Voyager Therapeutics, Inc. (VYGR) Earnings Call Transcript & Summary

Good morning, and welcome to Voyager Therapeutics conference call to discuss today's announcement of a strategic collaboration with Neurocrine Biosciences. [Operator Instructions] Please be advised that this call is being recorded at the company's request. A replay of today's call will be available on the Investors section of the company's website approximately 2 hours after completion of this call. I would now like to turn the call over to Pete Pfreundschuh, Chief Financial Officer. Please go ahead.

Thank you, and good morning. Earlier this morning, we issued a joint press release with Neurocrine, announcing a strategic collaboration between the 2 companies for the development and commercialization of Voyager's GBA1 program, 3 additional CNS rare disease gene therapy targets. This press release is available on our website. On today's call, we will review highlights from the strategic collaboration and discuss the transformational value that this brings Voyager. We will also provide an update on our early-stage programs. Then we will open up the call for Q&A. Joining me today on is Dr. Al Sandrock; Voyager's Chief Executive Officer; Todd Carter, Scientific Officer; and Allen Nunnally, Chief Business Officer. In a moment, I will turn the call over to Al. Before I do this, I would like to remind everyone, during today's call, later representatives may make forward-looking statements regarding future expectations, plans and prospects. All forward-looking statements are inherently uncertain and are subject to risks and uncertainties that may cause actual results to differ materially from those indicated by these forward-looking statements. You are encouraged to review and understand a number of the material risks and uncertainties as described in the company's annual report on Form 10-K filed with the SEC and as updated by subsequent SEC filings, including the company's most recent quarterly report on Form 10-Q. All SEC filings are available on the company's website. Now it is my pleasure to turn the call over to Voyager's Chief Executive Officer, Mr. Al Sandrock.

Thank you, Pete, and good morning, everyone. I'm thrilled to announce Voyager's new strategic collaboration with Neurocrine Biosciences, which leverages our expertise, novel capsid discovery, payload design and neuropharmacology with Neurocrine's expertise in neuroscience research and development as well as the commercialization of treatments for neurological diseases, especially movement disorders. This collaboration builds on our long-standing relationship with Neurocrine, several ongoing gene therapy programs, including Friedreich's ataxia. Turning to Slide 3. I'd like to highlight a few reasons why I am so excited about this new collaboration. First, it underscores the value of one of our prioritized pipeline programs. When I joined Voyager as CEO 9 months ago, one of my first projects was to analyze the company's scientific assets and to reprioritize the pipeline around those that we believe have the potential to create the most value for patients and thus for shareholders. Our GBA1 program was 1 of the 3 we chose to prioritize. We did so because we believe that a gene therapy leveraging one of our novel capsids, the GBA1 replacement payload, represents a highly differentiated approach for a validated target in diseases such as Parkinson's. We saw the potential value in this program, and today's collaboration shows that Neurocrine, an expert in the field of movement disorders, also recognizes that value. To that end, the collaboration will leverage Neurocrine's extensive R&D and commercial capabilities, which we believe increases the overall value of the asset and improves the likelihood that this gene therapy may reach and help patients. Upon closing the deal, we look forward to welcoming Jude Onyia, Chief Scientific Officer at Neurocrine, to our Board of Directors. Jude's extensive R&D experience across dozens of programs will be a wonderful addition. This transaction is a great example of the breadth and depth of the partnerships Voyager has engaged in and will continue to pursue to enable neurogenetic medicines. We have entered into option and licensing agreements with Pfizer and Novartis for access to our novel capsids. Today's collaboration also illustrates our interest in co-development collaborations and other types of partnerships. The financial terms of this deal provide transformational value to Voyager, reflecting our leading scientific capabilities in both [ pipe ] capsids and payload designs. The benefits accrued both in the near term by strengthening our balance sheet capacity and also, over the longer term, with significant potential milestones -- milestone payments and royalties as well as the option to elect a 50-50 cost and profit sharing and co-development, co-commercialization arrangement for the GBA program in the United States. Finally, I'm excited about how the resources from this collaboration will enable Voyager's future growth. We now have 4 programs in preclinical development, the GBA1 and FA programs in collaboration with Neurocrine; and our wholly owned tau antibody program for Alzheimer's disease; as well as the gene therapy -- SOD1 gene therapy program for ALS. We are also continuing to build a sustainable pipeline by investing in cutting-edge early research initiatives. I will talk more about one of these later on this call. Turning to Slide 4. I want to take a minute to explain what is so compelling about Voyager's proposition in neurogenetic medicines. We have demonstrated the differentiation and innovation of our novel capsids through multiple data presentations at scientific conferences, and we have attracted capsid option and license agreements with multiple leaders in the gene therapy field, including Pfizer and Novartis. Today's collaboration highlights the recognition of our expertise, not only in capsids and delivery but in the development of payloads for neurological diseases. We have designed a GBA1 gene replacement payload that effectively restores GK's enzyme activity in the brain of GK's deficient animals when administered intravenously. This illustrates our ability to use gene replacement to address loss of function mutations. We also have the demonstrated capability to vectorize siRNAs to address toxic gain of function mutations as well as antibodies address extracellular CNS targets as reflected by other programs in our pipeline. I sound a bit like a kid in a candy store here because these are amazing tools with which -- to enable neurogenetic medicines. The diversity of our payload capabilities, combined with our novel CNS-penetrant capsids, allow for the development of therapeutic candidates across a wide range of diseases of the CNS. I'll come back to this in a moment when I talk about our new research initiatives. But first, I'll turn the call over to Allen to review the terms of the deal.

