Rockville May 9, 2020 (Thomson StreetEvents) -- Edited Transcript of Regenxbio Inc earnings conference call or presentation Thursday, May 7, 2020 at 8:30:00pm GMT

* Kenneth T. Mills

REGENXBIO Inc. - CEO, President & Director

* Patrick J. Christmas

REGENXBIO Inc. - Senior VP & Chief Legal Officer

REGENXBIO Inc. - Senior VP & Chief Medical Officer

* Vittal K. Vasista

REGENXBIO Inc. - Senior VP & CFO

Chardan Capital Markets, LLC, Research Division - Director of Research & Head of Healthcare Research

SVB Leerink LLC, Research Division - MD of Genetic Medicines & Senior Research Analyst

Good afternoon, and welcome to the REGENXBIO First Quarter 2020 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Patrick Christmas, Senior Vice President and General Counsel for REGENXBIO. You may begin.

Patrick J. Christmas, REGENXBIO Inc. - Senior VP & Chief Legal Officer [2]

Good afternoon, and thank you for joining us today. With us are Ken Mills, REGENXBIO's President and Chief Executive Officer; Dr. Steve Pakola, our Chief Medical Officer; and Vit Vasista, our Chief Financial Officer.

Earlier this afternoon, REGENXBIO released financial and operating results for the first quarter ended March 31, 2020. The press release reporting our financial results is available on our website at http://www.regenxbio.com.

Today's conference call will include forward-looking statements regarding our financial outlook in addition to regulatory and product development plans. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from those forecasted and can be identified by words such as expect, plan, will, may, anticipate, believe, should, intend and other words of similar meaning. Any such forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties. These risks are described in the Risk Factors and the Management's Discussion and Analysis sections of REGENXBIO's annual report on Form 10-K for the full year ended December 31, 2019, and comparable sections of REGENXBIO's other filings, which are on file with the Securities and Exchange Commission and available on the SEC's website.

Any information we provide on this conference call is provided only as of the date of this call, May 7, 2020. And we undertake no obligation to update any forward-looking statements we may make on this call on account of new information, future events or otherwise. Please be advised that today's call is being recorded and webcast. In addition, any unaudited or pro forma financial information that may be provided is preliminary and does not purport to project financial positions or operating results of the company. Actual results may differ materially.

I would now like to turn the call over to Ken.

Kenneth T. Mills, REGENXBIO Inc. - CEO, President & Director [3]

Thank you, Patrick. Good afternoon, everyone, and thanks for joining us. On today's conference call, we'll provide a recap of our recent progress, advancing and expanding the NAV Technology Platform as well as expected future milestones. Steve will provide an update on our clinical programs, and Vit will provide an update on the financial results for the first quarter of 2020. Then we'll open the call for questions.

First, I want to take a moment to say that I hope everyone is healthy, staying safe during the COVID-19 pandemic. At REGENXBIO, we've made some changes to our business operations in order to support the health and safety of our employees and the community, and we're fortunate that we've been able to successfully advance our business during this time. As always, and especially throughout the past few months, our overall focus remains on the important goal of improving lives through the curative potential of gene therapy, and I'm grateful that our team is dedicated to this pursuit even in these challenging times. Along these lines, we've made important progress in recent months at REGENXBIO as we continue to see the remarkably consistent and durable effects of gene therapy treatment, patients with severe wet AMD.

If you haven't done so already, I highly recommend referring back to our webcast that we hosted on April 22, in which several leading retina specialists joined us to provide their perspectives on our recently announced data. Our RGX-314 gene therapy is designed to enable sustained production of an anti-VEGF antibody fragment in the eye, and we've now demonstrated stable and consistent results out to 2 years in the third dose cohort. We believe this is the longest time line of continuous therapeutic effects demonstrated in wet AMD patients from a single administration of an anti-VEGF treatment.

