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Edited Transcript of DRNA earnings conference call or presentation 8-Aug-19 8:30pm GMT

Q2 2019 Dicerna Pharmaceuticals Inc Earnings Call

Watertown Aug 14, 2019 (Thomson StreetEvents) -- Edited Transcript of Dicerna Pharmaceuticals Inc earnings conference call or presentation Thursday, August 8, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Douglas M. Fambrough

Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director

* John B. Green

Dicerna Pharmaceuticals, Inc. - CFO

* Ralf H. Rosskamp

Dicerna Pharmaceuticals, Inc. - Chief Medical Officer

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Conference Call Participants

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* Antonio Eduardo Arce

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Brendan Smith

Cowen and Company, LLC, Research Division - Research Analyst

* Jonathan Miller

Evercore ISI Institutional Equities, Research Division - Associate

* Joon So Lee

SunTrust Robinson Humphrey, Inc., Research Division - VP

* Mani Foroohar

SVB Leerink LLC, Research Division - MD of Genetic Medicines & Senior Research Analyst

* Mayank Mamtani

B. Riley FBR, Inc., Research Division - Research Analyst

* Stephen Douglas Willey

Stifel, Nicolaus & Company, Incorporated, Research Division - Director

* Victor Rusu

Citigroup Inc, Research Division - Research Analyst

* Lauren Stival

Stern Investor Relations, Inc. - VP

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Presentation

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Operator [1]

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Good afternoon, ladies and gentlemen, and welcome to the Dicerna Pharmaceuticals Second Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded at the company's request.

I will now turn the call over to your host, Lauren Stival representing Dicerna Pharmaceuticals. Please go ahead.

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Lauren Stival, Stern Investor Relations, Inc. - VP [2]

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Thank you, operator. Good afternoon everyone, and thank you for joining us to review Dicerna's Second Quarter 2019 Financial Results and Operational Highlights. For anyone who has not had a chance to review our results, we issued a press release after the close of trading today, which is available under the Investors & Media tab at our website dicerna.com. You may also listen to this conference call via webcast on our website, which will be archived for 30 days beginning approximately 2 hours after this call has been completed.

Speaking on today's call will be our President and CEO, Doug Fambrough who will discuss pipeline progress and key milestones for 2019 and provide an update on clinical and preclinical development activities. Then our CFO, Jack Green will review our second quarter financial results. Following our remarks, we will open the call up for your questions.

I'd like to remind listeners that management will be making forward-looking statements on this call today, including for example expected timelines and plans for development, clinical trial and regulatory milestones involving DCR-PHXC, DCR-HBVS, DCR-A1AT and other pipeline programs; expectations related to our collaboration with Eli Lilly, Alexion and Boehringer Ingelheim; expectations for discussions and possible opportunities with potential partners, collaborators and guidance regarding cash usage. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our Risk Factors section of Dicerna's latest Forms 10-Q and 10-K filed with the SEC. We may elect to update these forward-looking statements at some point in the future. We will specifically disclaim any obligation to do so, if our views change.

Now I'd like to turn the call over to Doug Fambrough, Dicerna's President and CEO.

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Douglas M. Fambrough, Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [3]

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Thank you, Lauren. Good afternoon and thank you for joining us. With me are Jack Green, our Chief Financial Officer; and Ralf Rosskamp, our Chief Medical Officer. In the second quarter and the period leading up to this call, we continue to grow from both the corporate and a clinical progress perspective pursuant to our vision of building a fully integrated company, developing and commercializing innovative therapies for high unmet medical needs, while broadly capturing the value of our GalXC RNAi technology platform. We are pursuing this vision with a clear and focused dual strategy.

The first aspect of the strategy is to go deep on select opportunities addressing high unmet medical need with what we believe is a high probability of clinical and commercial success. Our internal clinical pipeline reflects these choices, including 2 rare diseases, primary hyperoxaluria and alpha-1 antitrypsin deficiency-associated liver disease where we plan to drive development and commercialization either wholly or largely on our own and 1 prevalent disease, chronic hepatitis B virus infection, where we are seeking a development and commercialization partner concomitant with Phase I proof-of-concept data.

The second aspect of the strategy is to realize the potential of our technology against all remaining targets through collaboration and discovery stage licensing with therapeutic area leaders. Our collaborations with Eli Lilly, Alexion and Boehringer Ingelheim reflect this aspect of our strategy. It is our expectation and plan that we will expand on both aspects of this strategy in coming quarters, both expanding our internal pipeline and expanding our circle of corporate collaborators, funding from much will help us drive the internal pipeline.

To date, this strategy has helped us build a strong balance sheet with cash in excess of $345 million positioning Dicerna well to continue funding our internal pipeline candidates and poised to continue partnering as our GalXC discovery platform continues to generate potential therapies against new targets. While initially focused on the liver, we believe our GalXC RNAi technology platform has the capability to extend beyond the liver and indeed, we have already secured a partnership with Eli Lilly to harness the power of GalXC in the nervous system.

