REGENXBIO Inc. (RGNX) Earnings Call Transcript & Summary

Good afternoon, and welcome to the end of day 1 of the 2022 Bank of America Healthcare Conference. Thanks for joining this session with REGENXBIO. My name is Alec Stranahan, I'm Vice President and Senior Biotech Analyst covering REGENX here at BofA. And I'm pleased to be joined today by Ken Mills, President and CEO of REGENX as well as Steve. Thank you guys for joining. I really appreciate it. And I believe that Ken is going to run through some of the initial comments, and then we'll go into the Q&A.

Sounds great. Thanks out to you and the entire team for hosting. It's great to be back in-person and good to have some discourse with people. I had a lot of great meetings, so it's good to have a little bit of time up on stage. Transformative year and last year for REGENXBIO as a company. We had a lot of growth in people, in our plan, in our science and come into 2022 in a really strong capital position. We had -- one of the features of the company that I've been most proud of is that we've really set our own path, invested in our science and had a lot of confidence in it. One of the few companies in the AAV gene therapy space to advance a program all the way to pivotal phase, we got to that stage. We realized that as a company, we had some consideration to put into how to map ourselves and our science on to ex-U.S. geographies, and we're fortunate enough to execute a business development process and a deal that landed us a great partner in AbbVie around our wet AMD and diabetic retinopathy and I think additional indications for treating ocular disease with anti-VEGF and gene therapy combined. And that was something we had just announced in September that closed in November. And so Steve and the team medically as well as our pre-commercial teams have been really putting a lot of effort into that since the beginning of the year and even had some data that we presented since the closing of that deal in February that continued to show, I think, really robust foundation for a program of multiple different types of products that can emerge from that. At the same time, in the last year, we moved into a new headquarters. We built out a new GMP manufacturing facility, which we just announced last week, is open for the first time and that is supporting not only clinical and eventually commercial supply for our partnership with AbbVie, but also our investment and focus in rare diseases where we're leading clinical and late-stage preclinical development in Duchenne muscular dystrophy and 2 lysosomal storage diseases, Hunter syndrome and Hurler syndrome. So we've got really a diverse pipeline and profile as a company, both large indications, rare indications, all of which we think have importantly, commercial viability, high unmet need and already really everything that we brought into the clinic between our RGX-314 program and our Hunter and Hurler programs have, for us, established human proof of concept very early stages, giving us the confidence to continue to reinvest and advance those programs. As a result of all of that, and I'll wrap up by saying, I felt really confident at this point in time in the history of the company to establish a new strategy sort of challenge all of our different groups to have 5 programs in late-stage development or approved by 2025. We call that our 5x25 strategy. So this reconciles work that we're doing across RGX-314 in wet AMD and diabetic retinopathy, the rare programs, and also borrows from our history in partnering where we actually have other partners, in some cases, large companies, in other cases, SMID cap companies who are advancing our gene therapy technology that we've licensed out into later stages of development as well. So I think that for gene therapy, for the field, for REGENXBIO as a company, it's really important for us to start bringing the focus to products. There are currently 2 approved products in the United States, LUXTURNA and ZOLGENSMA. One of those products is based on REGENX technology, ZOLGENSMA, of the 2 of them. And I think we have a lot of pride in the platform being something that is beyond just 2 products, but there's going to be many products, a modality that's here to stay, to expand and setting a goal for that to occur over the next 3 years in a meaningful way is important to us. So I'll end there.

Okay. Great. Well, that actually feeds into the first question I had, which is the 5x25 strategy. I think that is helpful in framing sort of the long-term vision of the company. So could you just sort of walk us through what you mean by this and how you plan on achieving this?

