Sana Biotechnology, Inc. (SANA) Earnings Call Transcript & Summary

Good afternoon. Thanks, everyone, for joining us. We're really pleased to have Sana here with us. And we have Steve Harr, who's President and CEO.Steve, Sana is a preclinical biotechnology company that's focused on cell engineering in a broad sense with a dual platform approach. Could you just give us a brief overview of both your ex vivo hypoimmune and in vivo fusogen technologies? And remind us how your platform is differentiated versus others?

Yes. First of all, thank you, Salveen, for having us. It's a beautiful location, and it's always nice to get out and see people again. And I appreciate everybody who's been going at it for a long day for joining us, and we'll try to make sure this is hugely entertaining part of your day and worthwhile, so thank you. So we will make forward-looking statements just on the -- so everybody, so we do spend time running our risk factors and things. So feel free to peruse and I think you'll learn a good bit about the company. So it's a great question. When we started the company, I think a lot of -- we really wanted to build the company around the idea of engineering cells, right? Basically, every disease you can think of is caused more or less by damage to or actually death of a cell. And we would want to approach it from a lens where we could be agnostic. If the cell was still alive and we could fix it in vivo, be able to modify the cell inside the body; and if the cell were too far gone or already dead, to be able to really grow on or build one ex vivo and replace what was missing. And so it was probably not something that a lot of people would have done. Most people went down one or the other track. It turns out that most of the capabilities we need to build are highly synergistic and utilizable across both platforms or both areas of modifying cells. But the risks are really pretty idiosyncratic, which is something that's great from a portfolio construction perspective. So when we started down the path of in vivo cell modulation, really what you're trying to do in a very simplistic way is deliver a payload that modifies the genome or the RNA downstream for the genome. And it struck us that you can more or less do anything you want to the genome in vitro, right, in a petri dish. And the real challenge is delivery. So from the outset, we really focused on delivery. It's not to say we don't have a big program around gene editing and gene modification and RNA and epigenetic modifications and things like that, but it really is on delivery. So our goal is really simple, it's to be able to deliver any payload to any cell in a specific and repeatable way. And to be really clear, we can't do that. But every time you take care of one of those 4 things, you open up whole new areas of medicine. And what we started the company around was a technology that allows us to do cell-specific delivery, so just the T cells or just the hematopoietic stem cells or just the muscle cells. And with that, came along the ability to really deliver any payload. So we can deliver DNA, RNA, protein. It allows us to deliver gene editing machinery, like you can knock genes out. We can base edit, we can prime edit, you can do any of those with the technology. And so that's kind of part 1. And we've chosen the first place to apply it is by delivering a gene to a T cell to make a CAR T cell, right? And so we've shown in mouse models and in monkey models that we can do this in an efficient way, in a cell-specific way. And we're going to hopefully get an IND in this year that will allow us to test whether we can do this in humans in a specific and efficient enough way to go after certain cancers. So we'll start with the CD19 cancers. That's because -- yes, we'll talk about why in a little bit. So on the ex vivo side, here what we're trying to do is manufacture cells at scale that will engraft, function and persist, right? That's ultimately what all cell therapy is. And the real challenge in our industry has been, I think, the tension between manufacturing cells at scale and cellular persistence. Basically, when you manufacture -- you need to overcome the problems of immune rejection of allogeneic cells, people have gone forward with autologous cells, and it works, right? But it's really, really difficult to scale these products. And there are only a handful of cell types that you can actually manufacture that way. So our goal from the outset was to cloak cells from immune recognition so that we could do allogeneic cell transplants. And we've chosen to really go after, and for proof of concept, 2 areas where the field has already worked out how to get cells, what are the right cells to function and how do you get them to engraft, right? So starting with an allogeneic CAR T cell. We do a donor-derived T cell. We gene modify it. We can show you data, which I'm happy to talk about, which suggests that our cells will really evade immune recognition and live at least as long as autologous cells, maybe longer which would be transformational, I think, from an efficacy perspective. So that's part one. Again, that will hopefully have an IND in this year. And part 2 is type 1 diabetes and making beta cells from IPS cells. Again, the field has already shown that you can take cadaveric islets, immunosuppressive patients and transplant in these cells, and you will cure them of their diabetes for as long as they can tolerate immunosuppression. Our goal is to be able to, in a single therapy, inject these cells and have patients who, with one treatment, are euglycemic, so normal glucoses, off of all exogenous insulin and with no immunosuppression. And again, we can go through why we think that will work in a second. But that's kind of a little bit around what we've done. And what's really different, I think, in what we've done is, first of all, the focus on delivery on the in vivo side, right? And it's -- there aren't many things that you can look at where you can say, you know what, they can actually maybe deliver cells to somewhere besides the liver, right? That's really where everything goes. Everything, all LNPs, by the ApoE and by the LDL receptor, which is mainly in the liver. Then if you sit on the cell therapy side, really the focus on the immunology of transplant rejection. And we've shown now across multiple different cell types in nonhuman primates and in mice and in humanized mice and in ferrets and things that we can prevent these cells from being seen by the immune system and rejected. So there still is the hurdle of taking the word non away and moving from nonhuman primates into the human primate. But I think if it works in the human like it does in nonhuman, it can have the potential to be like Intel for every cellular therapy, right? Intel is in every computer. This type of immune cloaking really would be transformational for the entire field of cell therapy. It's got to work though first. That's a long-winded answer to your very simple question.