Before turning to our clinical progress, I want to highlight the growth of our organization where we've been privileged to add several incredibly talented people that extend Dicerna's capabilities. During the second quarter, we announced the hiring of Dr. Bernd Hoppe as Vice President of Global Medical Affairs. Bernd is a renowned global expert in the treatment of primary hyperoxaluria, having spent over 30 years focusing on treating all forms of PH. His experience will be invaluable as we drive to successful approval and commercialization of DCR-PHXC. In addition, Rob Ciappenelli joined Dicerna as Chief Commercial Officer, establishing the leadership of our nascent commercial organization as we plan for that approval in commercialization.

2 other notable additions are Steven Kates as Vice President of Regulatory Affairs who brings high-level regulatory experience to the company and Dave Caponera as Head of Patient Advocacy and Patient Services, reflecting our commitment to serving the patient community. With these individuals and the rest of our team, we continue to work toward our goal of bringing new and innovative RNAi-based therapies to patients in need.

Now turning to our clinical progress. I'd like to start by highlighting progress in the clinic with our most advanced program DCR-PHXC, which is the only RNAi candidate in development to treat all forms of primary hyperoxaluria or PH for short through our differentiated mechanism of action. PH is a family of very serious rare genetic diseases that currently have no approved therapies. In the PHYOX2 pivotal trial, we have multiple sites across several countries open and are actively screening patients. And our open label rollover extension study, PHYOX3, we have already begun dosing in patients who have already completed the PHYOX1 trial.

As a reminder, results from our Phase I, PHYOX1 study demonstrated that a single dose of 3.0 milligrams per kilogram of DCR-PHXC brought urinary oxalate levels into the normal range at 1 or more post-dose time points in 4 of 6 participants with PH1, including a mean maximal reduction in 24-hour urinary oxalate of 71% for the cohort.

We've also made progress on the regulatory front. The FDA granted breakthrough therapy designation to DCR-PHXC for the treatment of PH1, which we announced last month. In Q1 2019, we achieved agreement with the FDA on the primary endpoint for the PHYOX2 pivotal trial and alignment with the FDA regarding the path to full approval for the treatment of patients with PH1. We believe the agency's recognition and our breakthrough therapy designation letter that PH2 and PH3 also meet the criteria for a serious or life-threatening disease or condition is directionally positive from a regulatory standpoint, and we will continue discussions with the agency regarding endpoints for studies of DCR-PHXC in all patients with PH as part of the broader PHYOX clinical development program.

The PHYOX2 pivotal trial is a double blind, randomized placebo-controlled study in approximately 36 patients with PH1 and PH2. Adult and adolescent subjects receive a convenient monthly fixed dose. Should we receive approval, we believe this regimen of DCR-PHXC as a monthly fixed dose will provide us an advantage from a compliance and convenience standpoint compared to potential competitors using weight-based administration with 4 monthly loading doses followed by quarterly dosing. Our open label extension study, PHYOX3, also utilizes this convenient fixed dose monthly regimen, and we expect to have multi-dose data available in the fourth quarter from the first group of patients enrolling in PHYOX3.

I'll now take a few minutes to discuss our DCR-HBVS program for the treatment of chronic hepatitis B virus infection. As you are aware, chronic HBV afflicts more than 250 million people globally, often causing advanced liver disease and liver cancer. There is currently no effective curative therapy for chronic HPV. In the second quarter, we initiated dosing of Group C patients in our Phase I placebo-controlled multiple-ascending dose trial testing 4 monthly doses of DCR-HBVS at 3 different dose levels; 1.5, 3.0 and 6.0 milligrams per kilogram. These patients will continue on their background new therapy.

This Phase I trial includes a 3-month dosing period and at least 2 months of follow-up, which should allow us to see data from the first 1.5 milligram per kilogram cohort in the fourth quarter of this year with the higher dose cohorts available in the first half of 2020. Later this year, we expect to initiate dosing in the Group B portion of the trial, which is a single dose monotherapy trial of DCR-HBVS dosed at 3.0 milligrams per kilogram in patients who have been newly diagnosed with chronic HPV infection. This enables us to explore the pharmacodynamic effect and duration of DCR-HBVS in the absence of other lines of therapies, which will allow us to better plan a combination dosing regimen. We believe this will be useful as we expect that achieving functional cure in these patients will involve multiple lines of therapy targeting different aspects of the disease.

We believe the ability of RNAi to provide strong knockdown of HBVS antigen will be an important part of any combination therapy approach to achieving a functional cure for HBV. We look forward to announcing proof-of-concept data for DCR-HBVS in the first cohort of patients in the fourth quarter of 2019. We are seeking a collaboration partner for development of DCR-HBVS beyond Phase I, and we look forward to updating investors at the appropriate time.

Moving briefly to our third GalXC clinical program. In July, we announced the filing of our clinical trial application with the Swedish Medical Products Agency for DCR-A1AT for the treatment of alpha-1 antitrypsin deficiency-associated liver disease. A1AT deficiency is an inherited disorder that can lead to liver disease in children and adults, and lung disease in adults. Individuals, who carry 2 copies of the mutated Z form of the A1AT gene have A1AT deficiency and are susceptible to accumulation of misfolded A1AT protein in their livers, which can cause liver damage and dysfunction.

