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

Good day, and thank you for standing by. Welcome to the Precision BioSciences In Vivo Gene Editing Collaboration with Novartis. [Operator Instructions]. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker today, Alex Kelly, Chief Financial Officer. Please go ahead.

Thank you, Catherine, and good morning, everyone, and welcome to our webcast to discuss our recently announced in vivo gene editing collaboration with Novartis and the financing that we completed yesterday, which together extend our cash runway to the end of 2024. Before we begin, I'd like to remind you that the statements we make today on this webcast that do not relate to matters of historical fact, our future expectations and forward-looking statements. Our forward-looking statements are within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors, including without limitation, the risk factors in Precision's first quarter 10-Q. All forward-looking statements speak only as of this date, and except as required by law, Precision has no obligation to update or revise any forward-looking statements made today, whether as a result of new information, future events or changed circumstances. With that said, I want to introduce the call participants. First, we have Michael Amoroso, our President and CEO; next, Derek Jantz, our Chief Scientific Officer and Co-Founder; and Cindy Atwell, our SVP of Business Development; and also, Alan List will be joining -- Alan List, our Chief Medical Officer, will be available for the Q&A session. With those things said, please let me introduce Michael Amoroso.

Thank you, Alex, and good morning to our investor community. Thank you for being with us today. Throughout the presentation, what we'll do is we'll call out the slide number. I know some of you are in front of the deck, some have paper versions, so we'll try to make the navigation easy for you. My name is Michael Amoroso, for those who I have not met, the proud CEO of Precision BioSciences, this morning. Thank you for being with us. We're excited to be with you, to share our newest partnership with Novartis in sickle cell disease and other specific hemoglobinopathies. Slide 4, please. We'll begin with a brief background who is Precision BioSciences. First and foremost, Precision BioSciences is a gene editing company. We utilize and have the proprietary rights to the ARCUS genome editing platform, a platform that we believe is the best gene editing platform in the world, created by our own Dr. Derek Jantz and Jeff Smith. Derek will highlight some of those reasons today in the context of our Novartis deal. And a platform that was created and sold rights proprietary to Precision BioSciences. We are a dual-platform company starting with the foundation of our house being our in vivo gene editing platform, addressing genetic diseases within the human body with intent potential onetime treatment and cure. Our first lead organic programs wholly owned, in vivo, our PCSK9, PH1 and hepatitis B, where we just released some exciting data at ASGCT [ in May ]. On the other side of our house, we utilized only ARCUS to make a single gene edit, single-dose, donor-derived and off-the-shelf allogeneic CAR T therapy for patients with relapsed/refractory hematologic malignancies. And PBCAR0191 is our lead asset there that we just reported exciting data about 2 weeks ago at the close of ASCO. Slide 5, please. Next, we'll start this morning with an overview of our newest partnership with Novartis. The partnership highlights and will build upon ARCUS capability as an in vivo gene insertion or gene addition tool of sickle cell disease and beta thalassemia. Precision will generate a single nuclease for a single safe harbor target to be delivered to hematopoietic stem cells. Precision's received $75 million upfront for a single target, with the possibility of an additional $1.4 billion in tiered royalties and milestones. This partnership continues to highlight the versatility of ARCUS to be delivered to tissues beyond just the liver. We now have ongoing programs internally or through partnerships at the liver, muscle, CNS and now HSCs. Last, this partnership unlocks value and capability for Precision as the $75 million upfront, with an additional $50 million raised in the private placement, discussed by Alex at the beginning of the call, for a total of $125 million, allows Precision operational cash runway to year-end '24. Our teams will be focused on execution. Slide 6, please. Why Novartis? Precision is very selective about their partners and simply stated, we believe Novartis is a world-renowned drug development organization, highly capable with a similar united mission as Precision to bring a solution of hard-to-treat sickle cell disease and hemoglobinopathies to patients around the world. Here, I'll let you digest the quote of Jay Bradner, President of the Novartis Institute for Biomedical Research. Quote highlights the synergies with Precision and our united mission. We appreciate Jay and the Novartis team greatly as he was one of the great driving forces to finalize this partnership. We look forward to this partnership with Novartis. Now Slide 7. I will turn it over to Dr. Derek Jantz for an update on the science behind this partnership and in a short while, our Head of BD, Cindy Atwell, will take you through some further deal dynamics. Derek, please?