You talked about being on track to follow your first IND with CD19. So 2 questions. One, can you just walk us through your time lines for IND filings this year and next year and what programs they are? And then two, what is -- I mean, I would assume CD19 is for platform optimization because you know the target, Steve, is and you can see how your platform is working. But is there really a commercial opportunity with the drugs going after CD19 at this point?

So I'll answer the second one. It's the easiest question I can think of. It's absolutely yes, right? Today, if you just took CD19 and BSMA, there are 100,000 people in the U.S. and Europe alone that die of myeloma, leukemia, lymphoma, okay? These drugs are pretty good, right? You've got a 35% to 50% of patients really getting a long-term durable response to them. In the history of humanity, you can count the number of people who got in the CAR T cell in the thousands, right? There are thousands and thousands of people dying every month that don't get access to these drugs. They can't make it, right? I'm absolutely convinced that if we can make -- and it's inconvenient. If it's off the shelf, available for infusion and sent to you as soon as you want it, right, just get your lymphodepletion and off you go. And we have data that are comparable or better because I think you could do either to autologous will be in a wonderful position. I think if it's inferior which I think a lot of the field has been today is, there's a place for it, it's going to be highly fragmented and competitive, right? So it does need to be different. It needs to be at least as good as what you see from autologous cells. And we can get into like why we think that will happen. In terms of why we do in CD19, I think you're getting this question. So I kind of compartmentalize risk, right? So in the simplest form, there are 4 major risks in our industry, right, if you're making a platform. You've got platform risk, platform work, right? Then you have disease biology risk, and I get it to intercede and really important disease biology. You then have clinical trial risk, and I prove it in a human, right? You then have commercial risk, right? And you're getting that by, you can create more commercial risk by focusing on the other 3. But -- so what we chose on those scientific risks is to say, let's isolate platform risk. If it turns out that our platform does what it says it will do, we will have really clear evidence of human efficacy, right, with CD19. I think we're going to make a really important drug that's really -- that has a big impact commercially. Above and beyond that, you now have proven your platform risk works. So now we get the privilege of taking on more disease biology and target risk, right? So that's how we've approached this from a step-wise perspective, and say if we didn't target X, whatever target X is, and it was going after ovarian cancer, it didn't work. Or we did target X in gene therapy, it's off to Alzheimer's disease, it didn't work. You'd say, well, I don't know if it was your platform, or if it was the target you went after, right? And so we really want to kind of isolate and stepwise go after. So if things don't work, we know why, right? And so that's why we chose to go after CD19 out of the gate. It isn't like -- I think we'll do something really important if it works. And I think it gives us the privilege of taking on this other risk. And you'll know, I mean, the great thing is a year from -- so I'll get an IND. But a year from now, if we are putting in allogeneic cells and they're living for 3, 4, 5, 6 months, right, as much as an autologous cell, you'll know we've got something, right? You will absolutely know that, that will: one, translate into an important clinical drug; and two, that this hypoimmune platform really does cloak these cells for immune recognition. And you can go all-in on a whole bunch of different targets, both in oncology and cell therapy more broadly, things like type 1 diabetes. So in terms of IND time lines you ask, the other part of the question, we hope to have -- our goal is to have 2 this year. One is called SC291. That's the hypoimmune allogeneic CAR T cell targeting CD19. We're basically in doing all the work for tech transfer to get this manufactured. It's a very complicated drug. There are 6 different GMP components, which means they're also -- you're not just transferring the manufacturing, it's all the assays that go with it. It will happen, right? There's not a lot of technical risk in this. Could we slip up and miss a time line by a week or 2? We could do that. We could not get bags in on the right time, all those things, but it will happen. The second drug which we're filing an IND this year, we hope, is called SG295. That's in vivo delivery to T cells of a CD19 CAR. We're finishing up the pharm tox studies now. There's always some risk when you -- we've done nonhuman primate studies before. We've done mouse studies before. There's always some risk you find something that slows you down a little bit, right? And that's ongoing. Again, goal is this year. Once those are done, we are looking for 2 next year. Those 2 are a drug called SC271, that's looking at CD22 and CD19 together, really going after mechanisms of failure and resistance. And that's the type 1 diabetes program I mentioned earlier. So hopefully, we get both of those in as we move through 2023. That's a little about that.

