Matt Kapusta, CEO of uniQure - February 6, 2018

Yeah, thanks Fred, Danielle, and everybody else that was part of putting on this production. And thanks for everybody here for attending. It's a really large crowd, larger than I thought, but it's really great. I thought either they were giving free alcoholic beverage at the end of the session, but then I heard that you get extra credit for being here, and I'll let you go. Got this big. So, well, you know, in the end, I know a lot of you, or all of you, are business majors, finance and accounting, which is near and dear to my heart because, well, we'll talk about probably some of the highest science that is being developed today. I am neither an MD or a PhD. I've learned an incredible amount about our technology and the healthcare field in general, but I started in the finance and accounting field, like many of you probably aspire to. I was an accounting and finance major in undergraduate. I spent four years at Ernst & Young, where I was a certified public accountant, long enough to know that's not what I wanted to do, but it was incredibly beneficial foundational experience for me. I went to business school, where I did an internship, my first foray into healthcare. I did an internship at Johnson & Johnson in their personal product group, where, believe it or not, I worked on a soy-based menopausal supplement. So I knew a lot about hot flashes, which was interesting, and I'll never put to use. And then I went through a career in investment banking, where I exclusively focused on healthcare companies and had the luxury and the privilege of working with a lot of senior management teams and boards of directors. And then went into industry when everything collapsed, which I don't know if you recall, you may have learned about, but everything really collapsed in 2007 and 2008. I decided to go into industry, and I've been in industry for the last 11 years focused on healthcare. So your path, or maybe some of what you aspire to do in terms of your career, I've been there and done that. So I'm looking forward to talking with you in more detail. So I'll spend about 15 minutes just going through the field of gene therapy, which is becoming a reality. I think it was considered many years ago to be voodoo, but it's really a reality now, and we're getting to the precipice of where we're actually bringing transformational products to patients, which is in the end what we all are going to work every day to accomplish. If I could just ask the question, who has heard of gene therapy here? Okay. And who knows what it is? Okay. Well, it's better than me when I was your age, but there was probably reasons for that. The field has evolved tremendously. And uniQure has actually been in the forefront of making this a reality, and we are really, I think, one of the pioneers in the gene therapy field. As Fred may have mentioned, we were not called uniQure for the 20 years that we've been in existence. We were called Amsterdam Molecular Therapeutics. We became known as uniQure when we went public in 2014. The company, as I said, has been doing this for 20 years, is considered to be a pioneer in the field of gene therapy, and as we'll talk about, was the sponsor of the first ever approved gene therapy in the Western world with a product called Glybera. A lot of lessons learned with Glybera, but nevertheless it was a huge achievement for the company and for the field in general. We have locations based in Lexington, Massachusetts, and Amsterdam, where the company was founded. We have deep roots in Europe, and we have a 55,000 square foot facility about 15 minutes away here, where we have some incredibly impressive manufacturing capabilities. We have about 200 employees, roughly split 50-50 in the United States and in Europe. As I said, we went public in 2014, were listed on the NASDAQ exchange, we raised about 90 million dollars, and in total over the last 20 years we've raised about 450 million dollars. So an enormous amount of money just with one company that had the mission of really bringing these transformative gene therapies to patients. So a few facts about what we do. We predominantly focus on rare diseases, and there's an obvious reason for that. Because when you're looking at using a vehicle to modify or to introduce a gene, typically you're going to go after monogenic diseases. And what's amazing is that while there's about 20,000 genes that code for proteins in the human body, they've identified 10,000 of these coding genes that underlie monogenic disorders or some kind of disease. So while it's called rare disease, it's incredible that there's 30 million people in the world that suffer from rare diseases. So it is an absolutely enormous opportunity and problem. And traditionally, up until probably about two decades ago, most of biopharma didn't really go after rare diseases. Why? Because they were extremely small patient populations and it was very difficult to make that work commercially. And Genzyme and other companies have really pioneered this as a business model, which is fantastic, because these diseases deal with children, and these children have really dire prognosis, and it's incredibly devastating for their families. 30% of children with rare diseases will die before their fifth birthday. So it's essentially a death sentence for a lot of these children. And what's incredible is that 95% of these diseases have absolutely no FDA approved treatments. So they will find out either through prenatal or postnatal screening that their children have a devastating disease, and there's absolutely no medical options for them. So what is gene therapy? I think it's a term that's bandied about pretty ubiquitously, but it actually deals with a number of different modalities. I'll just go through these really quickly. The first one is called gene transfer. This is when you essentially are identifying a missing or deficient gene within the body, and then you're going to introduce that gene into the patient. The gene is transferred typically by a virus, which its sole purpose in the life of a virus is to infect a cell and to introduce its DNA. These viruses are modified in a way to make them benign, so they don't cause any illness. The introduction of these viruses into a human body will introduce a DNA sequence into the nucleus of the cell. The DNA sequence typically won't integrate into the genome, and then this will produce a protein that is manufactured within the body on an ongoing basis. So that's one modality of gene therapy. The second one, which has been getting a lot of media today, is gene editing. Here, the mechanism whereby they use a sequence that will actually go in and cut the gene or modify the actual genome sequence and correct it or fix it in a way such that it normalizes the production of various enzymes or proteins. This will permanently, I think theory is, change the genome in a way that for the patient's entire life it will be corrected. And then the last one is cell therapy. This is where they're essentially harvesting whole cells out of a donor or the patient themselves, they are modifying those cells ex vivo, and then they're reintroducing the cells into the patient. So these are broadly speaking the modalities that are represented by gene therapy. As you might expect, the level of complexity increases from left to right here. Some of the most advanced medicine today and some products actually that are getting approved are using cell therapy, but it's highly complex, traditionally focused on oncology. We are focused at uniQure on some of the oldest gene therapy technology, based on the first one, gene transfer. We use adeno-associated virus to deliver our genes of choice. So I'm going to play just a short video here, because I think while you may not fully understand all this, sometimes it's easier to see a video or pictures that will represent what we do.

