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Edited Transcript of AVXS earnings conference call or presentation 10-Aug-17 8:30pm GMT

Thomson Reuters StreetEvents

Q2 2017 AveXis Inc Earnings Call

BANNOCKBURN Sep 15, 2017 (Thomson StreetEvents) -- Edited Transcript of AveXis Inc earnings conference call or presentation Thursday, August 10, 2017 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Brian K. Kaspar

AveXis, Inc. - Chief Scientific Officer, Director and Member of Scientific Advisory Board

* Jim Goff

AveXis, Inc. - VP, Investor Relations

* Sean P. Nolan

AveXis, Inc. - CEO, President and Director

* Sukumar Nagendran

AveXis, Inc. - Chief Medical Officer and SVP

* Thomas Joseph Dee

AveXis, Inc. - CFO and SVP

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Conference Call Participants

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* Biren N. Amin

Jefferies LLC, Research Division - MD and Senior Equity Research Analyst

* David Neil Lebowitz

Morgan Stanley, Research Division - VP

* Gbolahan Amusa

Chardan Capital Markets, LLC, Research Division - Director of Research and Head of Healthcare Research

* Martin Douglas Auster

UBS Investment Bank, Research Division - MD and Equity Research Analyst for Biotech

* Mohit Bansal

Citigroup Inc, Research Division - VP and Analyst

* Vincent Chen

Sanford C. Bernstein & Co., LLC., Research Division - VP

* Yanan Zhu

Wells Fargo Securities, LLC, Research Division - Associate Analyst

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Presentation

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Operator [1]

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Good afternoon, ladies and gentlemen, and welcome to the AveXis conference call to discuss second quarter financial and operating results as well as recent corporate highlights and upcoming milestones. (Operator Instructions) I would now like to introduce Mr. Jim Goff, Vice President of Investor Relations. Please go ahead.

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Jim Goff, AveXis, Inc. - VP, Investor Relations [2]

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Thank you, operator. Hello, everyone, and welcome. With us today are Sean Nolan, President and Chief Executive Officer; and Tom Dee, our Chief Financial Officer. Dr. Suku Nagendran, Chief Medical Officer; and Dr. Brian Kaspar, Chief Scientific Officer, will be available for questions.

This conference call is being recorded. To access the playback, please go to the Investors and Media section of the AveXis website at avexis.com.

I'd like to remind callers that the information discussed on the call today is covered under the safe harbor provisions of the Private Securities Litigation Reform Act. I caution listeners that the company's management will be making forward-looking statements. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business.

These forward-looking statements are qualified in their entirety by the cautionary statements contained in today's press release and the company's SEC filings. The content of this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, August 10, 2017. AveXis undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, except as required by law.

This afternoon, we issued a press release detailing the contents of today's call. A copy can be found within the Investors and Media section at avexis.com.

We'll begin with prepared comments from our team, and then we will open the call for your questions. Now I'd like to turn the call over to AveXis President and Chief Executive Officer, Sean Nolan. Sean?

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [3]

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Thank you, Jim. Good afternoon, everyone, and thank you for joining us today.

It's been another eventful quarter for AveXis with important progress made across multiple fronts. First, we announced alignment with FDA regarding the process for producing the intended commercial scale GMP-derived gene therapy product following the receipt of minutes from the Type B Chemistry Manufacturing and Controls Meeting. This alignment includes support for the proposed commercial manufacturing process, the proposed analytical methods and corresponding qualification and validation plans, inclusive of key release assays, such as potency, purity and identity, and a proposed comparability protocol, which helps assess how similar the product derived from the GMP process is to the original product used in the Phase I trial of AVXS-101 in patients with SMA Type 1.

As a reminder, the FDA requested that we complete implementation of our potency assay qualification plan prior to initiating upcoming clinical studies. This assay utilizes the Delta 7 mouse model, which has been used historically to assess AVXS-101 potency but now incorporates additional elements to make it acceptable to global regulatory authorities. We are pleased with the progress made thus far and expect to have the data ready to submit to the FDA this month as planned.

FDA is aligned with our proposed comparability protocol to assess the similarity of key characteristics of the Nationwide Children's Hospital product used in the Phase I SMA Type 1 study with the product derived from our new GMP manufacturing process. Data from this comparability work is ongoing and will include the above-mentioned potency qualification data along with the full Phase I clinical data that will be reviewed and discussed during the end-of-Phase I meeting.

Continuing on the regulatory front. We held a comprehensive program review at EMA in May, considered a prime kickoff meeting. This was to provide an overview of our program to the recently assigned Committee on Advanced Therapies' rapporteur as well as representatives from the Committee on Orphan Medicinal Products, the Pediatric Committee and the Scientific Advice Office. The objective of the meeting was to initiate interaction between us and the EMA prime team to facilitate the development of AVXS-101 as it is a prime-designated product.

