Brainstorm Cell Therapeutics Inc (BCLI) 2015 Q2 法說會逐字稿

Good day and welcome to the BrainStorm Cell Therapeutics second-quarter 2015 earnings results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Michael Wood of LifeSci Advisors. Please go ahead, sir.

Thank you and good morning. This morning, BrainStorm announced financial results for the second quarter ended June 2015. If you have not yet received the news release or if you would like to be added to BrainStorm's distribution list, please visit the Company's Investor Relations website at www.BrainStorm-Cell.com.

Before turning the call over to BrainStorm's management team, I would like to remind you that information we are about to discuss includes forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties. The Company's actual results could differ materially from those discussed on this call. Factors that could contribute to such differences include but are not limited to those items noted and included in the Company's SEC filings, including the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The forward-looking information that is provided by the Company on this call represents the Company's outlook as of today and the Company does not undertake any obligation to update forward-looking statements made in this call. Subsequent events or developments may cause the Company's outlook to change.

At this time, it is my pleasure to turn the call over to Dr. Tony Fiorino, Chief Executive Officer of Brainstorm Cell Therapeutics. Tony, please go ahead.

Thanks, Michael, and thank you, everyone, who are joining our call today. We had another productive quarter and we will give you an update today on continued progress with our [lease] candidate, NurOwn for ALS, as well as a pipeline update. I will recap our most recent clinical and manufacturing highlights before handing it over for discussion of the financial results for the quarter.

Before I begin, I would like take a moment to welcome our new CFO, Yoram Bibring, who is joining us for the first time on an earnings call today. Yoram joined BrainStorm on July 30, bringing to us more than 25 years of financial leadership in the healthcare and technology industry and a track record of creating shareholder value. He has served as the CFO in both the biotechnology and healthcare services industries and has extensive experience with companies having both US and Israeli operations. Yoram will be based here in New Jersey but will be spending time in both the US and Israel, and we are looking forward not only to his leading our finance operations, but also to his assuming a key role in Investor Relations. We are excited to have him aboard and he will review the quarterly financials in a few minutes.

Most of you should have seen the press release on Tuesday of this week announcing that we have completed enrollment in the ongoing randomized double-blind placebo-controlled study of NurOwn in ALS. This is a very meaningful milestone for the Company as it represents the culmination of an enormous amount of work dating back several years, including separate tech transfer processes to two manufacturing sites and coordination of many logistical issues in producing and distributing ourselves in the context of a randomized blinded study.

I would like to think not only the BrainStorm team, each and every member of which contributed to us getting to this point, but our partners and collaborators as well, including the investigators and staff at our clinical sites, the staff at our manufacturing sites, and our CRO, PRC Clinical.

And of course, I must acknowledge the ALS patients who participated in the study, or who were not able to participate for whatever reason. It is only with their participation in these studies that treatments for ALS can be found.

As a reminder, this is our first US study and also the first placebo-controlled trial of NurOwn. The primary employer is safety and tolerability, and while the study is not designed or powered to prove efficacy, we are looking for positive trends in ALS FRS and lung function. With enrollment complete, we continue to anticipate the final administration of [cells] or placebo in early October, and so the six-month follow-up period would bring us to our last subject, last visit early in the second quarter of next year.

After that, we anticipate closing out the sites, locking and scrubbing the database, and would anticipate topline results to be available within a few months after. We also expect a second data safety monitoring board review during the fourth quarter, although we can report that we've not seen any treatment-related serious adverse events in the study to date.

We are also making progress preparing for our multidose trial in Israel that will incorporate several manufacturing approvals, a production cycle shortened by one week, stability going out 72 hours, and perhaps most importantly, the use of cryopreserved cells that will allow us to produce all three doses from a single bone marrow aspiration. We have the protocol and investigational medicinal product dossiers or ISPD ready and are getting the rest of what we need in place over the coming weeks in order to be in a position to submit all the materials to the Ministry of Health in Israel, barring any unforeseen delays.

We have discussed on prior calls the Phase 2a data that were presented at the American Academy of Neurology meeting in April and the International Society for Cellular Therapy meeting in May. To briefly summarize, across the Phase 2a and the prior Phase 1/2 study, we have seen a good safety and tolerability profile. We also saw very encouraging signs of efficacy with subjects receiving -- who received intrathecal administration, showing a reduction in the rate of progression of 50% or more at six months, whether assessed by ALS FRS or forced vital capacity.

To put that in context, a survey of ALS-treating neurologists showed that they would consider a 20% to 25% reduction in the rate of ALS FRS progression to be clinically meaningful.

I want to discuss for a few minutes the pipeline. We are planning to move towards an IND filing for NurOwn in the treatment of progressive multiple sclerosis, which unlike the more common relapsing remitting MS, is an unmet medical need. We believe progressive MS is a good indication to target for several reasons.

