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

Great. Good afternoon, everybody. Thanks for joining us for the next session. I'm Matthew Harrison, one of the biotech analysts here at Morgan Stanley. Really pleased to have Steve Harr, the CEO of Sana with me. Just quickly before we get started, I need to read a disclosure statement. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website at morganstanley.com/researchdisclosure. So with that, Steve and I are going to switch places. He's going to ask questions, I'm going to answer now.

Great. That'll be fun. I think people might enjoy that more.

And -- but Steve, thanks for being here. I thought maybe a good place to start. It's just -- I think everybody's heard of Sana, but maybe doesn't know sort of the 2 platform technologies that you have. So maybe set everybody in the right place and talk to them about why you brought this together and what the idea for the company is.

Sure. So first of all, thank you, Matthew and Morgan Stanley and everybody here for joining us. And we, of course, will be making forward-looking statements. So we spend a lot of time to write our risk factors so take a perusal of them, if you want to learn a little bit more about what could go wrong. So the company is about -- now it's coming up on almost 4 years old, right? And it was founded under the premise of -- we wanted to -- engineered cells and the ability to modulate cells and genes would be the most important transformation of medicine over the next couple of decades. And we thought we could build an important company around that. And we wanted to be able to do 2 things: one, to change a cell or repair it inside the patient's body or in vivo, right, really control or change DNA or control the RNA. And the second is to be able to build the cell from scratch, really to be able to put it back and replace a cell that was too far damaged or missing. And so to really go about that, we explored and thought about what are the most important and actually tractable challenges in making that happen and came really to very distinct and different conclusions. So if we want to be able to deliver something or modify a cell in vivo or inside a patient, really, you could -- you've been able to do for years now, almost anything you want to the genome or to RNA in a Petri dish. And the most difficult challenge has actually been delivering the payload into the cells, right? And so our goal at the outset was to really go after delivery and to be able to deliver any payload, so DNA, RNA, protein. You could do gene editing, base editing, whatever to any cell in a specific and repeatable way. Now to be really clear, we haven't cracked that. But every time we do 1 of those 4 things, you open up whole new areas of medicine. I'm going to talk about one of our platforms, which is called fusogen, gets into self-specific delivery, and then we can use that to deliver all kinds of different payloads, whether that's gene editing machinery, base editing, prime editing, insert DNA, whatever you want to do, modify it. The other is, if you want to replace cells, this is like we call it ex-vivo cell engineering. These are the diseases that most of us and most of our loved ones will suffer from. And to be really clear, it's hard to make an important medicine, you have to build a cell at scale that will engraft, meaning to kind of go to where you -- stick around the patient's body function as you want it to, and then persist. Sounds easy, right? Just make it and get it in there and get it to function and persist. But to be a good medicine, you have to do all 4 at the same time. And of those, the most important challenge has been cellular persistent, right? So since the advent of transplant medicine now 70 years ago, allogeneic cells or my cells into you, your body will see them as foreign and reject them. And there have been a couple of ways to get around that. One is by really immunosuppressing the patient that works in very severe illnesses, but isn't really generalizable. And the other is what many have done, which is autologous cells. So a great example of the autologous CAR T cells. That is very difficult to scale and only really works for a couple of cell types. And so our second platform is really going after this persistence issue by trying to hide cells from immune detection. And therefore, we have immune invasion, right? So a hyperimmune platform. So that's really when the company was founded, those are the 2 things we set out to do is cell-specific delivery with diverse payloads and then really this hypo immune platform. We've actually made a lot of progress. I'll start with the latter. So the fundamental insight here because it really started as some of a stem cell biologist begin to understand the power of pluripotent stem cells, call it, 15 years ago and quickly realized that they really were almost useless unless you could overcome this problem of rejection, right? And a couple of different groups that actually helped us found the company, 1 in Harvard and 1 at Stanford, got -- went to their immunology colleagues, got the same advice. So this is actually not that hard just figure out the paradox of pregnancy. And the paradox of pregnancy is that we're each half mom and half dad. And the only reason we're here together today is our mothers didn't reject us when we were in utero. And so really, what is different about the maternal fetal border from the way we exist day-to-day. And actually, we came up with really -- what looks to be a viable solution. And so when you're trying to reject -- sorry, protect cells from being rejected by the immune system, you have to grapple with 2 different arms of the immune system. One is the adaptive immune system, and that's T cells and B cells and antibodies. They're kind of all that's actually relatively easy and we've known how to do that for years, and you knock out or disrupt something called MHC class I and class II. The other problem is the innate immune system. And by the way, cancer has figured this out. Virus has figured this out. They really try to suppress MHC class I and class II. And so we've evolved the innate immune system to detect these cells. It's like natural killer cells and things like that. And that's the challenge. And we seem to have figured out the only system that we've ever seen, where you can really protect cells from both the adaptive and innate immune system. So now we have a transplant. And again, we're unaware of anybody doing this. Multiple cell types into all kinds of different locations in non-human primates. And we've done this in mice and humanized mice and ferrets and other species. And now we just have to figure out what works in humans, and I'll come back to how we do that. The other platform, as you mentioned, was the cell-specific delivery. And again, when you're faced with a complex biologic problem, one thing to figure out as mother nature solved it already, right? And mother nature -- viruses go to specific cells in our bodies, right? And if you think about COVID, it only goes to cells that express the H2 receptor. Our cells have figured out ways to communicate with each other. And a great example is that sperm only goes to egg. It doesn't go to any other cell that it runs into along the way. And they utilize for the cell-specific delivery, the same system that's called the fusogen. So what we did is we took these fusogens and figured out how to engineer them to go after the cell types that we want to go after. So we're able to get cell specific delivery of payload. So we've shown we can kind of do this in a mediocre way with just about any cell you gave us. The hard part is to do it in a really good way. So the first place we're trying to do that is going directly and only into T cells and delivering a CAR directly to a T cell to make it inside the body, which you can get into again. So we're 3.5 years old, about 500 people. We've actually built now probably 4 or 5 different platform/capabilities. These 2 will now -- we've gone through, I think, the most rigorous proof of concept you can in preclinical studies. We've completed more or less all of the GMP and [ from tox ] work that needs to be done. I'd say more or less. We're not quite yet to [indiscernible]. Hopefully, we'll have a couple of INDs in this year. And a sustainable pipeline behind that. And if we sit here a year from now, we'll know if these platforms are really working.