We also provided additional data from the fifth cohort, which received a higher dose of RGX-314 and in which 73% of patients remain anti-VEGF injection-free 9 months after a onetime administration of RGX-314. In our program, we're thinking carefully of all aspects of clinical management, not just anti-VEGF injections, are cognizant of the variables that might impact patient care and vision. And Steve will provide more details on these results and next steps for the program in his remarks.

Beyond RGX-314, we've continued to drive our internal gene therapy pipeline forward. As we previously announced in February, we presented encouraging initial data at the WORLDSymposium from Cohort 1, the Phase I/II trial for MPS II, and we look forward to providing additional data from these patients in mid-2020. We've begun enrolling patients in Cohort 2, where they're receiving a higher dose of RGX-121 and look forward to providing interim data on Cohort 2 in the second half of 2020.

We anticipate several other important updates this year including from our Phase I/II trial of RGX-501 for the treatment of HoFH, our Phase I/II trial of RGX-111 for the treatment of MPS-I and our RGX-181 program for the treatment of CLN2 disease, as well as our research programs in hereditary angioedema, neurodegenerative and neuromuscular diseases.

Lastly, construction of our GMP production facility here in Rockville continues, and the facility is expected to be operational in 2021. We expect the facility to enable us to strategically scale production while continuing to ensure high quality for patients. So with that, I'll turn the call over to Steve for a clinical and regulatory update.

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Stephen Pakola, REGENXBIO Inc. - Senior VP & Chief Medical Officer [4]

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Thanks, Ken. As you've mentioned, last month, we announced updated data from our Phase I/IIA study of RGX-314 for the treatment of wet AMD. We reported that the gene therapy continued to be well tolerated at all dose levels. And there were no reports of ocular inflammation beyond what is expected following routine vitrectomy. The latest efficacy update was focused on the 2-year data from Cohort 3 of the study. Patients in this cohort received [6 C] 10 genome copies per eye. And now at 2 years after administration of RGX-314, they have demonstrated markedly improved visual acuity and stable retinal thickness as well as significantly reduced need for anti-VEGF intraocular injections and stable protein expression.

50% of patients within this cohort did not receive any anti-VEGF injections over the full 2 years of the study. And one additional subject did not receive injections starting 9 months after the administration of RGX-314. We saw an impressive improvement in visual acuity with an increase of 14 letters in both the full cohort as well as the 4 patients who did not receive anti-VEGF injections in the second year of the study. This improved vision and durability of anti-VEGF activity is particularly meaningful, as real-world evidence has shown us that patients commonly lose vision over time, even with current standard of care.

And finally, Cohort 3 showed consistent protein production over 2 years, giving us confidence that the transduced cells in the retina have been producing the RGX-314 protein at a steady rate throughout the study. We also provided an interim update from Cohort 5. 73% of patients were anti-VEGF injection free over 9 months. We are very pleased with these results and look forward to additional efficacy data at the 1-year time point. We will use this data to then finalize the design of the pivotal program for RGX-314, which we expect to initiate in the second half of 2020. We are also planning to start trials of RGX-314 using the in-office suprachoroidal delivery approach in 2020 and for both wet AMD and diabetic retinopathy. We look forward to providing additional information about these trials over the coming months.

Turning to our rare disease portfolio. Data thus far from our Phase I/II trial of RGX-121 has been encouraging as patients in the first cohort demonstrated consistent and sustained reduction in heparan sulfate in the CSF, and available data support early signs of neurocognitive stability. We look forward to providing additional data from these 3 patients in mid-2020. Meanwhile, enrollment in Cohort 2 at a higher dose level continues and is expected to be complete in the first half of 2020, with interim data expected in the second half of 2020.

Recruitment screening and additional site activations are ongoing in our Phase I/II clinical trial evaluating RGX-111 for the treatment of MPS I. Recruitment in this trial had been previously focused on an initial patient over the age of 18, but the protocol was recently amended to allow enrollment of patients as young as 4 months of age.

