Good day, ladies and gentlemen, and welcome to the first quarter 2018 REGENXBIO earnings conference call. [Operator Instructions] I would now like to introduce your host for today's conference, Mr. Patrick Christmas, Senior Vice President and General Counsel for REGENXBIO. Sir, you may begin.

Good afternoon, and thank you for joining us today. With us today are Ken Mills, REGENXBIO's President and Chief Executive Officer; Stephen Yoo, our Chief Medical Officer; and Vit Vasista, our Chief Financial Officer. Earlier this afternoon, REGENXBIO released financial and operating results for the three months ended March 31, 2018. The press release reporting our financial results is available on our website at www.regenxbio.com. Today's conference call will include forward-looking statements regarding our financial outlook in addition to regulatory and product development plans. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from those forecasted and can be identified by words such as expect, plan, will, may, anticipate, believe, should, intend and other words of similar meaning. Any such forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties. These risks are described in the Risk Factors and the Management's Discussion and Analysis section of REGENXBIO's quarterly report on Form 10-Q for the quarter ended March 31, 2018, which is on file with the Securities and Exchange Commission and available on the SEC's website. Any information we provide on this conference call is provided only as of the date of this call, May 8, 2018, and we undertake no obligation to update any forward-looking statements we may make on this call on account of new information, future events or otherwise. Please be advised that today's call is being recorded and webcast. In addition, any unaudited or pro forma financial information that may be provided is preliminary and does not purport to project financial positions or operating results of the company. Actual results may differ materially. I would now like to turn the call over to Ken Mills, President and Chief Executive Officer of REGENXBIO.

Thank you, Patrick, and good afternoon everyone. Thanks for joining us. On today's conference call, we'll provide a recap of our recent progress, an update on our product candidates and financial results for the first quarter of 2018. We'll also review anticipated upcoming milestones for REGENXBIO and then open up the call to questions. At REGENXBIO, our mission is clear. We aim to improve lives through the curative potential of gene therapy based on our proprietary NAV Technology Platform. Our AAV gene therapy product candidates are designed to be single administration therapies that deliver genes to cells to address genetic defects, or that enable cells in the body to produce therapeutic proteins that are intended to impact disease. Our product candidates are intended to provide long-lasting effects for patients with significant unmet medical needs, potentially significantly altering the course of disease and delivering improved patient outcomes. We are currently advancing an internal pipeline of product candidates that employ our proprietary NAV Technology Platform to address retinal diseases, metabolic diseases and neurodegenerative diseases. These areas of focus have been strategically selected because we believe they can uniquely be addressed by our vectors. And within each focus area, there are many diseases with significant unmet medical need. Beyond our internal development programs, we selectively licensed components of our NAV Technology Platform, most typically single vectors for single indications, to third-party companies, whose vision and commitment to gene therapy is aligned with ours. Our NAV Technology Platform consists of over 100 novel adeno-associated viral vectors, or AAV vectors, including AAV7, 8, AAV9 and AAVrh10. Our goal is to utilize these vectors to enable the development of one-time disease-altering gene therapy treatments. Before we review the past quarter and summarize our upcoming milestones, I want to briefly touch on the importance of helping patients in everything that we do. While our company in the field of AAV gene therapy has grown and changed, the focus on patients has remained constant. Simply put, the desire to treat unmet medical needs for patients is why we are here. And we are excited about the progress being made to improve lives with gene therapy. We're actively engaged with patient advocacy organizations to ensure that we have an acute understanding of the patient experience. And we are using these insights to guide the development of our product candidates and to allow us to be a reliable and compassionate partner with these patient communities. We believe single administration gene therapy treatments that significantly alter the course of disease will create meaningful impact for the heroes we work for every day, the patients and families living with disease. I'd now like to turn the call over to Stephen Yoo, our Chief Medical Officer, to give an update on our lead product candidates.

