Sangamo Therapeutics, Inc. (SGMO) Earnings Call Transcript & Summary

Hello, everyone. This is Zeeshan Merchant from Morgan Stanley. Please note that this webcast is for Morgan Stanley's clients and appropriate Morgan Stanley employees only. This webcast is not for members of the press. If you're a member of the press, please disconnect and reach out separately. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. This session is for the fireside chat for Sangamo. With me today, I am joined by CEO, Sandy Macrae. And with that, I will turn it over to Sandy to briefly introduce the company.

Good morning, Zeeshan, and good morning, everyone. It's a pleasure to be with you. I joined Sangamo in 2016, and Sangamo is a fascinating company. It truly is a leading genomic medicine company. And we have programs in gene therapy, cell engineering and genome engineering. And we have a proprietary set of programs that are driving forward with our Fabry trial, which is currently enrolling and treating patients. But we also have a series of key partnerships, which have brought a great deal of revenue and allowed us to deliver technology into patients. And we partnered with 6 blue-chip pharma companies, each looped to the Sangamo platform and chosen it as the best way to engineer or to edit the genome. The platform, the zinc fingers, are at the core of what we do at Sangamo. And we think of it as our secret sauce. It's the things that we can do that no one else is able to. And it allows us to control the genome either by editing it, which is the classical way that people think of gene editing, or by altering the transcription of the genes, which is what led to the Biogen and Novartis deals that we signed recently. It's a pleasure to run a company like this because we have high science with a real purpose of taking to patients and treating patients. We have projects that are in Phase I. And we also now have a Phase III asset with our partnership with Pfizer, where they will soon announce, we hope, the beginning of their Phase III study for Factor VIII. The company is built now on strong infrastructure. It is well financed with over $700 million in the bank, thanks to the many partnerships and the confidence of our shareholders. And we have funding that will easily let us get to the point where Pfizer submits the file for Factor VIII. So we're in a good place now, and we're delighted to answer some of your questions on the company.

Thank you, Sandy. Maybe jumping first to a question on the top of everyone's mind during COVID. Can you just talk a bit about how your company is doing operationally during the pandemic?

Remarkably well. I'm very proud of how they're doing it. The COVID response has been led by our CFO, Sung Lee. Our labs have been open all the way through, both our labs here in California and those in France. In California, you have to have a COVID test each week now, and it ensures that we can keep our employees safe. And within the labs, they're socially distanced. For those of the office staff, they are working successfully from homes, from their bedrooms and kitchen tables and are working harder than I could ever have hoped for. The only challenge has been dosing patients in clinical trials, and that led to some delays in our Fabry trial as doctors in those centers focused on what was important in treating patients with COVID. But that is now resolved, and we get a sense that the clinical trial centers are opening up. So all in all, it's been a successful COVID for Sangamo, and we've been pleased to be able to operate so successfully.

That's great to hear. And then with Sangamo specifically, you guys have, especially in the last 4 years, struck a number of significant partnerships. How do you describe the importance of partnering in your business model?

We see partnerships as an integral part of our business model. We will have proprietary programs that we will take forward to commercialization. And we're building a company that is designed to do that with great clinical development and a nascent commercial organization. We fund that partly through partnerships. We've raised over $700 million in up-fronts from our partnerships in the time since I've joined Sangamo. And we now have partnerships with Takeda, Sanofi, Pfizer twice, Gilead, Biogen and most recently with Novartis. But the reason that we really like partnerships is our platform can target any bit of the genome, any bit of DNA. And we can't take it all forward. And when people come to us and ask about partnerships, it allows us to apply our technology to medically important conditions. And they bring us money. But what they bring us that's probably more important is they bring us an understanding of the biology and the clinical disease that they're targeting. So for example, partnering with Biogen for Alzheimer's, where they're the company that's most recently put in a file for Alzheimer's, know how to run clinical trials, is the ideal way to do it. Novartis has a passion for neurodevelopmental disorders. They came to us and suggested 3 targets that we had never considered and weren't aware of were linked to autism. And so we're now able to do things for other people. And I want to try and reframe how people think about our partnerships. They don't take things from Sangamo's pipeline. They add to our pipeline. Without partners, we wouldn't be able to have zinc fingers applied to these -- that whole range of diseases. And so our partners add to our pipeline and take it forward into patients.