So help us understand if your CD19 works.

Say that again?

If both platforms have positive data with CD19, who's the ultimate winner here?

So great question that I would love to have the privilege of answering. My general view would be that they will end up -- they will both be important and within the CAR T field, and they will serve different masters, right? So with the in vivo delivery, we're relatively capacity constrained in how much we can put into the cell at this point. And so it will be great for things like current hematologic malignancies. With the hypoimmune platform, we can really -- because we're outside the body, and we can do a lot of gene modification to these cells. And I think it will ultimately be what's necessary to go after some things like solid tumors where it's pretty clear that just going with the same old manufacturing, the same cells with the different target, it's probably not going to be enough, right? And so it would give us a platform to go after some of that. And also, they both will have all kinds of orthogonal uses. So we can deliver cells -- we can deliver genes efficiently in vivo. We're not going to do just T cells, right? We're going to do HSCs, we're going to do other cells, right? We're going to make that happen. If we can hide cells from the immune system, we're not just going to do CAR T cells, right? It's going to end up doing a whole bunch of other things. So I would love to be in a position where we're all debating which is better. And how we're going to divide the world up, that would be a wonderful place to be. We'd probably take one right now and be pretty happy. But 2 would be great, I'd love to have that problem.

Let's talk about -- you have a pretty vast portfolio that you could move forward. How are you thinking about capital allocation in these times? And where do you stand on cash and runway here?

Yes, important question. As I think -- in case you guys haven't noticed, it's a little bit dicey out there right now in the public markets, right? And we have the good fortune of having a strong balance sheet, but it's not limitless. And we really started the year. We actually -- our stock did pretty well last year and it got kind of feed up as we went through the end of the year and early this year. And we actually, at the beginning of the year, really sat down and to make a choice, so are we going to just kind of put our head down, execute and hope that the market is in a better place when we're next to raise capital? Or are we going to make the assumption that at least for the medium term, our cost of capital has changed and we need to change how we operate? And so we went down the latter path, right? And so this morning, we put into a little 8-K that we have money that will last us -- our balance sheet will last us into end of 2025. We can make it go further if we need to. We -- with that, what we prioritize with the 4 drugs we already talked about really with no change to our investment into them. We prioritize building our own and controlling our own manufacturing. We did announce about 3 weeks ago we're changing where we do that and saved us about $100 million. And we prioritize ensuring that we were continuing to really hold on to investing in some of these platforms. Everything that's earlier, we slowed down. So that has a consequence. We talked about 1 IND and 2 and 3 INDs -- 2 to 3 INDs per year. We'll do it for the next few years. We probably won't be able to hold on to that for some period in the middle, medium term. But we'll be live, right? And that's a good thing. And so that's how we've decided to -- we have slowed some things down. We've changed where we're manufacturing. We've slowed down our overall growth rate. We'll make sure this lasts for a while. And the great thing is we'll have time with that runway to turn over the cards on at least 4 drugs. So we'll know if this allogeneic CAR-T works with CD19. We'll know if our in vivo delivery works, we'll be able to see if we can get euglycemia off of immunosuppression in type 1 diabetes. And hopefully, we'll have a chance to look as well at the CD19/22 drug.

You've talked about the importance of manufacturing. Is this plan changed solely financial -- the benefit solely financial? Or are there other aspects for why you moved here?

