Geron Corp (GERN) 2010 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2010 Geron earnings conference call. My name is [Crystal,] and I will be your operator for today. At this time all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) I would now like to turn the conference over to your host for today, Mr. David Greenwood, Executive Vice President, and Chief Financial Officer. Please proceed.

Thank you. Good morning, and welcome to the Geron third quarter call. I am David Greenwood. Tom Okarma is with me. This is an earnings-related conference call and we will begin with a summary of the operating results for the quarter. Our agenda then includes an overview of recent operating highlights at the Company and a summary of our operating plans for the remainder of 2010 and 2011.

Following that update by Tom, we will have a general Q&A session. First, two informational items. In the event forward-looking statements are made during this call please understand those comments are made subject to the Safe Harbor provisions of the Securities Act of 1995. Any forward-looking statements involves uncertainty and we refer you to the risk factors detailed in our filings with the SEC. Secondly, participants are currently in listen-only mode. The lines will open for the Q&A. The call will be available for webcast replay, until the end of November, and you can go to our website for instructions.

Revenues from license fees and royalties were up over the comparable three-month period in 2009 and the comparative number of nine months year-to-date is also up over 2009. But, at the $2.5 million for nine months, these numbers are not overly significant. Other cash inflows to the company during the quarter included $220,000 of interest income, a smallish amount, that reflects the positioning of the yield curve. Our marketable securities portfolio remains intact with no write-downs or provisions for write-downs.

Third quarter R&D expenses were flat period-to-period but that is coincidental and mostly a function of timing differences in purchasing drug product and funding clinical trial sites. Nine month R&D expenses were slightly below the 2009 number, but again, coincidental and for the same reasons. G&A expenses were up for the quarter and the nine-month period, which reflects consulting expense and of course non-cash stock-based compensation expense.

We end the quarter with $146 million cash on the balance sheet. Our current running rate, net burn number, is in the $48 million range annualized. So, the company is funded for the near-term. Tom?

Thank you, David. Good morning, everyone, and thank you for dialing in. The big event in the quarter was really the October 11 announcement that Geron initiated the world's first embryonic stem cell trial in patients with sub-acute complete thoracic spinal cord injury. This was obviously a major milestone for Geron and for the field. We got a great deal of global news coverage, Diane Sawyer's evening news program, we were covered in China, Japan, the UK, and all over Europe. So, it was a nice celebration of a lot of work having been accomplished.

So, currently we have two sites in the US that are enrolling patients -- or screening patients. We expect to initiate two more before year's-end and two to three more early in next year and these sites will be with us for the complete program as we progress from low-dose complete thoracics through dose escalation studies and advancing the study into the cervical patients.

While we will not be commenting patient-by-patient or week-by-week, given that this was the first subject I will comment that the injection was completely uneventful. Patient is doing fine. And the first repeat MRI showed no deleterious impact from either the injection or from the injected cells, which is precisely what we had hoped and expect. So, we're off to a good start.

Secondly, in early October we announced the launch of a GE Healthcare human cardiomyocyte product for drug discovery and tox screening. This is really another milestone for Geron in the sense that it is the second royalty-bearing to Geron product that we launched this year. The first being the Synthemax flask for growing, without feeders or attachment proteins, embryonic stem cells. That's been a co-development project between Geron and Corning Glass.

So, the GE cardiomyocyte product is a step forward generally in the sophistication with which drug discovery and tox screening can be performed. You may know that before this product was launched, the only way to do tox screening was with animal Purkinje fibers, which are problematic. Their spectrum of sensitivity to different ion channel blockers does not resemble that of man. There is a lot of extra work one has to do to normalize the baseline before you get the read in these older animal assays. These are completely normal, human cardioimyocytes and they can be used for a variety of screens from manual patch clamping, which is the standard way that drug companies examine the impact of a drug on calcium or ERG or dual-channel blockers all the way to high content screening, where you can use some very sophisticated imaging software to query lots of metabolic pathways within the cardiomyocyte cell.