The attendees from the EMA were encouraged by our progress to-date and recommended that we seek specific scientific advice on our new manufacturing process and the approach to comparability and to discuss the potential for conditional approval. This meeting will effectively align EMA and FDA relative to comprehensive program data to-date, inclusive of both clinical and manufacturing data. We plan on conducting that meeting in the fourth quarter of this year.

Next, we announced that we entered into an exclusive worldwide license agreement with REGENXBIO to develop and commercialize gene therapy treatments using REGENXBIO's NAV AAV9 vector to treat Rett syndrome and a genetic form of ALS caused by mutations in the SOD1 gene. Building on our expertise and the success that we have seen to-date with the use of REGENXBIO's NAV AAV9 vector in our SMA clinical trials, this license agreement reflects progress on executing our corporate strategy and our vision of becoming a leader in the treatment of rare and life-threatening neurological genetic diseases. While we remain intensely focused on the development and commercialization of AVXS-101 for the treatment of SMA, we are excited about the potential for gene therapy to address the needs of patients with Rett and ALS, 2 devastating diseases for which there are no cures and insufficient existing treatments.

Additionally, Dr. Jerry Mendell presented results from the closeout of the Phase I study of AVXS-101 in SMA Type 1 during the American Academy of Neurology Annual Meeting, including video evidence of children achieving motor milestones. These data suggest a onetime infusion of AVXS-101 appears to be generally well tolerated with a favorable safety profile and indicate the potential for a clinically transformative effect on event-free survival, a clinically relevant decrease in the need for pulmonary and nutritional support, and rapid and sustained increases in motor function as well as the achievement of motor -- major motor milestones never seen in the natural history of SMA Type 1.

Lastly, we raised $269.7 million in a public offering of our common stock, which we intend to use in addition to existing cash and cash equivalents to fund research and manufacturing activities, planned clinical trials of AVXS-101 in SMA, preclinical and Phase I trials in Rett syndrome and ALS and for general corporate purposes and working capital.

I will now turn the call over to Tom Dee to provide the financial update for the quarter.

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Thomas Joseph Dee, AveXis, Inc. - CFO and SVP [4]

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Thank you, Sean. As of June 30, 2017, AveXis had $417.6 million in cash and cash equivalents. Research and development expenses were $45.2 million for the second quarter of 2017, which included $3.7 million of noncash stock-based compensation compared to $10.4 million for the same period in 2016, which included $1.3 million of noncash stock-based compensation.

This is an increase in the total R&D expenses of $34.8 million year-over-year. The increase was primarily attributable to product manufacturing expenses and associated accelerated spending, including increased headcount in the company's product manufacturing facility as well as expenses related to the conclusion of the Phase I clinical trial of AVXS-101 and SMA type 1, licensing fees related to the company's planned new programs in Rett syndrome and genetic ALS, and an increase in non-stock-based compensation expense.

General and administrative expenses were $13.2 million for the second quarter of 2017, which included $4.5 million of noncash stock-based compensation compared to $5.4 million for the same period in 2016, which included $2.6 million of noncash stock-based compensation, an increase of $7.8 million. The increase was primarily attributable to increases in salaries and personnel-related costs, legal, professional and consulting fees, and other administrative costs driven by increased headcount across all G&A functions to support the company's overall growth and non-stock-based compensation expense.

Our net loss was $58 million or $2.07 per share for the second quarter of 2017 compared to a net loss of $15.7 million or $0.68 per share for the second quarter of 2016. Looking forward, it's important to note approximately 20% of the second quarter spending was for upfront license fees and other expenses we don't expect to be repeated.

With that, I'll turn the call back over to Sean.

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [5]

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Thanks, Tom. Before we open the call up for Q&A, I'd like to remind everyone briefly of our upcoming milestones. We are on track to submit the potency data requested by the agency this month. And pending agreement from the FDA that the potency assay data are sufficient, we plan to move quickly to initiate a pivotal trial of AVXS-101 in SMA Type 1 and a Phase I/IIa trial in SMA Type 2 via intrathecal delivery. Both of these trials would occur in the United States.

We will provide an update once we've received FDA agreement that these data are sufficient to initiate the studies, which we expect to occur in the third quarter. We will also provide design details for these studies at that time.

We expect to initiate a pivotal trial in the EU in the second half of 2017 using IV delivery of AVXS-101 in patients with SMA Type 1. We intend to provide more details on the Rett and ALS programs later in the second half of 2017.

And finally, we look forward to conducting an end-of-Phase I meeting with the FDA, which will further inform the regulatory pathway options for AVXS-101 and to provide -- and to providing an update on that discussion in Q4 of this year once the official minutes are available.

I will now open the call to your questions. Operator, please poll for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from the line of Biren Amin from Jefferies.

