Lineage Cell Therapeutics Inc (LCTX) 2017 Q2 法說會逐字稿

Greetings, and welcome to the BioTime Second Quarter 2017 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Doug Sherk. Thank you. You may begin.

Thank you, operator. And good afternoon, everyone. Thank you for joining us today for BioTime's investor conference call and webcast to review the company's results for the second quarter of 2017 as well as recent corporate developments. There will be a replay of this call, which will be available approximately 2 hours after the call's conclusion and will remain available for 7 days. The operator will provide the replay information at the end of today's call. With us today at corporate headquarters at Alameda, California, are Co-Chief Executive Officer Adi Mohanti; and Chief Financial Officer Russell Skibsted. In addition, Co-Chief Executive Officer Dr. Michael West is joining us today from the East Coast. Each executive will make prepared remarks, and then we will take questions from our covering analysts and institutional holders.

Before we get started, we would like to remind you that during the course of this conference call the company will make projections and forward-looking statements regarding future events. We encourage you to review the company's filings with the SEC, including, without limitation, to the company's forms 10-K and 10-Q, which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements. These factors may include, without limitation, risks inherent in the development and/or commercialization of potential products, uncertainty in the results of clinical trials or regulatory approvals, need and ability to obtain future capital and maintenance of intellectual property rights.

And with that, I'd like to turn the call over to Adi Mohanty, Co-Chief Executive Officer of BioTime.

Thanks, David. The second quarter of 2017 was a very productive one for BioTime. We achieved a number of important strategic goals, including positive clinical data in both of our lead programs. The highlight was the successful outcome of our pivotal study of Renevia in Europe. The data from the study was we believe an unqualified success. We're now advancing Renevia towards commercialization in Europe. The next step in that process is filing for CE Mark, which we expect to do by the end of this year.

The results from our ongoing study of OpRegen in dry-AMD continued to be encouraging. We presented new data at ARVO from the second cohort of patients. The data show evidence of cell survival and early signs of a biological response. Last week, we announced that we received clearance from the DSMB to proceed to cohort 3 in this study.

We also made progress with our subsidiary AgeX Therapeutics, which we established to consolidate certain subsidiaries, early stage assets and research programs primarily focused on the biology of aging and age-related diseases. Our goal in forming AgeX is to unlock the potential value of these assets for our existing shareholders, while not taking resources away from our rapidly progressing clinical programs. It also helps us to further simplify our company, which is one of our key corporate objectives. This afternoon, we announced AgeX raised approximately $10 million to fund its operations. The investor group includes several new investors and some existing BioTime investors. The transaction values AgeX at approximately $68 million postmoney. As part of our simplification strategy, as well as our strategy to unlock value for our shareholders, we intend to distribute some or all of our holdings in AgeX to BioTime shareholders. Although no date has been predetermined yet for the distribution, we are in the midst of examining various strategies, and the distribution could take place as early as the end of this year. Dr. Mike West, who's leading the new subsidiary, is going to provide a more detailed overview on the program of AgeX in a few minutes.

Turning now to our aesthetics program. On June 14, we announced that Renevia had met its primary end point in the European pivotal trial. This was a multicenter, randomized, evaluator-blinded controlled study. Here are some of the highlights from our call last June. The results showed there was approximately 100% retention of transplanted volume at 6 months, whereas the untreated patient had no incremental hemifacial volume increase. The data from the run-in patients showed a 96% volume retention at 6 months, an impressive 93% volume retention at 12 months. This may be an indicator of long-lasting volume retention. There were no device-related adverse events. There was no serious adverse events during the transplant or during the follow-up period. Currently, over 2 million procedures are done annually for facial re-aesthetics purposes. They use dermal fillers and fat transfers. People prefer fat transfer as a more natural alternative to have a more healthy or youthful look. However, around 15% of fat is lost within 6 months of transplant. We believe that Renevia can stand out in the space given the data generated from our study. The full trial report, including the other data collected during the trial, is expected to be available sometime in the third quarter of 2017. Importantly, we believe the results we have reported provide sufficient clinical evidence to proceed with a CE Mark filing in Europe. We plan to file by the end of this year and have a solid data package demonstrating efficacy and safety from this trial, which will be important for clinicians, regulators and potential commercialization partners. Following CE Mark approval, Renevia could be available in Europe in 2018.