I think moreover, this is additional evidence that, once again, cells that we make from embryonic stem cells are in all respects completely normal. You may remember that we are coming to the end of a major in-life pig study, these are large pigs. We already have good evidence that after infracting the pig, waiting for a month, and injecting the human cardiomyocytes into the infarct zone we have significant improvements in contractility. We're waiting to receive the telemetry data, which will hopefully demonstrate that we do not induce arrhythmias with these injected cells.

So, that report will come out we think in the first quarter of next year. So, that project is going really very, very well. The next cell type that will be commercialized will be the hepatocyte, which probably has a greater market opportunity given that this is the master cell that will be used to determine, not only the effect of the drug on human liver cells, but the way in which human liver cells metabolize and react to the drug. So, that's coming in the future.

Then thirdly we announced, in September, progress with our collaboration on chondrocytes. We had initiated this project with UK funding at the University of Edinburgh. Brendon Noble, the principal investigator moved to the University Campus Suffolk, where the project is now underway. We have retained significant funding from the UK, from the Suffolk City Council, County Council, from the East of England Development Agency and from the University Campus Suffolk itself.

You will recall that we've reported that these chondrocytes, which are articular, meaning they are designed to repair joint spaces, showed excellent cartilage repair in an injury into the knee of non-immune-suppressed rats. And we kept these animals alive for nine months and, at the end of that period, you could not tell unless you used a human probe, where the rat cartilage ended and the human cartilage began. There was full integration and an absolutely normal biopsy and of significance is the fact that these cells restore subchondral bone, which has never been demonstrated by any cartilage cell injection before.

I want to emphasize again that this cell type does not even need immune suppression in the xenogenic setting. So, this is also being done now with the large animal model, the sheep, at University Campus Suffolk, which is obviously the iron test of these cells in a larger animal and a weight-bearing joint. This is a testimony to the very protected immune status of these embryonic stem cell-derived cells. We have demonstrated that human embryonic stem cells, the OPC1 product for spinal cord injury, cardiomyocytes, and now chondrocytes, are just not recognized by the human immune system.

We are on track in terms of other ongoing projects to initiate three Phase 2 trials of our telomerase inhibitor drug, imetelstat, a large randomized Phase 2 study in breast cancer, and two smaller Phase 2s, one in multiple myeloma, and another in essential thromboycythemia. That will all happen by the end of this year. We are enrolling very well in the ongoing randomized Phase 2 for non-small cell lung cancer. There are now 24 US medical centers that are screening and enrolling subjects in that trial

We've been very busy presenting the company. I'll just run down the talks that we've given. I gave a plenary lecture in Amsterdam at the Biospine conference in early September. We presented at Rodman & Renshaw, Stifel Nicolaus, and UBS, all in New York, in September. I gave a plenary at the World Stem Cell Conference in Detroit in October. And that talk was filmed by C-SPAN, which has since televised that lecture. We presented last week at the Newsmakers in the Biotech Industry meeting in New York. I'll be speaking next week in Singapore, giving a plenary at the Stem Cell Society Symposium. We'll be presenting at Lazard in New York in November and we will be presenting at the JPMorgan Healthcare Conference in San Francisco, in January.

So, this is going to turn out to be a very good year for the company. We will literally have achieved all of the company's milestones that we set out to achieve at the beginning of the year, which in summary are initiating four Phase 2 studies of our cancer drug imetelstat. Completing the final evaluation of minimal residual disease and disease-free survival in our Phase 2 AML study of the vaccine and that will be presented at the ASH meeting in December. We've initiated the Phase 1 trial on spinal cord injuries, and we're well on our way to execute and finish the remaining pre-clinical studies in animals that will enable us to expand the trial to the much more common cervical injured patients.

