Design Therapeutics, Inc. (NASDAQ:DSGN) Q4 2023 Earnings Call Transcript March 19, 2024
Design Therapeutics, Inc. beats earnings expectations. Reported EPS is $-0.21, expectations were $-0.32. DSGN isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good afternoon, and welcome to Design’s Conference Call. [Operator Instructions]. Please be advised that this call is being recorded at the company’s request. I would now like to turn the call over to Dr. Sean Jeffries, Chief Operating Officer of Design Therapeutics. You may begin.
Sean Jeffries : Welcome and thank you for joining us today. Earlier, we issued a press release outlining our fourth quarter and full year 2023 financial results and updates across our portfolio of GeneTAC small molecule genomic medicines. The slides that we’ll be using today during today’s call will be available along with the recording of this call in the investor section of our website at designtx.com. I’m Sean Jeffries, Chief Operating Officer of Design, and I’m joined today on the call by our Chairman and CEO, Dr. Pratik Shah. During this call, we will use forward-looking statements to related to our current expectations and plans, including our program development plans, which are subject to risk and uncertainties. Actual results may differ materially due to various important factors, including those described in the risk factors section of our most recently filed Form 10-K.
These statements represent our views as of this call and should not be relied upon as representing our views as of any date in the future. We take no obligation to publicly update any forward-looking statements. With that, I’d like to turn the call over to Dr. Shah.
Pratik Shah : Thank you, Dr. Jeffries, and good afternoon, everyone. I’m excited to present Design Therapeutics’ First Significant Update for 2024. What makes this company unique and compelling is that we have discovered a new class of small molecules that are designed to dial up or dial down the expression of an individual gene in the genome. When you think about the role of individual genes and disease, there are many monogenic disorders where the single gene that causes the disease is well established. Our vision is to develop small molecules that can provide a restorative therapy and work with the patient’s natural genome to help cells read the genes in a manner that restores cellular health despite the presence of the mutations.
We are working on at least four major such disorders, Friedreich Ataxia, Fuchs Endothelial Corneal Dystrophy, Huntington’s Disease, and Myotonic Dystrophy. Each of the programs we are pursuing in these areas have the potential to be first in class or best in class. I’m Pratik Shah, I serve as the CEO. I was previously Chairman of Synthorx, which is now part of Sanofi as a result of $2.5 billion acquisition, and prior to that I was CEO of Auspex Pharmaceuticals, which was acquired for $3.5 billion. There we had discovered and developed AUSTEDO, which is now doing over $1 billion in annual revenue, and I’m joined by an accomplished and capable leadership team at Design, including Dr. Sean Jeffries, our Chief Operating Officer; and Dr. Jae Kim.
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Q&A Session
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Our Chief Medical Officer. Design’s genomic medicine platform has the potential to surpass competing modalities like gene editing and gene therapy for the treatment of these diseases. In addition, we have a five-year operating runway, which enables us to generate clinical proof of concept on up to four programs. Success in any one of these programs has the potential to generate enormous value for patients and shareholders. Each of our programs is pursuing the treatment of monogenic diseases where the single gene root cause is known, and our therapeutic strategies to restore the normal gene expression state of this known single gene driver. Each of our programs has a first or best in class profile, which has highly differentiating features, and each of these are substantial market opportunities.
Friedreich Ataxia or FA is a debilitating neuromuscular disorder with hypertrophic cardiomyopathy as the primary cause of death. It’s caused by a GAA repeat mutation in the Frataxin gene, which is broadly expressed in the body. The goal of our genomic medicine is to increase levels of endogenous RITUXAN and address the monogenic cause of FA. We will address the background in greater detail later in the presentation. We had taken our lead molecule DT216 for Friedreich Ataxia into clinical trials in 2022 and ‘23, and confirmed that DT-216 can increase the level of frataxin RNA expression in patients with FA. We also learned about limitations to the prior formulation in human studies. Today, we would like to announce a new drug product using the same DT-216 drug substance as before.
