Wave Life Sciences Ltd. Q2 FY2023 Earnings Call

Good morning, and welcome to the Wave Life Sciences Second Quarter 2023 Financial Results Conference Call. As a reminder, this call is being recorded and webcast. I'll now turn the call over to Kate Rausch, Vice President of Investor Relations and Corporate Affairs. Please go ahead.

Thank you, Haley. Good morning, and thank you for joining us today to discuss our recent business progress and review Wave's second quarter 2023 financial results. Joining me today are: Dr. Paul Bolno, President and Chief Executive Officer; Anne-Marie Li-Kwai-Cheung, Chief Development Officer; Kyle Moran, Chief Financial Officer; and Dr. Chandra Vargeese, Chief Technology Officer. The press release issued this morning is available on the Investors section of our website. Before we begin, I would like to remind you that discussions during this conference call will include forward-looking statements. These statements are subject to several risks and uncertainties that could cause our actual results to differ materially from those described in these forward-looking statements. The factors that could cause actual results to differ are discussed in the press release issued today and in our SEC filings, including our annual report and our quarterly report. We undertake no obligation to update or revise any forward-looking statements for any reason. I'd now like to turn the call over to Paul.

Thanks, Kate. Good morning, and thank you all for joining us on today's call. Today, I'll share a highlight on our progress during the second quarter and then turn the call to Kyle to review our financials. Then we'll open up the call for questions. Ann-Marie and Chandra are on the line today and will be available for Q&A. In the second quarter, we continued to execute on our vision of pioneering transformational RNA medicines using our multimodal platform. We remain on track to submit CTAs for our AATD program, and the first RNA editing medicine to enter human clinical trials. We're accelerating work on a number of compelling targets in our collaboration with GSK, and we continue to advance our clinical programs in DMD and HD. Today, I'll begin with AATD and RNA editing, then review our progress with GSK in building a sustainable pipeline. And finally, we'll end with an update on our clinical trial. As I speak with you today, we are preparing for the imminent submission of our first clinical trial applications or CTAs for WVE-006, the first RNA editing clinical candidate for the treatment of AATD. This milestone is important on multiple fronts. First, WVE-006 signifies an entirely new modality moving into the clinic. We are incredibly excited about this milestone, which is an important advancement for the nucleic acid field and for all patients who stand to benefit from RNA editing therapeutics. With AATD, our ability to utilize validated biomarkers in the clinic is expected to enable rapid delivery of proof-of-concept data for WVE-006. This early clinical data set would increase the probability of success with Wave's future RNA editing programs in the liver and beyond. Second, our path from target to the clinic with WVE-006 reflects the translational speed of our platform. Upon first human dosing, we will demonstrate that we have expediently advanced this clinical candidate with a novel modality from the bench to patients at a remarkably fast pace. As we build our pipeline, we expect to drive further efficiencies with each new RNA editing clinical candidate. Importantly, WVE-006 is not only first-of-its-kind, but it's also best-in-class in AATD as supported by our robust preclinical data package. We are able to achieve remarkable potency and durability of editing with convenient subcutaneous dosing because of our unique fully chemically modified oligonucleotides. WVE-006 is also compatible with GalNAc conjugation, a highly specific and elegant delivery tool that is well-validated through multiple approved silencing therapeutics on the market. For AATD, it is a significant advantage to have a stable and optimized candidate that can leverage GalNAc and thereby avoid lipid nanoparticles, which require intravenous dosing. Among the AATD field, we continue to generate excitement for our RNA editing approach, which is a first-in-class therapy designed for restoration of both healthy hepatic and pulmonary function with a reversible redeemable therapeutic agent. Our team has received enthusiasm first-hand from the community at the Alpha-1 National Conference in Dallas, Texas in June. There is a major unmet need in AATD, with current therapies largely confined to treating either pulmonary or, in the future, hepatic manifestations of the disease. Despite the limitations of current therapy, AATD already represents a substantial pharmaceutical market, with augmentation therapy alone currently accounting for about $1.3 billion in annual pharmaceutical revenue worldwide, and this market is expected to grow. Our collaboration with GSK puts us in a strong position to execute on bringing our novel therapeutic option to this market. GSK has a long history and clear leadership in respiratory medicine development and commercialization, and under the terms of our deal, Wave is eligible to receive substantial development, launch, and sales milestone payments, including meaningful near-term clinical milestones as well as significant royalties. As with AATD, our internal discovery work on the next wave of RNA medicine is substantially focused on first-in-class RNA editing therapeutics designed to repair and restore protein. With ADAR editing, we have a versatile modality that allows us to impact target biology in novel ways. As we look at the universe of genetic mutations driving disease, the