We're also starting studies to get additional data that would help support indication expansion and U.S. entry plans. One such trial will start shortly in Beverly Hills under the direction of Dr. Aronowitz, who is a leading plastic surgeon. We hope to be able to begin sharing data from these trials before the end of the year. All these activities are helping us prepare our data package for the discussion with the FDA. As mentioned before, we've had previous conversations with the FDA, during which they indicated that we're likely to be using the device pathway for approval in the U.S. A device pathway is usually shorter and faster than biologic approval pathways. We expect to have further details of our plans with the FDA for Renevia before the end of this year.

Now let's turn to ophthalmology. Earlier this month, we announced approval from the DSMB to proceed to cohort 3, which is another positive step forward in our ongoing Phase I/IIa trial for OpRegen in dry age-related macular degeneration, also known as dry-AMD. In May, we presented data at ARVO from patients in cohort 1 and 2 of this trial. The data was quite encouraging and showed evidence of cell survival as demonstrated by imaging analysis, showing that the transplanted OpRegen cells remained in place, and we saw early evidence suggesting biological response with some areas of the retina showing structural improvement. Cohort 3 is expected to begin enrolling patients in the coming weeks and will include patients in both Israel and the U.S. The investigators in the U.S. will be 2 leading ophthalmologists, Dr. David Boyer of Retina-Vitreous Associates Medical Group and Dr. Richard McDonald of West Coast Retina Medical Group. On July 25, we hosted a KOL event in New York on the topic of dry-AMD. The event featured a presentation by Dr. David Boyer. Dr. Boyer addressed the broad treatment landscape explaining how there are no effective therapies available for dry-AMD despite clinical research with various modalities. Any new treatments that can demonstrate even modest benefit will likely be used at some point but would ultimately be replaced or used in combination with something like OpRegen. One advantage of a cell therapy like OpRegen is that it has the potential to provide benefits without having to completely understand the underlying biology that's causing AMD, which in effect is more like a transplant than a drug. The event was well attended. We were pleased to see such a high level of interest from the investment community. The webcast is archived on our website. In other OpRegen news, we've been accepted for a paper presentation at AAO this November, and we expect to share additional updated data there.

Moving to our public affiliates. They're also making good progress. Asterias presented new 9-month efficacy and safety data from its trial investigating AST-OPC1, a spinal cord injury. The results show that 50% of patients treated have now recovered 2 levels of motor function. Asterias will report second quarter results on August 14, and I encourage you to listen to their call.

OncoCyte reported positive new results for its blood-based lung cancer diagnostic. OncoCyte successfully completed the analytical validation study, and the results again supported the data presented at the American Thoracic Society conference in May. OncoCyte will also report second quarter results on August 14.

Now I'd like to turn the call over to Mike West, who will provide you with more details of AgeX and its exciting programs. Mike?

Thank you, Adi. Today, we announced funding for our subsidiary, AgeX Therapeutics. I will summarize several aspects of this transaction in turn, first, the product focus of the subsidiary; then I'll provide some detail on the current financing. And finally, I'll describe its operational relationship to BioTime, including the possible distribution of shares to BioTime shareholders and public trading of AgeX.

So let's begin with the product focus. As we have discussed on prior occasions, BioTime has an incredible technology platform with which to manufacture high-value therapeutics. The pluripotent cell technology, unlike so many other technologies in adult stem cell companies, allows us to manufacture any and all of the cell types of the human body. That in itself is pretty astonishing. Shortly after I organized the first effort to isolate these cells, Harold Varmus, Nobel laureate, and then director at the National Institutes of Health, testified to the U.S. Congress that "The development of cell lines that they produced almost every tissue of the human body is an unprecedented scientific breakthrough. It is not too unrealistic to say that this research has the potential to revolutionize the practice of medicine and improve the quality and length of life." The reason he was saying that it had the potential to revolutionize medicine is that for the first time in history biotechnology was given a means of manufacturing any kind of human cell to repair any tissue in the body. This is so critical to the practice of medicine because approximately 80% of the nearly $3 trillion annual health care expenditures in the United States are directed toward chronic diseases. And the chronic degenerative diseases of aging associated with a loss of cells and tissues is the fastest-growing sector in these costs, with 92% of the elderly having 1 chronic condition and 77% having 2 or more. So not only does this platform open up the possibility of a large new industry in biotechnology, it's also nicely suited to meet the needs of an aging population and improve, as Varmus said, "the length of life." But the strength of the pluripotent stem cell platform don't end there. These cells have an another amazing property. They are the first normal human cells ever isolated in a laboratory that don't age. That is to say they replicate endlessly. Scientists call this replicative immortality a degenerative disease associated with the aging baby boom generation and approximately 20 years of research behind us, we believe it's the right time to aggressively commercialize this technology through AgeX Therapeutics, as its name implies, a company focused on applying the biology of regeneration and cell immortality to aging and age-related disease.

