Sangamo Therapeutics, Inc. (NASDAQ:SGMO) Q3 2023 Earnings Call Transcript

Sangamo Therapeutics, Inc. (NASDAQ:SGMO) Q3 2023 Earnings Call Transcript November 2, 2023

Operator: Good morning, and thank you for standing by. Welcome to the Sangamo Third 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 turn the conference over to your speaker today, Louise Wilkie, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Louise Wilkie: 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 the Sangamo executive leadership team, including Sandy Macrae, Chief Executive Officer; Mark McClung, Chief Operating Officer; Prathyusha Duraibabu, Chief Financial Officer; Amy Pooler, Head of Research; Nathalie Dubois-Stringfellow, Chief Development Officer; and Lisa Rojkjaer, 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 regulatory submissions, initiating and conducting clinical trials, screening, and dosing patients and presenting clinical data, advancements of our product candidates, anticipated feedback from and interactions with regulatory agencies, advancements of preclinical programs to the clinics, our strategic reprioritization and the anticipated benefits thereof, the sufficiency of our resources, cash runway, and plans to seek additional capital, our estimated financial guidance for 2023 and estimates of 2024 operating expenses, upcoming catalysts and milestones and other statements that are not historical facts.

Actual results may differ materially from what we discuss 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 September 30, 2023 filed yesterday 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.

Sandy Macrae: Thank you, Louise and good morning to everyone joining the call. Sangamo has a long impressive, history of scientific innovation, leading to new discoveries and industry first for genomic medicines. I am so honored to lead a company with such deep scientific expertise and a team so dedicated to their mission of transforming patients’ life with our technology. While our programs are delivering promising results, the environment within which we are operating has been and is slightly to remain challenging. In 2020, we shared our refreshed company strategy, which aims to both maximize the potential of our proprietary genomic editing and delivering technology and to focus on areas where we believe we can apply that technology to be either first-in-class or best-in-class.

That began with our decision to transition away from developing new traditional, liver-directed gene therapy several years ago and has continued into today. Our renewed focus has been to identify areas where we believe we can be market leaders and to prioritize our resources to those programs accordingly. The difficulties in accessing capital being experienced across the industry have accelerated the pace of our plans. And so today, we’re announcing the final stage in the strategic transformation of Sangamo to become a neurology-focused, genomic medicine company. As we have shared before, we strongly believe our technology is ideally suited to address a range of devastating neurological indications that are few if any treatment options available today.

Over recent years, we’ve increased our focus in this important part of our business and have advanced exciting data from our epigentic regulation programs for neurological diseases. The promising preclinical evidence from our Zinc Finger editing capabilities, coupled with the strong progress we’re making to identify novel capsids with enhanced delivery capabilities demonstrates the potential for Sangamo to become a leader in this space. Our differentiated combination of precise, versatile, and compact genome targeting cargo, alongside our novel AAV capsid evolution engine, which has the potential for meaningfully improved central nervous system construction efficiency forms the foundation from which we believe we can transform the lives of patients with neuro generative diseases such as intractable pain conditions, prion disease, Alzheimer’s and many other neurological conditions.

You’ll hear us say throughout this, it’s capsids and cargo, you have to have capsid and cargo to be successful. We believe this combination of genome targeting cargo and delivery capsule will be critical to a sustainable business model with our internal programs, as well as providing important potential partnership opportunities. I’ll speak more about this in a moment. In order to set the neurology company up for success, we must truly focus and carefully allocate resources to those prior to programs are central to our core strategy. This means, deferring new investments related to Fabry in our CAR-Treg programs, while continuing to seek ways to maximize the potential value. We’re committed to these changes. It’s an immensely difficult decision to de-prioritize spending on our legacy clinical programs, which have such clinical promise.

I strongly believe that our Fabry disease program is potentially transformative for patients. The phase 1/2 STAAR study continues to generate a meaningful packet of data with 25 patients now dosed 25 patients, including 14 at the planned Phase 3 dose. All patients continue to demonstrate sustained, elevated, alpha-Gal A levels with 12 patients having achieved at least one year of follow-up, and the longest treated patients having now achieved three years of follow-up. It’s a significant achievement. Additionally, all 11 patients who withdrawn from enzyme replacement therapy remain off enzyme replacement therapy for up to 24 months for the longest withdrawn patients. I think it’s worth emphasizing that these are patients who were on ERT and said to be treated.