Population genetic analysis suggests there are nearly 200,000 individuals in Europe and North America, who carry 2 copies of the Z gene form. In children with A1AT deficiency, approximately 7% developed cirrhosis and more than 15% of those require liver transplantation among adults with A1AT deficiency; about 10% developed cirrhosis; and about 15% of those require liver transplant. Adults affected by A1AT deficiency are also at risk of developing hepatocellular carcinoma, a type of liver cancer. Liver transplant is currently the only effective treatment for A1AT deficiency-associated liver disease.

As I mentioned earlier, we plan to begin a parallel group, placebo-controlled, Phase I/II study later this year to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of DCR-A1AT in healthy adult volunteers and patients with A1AT deficiency-associated liver disease. The study will consist of 2 phases. The first is a single ascending dose phase in healthy volunteers enrolling up to 36 participants in as many as 6 cohorts. The second, a multiple ascending dose phase in patients with confirmed A1AT deficiency-associated liver disease, consisting of up to 24 participants in 3 or fewer cohorts. We look forward to announcing the initiation of the study in the coming months.

Beyond these 3 clinical stage programs, we continue to select additional therapeutic opportunities for internal development based on unmet medical need that we believe had a high probability of clinical success relative to industry averages. For opportunities that do not meet these and other internal criteria, we seek development partners.

For the remainder of 2019, we're very much looking forward to several important inflection points on the horizon that demonstrate continued advancement of our pipeline. In the near term, for DCR-PHXC, we expect to dose the first patient in the PHYOX2 pivotal trial and look forward to providing a first look at results of multiple doses in patients in our PHYOX3 open label extension. For DCR-HBVS, we look forward to announcing proof-of-concept data in the first cohort of patients in the fourth quarter of 2019.

Finally, we also expect the initiation of the multi-center Phase I/II trial of DCR-A1AT later this year. With our current balance sheet, we have the resources to drive these programs through and beyond 2020, while continuing to explore additional opportunities, extending the reach of our GalXC technology to additional tissues and driving the creation of new programs for our collaboration partners; in other words, to continue to execute on all aspects of our strategy.

And with that, I will turn the call over to Jack.

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John B. Green, Dicerna Pharmaceuticals, Inc. - CFO [4]

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Thank you, Doug. I'd like to briefly walk through the key financial results and direct you to our 10-Q filing for additional details. Net loss for the quarter ended June 30, 2019 was $23.8 million or $0.35 per share compared to $35.6 million or $0.68 per share in the second quarter of 2018. The decrease in net loss between periods was primarily due to the absence of litigation expenses, along with increased revenues in the second quarter of 2019 partially offset by increases in R&D and G&A expenses.

R&D expenses were $22.8 million for the second quarter of 2019, compared to $10.3 million for the same period in 2018. The $12.5 million increase year-over-year was primarily due to a $7.1 million increase related to manufacturing and clinical study costs tied to our DCR-PHXC and DCR-HBVS programs. Research and development expenses were also impacted by a $4 million increase in employee-related expenses, including stock-based compensation and benefits. We expect overall research and development expenses to increase throughout 2019 and for the foreseeable future as we ramp up our clinical manufacturing activities, continue other activities associated with our 3 proprietary product candidates, and increase activities under the Lilly, Alexion, and BI agreements.

G&A expenses were $8.8 million for the second quarter 2019 compared to $4.8 million for the second quarter 2018. The increase was largely driven by a $2.4 million increase in employee-related expenses due to increased stock-based compensation and headcount growth. We expect G&A expenses to increase in 2019 as compared to 2018 largely due to investments in staffing and market readiness activities.

During the second quarter 2019, we recognized $5.7 million in revenue from our collaborative agreements with Lilly, Alexion, and BI compared to $1.5 million from the BI collaboration in the second quarter of 2018. As of June 30, 2019, we had $182.4 million of deferred revenue on the balance sheet from these collaborations, of which $78.1 million was classified as current. We expect to recognize the majority of the deferred revenue through the end of the fourth quarter of 2021.

For the second quarter of 2019, we used $26.1 million of cash and operations as compared to $15.8 million for the second quarter of 2018. As of June 30, 2019, we had $345.3 million in cash and cash equivalents and held-to-maturity investments, which enables us to advance clinical trials for PH, HBV and A1AT, along with additional pipeline assets.

By comparison, we had $302.6 million in cash, cash equivalents and held-to-maturity investments as of December 31, 2018. We believe that our current cash, cash equivalents and held-to-maturity investments will be sufficient to fund the execution of our current clinical and operating plan beyond 2020, which includes advancing DCR-PHXC through late-stage clinical development and regulatory filing, completing proof-of-concept studies with DCR-HBVS in participants with HBV and advancing our A1AT program through initial clinical studies. This estimate assumes no new funding from additional collaboration agreements or from external financing events and no significant unanticipated changes in costs and expenses.

Excluding the $94.5 million of net proceeds we received from our collaborations in Q1 2019 and proceeds from any new collaborations, we currently expect that our operating cash used for 2019 will be in the range of $110 million to $125 million and will continue to increase in future years as we advance our clinical studies and prepare for regulatory filings and commercialization of DCR-PHXC.

