Arrowhead Pharmaceuticals Inc (ARWR) 2011 Q4 法說會逐字稿

Ladies and gentlemen, welcome to the Arrowhead Research fiscal 2011 fourth quarter and year-end conference call. Throughout today's recorded presentation all participants will be in listen-only mode. After the presentation, there will be an opportunity to ask questions. (Operator Instructions) I will now hand the conference over to Miss Danielle Spangler of The Trout Group. Please go ahead, ma'am.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us today to discuss Arrowhead's results for its fiscal 2011 fourth quarter and year ended September 30, 2011. With us today from Management are President and CEO, Dr. Christopher Anzalone, and Chief Financial Officer, Ken Myszkowski. Management will provide a brief overview of the quarter and will then open up the call to your questions. Also on the call for participation in the Q&A session is Chief Operating Officer, Dr. Bruce Given.

Before we begin, I would like to remind you that comments made during today's call may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact including, without limitation, those with respect to Arrowhead's goals, plans, and strategies are forward-looking statements. Without limiting the generality of the foregoing words such as may, will, expect, believe, anticipate, intend, could, estimate, or continue or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. In addition, any statements that refer to projections of Arrowhead's future financial performances, trends in its business or other characteristics of the future events or circumstances are forward-looking statements. Forward-looking statements represent management's current expectations are inherently uncertain. You should also refer to the discussions under Risk Factors in Arrowhead's annual report on Form 10-K and the Company's quarterly reports on Form 10-Q for additional matters to be considered in this regard. Thus, actual results may differ materially. Arrowhead undertakes no duty to update any of the forward-looking statements discussed on today's call.

With that, I'd like to turn the call over to Dr. Christopher Anzalone, President and CEO of the company. Chris?

Thanks, Danielle. We're going to have to work on your pronunciation of my name.

I'm sorry.

Thanks very much. Good afternoon, everyone, and thank you for joining us on our call today. 2011 was a transformative year for Arrowhead. We are a fundamentally different company than we were a year ago and even substantially different than we were at our last quarterly call. We have accomplished our transition from a broad nanotechnology holding company with subsidiaries to a focused and operationally integrated nanomedicine company.

As we have discussed in the past, our model is unique among smaller biotech companies. Rather than being focused on a single drug candidate and requiring our shareholders to assume a binary risk profile, we take a more diversified approach. We are focused on multiple platforms, each of which has the potential to generate multiple therapeutic products. This is intended to provide a broader up side potential and a more limited down side risk than a traditional biotech company. We have advanced programs in oncology and obesity, broad capabilities in small RNA therapeutics, state-of-the-art R&D facilities, and we have maintained a capital efficient structure.

Accomplishments related to this transition include the following -- Completing the sale of electronic subsidiary Unidyme to Korea-based Wisepower Company; Acquiring Roche's RANi business and related technology licenses, creating the most comprehensive portfolio of nucleic acid delivery platforms including our proprietary RONDEL system, Dynamic PolyConjugates, or DPCs, and liposomal nanoparticles, or LNPs; Acquiring the licenses to use the three primary RNAi formats, Canonical, Dicer substrate and Meroduplexes; expanding our research and development capabilities through a seasoned and cohesive RNAi developing team in Madison, Wisconsin; completing a Phase I trial of our siRNA drug candidate, CALAA-01, and initiating a Phase I-B trial to gather additional data; moving our anti-obesity drug candidate Adipotide toward the clinic; expanding the Company's management team, Board of Directors, and scientific advisory board; strengthening our balance sheet, and regaining compliance with NASDAQ's minimum bid requirement.

In October, we acquired Roche's RNAi therapeutics business, select licenses and state-of-the-art research facility in Madison, Wisconsin, making Arrowhead the most comprehensive RNAi therapeutics company in the world. It is difficult to overstate the impact of this transaction to our Company. Roche invested over half a billion dollars to acquire and develop the technologies necessary to independently create RNAi therapeutics. They assembled a truly world-class team to build on world-class technologies in the areas of delivery and RNAi chemistry. These are the broad shoulders on which we now stand.