Thank you, Michael, and good morning, everyone. If we're going to turn to Slide 8, please. Our ARCUS gene editing technology is based on a natural gene editing enzyme from algae, it's called I-CreI. And what I-CreI does in the algae is shown in the fancy animation on the right-hand side of this slide. It basically gets expressed, it hunts through the genome of the algae until it finds a particular 22 base pair DNA sequence in the 23S ribosomal RNA gene. And once it finds that particular site, it cuts both strands of the DNA. But very importantly, the top and bottom strands of the DNA are cut, offset by 4 basis. And this is shown by the location of the 2 pairs of red scissors in that figure. This results in the production of a 3 prime overhang on either side of the cut, and that is going to be really important to the story in just a moment. Once the genomic DNA is cut, a new piece of foreign DNA gets inserted right into the middle of it. And that foreign DNA is actually the gene that encodes the I-CreI enzyme. The I-CreI is what's called a selfish DNA. It exists for the sole purpose of inserting its own DNA sequence into this particular spot in the genome of the algae. So the bottom line is I-CreI evolved for the purpose of adding a gene to a specific location in the genome of a complex [ eukaryotic ] organism. It did not evolve to knock a gene out. And because of this, it has fundamentally different enzymology from CRISPR and the other editing technologies. To produce an ARCUS nuclease at Precision, we reengineered the I-CreI enzyme from algae to recognize new DNA sequences of our choosing. And this allows us to redirect the enzyme to genes of therapeutic interest, while maintaining the properties of the natural I-CreI enzyme that we think make it a highly advantageous platform over CRISPR and the other editing technologies. And in particular, in the next few slides, I'm going to highlight 3 advantages of ARCUS that we think make it the best option for an in vivo editing therapy for sickle cell disease. The first of those advantages is on Slide 9. And this advantage impacts safety. So ARCUS is unique among the editing platforms, in that it self-inactivates. It has the ability to turn itself off. The enzyme can switch between an active form and an inactive form and in the absence of its target DNA, the enzyme defaults to the inactive form that cannot cut or edit the DNA. So once a gene edit is made at the intended target site in the genome, the enzyme then shuts itself down, so it can't cut any off-target sites. What this allows us to do, why this is really important is it allows us to express an ARCUS enzyme for an extended period of time without having to worry about off-target edits accumulating after weeks or even years of continuous expression of the enzyme, which means we aren't limited to transient delivery systems like lipid nanoparticles. We can use any viral or nonviral gene delivery vehicle, including AAV, despite the potential for prolonged expression of the ARCUS enzyme. To date, we have conducted long-term nonhuman primate studies with 16 different ARCUS enzymes delivered via AAV. And collectively, we have over 80 years of in-life data from those studies without a safety event. And the editing profile that we see a couple of weeks after ARCUS delivery is the same as what we see after several years of continuous expression. I think that pretty clearly suggests that ARCUS is very safe even with long-term expression. The next advantage I'd like to highlight is on Slide 10, and this relates to gene delivery. Arcus is small. An Arcus gene is about 1,000 basis, and it's easily the smallest of the gene editing technologies. It's even significantly smaller than the micro Cas9s that have been described recently. What that means is it fits very comfortably into AAV or any of the commonly used delivery vehicles, and we have both AAV and lipid nanoparticle platforms in-house. ARCUS works well with both of them. Now because ARCUS is so small, it lets us do something very interesting, which is shown on this slide. We can put an ARCUS gene into an AAV vector with a tissue-specific promoter and still have about 3 kb of additional carrying capacity left in the vector. And we can use that additional capacity for gene cargo that we want to insert into the genome at the site of an ARCUS induced cut. So essentially, we can get both of the parts that are necessary for a targeted gene addition therapy, meaning the ARCUS enzyme that makes the targeted cut as well as the transgene that gets inserted into the cut, we can fit both of those parts into a single vector. And this allows us to add genes efficiently to tissues where AAV is the only available delivery option. And on the subject of gene addition, if we can go to Slide 11, please. The final unique attribute of ARCUS that I'd like to highlight and that is very relevant to the sickle cell collaboration is its versatility. And specifically, ARCUS is really, really good at adding genes to the genome. Remember, that's what the I-CreI enzyme actually evolved to do in the algae in the first place. It adds a gene to the genome. The reason it's so good at adding genes is the 3 prime overhangs that I told you about a few slides ago. When Arcus makes a DNA break, the 3 prime overhangs very potently stimulate DNA repair by a process called homology-directed repair, which is the cell's high fidelity repair mechanism. It's a completely different process from the non-homologous end joining pathway that creates the gene knockout mutations that we typically associate with CRISPR-Cas. By stimulating preferentially the HDR pathway, ARCUS can drive site-specific recombination between the cut genome and the repair template that we provide to the cell that carries a new gene. The result is that the new gene gets inserted permanently into the genome at the site of the ARCUS cut. On the right-hand side of the slide, a very nice demonstration of this was shared by Lili Wong from Penn at the ASGCT conference a couple of weeks ago. Lili and team used an ARCUS nuclease that targets the PCSK9 locus to insert a transgenic copy of a gene called OTC, that's defective in a rare genetic disease. Using AAV delivery, the team showed high-efficiency gene addition in nonhuman primate liver. In the stained micrograph on the lower right-hand side of the slide, that sea of red cells that you can see is all of the hepatocytes in the monkey that were successfully edited to acquire a copy of the OTC transgene integrated stably into the genome by Arcus. We have never seen that kind of efficiency with any other editing technology. And as I'll tell you in just a moment, this is going to be very, very relevant to what we're doing with Novartis in sickle cell. If you go to Slide 12, please. Our collaboration with Novartis is focused on sickle cell disease, but the therapy can likely be applied to other hemoglobinopathies, like beta thalassemia. As I imagine, a lot of you already know, sickle cell is caused by a point mutation in the beta-globin gene that causes the protein to misfold and gives red blood cells a characteristic sickle shape that cause them to get stuck in blood vessels. It is a major world health problem that affects millions of people worldwide. And importantly, for this discussion, the vast majority of sickle cell patients live in the developing world, primarily in sub-Saharan Africa. If you go to Slide 13, please. What we're working on is an in vivo therapy for sickle cell. This is a very different approach from all of the other gene therapies that I'm aware of in development for sickle cell, all of which are ex vivo approaches that involve extracting hematopoietic stem cells from the patient, modifying them outside the body and then returning them to the patient. That type of ex vivo therapy is, in essence, a gene therapy on top of a stem cell transplant. So it's a very complex therapy that probably isn't applicable to the vast majority of patients who live in geographies that don't have transplant centers. What we're hoping to achieve is a onetime IV administration of our therapy. The therapy would then traffic to the bone marrow and modify the hematopoietic stem cells in the patient. It's an approach that, if successful, would be far more amenable to treating patients in developing countries. And our hats are off to the Novartis team for making the decision to develop a drug for these greatly underserved patients. Next slide, Slide 14 shows what we would like to do at the molecular level. This is a gene addition therapy. Our objective is to deliver an ARCUS nuclease that makes a cut in a safe harbor locus in the genome of hematopoietic stem cells. An anti-sickling gene will then be inserted permanently into the genome at the site of the ARCUS cut. And remember, I told you earlier that inserting DNA is what ARCUS is really good at. And then as the HSC divide and differentiates, the anti-sickling gene will be expressed in erythrocytes, to hopefully counter the sickling mutation and restore normal cell morphology to ameliorate the symptoms of disease. Because I know somebody will probably want to ask for competitive and IP reasons, we are not yet disclosing the exact location of the safe harbor locus or any specifics about the anti-cycling gene. If we can turn to Slide 15, please. I would like to talk for just a moment about how this new project fits into our overall strategy for in vivo gene editing. We made a decision to start with programs that have the fewest technical challenges associated with gene delivery. So these are programs that involve knocking genes out in the liver. And that's similar to what some other gene editing companies are doing. The rationale for this is it gives us the best opportunity to validate ARCUS in the clinic as well as validating both our AAV and LNP delivery platforms. And to that end, as Michael mentioned, we expect to file INDs for our wholly owned PCSK9, PH1 and HBV programs in '22, '23 and '24, respectively. But at the same time, we're very interested in getting beyond the sort of low-hanging fruit and expanding ARCUS into white spaces where we don't think the other editing technologies can go. That means indications outside the liver and indications that require more complicated edits than simply knocking a gene out. For these more challenging programs, we have actively sought out partners who can bring expertise and resources to the project and help us build out our internal capabilities. In 2020, we announced a partnership with Eli Lilly to develop 3 in vivo gene editing therapeutics, including a potentially curative therapy for Duchenne muscular dystrophy. And we are very pleased to announce today this new collaboration with Novartis focused on the treatment of hemoglobinopathies. And with that, I will turn it over to Cindy Atwell to tell us a little bit more about the deal itself.

