Call Start: 11:40 January 1, 0000 12:11 PM ET
CRISPR Therapeutics AG (NASDAQ:CRSP)
Morgan Stanley 20th Annual Global Healthcare Conference Call
September 12, 2022 11:40 ET
Company Participants
Samarth Kulkarni – Chief Executive Officer
Conference Call Participants
Terence Flynn – Morgan Stanley
Terence Flynn
Okay, great. Thanks for joining us, everybody. I’m Terence Flynn, Morgan Stanley, Pharma and Biotech Analyst and we’re very pleased to be hosting CRISPR Therapeutics this morning.
First, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/research disclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.
Joining us today from the company we have Sam Kulkarni, Chief Executive Officer. Sam, thanks so much. Really appreciate you taking the time to be with us today.
Samarth Kulkarni
Our pleasure. Thank you for having us.
Terence Flynn
Maybe to start, I just thought — you guys hosted an Innovation Day back earlier this summer. I thought you could just kind of give us an update on kind of the forward vision for the company coming out of the Innovation Day. You guys had a number of updates there, including some new strategies or maybe new public disclosure of some of your strategy and then we can go from there.
Samarth Kulkarni
Happy to. If I zoom out a little bit — and I’m a big fan of biomedical history, the history of what’s happened in terms of drug development over the last 100 years. And I was thinking back — and if you look at the last 100 years, there have been discontinuities every 30 to 40 years in biomedical innovation. You saw that in the 1980s with antibodies — and Genentech and Amgen were the vanguard of developing recombinant proteins and antibodies. And today, 40 years later, half the pharma market is antibodies and recombinant proteins.
And we’re going through a similar sort of shift now with the advent of CRISPR and cell and gene therapies. I wouldn’t be surprised that in the next dozen years, it seems aggressive. 1/3 of the entire market — pharma market will be selling gene therapies and largely powered, I think, by — fundamentally by gene editing. And so, we’re very pleased to be at the vanguard, the cutting edge of this new wave. And a lot of the patterns we’re seeing are similar to what we’re seeing in the 80s with antibodies. But I think our vision is to create — is to be the Genentech of cell and gene therapies, or maybe even more.
I think, by 2030, question is, can we become a $100 billion company. And that’s just the numbers part of it but can we have medicines that are reaching patients across the globe in a commercial setting, have a rich pipeline but never forget the ethos of what we are as a company which is to innovate. And our tagline of the company is, innovation that matters. We want to continuously innovate. We’re not going to turn into a commercial company that forgets about the pipeline. Once we get to that stage, we’re going to continuously focus on bringing new programs, targeting very novel targets, continuing the engineering portion of it and hope to have a pipeline as broad as 30 or 40 different programs in the not-too-distant future. So the vision, obviously, is to be the biotech that’s never been seen before, the company that can bring multiple programs to patients, continue to innovate and push forward this new paradigm.
Terence Flynn
I guess in terms of thinking about the steps needed to get there, first, you guys are ex vivo, you’re moving to in vivo. You have gene ablation to gene correction. So maybe just elaborate on kind of where we are in that continuum? And then, as a time frame, like what are some of the milestones that we should expect from you guys as we think about achieving that and making progress towards getting to that ultimate goal?
Samarth Kulkarni
Absolutely. Yes, I think as we look at the — analyze the market — and there’s many different ways to cut the opportunity and you’ve heard that from different companies. But we see co-opportunity across ex vivo and in vivo. I think with ex vivo, there are a number of indications you can go after, whether it’s rare diseases or more common diseases like cancers and organ replacement. And I think organ replacement is going to be a big paradigm in the future. In fact, it could be a really important part of anti-aging in a way. So, we see co-opportunity across ex vivo and in vivo.
Within the in vivo side, again, people talk about 6,000 rare diseases or 10,000 rare diseases. A lot of them are very small rare disease. I think for a meaningful set of opportunities, you have about 100 indications on the rare disease side and then probably a large number of indications on the common disease side that will also be impacted by in vivo gene editing.
To a large extent, I think on the rare disease opportunity, ¾ of it is whole gene correction, or gene correction in general and a smaller opportunity is the gene disruption. And I think in the gene disruption space is where you have this — I think you’re going to see sort of this competition or a competitive battle, all better for patients between RNAi or siRNA and gene editing, one and done. And I think gene editing will have a big advantage there.