Thank you, Al. Let's turn to Slide 5. This is an exciting day for Voyager, and we could not be more pleased with this new collaboration that builds on our long-standing relationship with Neurocrine. The strategic collaboration has very attractive front-end and back-end economics for us. Upfront, Neurocrine has agreed to pay Voyager $175 million, of which about $136 million will be paid as a pure cash upfront and $39 million will constitute a purchase of newly issued equity in Voyager at a price of $8.88 per share, which represents a 50% premium to the volume weighted average price of Voyager stock over the 30 trading days prior to execution. Neurocrine has also agreed to fully fund all costs incurred under the collaboration, subject to Voyager's option to elect cost and profit sharing under the GBA1 program downstream. We expect that these near-term payments and program funding will greatly strengthen our balance sheet and extend our cash runway while defraying our near-term program spend. The downstream economics also offers significant potential value for Voyager and our shareholders. For the GBA1 program, Voyager may elect 1 of 2 tracks following the completion of a Phase I trial. We may opt for a 50-50 cost and profit sharing arrangement for the U.S. in which we co-develop and co-commercialize the GBA1 program with Neurocrine in lieu of receiving further U.S. milestone-based payments and royalties beyond to those for development candidates and IND acceptance. Alternatively, Voyager may decline this option and remain eligible for a total of $985 million in total potential development milestones and up to $1.9 billion in total sales milestones for the GBA1 program plus tiered royalties ranging from low double digits to 20% on U.S. net sales. Irrespective of our decision on the U.S. cost and profit sharing option, Voyager will be eligible for ex U.S.-based regulatory and commercial milestones as well as royalties ranging from high single digits to mid-teens on ex-U.S. net sales. For the 3 discovery stage gene therapy programs, Voyager is eligible to earn up to $175 million in development milestone payments and $275 million in sales milestone payments for each program, plus tiered high single-digit to mid-teens royalties on U.S. net sales and mid-single-digit to low double-digit royalties on ex-U.S. net sales. Neurocrine has agreed to fully fund the development of the 3 new programs. The collaboration agreement is subject to certain closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions. We believe this deal provides transformational value for Voyager. In addition to bolstering our balance sheet capacity, it gives us optionality on how we choose to participate in potential downstream economics of the GBA1 program while ensuring we have a highly capable and well-resourced partner backing and advancing these programs. I will now turn the call over to Pete to review financial implications.

Thank you, Allen. Turning to a brief financial update. Let's go to Slide 6. As of the close of September 30, 2022, Voyager had reported $131.6 million in cash, cash equivalents and marketable securities, not including the Pfizer licensing payment of $10 million in the fourth quarter of 2022. As part of Q3 2022, we communicated that the company had a balance sheet runway into 2024. Rolling this forward through to December 31, 2022, the company closed the year with preliminary unaudited cash, cash equivalents and marketable securities of approximately $119.2 million. Pro forma cash following the Neurocrine collaboration is estimated to be approximately $294 million. Just as a reminder, Novartis is expecting to provide a decision in Q1 of 2023 around their 3 options to license capsids on select CNS targets. Each of these would trigger a licensing fee of $12.5 million. This could be upsized by 2 additional targets, each with an option fee of $18 million. This is another example of how Voyager continues to strengthen our balance sheet and runway while enhancing the long-term value for shareholders. Voyager Management will provide further financial guidance as part of our year-end 10-K financial results in March of 2023. I will now turn the call back over to Al to review our pipeline.