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Biren N. Amin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [2]

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On the Delta mouse model, how many samples do you need to test? And what's the duration of follow-up that you need to have before you can file the data with FDA?

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [3]

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Sure, Biren. What I'd like to do is ask Brian Kaspar to please take that question.

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Brian K. Kaspar, AveXis, Inc. - Chief Scientific Officer, Director and Member of Scientific Advisory Board [4]

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Great. And thank you, Biren. We haven't guided to the exact number of different samples or different concentrations of AVXS-101 GMP are tested in the Delta 7 mouse model. What I can say, however, is that there are multiple doses that are tested with a cohort of animals that allow us to perform statistics within the group and repeating this in a number of times where we can evaluate linearity as well as parallelism between the studies. So again, there are multiple dilutions of the virus that would extend survival of the Delta 7 mouse model.

I'll just remind you that this mouse model is a very reliable mouse model that dies at 15 plus or minus 1 or 2 days is the median lifespan. AveXis in previous studies have evaluated doses that would extend the survival approximately 1 week. We've defined doses of AVXS-101 that doubles the lifespan of the animals, and we have other doses that extend the animals to where it appears that we have rescued the lifespan of these animals. We are, indeed, in these biopotency assays testing multiple doses, including the proposed therapeutic doses that rescued the animals. And we are providing all of this data, including some longer-term data that has been collected, to the agency in our submission -- when we submit. Hopefully, that gives you a little more clarity, Biren, about the way that we're approaching this potency assay. And we've been making significant progress.

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Biren N. Amin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [5]

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Yes, that helps, Brian. Maybe just a follow-up on that. Will you need to prove to the FDA that you can rescue the animal models? Or is a doubling of survival sufficient to proceed forward?

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Brian K. Kaspar, AveXis, Inc. - Chief Scientific Officer, Director and Member of Scientific Advisory Board [6]

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So another excellent question. Let me just state that we do have some long-term studies that have been collected that gives us confidence that AVXS-101, when given the proposed therapeutic dose, can extend survival. And we will provide the longest-term data that we have on the subset of experiments, and these are multiple experiments, including many animals. That will be provided to the agency. Regarding release criteria, animals have to reach a median lifespan to develop a potency release assay. And those, as you can imagine, would be -- doubling of the lifespan would be approximately 30 days of age. So early on, this is going to be a collection of animals that are longer lived as well as animals that have received a lower dosage in which we have, for example, doubled the lifespan of the animals, which would be approximately 30 days, in that case.

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [7]

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Biren, this is Sean. Just to further interject on this one. I think what you're getting at is, do we have to demonstrate to the FDA that the mice have lived 250 days, as Brian's data has indicated in the past. And the answer to that is that's not the expectation that the FDA has. We were not given specific guidance on how long, what is the specific duration that these mice have to live and what is specifically sufficient. So there's a level of subjectivity to it. What we can say is that in the decades that Brian's been utilizing this model, number one, it's important to find the dose that doubles the lifespan of the mouse, which is about at 30 days, which obviously we've got a lot of experience on that. And what Brian has found that, once you get to about 40, 45 days of survival, he'll refer to the mice getting on a plateau. And that plateau runs out over time and essentially rescues the mouse.

So with the initial data that we're submitting, what Brian was stating is that we're probably being more conservative. We're -- we started the studies as soon as we could after the CMC meeting. So we're giving them a very significant amount of data from a duration standpoint. And we would expect, assuming they agree that things look good, as time goes on, with releasing different batches, that the time period that we get to is shorter and into that, call it, 30- to 45-day range. So I just wanted to give you that perspective. There's no perspective on our part that we're going to have to show 200-plus days of data, just to be really clear about that.

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Operator [8]

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And the next question comes from the line of Ian Somaiya from BMO Capital Markets.

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Unidentified Analyst [9]

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It's Steve on for Ian, actually. Wanted to ask about the Phase I dataset, specifically just revisiting the 2 children that could crawl, stand and walk independently. As we think about the standing and walking milestones, I guess, you'd expect those at about 12 months -- or 12 to 15 months, using at least the HINE scoring system. So I was wondering if you could talk about the age of those children or if there's any plan to sort of share more data on those 2 milestones, in particular, given you had median follow-up of 20 months at the last data cutoff?

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [10]

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Yes. I would ask Suku to please take that question. And one thing I would comment on is just to remind everybody that the benchmark for these kids is that they can't sit. They can't walk. Essentially, at this point, they can't do anything. So the common -- the denominator on any milestone for these children is essentially a zero. So again, these kids were symptomatic. And so the reason I'm saying that is, we shouldn't be benchmarking to normal developmental times until we're in a state where we've got a prenatal screening and the children are effectively being treated before they're symptomatic. So I just wanted to say that at the onset. But then, Suku, would you please more directly answer the question?