Gene transfer using carriers called adeno-associated virus, or AAVs, can target specific cells to correct disease-causing improper protein function. Once inside the target cell, the carrier can provide copies of a gene that corrects the defective or missing protein function. To achieve this, AAV genetic material is replaced with a therapeutic gene to restore natural function of the disrupted proteins. A protein shell called a capsid encases the genetic material and helps target delivery to certain cells. Once within the target cells, the capsid is shed inside the nucleus to release its genetic material. The genetic material does not integrate into the cells' own DNA, but instead it forms an episome. Episomes are not passed on to future generations of cells, thereby ensuring that the effect of the gene transfer is not passed on. Using the body's natural machinery, this allows stable and long-term production of the therapeutic molecule. So this video is longer, but we just cut it off because it was quite complex. But hopefully this gives you just a little bit more of an illustration about how this works. But it's obviously very, very complex. In terms of the history of gene therapy, this was initially conceived in the 70s, that one could actually utilize a virus to deliver a gene sequence in an individual for therapeutic reasons. But it probably took around another almost two decades to translate this science into actually something that we can introduce to humans. So the first gene therapy study was conducted in humans in 1989. Then 10 years later, there's a devastating consequence that happened in a rare disease called OTC, which is a liver directed disorder, where there was an adolescent that was administered a gene therapy and died. It more or less froze the field. All the clinical studies were put on hold, although there was still quite a bit of money that was going into the field, but it really was a big setback. As I said, we were actually founded the year before this death, and we were the first approved gene therapy that was approved in Europe in 2012. And then the first approved gene therapy in the US was this year, or traditional classic gene therapy for a retinal disorder by a company called Spark Therapeutics, approved in December of 2017. Hasn't yet been launched, will most likely be launched this year. The projection is, if you look at the pipeline, and I have a slide on this next, there's over 2,500 completed, approved, or ongoing clinical studies in gene therapy. Only a portion of them are in late stages, but I think the expectation is that over the next 10 years, if you apply the probabilities of success for these clinical studies, we could have more than 50 products that are actually approved. So it's been about 45 years, but that's often what it takes to bring high science to products and ultimately to patients. So today, gene therapy is a thriving business. A lot of the money, the investment and the enthusiasm, was brought in after uniQure was able to show that it can get a product approved in a developed country, and not only approved but actually reimbursed. The price of Glybera at the time it was reimbursed was for approximately a million dollars of treatment. I think there's a lot of lessons about that. It was right in the throes of a lot of pushback from governments and regulators about the pricing of therapeutics, which I think had some to do with the lack of success of Glybera. But nevertheless, the investors realize that there is a regulatory pathway, there is a commercial pathway for gene therapy. And today there's probably at least 20 and growing pure-play gene therapy companies. All they do is develop technologies and product candidates utilizing the techniques that I just went through. And their value today is around 40 billion dollars. So if you think about it, it's pretty amazing, because there's only about two or three gene therapies that have actually been approved. So most of this valuation is for companies that don't have a single approved product. In 2017, these companies have raised more than a billion dollars of capital, and there's been many strategic transactions that have happened. One was a transaction that we announced in 2015 with a large pharma company called Bristol-Myers Squibb in the area of cardiovascular disease. We're actually developing a product for congestive heart failure, which is not a monogenic disorder, it's actually a complex disease that we're beginning to understand the underlying genetic components. So this is one of the things that I think has excited the field: really all diseases are genetic diseases, right? Some of them are more complex, but as our understanding increases, you're starting to have much larger commercial opportunities that are now attracting large pharma. You can see other deals that have happened, including two acquisitions for cell therapy companies in the CAR-T space, which is a space that is really targeting oncology. One was the Gilead acquisition of Kite for 12 billion dollars, and then one that was just announced a few weeks ago, probably one of the largest pure-play oncology companies, Celgene announcing the acquisition of Juno for nine billion dollars. This is a slide about we talked about here: the first gene therapy first clinical study in 1989, and this is the number of clinical studies that have initiated in each of these years. You can see that the growth sort of stopped, right? I mean, not really, but you can see that the ramping here sort of stopped in the late 90s. This was largely due to the death in that study that I was mentioning. And then you can see here just a really significant ramp since 2012, in part because a lot of the capital went into the industry. So virtually all the major countries have clinical studies enrolling patients in gene therapy. Most of the work though is happening in the United States. I would say most of the clinical studies are really focused on oncology. You can see about 10% of the clinical studies are focused on monogenic disorders, which is what uniQure is focused on. And you can see that despite the fact that the field is 30-plus years old, only 5% of the clinical studies are in late stages. And late stages is still probably two to three years away from the market. So there's a lot of promise that really is still pent up that hasn't yet been delivered to the patient. So what are the challenges in gene therapy? I won't go through this in detail. As you might imagine, success in these highly innovative fields is very challenging, very difficult. If you think about the notion of a gene therapy, this is a product that you will administer one time and it potentially has curative benefits. How do you prove or demonstrate curative benefits? It's very difficult. You're certainly not going to wait 20, 30, 40 years to get a product approved. So often these products are approved on a limited amount of efficacy data and a limited amount of safety data. And trying to get payers to pay for this, trying to value it, is extremely difficult. The other part is, as you might imagine, the manufacturing of these products is extremely challenging. These are biologic products, which means these are living cells that are actually producing the products that we are administering. With biologic products, you're not making a small molecule, you're not making a tablet of aspirin. The process that you go through is extraordinarily complex, and the process is actually defined in part as the product. So if I manufacture my products in Lexington, I can't just start another facility and manufacture across the street, because the process is different and the process needs to be validated. So these are extremely difficult. And uniQure has invested a very significant amount of money in developing manufacturing capabilities, because in the end that is going to be absolutely critical to bring safe and robust products to the market. And then of course commercial is extremely challenging. Why is it challenging? Well, think about it: if you are administering in one procedure a product that's going to have potentially curative benefits, how do you get somebody to pay for that? How do you get somebody to value that? We chose, or our partner chose in Europe, to have a bolus payment upfront to monetize that value, but that often leads to a very high price tag, especially for indications where there's small numbers of patients. But in the United States, where you have patients that are mobile in terms of who their insurance companies are, you can't really have a payment model where you're paying in some kind of annuity. There's a lot of talk about paying for performance, paying for efficacy: we'll pay you every year that your product is demonstrating efficacy. But how do you do that when a patient can get a procedure approved by one insurer and then move to another carrier that doesn't approve that treatment? So there's a lot of complex issues that we have to really surpass in order to make this a success. And that's really, I guess, how well, let me go into that afterwards about how we saw that. I talked about manufacturing. At uniQure, we've spent the last ten years developing manufacturing capabilities, and we've probably put in more than 150 million dollars of the amount we raised into developing our capabilities. But we today have GMP qualified manufacturing at commercial scale. And believe me, that is extremely difficult to develop. And we're probably, in my view, I think we have some of the leading capabilities in manufacturing. And as I said, this is about ten miles up the street. And we've demonstrated last year our ability to manufacture multiple gene therapy products using the same underlying process. Our pipeline at uniQure: we have a lead program in hemophilia B. That program is ready to move into a pivotal study. We also have a program in late stage preclinical studies in Huntington's disease. Huntington's is probably one of the largest orphan and rare diseases that exists. It impacts approximately 60 or 70 thousand patients in the United States and Europe, and there's no disease modifying treatments for these people. It is a disease that is hereditary, and typically patients can be diagnosed at birth. Often they don't get diagnosed because they have no treatments, but what will typically happen is by the time they turn 30 or 40 years of age, they will begin to experience neurological cognitive decline, and ultimately that will lead to death. We also have other preclinical programs largely focused on liver directed disorders and CNS diseases, including hemophilia A and other research programs that we're currently working on. So if I look at one of these diseases, which is our lead program in hemophilia: hemophilia is an X-linked disease that impacts predominantly males. This is an inherited disorder where their body is not able to produce a particular protein in the quantities that is required to clot. As a result, they are susceptible to external and internal bleeding. You can see the pictures here of what happens. Typically a male is born, and within probably the first year they will have their first bleed, and typically they will bleed into their joints. You can see what happens to people's joints when they have repetitive bleeds: they get swollen, it's difficult to walk, they have burning sensations, a lot of pain, and it is a huge impact on their quality of life. The only treatment that these patients have is to have what's called factor replacement. They will self-administer infusions. Severe hemophiliacs can administer over 150 infusions a year of replacement therapy. This has a massive implication on the healthcare system from an economic perspective. The average cost to provide therapy for a severe hemophiliac could be up to half a million dollars a year, and this is for the rest of that patient's life. Many of these patients across the world are simply not adequately served. You can see here the statistic that 75% of patients do not get adequate factor 9 replacement therapy. So this is a ripe indication for gene therapy, because we're developing a product that after a 30-minute IV infusion has the potential to provide lifelong benefit, where a patient no longer requires factor 9 replacement therapy. This is actually a patient, his name is Leon Boz. He's a patient in our phase 1/2 study that we completed last year. Leon was a severe hemophiliac. He was diagnosed as a toddler, and he was told by his doctors that he would be requiring factor 9 replacement therapy, these infusions that I was talking about, for the rest of his life. After the administration of our product candidate called AMT 60, we were able to increase his levels of factor 9 in circulation to a point where he no longer requires factor 9 therapy or replacement therapy. What's incredible is that despite the fact that he was taking 150 infusions a year, he actually bleeds less. We've actually stopped his bleeding, despite the fact that he no longer requires replacement therapy. So it's incredible. When we did this, we had a chance to speak with Leon, and he was telling us how much this has transformed his life, how he can now be active with his children, ride his bike, whatever he wants to do, go to the gym. He's not normal, okay? So he is still a hemophiliac, but he now has a quality of life, and the healthcare system no longer has to supply this very expensive therapy. So how do we break down the barriers? As I talked about, gene therapy requires a new paradigm. Typically, products are manufactured and taken chronically to address a disease for as long as somebody has the disease. That's a business model for biopharma. It's a business model that makes a lot of money. When you're now producing a gene therapy that is going to be administered once and potentially be curative, it provides a lot of challenges, as we talked about before, commercially as well as from a regulatory perspective. There's a lot of stakeholders involved: you have patients, you have providers, you have insurers, you have the sponsors like we have, you have the families of these patients, you have the regulators. All these stakeholders have to work together, because the power and the transformative capability of gene therapy is just simply too large. The regulatory and policy has to keep pace with the technological innovation. So when we go and meet with agencies, we talk about trying to get our products approved. We're educating them. They're trying to figure out what is the safety of this, how do we approach safety from a preclinical standpoint, how do we test it in animals, how should we test it in humans, how much efficacy data do we need. We're educating them. I think there's now become a much more clear and transparent pathway, but it has to continue to evolve. And then of course, in the end, patient advocacy is critical. A lot of these monogenic disorders are rare and orphan diseases. They have very tight-knit patient communities. We can't afford, we can't enroll studies to show statistical significance. Hemophilia impacts maybe 10,000 patients in the United States and Europe. If we were going to do a clinical study to show statistical significance, it would take potentially hundreds of patients. You can't enroll that many patients in a study. So the advocacy from the patients and their families to try to get these products approved as quickly as possible, we have to ensure they're safe, but to get them approved as quickly as possible is critical because of people like Edwin, who's another patient in our clinical study. So with that, hopefully you have a little bit of a better understanding of gene therapy and the promise that it holds. I guess we'll take a pause now and we can have a little bit of a Q&A session.