We have completed the in-life phase of the large animal efficacy study for cardiomyocytes. We are now manufacturing cells for the IND-enabling studies. And of course I should mention that in the context of the GE Healthcare product launch, we have successfully transferred the manufacturing process from Geron to the UK. So, those cells are being made in GE Healthcare's facilities under our direction. We have now established proof of principal in a diabetic animal for our embryonic stem cell derived islets. It's a very nice study showing that the cells engraft and after their endogenous islet cells are destroyed with the drug streptozotocin the animals for weeks and weeks remain normal glycemic until they're sacrificed to examine the graft.

We will complete the initial proof of concept study in large animals for chondrocytes by end of this year, and we have pushed the button to begin our IND-enabling studies on our telomerase activator small molecule GRN510. So, a good year. This is now a clinical development company on both sides of the aisle in oncology and in regenerative medicine. And with that I'd welcome your questions.

(Operator Instructions) Your first question comes from the line of Joel Sendek, with Lazard Capital Markets. Please proceed.

Hi, thanks a lot. So, for OPC1, it seems like you're going to have a lot of sites up. Can you tell us what your anticipated rate of enrollment might be and when we might get any sort of data from any of these patients? Thanks.

Well, for the beginning, we are limited to one patient a month by the FDA and that limitation, a, will be lifted, we assume, after three or four patients are enrolled. The rationale was to be sure that the trauma of the injection would not exacerbate any of the patient's symptoms. And as I mentioned, we have good evidence now that the first injection did not do that. So, as soon as we have two or three more patients enrolled, we will petition the agency to remove that governor from enrollment, which will enable us we hope to enroll this first study of up to eight patients by middle of next year.

Now in terms of data, we are going to wait until the appropriate follow-up period is accomplished for the whole group before we say anything about safety, feasibility, or any efficacy that we see. And you have to remember that what we're doing is we're trying to rebuild, with living cells, the injured spinal cord. And from the animal studies, we know that it takes four to six months before these cells have fully amplified numerically -- they divide -- before they have fully migrated within the lesion and before they have matured from the progenitor stage, which is what they are at when they are injected, to fully differentiated integrated and myelinating oligodendrocytes.

So, this will require some patience, not only to achieve that follow-up period for the group, but also equally important, to determine if any clinical improvements are durable. So, it'll be a while before we are reporting any data. I think the next major move for us will be to leverage the safety data that we generate, hopefully, in this first low-dose thoracic cohort to start dose escalating in the thoracic and in the cervical cohorts. So, as you remember the thoracic injured patients are relatively rare because of car air bags in this country. But we started there at the insistence of the FDA, which we agreed with, because, if there's any toxicity, which we don't expect, but if there is any it will not be a significant long-term impact on the patient because the thoracic injury is very far away from the respiratory centers.

So, we do need to show safety in the thoracic patients before we move to the cervical patients. And frankly it's the cervical patients where we do expect to see a greater amount of efficacy. We've seen that now in the cervical animal studies. And the reason for that is, in the cervical region, there are many cell bodies and these glial OPC1 cells do more than myelinate. We now know that they induce neovascularization, and they also secrete families of biologically active neurotrophins.

And the cell body sparing that we demonstrate in the animal model is not due to -- in a cervical region, is not due to myelination, it's due to these neurotrophins that the cells secrete, which enable the cells themselves to resist the toxicity of the injury.

Okay, that's very helpful. Thanks for the detailed answer but kind of just to sum it up then, for the first eight patients it doesn't seem likely you're going to get anything maybe for at least a year, could it roll into 2012 before we see something?

No, I would say you'll hear something about this in the third or fourth quarter of next year.

Okay, great. Thanks a lot.

Sure, you're welcomed, Joel.

Your next question comes from the line of Mark Monane, with Needham & Company. Please proceed. Mr. Monane, your line is open.

All right, your next question comes from the line of Ren Benjamin, with Rodman. Please proceed.

Hi, good morning everyone, and congratulations on this very incredible feat. It's really a testament to you guys and your efforts. And I guess just to start off with -- regarding the spinal cord trial, is there any additional details, Tom, you can give us regarding the first patient. Obviously you don't want to get into too much, but can you give us a sense as to where the thoracic break may be and was it -- how severe of an injury was it and has the patient already been discharged from the hospital or do they stay there throughout the first months? Can you give us any color along those lines?