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Sukumar Nagendran, AveXis, Inc. - Chief Medical Officer and SVP [11]

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Yes, sure. Ian (sic) [Steve], you ask another important question from a clinical observation standpoint. And as you pointed out, you have time lines for normal development of children. And what I can tell you is that specific to those 2 children who have responded very well to AVXS-101, their milestone, sitting unassisted, the ability to stand and also the ability to walk, were all hit pretty close to what I would consider normal developmental milestones. And as Sean pointed out, these children were symptomatic very early in their lifespan after birth. And we have these things documented in our clinical dataset. As far as the exact specific age at which they met milestones such as standing and walking, we haven't officially disclosed that yet. But I think, over time, we will -- we do plan to disclose some of that data at specific medical meetings.

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Unidentified Analyst [12]

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Okay. Very helpful. And thinking about R&D, obviously, this quarter, so it looks like a $6 million license fee to REGENX and about a $1.5 million incremental more stock-based comp to the R&D line. So if we think about a $37 million to $38 million run rate then from here, backing those out, is that what we're looking at? Obviously, that's a bit of a jump over 1Q. And then, I guess, conversely, the $8 million to $9 million CapEx, should we be expecting that to come down considerably in 3Q given the plant construction is done?

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [13]

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Yes, I would ask Tom Dee to please take that question.

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Thomas Joseph Dee, AveXis, Inc. - CFO and SVP [14]

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Yes, thank you. Your assessment is accurate. We have not to-date provided any guidance on P&L and cash burn. But as you do note, there was a significant amount of expenses, including capital expenses that we do not expect to recur. We are nearing completion of the capital expenditures relative to our manufacturing facility. So those will -- should be expected to come down. And we're starting to normalize the burn rate over the next quarters, which allows us to actually be funded into 2020.

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Unidentified Analyst [15]

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Okay. Helpful. If I could squeeze one more quick question in on ALS. So some of the research shows the SOD1 mutation actually in astrocytes, which sort of drives motor neuron degeneration in a trans fashion, implying you need to deliver AAV to the astrocyte. So I guess it looks like AAV9 does that efficiently in adult astrocytes, at least. And I was wondering if you could just sort of comment on this dynamic and the science there and using AAV9 in that disease, if we're thinking about this correctly?

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [16]

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Sure. Brian, would you please take that question?

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Brian K. Kaspar, AveXis, Inc. - Chief Scientific Officer, Director and Member of Scientific Advisory Board [17]

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Yes. Steve, it's an excellent question. And exactly, as you just were talking about, ALS is a non-cell-autonomous disease, meaning that there are motor neurons that are affected, but there are also other cell types involved in disease progression. And exactly, as you said, astrocytes have been implicated in disease progression. We have studied AAV9 extensively in multiple species, including the mouse model of the disease, where we have extremely strong preclinical efficacy as well as proof of concept in dose-ranging studies where we've extended survival. Some of this work, not all of this work, has been published in peer-reviewed manuscripts. More to come from this research.

We have studied the ability for AAV9 delivered by an intrathecal route of administration, again a onetime delivery into the CSF and have evaluated the ability to reduce SOD1, not only in motor neurons where we have been extremely efficient at reducing motor neuron SOD1 levels by up to 80-plus percent. But when we have looked at nonneural [pill], so cells that are not motor neurons within the spinal cord, we have significantly shown reduction of SOD1, which indicates that AAV9 has the ability to get into other non-neuronal cells, again following the CSF delivery route. So we're extremely pleased with the ability for AAV9 to target multiple cell types that are involved in ALS disease onset as well as disease progression, including astrocytes, quite efficiently.

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Operator [18]

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

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Gbolahan Amusa, Chardan Capital Markets, LLC, Research Division - Director of Research and Head of Healthcare Research [19]

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I had a competitor question. On the 25th of July, I think Biogen stated on its call that up to 60% of the Type 2 SMA population has already undergone some type of spinal surgery, which creates challenges for them in intrathecal administration of SPINRAZA. So my question is, given that comment, first of all, is your strategy in SMA Type 2 patients who've undergone spinal surgeries to use the existing IV form of AVXS-101? Or would it be to use an intrathecal approach still, just given lower injection burden than SPINRAZA. And then secondly, is your intrathecal approach, just as an update, for Type 2, is it more of a defensive strategy? For example, to spare doses in manufacturing or, for example, to limit any systemic toxicities, if any ever emerge? Or do you feel it's more of an offensive strategy that can maybe get you better efficacy still?

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [20]

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Yes, I would like Suku to please take those questions.

