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

All right. Thank you, everyone, for joining us at the fireside chat with Precision Bio. I'm Soumit Roy, the Head of Health Care Research at Jones. With us today, we have Chief Scientific Officer, Cassie Gorsuch, she's, I can say, the brain behind the whole project here; and Alex Kelly, he is the CFO. Thank you again for joining us.

Thanks, Soumit.

2025 is a monumental year for Precision Bio. We have -- I've covered the company for -- since 2018 or something like that, and this has gone through a few phases. And now we have really seen '25 could be the pivotal year, clinical data with a highly differentiated gene editing machinery in chronic HBV. Alongside, we also see exciting preclinical data with DMD program, which has turned up again as a very hot topic area this year. Would love to dig into that. We are now seeing a complete shift in the approach of gene editors. Before the focus used to be on rare disease at higher pricing, ease of approval purposes. But now we see gene editors going really mainstream and addressing large markets.

So maybe we can start with, Cassie, if you can walk us through really the decision-making process of not going first with, let's say, mitochondrial targeted disease, but really going towards HBV and then DMD possibly.

Sure. Yes. I mean I think I can start here. I'd be interested to hear Alex' thoughts on this as well. But -- so I've been at Precision for about 9 years now. And in that span of time, we've really evolved as a company. Over that time, we went from having an agriculture business, an immuno-oncology part of the business and in vivo gene editing to really singularly focused on in vivo gene editing. And another thing that came along with that shift was a management team that is laser-focused on commercial opportunities and not drugging targets for the sake of drugging targets, not selecting the same indications that everyone else is selecting, but really thinking deeply about what our technology can do that differentiates it from other gene editing technologies or from other types of clinical development modalities and choosing indications that make sense for our technology and doing that in a really thoughtful way and really prioritizing the pipeline in a way that allows us to move quick. And so as we think about how do we put together a pipeline at Precision from a scientific side, I think, first and foremost, unmet need. Of course, there needs to be a need within the patient population. And then is this an area that ARCUS really shines? Is this an area that we can provide a meaningful difference for patients and that we can be differentiated from other gene editors? And I think we've been really selective and intentional about building our pipeline in that regard.

Alex, maybe I'll ask the question and see how you want to answer with the previous one. Really curious how the investor interaction has changed over the last 2 years. Like do you keep seeing questions around understanding the platform, the editing, how it differentiates with the CRISPR and others? Or that has completely changed into, okay, what's the value proposition, what's...

Yes. I think that there has been a big shift. And I think that the primary driver of that shift is that we have a program, an in vivo gene editing program in the clinic, right? So it's been really a game changer in terms of investor interest, also in terms of interest coming from business development partners as well because now there's something concrete that either the investors can focus on in terms of next milestones and catalysts, but also potential partners now have something that they can anchor to as well. And whether we're talking about that program and business development or other ones that we've already developed or de novo programs that might be brand new in a partnership, it's just kind of created the view that there are opportunities in in vivo gene editing with ARCUS. And I think that having a clinical stage program kind of is the focus for that attention and then it can go from there into other areas.

Do you find yourself still talking a lot about -- explaining the basics of ARCUS and the differentiation mechanism at all? Or it's like, we kind of educated the market. Let's talk about valuation. Let's talk about clinical trial, patient characteristics and things like that.

Go ahead. You start, Cassie.

Yes. And I think -- yes, we are still talking about the platform. And I think it's important that we continue to talk about the platform because it is so different than the CRISPR-based technologies. And there's so much familiarity and focus on CRISPR-based medicines, whether it's Cas9 or base editors or prime editors or epigenetic editors. They're all built on Cas nucleases. And so I kind of lump them all together. But because they're so accessible, you can order a guide RNA on Amazon probably, and you can use it in every academic lab across the country. That's really -- people start with their gene editing understanding from a place of CRISPR. And so it's important, I think, to continue to talk about why we think ARCUS is unique and differentiated in ways that matter for therapeutic development and continue to drive that message home because you've got to meet people where they are in their understanding of the gene editing space. And I think it's important that people understand that ARCUS is a different platform. It's not the same as CRISPR. And once you understand that, our pipeline starts to make more sense in terms of how we choose indications that can be differentiated amongst the gene editing space.