Thanks, Pete. Let's look at Slide 7. We're very pleased with the evolution of our pipeline, which now includes 4 preclinical programs, 2 partnered with Neurocrine in the -- with U.S. cost and profit share options for Friedreich's ataxia and now GBA1; and turning to Slide 8, 2 wholly owned programs in Alzheimer's disease and ALS. We continue to advance all 4 programs, and we anticipate the selecting development candidates for our wholly owned programs in the first half of this year. As you can see called out on Slide 9, we are continuing to build a sustainable pipeline by advancing early research initiatives behind our prioritized pipeline programs. I will now provide an update on our early research program for Huntington's disease. For Slide 10, Huntington's disease is a devastating fatal neurodegenerative disease affecting over 40,000 people in the U.S. alone with no cure or approved treatment to slow or reverse the decline. While this program is still at an early age -- early stage, we have a long-standing interest in Huntington's disease. We previously pursued early research around the gene therapy for the disease but we have now evolved this program in order to leverage insights derived from emerging clinical data from other Huntington's disease programs as well as new and emerging science of disease pathophysiology. Our new initiative will investigate a mutant HTT allele-specific siRNA, an MSH3 genes financing approach or a combination of the 2, delivered intravenously to the TRACER capsid. The MSH3 approach reflects new research on the role of somatic expansion, process that is thought to introduce harmful DNA expansions into the HTT gene in the cells most affected by the disease. Genes in the DNA mismatch repair pathway, including MSH3, are thought to be drivers of somatic expansion. In addition, targeting the mutant HTT on an allele-specific basis allows us to knock down the mutant protein while preserving the normal version, which the evolving clinical trial data in the field suggests may be important to provide therapeutic benefits safely. In summary, today is a momentous day for Voyager Therapeutics, furthering our mission to break through the barriers constraining the fields of gene therapy and neurology. This new collaboration with Neurocrine reinforces our value creation strategy. Our novel capsid platform, our growing CNS pipeline and our strategy of leveraging partnerships to generate not only nondilutive revenue but transformational value. Today's collaboration, in addition to proving the value of our innovative neurogenetic medicine programs, help us advance multiple gene therapy programs to our patients who desperately need them. I also -- it also serves as an example of the types of partnerships we have engaged in and will continue to pursue. And importantly, the near- and long-term financials of this deal provide resources to further advance our platform and prioritize pipeline programs as well as early-stage research. The Huntington's disease program we provided an update on today represents an opportunity where we see significant unmet need, and we believe we can deliver a unique solution resulting in value creation for patients and thus for shareholders. I want to thank the teams at both Voyager and Neurocrine, who have worked hard to enable this collaboration. We look forward to providing future updates as we advance and enable new neurogenetic medicines. With that, we're happy to take any questions you may have. Operator?

[Operator Instructions] Our first question comes from Phil Nadeau with Cowen.

Congratulations on the collaboration. First, on the GBA gene therapy program itself, I think the prior guidance was for we can relate to be determined here in the first half of 2023. In light of Neurocrine getting involved, is that still likely to happen? Or will it be somewhat later that you'll be able to determine a lead candidate?

Well, this is Al. Well, this is now Neurocrine's decision, right? So -- but I anticipate that the timing will be similar. But again, it's really Neurocrine's final decision as to whether or not to development that candidate that meet their standards.

And in terms of the opt-in for 50-50, it does seem to be a very intriguing part of the deal. What led you to establish the trigger as the end of Phase I? I mean I guess I'm curious because it seems like the end of Phase I could actually come relatively soon and maybe having more time to determine whether strategically a 50-50 commercialization deal would fit better with your capabilities.

Well, the -- we think -- again, it's Neurocrine's decision how to develop this product. But in our view, there are some very good biomarkers that are available in the spinal fluid to determine whether or not we've got adequate and meaningful gene expression that we hope will translate into clinical meaningfulness. These include measurements of the enzyme itself in the spinal fluid since it's a secreted enzyme. But also the substrates that abnormally build up in the spinal fluid in patients who are GBA1 carriers, so we can measure whether or not our treatment lowers the substrate to normal levels. We think that would be very meaningful data, potentially derived from a Phase I trial. But again, I emphasize it's up to Neurocrine, how the clinical development program is done.