Good morning, and thank you, Derek. It's wonderful to be here today. ARCUS -- as you've heard from Derek, ARCUS is a platform technology that has a large number of applications and partnerships with companies, such as Novartis, allow us to more rapidly apply ARCUS in areas which are outside of the focus of our internal development. Now if we turn to Slide 17. As we have a -- we do have a systemic approach to business development and rules of engagement for selective in vivo gene correction partnering. The Novartis deal checks all of our boxes. Now we are focused on leveraging the unique attributes of ARCUS to enable development of differentiated products. This includes the safety and versatility, including complex edits, such as gene insertion or genic excision and/or targets which are outside the liver. And we believe strongly that ARCUS is the premier gene editing platform because of these unique attributes, which Derek elaborated on. And this deal is a great example of enabling entry of ARCUS into an area outside of our core focus and really enabling ARCUS to more rapidly reach patients who have sickle cell or beta thalassemia. Now if we turn to Slide 18. The deal structure leverages Precision's unique core capabilities, which include generating and characterizing ARCUS nucleases, while at the same time, we are working with Novartis, a company which holds deep expertise in the development and commercialization of blood disorder therapies. Precision is responsible for the design of the safe harbor new place for gene insertion. We conduct the in vitro characterization of the nuclease, while Novartis is responsible for all other research, development and commercialization. The deal structure creates minimal distraction from Precision's work on its internal programs and bringing PCSK9, PH1 and HBV ARCUS therapeutics to patients. At the same time, it allows us to expedite the ARCUS development in areas that are outside of our core focus and get these therapies to patients much more quickly. Now please turn to Slide 19. In terms of the deal economics, the Novartis deal is a single target deal with $75 million upfront, $50 million in cash and a $25 million stock purchase at a 20% premium to a 10-day VWAP, which ended on June 13. Novartis purchased about 12.4 million shares in total. There's the potential for up to $1.4 billion in total milestones and fees. In addition, Novartis is responsible for the research funding. Additionally, Precision is eligible for mid-single digit to low double-digit royalties on commercialized products. Turning to Slide 20. The Novartis deal further validates ARCUS and is complementary to the Lilly deal, as it allows us to apply ARCUS for gene editing in hemopoietic stem cells, further expanding the tissue types, in which we are gaining experience with ARCUS. Our Lilly partnership enabled us to gain experience with Arcus in muscle through the DMD program, liver and CNS. As a reminder that Lilly deal economics, we received $135 million upfront including $35 million in equity. And we have the potential to receive up to $420 million per product and milestones with mid-single digit to low-teen tiered royalties. We are working closely with Lilly in this research collaboration to treat and potentially cure challenging genetic diseases. Now both of these partnerships provide validation to the ARCUS technology, allowing us to unlock the potential of ARCUS and now 4 different tissue types. Most importantly, this will enable us to reach more patients more quickly with these novel treatments and possible cures. With that, I'll hand it back over to Michael Amoroso.