Sure. And how do you choose what to partner versus what to keep for your proprietary portfolio?

That's a great question and an important one, and one we think about often. We choose to take forward things that are manageable by us and have an appropriate risk and chance of success. We choose to take forward things that are adjacent to targets and to things that we understand. We choose to partner things where the other company has got specific expertise that we don't have or where the trials are large, like in Alzheimer's, and complicated, where there's clinical risk, where there's a commercial risk that we don't want to take, where it requires, for example, for hemophilia A, is going to be the first drug to have a robust reimbursement discussion for gene therapy. And we believe that, that medicine will be taken globally and have a better chance of better reimbursement in the hands of Pfizer than Sangamo could have achieved. And so it's a discussion we have with each project at each decision point to decide, is it better for us to take it forward? Can we add value? And can we do it quickly? Or is it better to partner?

Got it. And turning now to the SB-525 hem A program that you guys have ongoing. Could you let us know how the Phase III program is progressing?

So that's in the control of Pfizer, and we always have to be careful because the agreement is, once it moves into their hands, that they will lead discussions and all announcements about it. So I won't be saying anything that you haven't heard from Pfizer. We expect them to initiate dosing in the Phase III study this year. They said that they will expect a pivotal data in 2022 that would support a '23 launch. And we're very pleased with the progress. We sit on steering committees with them, and it's a pleasure to watch the whole Pfizer machine focus and drive forward with the Phase III program. They are working with a strong global franchise and an expertise in this field.

Sure. And being cognizant of your sensitivities as well, are you able to provide an update of when we'll see the next update from the Alta study?

So Pfizer guided that they will present additional follow-up data at a medical conference later this year. And there are obvious conferences to come. And earlier this week, they showed a snapshot from the July 2020 data, where the 5 patients in the high-dose cohort had a mean Factor VIII expression of 71% between weeks 9 and 52. More importantly, none of these patients has had a spontaneous bleed or required factor replacement since starting the study. So it's all going very well. From the Pfizer presentation in R&D Day that they had earlier this week, they're very positive about it and looking forward to drive this forward. So we're delighted with our partnership. And that's perhaps something I want to say about partnerships. They take work. They're like marriages. You need to understand the people on the other side, and you need to understand how their organizations work. And we've made this part of our business model to do this well.

Great. Moving to a broader question, maybe. The FDA declined to approve BioMarin's Roctavian on an accelerated basis. They've also requested additional work from Sarepta before allowing them to proceed with clinical studies in DMD. Are we seeing a shift in how the agency thinks about gene therapy risk/benefit generally?

I don't think so. I have a great sympathy for my friends at BioMarin. I know how much work it takes to put in a file. And I know how heartbroken and disappointed they must be to have had a Complete Response Letter. We hear about the moments when the agency makes a decision that people weren't expecting. We don't make a fuss about all the many tens and hundreds of interactions we all have with the agency where they are predictable and reliable. And I think CBER, under Peter Marks, is working exceptionally well. We find them very logical and thoughtful. They have a real drive to take things forward for patients. But they realize that they need to be done with proper evidence and reproducibility, so as they can describe how the medicine should be used well and the label. The BioMarin data, we've all [ trowelled ] over it, and it's one of the challenges of being first in a field is that everyone learns from you. And the 2 things people talk about are the sustainability of the medicine and the reproducibility between Phase II and the Phase III study. To me, as a simple drug developer from small molecules to monoclonals, it's that reproducibility that I'm sure has been more of a challenge to the agency, and it's something that they always ask for. The then question I get asked after that is, but the agency told them at the last moment without any warning. I've never seen that with the agency. They're always guiding. We all get enthusiastic and believe that we can persuade them that our data is good enough. And every time I go, when I do diligence on other companies, when you go and look back, you see that the agency has guided very clearly what they're looking for. So I don't see a change. I think this is an important medicine. It's going to be used by many patients, and the agency is being appropriately prudent.

Turning to the Fabry ST-920 program, could you describe the latest status on Fabry disease gene therapy?