majority of these mutations lead to a loss of protein function, meaning they can't be addressed with silencing tools such as siRNA or antisense. Wave is best positioned to capitalize on these loss of function disease targets using our protein restoration and repair tools, including our leading RNA editing modality and validated pharmacological platform. We are not constrained by therapeutic areas, and we have previously shown robust editing in extrahepatic tissues, including CNS, kidney, and lung. Beyond rare monogenic disorders, there is also a growing opportunity for RNA medicines with prevalent diseases. With genetic insights being unlocked from large genome-wide association studies, new druggable targets are rapidly becoming available. GSK is at the forefront of investing in genetic discovery, and through our strategic collaboration, we are benefiting from their proprietary genetic insights, which augments our own internal data sets and informs and accelerates our next wave of programs, including partnered and wholly-owned programs. We are rapidly building momentum within our collaboration, and the Wave and GSK teams are already actively working on multiple targets. Importantly, GSK pays 100% of the costs and expenses related to target validation for these partner programs. As a reminder, the GSK deal includes meaningful near-term milestone payment opportunities beyond the clinical development milestones related to WVE-006, which has the potential to add substantially to our balance sheet in 2023 and beyond. We are planning to hold a virtual R&D Day on September 28, 2023, during which we will demonstrate how we are continuing to extend our leadership in RNA editing. We will also discuss how we are uniquely translating genetic insights into internal wholly-owned programs for both rare and more prevalent diseases. During the event, we will share new preclinical data for both hepatic and extra-hepatic disease indications, highlighting the potential depth and breadth of our next wave of pipeline programs. Moving on to DMD. We are on track to initiate Part B, a potentially registrational Phase 2 study of WVE-N531, our exon 53 skipping candidate. This open-label study will evaluate doses of 10 milligrams per kilogram of N531 administered every other week, and we plan to assess dystrophin protein after 24 and 48 weeks of treatment. Since our last update, our clinical development team has filed the clinical trial protocol with regulatory authorities and identified additional trial sites. We expect to share clinical data inclusive of dystrophin protein in 2024. If these data are supportive, we intend to use them to file for accelerated approval in the U.S. As a reminder, our excitement for N531 is grounded in the proof-of-concept data from Part A of the study, which showed 53% exon skipping after just 3 biweekly doses, high muscle tissue concentration, and a favorable safety profile. We presented these results to the DMD community at the PPMD conference in June, where they were met with excitement and optimism. With the extended dosing period in the forthcoming trial, we expect these high levels of skip transcript to result in downstream accumulation of substantial fully functional dystrophin protein. We know the DMD community is waiting for additional and better therapeutic options. With N531, we aim to provide a treatment option that delivers convenient, safe production of endogenous functional dystrophin and ultimately meaningful clinical benefit for all patients amenable to exon 53 skipping. We are also planning a broad strategy to expand the number of exons we can address, which we would accelerate rapidly following positive dystrophin data for N531 to build the wholly-owned DMD franchise. Turning to WVE-003, our first-in-class, allele-selective candidate for Huntington's Disease, or HD. HD patients have no disease-modifying therapies available to them today, and we believe WVE-003 is the most promising HD compound in development. WVE-003 takes advantage of broad delivery to the CNS, thereby reaching various brain regions implicated in HD. We've now confirmed the ability of oligonucleotides to distribute in the CNS in multiple NHP studies with our partner, including relevant concentrations in the cortex and striatum. Therefore, we are confident that WVE-003 is getting to the right part of the brain. It is also the most advanced approach designed to selectively knock down the toxic-mutant Huntington protein while sparing the healthy wild-type HTT protein. Wild-type HTT is essential and plays several critical roles in the CNS, including regulation of synaptic and protein transport, promoting neuronal survival and formation, and function of cilia, which are essential to regulate CSF flow and reabsorption. Dysfunction in any of these pathways could be expected to adversely impact response and potentially cause complications. With only single doses of WVE-003, we have already demonstrated positive initial Huntington reductions of approximately 35% as compared to placebo in the CSF with wild-type HTT levels appearing consistent with allele-selectivity. The SELECT-HD trial has continued to progress, and in the second quarter of 2023, we initiated the multi-ascending dose phase of the trial, dosing at 30 milligrams every 8 weeks. Given our robust and durable knockdown data observed in the multi-dose cohorts of the FOCUS-C9 clinical trial of WVE-004, we believe the multi-dose data for WVE-003 will be most important to informing our next phase of development. In the second half of 2023, we intend to share additional single-dose biomarker and safety data along with any available multi-dose data. With that, I'll now turn the call over to Kyle Moran, our CFO, for our financial update.