Right. So again, I think there's -- for me, there's 3 components to it. There's all the work that we have going on in this large indication space of anti-VEGF treatments in eye care. Right now, we have 5 ongoing clinical trials, 2 pivotal stage programs for our subretinal route of administration, which is historically where we started establishing a strong safety and pharmacological profile for gene therapy in wet AMD. Within the last few years, we've also derivatized that pharmacology into a new device approach that we call our suprachoroidal delivery approach. We partnered with a company called Clearside that provides us unique insights into a device that gets into a new space, but it can be delivered in the office. It provides us expansion opportunities in our partnership with AbbVie. So that's 3 different really distinct products, in my view, 2 of them are intended to treat wet AMD, but a third indication is for the treatment of diabetic retinopathy. Then we have 3 other programs in our rare disease franchise, all of which we think can be part of our 5x25 strategy. Again, that's Duchenne muscular dystrophy, Hunter syndrome, MPS II and Hurler syndrome, MPS I. 2 of those programs, we've already reported out clinical data and have really over 20 patients that have been treated with those gene therapies and, in some cases, have from these onetime administrations evidence of data, both biochemical and biomarker measures correlating to long-term functional outcomes clinically for out over 3 or 4 years. And then finally, we have a research pipeline, of course, that continues to advance technology, advance treatments, but the third category is those partner programs. ZOLGENSMA is an approved product. Last quarter, Novartis reported $370 million of sales from ZOLGENSMA in the IV administration. We're not going to count that towards the 5x25 strategy. That's a given, that's already out in the market. But we have other treatments that are partnered as well with companies like Pfizer and Astellas and Ultragenyx as examples, and additional things with other large companies that could come into focus for us in the next several years that could be late-stage programs or are late-stage programs that could be approved products. So we've got a number of things to draw from. I think it's still an ambitious strategy. It's not a guarantee, but it's something that motivates us every day. And there's a lot of unmet need out there. And I think it's a step towards the next approval in AAV gene therapy really opening up channels for many, many more approvals even after 2025.

Right. So a stretched goal, but definitely achievable given the current pipeline. And I guess how does having pretty expansive manufacturing capabilities feed into this long-term strategy? And how is this really going to grow in importance in your view over time?

Well, we've got an important reminder of that recently. We had prior to COVID established that we were going to add a GMP manufacturing suite capability to a new building that was being created in Rockville to house our office and laboratory capabilities. We were sort of -- this is a building that's on the same street where many of the original facilities that we had leased even 3 or 4 years ago were, and in doing so, we really said to ourselves, we're going to stay in control of things that are important to us, and that is both drug manufacturer and final formulation and fill. So REGENXBIO, we do a really broad array of things in AAV gene therapy and then we do intraocular delivery with 2 different types of device approaches. We do intra CNS delivery with 2 different types of routes of administration that require different surgical techniques and different devices and then our Duchenne program is an intravenous administration. So just across the existing pipeline, we literally have 5 different types of formulations, devices. So it's not really just about bulk drug manufacturer. It's also about the capability of being able to finalize the formulation, fill, finish and kit it and get it out to sites, both for clinical supply and ultimately for commercial supply. I think I referenced, but I'll remind again that when we went searching for a partner in wet AMD exercise, we were intent on being the company that was going to be responsible for commercial supply in the United States. And so in our partnership with AbbVie, we have that responsibility. We have a 50-50 profit share, and we'll be leading commercial supply in the United States for RGX-314 for both potential device indications. Outside of the U.S., we're going to enable them. They're going to help us find the right opportunity to build sites and supply outside of that. But this is really essential for a growth strategy for a company that is telling you we are bringing products to market, we're going to do so in partnership with large companies outside the U.S., in the U.S. and potentially worldwide in rare diseases, we plan to commercialize AAV gene therapies and making products as among the most important things you can do in that regard.

Right, right. And maybe moving on to 314. And Steve, as the company's Chief Medical Officer, I was wondering how did you approach the design of the 2 Phase IIIs, picking LUCENTIS and EYLEA as the comparators and noninferiority as sort of the primary outcome.