I'm delighted to. So as I said, we were about to dose the Fabry patient in the springtime, the first Fabry patient. And my Chief Medical Officer made thought -- what I thought was the absolute correct decision that we shouldn't do it in the middle of -- at the height of the pandemic. But we announced last week that we treated the first patient, and I'm pleased to say that we have now dosed the second patient. And we have additional patients lined up for future cohorts. So now that these clinical sites are opening up, we are -- we have -- the clinic operations group have done a fantastic job in staying close to investigators and having patients ready in the queue to be treated.

And when can we see the first data from the study?

We've said publicly that we will show data from the completed 3 -- the completed study because we feel that to show it cohort by cohort or patient by patient is not helpful either for us or for investors. And therefore, we are guiding to the second half of '21 for biochemical marker data after we've enrolled the 6 patients in the dose response part of the study.

Great. And what's the need in this market? How would a gene therapy serve Fabry patient?

So Fabry is a fascinating disease, because very often patients are diagnosed as adults after a long journey where they've had a series of symptoms that haven't been put together as Fabry disease. And when we see patients, because they come in and talk to us and now Zoom with us to make sure that our team understand the disease that they're facing. They say that they get some benefit from enzyme replacement therapy, but there are still a series of complaints, whether it's pain, whether it's skin, whether it's temperature sensitivity that are just not addressed that dominate their life. They talk about the inconvenience of regular infusions. And inconvenience sounds like a trivial thing, but they have to plan their whole life around a series of infusions. And you can imagine that involves long trips to hospitals, weekends of infusion. And gene therapy has a potential for changing that and for releasing them from their burden and, we hope, from also addressing their condition. Now beyond that, there's also the effect it has on the kidney and the heart and the cerebrovascular disease that comes with this disease. So it has -- we believe that gene therapy will have an important impact on morbidity, mortality and the condition that it will address the things that the patients are complaining about, and that it will be a better way to treat what is a lifelong condition.

Great. And can you comment on the broader competitive landscape in Fabry? It does seem that there are several other cell and gene therapies in development.

Yes. And I think that speaks to the fact that many of us have looked at Fabry and seen the medical need and the potential for gene therapy to solve it. So I look in as really 2 competitors. One is AVROBIO with their cell therapy version. Well done to AVROBIO. They are out there and have shown data, and the data is fascinating because what it shows is a very small increase in enzyme within the plasma and yet an important decrease in Gb3 in the kidney, which I think they -- it can teach us all about the pharmacokinetics of this disease and how very small differences in plasma may not -- or it's not the plasma that's important. It's what's in the tissue that is -- causes damage to the patient. But they use a cell therapy approach that requires apheresis conditioning and then an whole autologous process that is -- will be expensive and is inconvenient and involves the patient going through conditioning. So it's not ideal. And if it was the only treatment, it would be great, but it's not ideal. The other company that I think is relevant to this discussion is Freeline who has gene therapy approach. Freeline's just IPO'd. It's a very new company based in the U.K. Their first patient showed some myocarditis and probably not enough efficacy. So they're working out, as far as we can understand, that they're navigating that benefit/risk line and learning about their treatment. Now until I can show that I'm -- my medicine is efficacious and, of course, safe, I'm not going to compare and contrast against Freeline because it's -- we need to show the data. Now we have 2 patients in. We are confident that we'll be able to show you some biochemical data next year.

Wonderful. I'd love to turn to your CAR-Tregs technology. You're a leader in this emerging field, which you entered through an acquisition a couple of years back. How would you describe the promise of the technology?