They’ve come off ERT and they’re staying off ERT, because they’ve feel a benefit from our treatment. And they tell us about it. We have received testimonies from patients seeing that the impact of ST-920 has been transformative and to report real and meaningful improvements in the quality of life, some even over and above the benefits that they were experiencing on ERT. We have shown and strongly believe in the promise of ST-920 as a potential medicine for patients suffering with Fabry disease. This is first-in-class currently the only gene therapy in the clinic for these patients. However, at this time we’re deferring any additional investments in these Phase 3 planning. The cost of progressing the program beyond the current Phase 1/2 study would constrain our resources and require significant development and commercial investments which we do not have the ability to support at this time.

We’re doing everything in our power to max size as value by actively seeking a potential partner or are currently financing to fund the potential Phase 3 trial. We’re confident in the hands of a partner ST-920 will make an enormous difference to the Fabry community. I firmly believe Fabry patients deserve a better option than the current standard of care. We expect to complete dosing of the remaining enrolled patients in the first half of 2024 and anticipate presenting additional updated clinical data at a medical meeting in early ’24. Turning now to our regulatory T-Cell programs. We are proud of our efforts to advance innovation in the CAR-Treg field. Since our acquisition of TxCell five years ago, we have become the first known company to dose a human with an engineered CAR.

Treg overcame significant manufacturing challenges are known hurdles in this field and deepened our clinical and preclinical expertise. From our Phase 1/2 STEADFAST study of Tx200 for the prevention of immune mediated rejection in HLA A2 mismatched kidney transplantation, we have now dosed four patients, including the first patient in the second dose cohort. The product candidate continues to be well tolerated for all treated patients today and we’re encouraged by the early translational medicine data emerging from this study. This quarter, we also received approval for an accelerated dose escalation protocol that will allow us to advance significantly more quickly through the dose cohorts and which adds a new fourth dose level to the protocol.

We have already successfully manufactured that dose for patient in cohort 3 and for the first patient in cohort 4. These patients are enrolled, manufactured and we know when they’ll be dosed, and we expect to dose the first patient in this highest dose cohort in January, a meaningful year-and-a-half earlier than originally planned. Acceleration to this top dose level, which is 18 fold higher than the starting dose could allow potential partners or investors to view efficacy as early as early next year. All the progress being made in the clinical program is exciting the real value of this business is in what lies beyond the proof-of-concept with Tx-200. We believe this technology is ideally suited to treat autoimmune conditions with high unmet medical need and significant commercial opportunities and our preclinical work in multiple sclerosis, and inflammatory bowel disease supports that potential.

We’ve received external interests and ways to invest specifically in our CAR-Treg pipeline and therefore been an active discussion with parties to explore ways that they can do. We have shared initial Tx200 data with the potential investors and will continue discussions in an effort to realize true potential of this exciting science. I think we’re not successful in closing collaboration or financing transaction over the coming months. We will consider other alternatives for CAR-Treg cell therapy programs. And we plan to provide an update on these efforts for the beginning of next year. In the meantime, we’ve decided to defer new investments until we’re able to successfully secure a collaboration partner or external investment. We believe that discontinuing spending beyond our continued current commitments, while seeking potential partners and investors for both Fabry and CAR-Tregs that are both better suited to develop each technology and have the resources needed to bring them to patients.

We will also allow the market to better assess each business’ value. As a result of all I have outlined today, we are announcing a reduction in our current US workforce. We also expect to close our Brisbane, California facility in early ‘24 to conserve cash resources, and we’ll transition our headquarters to our Richmond, California facility as of January 1st, 2024. Point Richmond is the original home of Sangamo is where Zinc Finger editing and capsid development capabilities are based. These actions are designed to focus our cash resources in advancing our Zinc Finger platform and our capsid discovery engine. We believe these changes in combination with the cost savings expected from the restructuring, workforce reduction and other potential cost reduction initiatives will reduce our annual operating expenses by approximately 50% and allow us to fund our planned operations into the third quarter of 2024 assuming no other additional capital is raised.

Alongside these announcements and with real personal sadness I share that Mark McClung Executive Vice President and Chief Operating Officer will also be leaving the company. In the context of a streamlined and more focused organization, Mark and I felt it was important to line the leadership team with the changes being announced. I’ve known Mark for many years and I have an enormous respect for his wisdom, judgment and leadership. All of us have benefited from his business experience and constant reminder to focus on the patient. A trusted, confident and colleague he’ll be enormously missed. Until his departure, Mark will continue to lead our search for partners, investors in our Fabry and CAR-Treg programs. Jason Fontenot, Senior Vice President and Chief Scientist Officer will also be leaving the company.