Very simply, Ren, this patient was spot-on within the pre-determined eligibility criteria. Which means that first, the injury was severe, meaning it's a complete thoracic injury, yet the comorbidity, in other words damage to lungs or abdominal organs, was minimal so that the likelihood of the patient surviving the trauma was high, so that we have a follow-up period, that's the rationale for that. Clearly we were able to visualize the patient's entire central nervous system with MRIs so that there was no occlusion by any rod placements.

Generally speaking the way spinal cord injury is treated in the United States today, they first get stabilized medically at the local hospital. They are then medevaced to one of the neurotrauma sites in the country, and obviously all of our sites are neurotrauma referral centers. And when the patient is received there, either there is further stabilization surgery or verification that the fracture or displacement has been stabilized and then the patients are carefully examined by multiple physical exam modalities and MRIs and evoke potentials, to confirm that the patients are indeed complete thoracic injuries, meaning between T-3 and T-10 as the last functioning segment. And that's all pre-specified in terms of the protocol.

After that point the patients receive a second MRI and if they thus far qualify, then informed consent is applied on multiple occasions with patient advocacy to explain to the patient other options besides enrolling in the trial. Then, if the patient consents more than once, another MRI is performed and then on day 14 after the injury, the actual injection takes place. Now in terms of the follow-up, this really is a critical issue. So, all of the clinical trial sites that are a part of this trial, not only have premier neurosurgeons and neurotrauma support services, but they have affiliated rehab centers, which is where the patients go within a week or two of the injury for rehab and stabilization post-op.

That can take place anywhere from seven to 21 days, after which time the patients are returned to home. So, that's a pretty dramatic change in the way severe spinal cord injury is treated in the United States. They used to be in rehab centers for months. Well, in complete injuries there's really no benefit to that, so, once the patients are medically stable, they're discharged to home. And that's what adds another level of complexity to this trial, because we're following these patients with nine MRIs and monthly physical exams for the first year. Which means that a trained group of investigators gets into a car and drives to the patient's home every month to apply these instruments, physical exams, and such, in the patient's home.

And this is critical for both the demonstration of safety and for the reliable detection of any clinical efficacy that these exams, which are very laborious and take hours, are performed exactly the same way, hopefully by the same individuals for each patient over time. We have a central database where all of that information is channeled and analyzed by a yet again another set of neurosurgeons. All of the MRIs that are taken throughout the study at multiple centers are likewise evaluated centrally. So, what we're trying to do is minimize any observer- or temporal-related bias in the data collection. Both because we need to document safety, no progression, as well as we need to be really sure if we see some early signs of efficacy that that is real.

And that's why the inclusion criteria are so strict that this be a bona fide complete injury for which spontaneous recovery is vanishingly rare.

And so following up on that, Tom, I'm to assume that the patient has had their -- I guess it would be their fourth MRI after the injection?

No, no. They have an MRI after day one, after day seven, which is the MRI I reported on earlier, and then it's monthly.

Okay, okay, got it. And I guess just now that the first patient is enrolled, and I think we've talked about this in the past, that maybe things have changed now that the first person has come through, what in your mind are still the gating factors for the enrollment of patients. Is it still the stringent criteria, since the first patient has come through, maybe now there's a greater awareness and a greater interest, not just from sites but also from potential patients? Do you have any sense as to what's happening in the community and how it could affect enrollment?

Well, I think one of the hidden benefits of being put on hold again was the period of time during which the community became aware of this option to treat severe spinal cord injuries. So, I think it's pretty evident that a lot of kids in grade school know about the embryonic stem cell spinal cord trial. So, I think that there's adequate dissemination of this availability out there. I can tell you for certain that all of the spinal cord patient advocacy groups have this trial front-and-center on their websites. And what normally happens in the horrifying period right after such a devastating injury, is that family members immediately contact the patient advocacy groups wanting to know where they should go, what should they do, what are the available opportunities.