Sure. First, thanks for having us. It really is great to be in person, 3D, as you said. So I think the first component is we assess the data that we have from our first-in-human study, where we've seen clear proof of concept, but also hitting our target product profile across a range of doses and with good safety and tolerability. So that's obviously the first step. The benefit we have in this space is, although it's an innovative approach and a big unique value proposition of a onetime sustained anti-VEGF, we have the benefit of applying it in a space that has a lot of precedence. So we get to take advantage of what's come before us and learn that, yes, anti-VEGF treatment applied frequently works very well in most patients. But in the real world, patients don't get what they need and patients continue to lose vision, unfortunately. But we also get to apply this not only to support our value proposition, but also in clinical trial design. And because these treatments are available to your broader question of Phase III pivotal design, this is not a space where you can do placebo or observation control. These patients need to be getting treatment or else they definitely will go blind in diseases like wet AMD. So you use an active control arm. And with the FDA, that's generally an existing, approved, on-label treatment approach. So for our first indication in VEGF-driven retinopathies, there is the requirement to have 2 adequate and well-controlled trials. So we have 2 noninferiority trials compared to standard on-label treatment for the standard endpoint of best-corrected visual acuity of 1 year and a question we get a lot is the difference between these 2 studies. And they're very similar in terms of those standard approaches of design like the primary endpoint and non-inferiority. But we actually use this to our advantage, we believe, to take advantage of having 2 studies to compare against the most validated and the treatment regimens that exist that people are most comfortable with and have the most experience so that we not only meet the regulatory bar, but we're actually showing data to the treating clinicians of what people see as a really good bar. The key aspect that is important is that from a regulatory standpoint, you have to show noninferiority to these strict treatment regimens. And in clinical trials, these are patients who were followed very closely. They are more compliant. If they don't show up for a visit, they get calls and because it's very important to have these patients come in. So if you can show noninferiority in that setting, the retina community, writ large recognizes that, that actually means you're going to be better than existing therapy in the real world because patients are simply not getting the anti-VEGF treatments they need in the real world, and they're continuing to lose vision. So our value proposition is not only decreased treatment burden, but ultimately in the real world, better outcomes for patients.

Right, right. And obviously, as a topic, Roche's VABYSMO recently got approved, right, in wet AMD. How do you see this sort of playing into the mix? Obviously, it's not a onetime gene therapy. So it's kind of like another anti-VEGF when you look at the competitive landscape from your perspective. But how does this sort of -- how could this potentially change the treatment paradigm over the next 2 or 3 years? And would a comparison study need to be run ultimately?

So I think it's an exciting advance for the retina community to have this incremental advancement of slightly longer treatment interval on average and for individual patients. And I think the retina community's excitement about that actually validates the whole underlying premise that we have that the existing unsustainable treatment burden is the big unmet need to really help patients. So from our standpoint, this is actually great. It's a great advance. From a regulatory standpoint, there's not a need to replicate or go and do additional studies. We also think from a commercial standpoint because it's really an incremental advance as opposed to something more seismic, frankly. But again, that's why we're excited where this really is different. This is not an approach of bolus peak and trough, but longer intervals. This is a totally different concept where you have a onetime treatment that provides sustained anti-VEGF activity. And so great advance. Retina is an exciting place to work, but still big unmet need because these incremental -- whether you're getting treated every 4, 8, 12 or even 16 weeks, that's still a very sizable treatment burden that we have to do better on if we're going to help patients.

And one question for you, Ken, maybe Steve, you can weigh in as well is, the suprachoroidal approach, we saw the early update from both of the studies and they're now going into the higher dose cohorts. I guess how do you look at suprachoroidal as sort of driving the 314 program in the longer term? And how large of a component was this in the AbbVie deal ultimately?

