SGMO - NASDAQ

Good day and thank you for standing by. Welcome to the Sangamo First Quarter 2023 Teleconference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today Louise Wilkie. Please go ahead.

Thank you. Good morning. I'm Louise Wilkie, Sangamo's Vice President of Investor Relations and Corporate Communications. Thank you for joining us on the call today. On this call are several members of Sangamo executive leadership team, including Sandy Macrae, Chief Executive Officer; Mark McClung, Chief Operating Officer; Prathyusha Duraibabu, Chief Financial Officer; Jason Fontenot, Chief Scientific Officer; Nathalie Dubois-Stringfellow, Chief Development Officer; and Bettina Cockroft, Chief Medical Officer. Slides from our corporate presentation can be found at our Website, sangamo.com under the Investors & Media section on the Events and Presentations page. This call includes forward-looking statements regarding Sangamo's current expectations. These statements include, but are not limited to, statements relating to the therapeutic and commercial potential of our product candidates, the anticipated plans and time lines of Sangamo and our collaborators for initiating and conducting clinical trials, screening, and dosing patients and presenting clinical data, advancements of our product candidates, advancements of preclinical programs to the clinic, our strategic reprioritization and restructuring and the anticipated benefits thereof. The sufficiency of our resources, cash runway, and plans to seek additional capital, our preliminary estimated operating results for quarter-ended March 31, 2023, estimated financial guidance and targets for 2023 and beyond, upcoming catalysts and milestones, and other statements that are not historical facts. Actual results may differ materially from what we discussed today. These statements are subject to certain risks and uncertainties that are discussed in our filings with the SEC specifically on our annual report on Form 10-K for the fiscal year ended December 31, 2022 as supplemented by our quarterly report on Form 10-Q for the quarter ended March 31, 2023 to be filed with the SEC. The forward-looking statements stated today are made as of this date, and we undertake no duty to update such information, except as required by law. On this call, we discuss our non-GAAP operating expenses. Reconciliation of this measure to our GAAP operating expenses can be found in our press release, which is available on our website. Now, I'd like to turn the call over to our CEO, Sandy Macrae.

Thank you Louise and good morning to everyone joining the call. At target is where Sangamo is today, I am proud of our rich history of scientific innovation and industry firsts. We are committed to developing genomic medicines have the potential to transform the lives of patients and to bring value for shareholders. In so doing we have been driving forward important programs in our pipeline which are producing promising results. Today I want to sit back and spend some time reiterating the vision for the company and why we believe Sangamo has the potential to create significant value in these areas of chosen focus. I will then outline a strategic reorganization that is being announced today to prioritize resources and spend in an effort -- to achieve our vision. We will advance our wholly owned neurology portfolio of preclinical assets that leverage the power of our

Thank you, Sandy and good morning to everyone on the call. Here at Sangamo, we strongly believe in our scientific capabilities, our platform, and the potential of our programs to help transform the lives of patients. Our