Jason’s scientific expertise is well known in the industry. We’ve been lucky to have him guide our CAR-Treg and broader scientific efforts. He leaves a strong scientific legacy for which, we will always be grateful. With our clear focus on neurology as a cornerstone to Sangamo going forward, I’m pleased to welcome Amy Pooler, Head of Research and Greg Davis, our current Vice President of Genome Engineering, Design and Technology as Sangamo’s new Head of Technology. These roles will be critical as we continue to advance our neurology focused pipeline, and continue to innovate in the potential life-changing field of research. I look forward to having them both join the leadership team. These decisions were not made lightly and it’s in head incredibly horned to let go of such talented team, members who’ve dedicated themselves to advancing our mission.

However, we recognize in order to move forward and to protect our future, we must become a leaner, simpler organization, focused on progressing our neurology programs with a simplified and purposeful capital allocation and in turn, increase flexibility to grow. We are committed to aligning our investment strategies to our goals going forward, which are more focused than ever. I believe in saying them, I believe in Sangamo as a standalone neurology-focused, genomic medicine company with our core pipeline and out licensing opportunities as a foundation of our business model going forward. Through our neurology business, we aspire to apply our differentiated epigenetic editing capabilities and our novel engineered capsids to revolutionize the treatment of neurological disorders.

Sangamon has both the differentiated genome-targeted cargo and the delivery capabilities of the capsid to be positioned favorably versus others in the field. The data we have shared for our Nav1.7 in Prion disease programs provide promise for our program going forward and we have encouraging data from other advanced preclinical programs that we entitle for Alzheimer’s disease and Alpha-synuclein for Parkinsons disease which were progressed extensively as part of prior collaborations and we had simply paused pending the identification of a suitable delivery capsid. We believe we’ve made meaningful progress in identifying such a Blood-Brain Barrier Penetrant Capsid who work with our sister platform which we believe will open the doors for many other high value and unmet diseases that can be addressed uniquely with our editing capabilities.

The neurology-focused genomic engineering business is the future of Sangamo and is a combination of our strategy that has been in the works for some time because of the compelling focused business model it represents and the potential commercial opportunities we believe it affords, we are excited about the opportunities that lie ahead, opportunities are best for patients, best for advancing our science and best for the shareholders who have stayed with us through this journey. I’d now like to turn the call over to our new Head of Research Amy to discuss the strategy of our neurology program in more detail. Welcome Amy.

Amy Pooler: Thank you, Sandy, and good morning, everyone. As you’ve heard today, we are on a journey to transforming Sangamo into a pure play neurology genomic medicine company committed to driving forward development of potential treatments for neurological disorders in order to better serve patients. I’ll go into more detail on the value we see in this business and the strategy behind our neurology program. At a high level, we have a differentiated platform that can create powerful genomic medicine that’s part of our genome targeting cargo, the preclinical data that demonstrates the potency, specificity and importantly, the efficacy we may be able to achieve. Our technology allows us to target neurological indications in the most direct and genetically validated way.

In defining our pipeline and pathway forward, we choose to focus on indications where there is a clear driver of disease, not only do we believe the strengthening the likelihood of pre-clinical success, but we also believe it increases the speed to potential approval, because the drivers of disease are well understood meaning we know which genes cause the diseases, we’re able to effectively target those genes that offer curative potential pursuing the fundamental drivers of disease within our view of very compelling approach. Sangamo has highly differentiated technology that we believe allows us to execute on our strategy. We’re developing proprietary genome targeting cargo, as well as our own novel delivery caspids. Whereas, most other companies are really doing one or the other.

The favorable AAC compatibility of Zinc Finger proteins over other editing modalities enabled Sangamo to lead the field in neurological medicine development using a range of approaches including epigenetic gene repression, activation and multiplexed approaches. This gives us both the competitive advantage as we progress our neurology pipeline and presents future opportunities for partnerships. It’s important to understand that in genomic medicine, the drug consists of the cargo, the delivery capsid and the promoter, which enables tissue-specific profession of this cargo. This trilogy is what becomes a treatment for patients with genomic – with genetic diseases and the strengths that we have as a company in this space lies in our control over all three of these components.

We believe this provides a strong foundation for the future of Sangamo given our unique position and ability to lead in the area of epigenetic regulation. As a reminder, Zinc Fingers possess unique qualities that make them superior to other therapeutic approaches being explored, their versatile customizable allow for genome-light coverage and are very compact. And as such, we’re pleased to see that Zinc Fingers are increasingly being recognized in the fields for these benefits and being more widely embraced. Our promoters the Zinc Finger Cargo and novel delivery capsids are designed to work together the target-specific cells and tissues and optimize efficacy and safety. We’re able to powerfully control the repression or activation of genes, a benefit, not necessarily shared by other therapeutic approaches.