I mean, I think getting anti-VEGF treatments, even one time into the office is really important. And I think it's a major motivator for us. We went searching for a device and preclinical evidence that something could work and I think spends a lot of time evaluating different options and characterizing something like the suprachoroidal approach in a way that we felt comfortable bringing into the clinic. That could not happen had we not established the kind of pharmacological understanding of RGX-314 with the tried and true subretinal approach. They're just -- the amount of work that went into the design and the assessment and then the clinical evidence that we've created, I think, is paramount to anything that happens for RGX-314 with any device subsequent. And it's going to be our first approval. It's going to be ours, and have these entry point into the market. And I think commercially, the meaningfulness of that is you have to step back and even compared to the device approach from Roche and everything else that comes out in between where the LUCENTIS, AVASTIN, EYLEA are through a 6-month refillable device. We're talking about evidence that we have clinically of half of patients in our first-in-human studies at doses where we were seeing efficacy, completely eliminating the need for any injections whatsoever for out to 3 years, and I think evidence that it should sustain much longer than that. That means all the way across the world, all the people that are taking whatever they're on today, we can take half of those people, give them a onetime intervention and say, you never need to receive treatment again. So the value, and that's not just the drug value of sort of offsetting the cost of those treatments, it's actually looking deeply at where physicians, I think, are significantly concerned where payers and providers are reconciled to be concerned is that all of these new diagnoses that come in, and it's a regular thing that's driving, frankly, the sales of EYLEA and will drive the sales of faricimab, are these new presentations of VEGF-driven disease in wet AMD. But what about those patients a couple of years later? Where are they? And in fact, they're -- as Steve alluded to, they're not coming in for their visits. They're not getting their treatments. They're actually -- they're falling off. And frankly, if I were a company that was selling drug, I'd be concerned about that, too, except there's such a new incident population coming in that's refreshing that, that they continue -- we continue to see really phenomenal outcomes in the first couple of years for patients. But at the 3-year point, at the 4-year point and beyond, we're losing them. I mean the American Society for Retinal Surgeons (sic) [ American Society of Retina Specialists ] has published a lot of data showing evidence of the fact that from the time that people are diagnosed, they go on these new treatments, and then they assess them years later, 2 years, 3 years, they're back below baseline when they presented with their sort of original concern about losing their vision. And we've shown evidence for REGENXBIO RGX-314 that we can give someone a onetime treatment and sustain that response and never have them return. So I mean, I think I'm incredibly excited to sort of take the next step and sort of move off of the pivotal phase work that we're doing with subretinal and get that type of treatment to patients as quickly as possible. And then I look at the office-based approach, and I go now we're changing the whole paradigm where we can potentially move upstream. Now it's not just about taking care of those patients that are reliant on that treatment and getting them something that's far more convenient and they're able to be compliant with. It's us moving upstream closer to that. What about naive patients when they're first diagnosed? Can this be something that additionally can be offered to them as a potential solution? And then I don't need to be black and white about it, it's you can stratify too. What about the patients in our trial that saw a 50% or a 75% reduction in reliance? I was just focusing on patients that have completely obviated the need for additional treatment. There's additional types of benefit and value to be teased out of that. And that's the beauty and the wonder and frankly, I'm focusing on wet AMD, but it's the kind of interest that draw me to the transformational nature of gene therapy and its onetime treatment with AAV is that it can be that effective. And we've shown it clinically. So I'm definitely excited to see us take that next step and in partnership with AbbVie bring that forward commercially.

All right. And I do want to touch on the rest of the pipeline you guys have. You've got MPS I and II assets, you've got 381 for CLN2 disease. But maybe we can talk about DMD since you recently pumped the brakes on starting the Phase I. I guess what does the time line sort of look like at this point for those who maybe aren't familiar with the latest developments, maybe you could just go into that a little bit more.

Yes. So in January, we announced that we were safe to proceed with a new IND to initiate first-in-human dosing of what we call RGX-202 which is a new AAV gene therapy candidate for treating Duchenne muscular dystrophy. I'll get into maybe some of the characteristics and details of some of the advantages. But our plans to start that first-in-human study have been delayed. My assessment and guidance at our earnings call last week was we consider this a 6- to 12-month delay. So we're going to be instead of initiating first-in-human dosing at the end of the first half of this year or by the first half of 2022, we're now expecting to initiate that dosing in the first half of 2023. This was due to an observation that we made at a third-party manufacturer that we contract with to do final fill and finish of our product. And we had an observation that didn't meet the criteria of our quality system. And so we had to put that clinical material on hold. I think implicit in that is as likely that we're not going to be able to use that material to move forward. But it's -- actually, it was a very recent news for me when I announced this last week, it was both disappointing, but I was frankly still raw from the news and it's an ongoing investigation, but I'm giving the guidance that I think is appropriate based on what we know at this stage for that type of delay. We basically are going to have to resupply our clinical material that was created to support that IND even initially at that time. Bulk drug substance was released back in January when we announced the IND was safe to proceed. So it's a delay of, again, about 6 to 12 months. But I think in no way, shape or form does it change our conviction about, I think this profile of our new candidate for Duchenne. We think we've got a unique profile with the new science. We actually think that it's highly manufacturable. In fact, we're going to be able to, because of this delay, ironically insert some additional process improvements into our manufacturing process that we've been working on over the last months and years, so that we think will even enhance the sort of safety, quality and yield of our manufacturing process, not expect to make any changes after that, but allow that to guide us all the way into what we hope would be commercial phase manufacturing. And we also have an AAV capsid that has a unique serological profile that's different than some of our other peers and colleagues are focused on that are already in clinical development. I know a lot of people are aware of the work that groups like Sarepta and Pfizer and Solid have been doing. But one of the things that we have seen in the rare disease community, and frankly, it's been raised to us through our partners, through our own work in rare diseases is that people develop these individual AAV gene therapy products, and we all know it's likely in certain situations, and especially those that are delivered intravenously or systemically, we sometimes say, that perhaps every child or in some cases, adults are not going to be able to access those treatments because of their preexisting immune status. And so where is the alternative for those patients? Even when you have 2 products that have different serological characteristics, our estimate is you could still have 15%, maybe up to 20% of patients that couldn't access that treatment. So we're bringing something that would be a third option even to the extent that we may not be first to market, we would look to be a fast follower that would still provide a solution for a double-digit number of percentage patients that need that treatment still have that unmet need that would benefit from it.