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Sukumar Nagendran, AveXis, Inc. - Chief Medical Officer and SVP [21]

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Thanks, Sean. Gbola, thanks for those questions. Those are 2 very interesting questions because they have a broad strategic clinical impact on how we make decisions on treating patients in the future. So let me answer the second question first. So other than SMA Type 1, if you look at SMA Type 2, 3 and 4, what you find is that these children obviously are older. They have more copies of SMA2 and, therefore, present with the disease much later -- or later in life compared to SMA Type 1. Furthermore, it is understood that in SMA Type 2, 3 and 4, these children usually do not have systemic features of disease.

So the way we designed our program is that we felt using the intrathecal approach and a onetime intrathecal approach will help us target the central nervous system by giving AVXS-101 directly into the cerebrospinal fluid and, therefore, optimizing targeting of the motor neurons, such that we can get maximal efficacy. And we are quite confident, based off of the preclinical translation to clinic seen in the IV model, we'll see a similar preclinical translation in the intrathecal models as well.

Now to answer your first question, it is well known that most or almost all patients who have SMA type 2 and 3 will eventually develop scoliosis and contractures. And furthermore, usually these children do have either spinal fusion surgeries usually between the ages of 10 to 12 and many of them will get rods or growing rods placed before that. Therefore, when you have all these procedures and coupled with scoliosis or contractures, what happens is it becomes very challenging with [ASAT] academic centers or at community centers to do repeat lumbar punctures because these patients cannot curve their spine on a bed and the approaches directly into the CSF becomes quite challenging, especially if you have to do them repeatedly.

And many a time, at academic centers and elsewhere, you need suites for anesthesia. You need backup support. You need interventional radiology, which again, logistically, I think, makes repeat lumbar punctures to infuse any medication becomes challenging. So having said so, I think our approach using a onetime intrathecal approach to treat SMA Types 2, 3 and otherwise any other subtype, I think is most appropriate and will allow us to optimize the clinical care for these patients.

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Operator [22]

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And our next question comes from the line of Martin Auster from UBS.

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Martin Douglas Auster, UBS Investment Bank, Research Division - MD and Equity Research Analyst for Biotech [23]

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I had a regulatory question maybe for Sean. In the past, you've outlined scenarios for the end-of-Phase I FDA meeting you've got coming up. Just wanted to check in to see if there are any evolved thoughts on that? And then also for the EMA meeting in Q4, are the same kind of range of outcomes likely exiting that meeting as well?

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [24]

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Marty, sure. Really, the scenarios have stayed very consistent. There's been nothing new to change our view or add to or delete any of those scenarios. So very happy to quickly outline what those are. I think what's in the overall -- on the cell side models right now is consistent with what we've always guided to is that we would do a confirmatory trial and then seek approval. And that would occur in about the 2020-time frame. And we've always shared with our investors that we would do everything we can to -- as safely and as quickly as we could, move the product through the regulatory process and working in concert and taking advice and direction from the agency as appropriate along the way.

And so given the fact that FDA and EMA have, first of all, given -- granted breakthrough designation and prime designation, respectively, is an encouraging step relative to the overall program because those are rarely given. Number two, both of the regulatory agencies have also agreed that the pivotal -- the next, call it, confirmatory trials for SMA Type 1 would be a single arm utilizing natural history as the control with relatively few patients, 15-or-so, 15 to 20 in the U.S. and approximately 30 in EU. So there's great consistency there. And they've each asked us to seek a discussion with them to talk about accelerated approval or conditional approval.

So if you think about those options, we see that there's essentially 2 shots on goal with accelerated approval. The first would be that the combination of the initial clinical data generated with the NCH-derived product and the comparability data -- the analytical comparability demonstration between the NCH product and our GMP product would be sufficient for accelerated approval. The alternative accelerated scenario is that the FDA or the EMA make a request that some set of patients be dosed for some period of time to demonstrate initial efficacy and safety, now -- is also a potential scenario. And to be clear, that -- none of those scenarios we've had discussions with specifically either agency at this point. We plan to have that discussion with FDA at the end-of-phase meeting, and we'll provide an update on that once we have the official minutes from that meeting.

In Europe, they've asked for us to do a scientific advice meeting on manufacturing and quality, which will actually get them, if you will, caught up to where the FDA is from seeing all the data. So if you think about it, we're going to be submitting the comparability data and the end-of-phase package to the FDA. That's the same data that we would share, obviously, with EMA. So both groups will be essentially on the same path. So long story there short is we're on the same track that we've been communicating. We look forward to having productive discussions with both agencies, and we'll certainly provide an update once we have the official minutes and scientific written advice from those 2 regulatory bodies.

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Martin Douglas Auster, UBS Investment Bank, Research Division - MD and Equity Research Analyst for Biotech [25]

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Sean, do you think it's more likely than not that you're going to see the approval tracks be pretty parallel between the 2? Or do you view these -- Europe and the FDA process completely in isolation at this point?