On the whole gene correction, I think you have a confluence of modalities, whether it’s mRNA, AAVs, antivirus and gene editing. And again, I think gene editing has an advantage because it’s a one and done in terms of gene addition. It’s not — it’s a little harder from a technological standpoint at this point because you have to put a donor template in and you haven’t worked out all the delivery mechanism to get high efficiency gene addition. But that’s a big focus for us on the in vivo side. On the ex vivo side, I think we want to expand beyond rare diseases that we do with CD34 cells into immune cell engineering, into organs off the shelf, starting with diabetes.
So I think there’s a plethora of opportunities. We haven’t even touched neuro yet. But I think — at this point, I think what we want to do is to take a very — have a balanced portfolio to manage risk and show that we can do it and de-risk different platforms along the way that can allow scalability and expandability going forward.
Terence Flynn
The other technology we’re hearing more and more about is the base editing. And so maybe just compare, contrast kind of your approach versus some of the base editing, what are some of the advantages of your approach? What are some of the limitations of base editing? Because that’s the other new technology we’re hearing some more about recently.
Samarth Kulkarni
Yes. I think it’s just interesting — I’ve heard this question before, too which is this interesting notion of CRISPR/Cas9 gene editing versus base editing. And it’s really not a versus thing. It’s like an improvement. I think you saw that with antibodies, where you have the initial generation antibodies, then you had the improvements with humanization of antibodies, fully human antibodies. They all had advantages but it wasn’t like a different platform. And this is the same thing with a base eating. Base editing is one form of tethering something to Cas9. If the fundamental discovery with CRISPR/Cas9 is that you can take a protein — an effective protein and bring it to any site in the genome because it’s tailored to a guide RNA and then you can tell there a different effective protein on top of it, base editing is one form of it. It’s an improvement.
Now, as we’ve looked at all the ex vivo applications, we have our own base editor that we use for multiplex editing in CAR-Ts for our Gen 3 CAR-Ts. But on the in vivo side, I think, there’s a limited set of indications you can go after with base editing. So it’s not like you can go after hundreds of diseases. There’s other forms of gene correction as we talked about, that become really important as you open up that space. And there are other technologies emerging. I think that could improve upon the efficiency but also fidelity of whole gene correction or even part of the genes being corrected. And we’re looking at all that.
We actually started a company within a company, we call it CRISPR-X. So that — they’re kind of separate in a shell within our R&D enterprise that is focused on all the next-gen gene editing platforms that can allow gene correction. And we’re making a lot of progress there. And I think as we — as the delivery technology improves with the technology for editing, you’re going to see many different proteins being tethered to the CRISPR/CAS9 system, whether it’s the deaminase but also reverse transcriptases, integrases and recombinases. So you’re going to see a whole plethora and spectrum of things, much — very akin to where you start with the antibody space, with the humanization, fully human antibodies, then you have the ADCs, then you had nanobodies, you had different forms of the antibodies. And I think that’s the evolution of the technology from the beta CRISPR/Cas9 [ph] but we have the foundational IP, the foundational expertise and the manufacturing capabilities to expand to any of these next-generation modalities.
Terence Flynn
And then in terms of, I guess, bandwidth at the company, maybe just give us an update in terms of — again, these opportunities that you’re talking about require people to execute this. So where are you in terms of building out the team? Are you in a good spot now? Or is there, again, additional investment that’s going to be made on the R&D team side?
Samarth Kulkarni
Yes. I think we’re very conscious in terms of dilution and overall in terms of fund raising. We have been in a very fortunate situation to have raised over $3.5 billion. Since the founding of the company, we’ve put a large amount of money to work but we also have a very strong balance sheet. And I think we’ve gotten to a point where it’s becoming much more efficient. I think our next gen — our first gen CAR-T, for instance, cost us about $80 million to get to an IND. Our improved version of CTX-112 and CD19 — again, CD19 targeted malignancies, cost us about $20 million to get to the clinic, right?