Thank you, Ken. As a reminder, our lead product candidates are currently targeting the following indications: wet age-related macular degeneration, or wet AMD; homozygous family hypercholesterolemia, or Hooch; and mucopolysaccharidosis type I and type II, or MPS I and MPS II. I'll begin with RGX-314 for the treatment of wet AMD, a disease that results in diminished, distorted or even total vision loss and which, we believe, effects more than 2 million patients in the U.S., Europe and Japan. RGX-314 is administered with a one-time subretinal injection and is designed to overcome the limitations of current anti-VEGF therapies being used to treat wet AMD. These limitations include patients receiving frequent painful and inconvenient administrations of anti-VEGF therapy into the eye. Many patients trouble to comply with the recommended therapeutic regimen for current anti-VEGF therapies, and lack of compliance may lead to reduced therapeutic efficacy and ultimately loss of vision. Utilizing the NAV AAV8 vector, RGX-314 is designed to encode a gene for a monoclonal antibody fragment in the cells of the retina. The expressed antibody fragment is designed to neutralize VEGF activity, employing a similar mechanism as standard of care, but with just a single administration. The NAV AAV8 vector has been selected for this product candidate because it has demonstrated effective transduction of retinal cells in multiple preclinical animal models. In February, we were pleased to announce the completion of dosing of the third cohort in our Phase I clinical trial, evaluating RGX-314 for the treatment of wet AMD. The primary objective of the trial was to evaluate the safety of a one-time subretinal delivery of RGX-314 at 24 weeks. Additionally, we'll be evaluating several efficacy parameters, including best corrected visual acuity and retinal thickness as measured by optical coherence tomography, or OCT. The clinical trial currently has seven…

Thanks, Stephen. So beyond the advancement of our lead product candidates, we continued to expand our team and capabilities. We've made great progress in the build out of our state-of-the-art research and development facility, which is expected to be completed in the second half of 2018. And we're looking forward to having a consolidated facility for our rapidly growing research team. The NAV Technology Platform is also continuing to advance through efforts of our external partners and licensees. Our technology is currently being employed in the development of more than 20 partnered product candidates by our NAV Technology licensees, 10 of which have advanced to clinical stage. As licensee programs continue to move forward and achieve efficacy and safety milestones, we believe they further validate the versatility of the NAV Technology platform and provide additional data that collectively drive the advancement of the AAV gene therapy space. The strength of our platform was highlighted in the first quarter of this year by Novartis' recent announcement of its intention to acquire our licensee, AveXis, for approximately $8.7 billion. And AveXis has continued progress with its AVXS-101 SMA type 1 program, which uses the NAV AAV9 vector. At the American Academy of Neurology Annual Meeting in April, AveXis announced that 11 patients have been enrolled in the pivotal trial for AveXis-101 in type 1 SMA. And that the six patients who were at least 1 month post gene transfer were exhibiting motor function improvements that correlate to motor function improvements experienced in patients in the Phase I clinical trial. In addition, AveXis announced that the first patient had been dosed in a Phase III trial, evaluating AVXS-101 in presymptomatic patients with SMA types 1, 2 and 3. We're very encouraged by the continued progress of this study and the impact AVXS-101 is…

Thank you, Ken. REGENXBIO ended the quarter on March 31, 2018, with cash, cash equivalents and marketable securities totaling $235.8 million as compared to $176.4 million as of December 31, 2017, an increase of $59.4 million. Cash and cash equivalents and marketable securities as of March 31, 2018, include the $80 million received from AveXis in January 2018 in connection with our license amendment. Revenues were $132.4 million for the three months ended March 31, 2018 compared to $0.5 million for the three months ended March 31, 2017. The increase was primarily attributable to $132.1 million of license revenue recognized upon the amendment to the license agreement with AveXis, which consist of the $80 million payment received in January 2018, the present value of the $30 million payment due in January 2019 and the present value of the $30 million payment due in January 2020. In the event that transaction between AveXis and Novartis is completed, REGENXBIO expects quarterly revenue will also be higher than normal in the quarter that -- as a result of the accelerated milestone payment to be received. Research and development expenses were $19.6 million for the three months ended March 31, 2018 compared to $16.6 million for the same period in 2017. The increase was primarily attributable to increased head count, laboratory and facilities cost and the expenses associated with conducting clinical trials. General and administrative expenses were $8.4 million for the three months ended March 31, 2018 compared to $6.6 million during the same period in 2017. The increase was primarily attributable to increased headcount and professional fees for advisory services. Net income was $104.2 million or $3.30 per basic and $3.04 per diluted common share for the three months ended March 31, 2018 compared to a net loss of $22 million or $0.82 per basic and diluted common share for the three months ended March 31, 2017. Net income in the first quarter was primarily driven by the nonrecurring license revenue recognized upon the amendment of the license agreement with AveXis. As of March 31, 2018, we had 31.9 million common shares outstanding. REGENXBIO iterates that it expects full year 2018 cash burn to be between $85 million and $95 million, which will support continued development of its lead product candidate programs. Full year 2018 cash burn guidance excludes the fact of the $80 million we received from AveXis in January 2018 and any other potential consideration that may be received from AveXis in connection with our license amendment. With that, I will turn the call back to, Co-Founder, President and CEO, Ken Mills, to review our upcoming 2018 milestones.