Sure. So one of the reasons why people are going after hemophilia is it is a very clear monogenic disorder. You have normal, effectively normal patients that have a dysfunctional one gene, and that gene therefore can't code for one protein. What's interesting about hemophilia is you can have profound clinical benefits from taking a patient that has 1% of normal levels of this clotting factor in their blood to just 5 or 10% of normal. So you don't need to restore all of the level of the protein to have a profound clinical impact on these patients. So a lot of this became a fertile ground for a lot of gene therapies to go after, because there's also a fairly attractive market in terms of the size of the patient population. It became a fertile testing ground for a lot of companies. I think what differentiates uniQure is a couple of things. I don't want to get into too much of the technical details, but when you think about what you're doing in gene therapy, you are using a virus to deliver a gene. The properties of that virus are extremely important. In a disease like hemophilia, we are administering this systemically, so we're not going directly into the liver and putting it into the liver. We're doing an IV infusion, and we're exposing the entire body to that virus. While they're benign viruses, your body's immune system is pretty sophisticated, and it can provoke an immune response as a result of these. In fact, that's how that one patient died in 1989. So we're using a particular virus, it's called AAV5. AAV5 is something that we've administered in more than 20 patients, and we've never provoked a T-cell mediated immune response. So we think it's highly safe. The other part of this is that the viruses that we use are actually naturally occurring viruses. So we use a backbone of a naturally occurring virus. You and I can be exposed to these viruses. If you're exposed to a virus, what happens? Your body develops antibodies to the virus. You wouldn't know it if you were exposed to it, but when we screen patients for clinical studies, we test to see if that patient was exposed and has developed antibodies. Because if you have antibodies to that virus, it will kill the virus before it's able to transduce the cell. Depending on the virus that you use, you can have different prevalences of what they call these neutralizing antibodies. Our virus, AAV5, has been documented to have the lowest prevalence of neutralizing antibody. So what does that mean? It means that we can make our gene therapies eligible, or give patients access to our gene therapy, to nearly all patients that have a particular disease. Other vectors that are used, other AAV vectors that are used, could have preclusion in up to 50% of the population. So we have a virus that we think is safe, it doesn't provoke immune responses, we think we can treat nearly all patients with hemophilia or other diseases. And maybe most importantly, we can manufacture it. So we've invested heavily, as I talked about, in our manufacturing capabilities, and we demonstrated that we can do it successfully, reliably, and predictably at commercial scale. Thank you.