Thank you, Cindy. Thank you, Derek, for exciting presentation. Slide 22, please. So in summary, where does this leave Precision BioSciences. We believe with an incredibly promising future and in vivo and ex vivo, not shown in the slide here today, pipeline with great promise for patients who have the highest unmet need. First, our wholly owned programs, where we will lead end-to-end development and commercialization, PCSK9, PH1 and hepatitis B, then our highly selective and promising partnerships, our latest partnership for sickle cell and beta thalassemia in hematopoietic stem cells with Novartis, our ongoing partnerships with Lilly for Duchenne muscular dystrophy and for 2 undisclosed targets, focusing on liver and central nervous system, and finally, our partnership with iECURE in OTC and PKU. Slide 23, please. Before we move to open question and answer for our investor community, I wanted to sum up with thoughts on Precision BioSciences. Precision Biosciences is and will continue to be a leading gene editing company in this space. This is underpinned by our technology, proprietary. ARCUS has unique features that we believe make it a best-in-class in vivo gene editing tool. And we think this Novartis deal helps to continue to validate what we've been saying. Our people, we continue to fortify our senior leadership team. We're bringing in people with years of BLA experience because we intend on being an end-to-end organization. This complements Derek's teams of deep science, 15-plus years handling ARCUS, understanding the enzymology, the protein engineering and reengineering for the cleanest possible gene editing clinical candidates. And finally, our focus and our discipline. Three INDs in vivo in the next 3 years. Our lead allogeneic CAR T candidate, PBCAR0191 is now deep in the clinic on the back of some successful data post ASCO. And with this latest partnership and transaction, our fiscal resources will support our operational capabilities. This extends our cash runway with the $75 million upfront from Novartis as well as the additional $50 million raised in the private pipe to the end of 2024, giving us operational flexibility of about 2.5 years. With that, operator, I will open it up for question and answer from our community. Thank you for your time this morning.

[Operator Instructions]. Our first question comes from Ben Burnett with Stifel.

Appreciate the call this morning. Just a question about the collaboration. I understand a lot of this is -- there's some competitive elements and not everything can be disclosed. But I guess what time frame would you estimate that you'd be able to generate this ARCUS nuclease for Novartis?

Yes, Ben, I'll start with this one. Good to hear your voice. Thanks for the question. Thanks for joining us. So what we've disclosed, obviously, we haven't disclosed a work plan, but what we have disclosed is the deal is completed, and we will begin working on the nuclease right away. So that is something we have disclosed. Otherwise, Ben, we have to create the nuclease, and then it will be handed off to some of the pre-clin and IND-enabling activities to Novartis. So that gives you an idea of where we're at in the life cycle.

