ProQR Therapeutics N.V. (PRQR) Earnings Call Transcript & Summary

Thank you, operator, and good day, everyone. We appreciate you joining the call. I'm Sarah Kiely, Vice President of Investor Relations and Corporate Communications at ProQR. Today, we issued a press release announcing that going forward, we will focus exclusively on our RNA-editing platform technology, and will seek to partner our ophthalmology program. This press release can be found on our website at www.proqr.com. With me today from the management team is Daniel de Boer, our Founder and CEO. Following Daniel's prepared remarks, we will have a Q&A session, which will include Daniel, along with Rene Beukema, our Chief Corporate Development Officer. In order to include your question on today's call, we request that you use the phone numbers provided via the webcast link. During the call today, we will make forward-looking statements. There are risks and uncertainties associated with an investment in ProQR, which are described in detail in our SEC filings. I will now hand the call over to Daniel.

Thank you, Sarah. Earlier this year, we announced that we would be accelerating the advancement of our proprietary Axiomer RNA-editing technology. Since this technology was discovered at our labs in 2014, we have been building a dominant and blocking IP estate that forced a strong partnership with Eli Lilly, and have generated compelling data in targets across multiple organ systems. We believe there is significant potential for the Axiomer platform to generate medicines in both rare and common diseases. Today, we announced that moving forward, the company will be focused exclusively on Axiomer RNA-editing platform technology. We also announced today that we will seek to partner our ophthalmology programs, including sepofarsen and ultevursen. As we prioritize the development of the Axiomer RNA-editing platform technology, we believe partnering these ophthalmology assets is the best strategy to drive these programs forward, so they may one day benefit patients. The decision around our ophthalmology programs was made following feedback from the regulatory body in Europe, the European Medicines Agency, or EMA recommending to conduct another clinical trial for sepofarsen before a marketing authorization application could be submitted. As a reminder, we conducted postal analysis of the Illuminate trial and asked EMA if they would accept our postal analysis as a basis for the MAA. And unfortunately, they have indicated that they need an additional pivotal trial with a prespecified analysis to be conducted before submission of an MAA. As a result, therefore, in order to preserve operating capital, we have made a decision to wind down the sepofarsen and ultevursen clinical trials. This was not an easy decision, and I want to acknowledge the disappointment that many in the IRD community may be experiencing. I also want to thank the patients, investigators and supporters of these programs for their contributions and advancing them to this stage. Importantly, we will offer clinical trial participants the opportunity to continue treatment through access to currently available sepofarsen and ultevursen product. We believe that the best chance for sepofarsen and ultevursen to benefit patients at some point in the future is to have these programs develop further in the hands of a strategic partner with the right resources to move them forward. Related to the wind-down activities of sepofarsen and ultevursen clinical trials, we will also be implementing an associated workforce reduction of approximately 25%, expected to be completed by the end of this year. This was an extremely difficult decision to make, but the necessary one, as we focus on Axiomer and position the business to drive long-term growth and value. I want to thank those employees who will be departing the business for all of their contributions. Preservation of capital continues to be a priority. And with the update announced today, ProQR will realize cost savings in headcount, program and related support activities which are expected to extend ProQR's cash runway into 2026. The cash runway into 2026 excludes any revenue generated from the company's existing partnership with Eli Lilly and any potential new partnering deals. Going forward and in line with our new corporate strategy announced in April, ProQR will focus its strategy and investment exclusively on furthering the development of our Axiomer RNA-editing platform technology, which allows selective editing of individual basis in the RNA. The Axiomer technology recruits an endogenous system called ADAR, which we can guide to a place in the RNA where we wanted to add it. We have protected this finding with more than 10 patent families dating back to as early as 2014, when we made a discovery at the ProQR Labs. Axiomer is best recognized for reversing disease causing G2A mutations but these capabilities go beyond single mutations in genetic diseases. We can, for example, also use the technology to selectively edit wild-type RNA, and this can be used to engineer proteins or modify their function, for example, by altering glycosylation or phosphorylation sites. This application has significant potential in nongenetic, and even common diseases. Our strategic growth initiatives related to the advancement of Axiomer includes both in-house development of select pipeline programs using this technology as well as a partnering strategy that allows us to capture the full value of the platform technology. As an example of that, we entered into a partnership with Eli Lilly last year, under which we licensed 5 targets to them in liver and nervous system areas. In exchange, Lilly paid us $50 million upfront with the potential for another $1.25 billion in milestones plus royalties down the line. The partnership is making great progress so far, and we continue to execute on this partnership with priority as we have just licensed 5 targets in this partnership, the remainder of the platform remains unencumbered and could be used for additional partnerships in the future. With respect to our in-house development plans for Axiomer, we plan to provide a program update on targets in late 2022 or early 2023 with our initial work focusing on the liver and CNS therapeutic areas, which have strong alignment with the oligonucleotide delivery approaches. The Axiomer platform has a strong value proposition, a leading IP position and the validation of an industry partnership with Lilly and robust data across multiple targets in therapeutic areas with very broad platform applicability. So in conclusion, since the inception of the company, ProQR has focused on RNA technologies that allow us to develop potentially life-changing medicines for patients with high unmet medical needs. That remains our focus. We look forward to sharing more about the development plans for Axiomer in the months ahead, and to keeping you updated on our progress as we advance the business. Before we open the call for questions, I want to thank again all of the employees that will be departing ProQR for their significant contributions towards our mission, our shareholders for their support through the years, and the clinical throw investigators, the patients and the caregivers for their support of our programs. The future is bright for ProQR as we unlock the potential of Axiomer. Operator, we'll now take questions.