So there’s a major efficiency improvement that allows us to prosecute and bring for more drugs into the clinic. Now obviously, there’s a threshold level of investment that we need to make, whether it’s regen med or in vivo and we’re making those investments. But that once we make those investments, we can bring many more programs to the clinic. So I think what we’re balancing is sort of overall, how much we burn. But at this point for being a non-commercial biotech, we’re actually putting the most money to work across the entire biotech spectrum and with that from a lot of vantages. And I think an environment like this where the markets have taken sort of a downswing, or there’s a factor cool off, is the time we’re putting — we’re being more aggressive so that we come out of it with an expanded lead over all the other companies that are becoming more conservative.
And so, we’re very thoughtful about it. We have a very strong notion of ROIC and return on invested capital. But at the same time, the power of the platform is such that we want to put more things into play because I think they’re very high likelihood they all succeed.
Terence Flynn
Maybe we’ll transition to some of the programs now. Your lead pipeline asset, exa-cel partner with Vertex. I know you guys are in the midst of regulatory discussions now, both in the U.S. and Europe. So maybe you could just give us an update on kind of progress here? What are the remaining pieces that need to fall into place?
Samarth Kulkarni
Yes. I think we’re making terrific progress. I think I just want to — I know the biotech sector is always questioning whether the FDA is supportive or not supportive. And I would just say that both the regulators in the U.S. and Europe have been very supportive of a modality at CRISPR/Cas9.
And in many ways, for them as the regulators look at it, the fact that it’s not as variable as viruses, the fact that there’s more predictability, it’s more robust, all comes into play in ensuring that patients get the highest quality product in a safe and effective manner. And I think that support has been great to see. And if you zoom back again, if someone said, 2011, 2012, we’re going to have a great new platform coming to play and 10 years later, you may have an approved product — or 10 or 11 years later, that I think would have been — people would have said, no way.
And here we are at the cusp of a BLA. And I think we’ve had very encouraging discussions. We’ve recently said that we’ve completed sort of the pre-BLA meetings with the FDA. We’re ironing out a few of the last details and we’ll provide guidance in the next few weeks around when the exact BLA timing would be. But I think we’re — we’ve completed all the discussion on the European side, almost there with the FDA and I think we look forward to filing for regulatory approval across both side of the ocean soon.
Terence Flynn
And any key differences in terms of like number of patients or duration of follow-up as you think about FDA versus EU? Or are they pretty much aligned in terms of the requirements that they want?
Samarth Kulkarni
I mean, largely, I think it’s very similar. I think if you look at these diseases — I mean — in fact, if you look at the — some of the recent approval for Bluebird, there’s 2 studies in there but the number of patients in the second study is relatively small. And because the effect size is so dramatic for a patient going from several VOCs per year to nothing, or requiring transfusion twice a month to not acquire transfusions, I don’t think you need a big number for efficacy.
For the safety aspect, you can put the sickle cell and thal population together, right, because most of the safety events you’re observing may happen in the first 6 months because it’s a transplant procedure. We have a much larger safety package. We’ve done a lot of robust work preclinically around off targets and not having any off target here. And I think, with the efficacy, it’s very clear, this is working.
So I don’t — not a big difference between the regulators and how they look at the diseases. There’s probably differences in what requirements they have on CMC and everything else and small differences but we’re navigating all that.
Terence Flynn
And what about in terms of duration of follow-up for these patients? I mean, any big picture differences between the 2 regulatory bodies? Or is that pretty consistent? And maybe just remind us what you guys need on that front.
Samarth Kulkarni
No big differences. I mean, we’ll remind people — if you look at our data set, some of the patients that we have are out 3 years now since we first dosed them. And so there is — what’s remarkable in the data set — and for those who follow the EHA data set that we presented, in June in the plenary, if you look at the editing in the bone marrow, it’s very consistent, 6 months, 12 months, 18 months. There’s no difference. You had — with viruses, you have change in VOCs and everything else over time. A little more dynamic here, it’s very consistent. Our drug product is very consistent over time. And so that just tells you that this is going to be a durable therapy. You haven’t had any drop-off in fetal hemoglobin percentages.
Now, unlike oncology, where you look at a swim lane chart and you look at continuing data, here, you have thresholds and cutoffs and say X number of patients are evaluable [ph]. If this is the metric, there’s transfusion independence, or a VOC-free metric and then, that’s how you calculate the number of patients. But that’s just a nuance. I think generally, you’ve seen that, if patients do get benefit, they’re getting sustained benefits.