Understood. Okay. And if I could ask maybe a scientific question. What -- I guess what proportion of stem cells would you estimate at this point that you need to edit in order to achieve the sort of anti-cycling effect?

Great question. It's a good thing I have Derek next to me here. So Derek, could you please chime in on that?

That is exactly the question. So again, trying not to get too deep into some of the science for competitive reasons. We have thought about different strategies that can be employed to really maximize the efficiency of the editing process because I think the short answer to your process is -- or short answer to your question is, we want to modify as many stem cells as we possibly can. What is the minimum threshold necessary to achieve therapeutic benefit? We don't actually know.

Our next question comes from Patrick Trucchio with H.C. Wainwright.

This is Jason, on for Patrick. And my first question is, can you tell us more about the $1.4 billion of additional payments for future milestones? And are these payments all related to development sickle cell and beta thal? Or would this include additional targets? And I have a follow-up question after that.

Sure. Cindy, why don't I give you this question on the additional $1.4 billion milestones, and Patrick (sic) [ Jason ], we'll stay on what's been disclosed in the 8-K. We haven't given an exact breakdown of the royalties and milestones. But I think we can give you some more color on this. Cindy?

Yes. So yes, as Michael said, we haven't disclosed the exact breakdown, but I can tell you it's the typical structure you would see in preclinical development, regulatory and commercial milestones. There are 3 options in addition to the sickle cell target. Those are not disclosed currently, but there are 3 additional options.

Go ahead, Patrick (sic) [ Jason ], I think you had additional question, please.

Sorry, this is Jason, on for Patrick [indiscernible]. Yes. So -- and then just a follow-up question is, can you discuss the clinical data that has been generated today by gene editing modalities in sickle cell disease and beta thal? And how would you anticipate the ARCUS-based nuclease differentiate from that data?

Yes. Derek, we've heard that one a bit. Derek, you want to give some thoughts on what really is out there? I don't know that there's a ton, Jason, but what is out there in vivo for HSC sickle cell?

So as far as in vivo gene editing for sickle cell, I'm not aware of anything, certainly nothing clinical. There are a number of ex vivo gene editing programs. And in particular, we saw some nice data from CRISPR Therapeutics a few weeks ago. But again, this is -- that's editing stem cells outside of the body, so a very, very different type of therapy from what we're contemplating. As far as in vivo data is concerned, I'm not aware of any.

Next question please?

Our next question comes from Kostas Biliouris with BMO Capital Markets.

Congrats on the deal. Two questions for me. The first 1 is now that you have this additional capital, which provides flexibility, are you thinking to somewhat reprioritize the pipeline or the strategy remains unchanged and you are going after the same catalysts and targets you have discussed?

Hey, Kostas, this is Michael. Good to hear your voice. Great question. I think what you'll see, and I hope you see we continue to have focus and discipline. Over the last year, we've continued to follow the evidence and streamline. You see that even first for us divesting out our [indiscernible] business, our agricultural business. From there, we've kind of put a sequential ordering of our furthest along in clinic assets ex vivo, that's our CAR T platform. And we think we have a potential path with our first asset there PBCAR0191, and we slotted the stealth program and BCMA behind that. So again, that's following the evidence and make it evidence-based decisions and really thinking about the patient and need mean, how fast we can get there, of course, with safe and effective products. When it comes to our in vivo, Kostas, I think we remain steadfast on our wholly owned, which in order PCSK9, PH1 and HBV. We always look for what ways here, Kostas, to expedite. The HBV data at ASGCT has a lot of people exciting, including ourselves. So we'll always look for ways and partnerships like this do help us from a resource standpoint to possibly think about ways to expedite that. And now what we're doing, Kostas, is expediting potentially ARCUS drive therapies to -- in disease states that, frankly, we wouldn't have been able to get to on our own in a timely fashion with amazing partners, like Lilly, like Novartis. So I think what you're seeing right now is our streamlining [ pair down ]. Now what I can say is going forward, we'll be incredibly operationally disciplined and will follow data, right? We have very, very stringent target product profiles for all of our programs. We believe are not being [indiscernible], but trying to really move the standard of care in every area we go into. And if we don't see that early in Phase I, Phase Ib we will make the call, and we will look for a different option. So Kostas, I think we'll continue to have that dynamic conversation, but I hope that gives you a little bit of a purview of kind of what our streamlined business is today.

Absolutely. Thank you for the comprehensive answer. And one follow-up quickly. And sorry if I missed that, is this work with Novartis on sickle cell disease starting from scratch? Or you had already performed some work in the sickle cell disease area?

Yes. Kostas, I think what we've disclosed is we're going to begin work immediately on the nuclease. So we have not disclosed anything prior to that. We will be initiating the nuclease generation.