Before we move on to Q&A, I will turn the call over to Doug for some closing remarks. Doug?

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Douglas M. Fambrough, Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [5]

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Thank you, Jack. We've had a great first half and move into the rest of 2019 with a strong balance sheet enabling full execution on our corporate strategy. It should be a noteworthy second half of the year as we look forward to dosing the first patient in our PHYOX2 pivotal trial as well as providing first look at multiple dose results for patients in our PHYOX3 open label extension study as well as reporting proof-of-concept data for DCR-HBVS in patients with chronic hepatitis B virus infection and initiating our Phase I/II trial of DCR-A1AT. We will be presenting at a number of investor conferences this fall and look forward to providing updates as they materialize. Thank you again for joining us.

Now operator, please open the up for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) First question is from the line of Mani Foroohar from SVB Leerink.

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Mani Foroohar, SVB Leerink LLC, Research Division - MD of Genetic Medicines & Senior Research Analyst [2]

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I just have really lots of nuance questions on study design, but I want to take a step back when you think about A1AT in a distribution of patients broadly, are there specific founder mutations or higher prevalence communities in various countries globally that we should keep in mind as places where you can potentially more rapidly accrue patients and/or may have an outsized impact on the commercial opportunity as (inaudible) et cetera?

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Ralf H. Rosskamp, Dicerna Pharmaceuticals, Inc. - Chief Medical Officer [3]

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And this is Ralf, Chief Medical Officer. Yes, it's predominantly a genetic mutation and found gene in Caucasian population. So in the U.S., it's mostly from European ancestry and we had a high prevalences for instance in some European countries, in Ireland, and Germany, and Spain, and Italy. So it's mostly a Caucasian population/. It's virtually unknown in Asian countries.

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Operator [4]

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Next question is from the line of Jonathan Miller from Evercore.

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Jonathan Miller, Evercore ISI Institutional Equities, Research Division - Associate [5]

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I have a handful here. Could you talk to us a little bit about why the A1AT trials are entirely ex-U. S., why you're enrolling and trialing in European sites? And as you know, your competitors have had some delays or a bit of a rocky road here. How is your approach to this disease a little bit different from theirs and how will you avoid those same delays?

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Douglas M. Fambrough, Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [6]

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Thanks for the question. So we're doing the trial in Europe because the European regulators are allowing us to run the cohorts in parallel, such that when we clear an early safety hurdle and 1 dose cohort, we can then move to the next escalation dose and initiate subsequent cohort as opposed to waiting for the full completion of a cohort before initiating the next cohort. So that compresses the time line for the Phase I/II study, doing it in Europe compared to the U.S. The data is the same that comes out at the end. It's just done more quickly and it provides the same data package, which kind of gets us into the second part of your question. We had spent an -- had an extended dialogue with the FDA initiated by our original pre-IND meeting, where we had proposed our view on a full development program through approval for discussion at that point.

And we received, I think very interesting feedback from the FDA that reflected their thinking on the disease that did -- had us make some changes both to our clinical program as well as our non-clinical toxicology program that we subsequently went back and included and performed, and we believe that we are now very much in alignment with the FDA on what will be required to move expeditiously from this Phase I/II trial into registrational cohorts, without any undue delay or long negotiation associated with that. Is there anything you'd like to add, Ralf?

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Ralf H. Rosskamp, Dicerna Pharmaceuticals, Inc. - Chief Medical Officer [7]

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No. I just want to add that we are also contemplating at finishing our healthy volunteer part to also continue the dialogue with the FDA and actually think that we have all the non-clinical and then also clinical requirements to open up an IND in the U.S.

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Jonathan Miller, Evercore ISI Institutional Equities, Research Division - Associate [8]

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Great. That makes sense. I suppose one on the HBV program, is there a particular bar for S antigen reduction? You specifically mentioned that as being a crucial component of any regimen. Is there a bar that we should be looking for when we see Phase I data?

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Ralf H. Rosskamp, Dicerna Pharmaceuticals, Inc. - Chief Medical Officer [9]

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I don't think that one should go into looking at the data, targeting 1 specific number for a variety of reasons. So there's variability in the patients. So there's variability in the measurements and the N is small. So really what we're looking to see is a substantial effect on S antigen. And I think we can define that as we got to be here, notably more than 1 log. With this number of patients and given the underlying variabilities, I don't think there is a real statistical difference between, for example, 2.2 versus 1.7. And so, holding to a particular defined number, I think, is unwise. But we are looking for a powerful greater than 1 log effect in this initial cohort.

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Operator [10]

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Your next question is from the line of Yigal Nochomovitz from Citi.

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Victor Rusu, Citigroup Inc, Research Division - Research Analyst [11]

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This is Victor on for Yigal. I'd like to switch over to PH for a little bit. We are wondering for which of the PH types do you theoretically think your approach could have the greatest impact on oxalate levels.

