in vivo editing in nonhuman primates, and today we will be sharing some of our preclinical data on a few of our in vivo gene targets. Now just as we have done with our CAR T platform, our near-term strategy in in vivo editing has been built around selecting highly validated genetic targets, developing in vivo -- I'm sorry, in-house manufacturing capabilities at a very early stage fully leveraging the unique expertise of our team. And we have 2 of the world's leaders in genome editing and, frankly, 2 of the true pioneers in my co-founders, Jeff Smith and Derek Jantz, who are leading us from within the company. And this is really important because they are fully focused on ARCUS. And finally, we sought out leading industry partners to help us more rapidly unlock the vast potential of ARCUS to potentially cure genetic diseases. Let's turn now to Slide 6. And unlock this potential is exactly what we're seeking to do in this exciting new partnership with Lilly. Precision BioSciences is clearly a leader in the field of genome editing and has developed a very deep set of editing-related capabilities over the last 14 years. Joining forces now with Lilly, a global and trusted health care leader with deep expertise in clinical development and in delivering greatly needed therapies to those in need, makes a ton of sense. And the time for us is right. We feel that this collaboration is a perfect match of capabilities and aligned commitment to make an outsized impact in the treatment of genetic disease. Let's turn now to Slide 7. This is a truly transformative collaboration for Precision BioSciences; and allows us, in partnership with Lilly, to directly impact the course of a genetic disease at its source at the DNA level, utilizing ARCUS to develop what could be life-changing treatments for patients suffering from genetic disease. And importantly, all of this is outside of and now additive to our existing efforts in oncology. And the commitment that Lilly is making to this early-stage partnership is tremendous. Of the 6 targets they can select, Lilly has already picked Duchenne muscular dystrophy and 2 undisclosed targets to be a part of the collaboration. Lilly is also making a significant financial commitment to the partnership, recognizing the potential of the ARCUS editing platform. And we firmly believe we selected the right partner in Lilly as we move towards our long-stated goal of not just treating but actually curing genetic disease. Let's turn now to Slide 8. The role in this collaboration are clearly defined with Precision leading the pre-IND research, development and CMC-related activities; with Lilly leading from IND onwards, including clinical development and potential commercialization. We think this makes a ton of sense and undoubtedly the logical split given our capabilities, focus and our deeply held desire to see the ARCUS editing platform make an outsized positive impact as rapidly as possible. Let's turn now to Slide 9. The first target we are disclosing under this new collaboration is Duchenne muscular dystrophy. And as many of you certainly know, DMD is a devastating genetic disease and one that lacks really any impactful treatment capable of halting the course of the disease, leaving the boys afflicted with DMD to suffer from severe muscle deterioration that worsens greatly over time. So the team here at Precision BioSciences has been deeply exploring approaches to overcome this disease for several years now; and has developed a highly innovative, novel approach to treating DMD that directly leverages some of the key advantages of the ARCUS editing platform, but before I get into it too much, let's move to Slide 10 and allow one of gene editing's true pioneers and our Co-founder and CSO, Derek Jantz, to introduce the ARCUS editing platform, our innovative approach to combating DMD and some of our supporting preclinical in vivo editing data.