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [26]

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I think what's very consistent is how they're both giving us feedback and direction, meaning, the fact that they're guiding us to have a conversation about accelerated approval or conditional approval is consistent. The fact that they've granted the single arm is consistent. So there are differences in just how they administratively approach accelerated versus conditional, so it's a little bit difficult to get further in the weeds on that right now, Marty. I think it's something that we can provide more color on later in the fourth quarter once we have the official correspondence from each of those entities. I'd just say in closing that we're certainly encouraged by the consistency of the feedback from both of those agencies.

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Operator [27]

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And our next question comes from the line of Mohit Bansal from Citigroup.

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Mohit Bansal, Citigroup Inc, Research Division - VP and Analyst [28]

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Congrats on the progress. I have a quick question on -- especially given that you mentioned that the -- on your fourth quarter call or in fourth quarter, when you meet the FDA, you'll talk about the design of the confirmatory trial. So in your discussions -- recent discussions with the FDA and especially given that Biogen is on the market, do you think there's a scenario where you may have to do a comparative trial as far as a confirmatory trial just as a noninferiority trial versus SPINRAZA? Is this at all possible?

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [29]

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We do not -- Mohit, we do not see that as a possibility. We've had very consistent discussions with the FDA as well as the EMA for that matter. I can tell you from FDA perspective, we've submitted our protocols both for the Type 1 trial as well as the Type 2 trial. We've gotten feedback from them, and there's no deviation from our communicated plans previously. And we're going forward with the single-arm trials. So we don't -- we do not see that at all as a -- what you're suggesting as a possibility.

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Mohit Bansal, Citigroup Inc, Research Division - VP and Analyst [30]

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Got it. If I may squeeze one more. So in terms of capacity, if we -- if EMA or FDA ask you to do a -- ask you to file for a conditional approval, how do you think about having capacity in 2018-time frame? Do you think you will be able to cater to the market at that point?

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [31]

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So our view all along has been that we would not seek approval unless we had the ability to supply the demand that we anticipate in any of the markets. And so while we're working with the agencies and certainly thinking through the accelerated and conditional paths, if, from our planning perspective given the capacity that we have at our AveXis facility, we remain confident that we have the ability to supply both the initial demand at approval, assuming we do get approval, and recognize that, that would grow over the course of time as additional data is generated to support reimbursement in those markets, that we will have that demand addressed from a supply perspective.

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Operator [32]

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(Operator Instructions) And our next question comes from the line of Jim Birchenough from Wells Fargo Securities.

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Yanan Zhu, Wells Fargo Securities, LLC, Research Division - Associate Analyst [33]

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This is Yanan in for Jim. So first question, just trying to see if we get this correctly about the timing. So in August, when you submit the comparability assay to the FDA, what's required is just the assay itself, the actual comparability doesn't have to be established at that time. And then at the end-of-Phase I meeting in the fourth quarter, that's when you plan to present data that demonstrates the actual comparability to the FDA? Is that the right way to think about the timing of these events?

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [34]

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Yes. So at the CMC meeting we had in May, we shared with the FDA what the analytical assays and the associated methods look like. And what we were seeking was their approval that we had the appropriate methods. And they said, yes. So to your point, when we talk specifically about the comparability protocol, we shared with them in May, here's all the elements in the protocol that we plan to demonstrate to you that we can -- so let me take a step back. In the comparability protocol, it's a list of product characteristics and how we're going to measure those characteristics. We sought their approval that we were doing it in a comprehensive manner that we were capturing the right characteristics and that we were doing it with an appropriate methodology.

They've already agreed to the -- to, yes, that is correct. So now, you're right, the next step is, in the briefing document that we submit for the end-of-phase meeting that we will discuss at the end-of-phase meeting in the fourth quarter, has the actual data in it that will illustrate the product characteristics from the NCH product and the product characteristics from the GMP product, derived from the methods that they've already approved. Does that make sense?

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Yanan Zhu, Wells Fargo Securities, LLC, Research Division - Associate Analyst [35]

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Right. Yes, yes. That's -- yes, makes all the sense. And the second question is on the issue of preexisting anti-AAV9 antibody and whether that could be something that limits the population for the intrathecal delivery Type 2. I know it's intrathecal, so maybe you don't have to worry about preexisting antibodies that circulate in the body. But what's your take on whether the patient population will have an exclusion criteria on preexisting antibody?

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [36]

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I would ask Suku to take that question. And if you'd like, we can also send you an abstract that was presented at AAN that specifically addresses this. So Suku, would you please take that?

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Sukumar Nagendran, AveXis, Inc. - Chief Medical Officer and SVP [37]

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Thanks, Sean. So we've looked at this topic actually very carefully. And what I can tell you is that being seropositive for AAV9 in the pediatric population under the age of 10 is incredibly rare. And if you are positive, in general, your ratios tend to be 1 in 220 or less. And if you look across the globe, what you see is an increase in seropositivity actually increasing above the age of 40. And it tends to be a little more common in women than in men, especially in parts of the world like Japan. So at this point in time, based on our direct clinical experience with the trial we recently closed out as well as what we've seen from the epidemiology of AAV9 seropositivity, we are not concerned that AAV9 itself will be an issue when it comes to dosing these children intravenously or intrathecally.