Thanks, Paul. Turning to the financials. Our net loss for the second quarter of 2023 was $21.1 million, compared to $41.3 million in the prior year quarter. The decrease in net loss was primarily driven by revenue recognized under our collaboration with GSK. Revenue from the GSK and Takeda collaborations in the second quarter of 2023 was $22.1 million. In the prior year quarter, revenue of $0.4 million was recognized under the Takeda collaboration. Research and development expenses were $33.3 million for the second quarter of 2023, compared to $29.7 million in the prior year quarter. This increase in R&D expenses was primarily due to increased external expenses related to our clinical program. General and administrative expenses slightly declined in the second quarter to $12.3 million compared to $12.8 million in the prior year quarter, primarily due to a decrease in share-based compensation. We ended the second quarter with $173 million in cash and cash equivalents, compared to $88.5 million as of December 31, 2022. The increase is primarily attributable to the upfront cash and equity investment of $170 million received in the first quarter from our strategic collaboration with GSK. We expect that our cash and cash equivalents will be sufficient to fund operations into 2025. As a reminder, we do not include future milestones or opt-in payments under our GSK and Takeda collaboration in our cash runway. As Paul stated earlier, we have the potential to receive meaningful near-term milestone payments in 2023 and beyond, including clinical development milestones related to WVE-006, our RNA editing candidate in the treatment of AATD.

Thanks, Kyle. We are well positioned to execute on multiple upcoming milestones across our pipeline in 2023 and beyond. I look forward to seeing many of you at upcoming investor conferences and to speaking with you at our R&D Day event in September. And with that, I'll turn it over to the operator for Q&A.

Our first question comes from Steven Seedhouse from Raymond James.

Yes, good morning, thanks so much for taking the questions and for the broad update. Paul, you mentioned rapid delivery of proof-of-concept data from the AATD study. I was hoping you could just expand on that comment regarding the initial doses you'll be in the clinic with when gene editing went into the clinic in vivo, there were profound editing rates already even at the lowest doses. I'm just curious if that's the type of outcome you're expecting to see here at the early doses in the study? And what other proof-of-concept features do you think you can generate quickly?