Thank you, Matt. If we could please turn to Slide 11. ARCUS is not CRISPR-Cas. ARCUS is actually based on a naturally occurring genome-editing enzyme called I-CreI that comes from Chlamydomonas reinhardtii which is an algae. It is a very rare example of an enzyme that evolved for the purpose of genome editing in a eukaryotic cell with a large genome. The natural job of I-CreI and the algae is shown on the right-hand side of the slide. Essentially what the enzyme does is it hunts through the genome until it finds a particular 22-base-pair target sequence in the 23S ribosomal RNA gene. And then it cuts that site and initiates a gene-editing event in which a new DNA sequence gets inserted precisely into the genome at that location. Because I-CreI evolved to gene edit within the background of a very, very large eukaryotic genome, it has a number of attributes and safeguards that we think make it a very good starting point for the production of therapeutic gene-editing enzymes. First and foremost, the enzyme has a really exquisite degree of specificity, meaning it cuts the target site that we want it to and it doesn't cut off-target sites in the genome. For in vivo editing applications, we really view off-target gene editing as the primary safety concern that we need to have in mind. And I-CreI doesn't do that, in large part because, once it has made its intended gene edit, it self inactivates. It turns itself off rather than wandering off and finding other sites in the genome to edit. And that allows us to express the enzyme for extended periods of time in a cell without worrying about the accumulation of off-target gene edits that could potentially have deleterious effects. A second advantage of the technology is the type of cut that it makes. I mentioned that I-CreI evolved to insert a DNA sequence into the genome. The way that it does that is, when it cuts its target site, it generates a pair of 3-prime sticky ends, which are short, single-stranded sequences on the 3-prime end of the cut. Those sticky ends act as kind of a signal to the cell that the break needs to be repaired through a process called homology-directed repair or HDR, which is the cells' very precise mechanism of DNA repair. That's the mechanism that we need to take advantage of if we want to insert a DNA sequence or sort of swap out one DNA sequence for another to repair a genetic defect. So we can use the enzyme to knock genes out, and I'll show you some examples of that in a few slides, but where the enzyme really shines in comparison to the other editing platforms is when we're inserting or repairing genes. And then lastly, a very practical advantage of the technology: I-CreI is very, very small. It's only 364 amino acids, which means the gene that encodes it is a little more than 1 kb. And that's about 1/5 the size of pyogenes Cas9, which matters in this case because it allows us to take advantage of any of the common gene delivery technologies that are available to actually get ARCUS into the right tissues and the right cell types to accomplish in vivo gene editing. The platform was developed at Precision over the last 15 years. We have a very extensive IP portfolio and freedom to operate, so a pretty unique position in the gene editing space. [ If we want to go to ] Slide #12. ARCUS is the term that we use to describe our protein engineering method for reengineering I-CreI to make it recognize new DNA sequences of our choosing. If we want to make an enzyme to treat DMD, for example, we have to reengineer I-CreI to make it recognize the sequence in the dystrophin gene. And that's actually a pretty involved process, in large part because a very significant percentage of the surface area of I-CreI is actually directly involved in recognizing and cutting its target DNA sequence. And this is shown in the figure in the lower left-hand side. So in order to reengineer the enzyme, we have to make changes not only to the amino acids that are involved in [ conferring ] the specificity of the enzyme, which are shown in pink, but we can also make changes to the amino acids involved in catalytic efficiency, meaning how quickly or slowly the enzyme cuts its target, those are shown in green; and DNA binding affinity, which determines how long the enzyme actually remains bound to its target site. Those 3 parameters, efficiency, specificity and affinity, all sort of work together to optimize the enzyme for a particular therapeutic function. And we can optimize them all independently with one another to fine-tune the enzyme for its purpose. That is a fairly involved process, so as shown on the right-hand side, there is a pretty significant upfront investment that we have to make in terms of time in order to make a clinical-grade ARCUS enzyme. And that involves taking the enzyme through multiple generations and multiple rounds of testing and optimization, but the payoff at the end of that is a very, very high-quality, very high-specificity therapeutic-grade gene-editing enzyme. If we want to go to Slide 13, just a quick note on gene delivery. For in vivo gene editing applications like this, delivering ARCUS is half the battle. And as I mentioned before, because the ARCUS is very small, we do have a really wide range of delivery options available to us. And to a large extent, we're delivery agnostic and we'll pick whichever delivery approach makes the most sense for a given application. Having said that, we are very, very fond of AAV. Because ARCUS is small, it fits very comfortably into AAV. And in fact, we can use a single AAV vector to deliver multiple ARCUS enzymes simultaneously, and that will become relevant in just a moment when I tell you about DMD. We can also use a single AAV vector to deliver an ARCUS enzyme and a homologous repair template to really effect a much greater variety of gene editing