Thank you Jason, and good morning everyone. Starting with Fabry, we remain the leading gene therapy in this space with yet another competitor recently announcing the termination of development. This underscores the need for us to double down and continue working tirelessly to make this medicine available to those living with Fabry disease. As we actively prepare for a potential Phase 3 trial, it's helpful to remind everyone of the market opportunity for this asset. We know that there are approximately 4,000 diagnosed Fabry patients in the United States as well as many more that are not diagnosed even with familiar incidence of the disease. Of those diagnosed around 1300 to 1900 are actively on treatment like enzyme replacement therapy although many struggle with the adherence to the regimen. We have successfully recruited naive pseudo naïve patients into our Phase 1-2 study, as well as patients already on ERT, which demonstrates the desire of patients to have alternative and improved treatment options over and above the standard of care. We will therefore continue to appropriately invest in this program to maximize the chances of clinical and commercial success. The compelling data we shared last quarter from the STAR study demonstrated a favorable safety profile and evidence of clinical benefit from strong biomarker data to kidney biopsies and improved SF-36 general health scores. Since Q4 earnings, we have dosed a further three patients in the Phase 1-2 study to achieve a total of 20 patients to date, and we continue to enroll in this study. We strongly believe ST-920 is a potential medicine, so we're progressing Phase 3 planning with urgency and plan to meet with the FDA on the proposed study design this summer once we've accrued sufficient data for those discussions. The trial is anticipated to commence in the second half of 2023 and dosing of the first patient could happen as early as the first part of 2024, depending on the regulatory interactions. As a reminder, the expansion Phase 1-2 for which we expect to complete dosing in 2023 is not expected to be a gating factor for the commencement of the Phase 3, but will provide additional data, to support the regulatory package. Now turning to our CAR-Treg portfolio, where once again we're a leader in this field of research and in the clinic. When we acquired TXL in 2018, we gained deep expertise in regulatory T-cell biology and married that with our detailed understanding of manufacturing and our experience developing INDs and progressing programs into clinical development. With these factors combined, we believe we are well placed to maximize the opportunity for CAR-Tregs to treat a range of autoimmune indications and are pioneering a new type of treatment modality. The first of the programs, TX200 and HLA-A2 mismatch kidney transplantation continues to move through the clinic. This quarter we dosed the third patient in Cohort One, and all patients continue to do well. Preparation for the second and higher dose cohort is actively progressing, and we have additional patients in pre-screening who continue to enroll. As we outlined on the last quarterly call, we've been working to accelerate the pace of enrollment in this study. I'm pleased to announce that we've received positive initial feedback from two European agencies required for the enhanced trial design that will accelerate dose escalation. We're also on track to share clinical data from Cohort One by the end of 2023. As part of our sharpened focus, we plan to prioritize the investment of our near-term autologous CAR-Treg portfolio, and this has resulted in a decision to transition all allogeneic research activities from the United States to our Valbonne, France facility to see self-manufacturing in our Brisbane, California facility. While allogeneic capabilities will be important to the long-term development of the CAR-Treg platform, it's important that our resources are directed towards advancing TX200 at this time. Finally, I want to reiterate two other important components of the story that we expect to be value drivers for the company. The first is giroctocogene fitelparvovec an investigational gene therapy we're developing with Pfizer for patients with moderately severe to severe hemophilia A currently in Phase 3. Dosing is complete for all patients required to complete the primary analysis and Pfizer continues to work towards a pivotal read out expected in mid-2024. Pfizer anticipates the potential BLA and MMA submissions in the second half of 2024, which when completed would generate a significant milestone payment. As a reminder, this partnership agreement allows for a potential milestone of up to 240 million and up to 14% to 20% in potential royalties. The other important potential value driver of our portfolio is innovative new capsids that Jason outlined earlier, and which serves as a resource to address the issue of delivery to places like the central nervous system. We recognize the importance of unleashing the potential of new engineered capsids as enablers of genomic medicines, both for our own programs and those with potential partners, and are making significant progress in addressing delivery to a range of previously inaccessible areas. We see this asset as a source of competitive advantage and also potential revenue, and are hopeful to share some exciting updates about our capsid program over the coming months. I'll now turn it over to our Chief Financial Officer, Prathyusha for an overview of the financial results. Prathyusha.

Thank you, Mark and good morning everyone. Sangamo announced preliminary first quarter financial results yesterday as we worked towards completing customary quarter end close and review procedures including the evaluation of non-cash charges related to impairment of long-lived assets. Our preliminary results are as follows, revenue for the first quarter ended March 31st, 2023 are estimated to be approximately $158 million compared to $28 million for the same period in 2022, reflecting an increase of $130 million year-over-year. This was primarily driven by the return of assets from Biogen requiring us to accelerate approximately 121 million of non-cash revenue from the related upfront fees. Total GAAP operating expenses for the first quarter are estimated to be in the range of $120 million to $140 million compared to $73 million for the same period in 2022, reflecting an increase of $47 million to $67 million year-over-year. This was primarily driven by certain non-cash charges including goodwill impairment of $38 million and estimated impairment of long lived assets of up to $20 million. These impairments were driven by several factors, including termination of significant partner agreements noted previously and lower market capitalization similar to what other companies in our space have observed. We ended the quarter with approximately $241 million in cash, cash equivalents, and marketable securities, which is expected to fund the company for at least the next 12 months. This represents a decline of approximately $66 million from the prior quarter. Furthermore, the headcount reductions announced today in combination with other planned cost reductions are expected to result in annualized savings of approximately $31 million going forward. We continue to assess ways to further reduce our annual operating expenses and to manage Sangamo as a highly focused organization driving towards our prioritized two neurology assets Fabry and TX200. As a result of these changes our previously announced 2023 non-GAAP operating expense guidance range of $275 million to $295 million is now obsolete. We expect a current estimate for 2023 to be in the range of $240 million to $260 million. This range excludes certain non-cash charges including estimated [indiscernible] impairment of long lived assets and stock based compensation expense. Sangamo is assessing ways to further reduce operating expenses in line with our strategic priorities and the readouts from key programs will continue to drive physicians and investments in the coming months. In parallel, Sangamo is committed to creating long-term value for our shareholders, and we will continue to proactively and intensively explore avenues to raise additional capital, including through partnerships. I will now turn the call back to Sandy for closing remarks. Sandy.