The transactions fit well within our own assets and our plans to build out greater internal R&D and collaboration capabilities. We now have access to five delivery platforms, providing us with an unmatched toolbox to address the systemic delivery challenge for therapeutic RNAi. This enables us to optimize delivery based on tissue type, disease state, target, and siRNA chemistry. This type of flexibility is critical for development of our own diverse pipeline and provides us with something of great value to potential partners.

We believe that our portfolio of established delivery platforms uniquely positions Arrowhead as a partner of choice for many large biotech and pharmaceutical companies interested in RNAi therapeutics. We see continued interest in RNAi from larger companies but, perhaps because of the great complexity of solving delivery, we are seeing an increasing appetite to outsource development of this new therapeutic modality. This fits well with our strengths and is important to our capital model.

As important as the technologies and licenses are that we acquired from Roche, the talented team that came with the transaction gives us a depth and agility that is ultimately of greater long-term value to us. It has been our distinct honor to welcome this creative team into the Arrowhead family and its value goes well beyond just DPC development. The infrastructure and personnel at the Madison facility form a basis for integration of our subsidiaries and consolidating R&D. We have already installed the team in Madison to support ongoing development of the RONDEL delivery platform and our RONDEL enabled pipeline, and we expect to complete integration of our other programs in 2012.

Our technologies and units are not disparate entities built opportunistically, but rather are intended to fit together technologically and strategically. For instance, the RONDEL platform, DPCs, nanotopes regenerative medicine platform and our anti-obesity program all require substantial peptide chemistry expertise and this can all be centralized. Of course, Leonardo's delivery system will have many of the same challenges that RONDEL and the DPC space, so there's a great advantage to institutional knowledge and experience during development, manufacturing, scale up, clinical planning and regulatory decisions. By having all of our key technologies and R&D personnel under one roof, we are best able to collaboratively leverage the skill sets, knowledge, and synergies within the Arrowhead units. Additionally, bringing our people and technologies together enables us to advance our programs more cost effectively.

I would now like to spend some time reviewing our three lead programs. We recently published a white paper on the DPC's effectiveness and safety in pre-clinical studies. We have a very active program for this technology and plan to publish additional papers demonstrating the breadth and elegance of the platform throughout 2012. We currently have multiple forms of this class of molecule that may be optimized for different tissue uptake and indications. It is an extremely flexible platform that we intend to take into the clinic for multiple therapeutic products as part of our own pipeline and in collaboration with others. We are beginning to speak with potential collaborators now and are moving forward with our internal development efforts. We will provide more guidance on our first independent lead compound coming out of the DPC program after the first of the year.

This quarter, Adipotide, our anti-obesity peptide which specifically targets and kills blood vessels supplying white fat tissue was featured in major peer-reviewed journal. In November, primate data with Adipotide was published in Science Translational Medicine and generated significant coverage from the financial, scientific and mainstream media. The data demonstrated weight loss, reduction in body mass index and abnormal circumference and marked improvements in insulin resistance in obese Rhesus monkeys. Most obesity compounds fail as they advance in development from rodent to primate studies, so we're very pleased to have been able to replicate the impressive results we saw early on.

This program has partnered with M.D. Anderson Cancer Center in Houston, Texas, which is bearing the cost of the pre-clinical studies, drug candidate manufacturing and the planned Phase I clinical trial. M.D. Anderson initially filed an IND in December of 2010 and the FDA requested additional pharmacokinetic information and toxicology data from a non-human -- sorry, from a non-primate species. These studies were completed by M.D. Anderson and the results conformed to prior work. A complete report was submitted to the FDA at the beginning of December 2011. Barring any additional requests, M.D. Anderson plans to initiate a Phase I study in obese prostate cancer patients shortly after the first of the year. We are very excited about the potential for the Adipotide platform and its addressable markets. We believe we have a very powerful suite of drug candidates that not only may help to combat obesity, but also may help to reverse symptoms associated with type II diabetes.

CALAA-01, our current RNAi drug candidates utilized in the RONDEL platform completed an open label Phase IA trial this year. We've adjusted the dosing schedule for the open label Phase I-B trial which is now under way with the aim of expanding the product's therapeutic window. As you may recall, CALAA-01 uses unmodified siRNA's inside RONDEL. After we started the trial, other groups reported that unmodified siRNAs can cause immune responses in humans. The SAEs we saw at higher doses and associated cytokine spikes were consistent with this type of immune response.