Yes. And I think just to add on that, I mean, if you look at Precision BioSciences, Cassie mentioned this earlier, kind of traditionally research-led, right, scientifically led. And then over recent years, we've actually done a good job of bringing in commercial and operational talent as well, starting with Michael Amoroso. But you don't have to look much further than that. I mean, myself, Naresh, Cindy Atwell all coming from commercial stage companies as well. And I think that's appropriate for where this company is going forward. And it also changes the lens of how we look at things. I think when it's a research-led effort, it's can we do this? When it's more focused on commercial and operational, it's -- is there a need to do this? -- right? What is the unmet need? Is it satisfied right now by existing therapies or by things that are in development? Also look at the tool in terms of, where is it differentiated? Can ARCUS have some real advantages in certain indications versus others? And then finally, I think with ARCUS, because there's more versatility and there's fewer technical hurdles to overcome, we can also start looking at size of the market as well. And that leads us into bigger opportunities. If you look at our pipeline in terms of the programs we talk about the most, hepatitis B, 3243, mitochondrial disease and even Duchenne muscular dystrophy, they have common features and that there is an unmet need that's identified. The unmet need is large. The current therapies don't provide a cure necessarily for those conditions. And as a result, that's a really great place for us to operate.

Would love to -- if you want to take a few minutes to explain the HBV, how your product works. And really the unmet need there is -- how big the unmet need is because on nucs, patients are there and they are for like 20, 30, 40 years. Why pick that? And how does this kind of work?

Sure. Yes. I think it's important first to kind of understand the progression of hepatitis B. So patients who are infected and remain infected chronically, yes, many of them have access to nucleoside analogs. And nucleoside analogs were a big leap for us in terms of progress in the field, but those really started to come around in the '90s. And if you look at what's been innovative in the space, there really hasn't been a lot of innovation. Unfortunately, there's been a lot of failures in hep B. And I think the fact that there's still a lot of people trying to solve this problem speaks to there's still a need to solve a problem. But also if you look at the course of the disease, patients even on nucleoside analogs still have up to a 30% chance of hepatocellular carcinoma. They have up to a 40% chance of late-stage cirrhosis, liver failure, major complications. And globally, there's over 1 million deaths attributed to chronic hep B every single year, and that number seems to actually be growing. And so yes, I think there's definitely an unmet need. Nucleoside analogs can keep the virus suppressed, but they don't really cure people. It's 1% to 3% functional cure rate with nucleoside analogs, and patients have to remain on them for forever. So we see that as an opportunity to provide a differentiated approach. So our PBGENE-HBV drug is the only drug today in clinical development that is aimed at eliminating the root cause of the virus, which is cccDNA. And if you look across the literature years back, it's widely accepted that if you eliminate cccDNA, you will cure hepatitis B. There's been a lot of other hypotheses about how you might go about doing that by reducing S enough and maybe the immune system will come back. But nobody disagrees that if you eliminate cccDNA, you will cure hepatitis B. And so that's what our North Star is with this program is to use our ARCUS platform to deliver to the liver, to cut and eliminate cccDNA. And our drug can also cut and inactivate integrated HBV DNA, which is important for reducing S-antigen. We know that S-antigen can come from both sources, including integrated HBV DNA. And so you have to go after both in order to reduce HBV DNA and S-antigen with the goal of providing a cure for these patients. So it's a very differentiated approach. Again, it's the only one going at root cause of the disease. And we and others are really excited about having a novel approach, a new way to tackle this long-standing challenge in the clinical space.

Especially when we're talking to physicians, they were like the first group of patients that they think could be more amenable to gene editing are the younger population where they don't want to stay on nucs for like 40 years and have maybe bone marrow issues, bone density problem or slowly progress to cirrhosis on these complications. Do you see that to be the target population first? And how do you balance that with -- since this is DNA editing, now here comes long-term safety do you have to show? Is that...

What's the thought -- yes. So the way that PBGENE-HBV is designed, it could be broadly applicable regardless of how long you've been infected with chronic hepatitis B. We're obviously not starting in some of the later-stage HCC patients or those with heavy fibrosis. It's a Phase I study, and so we're really primarily focused on safety. And so we're starting in a patient population that's e-negative. Those patients are typically later in their disease course in terms of how long they've had hepatitis B. But all chronic hepatitis B patients eventually become e-negative once they get sort of through that more acute stage of their infection. So it's a real-world population. I don't think that necessarily the mechanism would limit you to any particular subgroup in terms of how long they've been infected. But certainly, I think there is a major upside for people looking at, if I go on nucleoside analogs today, I'm going to be on them for a long time. When we talk to physicians, we hear that, that's part of the decision-making process for when to start therapy is how long will they need to be on therapy. So sometimes people are actually delaying actually starting therapy because they know they're going to have to be on this for a long time. And so I think there's upside with this differentiated approach to -- the goal is always cure, right? And to be cured, you have to be off medication. And so this mechanism actually provides, I think, a really logical way to get there.