So I'm not even sure the benefits are financial at this point. I think we'll figure that out over time. I'm very confident that the benefits are dramatic in risk reduction. And I'll give you 2 examples of things that didn't go so well for us. So one of them was the simple manufacturing of our genetic reagents, right, and doing them in GMP. And hearing from CDMOs that basically, you have a couple of opportunities for slots. It's like 3 months from now, whereas 20-some months from that. And so having to go forward 3 months, which was a while ago, with GMP manufacturing run. So we're really done with all of our work. And that's just risk, right? And I kind of think of one of my main jobs is to figure out how to reduce risk, right? And so any time you're changing PTS of a program to negative, that's just not helpful, right? It turned out when it worked out. Another example is we were doing toxicology runs for our fusogen program. 5 of the first 6 times they tried to manufacture it, they failed. It was like it wasn't because our process didn't work, we actually never got to test it. It's like they forgot to hook up the oxygen, they dropped a bag one time, right? And so there's like a -- there's a 50% turnover on a lot of these CDMOs right now per year. And so you're taking on another element of risk, right, when you're transferring these products into them. And so it's -- to me, the main reason to control this is you control your time lines and you control the people who are doing the work that's really essential to the company's success, right? I do think, over time, it will save us money on cost of goods. But in the short term, it's clearly a more expensive way to operate. It's pretty clear to me that the whole industry can't go build their own manufacturing, particularly as cost of capital has changed, right? And so the fact that we're going to be able to do this, I hope, is a competitive advantage to us, both in terms of risk and access to drugs, partnerships and things, but we'll have to see. But it's really about risk. It's very little about financial.

Got it. You've also announced a number of licensing deals and you did a deal with Beam for their CRISPR-Cas12B recently. Was there a reason you bypassed base editing? Just curious why of all the enzymes you went after 12B.

They said why not use base editing?

Yes.

You could ask them. It's a wonderful technology. We were looking for 5 things when we were putting together our gene editing reagent access. We needed to have an efficient system, right, because we're doing multiple edits. This has to be really efficient. By the way, if you're knocking something out, a nuclease is probably better than putting in a stop code on because you can read through them, right? And you can actually see in some published literature that happens, right? So we want efficiency. That's first and foremost. Second is specificity, right? And third is ability to manufacture a GMP. Fourth is freedom to operate, right? And that's really difficult in a lot of these things. So I want the great things about the Cas12 states is that the intellectual property is much clearer than some other areas, right? And then fifth is could we get to a commercially reasonable agreement. And really we're being with terrific in all 5. It's a great company, and they've been a wonderful partner in this.

You've been in this field for a long time and well, not -- I mean, meaning you're a pioneer in the field of gene and cell therapy. But the FDA draft guidelines that came out, were there any -- was there anything surprising to you?

Let's see, there were 2 sets of guidelines, right? One was around gene therapy and another one was around CAR T cells. There really -- it was nothing in there that was an -- we have had -- because we have had pre-IND discussions and with the FDA around different programs, there's nothing in there that's different than what we expected. The other thing, I do think though that there's kind of this misconception that the FDA is on a one-way track to being more complicated, right? I think what is true is there are elements around where, as we've learned more, they've raised the bar, right? And there are elements where they've made things much easier. A great example is like RCL testing, replication competent lentivirus. You have to do that. At least you just have to do that before you could release a product, right? There's never been an episode, there's never been an incident and that has become a much more simplified area for testing. So I don't think it's irrational. Like it's -- they are moving targets in both directions. And justifiably when -- our field is one where we're taking 2 steps forward and occasionally take a step back, right? And when you take that step back, we learn things, and we have to make sure that all of us apply it because patient safety is paramount, right?

The hypoimmune technology, you talked about diabetes, type 1 diabetes, and moving forward there. How do you think about what we're seeing out of the stem cell programs with Vertex and CRISPR? How would this be differentiated?