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Yanan Zhu, Wells Fargo Securities, LLC, Research Division - Associate Analyst [38]

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Great. That's very helpful. And lastly, if I may ask about -- given that SPINRAZA is on the market, and perhaps there will be people who want to use both the gene therapy and SPINRAZA, is there a possibility for some kind of a drug-drug interaction study to clarify those -- any potential issues with those kind of risks?

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Sukumar Nagendran, AveXis, Inc. - Chief Medical Officer and SVP [39]

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Yes. So that's an important question that you raise. And let me give you some of the background here from a clinical aspect, though. When you look at our AVXS-101 dataset, I think we have transformative clinical impact in the patients studied with the proposed therapeutic dose. And when you think that through, I see AVXS-101 being the primary therapy for all subtypes of SMA, given that it addresses the root cause of the disease. But as you point out, in the prevalent population, if they have already received SPINRAZA or nusinersen, clinically, I look at that as an opportunity or SPINRAZA as a bridging therapy, which basically enables these patients to be more accessible to be hopefully transferred over to AVXS-101. There may be some patients or some small cohorts within these subtypes of SMA who may be benefited by a combination therapy of SPINRAZA and AVXS-101, but I think that needs to be studied further in an appropriate clinical trial.

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Operator [40]

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And your next question comes from the line of David Lebowitz from Morgan Stanley.

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David Neil Lebowitz, Morgan Stanley, Research Division - VP [41]

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With the push for early diagnosis, I was curious, how definitive is an early diagnosis between SMA1 and SMA2 within the first couple months of life?

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [42]

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I'll ask Suku to take it. It is going to be a combination of clinical presentation as well as genotyping. But Suku?

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Sukumar Nagendran, AveXis, Inc. - Chief Medical Officer and SVP [43]

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Yes. Thanks, Sean. So again, you hit on another important clinical question that we're all trying to address. But I think what -- if you look at the literature, it's very clear that there is enough experience now both in the commercial landscape when it comes to diagnostics as well as very specific academic centers that the identification of biallelic deletions, occasional point mutations in SMN2 copy number, itself, before clinical symptoms occur can be quite predictive of the SMA subtype. So for example, if a child has the biallelic deletion in the SMA1 gene and 2 copies of SMN2, that is a 97% probability that child has SMA Type 1. And if that child actually has 3 copies of SMN2, that's 85% probability that the child has SMA Type 2. And if the child has 4 copies of SMN2, then the probability is around 85%, again, for having SMA type 3. So this sets the stage, I think, for newborn screening and increased symptomatic [kids] for a therapy like AVXS-101, which addresses the root cause of the disease, to be used immediately as soon as we know that this patient is going to eventually develop some subtype of SMA. Now if you couple that with early clinical features, I would say you have the same clinical scenario where you can easily identify these patients and treat them (inaudible) with AVXS-101 such that we address the root cause of the disease.

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David Neil Lebowitz, Morgan Stanley, Research Division - VP [44]

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With patients that could be SMA 1 upfront, but you're not 100% certain, given the -- how far the, I guess, how quickly they decline in status, what would a physician do? I mean -- what -- how would the labeling down the line potentially address such a scenario because they certainly wouldn't want a delay.

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Sukumar Nagendran, AveXis, Inc. - Chief Medical Officer and SVP [45]

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Yes. So let me answer that from a clinician's point of view. As soon as a clinician who's treating SMA knows this patient has SMA Type 1, I think they will immediately intervene. And if AVXS-101 is approved and is in the marketplace, I think AVXS-101 will be used as soon as possible to treat SMA Type 1. As far as the label goes, we haven't really discussed or disclosed what the eventual label would look like. But I think once we have broader discussions with the regulators in the context of whether it's accelerated approval or conditional approval, at that point in time, we'll be ready to discuss whether it's a broader label or not.

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Operator [46]

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And our next question comes from the line of Vincent Chen from Bernstein.

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Vincent Chen, Sanford C. Bernstein & Co., LLC., Research Division - VP [47]

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Congratulations. A couple of questions on manufacturing. So the first is, in some of our discussions with manufacturing experts, they've noted that gene therapy manufacturing is often much more variable than traditional drug manufacturing. I wanted to get a sense for how stringent are your internal tolerances for variation? And what you have done to really narrow that variation? And then I guess, how much variation do you typically see within repeated measures of a single batch, between runs of the same process, and between the initial research scale process and the commercial scale? And then I guess, I'd like to have a corollary, has the FDA provided clear guidance on the stringency of their tolerances and what they're expecting?