Terence Flynn
Yes. The other big picture question, I think from — as we think about the evolution of the market, it’s obviously one-time therapy which is great but that does create some challenges for some of the pricing models, given the structure of the system, mainly more in the U.S., I guess, versus ex U.S. So, again, maybe initial thoughts there with post Bluebird’s decision on Zynteglo and their pricing? How you and Vertex are approaching that decision?
And then the kind of related question is eligible population size. I think that’s been one of the other debates here among investors, is just how to think about sizing that the number of patients that are likely going to come in and seek therapy with these new treatments?
Samarth Kulkarni
Yes, absolutely. We’ve had very encouraging discussions at the state level in the U.S. And the dynamic with thalassemia in the U.S. is, a lot of the patients are either commercial pay or Medicare. I think there’s a very strong willingness to pay for the drug, even at the price points that Bluebird has set. I think the — in sickle cell, a lot of the patients are Medicaid patients. But we’ve had very encouraging discussions with the state level and it’s hitting home that — the ISO report which showed that in sickle cell, you’re saving the system cost. Even from a pharmacoeconomic standpoint, you could save the system $5 plus million a year over time for each patient if you have the one-time investment.
And not only that, these patients then become much more fit and they go back to work and then they go on employer insurance. I think for Medicaid, that’s a really good scenario. What they have to work out is some of the mechanisms by which they can pay and budget for these and we’re trying to help as much as we can there. We’re flexible. Each of the states are putting in play different mechanisms. But I think that’s — this is a test case for our society which is, this is the paradigm in which medicine is evolving. We’re going to have one-time molecular surgeries. Are we at a society able to move towards that and create the mechanisms to pay for these patients, knowing that they have curative outcomes?
The value is there, even from a quality perspective, from a pharmacoeconomic perspective and just — in terms of just making these patients live longer. I think these are very important metrics we’re all looking at. But from a bigger picture, I think we have to sort this out, not just for this therapy but for many that are coming behind it. And so far, we’ve found a very supportive system, both at the state and the federal level and on both sides of the aisle but there’s work to do. And Vertex is probably the best at commercializing these rare disease drugs than any of the big pharmas even. And I think — we hope that this will all work out nicely by the time we get to a launch.
Terence Flynn
And is that — I know there’s often times like anchoring in a market. So, is Zynteglo, like — again, is that an anchor for — or do you guys feel like, given — your product profile has some differentiation? Like you could have some flexibility there?
Samarth Kulkarni
To a certain extent, there will be a bit of an aging effect. I think it’s hard to move away from that. I think — we haven’t commented on pricing at all. I think we’ll do that closer to the date. It’s premature at this point. We’re doing a lot of work. And we don’t want to say that because there is one drug out there, this is the price. I think we’re looking at it very carefully, from a society perspective, from a patient perspective, looking at it from a regional perspective and we’ll provide that guidance as well at some point next year.
Terence Flynn
And maybe just the last one before we move on to the CAR-T side, is just the — thinking about the eligible population. So I know you guys have talked about next-gen conditioning regimens as well as a way to kind of maybe open up a broader opportunity set. So maybe how are you thinking about the initial opportunity for the drug but then what steps are you in Vertex taking to maybe broaden it beyond that initial patient population?
Samarth Kulkarni
Yes. We’ve had this question. I think that many people are trying to model out what these therapies may look like. And what’s actually more important is the rate of penetration. Because I think it’s very clear in the U.S., there is 25,000-plus eligible patients.
I think, the constraining factor is the ability of the system to do transplant procedures. Right now, the system — the hospitals are geared where they do a few hundred transplants a year, because that’s the number of eligible — or eligible allo transplant donors that you get, right, that are matched donors. Now obviously, they can flex — the system, as you get more available drugs but it’s not going to be thousands per year right off the bat. And so, the question is how fast is that penetration going to happen and the rate.
I think my suspicion is, it’s going to be a growth curve for a long time to come. It’s a linear growth curve for years, assuming we’re successfully able to manufacture and deliver the product to the sites in a way that’s friendly to the provider systems and the patients. But you’re going to see the sensitivity around that rate of growth.