Thank you, Prathyusha. Today you heard that Sangamo is being responsible, responsive, and nimble in order to position ourselves for future success. There's a lot to look forward to. With Hemophilia A marching closer to a potential BLA submission. Today we announced our wholly owned neurology portfolio centered around NAV 1.7 with a IND submission anticipated in 2024, leveraging our innovative sync finger technology and underpinned by a capsid development capability that we believe can provide value in the near and long term. Our market leading Fabry program advances towards a potential Phase 3 trial expected to begin at the end of this year, and our first in class CAR-Treg technology is being assessed in the clinic through TX200 with initial data from Cohort One expected by the end of 2023. I'm very thankful to our leadership team and all my Sangamo colleagues for their hard work and dedication to our mission. I'd like to close by expressing my hope and excitement for the future that lies ahead for Sangamo. So at this time, we'd like to open up for questions. Operator, please open the line for questions.

[Operator Instructions]. And our first question will come from Ben Burnett of Stifel. Your line is open.

Hey, thank you very much. I had a question regarding the Fabry program. I was wondering if you could provide more color on the potential Phase 3 design being proposed to the FDA and is there any expectation that Fabry would be needed as a comparator? And I guess if so, any thoughts as to whether or not a non-inferiority study would supply for approval in the U.S.?

Ben, thank you for your question. I'm going to pass that one on to Nathalie.

Yeah, hi. Thank you for the question. We are preparing the interaction with the FDA, right now. We hope to have a meeting this summer and we will comment on the Phase 3 design and potential agreement with the FDA after the call.

Nathalie what gating are going to that interaction?

Some additional data from our top dose in the Phase 1-2 trial, but we are…

So it's simply just the time of collection of data.

Absolutely.

Okay. That makes sense. I appreciate that. And maybe if I could also just ask a question, like a biology question actually on the Prion disease program. I think the way the slide is depicted as we understand it, Prion proteins, I guess, are continually supplying like material for the production of these larger misfolded aggregates. Is there anything known about whether aggregates will be cleared once the Prion source is turned off, what have you unveiled there?

Jason, can you help with that please?

Yes. There is evidence that if the source of the Prion protein aggregates the gene, the Prion gene if turned off that aggregates do diminish. So, we believe that this approach will have therapeutic potential, and indeed the data that we have presented at Prion 2022 showed great effects in the preclinical mouse models. So we were very excited about this program.

And Jason, can you just summarize that data quickly about the difference in lifetime of mice and when the dosing was given?

Sure. So, the model that was used in that study is considered a gold standard for understanding Prion disease. And we took two approaches there, one where the mice were inoculated with the Prion protein, which initiates the disease and simultaneously treated with the

That's super interesting. Thank you.

And one moment for our next question. Our next question will come from Greg Harrison of Bank of America. Your line's open.

Hey, good morning and thanks for taking our questions. Maybe you could give us a little background on just what led to the choice of NAV 1.7 as the target of focus and how could your approach be differentiated from others like the small molecule, blockers under development, like for a Texas program?

Greg, thank you for the question. And, I'm going to pass on to Jason again to talk us through the science. But for those of us that have been in industry for any period of time, we've seen the number of companies have tried to drug NAV 1.7 and struggled with the fact that small molecules and antibodies that work on NAV 1.7 and give clear benefit in pain, interact with similar proteins such as NAV 1.6, NAV 1.8, and cause side effects. So Jason, why do we think our approach is so fundamentally different?