Okay. And Michael, if I can just add on to the first question that Kostas asked. I mean I think one of the key things with the funds raised from the Novartis collaboration as well as the share equity placement yesterday. We'll have the cash to see our in vivo programs, our 3 wholly owned in vivo programs into the clinic with that additional cash that carries us through the end of 2024.

I'm looking forward to it.

Our next question comes from Gena Wang with Barclays.

This is Tom, for Gina. Thanks for the question. We have 2 questions. One is, as you are responsible for the development of the nuclease, is there any prespecified characterization that Novartis are looking for, for example, like certain requirement on specificity? And secondly, what kind of proof content data have Novartis evaluated before enter the collaboration?

Yes. Tom, before I turn it over to Derek, thank you for joining us, and some of those questions go a little bit beyond the purview of what we shared. I guess, Derek, maybe you could give an idea of kind of what the nuclease generation and maybe in vitro characterization looks like that we do for all of our ARCUS nucleases, and anything else you would add there, please?

Yes, sure. I mean I would say in this particular case, again, the nuclease is intended to be used for gene addition. So what we're going to be looking for in the process of developing a nuclease for this particular program is we want to make an enzyme that is able to add genes very efficiently into the genome at the specified target locus. So that's really going to be the primary driver on our end. Obviously, specificity is always paramount. We're always looking to maximize the specificity, but that's true of all of the ARCUS enzymes we make. In this case, the overall efficiency of editing will be measured by how efficiently the enzyme can add a gene to the genome. That was the first -- what was the second question, Tom?

The second question was anything on proof of concept data, right? Any proof of concept data regarding...

Yes, proof of concept. Obviously, I can't comment on anything confidential that they might have seen. I would highlight the data that we have shared previously coming out of Jim Wilson's lab at Penn showing some of this data that I showed actually in the presentation, showing high efficiency gene integration into the PCSK9 locus in nonhuman primates. So obviously, that was a -- we thought a sort of a watershed moment for the gene editing industry, demonstrating for the first time really efficient gene addition in primates.

Thanks, Derek. But Tom, we don't obviously have HSC data to share with you, but these are some of the things that we think were very important in generating interest into this deal.

Our next question comes from Maury Raycroft with Jefferies.

Congrats on the update. In the slide deck, you mentioned Hbe. Just wondering if you can clarify if that's referring to the hemoglobin E variant and talk more about the uniqueness of this target. And for a bone marrow tropic AAV, is that something that Novartis already has?

Yes. So Derek...

Let Cindy take the first one, if I can, Michael.

Go ahead.

In the slide deck, I think it was just meant to say hemoglobinopathies.

Got it. Okay.

Yes. And Maurice, your follow-on was -- please look at the follow-on.

For the bone marrow tropic AAV, so getting the AAV into bone marrow, is that something that Novartis already has? Or is there going to be work that needs to be done on developing that?

Yes. So this has not been disclosed. I'll let Derek kind of address this, but this has not been disclosed, but we could talk about whose responsibility is? What -- Derek, do you want to touch this?

Yes, exactly. So the exact delivery vehicle hasn't been shared yet. Suffice it to say that gene delivery will involve Novartis technology. So Precision, again, we're responsible for providing the safe harbor targeting nuclease and doing the characterization on that. The rest of the therapeutic, including the delivery vehicle that gets it to HSCs, is going to be Novartis' responsibility.

Sorry on that, Maurice. We can't disclose more yet, but we will when we can. And I know it's an exciting dialogue in thinking about HSE. So we will disclose when we can. But right now, we need to stay within the parameters of the deal.

Makes sense. Okay. Congratulations.

Thank you, Maurice. I appreciate your kind words.

Our next question comes from Andrea Tan with Goldman Sachs.

Just wondering if you could provide more color here on the decision to explore sickle cell and beta thal initial indications, perhaps in the context of the competitive landscape, I recognize [ Vertex ] and CRISPR are using an ex vivo approach, but just given the strong data there and that they are on the cusp of a regulatory filing later this year. Just curious maybe the thinking behind going after this initial target?

Yes, Andrea, good to hear voice. Thanks for the question. I'll ask Derek to chime in, in a minute and/or Alan. But I'll tell you, I think it really highlights what we're about, what Novartis is about. Look, taking nothing away from the ex vivo approaches, we wish them very well. These patients have dire need. But I think Derek did a really eloquent job of showing you the epidemiology of these 2 diseases. The different -- really the concentrated areas where these diseases are endemic around the world, and saying that the ex vivo option is not something if it gets across the line, and we hope it does, I want to be clear on that. We're rooting for patients, is not really an option for everybody around the world. So having an in vivo option, we think is really, really important for sickle cell patients as well as beta thal. Derek, please feel free to add a subtract, anything to that.