We refer to this new drug product as DT-216P2, which we believe has properties that resolve these prior barriers to progressing DT-216 further into development The market opportunity for a systemic therapy that can restore endogenous Rituxan levels remains large and unaffected by progress by others in the field. The prior DT-216 drug product had a rapid elimination from plasma during a period called the alpha phase and its exposure profile, and therefore, drug levels in the plasma were low after only a few hours. The orange curve shows the pharmacokinetics of the prior DT-216 drug product in non-human primates. In green is the PK of DT-216P2, which has a shorter alpha phase and a more rapid transition to the beta phase, and therefore a substantial increase in drug levels over a much longer period of time.
Due to this increase in exposure, lower levels of administered drug are needed to achieve these desired profiles. In addition, a favorable injection site reaction profile has been seen with the new drug product in nonclinical studies. With this new advance, we are back on a path to continue further development of DT-216 for patients with FA. In the time, since our last update, we have also advanced the GeneTAC platform and have refined our strategy and priorities for the programs. Our FECD program data have now been reviewed by the FDA resulting in an IND cleared to proceed. As a result, we plan to initiate Phase 1 development for DT-168 this year. We have also decided to conduct an observational study in patients with FECD prior to conducting an investigational drug treatment trial in patients.
We are also announcing for the first time our Huntington’s disease program where we have identified small molecule candidates that exhibit allele selective reduction of Mutant Huntington expression considered an ideal, although elusive profile for molecules that could be reasonably advanced as systemically administered and widely distributing compounds. Similarly, we have identified compounds exhibiting allele selective inhibition of Mutant DMPK, which is the root cause of myotonic dystrophy with what we believe are best-in-class foci reduction and splicing restoration data. We aim to advance both HD and DM1 programs to declare development candidates. Gene editing and gene therapy have understandably captured the imagination of humankind. Ever since, we learned that mutations in single genes cause disease, there has been a desire to edit the genome in some fashion to restore normal cellular health.
Other approaches have also emerged that try to get at the root cause of monogenic diseases. However, if gene tech molecules work in patients, there would be little doubt that they represent the best option in genomic medicine. Since GeneTAC molecules when systemically administered, can distribute widely to a broad set of tissues in the target cells broadly to affect the desired outcome without altering a patient’s natural genome. Furthermore, investments into new platform companies often suffer from frequent rounds of dilution due to the necessary high R&D burn rates that often require investors that time their investment decisions with great care. Design’s approach is more cost effective, making an investment decision for a longer horizon potentially quite attractive.
The advantage of GeneTAC molecules become more apparent when you consider how much smaller these molecules are than those of competing modalities, which further explains the broad distribution properties. Also, by restoring endogenous gene expression, like in FA, the gene products are entirely normal and under normal physiologic control. The mechanism of action of these GeneTAC molecules, which drive these remarkable observations are shown in this animation that I’ll walk you through. First, we start with FA. FA is caused by low levels of frataxin, which is a protein that’s systemically expressed in the body. So if you look inside the cell and inside the nucleus, the frataxin gene has a GAA repeat expansion shown in red, which causes the RNA polymerase to slow down through this region and produce low levels of frataxin premium RNA, and therefore low levels of express translated protein.
And that’s what drives the dysfunction. GeneTAC candidates are hetero bifunctional small molecules, where one end of the molecule has been designed to specifically recognize the GAA expanded repeats. When this compound is administered systemically, it distributes widely, gets into the cell, gets into the nucleus, and then recognizes the GAA repeat expansions by binding to the minor groove of intact double stranded DNA in the frataxin gene, and the other end of the molecule recruits a transcriptional elongation complex. The presence of these transcriptional elongation complexes enables the RNA — race to now rapidly read through the repeat region, and therefore produce normal levels of the frataxin pre mRNA, because the repeat expansion is in an intron, that portion of the RNA is just spliced out normally to produce normal levels of intact full length endogenous mRNA, which produces normal endogenous frataxin protein with all of its natural isoforms under the native regulatory control.