Yeah, so what I mean, this is a pretty interesting thing, and I'll try to focus on the relevant topics for the audience here. As I talked about, you can have a profound impact on patients with hemophilia by taking their endogenous factor 9 activity level from what it's typically, let's call it 1% of normal, to 5% of normal. There was a clinical study that was done by St. Jude's Children's Hospital, and it was published in the New England Journal of Medicine in I think 2011 and 2014, that showed that it's now been eight years after this one-time administration that these patients are still no longer requiring factor 9 replacement therapy, and there's a substantial reduction in their bleeding frequency. So the goal for many years was how do you get a patient from 0% or 1% of normal to 5%. It turned out that there is a slightly modified gene that was tested that is called hyperactive. So for each molecule of factor 9 protein that is produced by this modified gene, its clotting activity is about 6 to 8 fold higher. What we did in October is we announced that we were modifying our gene therapy construct to include this modified gene to drive even higher levels of factor 9 activity, because the hematology community felt that to really benefit patients over the long term, you might need higher levels of factor 9 activity. Instead of 5%, you may need 20 or 30% of factor 9 activity. The problem is with a biologic, you just can't do that. You just can't in the middle of your clinical development just change something and say, okay, now I'm going to continue to develop this. Once you change something, you need to convince the agencies, the FDA, that you have not impacted safety, that you have not impacted efficacy. Because we control our manufacturing, we were able to do that very quickly and produce a lot of the non-clinical and preclinical safety data that got the agencies comfortable. When we disclosed that strategy to Wall Street, I think they were extremely pleased with it, and that led to the stock price increase.