Yes. So first of all, this is a gigantic problem, type 1 diabetes, right? It's millions of people in the U.S. and Europe alone. The average patient with all of these pumps and devices and monitoring lives 15 years less than a nondiabetic. And during that time, they have all kinds of challenges with hypoglycemia and hyperglycemia. We could be so fortunate to have all 3 of us work, right? Because I'm not sure how we're going to meet demand if all 3 of us really do work. That being said, what was really is different about our approach is we actually started from an immunology perspective, right, and we are transplant immunologists to understand transplant rejection and rejection of allogeneic cells and trying to cloak these cells first from allogeneic recognition. And then as we've come to learn, we actually are really good at cloaking them from autoimmune recognition as well. And so I think what's really different is that we kind of started out by approaches from an immunologic perspective. We then brought in -- there are a couple of people who really drove the field. There's one seminal paper, right, from Doug Mountains Lab that we originally looked at taking stem cells and turning them into a beta cell. And the 2 first co-authors, one with [ Assemble] and one is at Sana, right? And they have different approaches now to how they manufacture cells. I don't really know what Semen and Vertex does. They seem to make good cells though, right? I mean that -- certainly that one patient has benefited a lot. And based on what's in the public literature in terms of how these cells do, in terms of glucose-sensitive, insulin secretion, we seem to do really well. We won't use -- we won't need things like any kind of encapsulation, we won't use immunosuppression. Our goal is a single injection with no immunosuppression. And currently, what Vertex does, which really works with these patients get transplant level immunosuppression, right? It's really, really heavy immunosuppression. And that's really important for some people. But a lot of -- for many patients, lifetime immunosuppression is not better than lifetime insulin therapy, right? And our goal, if we can do this, it will be very different, right? It will allow patients to get a single therapy and come off of injections, like no immunosuppression for life. It's obviously a high bar but we're optimistic that this has a pretty good chance to work.

When you look at your 2 platforms and you think about the platform risk, right, and validating it through these 2 programs, coming up CD19 programs, where does the risk stand out?

The what?

Where does the risk stand for the platform? Like why would it not be successful in CD19?

Sure. So if you look at the allogeneic cloaking, right, we'll present 3 new cell types this week, cardiomyocytes, RPE cells and cadaveric islet cells -- sorry, islet cells, where we show that we can immuno cloak T cells and that they are able to evade immune recognition in nonhuman primates. So the risk is that there's something different in humans, right? But what we've already shown is if you with human serum and other things like we -- the T cells don't see this. There's no antibody recognition. The NK cells don't see these cells, macrophages don't see. In my mind, it would be something the unknown be unknown, right, something we weren't thinking about could get us still, right? I'll be pretty surprised if it doesn't work somewhat well, right? But immunology has a way of humbling us. So we want to see it in humans. But you -- we cannot test the system anymore preclinically. We've done it. We've done pretty much everything we can think of and we really need to get it in humans and to see what happens. And that will start happening hopefully this year.

Any questions from the audience? One last one for you, Steve. There's just been a lot of news flow, whether it's regulatory and how they're interacting with companies or just many cell therapy companies with news coming from solid tumors and blood cancers. How do you think about -- like has any of that impacted your vision for how Sana can move forward. Are there any changes that you're implementing from learnings around there?

Changes to what?

To the business model or to your programs that you're incorporating as a result of what's happening around you.

Macro-wise or regulatory wise?

Science and regulatory.

Yes. So I think the greatest scientific challenge in our portfolio right now is understanding what is an acceptable level of genomic and epigenomic heterogeneity to a stem cell-based product, right? It's inevitable that every time a cell devices, you get like one mutation, right? So you're going to do billions of divisions and then you're going to differentiate things. These cells are going to -- they're going to be different, right? And I think that there is no doubt that when you're watching others in the field sometimes have signals that may be related to their drug or it could have been it's not, right? Either one of those. It's a great reminder that we need to be as careful as we can in characterizing that, that kind of genomic and epigenomic drift that occurs or heterogeneity that occurs. That's part one. We second need to be really able to monitor if something goes wrong, right? I think that's something where maybe the field could have done a little bit better, is there are predictable challenges ahead of us and having serum blood test that just will look for, hey, have you gotten some tumor that you weren't expecting, right? And then the third is being able to intervene, right? So every one of these drugs will have some type of a kill switch on them, right, so that we can do something if something goes awry. So it has made it -- so it's much more granular to me that we have to do all 3 of those really well, right? And I think we may not have as a field always done all 3 really well. So that's definitely been impactful. And there's no question that we invest. So when you're looking at gene editing, and gene modification, understanding where you're inserting and modifying the genome is challenging. And we've made a gigantic investment in analytical genomics and computational biology. It's like child's play compared to stem cells, it's total child's play. And so that's made us much better at really analyzing things for the gene editing. Because at gene editing, it's like you're looking at one thing, you're trying to figure out what happens, it's not that complicated. With stem cell-based products, you're kind of -- you need to really look at the entire genome over many, many cells. And you're putting in cells where you're actually picking cells that grow well, right? That's what you're doing when you're growing cells ex vivo. And so we need to make sure that we're not selecting for our cells that are more likely to grow really well into a tumor, right?

Okay. Well, with that, thank you so much, Steve. Did I interrupt you? I apologize. Yes, thank you. Really appreciate it.

Yes. Thanks, everybody.