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [48]

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I think it's fair to say that with gene therapy manufacturing, there is certainly differences from manufacturing of one product to another product. So it's really difficult to speak broadly about things. I would say that, relative to our product and our process, with the assays that we've developed, I would say, without -- and I can't really get into too much detail. I'm not trying to be evasive, but a lot of this, from our perspective, when you're talking about manufacturing is quite proprietary. I would just say that we are pleased and encouraged by the level of, call it, how tight we are with our variabilities. We feel good about that. I would say that we have taken a very disciplined approach to how we are going to methodologically assess this, and we've put in place the highest possible quality standards for ourselves because we believe that it's really important, particularly when you're talking about potentially accelerated approval scenarios that you demonstrate to the FDA to the best of your ability that your process is producible, it's reliable, it's predictable and it's consistent.

So I can just say, at this point, at a high level, we're quite encouraged by what we're seeing. But obviously, we need to sit down with the FDA and walk that through. And I'll give you an example. It's a hypothetical, but I think it's a fair one to talk about just differences and how different products could be perceived. With us, we're giving a significant amount of virus to these children. And so from our perspective, we've always felt that it's critically important that we really have a clear understanding and a very tight parameter around empty to full capsid ratio. And I'm pleased to report that, based on everything we've seen with our GMP process, we have very consistent, from batch to batch, numbers with empty to full. We've set a standard for ourselves that anything that the NCH product was, we have the meet or beat that. And we feel encouraged by where we are at this point in time.

Now if you had a product that you're giving significantly less of, you may be more tolerant of a higher empty-to-full ratio than we would be or the FDA may be for one that's used broadly systemically versus one that's used in a much lesser kind of a dose. So that's just an example of the differences. But what I can say, from our perspective, we are pleased with what we're seeing with our process and feel that we've got the appropriate controls in place. Of course, we have to have the final meeting with the FDA to make sure they feel similarly. But where we sit right now, we're encouraged by the dataset that we have to sit down and discuss with the agency.

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Vincent Chen, Sanford C. Bernstein & Co., LLC., Research Division - VP [49]

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I see. Okay. And also, if I can (inaudible) manufacturing. You previously mentioned having enough capacity to meet demand. Just to clarify a little bit, when you speak of demand, are you thinking of incidents or incidents and a sizable portion of the prevalence? And is that Type 1s or is that all Type 1 and 2s?

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [50]

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Yes. So the way we're thinking of it is likely this. I think if you reference what happened with Biogen, they received a broad label, right, for the treatment of SMA. And that was based on pivotal data for Type 1 kids and some early work, open-label data, safety data in other patient populations. And so what basically that did was it left it up to the payers to what they were going to cover. And initially, the payers covered the Type 1 patients because that's where the substantial evidence was. And once Biogen had more complete data, it's our understanding, based on what they've communicated, that, that opened things up for the Type 2 and the Type 3 kids.

So from our perspective, if that's kind of a consideration on what actually happened, we would initially see patients being reimbursed for Type 1 because that's where our initial dataset is supportive and, we would argue, complete. We're planning to initiate the Type 2 trial. And when that's complete, we believe that the combination of the safety data generated and the efficacy data could potentially allow for reimbursement so that those populations would follow once we had the data available to support that reimbursement. So what I'm saying is that, over the course of time, your patient population will expand based on the data and that the manufacturing capacity that we have will continue to expand and be able to support the demand from those patient populations.

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Vincent Chen, Sanford C. Bernstein & Co., LLC., Research Division - VP [51]

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I see. That's very helpful. And then if I could just wedge in one last quick one. In the ongoing Phase I/II trial, has there been -- have there been any events since we last discussed this? And I recall there were some patients who were discharged on BiPAP, but on decreasing levels of BiPAP. Is -- are they all off of respiratory support at this point?

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Sean P. Nolan, AveXis, Inc. - CEO, President and Director [52]

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We are not giving a clinical update at this call. What we've been thinking about is what would be a natural time for us to give an additional clinical update. Keep in mind that the official efficacy analysis was completed in January. The children stay in the study for 24 months post dose. And they go in for, at this point, quarterly checkups rather than monthly. So for us, we felt that maybe -- and so again, this is a consideration we have right now. It may be appropriate to do a clinical update once we have all the kids through 20 months. And that would be something we would likely present at a scientific conference later this year. What I can also tell you, to give you a little bit more color, is we've always told all of our investors and analysts that we would not disclose an event unless we were giving a quarterly update. And we would stay true to that. The fact that we're not talking about any events, I'd leave that up to you to determine how we see things right now based on the information that's available to us.

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Operator [53]

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We will now conclude the Q&A portion of the call. Please e-mail Jim at jgoff@avexis.com if you have any questions from today's discussion. This concludes today's AveXis conference call. You may now disconnect. Everyone, have a great day.