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

Thank you. Thank you. Great. Hello everyone. I'm Max Skor, a biotech analyst with Morgan Stanley. And before we get started, for important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. And with that, I'm happy to introduce Steve Harr, CEO of Sana Biotechnology.

Thank you very much for joining me today, Max. Thanks for having us. I appreciate it.

So maybe just to get started, we'll give you the stage, introduce Sana's story, maybe set up recent progress, and what we should focus on going into the end of the year.

Sure. I'm sure everybody here recognizes we'll make forward-looking statements, and like you, I have my own little risk factor. Please read our 10-Q for looking at those risk factors. Now, we started the company around the idea that one of the most important transformations that will occur in medicine over the coming, you know, 20 years or so, is the ability to engineer cells. And we wanted to do this in a way that allowed us to go after diseases that are highly prevalent with scalable platforms that could access patients broadly. And we chose to go after two problems. And excited to say, you know, shortly we should be getting going on studies for them and really understanding their impact on human health. So the first one is, um, you know, if you transplant someone else's cells into your body, your body will see them as foreign and try to reject them or will reject them. And it's been a major limitation for transplant medicine for decades. And we went after the idea of trying to hide allogeneic cells, a transplant from immune recognition. Turns out that the technique we use seems to hide them, at least in some cases, not only from allogeneic, but also autoimmune rejection. And probably the most visible or potentially most important program that we're working on is a one-time functional cure for Type 1 diabetes. And Type 1 diabetes is actually a pretty simple disease from far away, which is the immune system gets confused and attacks and kills the pancreatic beta cell. The beta cell is the only cell in our body that makes insulin. And before the advent of endogenous insulin about 103 years ago, patients just starved to death. Their cells couldn't get any sugars over the course of several months. Since then, people have done a lot better, but they still, it's still not great. And so even with the best therapy today, your average Type 1 diabetic will live about a decade shorter than someone without it. And to put that into perspective, that's about the same for a 20-year-old being diagnosed with Type 1 diabetes as being diagnosed with breast cancer or HIV. And during that time, it's a very complex life, right? Every meal, every time you exercise, every time you get a little bit sick, you're trying to adjust your insulin. And so these people deserve something better. About 20, so if you take a step back and say, okay, the missing cell is the pancreatic beta cell. I'm going to go back and forth between beta cell and islet. Just think of it as islet is the beta cell plus its support structure. About 25 years ago, a guy named James Shapiro, and then others have followed, started isolating pancreatic islets from recently deceased people's pancreases. And it turns out it works very effectively. They're transfused in the liver, and people have lived for decades without any insulin. So normal blood glucose is no insulin. The challenge is that it's not a very replicable supply source, right? There's a lot of variability. It's not very scalable. And people have to be on extraordinary immunosuppression, like an organ transplant, and there just aren't that many people for whom the risks of immunosuppression are less than the risk of diabetes. But there are thousands of people around the world who have gotten this.

Thank you.

So over the last several years, others have begun to show that you can take pluripotent stem cells, either embryonic stem cells or induced pluripotent stem cells, iPSCs, and you can grow them and mature them into pancreatic islets. And there seems to be a more replicable outcome, which is kind of working in almost everybody. Two, it seems to be that it's probably more scalable, although I don't think we've asked that question for sure. But people are still on lifelong immunosuppression. And again, so the limit, the impact. Over the last several years, what we've shown is we can make some gene modifications. First we showed in vitro, then in mice, and then in non-human primates. And we showed it in people. We actually did this in Type 1 diabetic, published in The New England Journal of Medicine, we can gene modify these islets, transplant them into a person with Type 1 diabetes, and they will survive and function. And the last update in The New England Journal of Medicine is at 14 months. So no immunosuppression, cells doing really well. So now you have all the component parts together for a one-time curative therapy for Type 1 diabetes. And what we have is a gene modified iPSC-cell derived islet. So we made a handful of gene edits. We made a master cell bank. We've grown them and then now we'll differentiate them into islets. We've been working hard at this. I think we're almost there. Our goal is to get the IND cleared this year and start our Phase 1 study this year. I'll go through this, but you should know pretty quickly if this works or not. I'm sure you'll ask me questions about it. I think it's probably worth a second question, but people get bored of me rambling. We have another platform, though, and that is, you know, if you, our goal at that point was to go after another big problem, which is you can do more or less anything you want to a genome in a petri dish. The hard part has been delivering it into the cells in the body. And so we wanted to develop a platform that would allow us to go after the challenge of being able to deliver to any cell in a specific, repeatable, and with any payload way. We seem to have made some real progress on that. And so our most advanced program is in vivo CAR T-cell. We've been at this for a while. You know, we have a platform that we believe gives us some very specific advantages we can get into versus others. They've got a little bit ahead of us, so I hope it does play out that it's been worth the time to make a best-in-class therapy. I'm quite confident if you were a non-human primate, this would be the best-in-class therapy, and whether or not that's true with a human, we'll have to see. But again, our goal is to get that study started soon and start generating data and get that out in the not too distant future.