And these are the folks who, advocate would be too strong, but they allow or enable the family to become aware of where these trials are being done and what the status of them is. I don't know, Ren, that having one patient in under the bar is going to significantly help subsequent patients' decision-making or not. I mean, this is such an emotionally wrenching event to happen to a completely healthy normal active 25-year old or 35-year old, that's the general age range at which these severe injuries occur, that it's hard to predict.

And I think each patient is going to have their own story, quite honestly. I think the point you're driving at, Ren, is valid. After we're able to report that the first six patients have had no untoward effects over a period of time from this intervention, I think then the barrier to entry will be significantly lowered. But until we have data to report, all of the issues are really defined and controlled by the regulatory clinical protocol that is rigorously designed for patient safety.

Got it. Just switching gears to the GE collaboration, can you talk a little bit about just maybe some of the details of the collaboration? Is it a royalty-based collaboration or is more sort of profit sharing 50/50? How are these -- in your talks with GE -- how are these cells going to be priced? And it seems like the numbers or the potential market here could get quite big especially when you're screening for toxicity. And so, is it possible to just give us a better sense about this?

Well, Ren, I'll answer those questions in sort of reverse order. I think you can appreciate that GE Healthcare can't engage in a technology development program if they don't anticipate that the market size warrants that. So, as you know, we've known of this application, this utility for the cells, for metabolism tox screening for forever. And we wanted to work with the best partner and that's someone who brings sophistication, brings technology platform, knowledge awareness, and marketing distribution capability. So, they were a good choice, I think.

I will tell you we modeled the different applications and markets that we thought would make sense and GE did the same, much more thoroughly than Geron can do that. And I will tell you their numbers end up more aggressive than ours. I can't disclose what they assume the market -- the respective markets and applications will be. But they're enthusiastic. I think, with respect to guidance, I have to say we'll see what we book quarter-to-quarter and how it grows. Tom mentioned that hepatocytes will follow. And that's a very important cell, obviously, and -- but it doesn't stop with two cell types.

And there are potentially more applications than just doing retrospective studies with known drugs and trying to amplify from there and so on. There's a number of ways these cells can be very useful and one of the things that GE is doing is to establish some relationships with the larger pharmaceutical companies to explore all of those applications. So, they're beta-testing a number of different utilities and I think we'll learn about those as we go forward.

We know more than I can describe right now because obviously we work closely with GE on this. How are they selling? In a couple of classic ways. They're sort of catalog items at the end of the day. You can buy the cells. And at the same time you can subscribe to a relationship with GE and they'll work with you, as I was describing a minute ago. So, we're delighted that this is off the ground in good hands and we'll see what develops from it.

And all of that is correct, I'll just make one addition. We're highly confident that this is going to be a successful first product launch because we had these cells pressure-tested by ChanTest, which is a commercial concern, not connected to either GE or Geron, that performs cardio tox screening. So, they did head-to-head comparisons of these cells versus the dog and rabbit Purkinje fiber system and for a number of important commercially relevant parameters, these cells were superior. So, the product is distributed as a frozen stab of human cardiomyocytes which, when thawed and cultured, are certifiably good to go for a period of two to three weeks after thawing. So, it's a very simple point-of-sale. It's shipped frozen and the user can put it in their deep freeze for six months or use it the next day after receipt.

So, there's user-friendliness in all of this. So, we'll see how this progresses. There might be opportunities to alter the format of the cells, such that the product is sold a different way, that would make it a little more amenable for medium throughput screening. And that would considerably enlarge the market opportunity. That's particularly relevant for the hepatocyte product. So, it's early days. We are not going to make predictions. But we are confident in the functionality of the cell and its superiority to all of the standard methods of cardio tox testing that are available worldwide.

And maybe just as a follow-up and maybe I just missed it but when do you think the sales will begin and is it -- and how should we view the collaboration? Is it a royalty, is it something more that you're providing the cells for a cost and then they're selling it on their own, can you give us some sort of sense there?