We expect to provide a program update in the second half of 2020. We also anticipate updates from our Phase I/II trial of RGX-501 for the treatment of HoFH in the first half of this year. We have several other study programs headed towards the clinic, including the HAE and neuromuscular programs, and I look forward to providing additional details in the coming months. With that, I turn the call back over to Ken. Ken?

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Kenneth T. Mills, REGENXBIO Inc. - CEO, President & Director [5]

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Thanks for that summary, Steve. REGENX has an extensive footprint in the gene therapy space, and we're always purposeful in developing partnerships with key players in the space to continue to realize the potential of NAV Technology. Our NAV Technology is currently being applied in 1 marketed product and more than 20 additional partnered product candidates.

We continue to track the positive progress of Novartis' ZOLGENSMA, which uses the NAV AAV9 vector. Novartis has stated that they're treating about 100 patients per quarter in the U.S. based on their current launch. We're encouraged by the success that the Novartis team in reaching patients. I believe that this is among the most successful launches of gene therapy so far and believe that it demonstrates the transformational impact that NAV Technology can have on the treatment of genetic diseases with significant unmet needs.

We were also pleased to see the positive regulatory developments in Japan and Europe this quarter, which signal additional validation of the technology across the globe. And importantly, for the entire gene therapy field, Novartis recently published additional detailed data for the intrathecal delivery of ZOLGENSMA, which has shown improvement in motor function and achievement of motor skills following treatment. I'm excited for the additional progress to come from this program.

In addition, we recently announced another exclusive worldwide license agreement with Ultragenyx, extending our companies' existing gene therapy partnership. This agreement will enable the Ultragenyx team to apply our NAV technology, AAV8 and AAV9 vectors to the development of a new gene therapy for a rare metabolic disorder, and provides further validation of the breadth and depth of our intellectual property portfolio.

Throughout the remainder of this year, we also anticipate regulatory updates from our partners like Audentes Therapeutics, now part of Astellas, for their gene therapy candidate for x-linked myotubular myopathy, which uses our NAV AAV8 vector. The promising milestones and achievements from our partners, as well as the progress in our own internal pipeline, provide additional validation the proprietary NAV Technology platform and further demonstrate the transformational impact that can come from a onetime administration of gene therapy.

With that summary, I want to turn the call over to Vit for a review of our financials.

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Vittal K. Vasista, REGENXBIO Inc. - Senior VP & CFO [6]

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Thank you, Ken. REGENXBIO ended the quarter on March 31, 2020 with cash, cash equivalents and marketable securities totaling $356.6 million compared to $400 million as of December 31, 2019. The decrease was primarily attributable to net cash used in operating activities of $35.6 million and cash used to purchase property and equipment of $4.6 million.

Revenues were $17.6 million for the 3 months ended March 31, 2020, compared to $900,000 for the same period in 2019. The increase was primarily attributable to $10 million of royalty revenue recognized on net sales of ZOLGENSMA in the first quarter of 2020 (inaudible) $7.2 million of license revenue recognized from new licensing granted to Ultragenyx during the period. Commercial sales of ZOLGENSMA commenced in the second quarter of 2019. The REGENXBIO is eligible to receive a milestone payment of $80 million from AveXis upon the achievement of $1 billion in cumulative net sales of ZOLGENSMA. As of the end of the first quarter of 2020, they have reported over $530 million in net sales, so we are more than halfway to that milestone.

Research and development expenses were $37 million for the 3 months ended March 31, 2020, compared to $25.2 million for the same period in 2019. The increase was primarily attributable to personnel-related costs as a result of increased headcount, laboratory and facility costs, expenses associated with conducting clinical trials for our lead product candidates, and externally sourced services for preclinical, regulatory and manufacturing-related activities.

General and administrative expenses were $14.8 million for the 3 months ended March 31, 2020, compared to $11.6 million for the same period in 2019. The increase was primarily attributable to personnel-related costs as a result of increased headcount, and professional fees for advisory and other services.