So I think we're often asked this question. It's a hot topic across all of healthcare, and in particular in gene therapy, which as I said is a new paradigm. What I will tell you, it's not a cop-out, but what I will tell you is it's going to be a customized approach based on a particular product indication. For Glybera, Glybera was a product that was approved for a very rare condition called lipoprotein lipase deficiency. This impacts maybe one to two patients out of every million people that exist. What we showed in our clinical data was that we weren't necessarily curing these patients, but we were reducing their bouts of severe pancreatitis and the hospitalization that occurs as a result of that. So how do you, if you're going to try to charge on a pay-for-performance model, how do you? You'd have to follow patients, you'd have to monitor their hospitalization events, you'd have to then demonstrate which hospitalization event is in the 50% that you're reducing. It's extremely difficult. So that particular one, our partner chose to get a bolus payment upfront of a million dollars. For hemophilia, what's amazing about hemophilia is you could do a simple blood draw, and I can take that sample to a lab and within days I can tell you how much factor 9 is in circulation. So if I did that with your blood, it would come out to 100% normal. If I did that to a patient that we treated with AMT 60, it would be, I don't know what it is, it'd be 10%, 20%, 30%, maybe higher. But the bottom line is we can demonstrate very quickly if the product is working, because you have a surrogate. Factor 9 activity is a surrogate for the clinical benefits of the product, which is a reduction in bleeding frequency. So on that particular indication, you may begin to think about with the payer community a means of tracking patients and monitoring patients and having some kind of pay-for-performance model. So it's going to be customized. But in terms of the pricing, all I can point to is if you are providing a lifelong cure, and we don't know if our product's going to work for a lifetime, but even if it worked for ten years and that patient requires, just for easy math, half a million dollars of product that they no longer require after the administration of our gene therapy, on just one patient over 10 years you're saving the healthcare system five million dollars. Now can we charge five million dollars upfront? Probably not. I don't think that would be digested or appetizing for the payer community. But it just goes to show you how much the value of a product that has long-term durable efficacy can be.