Two factors were particularly important about our observations. First, the responses appear to be transient so if a patient stayed on drug, effects would subside and cytokine levels would drop. And, second, they do not appear to be related to RONDEL. Because of the former, we have hypothesized that an initial low-dose of CALAA-01 could desensitize, if you will, the patient and enable us to increase CALAA-01 levels even higher than without pre-treatment and this is precisely what the Phase I-B is testing.

In addition to teaching us a lot about CALAA-01, the Phase I has been highly informative for our future plans for RONDEL more broadly. First, we do not believe that we have yet seen the dose limiting toxicity related to RONDEL based on our interpretation of the clinical and pre-clinical data. This is extremely encouraging and suggest that RONDEL has an attractive and wide safety profile. Second, we know that RONDEL gets into tumors and silences target mRNA and proteins in humans based on the data we reported in the journal Nature last year. I do not believe that any other technology has been able to show RNAi knockdown in non-liver targets in humans. Third, siRNA chemical modifications that eliminate immune responses are now well understood and even routine. Therefore, all future drug candidates using RONDEL will employ these strategies and we believe enable us to use higher doses and potentially offer wider therapeutic windows. Keep in mind that CALAA-01 is valuable but the real value driver is RONDEL because it is not a single drug, it is eventually multiple drugs. RONDEL appears to be very well tolerated and, thus, we see broad applicability of the platform for many drugs.

Our transformation as a company has included a deepening of our management team. We appointed Dr. Bruce Given to Chief Operating Officer. This is a significant move for us because of Bruce's extensive senior operational and regulatory experience. He is the primary driver of our development programs and has been instrumental in the integration of our subsidiaries. He was also actively involved in the acquisition of the Roche assets and site.

We hired Dr. Brendan Rae as Chief Business Officer, whose efforts have been focused on establishing corporate partnerships and strategic alliances. We also pointed to appointed Dr. David Lewis as Vice President of Biology and Madison site head, and Dr. David Rozema as Vice President of Chemistry. They have a long history with the Madison site, are leaders in the RNAi field, and are key inventors of the DPC delivery technology. Just this week we appointed Dr. Michael Perry to Arrowhead's Board of Directors. As a new independent director, Mike brings 25 years of successful biotech and pharmaceutical management, research and development and deep regulatory experience to Arrowhead, which will be invaluable as we move into and through clinical development. In addition, oncology expert Dr. Timothy J. Triche and RNAi pioneer, Dr. John Rossi, joined our scientific advisory board.

On the capital front, we expanded our resources with a $10 million financing and established a committed equity financing facility with Lincoln Park Capital from which we can draw up to $15 million as needed. We also completed a 10 for one reverse stock split to regain compliance with the NASDAQ continued listing standards.

Given Arrowhead's transition from a broad nanotechnology holding company to a focused operating nanomedicine company, expect to hear us talk about Arrowhead in a slightly different way going forward. Generally, we will talk -- we will not talk about our subsidiaries but rather we will talk about our programs and products as part of a single entity that is focused primarily on small RNA therapeutics and obesity. This is how we manage the Company and it fits with our strategic focus. As we finalize this shift throughout 2012, we will talk about the Company has one integrated unit. With that overview, I'd like now to turn the call over to our CFO, Ken Myszkowski, to review our financials for the period. Ken?

Thank you, Chris, and good afternoon, everyone. Please recall that Arrowhead affected a reverse stock split on November 17, 2011; shared data and EPS data have been reflected accordingly. As we reported earlier today, our net loss attributable to Arrowhead for the year ended September 30, 2011, was $3.1 million, or $0.44 per share based on 7.2 million weighted average shares outstanding. This compares with a net loss attributable to Arrowhead of $5.8 million or $0.90 per share based on 6.4 million weighted average shares outstanding for the year ended September 30, 2010. On the quarter, our net loss attributable to Arrowhead was $2.8 million, or $0.39 per share, based on 7.2 million weighted average shares outstanding. This compares with a net loss of $2 million or $0.28 per share, based on 7.1 million weighted average shares outstanding for the quarter ended September 30, 2010.