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Douglas M. Fambrough, Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [12]

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Yigal (sic) [Victor], thanks for your question. We -- based on preclinical data and looking at patient data from the Phase I trial, it is our expectation that patients with both PH type 1 and PH type 2 can be normalized via the LDHA mechanism. Based on understanding of the disease, we think this is also likely in PH type 3, although there is no accurate reflective animal model of PH3 and we have not yet dosed any PH3 patients. So we don't have any data to back that up. But for PH1 and PH2, data suggests the effect will be comparably strong in both types.

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Victor Rusu, Citigroup Inc, Research Division - Research Analyst [13]

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And one last one from us, why are the diagnosis rates significantly lower in PH type 2 than PH type 1?

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Ralf H. Rosskamp, Dicerna Pharmaceuticals, Inc. - Chief Medical Officer [14]

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We don't know the actual -- of course, the actual, but knows is great in those cohorts. But there are 10% of patients diagnosed with PH2 in both registries; U.S. registry and the European registry. Now when you look at the PH2 data, especially, in the European registry, where do they come from, they come to 60%, 70% from the U.K. and we know especially, 1 investigator in Birmingham and Dr. Sally Hutton is very active in researching this disease. So when you look for PH2, he is able to find those patients. So we believe that actual -- the diagnosis rate of PH2 as well as PH1 will increase over the future. Does that answer your question?

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Victor Rusu, Citigroup Inc, Research Division - Research Analyst [15]

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Yes, it does.

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Operator [16]

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Your next question is from the line of Stephen Willey from Stifel.

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Stephen Douglas Willey, Stifel, Nicolaus & Company, Incorporated, Research Division - Director [17]

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Doug, can you maybe just remind us of the preclinical data that gives you confidence regarding this substantial reduction in S antigen that you're going to be seeing at this 1.5 mg/kg dose. And again, just given the small patient numbers here, I think there's only going to be 4 patients that are on active therapy. How do you interpret something that I guess is sub a log as being just kind of a statistical anomaly that's attributable to variants that is patient specific as opposed to this being some kind of indictment on the X transcript exclusion hypothesis?

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Douglas M. Fambrough, Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [18]

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Thank you for your question. And certainly, I'm concerned that there may be a temptation for people to over-interpret data, which maybe, like cuts in our favor and maybe, it cuts against us. When you have such a small number of patients and you have variability in disease expression as well as variability and measurement. What we do have from animal models though is a very consistent signal, where we have looked at both strategies I think in under discussion for using RNAi against the HBV viral genome, one strategy, whereby you reduce the expression of all 4 viral proteins and second strategy, the one, where we employ, where we reduce 3 out of the 4 viral genes and we leave the so-called X gene unperturbed if you will.

We had found very consistently, and we've reproduced this not just multiple times, but with independent sequences that are being targeted within the virus that when you use an animal model, where the viral gene regulation is driven solely by the viruses owned regulatory elements as opposed to a model, where you've been, for example, embedded the virus and another gene therapy vector and the control sequences associated with that other vector are involved in the expression of the HBV genome. When you just focus on models, where its HBVs own regulatory elements driving expression, we've consistently found that the X gene acts if you will, as a negative regulator of S expression. There's a pretty clear mechanism we see for that, whereby it -- X involved in excluding core protein from the nucleus and core protein in the nucleus as a transcriptional activator.

So when you get rid of X, core protein goes to the nucleus, it upregulates transcription of the very danger trying to suppress. So you want your negative regulator X still present. So what we find there is -- when we leave X unperturbed, we're getting almost 4 logs of suppression reproducibly in that particular model, 3.9, and we get a long duration of effect. We'll go 3 months in those models with almost no rebound.

In contrast, when you deplete all 4 in these models, we get about 3 logs suppression, that's still a lot of suppression, but it's nearly a log less suppression, and we find that the rebound occurs much more rapidly as such that after 3 months or so, it's back to about 1 log of suppression. We do believe this is likely to be the most predictive model. Having said that, this model, we do believe sort of over-predicts the amount of knockdown you're going to see. And as much as other companies that have seen multiple logs of suppression, I've seen less than actual patients. So that leads us to think there's going to be a general step-back in potency as we moved to patients. But there is the potential to see somewhat more roughly 30% more in this particular mouse model, S antigen suppression.

Looking at a n in a different trial with analysis in different labs, I don't think it's likely that, that one is going to confidently be able to say that, this model is predictive and leaving the negative regulator unperturbed it is clearly the right way to go. I think trying to draw that sort of conclusion from this early data's probably not warranted. See what the data is. And instead, really we're just looking for a nice solid suppression signal, substantially greater than 1 log. And as more data comes out overtime, we'll be able to statistically, we're flying that if you will and get a better read on whether we've in fact optimized the suppression of S antigen with the strategy. So that's kind of technical and going on at length, but it does surface the issue and thank you for asking the question that surfaces the issue.

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Stephen Douglas Willey, Stifel, Nicolaus & Company, Incorporated, Research Division - Director [19]

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And then just in terms of the nature of the dissemination, is this something we should expect to see in a press release or are you guys actually targeting, say for instance, the liver conference for some kind of presentation?