Wonderful. I'll take the question, Steven, and then hand the call to Anne-Marie. When we talk about rapid proof-of-concept, our goal is, as stated, to get to a measurement of protein as quickly as possible through the study's rapid healthy human volunteer section and then treatment section. The goal here is to measure editing efficiency. What is unique and particularly special about the Alpha-1 antitrypsin indication is that we can measure the most important contribution of editing, which is protein formation. Therefore, the biomarker we'll be able to measure in that study is the Alpha-1 antitrypsin protein. We'll also be able to characterize how much of it is fixed or corrected protein. This gives us a really unique way of confirming preclinical studies in the clinic, both in the magnitude of production and the quality of production. Anne-Marie, do you have further comments to make on the clinical trial design?

No. I would perhaps add that we are in the final stages before submitting, almost ready to submit the CTAs, and we'll comment further on the design once we’re locked and loaded there.

Okay. And regarding assessing off-target RNA editing, can you describe how this differs from what you would do for an siRNA? Is it any more arduous? What's your understanding of the regulatory landscape for establishing an off-target margin for RNA editing therapeutics?

Yes. It's exciting about RNA editing when we think about a standardized oligonucleotide approach and our experience in siRNA and antisense is the ability to assess normal potential off-targets in the same way we would for others. We've done the characterization to look for bystander edits and others on the transcript with highly specific editing, and therefore, we do not see bystander edits. In preparation for the submission, we did a lot of that work to preempt any issues in terms of demonstrating that as a new modality, we don’t see bystander edits and it behaves the same way as other oligonucleotides. Additionally, the importance of reversible editing is beneficial. The idea that we're working on the transcript and not inducing permanent genetic mutations on DNA is crucial. We see this as an important contribution to the field, being able to go after not just devastating rare diseases but also apply these technologies to broad chronic diseases.

Yes. And lastly for me, I appreciate this may be looking a little ahead. But when thinking about initial patient selection for AATD, how broad will that demographic be? Will you be looking for patients with lung and liver involvement right away to illustrate the power of this approach and specific genotypes that would be early targets?

Yes. I'll hand it to Anne-Marie for more detailed clinical aspects. Initially, we will be focusing on homozygous ZZ patients, which involve both liver and lung considerations. It’s important to clarify that it’s less about where the manifestation is, and more about the underlying genetics driving the disease. Thus, it's about correcting those ZZ patients to MZ patients, tracking their protein response relative to that. So early on, the proof-of-concept is focused on demonstrating the translational potential of the treatment for AATD.

No. I think you hit it. We're focusing on ZZ phenotype patients for now, and there'll be more details once we agree with regulators.

If we consider the ZZ population, it’s about 100,000 patients in the U.S. So, there is a significant number of potential patients for us to study.

Our next question comes from the line of Paul Matteis from Stifel.

Hi. This is Julian on for Paul. Thank you for taking our questions. Regarding AATD, you mentioned that for WVE-006, you’re not limited by therapeutic area. I'm interested to know if you see any compelling areas outside of AATD where you might want to establish proof-of-concept moving forward.

Thank you, Julian. You're absolutely right, AATD is not constrained by therapeutic area. In AATD, we're targeting liver and lung, but treating the liver to produce the protein to protect lung function. We've established data sets showing that we can operate extra-hepatic without the use of GalNAc, suggesting opportunities in various tissues. As we think about areas where you're under-expressing a protein, we can stabilize a transcript to enhance its expression, opening opportunities across multiple therapeutic areas. We're excited to share more data on programs and the RNA editing field's growth in that regard. Regarding the GSK collaboration, I can’t speak directly for them. However, there's a substantial amount of momentum. Anyone who attended Bio knows that GSK is focused on the translational potential of their genetics investment, highlighting opportunities with our multimodal platform. Importantly, editing isn’t their only focus. We are partnering on silencing using siRNA and other approaches across the board. There’s a lot of momentum in this collaboration, and we’re excited to continue providing updates.

Our next call comes from the line of Eun Yang from Jefferies.

Thank you. I have a couple of questions on RNA editing. You have the most advanced program in RNA editing, but others are also progressing. Can you comment on your technology and how you're better positioned for RNA editing compared to others, especially since there’s limited data out there?