Well, you can buy the cardiomyocytes today and our structure is a license arrangement and it is royalty-bearing.

But they are manufacturing the product. We transferred the cardiomyocyte manufacturing process to them last summer.

Got it. Okay. And I guess just moving on to GRNVAC1 and the expected results, are we still expecting those results at ASH this year and just sort of your thoughts regarding the program going forward.

Yes, I mentioned in my comments that the data will be presented at ASH. They're now embargoed so I can't talk about the data. They're positive. And we're not going to comment much today on what the development path going forward is. Clearly the commercial potential of VAC2, the embryonic stem cell-based dendritic cell product far exceeds that of VAC1 for all those reasons that you know as well as I. Moreover, the cost of goods is much lower for VAC2. The ability to load VAC2 cells with multiple cancer antigens is quite real. VAC2 will be a frozen ready-to-go ready-to-be injected preparation, unlike VAC1, which is frozen but it's prepared on a patient-specific basis.

And unlike VAC1, VAC2 is unencumbered by patient genetics, patients' disease, or patients' prior chemotherapy. So, I think from those comments you might be able to guess what we're thinking.

Got it. And then just one last question, the non-small cell lung cancer trial that's ongoing, can you give us a sense of how that's progressing and when enrollment may be complete, when we may see some data?

Well, the program is powered, structured and sized to have the first significant readout in mid-2012. And thus far we are on target for that.

Okay great. Well great. Thank you very much and congratulations.

Thank you, Ren.

And our next question comes from the line of Mark Monane, with Needham & Company.

Hi, can you hear me?

Yes, Mark. What did you do, fall asleep?

No, I'm having technical challenges with the buttons on the phone, which brings me to my next question on challenges in conducting the Phase 2 trials. You spent a lot of time updating us, thank you, on the embryonic stem cells, how about an update please on the progress of any of the Phase 2 trials especially any update on the difficulties with the quadruplex I think you described before, has that been resolved?

Well, I mentioned that we are now enrolling, at 24 US medical centers, the randomized Phase 2 non-small cell lung cancer. And that the enrollment kinetics are going fine. Remember that we are simply taking Class 3B and 4 non-small cell lung patients, putting them through standard of care platinum doublet induction and then randomizing them two-to-one, into the imetelstat arm versus standard of care. So, there's very little alteration in the standard flow of patients with non-small cell lung cancer, which is why we don't expect any issues in the enrollment kinetics.

The issue you ask about, the G-quadruplex, we have structured and arrived at a dose and dosing interval for the non-small cell lung that in our Phase 1 studies, after which this design was modeled, have minimal toxicity to bone marrow. Here, unlike the breast cancer program, patients are being treated with imetelstat in the maintenance setting, with imetelstat alone. Other than the small minority of patients who will come in with adenocarcinoma, who will be induced with Avastin as well as platinum doublet. So, if those patients are randomized to the imetelstat arm, they get imetelstat plus Avastin in the maintenance arm.

And we have shown that there is no additive toxicity between imetelstat and Avastin. In fact, it's the opposite. There's actually an anti-VEGF activity that we've demonstrated from imetelstat. So, we don't expect to see any dose-limiting tox that would prevent us from having patients in the non-small cell trial be treated with multiple cycles of imetelstat and obviously, this is a direct test of the cancer stem cell hypothesis because this is designed to de-bulk the tumor with standard induction chemotherapy times four, and then, in that de-bulked setting, use imetelstat to wipe up the residual chemotherapy resistant cancer stem cells.

And that's why we've powered this study with a hazard ratio of 0.5 to demonstrate a doubling of the progression-free survival in this disease. The breast cancer study is similar but here we're adding imetelstat to the standard of care and this study is also designed after a very successful Phase 1, which we presented at ASCO this year that showed a 53% response rate with a median duration of 21 months. In that study we were able to show better early uncontrolled small sample results even though there was a taxol sparing effect gleaned by the use of imetelstat.