I think just to add, if you look at -- we've dosed 3 patients now in the Phase I trial. And there is a variety of experiences there. Some patients have had hepatitis B since they were born. Others have had it for a shorter period of time. Some have higher levels of S-antigen, some have lower. And so we're trying to really get a broad distribution of patients in this clinical trial so that we can really know the potential of the program.

Do you really see patients right from the birth to have hep B? Because I thought mother-to-child transmission, vertical transmission was kind of well managed across U.S. to get...

I think when you're talking about the U.S., that's probably true. But I think outside the U.S. maternal-to-fetal transmission is the primary means...

I understand most of the migrant -- immigrant population, they come in with HBV. So you are looking at 30 and above patients [ with HBV ]. Talking about data, clinical data in 2025, you put out very, very early 3 patient data. Two of them showed substantial reduction. What should we expect on the next readout? Like -- because this is at a point where people want -- okay, we want to know if it's going to work. People want to [indiscernible]. So what would be the nature or the quality of the data? 6 patients at least on 3 doses, 2 repeat dose? Like how much...

Look, I think the first data release that we put out in February was really important. Number one, we went to establish safety at the lowest dose. And I think we've done that. All 3 patients had a well-tolerated safety profile. And I think that was very important for us to establish for the clinicians doing this trial and for others that ARCUS in vivo gene editing is safe in this population. And remember, these patients have a disease in their liver. So seeing that the LNP was well tolerated in them was important. And when we shared this data with the investigators in the trial and other KOLs, I think they were really satisfied to see that safety, but they were also very supportively surprised that at the lowest dose, we are already seeing efficacy, right? So to see a substantial reduction in the S-antigen at the first dose level, I think, was quite rewarding for them. And they're anxious to see or interested to see what will happen when we give administration 2 or 3 and what will happen when we go up and dose. Will we find the right -- the sweet spot of dose and number of administrations to get to S-antigen negative. I think as we think about the forward data, so the first patient cohort, once we complete the 3 administrations in that first cohort, and we have a chance for safety to make sure it's progressed through the safety period, that will be a good time to see some data for that set cohort. And at the same time, because of our multi-ascending dose trial design, we'll also start to get a peak at what does the dose level 2 look like in terms of safety and efficacy. But we won't have the full cohort 2 done as early. So I think kind of first half of the year, dose level 1. As we get into the second half of the year, we'll see dose level 2 and then opportunity to see dose level 3, after we get all 3 administrations for the patients, more towards year-end.

So we should expect multiple incremental updates from...

That would be our expectation. And then you also -- and dispersed there, you also have EASL, AASLD and other -- and ASGCT, examples of places where we could share data publicly as well.

In terms of safety, again, we are probably going to expect some acute phase liver enzyme element because of LNP delivery and you're repeat dosing everything. Long-term safety might never -- might take a couple of years before we really exhaustively investigate that. Is patients with cirrhosis or liver cirrhosis are enrolled? And is that going to be a problem where you have these 3 doses, higher dose -- that we should be concerned about?

Yes. So we're not enrolling patients that have evidence of cirrhosis at this point. So we're starting in patients who are -- obviously have chronic hepatitis B. We look at baseline liver characteristics like fibrosis and obviously look for any transaminase flares. And there's some criteria in our inclusion criteria to make sure that we're starting in a very safe patient population. In terms of LNP transaminase effects, our preclinical data is very clear that there's a particular dose level at which you get to where you start to see these transaminase elevations. And at that point, they become dose dependent. At lower doses in our preclinical data, we actually don't see transaminase elevations with LNP administration. And I think that, that really speaks to the quality of the mRNA that we're making, the quality of the lipid nanoparticle. Not all LNPs are created equal, and it really matters what you put inside the LNP. This is where I think ARCUS can really shine. It's a very small protein. It's encoded by a very short sequence of mRNA. So the actual drug substance, the mRNA that we make, we can make very high quality, high yield because it's such a short sequence, and we put a lot of time into optimizing the sequence, optimizing the production in order to ensure a safe product. And so while you will, at some point, I think, in the clinical study as you dose escalate as is consistent with other gene editors using LNPs to the liver, at some point, you may start to see transaminase elevations. Those aren't necessarily a problem if they are within a particular range that is considered acceptable, if they resolve within a particular time frame. And of course, I think that's -- our preclinical data really demonstrates the overall safety of our product. So I think we're feeling really excited about the safety data we've put out so far in the first patients. No Grade 2 adverse events are higher and transaminases look good. That really follows our preclinical data. And then one other thing I just want to comment on and when you think about DNA editing, I know you mentioned long-term safety events. When you think about what types of long-term safety events you'd expect from a DNA editor, that has to do with potential off-target editing. This nuclease is extremely specific. We did an extensive amount of optimization and characterization. We know we're going into a patient -- a huge patient population here, right? And so safety of the nuclease was absolutely paramount in how we designed this product. And so of course, we will continue to follow patients long term. We have 7 years' worth of nonhuman primate data with a different nuclease, different delivery, but just showing that DNA editing in vivo over a long term, that was even AAV delivery, can be safe. We've seen no effects in those primates that would suggest long-term safety.