Okay, great. Let's start with the Type 1 Diabetes Program. Stepping back, you talked about The New England Journal of Medicine paper. The follow-up UP421 data showed continued islet cell survival and insulin production without immunosuppression through 14 months. What do you expect the October presentation to add to investors' understanding of durability, immune evasion, or cell function?

I said this from the beginning, there's nothing that will get you after about a month from. So these cells are going to live until they die. When they die, it will be because of something related to these cadaveric islets, most likely. And so when they live, it doesn't mean that our cells, which are stem cell drive islets, will live in the long run. If they die, it doesn't mean our cells will die. We got immune evasion. And now we need, you know, we need to put these stem cell derived islets in and ensure that they last for hopefully decades for people. So, you know, unless something really surprising came up, like there's some new twist in the immune system that killed these things, I don't think you'll learn anything as you watch this for longer. I've kind of been pretty clear on that for a while. I don't view any around us learning that things are still alive as being material. I would if they died, and that was because of immune response to the material we would tell you. But otherwise, just assume they're doing fine.

Okay, then let's fast forward then to progress towards starting the SC451 Phase 1-2 trial. We could break it out. I can ask specific questions, but what are the gating factors? What are the challenges? Lay that out for us.

So it's great. Historically, the biggest challenge for us, it took us years to figure this out, was trying to make a genomically stable GMP master cell bank. I'll explain what that all means. So it turns out, so we genetted the the a pluripotent stem cell. We knock two genes out, we knock two in. And as we did that, what we'd find is we grew these in, because you start with one cell and you're going to grow every patient, let's just say it's around a billion cells as a dose. Every thousand patients is a trillion. To go after a disease of 10 million people, you need quadrillion cells. So as we grew up the number of cells, we would start to see um, you know, mutations arise. And essentially, it's the DNA repair enzymes, because you put things in growth media that selects for cells that grow quickly. The cells that grow quickly are those that don't stop to fix their genome. So the biggest challenge is doing that when we did it. So once we did that, it's actually been pretty rapid. And we had three work streams we're working our way through. Number one is just being clinically ready. Right, you have the clinical trial protocol aligned with everybody outside the company, regulators, physicians, others. And then in this case, because we're delivering this product, we send some live cells into a hospital where they have to be stored, processed, and then actually put into the muscle of the patient. We need to make sure that was replicable and good. So that was part one. We feel very good about where we are there. And particularly at a collaboration we signed earlier this year with the Mayo Clinic, they've been quite helpful in ensuring we did that in a replicable and hopefully reproducible way across sites. Number two is, it's all kinds of non-clinical studies that get done. The things that are normally done, GLP tox studies, biodistribution efficacy. Some things that are specific to what we do, genomic stability. Again, you don't want cancer causing mutations in these cells. And then another one is, we have a safety switch we put in. So that in case something did go wrong, we would kill the cells. That's preliminarily all done. We don't have the final study reports in our hands yet, but I think that can be off all of our worry lists. The third thing is manufacturing. Right, so, these are complex medicines, and we need to both transfer, we need to both block a process and then transfer it in from our research labs into a GMP, or good manufacturing practice, manufacturing suite, and then have it done by their hands, not our scientists' hands, but their employees' hands. So we're finishing that. It goes very well. We'd like to believe we're going to file this IND, get it cleared, and start our Phase 1 study this year. We don't know if we'll dose anybody this year. I think that's another question. Like we want to make sure it's the right patient at the end of the year, around the holidays. We'll hopefully get all that done soon.

Okay, can you talk about the trial design, the number of patients you anticipate enrolling, and just timelines in general.