Yeah, so this was probably one of the hardest decisions I've ever had to make. We're in the business of bringing novel therapeutics to patients to help patients, and I actually had to decide that we were going to withdraw or not pursue the renewal of the license of Glybera. There's a lot of reasons for that. I think the biggest reason is when you think about highly innovative fields, and this is the same thing for monoclonal antibodies, which is another technology platform that was probably 20 years ahead of gene therapy, the first products that get to market are typically validation cases in very high unmet needs in small patient populations. This particular indication of LPLD in fact impacts probably a hundred to two hundred patients in the world. Now, these are patients that were not dying. They were not part of those children that died before they become five years old. They have ultra high levels of triglycerides, and they have to be on very strict diets. What's amazing is most the patients that have LPLD are not genetically confirmed. I mean, why would you go through the effort of genetically confirming yourself when there's no treatments available? So we had a product with a very small patient population that was not identified. While it was an unmet medical need, these were not patients that are dying. It was the first ever approved gene therapy, so it was a lot of education. And it was priced in a way that I think was before its time, in the fierce pushback from the macro political landscape for high-priced therapeutics. In the end, what we felt is that to try to support that, because supporting a product that's on the market from a manufacturing and regulatory perspective, we had to continue to follow these patients for 15 years, we had to do a global registry, we had to do what's called a phase 4 post-marketing study. It was very expensive. And we thought that we could impact patients as a whole in a more impactful way if we could repurpose that money that was supporting Glybera for some of the other promising candidates in our pipeline. So we had to make that tough decision.

Yeah, we viewed it as a validation of our technology platform. It was a huge milestone in the field of gene therapy. We will be proud until our final days of what we accomplished. But sometimes the first is always not the biggest commercial success.

Yeah, I mean, there's environmental, I think for all biologics there's rigorous ethical committees and environmental compliance that is required. Even if we have to do a study in monkeys, we have to go through very rigorous ethical controls in order to clear the protocol. The field of biopharmaceuticals is heavily regulated, and in particular biologics are regulated even perhaps more so, because again you're dealing with a product that is produced and encapsulated in a living organism. We use viruses. I work in a facility every day that manufactures viruses. So we take environmental and other regulatory compliance very seriously, and it's something that all gene therapy companies have to deal with very seriously.

Yeah, so it's a great question. As often happens with highly innovative fields, whatever it might be, that are heavily regulated, the agencies that handle the regulation evolve at different paces. The pathways that are available in different jurisdictions can be different. In Europe, there is a pathway called an exceptional circumstance pathway. That pathway was meant to allow products like Glybera that are addressing very small patient populations to get to market with, I use the word less rigorous clinical requirements, although they're obviously quite rigorous. But to have to do a statistically significant relevant study in those kind of populations is very difficult. So they look at the totality of the clinical evidence that is produced and will allow a product to get on the market with restrictions. That pathway did not exist in the United States. There's all sorts of designations: fast track, breakthrough designation. But it just hadn't evolved in the way that it did in Europe. I think a lot has changed now. We did consider approval of Glybera in the United States, or pursuing approval. We actually met with the FDA, but the FDA came back and told us that we would have to perform two phase three clinical studies in Glybera. If you think about it, if there's 75 patients in the whole United States, we probably have to treat all of them in a clinical study program before we got the product approved. So it just didn't make a lot of sense.