Now as to the product development plans. Our lead products slated for development is called AGEX-BAT1. Like all of the AgeX products, it's aimed at the vast market opportunities associated with aging. Our product is based on pluripotent cells, but it also uses our proprietary PureStem technology, which we've used to successfully isolate over 200 diverse, purified and industrially scalable cellular components of the human body. AGEX-BAT1 is comprised of recently discovered cell types in humans known as brown adipocytes. These cells are dramatically lost during aging, and it's believed that their loss can disturb a youthful metabolism and lead to obesity, type 2 diabetes and heart disease. Animal models suggest that restoring youthful levels of these cells can restore a youthful metabolism. We plan to formulate this product in HyStem, the hydrogel used in Renevia for which we've already obtained clinical data on safety and efficacy. We plan to begin preclinical studies leading to the first human clinical application for type 2 diabetes, a disorder of epidemic proportions, with an expected 1 out of 3 Americans expected to have it by the year 2050, 90% of the patients with diabetes being type 2. Another enormous unmet need in medicine is age-related vascular disease. According to the American Heart Association, cardiovascular diseases associated with aging are leading to a rapid rise in health care expenditures, amounting to over $1 trillion a year in the United States alone by the year 2035. And of course, it's the #1 killer in the U.S. AgeX will take the lead in developing AGEX-VASC1 young cells to regenerate the vascular system in aged tissues like the heart. Lastly, AgeX is focused on an emerging technology called iTR or induced Tissue Regeneration. We believe this technology is also at the heart of human aging and like pluripotent cells will become an entire industry in itself.

Let me briefly describe this amazing science. You may have noticed that some animals have a natural capacity to regrow tissues after injury, so cut the leg off of a Mexican salamander, and it will simply grow back. Humans have a similar natural regenerative potential but only when the body is first being formed, then that ability is turned off. Using our pluripotent cells and artificial intelligence algorithms in collaboration with [in] silicone medicine, we uncovered genes that we believe underlie this important biology. The technology to unlock the body's abilities to scarlessly regenerate tissues damaged from age or trauma is called iTR, and we intend to lead in this important new field. To fund this product development, today we announced a $10 million financing in AgeX. These funds are expected to finance AgeX operations through June of 2019, thereby creating a significant savings through BioTime's cash spend. Investors in the round included new funding sources for the BioTime family, including IBF Capital LLC; Kazoo Technology Capital, a fund investing in companies turning research on molecular and cellular repair of the process of aging into therapies for human applications; and Jim Mellon, a visionary entrepreneur known for his skills in identifying emerging global trends. Other participants in the financing included founders of successful firms in the health care, technology and financial fields, including John Mauldin, founder of Mauldin Economics. Subsequent to this financing, BioTime will own approximately 88% of AgeX, imputing a postmoney valuation of AgeX of approximately $68 million. BioTime contributed certain subsidiary and early stage program assets to AgeX as part of the transaction. In addition, our portfolio of patents and patent applications were assigned or licensed to AgeX, together with certain biologicals such as cell lines and laboratory equipment. AgeX will be incubated within the BioTime facilities in Alameda, California, under a shared facilities agreement. It will lead -- I will lead AgeX's development, and our near-term milestones will include certain preclinical testing of the company's planned products and additions to the management team.

In addition, as Adi mentioned, we plan to distribute some or all of the BioTime ownership in AgeX. To achieve this objective, we're examining a variety of strategies, including those that led to the trading of BioTime's subsidiaries Asterias Bio-Therapeutics and OncoCyte Corporation on the New York Stock Exchange market. To help drive our AgeX operations, we recently announced the addition of Dr. Aubrey de Grey to the AgeX team as Vice President of New Technology Discovery. Aubrey is one of the world's foremost authorities on aging and the development of medical innovations that can postpone all forms of age-related health ailments, and we're thrilled to have him as part of the effort. In the coming months, Aubrey and I will be discussing AgeX's programs in a variety of high-profile forums.