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Douglas M. Fambrough, Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [20]

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It's our expectation at this time that we'll host a Research Day event late in the year, and we'll likely present the data there. The conference schedule or more specifically, the abstract submission deadline schedule for the conferences is not aligning well with our access to the data.

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Stephen Douglas Willey, Stifel, Nicolaus & Company, Incorporated, Research Division - Director [21]

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And then maybe just lastly, can you maybe just elaborate a little bit around your comments regarding the directionally positive interpretation of FDA's acknowledgement regarding PH2, PH3 is being a life-threatening condition. And then maybe, how that may or may not change the ongoing narrative around endpoint selection?

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Ralf H. Rosskamp, Dicerna Pharmaceuticals, Inc. - Chief Medical Officer [22]

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Yes. And when we got all breakthrough designation for PH type 1, the FDA acknowledged in that letter that PH2 and PH3 are serious and life-threatening diseases and conditions, but they felt at this time, we were not giving them enough data, clinical data. And at the time, when we had submitted our breakthrough designation to the FDA, we had only data from 1 PH2 patient and we didn't have data from any PH3 patients because we had not a dose that PH3 -- PH2 patients -- PH3 patients. Now meanwhile and we have reported this in June, we have data now from 3 PH2 patients and we plan to dose also PH3 patients.

So the FDA wasn't per se saying in their letter, this disease is not life threatening and serious. So they were pointing to the missing clinical data, which we were submitting. So we hope by generating those data that this piece missing to make the FDA decisions easier potentially or also to give us a breakthrough designation for the other forms of PH.

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Stephen Douglas Willey, Stifel, Nicolaus & Company, Incorporated, Research Division - Director [23]

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And then just one more quick one if I may, and I think this has been probably discussed before. but of the 36 patients that you're targeting for enrollment in PHYOX2, is there some minimal representation of PH2 patients that you're specifically seeking in that study?

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Ralf H. Rosskamp, Dicerna Pharmaceuticals, Inc. - Chief Medical Officer [24]

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No. We have not specified or there is no stratification with respect to PH type. Our experience from the PHYOX1 study is that we have around 15% of PH2 patients and looking at the projected enrollment for the PHYOX2 studies, right, we go back to the sites and ask them, which patients they want to bring into the patient -- into the study, whether that PH1 and PH2 patients would expect the same number around 10% to 20% PH2 patients, which reflects well about the natural prevalence of the diseases.

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Operator [25]

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Your next question is from the line of Yaron Werber from Cowen.

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Brendan Smith, Cowen and Company, LLC, Research Division - Research Analyst [26]

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This is Brendan on for Yaron. Kind of going off of what was just asked here about the HBV study. Thanks for all the color on the actual mechanism that it's actually very, very helpful.

I was wondering if you could give us a little bit more detail on kind of the patient numbers that we can expect for the data release at the end of the year and then what you guys are thinking in terms of subsequent data release for the other cohorts moving forward, and how many patients you are planning to enroll for each of those.

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Douglas M. Fambrough, Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [27]

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So it's pretty clear for the end of the year, we'll have completed Cohort 1, all those patients are on study and have been dosed. There are 6 patients total in that cohort. 2 of them are placebo; 4 of them are on drug. So it's going to be 4 patients who have received active drug. So a small number of patients, that subsequent cohorts are the same size as Cohort 1. So there are 8 more treated patients associated with Group C that multiple sending dose part of our Phase I program. And we have not planned what the data release associated with the subsequent cohorts are, but it is our inclination as a company that once we have data, we seek to efficiently communicate that.

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Operator [28]

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Your next question is from the line of Ed Arce from H.C. Wainwright & Co.

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Antonio Eduardo Arce, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [29]

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And first, just a question on -- your first initial data, you're expecting in the fourth quarter from PHYOX3. Obviously, you could report some data around urinary oxalate reductions, but what exactly can we expect with that first release from PHYOX3?

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Douglas M. Fambrough, Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [30]

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I'll pass to Ralf at the moment. But similar to with HBV, we do anticipate hosting a research update event around the end of the year and doing a data cut from the open label study and presenting where we are at that time. So Ralf?

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Ralf H. Rosskamp, Dicerna Pharmaceuticals, Inc. - Chief Medical Officer [31]

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So we just announced today that we start at dosing the first patients in the 301 study. So it is August, so by the end of a year, there are another 4 months. So what you can expect 3 to 4-month data of not the full readout of how 6 months would translate to give us an indication how the people could study would look like. But it will be multi-dose data at the dose level, which we haven't studied because as you know, we use 1 milligram per kilogram regimen and the PHYOX study and here we are using a fixed dose regimen, a monthly regimen.

So -- and in addition, you can also expect additional safety data because we have not reported multi-dose safety data. And I want to add this as well for the HBV program, by the end of this year, we'll also have additional safety data. So we complete at the dozing off the highest dose cohort in the healthy volunteers and we'll have a multi-dose data there as well. So from a platform perspective, I think it will be very important to inform us about the safety of both the HBV and the PHXC compound.

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Antonio Eduardo Arce, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [32]

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So just to clarify this Research Day that you're planning for later this year would have both the initial cuts from PHYOX3 as well as those first 4 HBV patients have 1.5 milligram dose.