Net loss was $40 million or $1.08 basic and diluted net loss per share for the 3 months of March 31, 2020, compared to a net loss of $32.2 million or $0.89 basic and diluted net loss per share for the same period in 2019. As of March 31, 2020, we had approximately 37.2 million common shares outstanding.

Based on our current operating plan, we expect the balance in cash, cash equivalents and marketable securities of $356.6 million to fund the completion of our internal manufacturing capabilities and clinical advancement of our product candidates into 2022. With that, I will turn the call back to Ken to provide final thoughts.

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Kenneth T. Mills, REGENXBIO Inc. - CEO, President & Director [7]

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Thanks for that update, Vit. So next week is the American Society of Gene and Cell Therapy Conference. And we've announced a number of scientific posters and presentations that will be shared. Our research and development team continues to demonstrate a deep and impressive knowledge in AAV discovery, characterization, delivery and significant experience and expertise in process development, production at large scale. So we look forward to participating with our industry partners, friends and colleagues, highlighting some of the work next week as well as continuing to share new data from our ongoing research throughout 2020.

Finally, as I've worked with our team to continue to pursue our mission for patients, balance the challenges and dealing with the COVID-19 pandemic, I've also reflected more on how the potential gene therapy treatments to help ease the burden on the medical community while also protecting patients, families, caregivers, even larger communities from certain risks involved current treatment options during events like what we're experiencing with this pandemic. There are many patient populations that rely on traveling, regular access (inaudible) medical care facilities for injections or infusions that are important, aesthetically necessary, sight-saving or life-saving medicines. Single administration gene therapy treatments can deliver important alternatives in moments where travel and access is restricted. Health care resources are limited, and product supplies may be threatened. Against the background of a pandemic that's taxing the global health care resources at unprecedented levels, it's even more apparent to me that our single-administration treatments have the potential to also create safer and more robust system for care.

The medical community and the biotech financial community should be doing everything possible to support and expedite single administration treatments, especially for large and at-risk populations. We continue to make strong progress in advancing key programs, broadening our internal care pipeline. After more than a decade of steadfast effort and focus, we remain dedicated and committed to improving lives through the curative potential of gene therapy.

With that, we're happy to turn the call over for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And your first question comes from Gena Wang with Barclays.

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Huidong Wang, Barclays Bank PLC, Research Division - Research Analyst [2]

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First related to resolution on the latest update in data was really impressive, especially after the update from other competitors. So another thing I wanted to ask you is, regarding the suprachoroidal data and the initiation first half this year, and also the clinical data, first cohort data by the end of this year. Just wondering what kind of data should we expect will you be presenting at the end of this year? Regarding the patient numbers, if we understand correctly, it's 6 patients? And what other data will you be able to share with us?

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Stephen Pakola, REGENXBIO Inc. - Senior VP & Chief Medical Officer [3]

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Gena, Steve here. Thanks for the questions. Yes, as you mentioned, our guidance is we continue to target starting our suprachoroidal delivery development program, first with a wet AMD and to kick that study off by the end of the first half of this year. And we still are guiding towards having interim initial data at the end of the year. We haven't actually disclosed how many patients we have in the study and other details, and we look forward to providing that later. But certainly, we stand by our guidance of giving an update based on some of the data that we'll have as of the end of the year. One of the nice things of the wet AMD indication is we already have a good handle on wet AMD in terms of looking at the appropriate types of endpoints, both anatomic, functional and treatment burden endpoints that we've talked about in the past and very recently with our recent data update in our subretinal delivery program. So we have a good handle on those types of endpoints. So I think you can envision similar types of data readouts.

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Operator [4]

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Your next question comes from Gbola Amusa with Chardan.