Great. And then one last question from us. In terms of the other or for CNS targets, have those targets been specifically defined and just not disclosed? Or does Neurocrine have -- still have discretion as to determine exactly which candidates and targets they wants to go after?

They've been defined, but we're not disclosing them at this time.

Got it. congratulations again.

Thank you, Phil.

Our next question comes from Jack Allen with Baird.

And congratulations to the team on this interesting deal. I guess at a very soft level, I know Voyager has some very novel vectors in capsids that you're developing. I was wondering if you can provide any color as it relates to the overlap between the capsids that are being selected for these various programs, be it with Neurocrine and also externally with your partners at Pfizer and Novartis as well.

Well, let me start, and I'll ask Todd, our CSO, to join in the conversation. But the key thing is to remember is that we could all end up using the same capsids for all we know because deals are not exclusive to the capsid. They're exclusive to the target. So -- and we have a number of targets as you -- as we presented it in various meetings that meet certain standards. The key is to develop a target sort of capsid profile, if you will. Each disease there are nuances as to what cells are involved in what disease. So is it going to be spinal cord neurons, cortical neurons, deep grade neurons? Is it going to be glial that we want to transduces of both. So in that sense, there could be differences in the capsids chosen. But I just wanted to emphasize the fact that deals are not exclusive to capsid. Todd?

Thanks, Al. It really gives us options. So one of the things we do is we build a capsid profile for particular disease indications, and we have the opportunity to evaluate multiple capsids to identify that, which would be, we hope, most successful. Al mentioned, we want to target particular cell types and tissues and organs. Thus, we want to de-target or not to target other tissues and organs. And each particular disease and indication has its own profile. And so we evaluate multiple TRACER capsids when we select one. And as Al pointed out, we might end up using the same capsid for more than one indication or it could be different. And those experiments and studies are in progress.

Great. Great. And then just generally, on your appetite for continued partnerships, it seems like the team remains very active in this field. I guess how do you balance partnering out significant assets while also maintaining enough to the development of your own internal pipeline as well?

Well, Jack, we're very interested in doing more partnerships. As I pointed out, that's the third -- that's 1 of our 3 pillars of growth. And listen, I think if you take this one, this particular deal, into consideration, I think it actually increases the overall value of the asset because it leverages capabilities across the 2 companies. And also, it increase -- as I said, it increases the likelihood that we can one day hopefully, make the therapy available to patients. So we're very interested in that. It -- and it provides resources that enables a whole variety of other programs. As I said, the ability to vectorize siRNAs, ability to vectorize antibodies, the ability to replace genes that are missing due to loss of function mutations or the functions of those genes, this provides a wide array of opportunities for us and we'd love to see what we can do across multiple diseases. And by -- with the resources that we're getting from a deal like this, we can certainly explore new early research initiatives.

Great. Congratulations again on the deal.

Thanks, Jack.

We have a question from Laura Chico with Wedbush.

Congratulations on the deal. I'm wondering, could you talk a little bit further about why GBA1 was selected. So obviously, as you mentioned, you have other programs ongoing. I guess I'm trying to understand why it made sense to partner the GBA1 opportunity compared to some of these other ongoing efforts. Can you talk about some of those considerations that came into play?

Well, I'll start and others may want to chime in, but -- maybe, Allen. But I would say that GBA1, Parkinson's, I mean, we're talking Neurocrine, and we're talking about an expert in movement disorders. I mean they have developed -- discovered, developed and commercialized the drug for tardive dyskinesia. They also have a COMT inhibitor for Parkinson's disease. Clearly, they are experts in this particular field. And so I think it makes a lot of sense to partner GBA1 with the people who have that kind of expertise. And as I said earlier, that increase the overall value of the asset. Allen, do you have any other thoughts on this?

Thanks, Al, and maybe I'll just add a little color there. So first, this was a competitive process. There was a lot of interest in GBA1 program as a target because I think it affords a pretty significant potential commercial opportunity, especially as you think about its potential for Parkinson's disease. So that is a factor. And we were able to maintain an option to have the 50-50 cost and profit sharing in the U.S. So this was able to provide a level of deal economics that, I'd say, is differentiated from some of the other things we might theoretically have considered. But there was really strong interest in this program because of what it represents.