On a consolidated basis for the year ended September 30, 2011, net cash used in operating activities of continuing operations totaled $7.7 million compared with $4.8 million in the prior period. Our total operating expenses for the year ended September 30, 2011 increased by $4.3 million to $10.1 million, from $5.8 million during the year ended September 30, 2010. The increase in operating expenses was primarily due to a one-time, $2 million payment to the University of Texas M.D. Anderson in December 2010 related to Ablaris. In fiscal 2011 we also had higher R&D costs of approximately $1.3 million due to costs incurred at Ablaris and Calando. Finally, we incurred approximately $500,000 in cash expenses related to outside legal costs, IP and business consulting and travel costs related to acquisition due diligence and related efforts during the quarter ended September 30, 2011.

Our total operating expenses for the quarter ended September 30, 2011 increased by $1.1 million to $2.9 million, from $1.8 million during the quarter ended September 30, 2010. The increase in operating expenses in the quarter was primarily due to R&D costs at Ablaris and acquisition-related costs. Turning to our balance sheet, we increased our cash position to $7.5 million at September 30, 2011, compared to $6.8 million at September 30, 2010. Our increase in our cash balance included $4.5 million in cash received from financing within the fiscal year, part of a broader total financing of approximately $10 million including financing since September 30, 2011. Our shares outstanding at September 30, 2011, were 8.6 million, up 1.5 million from 7.2 million at September 30, 2010. The increase in shares outstanding is primarily due to financings closed on September 30.

With that brief overview, I'll turn the call back to Chris for concluding remarks.

Thank you, Ken. As you can see, we have transformed Arrowhead this year and are well under way to fully integrating our subsidiaries into one operational company with multiple products and technologies.

Our ability to create value has been substantially enhanced by growing strengths which include -- one, unmatched capabilities in small RNA therapeutics that position us to have an outsized impact on diverse markets with this new therapeutic modality. We have combined what Roche invested over half billion to build with our own technologies to create something quite special. Two, a platform anti-obesity technology that we see as revolutionary in terms of efficacy and mode of action. This program has been built in an extremely cost effective manner and we expect to hear from the FDA any day about starting and M.D. Anderson funded Phase I clinical trial. Three, a Management team and Board with deep -- with very deep drug development, regulatory and business development experience. These new capabilities will increase the quality and speed our programs. Four, state-of-the-art facilities that we could not have afforded to build. Roche invested many millions of dollars in equipment and infrastructure that we can use across all of our programs. Five, capital resources that include a $15 million facility that we can draw on at our own discretion as needed over the next three years. Six, assets and capabilities that are of value to larger biotech and pharmaceutical companies that will serve as the basis of partnerships and collaborations. These deals are intended to bring in non dilutive capital to help fund our operations and internal pipeline development.

Needless to say, we are all very excited about what we are building at Arrowhead and I truly believe that we are changing medicine. Thank you for your interest and I would now like to open the call to your questions. Operator?

We will now begin the question and answer session. (Operator Instructions) At this time we will pause momentarily to assemble our roster. (Operator Instructions) And our first question comes from Greg Greenberg. Please go ahead.

Yes, hi. Three general questions. One is if you can give us any updates on Unidyme as far as the royalties or milestones you might receive?

Sure. We have not received any milestone payments or royalties from Unidyme. We have not expected any at this early time. As you know, as part of the consideration of the acquisition, we received shares of Wisepower -- they are publicly traded -- but we have not received any additional consideration as of yet.

Okay. And then second question had to do with the Cerulean, I guess, partnership if you would call it. Obviously looks like they've done a good job fundraising and have been successful in multiple rounds. How similar is that delivery technology to Calando?

That's a great question, thanks very much. Cerulean has been successful, they've got a very powerful and well regarded [stable of VCs] who are funding them. They've got a good management team and if we don't say so ourselves, we think they have some good technology they are bringing to the clinic. That platform is cyclodextrin-based just like RONDEL is, but beyond the backbone it's really a separate delivery system. Ours is optimized for nucleic acids and what they have now is optimized for small molecules. We can do whatever we want with the nucleic acids; they are not able to use that system for nucleic acids. So it is segregated fairly clearly in the marketplace.