The favorable safety profile comes from the specificity we’re able to achieve coupled with the fact that Zinc Fingers are human-derived reducing issues related to immunogenicity. Moving now to our pipeline, which leverages the delivery capabilities we currently have in hand in combination with our Zinc Finger technology. Our neurology pipeline is led by NAV 1.7, which leverages the exquisite specificity of Zinc Fingers to repress a target that has been challenging for other technologies. In addition, we believe this program is important because of the broad population we can address on small fiber neuralgia, and interactable pain syndrome that dominates the lives of these patients, plus the future opportunity to expand into other related indication.

We continue to advance this preclinical program and continue to anticipate an IMD submission in 2024. We’ve also defined Prion disease as another important program in the pipeline where we will implement our epigenetic regulation technology using a Blood-Brain Barrier causing capsid. Beyond these programs we strongly believe we have the capsid engineering capabilities needed to expand delivery beyond our currently available intra sequel delivery capsids. The industry broadly is challenged with finding or developing a capsid that can cross the blood-brain barrier, we are making excellent progress identifying potentially effective, intravenously delivered AAV, capsids to transport these cargo and to previously untouched areas of the nervous system and hope to share results from the non-human primate studies in early 2024.

Unlocking Blood-Brain Barrier Penetrant delivery mechanisms would be transformative for our neurology pipeline. Opening up significant untapped indications to development and releasing significant potential for additional Sangamo partnerships. Some of the high-value targets we could advance include Alpha-synuclein, which de-prioritize solely because a caspid was not available at that time. Sangamo has the technology and strategy around which we are building a focused neurology company developing all components of potential genomic medicine – engineering medicines. The data we’ve generated makes us confident in our ability to be leaders in the space and I look forward to providing updates in the upcoming quarters. I’ll now turn the call over to our Chief Financial Officer, Prathyusha for an overview of the financials Prathyusha?

Prathyusha Duraibabu : Thank you, Amy, and good morning. Over the course of 2023, we have proactively made difficult decisions to preserve our most valuable assets. The public biotech markets have been challenging for over two years now and we find ourselves in a similar position to many of our peers with limited capital resources and a tough path to navigate ahead. This has necessitated the exploration of our strategy execution, and the focus of spending in line with our mission as a neurology-focused genomic medicine company. As Sandy outlined earlier, this means optimizing our resources and continuing our assets in seeking investment alternatives for Fabry and T-Regs. Furthermore, as part of streamlining our spend, we expect to exit our Brisbane, California facility in early 2024.

We will be scaling back our internal manufacturing capabilities and leveraging external partners to manufacture clinical supply for our neurology pipeline. These actions have resulted in the reduction of approximately 162 roles or 40% of our US workforce. The annual cost savings resulting from the workforce reduction, combined with other potential cost reductions is expected to reduce our annual operating and all non-GAAP operating expenses from $240 million to $260 million this year to around $150 million to $135 million in 2024, a decrease of approximately 50% year-over-year. We ended the third quarter with approximately $132 million in available cash, cash equivalents and marketable securities. We believe that these resources in combination with the cost savings expected from the restructuring and other potential cost reductions will be sufficient to fund our planned operations into the third quarter of 2024 without factoring in any additional capital raises.

We continue to accumulate important Phase 1/2 data in the Fabry disease and Tx200, while we seek solutions to unlock the value within these programs, which could generate valuable capital for our neurology epigenetic regulation pipeline. Additionally, we continue to evaluate several avenues to raise capital and hope to have an update in the next few months. As a reminder, Pfizer continues to work towards a pivotal readout in mid-2024 in our Hemophilia A collaboration and anticipates potential BLA and MAA submissions in the second half of next year. This partnership agreement allows for potential milestones of up to $220 million and 14% to 20% in royalties, which could be a significant source of funds starting as early as the end of next year.

We expect that 2024 operating expenses for the core neurology company to be in the range of $80 million to $100 million. This range excludes additional transition cost of approximately $30 million to $40 million in 2024, as we complete our strategic transformation, which are expected to significantly increase in the future years. We will provide official 2024 non-GAAP operating expense guidance as part of our fourth quarter update. I will now turn the call back to Sandy for closing remarks.