Great. Thanks a lot, Vit. 2018 is shaping up to be a year of great momentum for the AAV gene therapy sector as a whole. And we're certainly enthusiastic about the continued clinical development of our internal product candidates, our partnered pipeline and the overall validation of the NAV Technology Platform. We look forward to reporting top line data from the RGX-314 Phase I clinical trial for wet AMD, the RGX-501 Phase I/II clinical trial for HoFH by the end of 2018, and we also look forward to the initiation of the RGX-111 and RGX-121 clinical trials for MPS I and MPS II in mid-2018. With our strong cash position, we're well positioned to achieve these and future milestones as well as advance therapies for patients with significant unmet medical needs. And with that, we will turn the call over to the operator for questions. Thank you.

[Operator Instructions] Our first question comes from the line of Matthew Harrison of Morgan Stanley.

This is Vikram on for Matthew. So our question is about the effective VEGF agents. And whether you think that affect is driven by Cmax or if it's driven by trough concentration? Basically, we are just trying to understand your views on the biology of the target, your views on why the impact of VEGF inhibitors is not Cmax-driven. So any color or context you could provide there would be helpful.

Hi, Vikram, sure. Yes, I'm going to turn this one over to Stephen.

Sure. So I think that we -- when we look at the effect of biologics and typically how biologics are modeled, there's traditionally a use of looking at the trough concentrations as a traditional point of terms of modeling effect of any kind of biologic that's used or monoclonal antibody in terms of the effect. I think what's important here as you've noted is that there is a different PK profile that could also come into effect in terms of Cmax and trough versus the continuous exposure. And we believe that, that continuous exposure from a PK profile will also have an impact in terms of the ability to suppress VEGF levels. So, I think in summary, we think that it's the trough levels that are important to really recapitulate in terms of exposure of anti-VEGF to suppressing VEGF. And we think that's supported by the overall biology of the product in terms of driving efficacy for anti-VEGF products.

And our next question comes from the line of Gbola Amusa of Chardan.

Couple questions. First, just given the AveXis acquisition for $8.7 billion, how does that change your view on internal versus external development opportunities using the vectors? And then, the second question relates to MPS I and II trials. As you move towards dosing patients there, can you comment a little bit more on what it means to meet an unmet medical need in those programs? Is there a list potentially that you could provide of things you could accomplish that would sort of change the game in those diseases?

Gbola, thanks for the questions. I'll take the first one, and I'll hand the second one over for Stephen to address the unmet clinical need in the lysosomal storage diseases. So -- yes, I think we have been, first of all, really impressed with the ability of our partners at AveXis to execute in the clinic with AVXS-101 and are excited for the acknowledgment and involvement of a large cap like Novartis to help, I think, continue and both broaden and deepen the commitment that AveXis has already established substantially in SMA, both pipeline and beyond. Internally, the strategy of REGENX has been always to maintain, I think, an important healthy balance between internal program investment and external partnership. And I think, obviously, we're a unique company in the field in that the foundational and intellectual property around NAV Technology provides so many different opportunities for development in different indication areas really more than in our view potentially any one company can handle, and so to have partners is a key part of our strategy. It has been from the beginning and continues to be. And I don't know that, on a going forward basis, that changes. We want to continue to saturate and use the capital that we have available to us at REGENX to advance as many programs singularly as possible in our pipeline. We exhaust that capability. We think it's going to be important, and I think that's resembled in the 10 partnerships we have to find ways to take advantage of partnerships in the best interest of patients, we think that's in the best interest of shareholders. On MPS II, MPS I, Stephen?