Okay. Any actual financial details that you can disclose at this time as far as what we could earn if that program advances and possibly is approved?

I can't give you any -- I can't handicap when those milestone payments would be realized and how much they would be. I can tell you this, though, we of course believe in the technology. We think that their choice on the Phase II is a good one and so we are bullish on what they're doing but I can't give you any more guidance beyond that.

Okay, thanks. Then the final thing for this set of questions basically just has to do with Tekmira. I think when you made the announcement of buying out Roche, maybe a few people on the call asked you if you had communication with them as I understood you basically have a sublicense to some of their technology? I wanted to know if it was the next-generation also and just if you wanted to comment on any relationship with Tekmira?

We haven't really talked about that. We have spoken with Tekmira. We do have a sublicense from Tekmira for a class of their LNPs. We have not gone in depth about what class that is. We are -- at least I am bullish on their technologies. I think those LNPs are probably good delivery vehicles for certain organ systems and for certain indications and so we certainly wish them luck. We don't have any formal relationship with them as of now other than the sublicense that we've got.

Okay. I mean, in general as I understand it, most of the programs that are advancing our either using Tekmira or Silence therapeutics. Do you see the success of both or either one of those as a positive for, let's say, RONDEL or a negative or how would you kind of view as those programs go through the clinic?

I see success by any of our quote-unquote competitors as a good thing for the field. This is a very large field, it's not based on an indication, this is pan indication. So if RNAi is going to be the revolutionary new therapeutic modality that we all think it's going to be, there's plenty of room for all of us. There's plenty of diseases that we can all look to treat separately, and so I think that, as they say, a rising tide will rise all boats. I think as all of us begin to show positive data in later stage trials, I think it's good for the whole field and frankly good for medicine. It will drive more interest into the field and I strongly believe that this field is a good thing for medicine; it's a good, new therapeutic for medicine.

Okay. And one more question, it seems like we were able to get into the obesity drug; I'm not sure how you pronounce it, at a fairly low valuation at the beginning. The next sort of phase, the next trial if you will; do you have any estimates on how much we wouldn't put in to keep our share?

Well, so, let's be clear about that. We own, or Ablaris, which is a majority-owned subsidiary of Arrowhead, Ablaris owns this peptide, Adipotide, entirely for obesity. We also actually own a number of other peptides that can be used for obesity. We really own a whole cluster of potential peptides that can be used for obesity, and so while we are working with M.D. Anderson, their exposure to this is solely via milestone payments and royalties. They don't own a piece of this drug, if you will. Now, regarding how much the next phase of this development is going to cost, if we look immediately down the road, which will be presumably the Phase I, once we hear back from the FDA that we are clear to move [into man], that Phase I will be paid for by M.D. Anderson. They will assume all the direct costs; that was part of our license agreement.

During this time, however, we have had a development program looking at next-generation compounds so that continues. That's a fairly low burn, we think it's important for the overall pipeline of our obesity program, but in terms of substantial costs, I don't expect that we would start to incur substantial costs until we get into a Phase II or until we start another Phase I.

Okay. Thank you for all the time.

You're welcome.

Your next question comes from [Jeff Fromm] of Stifel Nicolaus. Please go ahead.

Hi, guys.

Hi, Jeff.

Chris, the Phase I-B, where are we on that?

Thank you for asking on that. We have not given a lot of guidance on where we are with that. We have started dosing patients, we have not given guidance on any interim data or on the number patients that we have dosed, but we have started that.

Okay. So we don't as far as finishing that up, it's too early to comment on that?

To early to comment on that; that's correct. And, again, let me underline what that Phase I-B is and what it's not. The Phase I-B is designed to determine if we can widen the therapeutic window of CALAA-01. We believe that the effects that we have seen at higher doses of CALAA-01 are due to the unmodified siRNA within RONDEL, not with RONDEL itself, and so we are -- we think that we may be able to increase dose further if we pre-treat patients with a lower dose of CALAA-01. Now, going forward when we get into new drug candidates with RONDEL, we will likely not be employing this type of dosing schedule because we can use these -- we can use modified siRNAs and we think that will keep us from seeing the immune response that we have seen in some of these patients.