So in summary, we at BioTime are focused on unlocking value for our shareholders. The funding of these critically needed therapies through independent equity financing in AgeX potentially accelerates their development, while minimizing direct dilution to the BioTime shareholder. And let me add one final point. Throughout my nearly 3 decade career, I've been focused on building a technology to address the enormous market associated with human aging. First at Geron, from which we acquired a large portfolio of assets, as well as other regenerative medicine companies, my work has always been focused on gerontology. Of all the technologies I've ever been associated with from [tumors] to pluripotent stem cells to somatic cell nuclear transfer, the consolation of AgeX assets is the finest and the most powerful platform I've ever been associated with. We'd like to thank the visionary investors behind this effort, and I look forward to telling you of our progress in the coming months.

I'll now turn the call over to our CFO, Russell Skibsted, to review our financials for the second quarter. Russell?

Thanks, Mike. I'd like to review some of the financial highlights from the quarter. BioTime's consolidated cash, cash equivalents, restricted cash escrow and available-for-sale securities totaled approximately $21 million as of June 30, 2017. This compared to approximately $24 million as of March 31 of the same year. As of yesterday, BioTime owned almost 22 million shares of Asterias common stock and almost 15 million shares of OncoCyte's common stock. Together, these 2 ownership positions represented an aggregate market value of about $137 million based on yesterday's closing.

A little over a year ago, we introduced you to our 3-point strategy of focusing our company on, first, clinical progress. This is where the biggest increases in valves are created. Two, simplification, to make it easier for people to understand our company as well as for us to run the company; and three, unlocking value for BioTime shareholders.

Now I've spoken with many of you over the past several months, and as we've discussed, BioTime for the first time in over 10 years is now generating meaningful clinical results. For BioTime, the next stage of our development is an exciting one of accelerated clinical development, where we will generate even more human data and thereby clinical progress. These programs will require an even greater focus of our attention and resources than in the past. At the same time, the early stage programs that AgeX is pursuing, as you've heard from Mike, are extremely exciting and with the potential to profoundly change the face of health care for millions of people. In keeping with BioTime's core strategy, we have been able to initiate AgeX operations with the investment from investors that are keenly focused on supporting these programs. Importantly, the funds raised by AgeX will support operational expenses well into 2019 and, as Mike mentioned, reduce BioTime's annual cash spend significantly. For the time being, BioTime will consolidate AgeX's financials. However, as Adi and Mike both mentioned earlier, we're actively exploring strategies to distribute all or part of our holdings in AgeX to the BioTime shareholders. Should we end up distributing more than 50% of BioTime's AgeX holdings, we would then deconsolidate the AgeX financials, like we did with OncoCyte earlier this year and Asterias last year.

Now I'll turn the call back over to Adi.

Thank you, Russell. 2017 has been a very productive year for our company. The BioTime group has 6 products in the clinic, and the data from our clinical trials and those of our affiliates continue to be positive and encouraging. Our cell therapies have features that make them especially attractive as therapeutic candidates. We see parallels in the work we're doing with the success that has been achieved in organ transplantation over the last 30 to 40 years. Transplants these days have a very high success rate, approximately 80% to 90% in many organs, and this is possible even if the disease mechanism that caused the organ failure is not completely understood. In the same way, if we're able to establish that our cells safely engraft and remain alive in the patient, then it's likely that our cell therapeutics may have a much higher probability of success in clinical development as compared to small molecule or protein therapeutics, which only have a 10% to 20% success rate. Cells are the normal components of the human body, and as such, we believe that they have markedly better safety and efficacy profile than conventional drugs. We continue to work on simplifying our corporate, financial and organizational structure to allow us to execute our objectives more efficiently and make it easier for investors and other external stakeholders to better understand BioTime. We achieved an important step forward, achieving the objective with the formation of AgeX Therapeutics. With the funding raised by AgeX, we took a major step towards focusing BioTime's resources and operations on our programs that are more clinically focused. With this funding, AgeX has greater flexibility to explore additional strategic options to grow its technology platform. We've also set in place the strategy to reduce BioTime's cash utilization by several million dollars annually. I am very excited by the opportunities in front of us as we move our programs forward. All products in development have global opportunities with multibillion dollar potential. As we move these programs forward, I believe we will build value for our shareholders, whose support we deeply appreciate. We look forward to updating you as we continue to make progress.

Now operator, we're ready for questions.

(Operator Instructions) Our first question comes from Kevin DeGeeter of Ladenburg Thalmann.