Sure. So in terms of -- Gbola, in terms of MPS I and MPS II, we're clearly narrowing in on the cognitive deficits that occur in the most severe phenotypes in these patients. And so in terms of the unmet medical need, we're focusing on the neurodegenerative aspects that result in a loss of IQ over time. I would say that the unmet need is slightly different between the two different disease states in that stem cell transplant is available as a therapy that has been shown to halt that neurocognitive decline in MPS I, but is not considered standard of care for MPS II. And so for MPS II, there really are no available treatments that are approved as standard of care to address the neurocognitive decline and, therefore, really raising a great unmet need there. For MPS I, although stem cell transplant does exist and is part of standard of care, we believe that particular therapy still comes with significant morbidity and mortality that's associated with stem cell transplant. And therefore, there is room for improvement for something like RGX-111 to be able to halt and stabilize the neurocognitive loss that occurs in both of these diseases in spite of whether standard of care exists or not for the treatment of that aspect of the disease.

And the next question is from the line of Gena Wang of Barclays.

My first question is regarding also MPS I and II, the initial dose. And MPS II seems like almost one log higher than the MPS I. Just wondering if you could walk through the rationale behind?

Gena, I'm going to let Stephen take this one.

Sure. So in function, the dosing for MPS I and MPS II were both based on the preclinical data that we had submitted to FDA around the different animal models where the constructs were tested. In part with MPS I, we are entering into, initially, an adult population and that study is designed really more as a pure safety study with some readouts on biomarkers, because there is a patient population in adults in Hurler–Scheie that have demonstrated some neurocognitive decline. And so in conversation with FDA, it was really about entering into the clinic in a dose -- in an adult population that started with a more assessment of safety in that patient population. With MPS II, we're entering into -- directly into a pediatric population because that population -- in MPS II, there's more of a binary separation of patients who are severe and have neurocognitive decline that are children or in the pediatric population. And therefore, when we enter into the pediatric population, there is a greater burden to be able to show some potential for benefit. And therefore, the justification for coming in with a higher dose in that particular patient population as related to the pediatric subset of patients that we'll be treating.

I see, that's very helpful. Another question regarding the IP on AAV9 and AAV8 that are retained by GSK. Just wondering does GSK has exclusive rights on AAV9 for DMD and also AAV8 for hemophilia B?

Gena, this is Ken. Sorry, switching back over. That's right. Yes, I think we have disclosed that in the exclusive licenses that we've taken from GSK under our license agreement that we entered into back in 2009. There were certain fields that were held back for individual vectors in certain disease areas. And so you're absolutely correct that GSK retains the right and it was carved out of our license for the use of AAV8 vector to treat hemophilia B, that's how it's defined, and also for the use of the AAV9 vector to treat Duchenne muscular dystrophy.

Our next question comes from the line of Reni Benjamin of Raymond James.

I guess just going to the wet AMD program, can you talk a little bit about what you need to see in terms of a go/no-go decision? And I guess where I'm kind of going with this is, if we're not seeing any sort of an amendment in the current trial, can we assume that you are already seeing something that kind of precludes you from increasing the doses and evaluating it in more patients?

Reni, this is Ken. Thanks a lot for the question. An excellent one. I think right now where we are with the trial of 314 is that we're on track to have top line data in doses as the trial was designed. And we expect to have that data in the second half of the year. I don't think that we are at a point where we have enough access to a data set, where we're making any assumptions right now. We're progressing as planned. We finished enrollment of the first three cohorts as we announced in February, and have progressed now to a point where we think we're going to be collecting data and aiming to achieve 6 months of data in all patients in the study to sort of inform next steps overall. So I don't think that there's anything to assume or take away until we report the top line data in that form in the second half of the year as we've given guidance to.