First, we have positive preclinical data in the mouse experimental autoimmune encephalitis model of MS. But perhaps a more important part of the rationale is that there are many immune-modulating drugs that work well in relapsing remitting MS that have failed in progressive MS, suggesting that the neural degeneration seen in progressive MS has become independent of autoimmune phenomenon. Thus, we believe that providing neurotrophic factors via NurOwn can have a positive impact in the disease.

The next step in this program will be a pre-IND meeting which we hope will occur in the fourth quarter.

We are also launching a preclinical program in stroke, in which we will be looking at both intra-arterial and intro parenteral administration of NurOwn in the middle cerebral artery occlusion model, which is a commonly used animal model of stroke. The rationale for the stroke program is based on our understanding that NurOwn cells have, in addition to their neurotrophic and immunomodulatory properties, angiogenic effects driven by the secretion of vascular endothelial growth factor or VEGF. All three of these mechanisms could play a role in treating the aftermath of stroke. We are excited to launch this new project.

With that, I would now like to turn the call over to Yoram for an overview of the Company's financial results.

Thank you, Tony. Good morning, everyone. I am excited to have joined BrainStorm during this time when the Company is so well-positioned to move its ALS program while growing its pipeline in stroke [specificity].

Moving on to the financials, we have no revenues in the quarter. Research and development expenses for the second quarter were approximately $1.4 million compared to $1.25 million in the first quarter of the year, and approximately $900,000 in the second quarter of 2014. The increase in research and development expenses for the second quarter compared to the first quarter was primarily due to an increase of $170,000 in the cost associated with our Phase 2 US clinical trials, net of increase in grants received from the Chief Scientist of Israeli Ministry of [Economy].

General and administrative expenses were approximately $1 million, unchanged from the first quarter, and approximately $600,000 higher than G&A expenses in the second quarter of 2014, but amounted to approximately $400,000. Included in the G&A expenses in the second quarter were stock-based compensation expenses of $314,000 compared to $340,000 in the first quarter of the year and approximately $170,000 in the second quarter of 2014. Other factors that contributed to the increase in G&A -- in the G&A expenses compared to 2014 -- related to expansion of the management team, opening the new US offices and costs associated with the stock listing on NASDAQ.

Financial income for the quarter was $98,000 compared to financial expense of $31,000 in the first quarter, and an expense of $690,000 in the second quarter of 2014. The financial income for the quarter is mainly due to currency exchange gains on a shekel-denominated net monetary asset due to the weakening of the US dollar versus the Israeli shekel, as well as interest received on our dollar-denominated bank deposit.

We recorded a net loss of approximately [$2.26 million] or $0.12 per share the quarter compared to a net loss of approximately $2.24 million on $0.12 per share in the first quarter, and a loss of $2 million or $0.16 per share in the second quarter of 2014. As of June 30, 2015 we had cash equivalents and short-term deposits of approximately $19.7 million compared to $8.5 million on December 31, 2014. We believe based on our current plans that our current cash and equivalent position is sufficient to fund our operations well beyond the conclusion of our Phase 2 trials in the US.

I will now hand you back to Tony. Tony?

Thank you. Let me close by recapping our recent accomplishments. During the second quarter and in recent weeks, we made meaningful progress toward our clinical, manufacturing and corporate milestones. We have completed enrollment on time in our Phase 2 US study with NurOwn in ALS, and expect to have topline efficacy results around the middle of next year. We have made significant steps forward on the manufacturing front and continue to support a number of important initiatives to scale up our process. We are gearing up for our multidose study in Israel.

Finally, we are broadening the pipeline by moving new programs towards the clinic and launching new preclinical programs. We should have meaningful news flow from all these activities over the second half of this year.

Finally, we strengthened the management team with the importance of Yoram Bibring as CFO, which we believe will strengthen our presence in the US equities market.

With that, I will turn the call over to the operator for Q&A. Operator?

(Operator Instructions) Jason Kolbert, Maxim.

Dr. Tony, thank you so much, and I really don't have a lot of questions when you recently spoke. However, I would like you to talk a little bit about the process of cryopreservation. When exactly are you freezing the cells? And then what is the process like on the backside when you thaw them? What I'm trying to do is get more insights into the cost of goods and how this will play out.

And of course, I would like you to link this to the other Phase 2 trial that is going to evaluate multiple doses so that we can get a handle on the linkage once this trial is completed. Thanks.

So, the cryopreservation process occurs after the expansion of the mesenchymal stem cells. Perhaps I should take a step back and review the [manufacturing] -- production scheme.

We begin with the bone marrow aspiration. We isolate the mesenchymal stem cells from that, and then expand them when they have reached the necessary number of cells. We then put them through the differentiation process, which is approximately six days.