Yeah, so what's so exciting about NAV 1.7 is that there is very clear genetic data from human populations that show that this molecule is a key regulator of pain sensation. So it has a very clear genetic, it's genetically implicated in diseases. But as Sandy pointed out, the problem with targeting NAV 1.7 has been that there it is part of a family of very closely and structurally similar receptors and small molecule approaches in particular have been unable to specifically target NAV 1.7 without involving other receptors. And this creates issues of specificity. So what's unique about our

I want to just underline that and take it to a kind of simpler level. The small molecules target the protein. What we do is we target the DNA and the DNA target for NAV 1.7 is completely different from all the other NAVs, and therefore we do not have this problem of specificity because it's the DNA that we target and not the protein. Does that help Greg?

Yeah. Yeah, that's super helpful. If I could sneak one more, just curious, now that you're focusing on the 1.7 program and other earlier stage programs like CAR-Treg, will you seek partners to help fund development and just broader, what's your strategy for funding the pipeline in the more medium to longer-term?

That's a very fair question. Mark, can you help with that?

Sure. Hi, Greg. Thanks for the question. As we've communicated before, we're excited about our technology and when we get approached by potential partners that are interested in it, we really ask ourselves a couple of questions. One is, can the partners help us accelerate the program faster to patients by bringing resources, expertise, and capabilities. And if they do, then that we take a serious look at that. I mean, we've got a strong history over the last several years in terms of partnerships that have brought in about 815 million in upfront. And, we've seen a lot of progress as a result of those partnerships including Pfizer's advancements that I've commented on earlier. So we will look at that.

Great. Thanks for taking the question.

And one moment for our next question. Our next question will come from Gena Wang of Barclays. Your line is open.

Thank you. I also have one question regarding NAV 1.7. I think it's also expressing actually, quite different tissues as well, like pancreatic beta cells and olfactory sensory, there are a few other parts of the body. So wondering, several questions. One is, what is advantage or disadvantage of a long-term incubation and what is your route of administration and how good is the selectivity regarding the specific organ?

So there is three questions, Gena, that I heard. One is about route of administration, one is about specificity, which I think we partly addressed. And the other one is about long-term benefit to the patient. So between Jason and Nathalie, can we address this. So Jason, do you want to talk about the specificity please and the route of administration?

Sure. Thank you for the question, Gena. I think there are two important points about the specificity. First, this is where the power of our

Through systemic administration?

Sorry, excuse me, intrathecal administration.

Nathalie, do you want to comment on that?

Yes. So yeah, we are targeting a population of patients with so small fiber neuropathy that have chronic diseases. So we hope that the treatment will last for a long time. It's a one-time single intrathecal bolus injection of the product and we intend to do a dose escalation trial that will allow us to target the appropriate dose for reducing the pain in those patients.

And these are patients, this group that we're targeting as our first population are people with intractable pain, their lives are dominated and ruined by their intractable pain, we've had them come visit us for the company. By doing it intrathecally, by doing it with a promoter that specific NAV that is only going to appear in the run to dorsal root ganglion and by

And importantly I think, I may add that reducing pain by integrating NAV 1.7 is not known to be associated with any neurological side effect and other sensory modality are not expected to be affected. So very specific targeting, yeah.

So yeah, my question also like long term inhibition, what could be the disadvantage there?

So, we will do this, Gena you know us well, and you know how seriously we take patient benefit and patient safety. And so we will start at the appropriate dose agreed with the agency and gradually increase it. But I cannot say importantly enough, how seriously impacted these patients are by their pain. And so for them this is an enormous advantage. And we've consulted with them, we've had them come into the companies and they see this as a really promising future medicine.

Thank you.

One moment for our next question. Our next question will come from Maury Raycroft of Jeffries. Your line is open.

Hi, good morning. Thanks for taking my questions. Maybe as follow up to Gena’s question, you mentioned the cell specific promoter and intrathecal delivery. Can you talk more about capsids as a gating factor for program advancement, I guess I would like to clarify that for the previously partner Biogen and Novartis programs, one of the reasons why those are paused for now is primarily because of a) the delivery limitations and will you use a novel CMO capsid for NAV 1.7 and Prion or conventional capsid like [indiscernible] because you need less blood brain barrier penetration and distribution for those targets?