Congratulations on the progress. My first questions actually are for Dr. West. Mike, you've brought us a little bit of visibility in terms of presentation of any clinical data or, excuse me, preclinical data around AgeX assets. When we may see some specific forums and or programs?

Yes, so there is a very general description of these programs at a recent product keynote I gave at a world stem cell conference. It's called the future of aging, and it's available. You just search YouTube for that. But it's not preclinical data. And so as we said earlier, we plan to be disclosing more detailed preclinical data and other data on these programs;, in some cases, high profile forums will be disclosing more detail and in courses. It is typical in BioTime's history and will be with AgeX, and we plan to publish a lot of these results in peer-reviewed scientific publications. So later this year for a lot of the flow on that information.

And with regard to expected progress by the middle of 2019, what do you -- what should we look for, for the company? You think there's an opportunity to identify a clinical candidate within that window? Or just can you set some expectations for us?

Yes. Well, the expectation should be that not just identifying the clinical candidate in terms of the product. We've already identified those. So by giving the designation AGEX-BAT1 to the brown adipocytes, we've already isolated these cells in a scalable and 100% pure form. And as I said, we'll be publishing more data on that. We have presented some of the data in the past. I believe, it's -- it can be found relatively easy in poster sessions, but full-fledged scientific publications are yet to be published. So the products are identified. What we are somewhat vague still on, let's talk for a second about the brown adipocytes. So these are, as I mentioned, a recently identified cell type of the human body, which is kind of hard to imagine. With all the years of -- we've had microscopes for a long time and anatomists for a long time, and it just escaped people's notice, primarily because they're present early in life and lost as we age. And so the recognition that they're important in this age-related metabolic dysfunction is relatively recent. And so we have the cells in industrially scalable format. As I said, the HyStem for the delivery and stable engraftment of the tissue, as Adi pointed out, in a related type of fat tissue, just abdominal fat tissue performed, well frankly, beyond our expectations. I mean it did extraordinarily well in the Renevia trial. So brown adipocytes are another type of adipocytes, but they're very similar in most respects. So we think that we have the product in hand. The indication is where we're not being very specific at this point. I've mentioned in my discussion this metabolic shift that occurs, called the metabolic syndrome, with aging leads to central obesity. We all know what that is, right? And the redistribution of fat in coronary arteries or coronary disease and type 2 diabetes or insulin sensitivity in aging, and we'll be stating probably later this year what exactly we anticipate the clinical indication will be and how we'll go after it. It's very tempting to go after obesity. It's an epidemic, but we'll be focusing in on that in the future. Does that help?

It does, very much. Just one more housekeeping, if I may before getting back to queue. On the BioTime level, have you had any discussions with tax attorneys to get a point of view as to whether any potential distribution of AgeX would be taxable or tax-free distribution to BioTime?

That's a great question. Russell, you've looked closer at this. Perhaps, you should address that.

Yes, Mike. Let me try, Kevin, hi, this is Adi. Yes, we have done quite a significant amount of analysis on the various strategy and options. So Russell and his team have looked at various ways this could be a tax-free distribution, that is certainly an option. We have looked at going public by IPO. We have looked at the learnings we've had with the OncoCyte and Asterias activities where we took those companies public and they've done fairly well, and there was a lot of success and some learning. All of those have been thoroughly discussed. All of those have been assessed. We have a couple of shortlisted items, but since we don't have a final decision, it's a little early for us to tell you more than that. But it is really close, and we expect to be able to give you more information soon.

Our next question comes from Reni Benjamin with Raymond James.

This is Bin on for Reni. Congrats on the progress for the quarter. I have 2 set of questions. First one is Renevia. So Adi, I think you mentioned that additional data will be presented or disclosed from the Renevia trial in the third quarter. So maybe can you provide some additional color regarding what kind of data points or data sets we will be expecting? And then regarding your CE Mark filing package, I was wondering if the 6-month data is going to been enough? Or do you need to get 9-month or 12-month data to support the filing? Then I will have some follow-up on OpRegen.