Okay. Thank you.

And our next question comes from [Todd Aldridge]. Please go ahead.

Hey, Chris. How are you? Just had a question around where we may be with Calando, and just partnering ability there. It seems like on the last update call from last quarter, then with the Roche asset call that that 1B was helpful, as you have said, but not critical. Any update there?

I don't have any updates on that now, but let me give you some more color on the Calando partnering. I started to spend the majority of my time really from April to June on this Roche transaction. There was a very large amount of data and technology and licenses and documents and such, and then from June to October I spent the vast majority of my time -- not only myself but a team of about 10 people. Because we were a much smaller company, just a handful of months ago, that diverted our attention from other things. We think it was a good thing to do because we think what we acquired from Roche is of enormous value, short-term, mid-term and long-term and so we were happy to divert our attention. But what that caused us to do is really take our foot off the gas for other business development efforts, as well as some other programs.

So one of the really nice things about having our deeper and really experienced management team is that we will not have to make those kind of decisions as often. We will be able to do multiple things at once whereas when we were thinner up in Management over the last couple of quarters, we were not able to do that. So we were hopeful that we can really re-double our efforts with partnering not only RONDEL but also the other assets that we've got. And I'll tell you, we also would not want to rush into something when we're about to close a transaction with Roche because our value proposition really fundamentally changed and we were not just a single, albeit we think quite good, technology, we now had a whole basket of solutions. And I think that our posture and our discussions with companies is really quite different with that behind us rather than just RONDEL.

Okay. That's interesting. I mean very respectfully, but it seems like what we've heard about the promise of Calando now, and potential partnering there for quite a while and it seems like there's sort of an ongoing change, if you will, in terms of expectations having been set for potential partnering as we go through successive quarters. So I guess my worry from the outside is if one were to spend all that time and all that money and in due diligence for these Roche assets, why the push wouldn't have been with the most ripe asset for partnering? Obviously, the goal post moved as you said last year so you really do need that clinical data and human in order to make a convincing case to partner. DPC is pre clinical. Calando is nearing now the end of Phase I and I-B, and I think you said that I-B would conclude early part of next year.

I guess to me, it's somewhat concerning that maybe there is something not quite right about Calando in terms of the hope for that because now we have these Roche assets and now there's going to be part of the more bundled sale or bundled approach which might be speak of maybe Calando not being quite what the company has held it out to be.

Yes, I wouldn't categorize it like that. We're not -- let's be clear about this, we're not changing horses. We are not idling Calando or RONDEL and focusing on DPCs. We think that the winner in delivery of RNAi is going to have a basket of approaches. We don't think there's going to be a single silver bullet that will be the best delivery for all indications and for all targets. So it is of great value to us to assemble that basket of technologies and then, within that basket, to work up to optimize those technologies for various indications and we're doing that. We still believe in Calando. Things on the partnering front have moved more slowly than we would have liked, part of that had to do with the market, part of that had to do with a transient change in focus to get the Roche deal done and part of that just had to do with the nature of biotech partnering. We are not backing away from Calando. It's still a priority for us.

Okay. Well, okay. I'll just leave it at that. It just seems like this Calando situation and the goal orientation is almost on an endless loop in terms of setting expectations for partnership last year -- was supposed to be the end of last year and then earlier this year, mid part of the year, it was hopefully by the end of this year. Obviously that's not going to transpire. So it's just very interesting to me that there's always such promise with everything but yet delivering akin to what the goal orientation is. And on that note, there is great promise with Unidyme and potential sales around the corner and then, of course, there's always delays and yet there is no monetization there. So again, respectfully, but it just seems like there's been so much promise with so much revolutionary technology, but yet monetizing any of this has yet to be shown. And for the great assets you have it's just really interesting, the market doesn't really seem to recognize it, given what the stock has done. I mean, it would seem to potentially speak to maybe things not being quite as promising as the company would hold them out to be. Just an outside opinion looking at the stock and then looking at the Company's ability to deliver on goals which really hasn't been what I think most investors would hope.