The eligible patient population is very large. There’s 25,000 patients in the U.S., 16,000-plus patients in Europe, that are all eligible, or would want to take these therapies. And judging from the demand in our clinical trials, I think there are a lot who put their hands forward.
Terence Flynn
Maybe moving on to the CAR-T side. I know you guys are focused on the allogeneic CAR-Ts. Again, you spent a lot of time talking about the strategy at the Innovation Day. But maybe as you think about the remaining hurdles to make these competitive with the autologous CAR-Ts, recognize the off-the-shelf nature, is going to be the biggest competitive advantage or the hurdles that you and others need to achieve in order to make this a reality and make these competitive with the others?
Samarth Kulkarni
Yes. And again, zooming back a little bit, I was doing a lecture at MIT last week and I was looking back at the history of our fight against cancer. It was in Boston where the modern war on cancer was declared but a lot of help in New York here from where this was raised, to the level of all the politicians in D.C. In the 30s and 40s, there wasn’t that much cancer because people would die young. You just didn’t see the cancer. But then in the 60s, you started seeing more and more cancer. And now I think cancer is going to account for 1/4 of the death and probably more over the next few years.
And the fight against cancer has gone from a cocktail of small molecules all the way to — now to some target antibodies but we’ve seen the limitations of antibodies and ADCs to cell therapies. We are going to go into world cell therapies. And the only sustainable way of doing cell therapies across broad populations is going to be allogeneic cell therapies, unless we crack the code on bedside autologous therapies. And within allogeneic therapies, now there’s a lot of data around T cells, NK cells, again — and within T cells, alpha, beta or gamma, delta, et cetera. I think alpha, beta T cells have shown to be the most cytotoxic in the ability to kill cancers. And there’s not many companies that have shown durable remissions yet with allogeneic therapies but we hope to do that. And we’ve not only shown that. We’ve also shown that these CAR-Ts can have impact in solid tumors. And we had the first instance of a complete response in a solid tumor with an allogeneic CAR-T which people said would require 4 noble prizes before we get there.
So, if you zoom out, I think we’re making dramatic progress in cell therapies. What we’re going through from an investor standpoint right now is a bit of the initial excitement hype, the phase of disillusionment. But once pharma wakes up to it and pharma is coming around to allergenic cell therapies, you’re going to see another sort of cycle where there’s going to be a tremendous investment in cell therapies and we’re at the vanguard of that and we have probably the most advanced manufacturing setup that you’d ever see for allogeneic cell therapies in Framingham, in Massachusetts which is operational now. And we’re putting many different CAR-Ts into play. But for a more sort of micro-time standpoint, I think, we have continuing data from CTX110 and 130 that we’ll have over the next year. We have initial data for CTX112,131 end of next year. So, we have plenty of catalysts here. And what we expect is that CTX110 will be a product and find its own space in third line in DLBCL and could be $1 billion drug or more. And we have a clear path towards approval there. CTX130 can be very meaningful in T-cell lymphomas. In solid tumors, we’re going to switch over to CTX131. And then, we’re also going to see how CTX112 plays out in CD19.
So, we have several things ongoing right now, lots of data coming out and we’re learning as we go along. And I think our partnership with Nkarta on NK cells is very encouraging as well. And we’re going after CD70 as a target. We’d like to target a lot with NK cells as well. So, lots cooking. And I think, you’ll see more recognition of the potential over the next few months.
Terence Flynn
One follow-up question, I guess, is just on 110. We obviously saw the kind of first wave of auto CAR-Ts get approved on single-arm Phase II trials, then they ran confirmatory studies. Breyanzi is now approved in the second-line setting. And as you guys think about that kind of path to market, what does that look like at this point for you? Do you feel like there still is an accelerated path to market, given kind of the shifting landscape?