All right. Thanks, Ben. Yes, so you're asking about Renevia. And we did report our top line data, which as I mentioned before was really great. I mean getting 100% retention when comparable fat transfers that are done routinely, over 300,000 fat transfers done in the U.S. alone for the face, the results are something in the range of 50%, 60% of it dies within the first 6 months, so we think that getting 100% retention was a pretty good result. The primary end point of the clinical trial was 6 months efficacy and safety. So we believe that we have the data that would be required for doing the filing for the end of the year, and that this would be sufficient. But as you know, we just did the top line readout. The other data points that we're talking about are secondary end points like aesthetic scores, the complete safety report. So the entire completed clinical study report, we think will be here within a month or 6 to 8 weeks and that we will be able to share some more information. At that point, it is likely we will also have substantial number of the patients at 9 months or 12 months, so we might be able to include 9 and 12 months data in that reporting at the time for Renevia. But that is not required for our filing. So 2 parts. What is required for our filing is the 6-month data and the complete study report. We expect that by sometime later this quarter. We'll be able to use that for (inaudible).

(inaudible) is more than 3 patients before you move to the next -- those cohort. And then on the cell dose, do you plan to use 500,000 cells? Also, on the patient side, I think it appears that if you give patients with better visions with these RPE cells they might actually generate better results. So in your cohort 3, do you think you're going to enroll patients with better vision?

Yes. So that was a -- there's a several things you asked in that question. So let me try to get through most of them. So in cohort 3, absolutely, you're right. We expect to be enrolling patients in -- both in California and in Israel. It's a global trial, so globally competitive recruiting as we have gotten good safety data from cohort 1, cohort 2. This gives us -- allows us to keep expanding the number of trial sites. But really, cohort 3 is still part of that Phase I, where what we want to be able to achieve is a more improved or a better procedure, so we're -- even though it's a fairly straightforward procedure, it uses cells. These [retinal] surgeons are used to injecting cells in the subretinal space. But just making sure that the procedure is done right makes sense for us. So the main goal in cohort 3 would be to get on new sites, new physicians in a new country, get the procedure perfected and make sure that we're ready for that next cohort 4. We think 3 patients is enough. We think that, exactly like you said, that the real target population is less severe or earlier stage or younger geographic atrophies with better visions, and that's where we will see substantially improved functional responses. This is also what in our KOL data Dr. Boyer was talking about, the expectation that could definitely have a better response by being in earlier stage of the disease. All of those things are things we want to make sure we get in cohort 4. So for us, getting through cohort 3 is about the rest of the safety and improved procedure but focusing on cohort 4 to get to the younger patients, less immunosuppression, younger patients with a more confident or comfortable procedure. And we think that we have so far gotten data that gives us good reasons to believe, functional data looks good, safety continues to look fine. So getting through cohort 3 makes sense for us to not add more than 3 patients. We think that's going to be sufficient, and we're looking forward to getting it done and moving to cohort 4.

Yes, sure. Just one more question on that. Is 500,000 cells the dose?

Oh, good question. Yes, so I think that's -- a couple of things that we talked about in the past is we see cell transplantation or RPE that we're providing more like a transplant. So we're providing RPE cells to an area that is devoid of RPE cells or the ones that have died or got injured or diseased and don't exist. And that's why I keep talking about our therapy is more like a transplant than some of the other drugs or things that people in the industry might be used to thinking about where you try to figure out what the mechanism of action is, try to intervene in that mechanism of action and modify that pathway of the disease to try and change it. It's a more complicated endeavor, and that's why it is fraught with a much higher risk of failure. We are doing something that is more like a transplant, and there are definitely some risks, and we're learning how to perfect the transplant procedure. But as we get to that, we think that dose is probably not the appropriate way to talk about our transplant. So we're going to work through -- what that really means is we're trying to provide the appropriate number of cells for the appropriate size of the atrophy. So the atrophy's size requires a certain number of cells, and we've learned that also with cohort 1 and 2 that some people have small atrophies, some people have larger atrophies; in some cases, you just need 50,000, 70,000 cells to cover the area of the atrophy. So it's more appropriate for us to ensure that we get the right concentration of cells and the right volume of cells for the atrophy that we're trying to address. And we got enough information into the cohort 1 and 2 to make a judgment call on what we think could be an ideal concentration. And in cohort 3, we're also looking at volumes that might be less or more to make sure that we can cover the area of the atrophy. So we think that the third cohort is about refining the dose size -- again, I went and said dose, so -- I'm still getting used to saying this is transplant size, so getting used to the transplant size, so that we are ready for those younger, smaller atrophies in cohort 4.

Our next question comes from Keay Nakae of Chardan Capital Markets.

First question for Adi. When do you think the investigator-led studies both in Europe and California are going to start for Renevia?