Great question. It comes down to a decade of investment in building a nucleic acid chemistry engine. This has allowed us to enter the editing space with best-in-class capabilities, specifically designing oligonucleotides to optimize interaction with enzymes. The advantage lies in the fact that we can leverage catalytic pathways, allowing for smaller amounts of the drug to achieve a maximum effect, which in turn is less likely to induce any dose-limited toxicity. Our focus will continue to be on building a therapeutic portfolio primarily utilizing our RNA editing capabilities.

Great. Additionally, with about $225 million in development milestones from GSK on this AATD program, starting Phase 1/2 this year, what milestone should we expect from that?

Eun, we have a number of development milestones beyond commercial milestones from GSK. While we cannot disclose exact amounts for each milestone, the key is successfully delivering this program will lead to milestone payments. These would not be counted in our runway statement and would be accretive to our current cash position.

Our next call comes from the line of Asim Rana of Truist Securities.

Good morning. This is Osman for Joon. My first question is, given that you've improved upon RNase mediated degradation, splice-blocking ASOs, RNAi, RNA editing, all with your AMR platform, do you have any plans to design guide RNAs with enhanced properties like stability and low off-target cutting to improve upon high-rate DNA/RNA guides similar to those being used by Caribou?

Thank you. We’ve made a substantial investment in our broad capabilities and remain open to collaborations that could push us into new areas. While our core focus is building a therapeutic portfolio using RNA editing, we are open to exploring these capabilities in other modalities as there are numerous opportunities. Your second question about using patients who have received competitor gene therapy for N531 is an important aspect to consider. We’ll carefully monitor data from competitors in the field, such as Sarepta. Our focus will remain on delivering a functional dystrophin protein verifiably beneficial for patients.

Our next question comes from the line of Salim Syed from Mizuho.

Thanks for the questions, guys. A few quick clarifications. With the CTAs now imminent, do you have an idea of when we could see data? Do you think there will be data in 2024?

For AATD timelines, the CTA submissions are imminent. However, I think it’s safe to assume that data won’t be available in 2023. We will be able to provide additional updates regarding expectations for data once that trial initiates in 2024.

On DMD, do the functional endpoints have any bearing on whether this Phase 2 is registrational? Or are you solely dependent on dystrophin levels?

As you know, there is a well-trodden regulatory pathway for filing with dystrophin data, so we would expect that to be adequate. But we will provide the functional data collected throughout the study.

On 003, there seems to be a slight change in wording in terms of available multi-dose data in press releases. What exactly has changed there?

The multi-dose data is indeed underway, and having it listed as available is simply an update on our current data collection. It's important to stress there has been no change in progress; we will continue to update the data as it becomes available.

Is the Phase 1 trial design going to be shared this year for 006?

Yes, we'll share the trial design once the study is initiated, which should happen in 2023. This will provide further clarity regarding data timelines as the study initiates.

The next question comes from the line of Joe Schwartz from Leerink Partners.

Hi. This is Joori on for Joe. I was just wondering, have you commented on the stoichiometry of the AIMers or RNA editing and how that compares to your other programs like exon skipping? Do you expect dosing to be in a similar range, higher, or lower than those?

The stoichiometry we see with AIMer editing is catalytic, allowing smaller amounts of the drug to have a significant effect. This gives us a pharmacological profile similar to other catalytic pathways, allowing for efficient delivery without inducing dose-limited toxicity. This efficiency is essential for our approaching dosing.

Indeed, this foundational technology utilizes catalytic mechanisms to facilitate faster turnover kinetics.

As we think about RNA editing, we are not required to deliver large volumes of the drug, which is crucial for administering via alternative routes. Thank you all for joining the call this morning. We have made significant progress advancing our pipeline and driving forward our leadership position in RNA medicines in the second quarter. I am grateful to every Wave employee for their dedication and focus on our mission and on the patients and families we serve. Have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.