Yes, absolutely. I mean even if the ex vivo approach is wildly successful as we hope it will be, you're still talking about a, frankly, pretty tiny fraction, the overall percentage of sickle cell patients that would be able to access a therapy like that. So the -- I said our hats really are off to the Novartis team for thinking beyond the U.S. and EU markets and really trying to address the patients in the greatest native a therapy like this. And then obviously, you can imagine that if an in vivo approach, if we're successful in what we're doing, that has significant potential to displace any ex vivo therapy even in the larger markets.

Yes. So Andrea, I guess the last thing I would say on that, and if you think about it in the context of a lot of conversations we have often, even in the CAR T programs, I think we're pursuing a best-in-class, if you would, for sickle cell. So -- but I really am hoping there are therapies before us that we do have to displace. That would be a good problem for these patients with dire need.

[Operator Instructions]. We have a question from David [ Dai ] with SMBC.

Congrats on the update, fantastic progress here. So just a question on the -- targeting the HSC population with your gene adding approach. Understanding that targeting HSC is extremely difficult. It's more challenging than targeting the liver or muscle cells. Maybe Derek or Michael, you can share with us some of the key developments or improvements on the ARCUS nuclease and also you deliver technologies that you're able to implement to achieve the sort of desired level of editing that we're currently seeing in HSC and models ultimately resulted in the deal.

Yes. So Derek, before you start, I think what I'll -- David, good to hear your voice. Thanks for the question. I think when I'll turn that question a little bit to Derek is, David, you can correct me if it doesn't hit the mark. Derek, there's obviously a sickle cell approach with Novartis today, ex vivo. When it came to in vivo, which is a challenge to get to the HSC's delivery, ARCUS was the selection by our Novartis partners. And we think that's really validating from what we've been saying for quite some time. Derek, maybe you could give some context on why ARCUS here for this path forward.

Yes. You really hit the nail on the head, Michael. When we think about sort of performance differences between, say, liver cells and hematopoietic stem cells. In terms of the ARCUS enzyme itself, it will -- as long as we can get it into those cells, it will behave more or less the same way. The big challenge here is how do you get it to hematopoietic stem cells. And as you note, the challenges associated with getting to HSCs versus the liver are significant. So what we and the Novartis team were really interested in doing is minimizing the number of hurdles to gene delivery and maximizing the likelihood that we would get the desired edit in those cells to which we are successfully able to deliver the technology. So that's where the small size of the ARCUS enzyme really becomes important because that gives the Novartis team a lot more options in terms of the delivery vehicles that they can explore for HSCs. This is where having the ability to express the enzyme for an extended period of time becomes very important because whatever vehicle they select if it sticks around for a long time, that's okay. It's okay to express the nuclease for an extended period of time in the HSCs because it turns itself off. And this is where having the most efficient gene addition technology becomes really important because we are trying to get over some threshold of number of cells, number of HSCs that are successfully modified. So having a technology that's able to add the gene more efficiently than, say, CRISPR-Cas is really going to matter in helping us get over that threshold. So if you take all of the advantages of ARCUS together, I think it really points to it being the best option for this type of an approach.

Yes. Thanks, Derek. David, when I sum it up, and Derek always does it more eloquent than me. When I think of the HSC, and I know it's a complicated mission, the 2 teams are going to put their best minds on it. But the safety of Arcus going to an HSC, the fact that it has the size to Derek's point, delivery and then insert, it really is the story we've been talking about here at Precision BioSciences for quite some time. Most gene editing always comes back to deliver and knock out. I think this partnership, if Derek's taught me anything, really, really highlights what ARCUS is about. So we're excited. We're excited to put this in the hands of both companies and hopefully come up with an in vivo solution for these patients in need.

Great. Thanks for the color and congrats on the progress again.

Our next question comes from Justin Zelin with BTIG.

Maybe just a follow-up on Maurice's earlier question. Have you disclosed what the HSCs will be producing, whether it's fetal hemoglobin or another subtype of hemoglobin yet?

Go ahead, Derek.

We have not -- yes, we haven't disclosed that. We have disclosed that we will be adding an anti-sickling gene. And you can scour the literature and find that there are a few different ways to do that. But that's the extent of what we're disclosing at this point. I really wish I had more meat for you.

In due time. In due time, gentleman. Go ahead Justin.

Sure. Yes. And maybe just curious on your thoughts about the evolving regulatory bar in sickle cell, how do you see the end points being between hemoglobin numerically levels or [ VOCs ] and whether this approach could hit both of those 2 targets?