Can't leave without talking DMD. This is definitely -- earlier today, we had the session with Wave Therapeutics (sic) [ Wave Life Sciences ] with the RNA approach. And Precision has a very novel approach of expressing almost like a truncated but partially functional part of the dystrophin gene. Love to get your take on how you see differentiated in this crowded space where -- microdystrophin or single exon. And how do you address to the market saying, sure, RNA is one thing, and we have seen what they have done in the last 8, 10 years, but here is a better approach and it's reliable?

Yes. So I think when you look at the DMD space, microdystrophins, exon skippers, what we tried to do in our design was take the best attributes of both and put them together. And so on the microdystrophin side, it's a onetime administration. We like that about that approach. On the exon skipper side, you're creating a nearly full-length dystrophin from the native expression. So we liked that part of the exon skippers. So we're putting those together. For our approach, it's a onetime administration to ARCUS nucleases that remove a hot spot region of the dystrophin gene that is mutated in up to 60% of DMD patients. So kind of another upside of the microdystrophin approach is that ours is also very broadly applicable to patients versus exon skippers, which you have to kind of fragment in terms of the number of patients that would be amenable for that type of exon skip. And so it's really bringing together the best of both of those modalities into an approach that provides DNA correction at the dystrophin gene level to allow for natively expressed near-length functional protein. We know that protein is functional because it occurs in humans who have that genotype. Those humans are walking around for most of their life. So much better phenotype than what you see in DMD. So we've derisked the actual protein that gets expressed, which I think is a major advantage over the microdystrophins where the effectiveness of that truncated protein is in question. And we've provided a onetime administration broadly applicable, which I think really shines when you compare it against the exon skippers. I think it's a really attractive way to solve this...

It's almost like why nobody else thought about it.

And I think what -- Cassie just presented at the Muscular Dystrophy Association meeting that we've got durability of this functional benefit as well, presenting 3- and 6-month data to show not only maintaining but also improving muscle function over time.

That's right.

So Alex, how do you see this asset? Is it a BD asset for 2025? Or is it a wholly owned asset where we can see this coming into the clinic in first half '26?

If I say yes, is that -- I think -- look, I think that both are certainly possible. There's been a lot of interest in this program. Obviously, investors have a lot of interest in this space because they see that you can succeed in this market, that there are patients who are waiting for new treatments and that the FDA guidance has been supportive of trying to help get these drugs expedited into the clinic. So I think those things are all good and visible. What Cassie was talking about, about the science behind why this approach might be better is important. And also, I think that we're weighing those things. And at the same time, Cassie's team is doing some of the research work behind the scenes so that we can keep this program going while we're making decisions about wholly owned partner program, whatever that might be. We'd like to be in a position to make that decision and roll forward quickly without losing any time.

One last question is, any changes in the FDA's behavior, interaction pace? Or it's too early to say because you are on the...

Yes. Look, I think there's a lot of anxiety about what might be as it relates to FDA. Totally understand that. And it's something -- we are keeping our eye on the landscape in that as well. But I think the actual experience we've had is that there's been no change. We haven't seen a change in the reviewer attitude. We've seen progress. And in fact, we have an IND approved for PBGENE-HBV in the U.S. under the current administration. And this is an in vivo gene editing approach for a chronic disease like hepatitis B. So I think that we haven't seen any impact from that. I think we were quite reassured after getting the clearance of the IND, and we had good dialogue with them. And I think part of that is based on, I think, doing good science to begin with and complete science. We didn't take any shortcuts as it relates to pursuing the regulatory path. Like we didn't take a skin and bones package to some markets to generate a few patients worth of data in order to come back to the U.S. We took a wholesome, fulsome package to all those markets, but then also to the U.S. as well. And as a result, we got the IND cleared without requiring any clinical data, even though we have some that wasn't required, to get the IND cleared. So we think that -- I think Cassie has kind of said this well as we're keeping our head down. We're doing our work, doing the good science that will take to continue to get approvals.

That's great. Thank you again for joining us. Looking forward to...

Thank you. Soumit, thanks for inviting us to be here. We enjoyed it.

Absolutely.

Yes. Thank you.

Thank you. Thank you all.

Thank you.