outcomes. AAV. We like it because it has a very extensive clinical and regulatory history. We know what's good about it. We know what's bad about it. It offers delivery to a very wide range of tissues, has established manufacturing capacity and practices. And as I mentioned, the off switch of ARCUS allows us to express the cell for an extended period of time as we might expect if we use AAV to deliver the technology without having to worry about the accumulation of off-target editing, so all around a very versatile delivery strategy for us. If we move to Slide 14, please, a quick note on manufacturing. As Matt mentioned, Precision does have significant in-house manufacturing capabilities. We have our own GMP compliance manufacturing facility that we call MCAT. And that facility is currently producing the clinical trial material for our CAR T clinical trials, but in addition to the CAR T suite, the facility also has suites for GMP AAV and GMP mRNA. And we expect those to be very relevant to this collaboration with Eli Lilly, as Precision will be responsible for at least early-stage manufacturing. If we want to jump to Slide 15, please. Let's talk about DMD. So Duchenne is caused by mutations in the dystrophin gene. Dystrophin is the largest gene in the human genome. And generally speaking, the N-terminal portion of the protein and the C-terminal portion of the protein are critical for function, but the rod domain in the middle, which actually comprises most of dystrophin, is at least somewhat dispensable for function. Mutations in dystrophin that cause DMD most frequently are the loss of whole exons from that rod domain. And sometimes, groups of exons are lost spontaneously from the rod domain. Particularly, there is a deletion hot spot between exons 45 and 54 of dystrophin that is responsible for more than 50% of cases of Duchenne. The way the exon loss results in disease is shown in the box on the bottom of this slide. Essentially what happens is, if an exon is lost from the gene, for example, exon 50, what ends up happening is a mis-spliced RNA gets produced from that mutant gene. In this case, exon 49 would get spliced to exon 51. Those 2 exons are in different reading frames, so it introduces a frameshift mutation into the mRNA. And the entire protein downstream of exon 49, including that critical C-terminal domain, is in the wrong reading frame and therefore never gets produced, resulting in essentially 0 functional dystrophin protein. Our therapeutic approach for addressing this is shown on Slide 16. We have developed a pair of ARCUS nucleases that cut in the dystrophin gene. One of them recognizes a target site downstream of exon 44. The other recognizes a target site upstream of exon 56. If we express those 2 nucleases in a cell at the same time, they both cut their target sites. And they basically chop out a segment of DNA that's about 0.5 million bases in length, so really long DNA sequence that comprises that entire deletion hot spot, exons 45 through 55. I mentioned earlier that, when ARCUS cuts the DNA, it does so to generate 3-prime sticky ends. Those actually are very, very relevant in this project because we were somewhat surprised to find that, if we make those 2 DNA breaks in the genome such that they produce compatible sticky ends, meaning the 2 ends can anneal to one another, what happens the vast majority of the time and with remarkably high efficiency is those 2 ends find one another in the genome and just re-ligate that together without the addition or removal of even a single additional base pair. So it's entirely free of the sort of random insertion and deletion mutations that we typically associate with gene editing. And we refer to this process as perfect re-ligation. So what ends up happening in this case is we delete that entire hot spot from the genome. And we now put exon 44 adjacent to exon 56, those 2 exons spliced together in the mRNA. And exons 44 and 56 are in the same reading frame, so now we can produce a functional dystrophin protein, albeit one that is slightly truncated. And this actually mimics a dystrophin mutation that occurs in the human population. So there are people walking around that have a dystrophin gene lacking exons 45 to 55; and they have a very, very mild Becker-like phenotype. So essentially we could -- we can do this and convert a very severe disease potentially to a very, very mild form of the disease. And again, this approach would be applicable to greater than 50% of the DMD patient population. And this works, at least in cell culture. If we want to turn to Slide 17, just showing some quick proof-of-concept data that we can deliver that pair of ARCUS nucleases: 2 myoblasts from a DMD patient. We can produce that exon 45 to 55 deletion in the genome of about 30% of the transfected cells. That then produces a corrected mRNA in which exons 44 and 56 are spliced together. And that then gives us what we really want, shown on the right-hand side of the slide; gives us expression now of a slightly truncated form of the dystrophin protein. So very powerful proof of concept, albeit early proof of concept for a widely applicable treatment for DMD. If we want to go to Slide 18. If we sort of zoom out a little bit and sort of look at the bigger picture of in vivo gene editing, it's important to note that every in vivo gene editing therapeutic application is going to face a very different set of technical challenges. And we sort of think of those challenges as occurring along a continuum that has 2 axes. Along the x-axis is the difficulty of delivery. So for example, liver and eye are 2 tissues that are relatively easy for us to deliver ARCUS to, whereas lung and CNS are much more challenging, but then there's also the y-axis, which is the difficulty of the edit that we're trying to make. It's relatively straightforward to