Yeah, I mean, I'm a test case. I think a lot of that for me at least was in some respect luck. But I'm now the CEO of a public company focused in one of the most transformative, highly innovative fields in gene therapy. And as I said to you in the beginning, I don't have an MD, I don't have a PhD. The details of the science are just going to go way over my head. But in the end, everything is a business. When you get to the scale of the kind of funds and capital required to bring a product to the market, it is often 15, 20 years of an incredible amount of effort with a large group of people, and it has just an incredibly large appetite of capital. So you can be a business that is a net user of capital for decades, and managing that in the end is a business. So the way I look at my career is that the foundation that you're learning in class about finance and about capital markets and about accounting and profit and how to read financial statements, this is critically important for every business, including high science like gene therapy. Without that foundational experience, I would not have been able to get into an administrative role within my company. I will say that what I remember my father always telling me, I think when he was growing up, you just want to go to college. And maybe when I was growing up, and it's probably particular today, it's not just about going to college. You've got to now get your MBA or PhD or whatever it is. You don't have to. But I think what I've learned is I've spent about 20 years in the healthcare field, and having that kind of experience in a specific domain and being able to apply the business skills that I've learned in this particular domain provides a pretty valuable experience for me to bring to bear on my company.

What you'll find if you look at those 20 companies that I talked about, even the public companies, and there's probably just as many private companies, when you're in the early stages of developing a product, you simply just can't build your own manufacturing capabilities. It takes many, many years and tens of millions of dollars to construct that. So often what will happen is these companies will rely on contract manufacturers. I think in the end, if you want to be a fully integrated company and you want to bring a product to the market, and you're not just talking about producing an amount of material to treat five patients, you're talking about being able to produce a robust manufacturing of a product to treat the market, I think you really need to control your own manufacturing. It is too integral of a component in the value stream of these products to leave to a party that is outsourcing it for you. So my view, I think this is the strategy that we've always taken, is that as you get into late stage development where you have a product that is approved, you really have to control your own manufacturing, especially in the area of biologics.

Yeah, that was probably the hardest part. The construction of the facility, the four walls of the facility, the procurement of the equipment, that's the easy part. It's the qualification and the validation of your quality management systems and your standard operating procedures that really takes the heavy lifting. If you could see our SOPs, this gets back to the question on environmental compliance. Everything that you do has to be documented, has to be in a batch record. It's incredibly rigorous. So we have, I would say, probably out of the 70 people in our manufacturing facility, at least 20 of them, maybe more, are in quality. Quality assurance, quality compliance, from everything from environmental testing in the facility to the testing of our products. When we produce a product, there's probably 60 quality attributes that we have to test. We have an assay for every single one of these tests that we have to do. So we don't just press a button and produce the material. We can produce the material in two weeks. It's the releasing, the quality releasing of that material that could take four months. That's how complex it is.

Yeah, so it's interesting because you'll see a lot of sponsors of product candidates for rare diseases will get something called orphan drug designation. Typically, when you're going after these rare diseases, orphan drug designation gives you a greater period of exclusivity because the economics associated with these rare and orphan diseases are more limited. There has never been a situation, we talked about maybe you can count on one hand how many gene therapies have been approved, there hasn't been a situation where you've had a second gene therapy approved for the same indication. But here it's much more complex because really what is the property? You define the product. So if I'm delivering the same transgene but I've got a different virus that's delivering it, is it the same product? What orphan drug designation provides you is you can't have the same product approved for the same indication. But if you have a different product with a differentiated efficacy profile or safety profile, there are exclusions for orphan drug designation. So the short answer is we don't know. But I think this is part of why there are so many challenges in gene therapy. There's so many things we don't know that we're gonna have to wait and see.

Yeah, so in the United States you cannot patent things that occur in nature. But that's a very short sentence that is far more complicated than that in reality. The reality is you can patent viral vectors, the AAV vectors that we use, because they're modified in a way that enables their use within a therapeutic context. The same thing holds true for the transgene. The transgene that I talked about, with AMT 61, this hyperactive transgene, we actually have intellectual property related to a patent that was issued in the United States in 2016 on the modifications required to utilize this transgene. So you can navigate through the intellectual property landscape and get protection on various aspects or elements of your gene therapeutic. You also can get intellectual property on proprietary or innovative steps on manufacturing the product. Because we've had a leg up, being the first approved gene therapy, and we've been working on a manufacturing process for more than 10 years, we have a lot of intellectual property on how we produce it and the steps required to be able to produce it in a scaled manner. So intellectual property is important in all technological fields, and in particular in gene therapy, it's an active part of our strategy.

Sure. So yeah, I view it probably as both an enabler and driver. I think that getting back to the business side of things, there are companies that are more platform oriented companies. They don't necessarily want to develop an expertise or a core competency in developing products, but they have some kind of unique technological platform that can enable others to develop products. I think in the early days of uniQure, we were very focused on Glybera and really viewed what we had developed, this whole technology platform around the construct of gene therapies and the manufacturing of gene therapies and the know-how that we had developed, as being a platform. We had wanted to get that platform out, and the way we got that platform out was we did a lot of what's called academic sponsored studies, where we didn't put really any money into it and an academic institution would be the ones that were conducting the clinical work. That is not our strategy today. Our strategy today is yes, we have a platform that can enable product development, but we want to drive our own product development. That is where I think that is a model that is appetizing for us. We think it's a model that is appetizing for our investors, to develop our own products and retain the economics associated with those products in specific territories, particularly the United States.