Sandy Macrae : Thank you, Prathyusha. As you heard today, Sangamo continues to advance our transformation to becoming a neurology-focused genomic medicine company. This has been in progress since 2020. Against a challenging backdrop, we’ve needed to make incredibly hard decisions for our employees and our programs and development. In the coming months, we’ll continue to work diligently to unpack – unlock value from our Fabry and CAR-Treg programs, and to drive forward our neurology pipeline. We will provide updates and on these processes when appropriate to do so. Thank you again to those very talented individuals, now to these friends and colleagues who will be leaving Sangamo. Your tireless efforts and dedication have helped to progress Sangamo’s science and support the organization and for that I am very grateful and I wish you the very best in your next chapters.

As I look to the future, I am excited to the opportunities that lie ahead. We will progressively share more data and news from our neurology programs and anticipate sharing non-human primate data showing our progress identifying new novel delivery capsids early next year. The team continues to generate more pre-clinical data from NAV1.7 and has initiated final IND enabling studies. And so, it’s progressing towards an expected IND submission in 2024. We are still anticipating the pivotal readout for Hemophilia A in mid ‘24 with a first valuable milestone potentially coming as early as next year. As we work to raise additional capital, we hope to announce an update in the coming months. 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, a future that lies ahead for Sangamo and as focused genomic medicine neurology company. At this time, we’d like to open it up for questions. Operator, please open the line for questions.

Operator: [Operator Instructions] The first question comes from Reena Patel with RBC Capital Markets. Your line is open.

Reena Patel: Hi, thanks so much for taking my question. This is Reena on for Luca Issi. I just wanted to ask, would you be able to kind of walk us through what would be an ideal partner and ideal structure for the Fabry program partnership?

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Q&A Session

Sandy Macrae : Good morning. Thank you. Thank you for your question. So, you’re asking who does an ideal partner look like for Fabry? Mark, you’ve spent a lot of time working on this.

Reena Patel: Yeah, ideal partner.

Mark McClung: So I think from our standpoint, the partner would be someone that has a commitment to the patients with Fabry disease and sees that the pathway that we’ve agreed with the agency that has the capital resources to ensure that the study gets completed in a timely manner and commercialized globally to these patients. And there are a number of companies that fit that and we will provide updates when we’ve finished conversations with them.

Operator: Please standby.

Mark McClung: Okay.

Operator: Please stand by for the next question. The next question comes from Andreas Argyrides with Wedbush. Your line is open.

Andreas Argyrides: Good morning. Thanks for taking our questions. Two from us here and kind of a follow-up to the last one. So just understanding capital constraints and the need to extend the cash runway, Fabry is the most advanced program and there’s good data to-date. Can you also provide us an update on the Phase 3 design if there were any updates and you were in discussions with the regulatory agency there? And then, we’ve noticed that the Biogen has been selling a majority of their shares, if you could provide any color around that that’d be helpful as well. Thank you.

Sandy Macrae: Thank you for your questions. Let me do the first one, the one about Fabry, and I’m going to ask Nathalie to help us think about the design of the Phase 3. I just want to retrieve what I said in the script, the results in Fabry are. I think the most compelling of any clinical program I’ve worked on in 25 years. It’s a holistic benefit from the patient. And patients literally came up to us at the recent Fabry meeting and said, I have your gene inside of me and I’ve never felt better. My life is being transformed by that and that’s why as Mark says finding a company that can take this into Phase 3 globally is so important. Nathalie, how are we doing with thinking about the Phase 3?

Nathalie Dubois-Stringfellow : So, yeah, we were pleased to share last quarter the clarity we received from the agency on our proposed naive and pseudo-naïve study design. We continue to have productive conversation with the FDA and really are at good place on potential Phase 3 plan that can be activated in the future. We also received RMAT designation recently from the USFDA which really is a recognition that this potential medicine address significant unmet needs for Fabry patient population, but also a signal that the data produced so far has been highly encouraging. And those the RMAT designation really provide the opportunity to have live conversation with the FDA. So we’re very pleased that we are – will be in a very good position for any potential partner to start our Phase 3 program.

Sandy Macrae: Thank you, Nathalie and Prathyusha, can you comment in on the shares?

Prathyusha Duraibabu: Sure Sandy. Your question on the Biogen sale, as you know, Biogen’s main business is like us getting medicines to patients. It’s not really in the business of holding equity with other companies. So there – our understanding is their main intention of this sale was to get under the 10% threshold. And we’re not expecting any future sales at this point.

Sandy Macrae: Thank you.

Andreas Argyrides: Thank you guys. Thank you.

Operator: Please stand by for the next question. The next question comes from Maury Raycroft with Jefferies. Your line is open.