Got it, okay. And then just as a follow-up to this. We saw some GenSight data granted in the totally different indication, but I'm just kind of curious, are there any particular learnings that you might have taken away from that study? And I guess, I'm looking for, I guess, any sort of clarity regarding sham injections and the endpoints like best corrected visual acuity and how that might be affected?

I mean, obviously, that's not our data. So it's hard for us to comment in any meaningful way. I think the wet AMD and inherited retinal diseases are really sort of apples and oranges in terms of, I think, clinical implementation, certainly commercial opportunity. And I think the clinical design is going to reflect that. There's sort of a great departure there. So I don't know that we're particularly looking at that as a study that we would have -- that we should be using for takeaways.

Got it, okay. And then just one final one, just going back to the questions regarding MPS I and II. Can you just talk us through the clinical trial design, I guess, in particular in regards to the patient selection? And is there a weaning off period because maybe I heard you wrong that these patients were on some sort of enzyme replacement therapy, but maybe just some details there? What are the key endpoints we should be focusing on? And what are you -- how are you thinking about enrollment rates, given what you've seen with both HoFH as well as wet AMD?

Great. I'm going to turn that over to Stephen.

Yes. So to address the clinical endpoints, keep in mind that these are still primarily safety and tolerability studies. And so first and foremost, we'll be looking at things like adverse events and SAEs and overall safety and tolerability to the actual investigational product as well as the procedure, and that will be the primary outcome. In terms of -- I think you had a question related to enzyme replacement therapy and whether patients will be permitted and to enter into the trial on systemic enzyme replacement therapy, keep in mind that we're actually administering the drug product into the CSF to target the neurodegenerative changes that are anticipated to occur in this patient population. And one of the shortcomings of enzyme replacement therapy is that it doesn't cross into the blood-brain barrier into the CNS. And so -- therefore, we don't expect that enzyme replacement therapy to have an impact in terms of the CNS, which is exactly why we're administering the drug product into the CNS base to address the area where we think there's the highest unmet need. And therefore, any kind of exploratory secondary outcomes around efficacy will be related to measuring changes within the CSF as well as any kind of neurocognitive and behavioral measures that will be monitored over time in these patients. In terms of recruitment, I think, we've got a real good partnership with patient advocacy groups and heightened awareness of gene therapy in terms of these disease states, and we've got a lot of engagement. So I think with that in mind, we expect there to be a robust interest in the clinical trial. And we'll have to -- we're undergoing, like I said, site activation and initiation of recruitment. And so we'll continue to monitor this over time. But again, we expect really good engagement from the community in the MPS world.

And should I just be thinking about in terms of getting initial results as kind of like a second half 2019 event? Or do we expect these CSF changes and the neurocognitive improvements to potentially occur earlier?

So definitely the neurocognitive assessments are a longer-term assessment in terms of looking for change. And that's not just a function of looking for the effective investigational product, but it's also a function of the endpoints themselves and how frequently they can actually be measured. In terms of the kind of biomarkers, I think we would expect to, again, see some change that's faster than neurocognitive measures over time. But we're talking probably months here instead of days in terms of looking for changes in those markers.

Our next question is from the line of Ying Huang of Bank of America Merrill Lynch.

This is Chen on behalf of Ying. So a couple ones. First one on the HoFH program. So you have completed dosing of the second dose cohorts. Wondering whether you have completed the safety review? And could you -- when would we expect you to do the dose expansion or potentially can go higher dose? And by year-end, can we see more patient data beyond the six patients? And also a follow-up with the MPS I and II. What level of enzyme level in your opinion is sufficient to provide a clinical meaningful benefits? And also just curious whether it's possible for you guys to expect improvements rather than just halting the neurocognitive benefit, especially in the younger patients in MPS II group?