Okay. Great. Great. Thank you, Steve. So why don't we start with hypoimmune. And just -- well, I guess, the first thing is compare and contrast the relative difficulty of the 2 platforms. I think you started to do that, but how do you think about the path forward for hypoimmune and how straightforward that is versus fusogen? And just how should investors think about that?

Well, so one of the things about the hypoimmune platform is -- in some regards, it's -- the die have been cast, right? So we figured out what we think is a biologic way to hide cells from the immune system, and it works across multiple species. [ It's not ] working in humans, it's something that we'll figure out in the next 9 months or so. So the first place we're applying it is in the allogeneic CAR T cells. It's actually a complex supply chain, and there's a lot of work that goes into making these. But once we have them now, this is really relatively straightforward. If we are able to hide these cells from immune detection, and we'll know that within a few months of dosing patients, right? It is very straightforward for us to develop allogeneic CAR T cells across a multitude of different targets: CD19, CD20, BCMA, we've got a few others kind of in there. And we're already at a scale where we can do thousands of patients very easily, right? And that's really straightforward. When you move -- the next place you want to move it is to apply this to stem cell-derived products. So there, we would put these hypoimmune edits into pluripotent stem cells and make them in a different cell types of transplant. The most advanced is type 1 diabetes. For type 1 diabetes is basically the immune system attacks and kills the beta cells in a patient, and they can no longer secrete insulin when they have -- when glucose goes up. And the goal is to just replace those cells. And hopefully, with a onetime treatment, you have a chance to cure patients, right? And we can get it now to why we think that will work. That's complicated though. Like when you're gene editing and growing out stem cell-based product, that's actually really complex sciences again we can get into. That's not a straightforward allogeneic. Allogeneic CAR T cells is really -- like if this biology works, this is an execution company for a while with a lot of value. The stem cell stuff has some scientific risk to. The fusogen platform is more complicated. So the hard part in the fusogen platform generally is manufacturing this stuff consistently at scale, right? And so we can do this in a way where we can run early Phase I studies since you can get into a second. But really manufacturers at a scale where we're hitting our aspiration of around global access and a reasonable cost of goods. We have some work to do, right? It's true when you're entering human testing for most antibodies, the big difference is, over the last 20, 25 years, you now have a pathway to know that antibodies will work. We have some scientific discoveries we're going to have to make along the way to ensure that we can do this at the scale that we envision.