[Operator Instructions] And your first question today comes from the line of Jon Wolleben from JMP.

I know a difficult day for you guys, but I appreciate the color. A couple of questions for me. I believe you're also going to meet with FDA for a potential feedback on the path forward. Wondering if there's anything constructive there when you're framing discussions with potential strategic partners on the path forward for your ophthalmology assets.

Jon, this is Daniel. Yes, thanks for the question. So we were indeed disappointed with the feedback from EMA on the path forward for sepofarsen. We have got informal interactions with FDA that pointed in the same direction, so we don't expect any other outcome there, hence the announcement that we made today. I'm going to hand for your second question on the partnering activities on sepofarsen and ultevursen, the call over to Rene Beukema. Rene?

Yes. So basically -- Jon, it's Rene. The data is clear. The regulatory feedback is clear. We have a resilient amount of data and an excellent proposition for a party that has a different risk profile. So we hired [ Lazar ] to help us out with the process. It's -- and we will reach out after Labor Day to the usual suspects. There's a [indiscernible] amount of interactions that happened in the past based on the interim analysis of interim data. So we have great expectations, and we will inform the market as appropriate while we plow along and have news to report.

Got it. And then just checking on when we have the update on the ADAR technology late 2022, early 2023, what kind of context do you think you'll be able to provide that? Is it just identifying the targets? Or we're going to see data and wondering how quickly something can get into the clinic. So any details now? I know it's a little ways away, but what are you thinking preliminarily about what we could hear about when we get that update?

Yes. Absolutely. So all of the above, Jon. Obviously, we had the full focus shifting to Axiomer. We will really advance both the technology, the data generation as well as the target selection. So when we come and update, you can expect a complete update it includes our plans for pipeline development targets, data announcements in vitro and in vivo, the whole series of news updates. So it will be an extent about that. Indeed late this year, early next year.

We will now take our next question. And your next question comes from the line of Dae Gon Ha from Stifel.

This is [ Jacques ] on for Dae Gon. So just turning to Axiomer, how is your Axiomer ADAR-type differentiated? And how are you prioritizing specifically development, the development targets? And then as a follow-up, when can we see that differentiation beyond preclinical data?