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Douglas M. Fambrough, Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [33]

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That's right. We've anticipated we would be at the same forum.

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Antonio Eduardo Arce, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [34]

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And then a question around that first look clearly the lowest dose, as you continue with 3 milligrams per kg and then 6 milligrams per kg. And with a view towards potentially partnering this after the conclusion of Phase I, perhaps the initial low dose, not the best benchmark. Maybe to patients -- or excuse me, the potential partners may want to look at what you have for 3 milligrams per kg and 6 milligrams per kg as well.

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Douglas M. Fambrough, Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [35]

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Thanks for pointing that out, Ed, that -- it may in fact, be the case that we are not at the top of the dose response curve with the first cohort, although it would point out this is a multiple dose study with 4 doses administered to the HBV patients. So even at 1.5 milligrams per kilogram, we should have dose additivity, and given the duration of effect that has been observed generally in the field of GalNAc-mediated RNAi delivery and specifically with GalXC in the PH program, you would expect a near full additivity in those 4 doses, such that the single dose equivalent if you will, is going to be more like 5 milligrams per kilogram or 6 milligrams per kilogram, which by and large, is we would expect to be a fairly high dose. So I don't think we would be low on the dose response curve there.

I would just point out from a partnering perspective that I think it's accurate to say that there is a lot of excitement about the use of RNAi in establishing functionally curative combination therapy for HBV. And at this point, there is quite a bit of precedent that RNAi-mediated suppression of genes in the liver, including viral genes is quite robust. So we do -- it may be that potential partners don't see the Phase I data as all that risky. I think the bigger question is what combination is going to generate a functional cure and how long do you have to administer that combination whether RNAi works against HBVS is less of a question that needs answering.

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Antonio Eduardo Arce, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [36]

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And then if I may, perhaps more for Jack, just a couple of questions on the financials, I'd even get this quite clear earlier and I apologize, but first, the $182 million of deferred revenue, I think you said that, that was expected to be pretty much fully recognized by the fourth quarter of 2021. Just wanted to confirm that?

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John B. Green, Dicerna Pharmaceuticals, Inc. - CFO [37]

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Yes. That's correct.

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Antonio Eduardo Arce, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [38]

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And then the other aspect I missed was a guidance of $110 million to $120 million, what was that exactly?

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John B. Green, Dicerna Pharmaceuticals, Inc. - CFO [39]

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So if you back out the $94.5 million that we've got from upfront payments, net in Q1, if you take that out of our cash flow for the year, our cash -- operating cash use would be expected to be between $110 million and $125 million.

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Antonio Eduardo Arce, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [40]

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Okay.

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John B. Green, Dicerna Pharmaceuticals, Inc. - CFO [41]

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For 2019.

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Operator [42]

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Your next question is from the line of Joon Lee from SunTrust Robinson Humphrey.

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Joon So Lee, SunTrust Robinson Humphrey, Inc., Research Division - VP [43]

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This is Fang-Ke Huang on for Joon. A quick question on the A1AT programs, Doug, can you mention what's the key differentiation of your program compared to the 2 competitors program?

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Douglas M. Fambrough, Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [44]

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From a mechanistic perspective, the RNAi approaches to A1AT deficiency are very similar to each other. And I don't think that there is differentiation to point to at this point in time. They may differentiate themselves based on efficacy. We have made choices in PH as you know that differentiates the dosing regimen and all of the A1AT programs are before a point when a final commercial dosing regimen selected. So I think it's an open question right now whether what the level of differentiation is going to be, and we'll see how that develops.

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Joon So Lee, SunTrust Robinson Humphrey, Inc., Research Division - VP [45]

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And second question is so apparently, the PH2 and PH3 endpoint has not been finalized by the agency. And I'm just wondering what other sticking points that have been raised by the FDA regarding the endpoints?

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Ralf H. Rosskamp, Dicerna Pharmaceuticals, Inc. - Chief Medical Officer [46]

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Well. All 3 diseases are characterized by overproduction of oxalate in the liver resulting into an increased excretion of urinary oxalate in the urine. So that's the same. The clinical picture is different from PH1 to PH2, PH3 with PH1 the most severe and PH3 and most PH1 patients and they're not on a dialysis or kidney, liver transplant, whereas PH3 patients are milder with multiple stone events.

So it is not just the discussion around the primary endpoint, where I think, most people believe urinary oxalate is a very good market, but how then are you going to show that this actually predicts clinical benefit? So for PH1, the FDA is very clear. This is a clinical endpoint, you do not have to show confirmatory trials or you're in Europe, so-called an accelerated or conditional approval, I think that's a discussion we're having with the FDA around how could we use a (inaudible) as an endpoint knowing that some of the clinical outcomes would be taking years to show and the FDA also understands that in these ultra-rare diseases, that's not possible. So the discussion goes around the clinical endpoints and the confirmatory trials and whether it's a full approval or an accelerated approval. So it's around the regulatory path and what the final clinical endpoints could be.