Samarth Kulkarni
Yes. Our belief is that there is a path to get an accelerated approval of a single-arm trial. Obviously, we have to follow that with randomized controlled trials and everything else, confirmatory trials. But there is a path to get there because of the unmet need. I think, the regulators recognize that a large portion of the patients, they’ll get treated in community settings and they don’t have access to auto CAR-T. The safety profile of auto CAR-T is such that it’s never going to make it into community settings. Kymriah obviously had a safer profile than Yescarta and Breyanzi. But at this point, I think you’re seeing that most people are — in the academic centers are using Yescarta and to a certain extent, Breyanzi which have a significant proportion of patients getting Grade 3 CRS and also getting ICANS. So I think in the community setting, it’s going to be very hard to translate those, especially with all the manufacturing challenges that you have and allo CAR-T will have a place there.
Terence Flynn
And when will we know more about kind of your path? Is that end of this year? Or is it next year in terms of…
Samarth Kulkarni
Yes, I think what we’ve said is on 110, we’ll have additional data this year, end of this year and at that point, we’ll guide towards what the path forward is.
Terence Flynn
And do you think the most likely route is that — I know you have this consolidation arm as well. Is it’s going to be a consolidation strategy? Or do you think there’s still a possibility for like once and done?
Samarth Kulkarni
It’s very likely we use consolidation in sort of this first instance or the first registration path. And the reason for that is, I think, patients generally — not just our data and other data, generally seem to tolerate the second course of Flu/Cy as well, as long as the Flu/Cy, or Fludarabine/Cytoxan doses are not very high. You’ve had companies going with a very high dose of Fludarabine/Cytoxan out there which, I think, leads to a high proportion of infections. If it’s not very high dose, you can do it twice.
Second point is, I think other companies that have shown a PR to CR conversion after the second dose. And so if you can get a greater proportion of patients into complete remission after the second dose and a greater proportion of those patients with almost MRD negative CRs, you will see greater durability. And I think if you can get to a 1 in 4 type of regime — data set in terms of long-term, or 6-month CR rate or a 1-year CR rate, that is a very meaningful product profile for lymphoma docs, not just in community but also in academic centers.
I think we have a lot of people in our trials. Our investigators will say, they’ll switch over complete allogeneic. And actually, by the way, we could save the system cost again. I think the Europeans care a lot about what CAR-Ts are costing the system. And if allogeneic is less expensive than auto CAR-Ts, that will be a big wave tailwind helping us as well towards allogeneic.
Terence Flynn
Maybe just in the last couple of minutes here. You’re also advancing a type 1 diabetes program with ViaCyte. And I think you have kind of a multipronged strategy, part of which involves a device but ultimately getting to kind of a device-free construct. I think we’re expecting some data end of this year for maybe the first product. So maybe just anything to add on the strategy?
And then number two, what should we expect to see from this data later this year?
Samarth Kulkarni
Yes. Our strategy with making organs off the shelf for diabetes essentially is a small device that has cells that are pancreatic islet cells, or progenitors of those islet cells and they differentiate in the body and become your pancreas. So we’re creating artificial pancreas. The idea was to have a multipronged approach. We have a product 210 — VCTX210, followed by 211, followed by 212. The logic behind that is, we’ve made edits in VCTX210 that make the cells immune-invasive. We’ve edited beta-2-M, inserted a PD-L1, inserted HLAE and that makes it immune-invasive. And what we want to see is, are these cells are around 6 months after dosing that makes — and that projects out how far they can last. They may last 2, 3 years if they exist, if that are on 6 months. And so that’s the first test, immune invasiveness.
The second test is can you produce — can they produce enough insulin in response to glucose stimulus in the patient. What we did in the first instance with 210, we didn’t tune up the glucose, the insulin production very high because we wanted to see what the immune evasion is and we don’t want to confound [ph] the experiment. So we’ll see — we’ll get data from immune evasion either end of this year or early next year. But then, 211 is the one that can be the real product, because that one is tuned up for glucose, for insulin production, plus has additional edits to it that make it very fit and robust. These edits, namely A20 and MANF are 2Gs that came out of our large-scale empirical screens that allow these cells to survive much more easily in vivo inside the patient.
And I think we’re very excited for 2011. That data will come into ‘23. But I think the 210 data will be very important from a — as a telltale sign of Immune Evasion.
Terence Flynn
Great. Well, I think we’re out of time, Sam. But thank you so much. Really appreciate it and great to catch up.
Samarth Kulkarni
Thank you. It’s our pleasure.
Terence Flynn
Thanks.
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