Good morning, Maury. Thank you for the questions. So we're not revealing which capsids we are using for which diseases at this time. But we believe that we have a solution for each of the ones that we're advancing. Looking at -- talking about the Biogen Novartis programs, for example. Alzheimer’s, the challenge for that is ensuring that we have widespread brain coverage, particularly for the regions that are most impacted by Alzheimer's in an intravenous manner we believe. And so we've paused that program, it has advanced significantly over the three years it's been with Biogen, we are making great strides with our captured evolution, we are watching with interest other people's capsid evolution change. And when there is progress, and I truly believe there will be progress in a blood brain barrier crossing capsid in the soon future, those assets suddenly become very attractive for us or for other people.

Got it. That's helpful. Thanks for taking my questions.

Thank you Maury.

One moment for our next question. And our next question will come from Yanan

Hi, thanks for taking our questions. On the NAV 1.7 program, just wondering what percentage of suppression of expression are you driving for and expecting to have benefits? And also, is there -- are there advantages for using transcription repressor approach as opposed to straight knockout approach since you have both technologies? Thanks.

Jason, this sounds like a technical question for you.

Yeah, thank you for the question. So maybe I'll start with the second question. We are really excited about our epigenetic repression platform. And we believe that it's really optimal for this particular approach for a few reasons. One, because we're allowed -- we're able to regulate the genes without the introduction of double stranded breaks, or any type of mutation, and we're able to do that very specifically and very potently. So we've achieved what is essentially 99% close to quantitative repression of the target gene using this approach, and we believe it will be stable for the long term. So we're very excited about the approach and believe it's superior, especially in the CNS, where cells are non-dividing, than using the nucleases for instance, or any kind of approach that modifies the DNA permanently. Regarding how much repression is needed, I think there's two things to be considered there. There's the Purcell repression, and the coverage, the number of cells that are being repressed. What's really great about our platform is that on the Purcell basis, we can design repressors that repress gene expression to the amount that we think is needed to achieve the biological and therapeutic effect. And so we've identified repressors that are very potent at the single cell basis. And then through dosing and animal models, we will explore what level of repression across multiple cell types is necessary to achieve the appropriate therapeutic reduction in pain. And that will be done by dosing in preclinical models to understand what range of doses we want to explore, and then we'll take that into patients.

Got it. Thank you. And maybe also a question -- maybe two quick questions, one on the Fabry disease program. Could you comment on whether those patients who were off ERT remains off at this moment or should we -- do we have to wait until the next data update to hear about that? Thanks.

Nathalie, can you update that?

Yeah, so far, all the patients that have been withdrawn from ERT are still of ERT.

Very helpful. And lastly for the TX200 program, will you move to a higher dose sometime this year, because it sounds like I think the first cohort I designed is designed to have three patients and sounds like you have those three. So could you talk about potential decisions for dose escalation there? And yeah, I think, yeah, that's a question.

Bettina, can you help with that?

Yes, absolutely. And thank you for the question. So we're extremely happy to have concluded enrollment and dosing in Cohort One. For TX200, we plan to have a safety monitoring committee meeting, coming up very shortly in May so that we can then move on to the next cohort. And we already have patients lined up. And we're excited by this. We have also recently engaged with regulatory agencies in Europe who are representing with countries where we're conducting the trial that have agreed to an optimized design of our dose escalation protocol. And so this means we hope to accelerate dose escalation and then we'll plan to share initial data from Cohort One by the end of this year.

Got it. Thanks for all the updates.

One moment for our next question. Our next question will come from Luca Issi of RBC. Your line is open.

Oh, excellent. Thanks for taking our questions. This is Lisa on for Luca. Maybe just one here first on the restructuring efforts announced today. Just wondering what other initiatives are being explored to either preserve capital or raise funds? And have you thought about potentially monetizing the royalty stream for Hemophilia A?

Thank you for the question. The restructuring was a very important part of our announcement today. Prathyusha, can you comment on this?