Yes. Thanks for the questions, Jacques. So first of all, the Axiomer technology is a technology that we have discovered here at the ProQR Labs back in 2014. And what this technology allows us to do is to essentially add a new tool to edit messenger RNA. So where before the scientific field could use knockdown approaches or exon skipping approaches, supply-switching approaches. We can now microsearch and edit individual basis in the messenger RNA, and that opens up the applicability to a whole new range of indications and mutations that before were not treatable. This is differentiating in many different ways. So we can target loss of function mutations, we can target wild-type sequences to introducing patients, for example, to modify the function of proteins in terms of protein-protein interactions or [indiscernible] and so on. So the possibilities in terms of how this can be applied for example, targets that are so far undruggable without modalities are really limitless. Now we are currently obviously going through the exercise where we best apply this. And we can use this methodology to target G2A mutations to potentially target and treat a mutation that has a G2A mutation, where we can convert into A into an I [indiscernible] with G. This is mostly in genetic diseases, which obviously is mostly in rare indications. Now in addition to that, we're also looking at more common diseases where we introduce specific -- very specific mutations in wild-fire sequences that allow us to treat nongenetic and even really common indications. So we're in the midst of doing that, we have previously said that we are guiding to 18 to 24 months until the first clinical trial, and we are reiterating that. So we are making good progress in both the in-house work that we are doing as well as in the partnership program that we are running with Eli Lilly.

Got it. And if I could squeeze another one in here. I guess given your past endeavors across QR-010 and sepofarsen and ultevursen, how are you thinking about the breadth and depth of your next data announcement to further to instill or restore investor confidence in your approach?

Yes. Good question. So look, we're obviously very aware that the entire story for ProQR is built on Axiomer. We will share significant data for people to get excited about that. We have historically been focused on genetic diseases. We are now, as we have indicated in our April update, venturing beyond that, not just in rare genetic diseases, but also more common diseases. However, we will initially, as we have indicated, focus on liver and CNS applications as the delivery is somewhat derisked in those areas, and we can build on the vast body of data and experience there in the development of oligonucleotides for those organs, including the delivery. So those are the areas that we'll be focusing on going forward.

We will now go to the next question. Your next question comes from Jennifer Kim from Cantor-Fitzgerald.

I have two here. The first is on the Lilly partnership. I know you mentioned earlier that you've made good Congress. But I'm wondering -- when can we get more color on the progress there? And what would be the nature and extent of those updates? And then my second question is, we took a look through your updated corporate deck. And we saw that the R&D day is targeted for the first quarter of next year. So I just want to make sure, is the announcement of the pipeline target -- the internal pipeline targets in late 2022 or early 2023. Is that just going to be an announcement of the target and first quarter of 2013 is when we should first see data? Or I'm just wondering how we should think about the nature of those updates.

Thanks, Jennifer, for the questions. So yes, first on Lilly, obviously, we're somewhat dependent on our partner, but we are really pleased with how the partnership is progressing from both an interaction as well as a science and target progress perspective. We will continue to execute on that partnership with priority. And we do anticipate to be able to provide updates. What they will look like and what the content of those updates will be as to say tuned for that we can't provide guidance for that at the moment. But we will come back to you on that. Yes, we -- with respect to your second question, we are indeed planning to organize an R&D Day in Q1 of next year to outline much more chrome therapy around the platform technology we're developing that may or may not line up with the update that you asked for separately, so we update in late '22 or early '23, where we would lay out more information around data and the targets. We also have presentations on scientific conferences where we present data, and those could be additional validating proof points for the market as well. I hope to answer your question, Jen.

Your next question comes from the line of Yigal Nochomovitz from Citigroup.

Daniel, I just have a basic strategy question with regard to the decision that was taken today. Just want to understand why you decided to also partner ultevursen since it appears the EMA feedback was not specific to that program. Or basically, did you just decide it wasn't worth keeping 2A without the positive feedback on LCA10?

Thanks, Yigal. Yes, I think the result of the sepofarsen trial obviously put the company in a position where access to capital is limited. The execution of the ultevursen trial is very capital-intensive given we start [indiscernible] And I hear some feedback, by the way, given it to Phase I assets. So in light of the financial stability and viability and to enable the Axiomer business plan, we have decided to also find a partner ultevursen, also because we think it makes most sense strategically to keep sepofarsen per-person together. We obviously would aspire to participate significantly in the upside of those programs would they get approved in the future. Now with these modifications you go, we have been able to extend our cash runway into 2026, which we think is a very important feature of ProQR being able to maximize the value capture that value actually on Axiomer platform technology and really have the financial means to elucidate that platform. So it's -- again, as I said on the call earlier, it has not been an easy decision to make, but we think given how the cards are built, this was the right decision to make for a strategy.