make a gene deletion, as I showed you on the previous slide. And we can do that simply by delivering an ARCUS nuclease or a couple of ARCUS nucleases to the relevant cell type. It's more challenging to insert DNA into the genome or to repair a DNA sequence because doing that requires not only delivering the ARCUS nuclease. We also have to deliver whatever gene we're trying to insert or whatever template we're trying to use to repair the genome, so effectively the therapy has more parts that have to get to the same cell at the same time. So for any given therapeutic application, we can sort of plot them on this chart. And the farther they are away from the origin, the more technically challenging that project is likely to be. The reason I bring this up is our new partners at Eli Lilly, when they selected the genetic diseases for us to focus on, did something very, very clever. And that is they picked indications that have distinct technical hurdles that we need to get over, but once we get over those hurdles for a given indication, it sort of unlocks a bunch of additional indications that we could pursue. So DMD, for example, the big challenge there is delivering ARCUS to muscle and getting high-efficiency editing in muscle. We're very good at editing the liver. We're very good at editing the eye. Muscle will require some additional technology development, but once we overcome that challenge, it sort of unlocks gene editing in muscle more generally, so now we can start to think about indications like myotonic dystrophy or myotubular myopathy. So I just want to highlight that we're taking a very strategic approach to the collaboration and really recognizing that we are very much at the cutting edge. If we go to Slide 19, please. A question that we get asked all the time is how is this ARCUS gene editing approach different from existing methods with RNAi, for example; or conventional AAV-based gene therapy. And the short answer to that is ARCUS allows us to address the root cause of a genetic disease, which is the genome itself; and make corrections to the genome that we expect to be permanent and therefore, hopefully, curative for the disease. And I wanted to provide a couple of examples from other projects unrelated to the Lilly agreement that I think sort of illustrate this. If we want to go to Slide 20, please. This is some data that was generated in collaboration with Jim Wilson's group at the University of Pennsylvania involving knockout of the PCSK9 gene in nonhuman primates. PCSK9 is a gene that is expressed in the liver. It's involved in lipid trafficking and has been identified as a good target for cholesterol control. So we made an ARCUS nuclease to knock out the PCSK9 gene. We put that nuclease into an AAV vector and we delivered that vector systemically to nonhuman primates. What we see is shown in the lower left of this slide, a very rapid and more or less immediate drop in PCSK9 levels in the serum. So greater than 90% knockout of PCSK9 in those animals. And importantly, the knockout is stable over time. So we're out past 3 years at this point, and the PCSK9 gene has stayed knocked out. So the initial hepatocytes that were transduced are long gone. The vector itself is gone, but the gene edit is being inherited by subsequent generations of cells, and this effect appears to be permanent. And that corresponds to about a 50% reduction in serum LDL levels in those animals that is also stable over time, so essentially a onetime administration of the vector that appears to have reduced bad cholesterol by 50% or more, potentially for life. Slide #21 is the same story but a different gene. In this case, we're targeting the TTR gene responsible for transthyretin amyloidosis. You can see, very similar to the previous slide, we administered an AAV vector encoding an ARCUS nuclease to nonhuman primates. We see very rapid and very potent knockout of the TTR gene in those animals. And the gene knockout is stable over time; in this case, greater than 95% reduction in TTR, which is actually significantly more than we need to be therapeutically relevant based on the RNAi clinical experience. And one last data slide. Wanted to give an example outside of the liver. This is Slide 22, is our retinitis pigmentosa program, so an example of gene editing in the eye. In this case, we designed an ARCUS nuclease that targets the P23H allele of rhodopsin. This is a single-nucleotide polymorphism in the rhodopsin gene that is the most frequent cause of autosomal dominant retinitis pigmentosa. So it's a very challenging project from a specificity perspective because we had to make an ARCUS enzyme that can discriminate between 2 genes that are only different by a single base pair. We want to knock out the mutant form in the gene. We want to leave the wild type form of the gene intact. We put that nuclease into an AAV vector and delivered it to a pig model of P23H retinitis pigmentosa. We delivered it via subretinal injection. And what we see is a very significant restoration of vision in those animals, as measured either using electroretinogram, as shown on the left; or as measured in a visual acuity test in which we had the treated and untreated pigs navigate a maze. So a very, very significant restoration of sight in a very good large-animal model of disease. And if you ever see me in person, be sure to ask me for the movies of the pigs running through the mazes because they're really cute and it's kind of funny to see the pigs running through the maze. So I'll leave it at that; and just want to say that I'm very, very excited about getting this collaboration started. And I'm thrilled to be working with the smart and dedicated scientists at Eli Lilly to get this done. I think we're going to do a lot of good for a lot of patients. With that, I will turn it back over to you, Matt.