Yes, Sandy. So today's restructuring was a difficult decision but it was in line with the strategic priorities we outlined on the call. And we'll continue to assess ways of running Sangamo as a leaner, focused organization. As far as evaluating the different levers for extending our cash runway, as a clinical company we're actively pursuing different opportunities for financing and we will look at different avenues including the royalty monetization.

Alright, thanks. Go ahead Sandy.

It's a significant return or revenue for Sangamo in the future. And we need simply to be thoughtful about when we access that revenue. The closer it gets to submission and hopefully marketing of an important medicine, the more valuable it is. And so that's the balance that Prathyusha is constantly looking at to both near-term cash versus long-term value, all of which will lead to return for our shareholders.

That's right.

That's helpful. Thanks. And maybe just one on the Treg more of a big picture question. You announced that we are going to get some data maybe later by year end, just thinking, what are going to be the next steps for Treg, should the data be positive, will this accelerate your thinking on moving towards an autoimmune indication?

Mark, can you help us think about the Tregs please?

Thanks, Lisa. Yeah, I mean, as we talked about TX200 we think is a perfect biologic model to assess the performance of Treg. And so we're really excited about that and we'll be looking forward to providing an update as we mentioned towards the end of the year. We do have our preclinical programs, they're continuing to progress. MOG for multiple sclerosis and IL23 for inflammatory bowel disease. Both of those programs, as we've talked about, we're focusing primarily on the autologous to ensure we can move them forward towards IND. And so we're very committed to that and excited to continue this. We've got a lot of focus to execute against the preclinical work on both of those assets as we continue to execute on the TX200 trial.

Thanks for taking our questions.

And one moment for our next question. And our last question comes from Patrick Trucchio of H.C. Wainwright. Your line is open.

Thanks, good morning. I just had a few follow up questions from a few that had been asked earlier. The first was just I was wondering if you can just talk a little bit more about the SIFTER platform and how it enables selection of CNS tropic HIV capsules, and in particular, with regard to these neuro programs, what are you actually looking for in the identification, selection of the engineered AV capsids for enhanced CNS delivery? And then just separately, just with the CAR-Treg, I'm just wondering with the intention to prioritize the near term autologous portfolio, can you please provide some additional details around this decision, how will this perhaps accelerate the INDs for the broader indications like MS and IDD?

So, let's answer, Patrick, thank you for your question. Let's try and answer this in two ways. Jason, can you take capsids, please. And Mark, can you talk about Treg, please?

Sure. Thanks for the question, Patrick. So we're really excited about the work in our capsid evolution group. And I guess, I can take the question in two different ways. There's the actual technology that we're using to develop and evaluate capsids. But there's also the approach that we're taking to decide what we're looking for in capsids. And so on that second component, I want to emphasize the work that is done as a collaboration between our development groups and neurologists and our development group and our scientists in research to identify indications that we think are optimal for being addressed with the technologies that we have, specifically our

So Patrick, on the Tregs, I mean, I want to frame this in a couple of ways. One, as we all know, access to capital these days is a challenge. And as a result of that, and with the burn rate that we've had, we've had to really focus on prioritizing. And when we have to prioritize, it means we have to make choices. And sometimes there are things we would not choose to do. And in the case of the Tregs, we had to make a choice to really focus on TX200 and the execution of that trial to proof of concept and keeping them organized 23 preclinical auto programs, which are a little more advanced, moving forward. So we've had to make a difficult choice to deprioritize the LL [ph] work until the future. But you know, I want to say that our investors also say to us that they're very interested in the Tregs and they would love to invest in the Tregs. And so we're assessing how best we can set ourselves up to do that. But in the meantime, we're also looking and having conversations with interested parties around partnerships. If we ended up ended up having a partnership coming in, one of the thing we'd want them to do is bring enough money and expertise and that we can restart those programs and accelerate them again. But it's purely a choice that we've that we've had to make unfortunately.

That's helpful. Thank you very much.

And I'm showing no further questions. I would now like to turn the call back over to Louise Wilkie for closing remarks.

Thank you once again for joining us today and for your questions. As a reminder, you can access the earnings release and presentation on the investor relations section of the Sangamo website. We look forward to keeping you updated on our future developments. Thank you.