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Joon So Lee, SunTrust Robinson Humphrey, Inc., Research Division - VP [47]

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And just on that point, and so when you have been enrolling PH1 and the PH2 patients in the PHYOX2 study, are you going to enroll them in parallel, where you're going to wait until you have an endpoint for PH2, and then you start enrolling PH2 patient in the PHYOX2.

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Douglas M. Fambrough, Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [48]

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No. We enrolled them in parallel because we have agreement with the FDA in general on our endpoint for this trial of PHYOX2. So we asked the FDA, are you in agreement with this endpoint and they agreed knowing that we enrolled PH1 and PH2 patients.

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Operator [49]

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Your next question is from the line of Mayank Mamtani from B. Riley FBR.

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Mayank Mamtani, B. Riley FBR, Inc., Research Division - Research Analyst [50]

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Just 3 for me mostly follow-ups. On A1AT, I was just curious, since you have sort of an adaptive design and you -- we know that a biopsy would eventually be required for later-stage study. Is there a possibility you could study that as well as an extended cohort in the current Phase I, is that something that has been talked about maybe in the ongoing FDA dialog?

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Ralf H. Rosskamp, Dicerna Pharmaceuticals, Inc. - Chief Medical Officer [51]

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We have not published details of the patient part of the study. But it is fair to say that yes, we had the discussions with regulators in Europe and as Doug mentioned with the FDA and that we will be employing a liver biopsy in the patient part already. So we will not just look at A1AT levels in patients, but we plan to also assess the hepatic C protein and the liver as part of a general proof of concept because I think there is no doubt if you lower A1AT in healthy volunteers, you're able to lower A1AT also in patients. I think one has to be shown in the proof of concept that the knockout of the A1AT gene in the liver X results in improvements of liver histology and we plan to incorporate this already in this trial. Therefore, we are calling it a Phase I/II studies whereas HBV study and PHYOX studies, we call them Phase I studies. But since we have a different meaningful endpoint, we think that that's adequate to a Phase II study, which then could lead to the registration study.

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Mayank Mamtani, B. Riley FBR, Inc., Research Division - Research Analyst [52]

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And then on hep B, I think something -- someone just pointed this out and I might be reading the protocols wrong, but on clinicaltrials.gov, the highest dose is listed as 12 mg/kg. I'm just curious, is that just a protocol, where you included all the dose and you would probably go up to 12 mg/kg if it's needed. Could you maybe comment on that?

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Douglas M. Fambrough, Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [53]

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The 12 milligram per kilogram cohort is in the single-dose healthy volunteers' portion of the trial and it's designed as part of the safety assessment. We're not including that dose level in the patient Group C part of the protocol, Group C is -- has 3 established dose levels; 1.5 milligrams per kilogram, 3.0 milligrams per kilogram, and 6.0 milligrams per kilogram. So it's correctly part of the protocol, but only for Group A healthy volunteers single dose and in fact, we have -- we've dosed that cohort.

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Ralf H. Rosskamp, Dicerna Pharmaceuticals, Inc. - Chief Medical Officer [54]

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Yes. 12 milligram per kilogram cohort.

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Mayank Mamtani, B. Riley FBR, Inc., Research Division - Research Analyst [55]

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And maybe on the same study, would you be able to comment anything on the baseline characteristics of some of these? I know it's only 4 patients anything around E positive, E negative or genotype status? Any color there?

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Douglas M. Fambrough, Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [56]

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We don't have anything to say about that at this time.

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Mayank Mamtani, B. Riley FBR, Inc., Research Division - Research Analyst [57]

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And then lastly, on the collaborations, I understand that mostly led by the bigger companies, bigger partners. When do you think we could learn anything around the target or maybe plans on clinical development from any one of the 3 Lilly, BI, or Alexion?

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Douglas M. Fambrough, Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [58]

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Yes. Obviously, we are constrained to what we can say because of our need to protect the confidentiality of our partners. So there isn't a lot that I can say about that. These are discovery stage programs. So they start with literally, the discovery of the GalXC molecules that will then subsequently be developed and given the time course of discovery and then preclinical work leading to an IND or CTA filing. You're probably looking at a minimum time there that is a little greater than 2 years and that's a minimum before things would appear on clinictrials.gov. So we're in the early phases with both Lilly and Alexion with those partnerships or collaborations being less than a year old, at this point about 3 quarters in designing. BI has gone on a little longer than that.

So it'll be a little bit of time before I think there's any news and information coming out about how they're going. I can tell you just from our perspective and I think our partners share those perspective as well, the discovery phase has gone very well. It's a very robust technology. We're targeting both liver targeted -- liver genes, and all of these collaborations. But also CNS genes in the Lilly collaboration and we have been very pleased with our ability to target both pain targets and our degeneration targets. The 2 therapeutic areas in the CNS that, that we're collaborating with Lilly. So all report that I think they're off to a great start, but from a news perspective, you're probably looking more into the latter parts of next year before they're going to create a lot of news.

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Operator [59]

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(Operator Instructions) No further questions at this time. Presenters, please continue.

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Douglas M. Fambrough, Dicerna Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [60]

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I want to thank everyone for participating today, and we look forward to the next quarter's call.

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Operator [61]

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That does conclude our conference for today. Thank you for your participation in today's conference. You may now disconnect.