Right. And you mentioned the safety aspect as well, which has obviously been a big issue in the field. So I guess how have you approached this sort of building the asset from the ground up in terms of what you're packaging? And how does that -- hopefully, how will that drive efficacy and safety?

Yes. I mean, our candidate selection and optimization for Duchenne was a multiyear project that we started. And this is one of those cases where you have a little bit of advantage playing from behind because you get to see the science and the clinical evidence that's out in front of you and say, "How can I make things better? How can I make improvements?" Even when you're trying to stay within the sort of same class of treatments. And you want to get the good of what's been going on and maybe eliminate some of the bad that people have seen and experienced. And it's not a perfect process, but I think our scientists and our clinical development team have done an excellent job of making some scientific enhancements in the design of this truncated dystrophin process, which is the functional protein that we're expressing with our gene therapy to replenish the -- what's missing in boys with Duchenne muscular dystrophy, they're a full-length dystrophin with something that's functional, but not quite the size of the native protein. Again, the vector selection was something we gave careful consideration to. We have experience with AAV8 and other clinical trials. We've seen people apply it. It's highly manufacturable. Generally, our perspective was that it was safe and had evidence of in human clinical studies of safety, but we reestablished that preclinically, of course, as well. So -- and we did some other clever things with the science too. I think, impressed upon ourselves that safety is of paramount importance. In Duchenne gene therapy, we're going at doses that are some of the highest dosing that we've ever done in AAV gene therapy. And frankly, there are some things to learn even from the ZOLGENSMA experience and our partnership with AveXis and Novartis about how to do that in a right and appropriate way. So this is an area where I was really proud of our team. I think playing from behind is going to allow us to bring safety and sort of efficacy considerations to the forefront with knowledge and then allow us, hopefully, to move faster when we make our way into the clinic.

Great. And last question, just on capital allocation and gets down in the audience looking comfortable, but $765 million in cash on the books is a pretty comfortable position to be in, gives you some wiggle room. I guess, how will you focus your BD activities over the next couple of years? Will it be focusing more on supporting your pipeline development and maybe ramping up commercialization? Or would you guys pursue maybe some smaller M&A to complement your internal capabilities?

Whatever we do, Alec, we want to be a product-based company. It's going to be focused on identifying assets in our own pipeline, and we have a huge network of partners, but also a lot of experience engaging with a lot of companies on different types of AAV products and product candidates. I can't emphasize enough. We have a vision for REGENXBIO to be a product-based company. To execute on our 5x25 strategy means that happens sooner than later. And it's about creating a sustainable business and doing so, I think we can benefit as many patients as possible. And I think we don't have a mentality that it has to all come from REGENX and everything that's going on in our pipeline today. It could come from things in science that goes on maybe at other companies, certainly at academic institutions and through partnership, but we will achieve this goal, and we will become, I think, an important part of -- have been an important part of the history, will be an important part of the future of AAV gene therapy.

Okay. Great. Well, that's a perfect note to end on. I want to thank you guys so much for your time participating in the conference and the great discussion. Thank you.

Thanks.

Thanks.