Okay. Great. So hypoimmune, let's talk about allo CAR-T. So what's your first IND? What's the path to IND there? And I think -- and then maybe we can talk about what do you think success looks like once you dose this in the clinic?

So the first drug, we call it [ SC291-Sana cell ] -- SC291 -- and it targets CD19-positive CAR -- cancers, I should say. It's a well-validated understood target. And -- we have -- we're basically in the final throes of our -- all of our process transfer into the GMP manufacturing. So the path to file an IND is just hoping we don't get unlucky with supply chain issues and things as we're doing that, and we should have that done this year. If we don't, we'll miss it likely by a couple of weeks just because something happens along the way. So that would be -- and then it's really straightforward to figure out this works or not. I mean what we've seen over and over again is that actually, your active pharmaceutical ingredient matters, right? So when you make these CAR T cells, you need them to stick around for long enough to not just depress the tumor [ kill ] a lot of tumor cells, but to completely eradicate it. And that's been seen with autologous CAR T cells that's been seen with allogeneic CAR T cells. So the field today has been really stuck in the allogeneic CAR T cell with around a month of these cells persisting. I think if you start to see these things at 2 or 3 months, we'll have a best-in-class program. If you start to see it at 6 months, which I think is entirely in the realm of plausibility. We'll -- we have a good chance to have something better than autologous CAR T cells. So I would advise -- I know what I'll be looking at to figure out where we are in the competitive marketplaces. 2 or 3 months, we're going to be competitive with autologous, but we'll have a lot easier manufacturing into available off-shelf. If it's a lot more than that, we'll end up with, I think, much higher durable complete response rates than what's been seeing today, that's what I focus on. And we'll know that pretty quickly as we'll see that within months of beginning to dose patients.

And so for durability, that's irrespective of the dose level.

Well, you need to see these cells grow well, too. I mean, I would want to see -- I should be careful with that. I would want to see that you get a lot of complete response -- cells grow well and you get complete responses and then they persist. The cells persistent. And we didn't know if you didn't have that first part, we wouldn't really care if they're still around.

Great. So then, I guess, does that mean we can still expect to see that in the first, let's call it, first year? Or is it going to take a little bit longer...

You'll know by -- if you don't -- if it isn't clear by the end of next year, probably we'll never be, assuming that we execute well.

Okay, okay.

It's just not that complicated biologically. And if it is, I think the great thing here is if it happens to do what we hope it will do and we think it will do -- and not only can you do the CD19 CAR T cells, but right behind that we'll have multiple allogeneic CAR T cells. And if it works, the T cell space is harder, I think, than the -- things like beta cells. If it works there, I think most immunologists tell you it's going to work in protecting these beta cells from allogeneic rejection as well. So it's a really straightforward, both to create hopefully an important product, but then really validate this platform more broadly.

But then, I guess, get this to the next spot, which is type 1 diabetes. And there, I guess the issue is more about cell line than it is about because hopefully, if you get there, right, we'll know whether the platform works. So then it's a question about cell line. And can you take these iPSC, can you make the right edits? And can you actually grow them out? So where are we in cell line development, how to think about the risk and the complication there?

We can make the right edits. So the risks are -- the biggest -- I think the biggest [ ununderstood ] issue with all these stem cells is that every time our cells divide, you get an average 1 mutation. So now you're doing this billions and billions and billions of times, right? And so you're going to have -- and you're growing them in a media that selects for cells that really grow well, right? So what you want to make sure of is that you're not selecting for cells that can become a cancer, right? That's ultimately what the risk is in this space. And you can't -- you have to have a genomic heterogeneity because if you have the exact -- if you don't, then you have a tumor, right? If you have everything looking at exactly the same. You have to do it in a way where you feel good about the integrity and the control that you have around the genome. So we are in the process of making the master cell banks and sub cloning out the cells that have the edits that we want, right? Both deletions and insertions and that have the genomic integrity that we're hoping for, right? That's kind of where we are. You then grow them up, run your GLP tox studies and run our GMP manufacturing in parallel and hopefully begin to -- we'll file an IND next year.

And in terms of -- as we think about updates and new tellings about where you are in terms of derisking the cell line, should we -- is the first time we're going to hear about that because you file the IND? Or do you think we might hear about it like -- you've been able to make a [indiscernible]?

Generally, no news is good news, right? And it's hard to -- that's probably the...

Yes. Okay. That's fine. That's fine. Maybe we'll flip to fusogen then. And -- maybe you could just detail a little bit more about where you are in your ability to make new cells right now?