Okay. Understood. And then turning to the positive. I have a fairly specific question on Axiomer. So how many edits can this Axiomer platform perform at once? For example, what if there's more than 1 key to a transition in a single RNA transcript. Can it handle those simultaneously? Or is it typically the case that you only see on G2A transition per transcript for rare diseases?

So that's a great question, Yigal. We can actually engineer them both ways. We obviously have optimized the platform for specificity as in most instances, you want to be very dark in creating individual single nutropin changes. However, this -- we can engineer the editing oligonucleotide, the EON, such that they can also do multiple edits. So depending on the application, we can design the molecules in a way to have and execute what we want them to do.

[Operator Instructions] I will now take the next question. Your next question comes from the line of Steven Seedhouse from Raymond James.

I just wanted to clarify, apologies if I just missed this in your answer a moment ago. But the initial targets, will they all be -- just given the focus on liver and CNS, will they all be subject to the first 5 targets in the Lilly collaboration or will they include some wholly owned ones?

Yes. Steve, thanks for the question. No, they will exclude also targets that we plan to develop in our own development pipeline. So in addition to the work that we do in the partnership with Eli Lilly, we will announce the targets that we will work on -- in our own portfolio. So those are the ones that we go on outside. And they will indeed be in the area of liver and CNS.

Okay. Great. I have a few questions on the approach. You've already demonstrated over 60% editing and a couple of targets, various models preclinically. I'm curious if you think there's a theoretical limit on how much editing you can get with various therapeutic targets, just given that you're leveraging an endogenous editing enzyme? Or do you think you can push over time to get as close to 100% editing? Or do you think that's even needed?

Yes. That's a good question, Steve. The -- to answer your question, is that needed it really depends on the application. Often it's not needed. But to answer the question on the potential, yes, we think we can push the editing efficiency much higher than the 60% you mentioned. And we actually have -- we have seen much higher editing percentages in other targets. We don't think that's necessarily limited by the amount of available ADAR, although the ADAR expression differs quite a bit from tissue to tissue. In the tissues, we're now parking initially, we don't see that that's a limitation. So we think that there can be substantial percentages of editing we achieved such that the realm of applicability of technology is very wide.

Yes. Great. Okay. And then just your view on the state of the field with respect to off-target editing. Do you think that the sort of threshold here is regulators will just tolerate more off-target editing than, say, for gene editing because it's nonpermanent. And just wanted to get your comments on your ability to control or reduce off-target editing now, do you think it's already at the point where you can move into the clinic? Or is that one of the steps that needs optimization in the coming year -- year or 2?

Yes. So I'll answer your last question first. Yes, we think this is really -- as it currently stands to move forward to development candidates. We have been working on this technology for the last 7 or 8 years. And over that period, we've really been able to tease out all of these elements, including off-target editing. I think we now have design rules that are transportable from 1 gene to the next that avoid off-target editing. And with respect to your first question, I think as a general principle, the record there will be more [indiscernible] retrenchment editing than with permanent editing as it comes to any unplanned effects like off-target editing, However, we think our technology is specific enough to not have to rely on it.

Okay. And last question is just on delivery philosophy. So are you going to use GalNAc in liver and CNS. Curious what you're doing there? Is it AAV or intrathecal injection or -- just wanted to get your thoughts on how you're going to approach delivery for those 2 indications?

Yes. Absolutely. So I'll answer in a bit of general terms, mostly because we keep our options open for now. But the editing oligonucleotides that we develop on our Axiomer platform, the EONs, they essentially behave the same as any other oligonucleotide that has been developed, which means that we can build on the vast know-how and experience that the scientific field has with the development of oligonucleotide therapies over the last 4 decades. So in terms of delivery, these oligos will have the exact in delivery characteristics as other alopecia. So that means we can use proven delivery mechanisms for the organs that are starting here. And for these organs, there is indeed a number of successfully proven delivery methods including some of the ones that you just mentioned. So we will be pursuing those. And the good thing is we don't have to reinvent the wheel where we can take bits and pieces that are proven and essentially add them to the EON for developing to not assume any additional risk in developing these products.

I will now hand the call back to Daniel for closing remarks.

Thank you, operator, and thank you all for joining us today. We look forward to keeping you updated on our progress as we unlock the potential of Axiomer. Thank you.