Yes. I think that there are, you know, three things you're trying to learn. Well, let's just say you always try and learn safety. That's the most important aspect of any Phase 1 study. So let's put that in. And there are two main safety things to be worried about. One, at least as far as we know from afar, one is when you put in these stem cell derived islets, some of them don't live. They don't engraft. That's what will always happen when you put cells in. And they're full of insulin granules when they release. They need to make sure we don't have severe hypoglycemia or low blood sugar in the short term. Super easy to deal with if you have it, hopefully, which is just IV sugar. The second thing is in the long run tumors. And that's going to take many patients. So safety, very clear. So then what we wanna know is, is first off, does the technology or what we've seen, the immune evasion in this end of one study we did, transfer into these gene modified stem cells? If that occurs, I would argue, the majority of the risk is out of the program, right? Because we're going to transplant cells into a patient with a pre-existing immune response against beta cells, or islet cells, right, with no immunosuppression, they should be rejected in a matter of days. And if they're not, if these cells are living, let's just use it as a marker, a month out, they're probably going to live for years and years. So that's question one. Does that happen? I think that that will be super important. And if it does happen, it will be a very important event for our company. The second is we're not just trying to make a great technology, we're actually trying to make a drug, right? And the goal of the drug is normal blood sugars or euglycemia with no more insulin shots and no immunosuppression. If we use the experience of others, that may take us a quarter or two to ensure we have potent enough cells and we get the efficacy we want. And that could happen again pretty early in the year. The third thing is, is this a consistent result? Is this going to happen in more or less everyone? Is it going to be some subset of patients? And that may take us a bit longer to figure out, but we like to think we can figure that out maybe as we move through next year. So, you know, our Phase 1 study set up is around a dozen patients. You know, we can kind of flux it in a new direction. And we want to make sure we have a good solid dose and that these things really work. And I think then it's pretty straightforward to move into a registration study, assuming it all works as we hope it does.

And how have interactions gone with regulators, everything on track in that regard?

Ah, yes. Okay, we have a, yes, it's, it's, it's, it's a, it's an important field. I think from a regulatory perspective, they understand the unmet need. It's a very vocal patient group because they haven't had anything really novel in a century. I think with the human data that we have in this N of 1 experience, there's a lot of curiosity about how well that will translate to people. So we found that regulators around the world in many jurisdictions have been helpful in helping us navigate questions in the path forward. That does not mean they're easy. That means they're transparent, right?

And maybe you can comment a bit more on the deal you signed with the Mayo Clinic earlier in the year, the implications of that, and maybe looking out further, any strategic partnership you think would be valuable, or are you interested in that?

I'll start with the Mayo Clinic. It's been just a tremendous partner to date in what we, the collaboration with them. I have to say from my perspective it's exceeded, um, at least my expectations. I mean, in the very near term, they were trying to help us with two challenges, right? In the long run, we hope they can help us with more. One is really de-risking this period, this black box, from the time the drug product leaves our hands until when the patient leaves the hospital. And there are elements of product storage, there are elements of product preparedness. We're sending it in a media that has to, that you can't put all that, to keep it alive for a while, you have to concentrate the cells down so you don't put all that media into your muscle. There are elements of delivery, getting the cells into the right muscle at the right time and with the right needles and all that stuff. Then elements of taking care of the patient. We wanted to make sure we're standardized in a way that it could be reproducible across many sites. It's been really great for that. Cash for us. There was a $25 million investment in the company at a premium, which is helpful because we're an early stage company. Our cost of capital is high, and that was quite helpful. Those are two things that came with it to date.

I think we're both optimistic there'll be more as we go forward. And then view on potential strategic partners going forward.

We'll have to see. I mean, I always kind of think of this. If you knew the answer to these four questions, you would know how this movie plays out with this drug. One is, does it work? And you'll learn that very quickly. Two is can we figure out how to scale manufacturing, right? This is a disease of 10 million people. There are 500,000 new patients a year. I mean, if we somehow like cure 100,000 people per year, the prevalence pool will still be growing. So we have to figure out scale. And then the third is can we figure out commercial model for a curative therapy of a highly prevalent disease? I mean, those are the three big, like, giant macro questions. And the fourth one is how do we finance our company through all that, right? So we know big pharma partners can help with the latter. And I don't think they can help us answer the question, does it work, because the drug's kind of being made. The cards are on the table. We haven't been able to flip them over yet. And so we'll have to see if they can help us with these others or if it's just, again, never say never, because you never know what the financial conditions are of companies. Certainly if they can grow the pie for us, that's very, very attractive. If they can de-risk these kind of existential questions for us, that'd be very, very attractive. It's not clear yet that anybody can, because the questions haven't been answered. Not that we're better than they are, it's just the questions haven't been answered. And then it would be great to have a bigger pie with lower risk and more capital. Those are all good things, but we'll see if anybody can ever do that. I kind of like the idea of taking this forward a while on our own, but that isn't always the right answer for patients. And we'll do what we think is the right thing for the therapy and for all of our stakeholders.