Yes. So I maybe do the same thing that you asked like what do we have to do to get an IND, where we have to go from there? And to take a step back, [indiscernible] if we make this allogeneic -- these allogeneic cells now at a scale where it's -- we make hundreds of doses per batch most likely. We've got an ability to run them in parallel sequentially. And the path to making thousands and thousands and thousands of doses a quarter, a little along a year, it's just not complex. It's totally different with this fusogen platform, right? So we're going forward in the first-in-human study with a process where we're -- it's just -- it's okay, right, in terms of, what I call, scale and kind of where we want to be. So I'll start with where we are for the IND and then what we need to do to get manufactured and what success looks like maybe. So we're finishing up all of the GLP tox studies and the GMP manufacturing run, seems to be fine. Again, no news is good news. We've done all this stuff before in non-GLP settings and things. And so we should be able to file this year. The next step would be looking at getting this stuff into humans. Again, you'd expect it to happen within a few months of clearing an IND. The success in Phase I, and then I get -- maybe go that route and then the manufacturing. We are -- we still have work to do to get to the scale and potency that we want to do, get to ultimately -- and our goal in this fusogen program is to do 2 things. It's to safely deliver the cells -- the genetic material without having to send things off the autologous cells or having to send it off to a manufacturing facility, right? And to then really get really great gene transfer in the body that end with no lymphodepletion. We want no chemotherapy, which is a bit of a complicator, right? That's our goal. You can do that make great cells and no lymphodepletion where that's going to be -- it's going to be a great platform. So I would think about Phase 1 of those goals. And so what we've tried to do is start with what I'd call a Phase 0, Phase Ia type study, right? And so we will -- actually, we were going to start is to ensure we get safety is the first few patients who are going to -- take the blood out of the patient, put it back and expose inject the virus when it's outside the body and put it back, call extracorporeal dosing. It's not a -- there's no manipulation that happens ex vivo. It's just a way to increase exposure. And the goal is to show that we can safely get gene transfer and CAR expression, right? So if you can do that, it's just a matter of dose when you're going to get enough, right? So that's our first in-human goal. It's just [indiscernible]. It also validates the platform that because it says we can get cell-specific delivery in a safe way, right? That's goal #1, just gene transfer and CAR expression. Goal #2 would be to begin to see expansion and tumor begin to eradicate. And -- yes, there's some chance that happens in Phase 1. The first, I should say, the first doses of Phase I, there are some chances we have to go to higher doses. But if you have a gene transfer, we'll get there. So then to really get to the highest doses we want to, we're modifying our manufacturing process. So -- the work on that is more or less done, we'll lock the second-generation process any day now. Well then -- it'll take about a year to get into GMP. And so we would then go through dose escalation and Phase Ib/everything else, starting the latter parts of next year. So the most important element of that is validating platform, ensuring that we can get the gene in. There is one extra biologic risk in not doing lymphodepletion to be really clear, that could chemo -- with every single adoptive T cell program, whether it's TILs or CAR T cells, patients get lymphodepleting chemotherapy. And that lymphodepleting chemotherapy, no one really knows what it does, right? It definitely leads to higher levels of IL-7 and IL-15. These are cytokines that help cells grow. And it may not be necessary. We have a lot of reason to believe from animal data that it won't be. It may be necessary in cancer patients. So we really want to see -- first risk gene transfer; second risk, can we get away with no cytokines of [indiscernible] lymphodepletion, right?

So I think a couple of follow-up questions. So the first one is around cell expansion. And so what do we know about how quickly you can get expansion? And I guess what I'm really asking is how low do you have to start on dose levels because you don't -- you may not understand right the dose range? Or do you understand the dose range, correct?

We don't understand the dose to be really clear. We had -- my favorite story on this or most maybe informative story. So the first time we showed this program to external advisers, we had one adviser who is from Penn. And he said, your animal data are great, but they're in animals with just B cells, they don't have tumors in monkeys. And so when you go into humans, because there's cancer everywhere, you're going to have to start a lot lower because you could run into CAR T toxicity. And some -- this other guy from Chicago said, I completely disagree because cancers tend to depress T cell's ability to grow, you're going to need to go at least a lot higher than what you did in nonhuman primates. And so I think there's a lot of uncertainty around where that will be. I think we're going to be in a dose where you get transduction, CAR expression, right, then we can play with the dose.