And we have since, this hasn't been published yet, but we have demonstrated synergy in vivo between taxol and imetelstat. So, the simple take-home point is that all of the elements of these two randomized studies are based on both Phase 1 clinical trial experience in man, and in vitro evidence demonstrating synergy and the absence of additive tox of imetelstat with the companion drug.

That was helpful. And then in follow-up also on the safety issue, as -- when one says safety, one is left with the very challenging I think philosophical and technical problem when one has to disprove something that doesn't exist or prove something that isn't there, when we're thinking about safety. As a physician, which I know you are, and thinking about the embryonic stem cell trials, are there going to be any earlier indicators, which may suggest that the safety of the product, meaning that do problems happen earlier rather than later and if there are no problems early or later, how do you think about the safety issue overall?

Sure, that's a good question because everybody is worried about that, right? So, you're right to ask the question. So, the first index of a form of toxicity would be from the MRIs. So, if we see multiple small cystic structures that would be worrisome. Because we have baseline and an immediate post-injection MRI that should delineate the beginning of the initial cyst, okay? And if we should see over months the formation of growing secondary cysts, that would be worrisome.

And if those were consistent with symptoms of alodinea, increased neuritic pain, or spreading of the area of anesthesia or dysfunction, we have a protocol to intervene surgically, to reduce the swelling in the cord. Conversely, what we would hope to see, is a diminution in the size of the central cyst, which is what we saw in all the animal studies, because the cyst fills with these human cells that are remyelinating the demyelinated axons. So, that's the purpose of the MRIs. To look for structural evidence of either adverse events that may or may not be reflected clinically or histologic -- radiographic events suggestive that the graft is taking and expanding.

The physical exams though are the most direct way to determine if efficacy or toxicity is having a clinical impact. So, we are monitoring these patients routinely with a battery of neurologic algorithms, physical exams, evoked potentials, new instruments that have been developed, some by our principal investigators, so these patients are getting incredibly aggressively scrutinized, from a neurological perspective ,monthly. So, the comfort we have in terms of the patients, is that we will be using every available intervention to detect early any adverse events and to detect and monitor any positive clinical impact.

So, the scrutiny that these patients are undergoing, which frankly is one of the issues in the informed consent form because these patients normally go home and they're not seen again for awhile. It's quite the contrary with patients that are in this trial. For some, that's an attraction. To be monitored closely with a therapy that in animals was very promising. For others, it's a burden because they have to be examined and come back to the hospital for repeat MRIs more often than would be the standard of care.

That's very helpful. Thanks very much for the added information. We'll look forward to the progress going forward.

And the next question comes from the line of Steve Brozak, with WBB Securities. Please proceed.

Hey, good morning, gentlemen. I'll apologize for phone problems here but it seems like everyone is having difficulties on our end on the east coast. I want to basically ask a question that is 90-years old really because about 90 years ago the advent of insulin took place. And there was a real problem in the very beginning in terms of manufacturing when people realized the great potential that it had and there was a bottleneck that took place. And that bottleneck really put a damper on the expansion, the research, and the utilization for patients and obviously there's many, many different indications. Can you address what type of issues you might see -- obviously if we should start to see some results that are positive in addressing that bottlenecking issue? And the second and more important question would be, given positive results, there'd be a large number of potential collaborators that would be willing to work with you. What kind of bottlenecking issues might you see there as well?

Well, first of all the clinical development plans for all of the embryonic stem cell programs are integrated with the manufacturing plans. So, to be trivial, we already have stored here enough cells to get through the entire Phase 1 program in spinal cord injury. So, we will always be ahead of the utilization curve for the clinical demand. That doesn't include commercialization, I'll come to that in a minute. We are also taking steps to increase the efficient utilization of the cells we've already manufactured.

So, for example the syringe positioning device that we invented and qualified and was part of the IND acceptance, has a commercially available needle, which has a very large dead volume. And so we have a 2x loss of cells due to the dead volume in the needle compared to a new needle that we are developing that has a few microliters of dead volume. That actually has a huge impact on the consumption of cells in the clinical trial. That's an example of our investment in process development sciences.