Thank you, Derek, very nicely done. So if we can move to Slide 23. Look, before we wrap up, I thought it would be helpful to briefly review the terms of this transformative collaboration and the impact on our near-term financials. So our partnership with Lilly includes up to 6 targets, 3 of which were selected at signing, again, including Duchenne muscular dystrophy. The deal includes an upfront payment at closing of $135 million, $35 million of which is an equity investment. And we are eligible to receive additional research funding up to $420 million in development and commercialization milestones for each of the programs as well as additional nomination fees for the 3 additional "yet to be named" targets. Precision is also eligible to receive tiered royalties ranging from the mid-single to low teens on net sales. And we also have the right to co-fund clinical development for one program in exchange for an increase in royalties on the program. And importantly, upon closing, this will more than double our cash on hand, extending our runway into 2023, giving us a strong financial position from which to invest in the most promising programs across our portfolio. So let's turn now to Slide 24, which covers our in vivo gene correction pipeline. With this exciting new partnership, we've added 3 additional programs, including DMD, to what was already a robust in vivo gene correction pipeline. This includes targets we've previously disclosed such as TTR, APOC3, PCSK9, ADRP, HAO1 and hep B. And we are in active discussions with potential collaborators with several of these programs as well. And as Derek has shared with us, we already have some compelling large-animal data for several of these programs clearly demonstrating the power and the versatility of the ARCUS editing platform. And I'd also like to note that we do plan to provide an update on our primary hyperoxaluria type 1 program and some additional platform prioritization in the first half of 2021. So if you could turn to Slide 25. So to conclude, I'd like to thank Eli Lilly for putting their faith in Precision BioSciences as we embark on this important journey together. I'd also like to recognize the tremendous efforts that the team here at Precision has put forth to get us to this point. I mean this truly is an exciting day for Precision BioSciences. We've made tremendous progress in our efforts to aggressively build out a leading allogeneic CAR T platform, with 3 programs already in human clinical studies, as we seek to overcome cancer. And with this new partnership, we now have an opportunity to take a similar approach to curing severe genetic diseases. This is our mission, and we are dedicated to improving life. So thank you. And with that, I'll hand things back over to Alex Kelly.