I got you. So that's why from your viewpoint. The first thing is to look about safe gene transfer and whether you have a CAR and then you have to [ solve ].

So no one's ever done this, right? So whenever you start with -- on one's ever done something like this, like an in vivo making a CAR T cell, then first thing is safety. But you can't really have a water safe, right? So you can't really have safety unless you have evidence of biologic activity. That's okay, really, if you want to have a safety study, then the first thing you have to do is say we could get these genes into cells at a relevant number, right? And then the rest of it will take care of itself with dose and other things over time.

Okay. And then second question is -- so first-gen manufacturing platform versus second-gen manufacturing process, how high can you get in dose? And I guess, why do you feel confident that you need the second gen to get to a high enough dose? Or just how should people think about that?

So the limiter for us in a lot of gene therapies in dosing is actually concentration. Like how much can you put -- so there are 3 elements of these programs. You have to have potency, right? Purity and yield in terms of manufacturing. So potency and purity drive how much drug you can actually deliver in a given amount of volume. And so in order to get to some of the higher doses, we know we have to either have greater potency or greater purity, right? So purity is mainly -- if you've ever looked at majors of these viral-based drugs. There's like physical titer and infectious titer that people will talk about. Physical titer is just a number of particles that you have. And infectious titer, it's a number of particles that have all the machinery and can actually do the work you wanted to do. And they're usually a pretty big gap between those 2 as you start out. And so the more you bring that gap closer to each other, the more you can concentrate products and the more drug we can deliver. It's really not a -- we have plenty from a yield perspective, right? So we can make enough of this stuff, but we have to be able to concentrate it enough. That's how I know that to get to the highest doses that we might need, we're going to have to have another manufacturing product. It isn't that we can't make enough of it, that we can't infuse enough of it safely without putting patients at risk of something like congestive heart failure.

Okay. Okay. Got it. So then just to round that out, it sounds like with hypoimmune, maybe within a year's time of dosing should -- we should have a pretty good idea of what's happening. It sounds like this is a multiyear process. Or how best to think about it?

Yes, it depends what you want. So if you want a drug [ that ] I know this is like -- this is a drug that you're going to be full throttle towards registration. You'll know that the hypoimmune platform and they're begging to get a sense of it, I think, next year, you'll know it, right? The fusogen, you'll know this is platform work. Can I actually in a cell-specific way, deliver genetic content in vivo safely.

Next year?

Next year. But what you won't know is necessarily -- might get lucky, but we might not get lucky -- like you can't rely on luck. Do we have -- have we maxed out dose yet? We might get there. Again, it might work at the lower doses. We have no clue. To give you a sense, again, someone said log lower -- 2 really smart people, log lower -- log higher than where you were in nonhuman primates, right? And so we'll start in this -- the lower end of that range. And if we have to get the higher end [indiscernible] to really get great efficacy, then it will take at least in early 2024 to see it.

Okay. Great. So maybe in the last 2 minutes here, just remind us where you are from a capital perspective. What are some of the things you've done to sort of preserve capital and just how you're thinking about funding the business?

Yes. So we have enough money to last us into early 2025, right? So what we did recently was, first of all, we moved our -- we were building our manufacturing plant from the Bay Area to the Seattle area. It saved us a lot of money. The second is that we really kind of focused and prioritized our resources so that almost everything that we're spending is going to our first 4 product candidates and things behind that. They have activity, but a lot of the expensive stuff is gated on platform validation. So if you said -- you will know if we ran the company to E, right, empty, which it's hard to do. And we did no partnerships. We had 100% [ owner ] rights to everything. We could -- we'll be able to turn over the card of 4 different drugs. We won't do that, of course. We'll have to either do partnerships or capital for you. But we'll have enough money to understand at least the first 2 drugs in humans and how they're working before we have to raise capital, given ourselves that before we will raise capital, really giving ourselves a really nice buffer. So we really want to make sure that we understand both platforms before we go forward and re-approach investors.

Great. Well, perfect. Steve, thanks for being here. I appreciate it.

Thank you. I really appreciate it. Thanks, everybody, for your time and attention. And we -- we actually did a lot preclinically in 2020, 2021. The last 18 months have been focused on really on execution for manufacturing and toxicity -- GLP toxicity studies. And in the next 6 to 12 months, I think you're going to see a lot of information emerge around how well these things work in human, which will, I think, meaningfully change the overall risk profile and therefore, hopefully, the value and opportunity set for the company.

Great. Thank you.

Thanks.