If Tregs fulfill their promise, they could have a fundamental change in the work of -- in the world of autoimmune disease. When we did the deal with Gilead to provide them with an editing technology for their CAR-T for T cells and NK cells, the obvious next place to go for us was CAR-Tregs. And CAR-Treg -- Tregs are fascinating. They go to that place of inflammation, and they coordinate the immune response and calm down the inflammation. And by putting a CAR on them, that takes them to a certain tissue. We have the potential to localize this immunomodulation to a certain place or disease. So for example, in multiple sclerosis, the inflammation happens in the myelin sheath. By putting on a CAR for MOG, it takes you to the myelin sheath and hopefully controls the inflammation and will resolve the MS. It doesn't matter if MOG is the antigen that causes multiple sclerosis. It's the localizing antigen, not the causative one. It just takes the CAR there. So our first program is with -- is called TX200, and it uses HLA-A2 mismatched renal transplant. So when people get renal transplants, 20% of them has an HLA-A2 mismatch. And we take advantage of that by using an autologous program to create Tregs with a CAR for HLA-A2. The patient is A2-negative. They get an A2-positive kidney. So the only place that the antigen, HLA-A2, is present is within their transplanted kidney. When we then give them an infusion of Tregs, with the A2 CAR on it, they go to the kidney and, hopefully, at that point are activated. Now because they're activated across the kidney, they should be able to resolve any autoimmunity -- or sorry, immune response [indiscernible] to put to any other antigen that is mismatched between donor and recipient. The advantage of a renal transplant study is that the kidney is transplanted closer to the skin and is biopsied as part of the renal transplant process. By then looking at these biopsies, we will be able to have the first evidence that the Tregs are localized to the kidney, that they're activated in the kidney and that they're supplied from the kidney. And so this is not just a treatment, a study that will benefit patients with renal transplant and, hopefully, a product for renal transplant, but it will also guide us to the whole science of Tregs under other programs. Behind this HLA-A2 mismatch renal transplant study, we have 2 other programs that are being developed in our facility in France. There is the MOG program, as I said, for multiple sclerosis, and an IL-23 program for inflammatory bowel disease, such as Crohn's. Both of these are large, not sufficiently met medical needs. And they're taking Sangamo from the world of ultra-rare diseases into large medical needs and larger commercial opportunities.

And Sandy, can you talk a little bit about cell therapy manufacturing at scale for large autoimmune indications?

It's a good question because the world of autologous cell therapy is built around the tight Juno world of cancer and the business structure that, that allows and for a few patients. If we get into autoimmune disease, whether it's MS, Crohn's or even rheumatoid arthritis, that's a much greater scale, and it probably isn't feasible to consider that for autologous. We realized that allogeneic versions of these products are important. And we have programs where we both use our zinc finger technology to edit healthy donor-derived Tregs to be allogeneic and everyone -- there's a big debate of what does an allogeneic one look like that I can't go into here, but our technology allows that editing. Or to grow up iPSCs and convert them into Tregs. That iPSC route is really the most interesting because it allows banking of cells, it allows a much lower cost and it allows off-the-shelf treatment. And so we feel that developing expertise in both of these things, in editing down to allogeneic, and understanding how to -- I'm going to use to word transmogrify cells -- and we signed a deal at the beginning of this year with a company called Mogrify, who have a series of ways of understanding the processes to take us from iPSCs to various cell types. And the one we've signed with them is the Tregs. So I think it's a cutting-edge science. We are building cell therapy manufacturing suites in Brisbane, California and in Valbonne, France. Because we need to -- the process is something that owning it ourselves is very important in having the cell therapy process development at the same site as the scientists for the research are -- allows for a most efficient tech transfer. Which takes me to our manufacturing. It takes me to our kind of manufacturing strategy in general. We've worked for a long time with Brammer Bio that became Thermo Fisher. And we have ongoing contracts with them for large-scale manufacturing, very pleased with that relationship. But we also decided that we need to own this again, so as our pharmaceutical development -- product development group could be side by side with the scientists that are doing the initial drug development. And so in Brisbane, we have a facility that, by the end of the year, will be GMP-qualified. It's past its EMPQ cleanliness stage now. And it will allow us to make AAV for our clinical trials, but also for small-scale commercial manufacturer, if that was appropriate, as opposed to going to Thermo Fisher. Having manufacturing is one of the biggest challenges in this field. There's -- with the burgeoning gene therapy companies, there's a great competition for manufacturing slots. And having this relationship with Thermo Fisher and also the blended approach of being able to do manufacturing in-house we feel is the right way forward.

Thank you, Sandy. That brings us to the end of our allotted time. This is an extremely helpful overview of the company, and we appreciate you generously answering these questions.

My pleasure. Have a good day.