Chen, thanks for the questions. I'll start off and let Stephen jump in, if necessary. So on HoFH, that's right, I mean, we just announced that the third patient in the second cohort was enrolled. And so we think we're on track to be able to report top line data based on the six patients that have enrolled at the two doses that we initially intended in the trial to start with. And so that's what our plan is for top line data reporting in the second half of 2018. With respect to MPS I and MPS II, as Stephen just alluded to as he was talking Reni through the clinical implementation plans for these product candidates, we're going right into the CSF, and we're looking to get correction throughout the CNS intracellularly. This is not an area of, I think, understanding based on existing enzyme replacement where I think there's a consensus around what sort of levels of enzyme activity you see in the CSF that correlate to intracellular correction. I know from some of the preclinical animal model work that we did, for instance, that we would see histopathological correction in animals at varying degrees of sort of CSF enzyme activity. And so what we think is going to be important here is to look at certain biomarkers that represent that intracellular activity, but really follow these neurocognitive measures over time, as Stephen suggested, and not necessarily rely on enzyme in the CSF to sort of tell us what's happening with respect to the potential success of the product candidate.

And I think it's important to remember that measuring enzyme activity in the CSF is an extracellular process, and we're really looking at intracellular process in terms of clearance of lysosomal storage within the cells. And so the dose selection that we have proposed within our IND packages were really based on histological corrections that were seen within animal models trying to more accurately reflect what's in intracellular process.

I just have a quick follow-up. Would you do any biopsies to test the GAG reduction in some of the tissues potentially?

No, that's not planned in the protocol at this point.

Our next question comes from the line of Difei Yang of Mizuho.

Just -- so the first question is on the wet AMD program. Could you talk to us about, from commercial perspective, do you think the RGX-314 eventually needs to hit the bar, efficacy bar that's set by EYLEA or Lucentis or maybe it's a different bar. How to think about that? And then secondarily, in the case, for some reason, the therapy needs to be turned off, what are the mechanisms or what are the options?

Difei, thanks for the questions. I think with -- the initial work that we've done around sort of the target market and applicability of gene therapy in wet AMD, we've seen a spectrum of potential outcomes. And we're certainly a little bit getting ahead of ourselves since we haven't even reported our top line data in our first-in-human study yet to be talking about sort of steps towards commercialization. But I will say that for gene therapy at large, we know that in wet AMD there's good standard of care with things like EYLEA as well as Lucentis. And so we certainly view them as benchmarks. I think the target of gene therapy is to migrate patients to a one-time administration that maintains the visual acuity that they would achieve with regular intervention, sort of let's call it every 4- to 5-week injections of things like Lucentis and EYLEA. And so that is certainly a target. But we also have heard from key opinion leaders and patients themselves that a reduction in the burden of injections, so taking people from high frequency to less frequent injections is also clinically meaningful. So we're going to be considering that as we look at data outcomes, not only from first-in-human, but with an expectation of the program moving forward throughout development, and benchmarking it against current standard of care and how it evolves in practice.

Then on the very high level for NAV platforms in general. If you were to optimize different perspectives, what are the things that -- where do you think the biggest opportunities are? By the way congratulations on partner successes.

Yes, thank you. Well, look, I think in our view and I think we've -- having started working in the fields of gene therapy as a company almost 10 years ago, we and our peers and particularly our NAV Technology licensees and our internal programs have seen incredible expansion and sort of evolution of the potential of gene therapy, obviously, with the approval of LUXTURNA at the end of last year, its commercial launch. And with the emergence of therapies now like the AVXS-101, we think that current technology, and particularly the NAV Technology that we licensed in, has multiple potential shots for products to emerge into the market in the next several years and beyond. But I think at REGENX in other areas, we're also looking for continuous improvements. And I think those types of improvements are not any different than what other sort of biologics and small molecule companies are looking for is to continue to improve safety, continue to improve potency and efficiency with really safe products. And I think that gene therapy has that potential in a unique way. And certainly, by starting to build infrastructure around research and development at REGENXBIO, we're as interested in that as anyone.

Thank you. And at this time, there are no further question. I'd like to turn the conference back over to Mr. Ken Mills, President and Chief Executive Officer, for closing remarks.

Thank you, operator, and thanks, everyone, for joining us on the call this afternoon. We certainly have a significant number of milestones on the horizon for 2018. And we look forward to progressing our pipeline and providing everyone with further update throughout now to the end of the year. Have a great day.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.