Another example is the Corning relationship. So, the Synthemax surface, which is today commercialized in flask format, which is how we are using it in our manufacturing facility, well that's polystyrene that can be fabricated in a bead format because for -- and this is the part about commercialization, we could never satisfy even a meager commercial demand for any of these applications by using manufacturing in flat surfaces. So, we have to go first to the GE wave bag, but these are anchorage-dependent cells. So, we need a solid support to enable the cells to grow and expand in the bag. And that's where the bead format of the Corning Synthemax surface comes in.

We already have beads with the synthetic peptide on them, and we've demonstrated for cardiomyocytes that we can expand the undifferentiated cells on the bead and do direct differentiation to fully functional beading cardiomyocytes on that bead. And that's how we segue from the current manufacturing capacity to a very large bioreactor. First the wave bags and then standard bioreactors like are used in the manufacturing of monoclonals or recombinant products. So, it's really important that everyone understand that this is the only cell therapy platform that can be adapted to bioreactor growth so that ultimately the production runs for each of these cell types will be sufficiently sized to service hundreds of thousands of doses.

And the expandability of the master and working cell banks is virtually infinite. So, we've already calculated that if we were to consume all 250 vials of our H1 master cell bank of undifferentiated cells, dedicated at today's scale for OPC1, we would have enough material to service the entire spinal cord injury marketplace in North America for 22 years. So, the scalability, low cost of goods, large lot size, and quality controlled uniformity of product elements of our manufacturing program are very, very strong.

So, it will require investment. It's requiring process engineering now, which is undergoing today to anticipate all of this. But we have all the technology and intellectual property rights in hand to address the question that we hope we have to answer.

Okay, that was a succinct 22-year answer there. So, that gives you the answer to what happens if the hope for success takes place? Now that brings us to the next part, there are only 24 hours in a day, seven days a week, and you guys are -- you guys got a great work ethic. What would then happen with the fact that obviously success breeds success, you would then have a situation where other people, other researchers both private institutions, hopefully corporate America would finally get on the dime. And possibly even -- and definitely other potential entities that are actually nation states might become very interested. What would be a hypothetical there in terms of being able to expand your bandwidth?

Well, I mean, I'm not going to get too far down the speculative pathway with you, Steve, but obviously the capacity to scalably manufacture this product can be viewed, because of its efficiency, in similar fashion to the monoclonal and recombinant DNA industries. We can have contract manufacturers. We can do joint ventures with other parties and create a jointly operated and funded manufacturing facility. We can expand our own manufacturing capability here. We have all of the traditional options to collaborate, outsource the manufacturing, that any biological used today has.

And that's the point I'm trying to make. This is not an adult stem cell program. This is a cell therapy product that can be scaled in exactly the same way as a biological.

So, to recap, the platform itself can be scaled and the only rate-limiting step is the "inventor collaborators' creativity" in terms of what indication they decide to go after.

Well, sure, I mean we're currently working with four different academic centers on line extension opportunities for OPC1, right? Now that we know what these cells do, we're looking at stroke. We're looking at Alzheimer's. We're looking at leukodystrophies. And we're looking at multiple sclerosis. So, we control that, right? I mean, we have all the IP so it's our choice as to whether we do or do not follow these academic collaborative leads. But we control all of that. We would hope these leads are positive and some of that data is going to come out in early 2011 and we hope that we have -- we will recoup our investment in OPC1 many-fold over, not just from spinal cord injury but from some of these much larger central nervous system regenerative medicine opportunities that are approachable using this very same cell.

Great. I'll jump back in the queue. Gentlemen, I look forward to you guys having scalability execution details in the future with good results. Take care.

That concludes today's question-and-answer session. I would now like to turn the call back to David Greenwood, for closing remarks.

Thank you all for joining us. Tom, at the outset of his remarks, mentioned when we will next be presenting at various conferences, scientific and investor conferences. We hope to see you there. Thanks again. Have a good day.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect and have a great day.