That's another great question. It depends on the indication. If you have an indication where children are dead before they're five, you have to develop your clinical regulatory pathway will have to deal with pediatrics. Interestingly, if you go after a pediatric disease, you can get what's called pediatric designation. If you get a product approved for a pediatric indication, you can get a pediatric voucher, which allows you to apply a faster pathway regulatory clinical pathway to another indication. You can actually sell these vouchers. So to answer your question, it depends on the indication. For hemophilia, where you have an existing therapy for those products, the regulatory agencies will require you to develop it and get it approved and tested in adults, and to develop a long-term database of safety before they will allow you to go into pediatrics. But if you're looking at MPS 3B or Sanfilippo B or spinal muscular atrophy, where the children will die, you will have families that want their very young children to have access to these experimental products in clinical studies, and the agencies will allow you to do that.

Yeah, so that's a great question too. You guys are asking some good questions. It's a complex answer. The reality is one of the things I talked about was we're using viruses that are naturally occurring. These viruses have evolved over millions of years. These adeno-associated viruses that we use to deliver our transgenes, the reality is they have not evolved over all that time to be optimized efficient deliverers of transgenes in a way that you can drive that kind of expression of a protein from somebody who has no protein or 0% all the way to 100%. The technology that exists today will enable you to probably get somewhere between 5 and 20% increase on the natural expression of a protein in your body. So if you were a hemophiliac patient and you had 5% of normal protein in circulation, my gene therapy can probably get you to maybe 20 or 25%. Now we're using a hyperactive transgene which has greater clotting activity, that's very specific to this indication. But other than that, you just can't get the level of transduction needed with today's technology to get somebody from 0% to 100% in a lot of these indications. The goal for the patient is to cure them. The other piece of it though is there is patient to patient variability. We're not all clones of each other. So when I deliver a gene therapy systemically to you, how it circulates in your body, what your immune system does to it, and how it unfolds in the cell, all of that can be very different. It travels a very long molecular pathway, both physically, geometrically, and then biologically, to be able to transduce a cell and express a protein. That can be different. So what maybe 99 or 100% for you could be 150% for somebody else, it could be 50% for somebody else. You have to be thinking about safety. There is concern that if you generate 150 or 200% of normal clotting activity in a patient, you can generate thrombosis, you can clot when you don't want a clot. So I'd like every patient to be at 100%, but the technology has got to evolve and we have to better understand the patient variability so that we can control safety. So that's kind of a long answer to a good question.

Well, so what's interesting about rare diseases is, especially today, and it wasn't always like this, but today there is a clinical and regulatory pathway to get a product that is addressing a rare and orphan disease on the market in a more rapid way, where you can develop studies with fewer patients. Those studies can complete faster, and the cost of those studies is less. So if you think about the business model, generating profits, you've got a big investment upfront. If you can get a product on the market more rapidly, you get the revenue more rapidly, and the cost of development is cheaper. That's one side of the equation. The other side of the equation is pricing. I think the payer community has accepted that for indications that have very small prevalence, they will accept a bigger pricing umbrella. So if you're developing a new cholesterol medication for tens of millions of patients, you're not going to be able to charge hundreds of thousands of dollars. If you're developing a product for thousands of patients, the payer community can absorb a higher price. So you have faster pathways to market, cheaper cost of development, and greater pricing leverage. That's how these companies generate a business model.

Hmm. Well, look, I was a banker for ten years, so I focused on mergers and acquisitions. I unfortunately had the unenviable task of having to try to value these companies. In the end, you guys all know this, there's two ways to do it. You can project a long, long way out in the future and try to develop a cash flow model and discount that back and probably probability adjust and risk adjust the model. That's often very difficult to do, and there's a lot of vagaries in those assumptions. I think often the way that our investors will value us is relative valuation. When you have 20 public companies that are out there trading every day, you can look at the relative valuations given the market potential of the indications that you're pursuing, given your stage of development, given your qualitative assessments of your risk profile. So I think that's probably the more pervasive way that companies like us are valued. There's probably no right or wrong way to do it, but that's probably the way that most people do it. I can tell you, we're covered by six or seven different research analysts. All the research analysts have financial models, and in their notes they're all over the place, and invariably they're wrong. I'm not even sure if investors really look at them all that much. So it's a little bit more art than science. That's probably the short answer.