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Gbolahan Amusa, Chardan Capital Markets, LLC, Research Division - Director of Research & Head of Healthcare Research [5]

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Congrats as well on the 2-year durability data for 314. I had a couple of questions on the potential for inflammation for your in-office suprachoroidal approach. Obviously, there's a lot of benefit in going in the office, but some would argue there's greater potential for inflammation with that approach. So 1 -- 2 questions is, do you agree with that assessment? And then second, given that we've seen very recent and very early results with intravitreal gene therapy using expanded courses of prophylactic steroids addressing issues, maybe addressing thoroughly issues of inflammation with the (inaudible) capsid and wet AMD and also RP. Do those results go early? Do they motivate you to use an extended course of prophylactic steroids for your SCS microinjector programs? So those 2 questions then very quickly. Novartis just said that there's a multibillion-dollar potential for ZOLGENSMA, again, and this has updated guidance, and you got obviously up to 10% of that. What -- could you cover what they said [invites public forms] on the timing of the ramp towards that guidance?

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Kenneth T. Mills, REGENXBIO Inc. - CEO, President & Director [6]

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Steve, maybe I'll let you start with the 314 questions.

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Stephen Pakola, REGENXBIO Inc. - Senior VP & Chief Medical Officer [7]

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Okay. That makes sense. Gbola, that's a great question. Suprachoroidal delivery is a different route of administration than subretinal. Subretinal is the gold standard. That's where we have the most efficacy and safety and clear demonstration that there isn't inflammation associated with subretinal gene therapy. And that's obviously very excited about for our lead program with subretinal delivery. Suprachoroidal, the in-office potential delivery there, where we still are anatomically delivering very close to the target issue of the RPE and the photoreceptors, but you raise a legitimate question. What do we know about immune privilege or lack thereof and the potential for inflammation? Historically, there's been inflammation seen, an immune response with suprachoroidal delivery of earlier generation AAV vectors such as AAV2 and AAV5. One of the things that got us very excited about suprachoroidal delivery with our proprietary NAV technology is actual preclinical data in both small and large animal models, where we've seen no inflammation with suprachoroidal delivery of AAV8 vector including RGX-314 in multiple studies. So that gives us (inaudible) that perhaps there is less of a risk of inflammation with [suprachoroidal] delivery than exists with intravitreal, for example.

So with intravitreal, we know historically -- universally really, with preclinical and clinical experiments, that at the doses that you have to give with either AAV2 or other vectors, that you have to give a high enough dose to have fusion to get to the back of the eye, the target tissue and through the internal limiting membrane barrier, that invariably at doses where you get good transduction, you also see immune-mediated inflammation. And we continue to see that, frankly, validated in any preclinical experiments or clinical data that's come out with intravitreal administration.

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Kenneth T. Mills, REGENXBIO Inc. - CEO, President & Director [8]

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Gbola, just turning to the question about ZOLGENSMA. I think what we've seen most recently between Novartis' update at their last earnings call, and then they had an update around new data that was presented at MDA, is that for the IV route of administration, that's, of course, currently approved and being marketed, facilitating the sales numbers that we're seeing based on the U.S. approval, there's been some regulatory events in Japan and Europe. Specifically, they pointed to that indicate that reimbursement is coming in other jurisdictions as early as the end of the first half of this year. In addition, with respect to the new intrathecal data that we mentioned earlier in the call, that there was an update on the strong study showing improved outcomes as described, and there's been guidance from Novartis that a BLA could be filed or equivalents, I guess, worldwide, as early as the second half of 2020 or into 2021. So we continue to be really encouraged by the data, by what we're seeing in terms of the uptake of the use of gene therapy. Again, I think we're looking at what must mean among, if not the, most successful launch for gene therapy to date and are liking to see the regulatory and commercial milestones that are emerging.

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Operator [9]

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Your next question comes from Mani Foroohar with SVB Leerink.

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Mani Foroohar, SVB Leerink LLC, Research Division - MD of Genetic Medicines & Senior Research Analyst [10]

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