Great. Thanks, Matt. And thank you, Derek. And now we're ready to take your questions. [Operator Instructions] Also we ask that you please remember this call is focused on in vivo gene editing and our collaboration with Lilly. We ask that you, please, hold your questions about CD19 until our company-sponsored event to release the data, which will be held [Audio Gap] Josh, we're ready to take questions now.

[Operator Instructions] Our first question comes from Maury Raycroft with Jefferies.

Congrats on the update today. Maybe to start off: So for the strategy to use ARCUS to delete exons 45 to 55 and create sticky ends that can re-ligate to make the milder Becker phenotype, can you clarify if there are any other therapies or technologies in the public domain using the same approach?

Yes. Thanks, Maury, for your question. I'm going to let Derek take that one.

Yes, not that I am aware of. There are some, I'm sure, significant CRISPR gene editing efforts underway with -- that are directed to DMD, but anyone taking exactly the same approach that we are, I'm not aware of that.

Got it. And I'm also wondering, how much did other Precision bio capabilities play into Lilly's decision? I guess, how much did delivery technology factor in? And how much did manufacturing and IP positioning factor in?

Matt, can you comment...

Yes. So thanks, Maury. So we can't comment specifically on what's driving, what drove Eli Lilly's decision. We have to, you have to refer that question to our partners at Lilly, but certainly I think -- in discussions that we've had with different potential partners over the last few years and very recently, certainly the capabilities of the ARCUS platform, I think, are becoming much more widely known. And the relative importance of some of these critical advantages that Derek talked about today around our ability to really avoid the truly random off targeting and the small size of the nuclease that enables us to use this wide variety of different delivery technologies is, I think, really becoming much better understood. And then certainly our manufacturing capabilities and freedom to operate is something that I think is very attractive to potential partners. I'll stop there. And Derek, do you have any more to add?

You did great.

Our next question comes from Ben Burnett with Stifel.

Congrats on this collaboration. I wanted to see if maybe you can talk about the delivery challenge as it relates to muscle, Derek. You kind of gave some color around that, but -- and this notion that overcoming this would potentially open the door to other muscle indications. I guess, what are some of the solutions that you're exploring here with Lilly? And I guess, do you expect this to center around AAV?

Yes. So AAV is the obvious choice. We do have a number of AAV-based gene therapies in clinical trials for DMD. So the microdystrophin studies that Sarepta and Pfizer and Solid are all sponsoring. And that sort of allows us to kind of see how well AAV is working in that context. And generally speaking, those groups are seeing -- particularly Sarepta, are seeing clinically meaningful gene delivery to muscle. And to some extent, we can ride on those coattails a little bit and learn from what they're doing and apply that to our programs. So AAV in general is sort of our go to, but there are other sort of newer, cutting-edge delivery strategies for muscle that we're also considering either for the -- a first-generation program or potentially follow-on programs after a -- an AAV-based program.

Okay, very helpful. And then I also just wanted to see if you could comment on just how clear and -- the guidance that the FDA has sort of given just in terms of the types of data and assays that they need to see in order to sort of green light the systemic administration of this type of gene correction profile on people. Is this something that you're trailblazing with the FDA? Or can you kind of -- coming back to what you said earlier, can you ride on the coattails of what other programs have done, particularly CRISPR?

So we are, to a large extent, trailblazing here. We don't have clear guidance from the FDA. And generally speaking, our mantra has been we will hold ourselves to a higher standard. And Eli Lilly will hold us to a higher standard than the FDA is going to hold us to. And I think, as long as we adhere to that, particularly with regard to being open and honest and really doing a very, very thorough vetting of any potential off-target gene editing -- as long as we're doing that, I don't think we're going to have any difficulty with regulators. We do have a very good relationship with the FDA by virtue of our interactions with the CAR T platform. So the regulators are familiar with ARCUS, and to the best of our knowledge, they seem to like the technology. And they seem to appreciate the lengths that we go to, to really extensively characterize and optimize our ARCUS nucleases for each application.

Our next question comes from Raju Prasad with William Blair.

Congrats on the deal. Maybe one on the DMD program: So it sounds like the lead asset is looking at kind of exons 45 through 55. Would going after other exon mutation be a different program in the deal? And is that kind of how we could think about it a little bit? Or I know, Derek, you mentioned that some of the programs are kind of testing different types of optionality of the ARCUS platform. Maybe a little more color on does it test different tissue types as well.