Yes, Justin, I have to admit. I am no sickle cell expert as I talk to you in regulatory in some areas of cancer. I don't know Alan, Derek, if you have a thought of Alan's on, any thoughts here? I mean, it's early. We haven't kind of talks about clinical endpoints yet. We're still making the nuclease. Derek and/or Alan, if you're on the line, have any thoughts, please feel free to chime in.

I'm happy to comment, Michael. When you look at the -- what's the cause of death for people with sickle cell disease, it's a thromboembolic event, those vascular events. Certainly, transfusion burden, which is necessary to suppress the sickled hemoglobin causes hemochromatosis. But I think it's going to be those complications, those thromboembolic events, those sickled crises that leads the patient's demise. So I think those are going to be some of the endpoints in a regulatory strategy.

Great. And maybe last question, Michael. Just should we expect additional partnerships in Precision moving forward?

Yes, Justin, great question. I think what you see here is continued discipline on putting programs first, second and third based on data, evidence, need of patients. I think you now see continue to surround ourselves with the right operators to get across the line with BLAs. Now we add to the resources to be able to take a little bit of pressure off to get us through '24. And I think the short answer is, while we'll be head down and myopic on execution of our organic programs, Justin, we'll always be selective for the right possible BD partners. I think that the one challenge I have in my [ career ], which is a pinch me challenge every day I wake up, with most companies, when they do BD, it's dilutive at some level. And sure, that's fair, right? But I think in this scenario, there's so many diseases, so many therapeutic areas, especially in vivo, ARCUS, beyond the liver that we can go to that it really is something we cannot do. I don't know if we were the size of Pfizer if we could do it on our own. So I think the short -- the long answer because not a short answer is we'll continue to be opportunistic, but we feel really good where we are with Novartis, with Lilly. We're really selective in partners. iECURE, an up-and-coming partner, where we did kind of some smart work to get the preclinical work done and the Phase I work in parallel. So we'll continue to be opportunistic if it makes sense and it improves our capability, that means time to human beings and/or our fiscal runways. So I guess the long answer there, Justin, is I guess I hope so, but we're not reliant on it now. We'll be head down, and we'll be getting ready for execution of our own programs. We've got a CAR T program that we might be speaking to regulators sooner than later, I hope. We'll see what the next couple of patients look like. And like Alex said earlier, our INDs getting into clinic with our wholly owned are fortified now, and we can continue to move forward. So that being said, Justin, yes, we'll always be opportunistic about BD, but we will also be very selective. I hope that gives you an idea how we're thinking about the business.

And our next question comes from Soumit Roy with Jones Research.

Congratulations again on both the deals. One housekeeping question, how should we -- how are you going to recognize the $75 million spread across second quarter, third quarter or all in third quarter in lump sum and also the associated share counts increase, both from the Novartis deal and the pipe. Any color will be appreciated.

Yes, great...

Alex, go ahead.

Yes. Thank you, Soumit. Appreciate the question. So first of all, in terms of realizing the cash, so we've received already the $25 million for the equity component of this deal. So that's already in our cash. We'll recognize that in the next quarter -- quarterly reports. For the remainder of the cash, the remaining $50 million, we'll recognize that over the life of the research agreement with Novartis. Similar to the way we recognize revenue with the Lilly agreement as well. So it's done based on kind of over the life of the research agreement and quarter as opposed to seeing a big lump sum from that $50 million come into our financials. Next, on the share count. So before the Novartis deal, we had 62.5 million shares outstanding following the Novartis deal and their purchase of 12.4 million shares. We have 74.8 million shares outstanding post Novartis. And then post the pipe that we announced last night, we have 110.8 million shares.

Got it. And a quick question for Mike, maybe, should we expect from the CAR T side of the program data at ASH? Or can we expect something before that? I was...

Yes. No, Soumit, good question. Yes, I think what we said at ASCO here when we did our presentation 2 weeks ago was that we would give an update around the ASH time frame, whether we're part of the official programming with data submission timing or whether we kind of do what we did this time at ASCO kind of on the closing day or day after, you can expect an update at the end of the year on the CAR T programs, yes.

Congratulations again.

And that's all the questions we've had. I'd like to turn the call back over to Michael Amoroso, for closing remarks.

Thank you, operator. We appreciate your support today to our investment community. We thank you for being with us. We thank you for your questions for pushing us. Please continue to do that. I want to thank my team, who's really done some phenomenal work here over the first 6 months of this year. I'm blessed to be with this group every day. And we hope you're as excited as we are. We continue to hopefully put a very longitudinal path in front of you of commercializing ARCUS and bringing what we believe is the best gene editing platform in the world into human beings, in vivo and, of course, potentially ex vivo with our allogeneic CAR T. So thank you for your time today. It's a great pleasure, and we will speak to you all soon. Please be safe.

This concludes today's conference call. Thank you for participating. You may now disconnect.