What we will be doing for the multidose study is, after the mesenchymal stem cells are expanded, we will be freezing the necessary doses, in this case the three doses that we anticipate using in the study. And then, once those -- when those doses already to be administered, the cells will be thawed, undergo differentiation, and then administered to the subject.

So, from a -- really from a cost of goods perspective, it allows us to leverage much of a significant piece of the upfront costs in terms of the isolation of the cells as well as the expansion phase. And we believe that it would be -- the growth that we see in the mesenchymal stem cells. For this trial we are producing three doses, but we certainly would anticipate being able to produce a larger number of doses from a single bone marrow aspiration, perhaps as many as 10 or 12 doses from a single aspirate.

What this also means for the patient's perspective is a single bone marrow aspiration could generate -- one to two years of doses, and obviously that is a tremendous convenience for them as well. Does that address your question?

Yes, no, it helped me understand the question, thanks. Just talk a little bit with me. This trial in the United States sounds like it enrolls very quickly.

What were the limiting factors? Did it -- was it related to manufacturing? And how are you -- if it is manufacturing-related, how are you going to expand that base so that you can handle a larger trial when this therapy goes pivotal? Thanks.

Sure, yes, the rate limiting steps for enrollment in the US study absolutely was the manufacturing capacity. We were able to produce -- when both of our sites were online, went online and were functioning at full capacity -- approximately five to six patients per month. We know as we think about running larger studies and hopefully eventually commercialization, that we will need a larger manufacturing capacity. And so, this is one of the important initiatives that the Company is undertaking. We are engaged in conversations with several contract manufacturers who -- one of which we will eventually engage to both scale up the process and produce cells for future studies.

In addition, we have an ongoing research collaboration with Octane Biotech, a biotech company based in Canada in which we are working on a bioreactor, which was a different pathway for scale-up and commercialization, so we are pursuing both of these paths in parallel, really as kind of a risk mitigation strategy so that we are certain that we have the ability to produce cells for pivotal study and beyond.

Just help me understand. This is the last question. What would the transfer process look like if you convert to a bioreactor? Do you have to run some type of bridging study to make sure the product is the same?

It would depend very much on the characteristics of the cells. The cells look different, based on our release testing. It's produced by the bioreactors; and I believe that we would run -- we would need to run some kind of bridging study to show that indeed the clinical benefit is the same. So we won't know that -- we won't know the answer to that question until we see what the cells look like produced from the bioreactor.

Dr. Tony, you're awesome. Thank you so much.

[Ryan Sonali, LSA].

Congratulations on a great quarter. Just a quick question here. So I noticed on your recent proxy that you are asking shareholders to vote for a reduction in the number of authorized shares. Could you provide some color or explain the reason for this?

Sure. There is an explanation in the proxy statement which I would refer you to, but just briefly, after the reverse split and uplist to NASDAQ, our authorized share count remains at 800 million shares outstanding. This results in a fairly large franchise pack from the state of Delaware, and the reduction in the authorized share count will allow us to meaningfully reduce the franchise tax that we pay to Delaware.

Great, thanks for that clarification.

Aaron Martin, AIGH Investment Partners.

Can you talk a little more about the preclinical data in progressive MS and in stroke? Is this something we should see a publication on at some point? Just a little more detail if you can.

Yes, sure. So, the preclinical data in MS actually was published. It came out of our collaboration with [Donnie Oakland] at Tel Aviv University. And I can send you that PDF. The mouse model of MS, the CAE model, is actually not -- it is the only model, but it is not considered a great model for progressive MS. Again, unfortunately there is not really a good preclinical model for progressive MS because it is most -- the damage there is immune-modulated and again, in progressive MS, it appears that the neurodegenerative processes are not -- have become kind of de-linked from the autoimmune disease.

In stroke, this is a new area and a new program that we are initiating. So we will hopefully in the fall kick off the study and we will hopefully have results to share -- actually, I don't want to predict how long it -- the duration of the study, because I don't know the details. But either later on this year or early next year we should have results.

Okay. Can you talk a little bit about the multidose trial in Israel in terms of costs relative to the trial in the US?

Sure. Well, so the costs are meaningfully less than the US study for several reasons, one of which -- some of the costs of doing business in Israel are less than in the US, for instance the CRO costs in Israel is considerably less than in the US. The size of the study is smaller by half, and also it's a less complex study and it is not a randomized double-blind placebo-controlled trial. The complexity of running that study with the cell therapy, a costs in the US study that will not be reflected in the Israeli study.

Okay, great, thanks, congratulations on the progress and welcome to Yoram.

At this time, I would like to turn the conference back to management for any additional or closing remarks.

Thank you very much, everybody, for joining our call today and for your interest in Brainstorm Cell Therapeutics. We look forward to continue progress on all of our programs and providing another update to you as we move to the end of the third quarter. Have a good day.

This concludes today's conference. Thank you for your participation.