So from a practical scientific perspective, the exons 45 through 55 makes a lot of sense because that represents something like 60% of the DMD patient population that we can get with a single gene edit. As we look beyond that mutation hot spot, the pie tends to get sliced up really small pretty quickly. So that remaining 40% or so of mutations in the DMD population really are scattered throughout the dystrophin gene, including some of them that are in those critical N-terminal and C-terminal regions. So practically speaking, I don't know how much sense it would make to zero in on additional mutations outside of that core hot spot but certainly something that we could consider if we're successful in this initial approach.

Great. And one more, if I may. It sounds like for DMD obviously AAV is the delivery approach, but we're also seeing obviously a ton of focus on LNPs with mRNA vaccines or RNAi therapies or CRISPR going into ATTR. Can you just maybe comment on LNP delivery versus AAV for some of your liver-directed program?

Yes. Great question. LNP works really, really well for liver-directed editing, so it is a viable substitute for AAV in the liver. And LNP does have the advantage over -- excuse me. LNP has the advantage over AAV of being -- having the potential for repeat administration. So obviously, with an AAV, we sort of -- we have one shot before the patient is likely to develop neutralizing antibodies, whereas with an LNP we administer it multiple times. So yes, definitely that is a technology that we are very interested in for the liver editing programs.

Great. And sorry, maybe one last one, if I may: Matt, obviously the in vivo program is -- programs are advancing. Multiple are advancing. Can you just maybe talk a little bit about resource allocation with PH1, hepatitis B and then these programs? Do you still plan on exploring options for hepatitis to find a partner? Just maybe a little bit of strategic resource allocation on your side given how many programs you're doing.

Yes. No, great question, Raj, and thanks for taking the time this morning. So as we've discussed previously, we have a very broad platform in ARCUS. And there is no conceivable [ way in the ] near term that we're going to advance all the possibilities of ARCUS on our own, so partnering is going to remain a key part of our strategy going forward. And as I mentioned earlier, we are in active discussions around additional partnerships both in in vivo and in other areas across our organization. And so the -- a long way of saying that there's going to be additional prioritization that's going to occur as we both determine which of the programs we're going to continue to take forward on our own and which will be part of additional partnerships. And we'll provide some more color on the PH1 program and some of that prioritization in the first half of next year.

Our next question comes from Salveen Richter with Goldman Sachs.

This is Andrea on for Salveen. And congratulations. My first question is, while recognizing that it is early, can you just talk about what needs to be done here before entering a Phase I trial; what the time lines might be; and then which age groups you're targeting, particularly if you anticipate being able to treat a non-ambulatory population?

Okay, yes. Thanks for the question. And while we're not going to get into time lines today, I will let Derek comment a little bit on some of the near-term activities that we would anticipate as we move the DMD program forward.

Yes, sure. So we are with the DMD program very actively working to optimize the nucleases involved. As I mentioned in my talk, producing an ARCUS nuclease that's really therapeutic grade is a fairly involved process. It takes a lot of time. It takes a lot of iterations, and we're still in the process of iterating to get to the clinical-grade nucleases. In parallel, we are working on vector optimization and really optimizing our delivery strategy, with the expectation that the nucleases and the delivery technology are going to come together in the relatively near future and allow us to move into preclinical and IND-enabling studies. Precision is responsible for at least early-stage manufacturing and process development, so that will be getting underway shortly, those efforts. We want to have a pretty significant lead time on manufacturing to make sure that we're ready to produce the GLP [ tox ] materials and ultimately the -- potentially the clinical trial material. So those are the near-term activities for that program. And as Matt mentioned, we aren't talking about time lines at this point.

Got it. And then Derek, maybe just one additional question for you just if you could provide additional color on the nature of these other targets that could fall under the collaboration and where they might fit on that chart that you were mentioning given your comments that the targets could unlock additional programs.

Unfortunately, I can't comment on the additional targets, other than to say I -- really my hats off to the scientists at Lilly that have been very clever and have been very strategic in helping us to pick the indications to focus on.

Our next question comes from Tom Shrader with BTIG.