Okay.

And I also had a question for you on Ablaris, which again seems to me there's a lot of fanfare and a lot of news around that, but if I have it right it seems like the real focus is on the obesity part. The oncology or cancer part seems to be not really primary, but potentially a kind of secondary or side measure as people go through the sort of cancer part of it. So that if there is progression on cancer but yet there is some data showing it's good for obesity, then maybe M.D. Anderson will open it up to a larger sort of focus or trial and I think that Phase I is scheduled for three years from now in terms of the length of that. So is there any way to maybe get the obesity part more focused on or is it will they kind of sit sidesaddle to what happens with the part cancer part of this at M.D. Anderson?

No, the Phase I, as with all Phase I, is primarily focused on safety. Once we see a safety profile that hopefully we are comfortable with we can move into a Phase II. That Phase II could be a diabetes-based Phase II, could be an obesity-based Phase 2 or it could be a cancer-based Phase II. The data will help to dictate on where we move that.

Okay. And then again, not to go back to Calando, but is there any way to even assess when a potential partnership you would hope could get done? I'm trying to be very respectful. I have been a long-time investor and I've seen sort of progress over a number of years and maybe there's more of us on the call. We are still waiting for the [ball] to be validated and for collaboration to happen or partners to validate all this promise. Is there any way to get any sense as to when you would hope maybe you would have enough data to maybe get a partnership done in terms of a timeline on that?

Yes, I'm sensitive to your desire to have that guidance; I'm just not prepared to provide the guidance at this point. As we talked about on the call when we announced the Roche transaction, we have a lot on our plates now to start to bring to partners. Calando is one of those, the DPC's are also part of that and other technologies and so we are still in the process of establishing our longer-term strategy with all of those baskets and so I'm not in a position to provide guidance yet.

Okay. And not to monopolize the call but I have one quick follow-up on DPC which you said on the last call for the Roche assets was ripe for partnering or something along those lines, but yet it's pre clinical. And it seemed like the goal posts moved so that's really partners wanted to see clinical data in humans but yet that is not in human clinical trials yet. I mean, only Calando has that data. So it seems to me out of the basket of all of this stuff given how mature it is, Calando's really the only thing ripe for partnering, if I have it right -- unless something has changed again. Has it changed again so that big pharma is a little bit more open now or is it still they need to see human clinical data?

I think human clinical data is of course the goal for all these. I don't know until we start to speak with a large number of companies how quickly we can establish partnerships with DPC's. We have just started to talk to people about that so it's too early to tell. I think that that's a great technology and I think it is partnerable. Is it partnerable in a week or a month or a year or two years; I don't know at this point.

Okay. So I'll let it go at that, but that was my questioning around Calando is -- I mean, cash burn now has gone up probably near ten-fold and so my question and being very focused on Calando is that is to me, it seems like the only thing that's potentially ripe enough to get money in the door, given that cash burn has gone up so much, hence my worry about further dilution to all of us shareholders because there's really no meaningful money coming in. So we'll be subjected to endless capital raises and dilution as we've seen for the last several years and that these partnering goals on Calando for money coming in, cash coming into offset this is just another year away when we thought it would be this year like we thought it was last year. It's just again, it's just, I think a very important part of the story as it was to help offset the cash burn and that's why I'm focused on it.

Our cash burn has not gone up tenfold. It has gone up but not nearly to those extents.

The Roche assets, okay, if you guys were burning -- didn't the Roche assets, didn't you say that basically the Roche asset -- to maintain those would be roughly about $8 million to $10 million a year, and before pre-Roche I think there was probably a cash burn around the company about $1 million or so?

No, that's not correct.

Okay. Okay. All right. Well, appreciate the time. Wish you guys the best of luck.

Thank you.

(Operator Instructions) Having no further questions, this concludes our question-and-answer session. I would now like to turn the conference back over to Chris Anzalone for any closing remarks.

I thought you would get it this last time. Thanks very much for listening on the call today, everyone, and I wish everyone a happy holidays. Bye-bye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.