So our doctor in Beverly Hills, which I find quite interesting, a plastic surgeon at Beverly Hills, is ready to start. So we think a couple of weeks or so, he will be treating first patients. I don't want to get that specific. This is why I said that for sure very shortly they'll be starting to treat patients that are non-HIV patients, that are doing cosmetic need implant with Renevia, and any size of implant that they would like. And this will start very soon, and we expect hopefully even -- because it's an open-label study that before the end of the year we can start sharing some data from that study. And in Europe, it is summertime, but we are in the process of getting approvals, so we expect those to start after the summer some time. I don't quite have the dates, but they are in the process of approvals, so that as soon as they're done, then we'll start those studies in Europe.

And are these patients that they're going to evaluate are they treatment naive? Or are they patients who've had some sort of failed procedure previously?

So Keay, let me also tell you before I answer that, that if you missed -- when we were talking about the Renevia trial and the results, several of the patients in the pivotal trial for Renevia were people who had already had dermal fillers, procedures done with dermal fillers that they were not satisfied with that either had -- you remember, gravity pulls them down, they get nodules, they had certain other issues, so they were either not long-lasting enough or not natural or had some deformities. And so we had several of those patients in the trial, and we had naïve patients. So we believe that the treatment that we're able to do is able to help both correct for previously treated patients and helping them improve as well as naïve patients. So in our requirement criteria, there is certainly a requirement for you couldn't have just done it; but if it's in the past, you've already tried it, it's okay to treat those patients. So we think that we might have some of those.

And cells to lower blood sugar and treat obesity in the animals did not try to localize the cells. But you're quite right. This issue is an [endocrine] tissue, and it's innervated. Without going into all the fascinating science, the brain literally through the sympathetic nervous system turns this issue on, and it actually generates heat. So the reason these cells cause weight loss is they -- and treat diabetes is they soak up an enormous amount of sugar out of the blood and keep the body warm, and so it's part of the thermoregulatory system of the body. So our assumption is that we'll be transplanting this tissue or these cells into the muscle tissue near the spine in the back in the upper chest region, where it is normally when you're young and where it's [soft]. So we'd be putting it back in the same place. Some have speculated that the tissue could be used for cosmetic purpose. So you kill 2 birds with 1 stone. You could improve the contour, say, of the face but also treat diabetes. But we're not thinking that's the way it will actually be performed clinically.

And then just back to Adi for the follow-up data Renevia. If we do see that in 6 to 8 weeks, are you just going to issue a press release and talk about the results that way?

Yes, Keay. At this point, we thought we would issue a -- we would just do a press release. Given our run-in data, we hope this is all good news and great data and that we would issue it out as a press release and quickly start working towards a filing for approval.

Our next question comes from Patrick Dolezal of LifeSci Capital.

So I'll start with Renevia. I was just curious if you'd be able to remind us of your commercialization plan for this product in the E.U.? And kind of if there's any preference for a partnership at this time or development there?

Patrick, so we have been, I think, like you said, reminder, right? So we have been working with several potential partners, and we had on the table all the different options, which is just license it out, partner it out, get the distributorship. And a couple of those conversations have gone quite far along, so we expect to get the conclusion fairly soon. And we want to be able to make sure that we get a partner that would help us make sure that we address the plastic surgery market, that would allow us to work with them to continue to grow and develop this product because I think, as we mentioned, we think there's huge potential for Renevia, not just the $7 billion facial aesthetics market but the fact that we could possibly be growing new tissue, the reconstructive surgery market, there's several areas where we think that this could continue to grow, right? Sometimes I've talked about something like think about Botox when it came on and had 1 indication and it (inaudible), and we'll look at how that progresses. And certainly, another huge market opportunity is Asia. The current attraction for regenerative medicine assets and aesthetics assets in places like South Korea and China and Japan is something that we find quite interesting, and lots of people there have been interested. And what we needed to make sure that we were in a better position with was data, and we have that now. We have really good data. So we're having those conversations about Asia. We'll look at what the right situation is for Asia, and we'll report on that. So Europe on deck, Asia on deck, U.S. on deck.

Great. And moving on to AgeX. I was just curious if you could provide any more color on the implications of the formation of the subsidiary from a cash burn perspective? And then kind of on a similar note, any additional granularity on the company's contribution to the financing?

So yes, thanks. I think what I'll do is let Russell talk about the cash and the cash burn implications. And then we'll see if we need to continue on that.

Sure. And before I answer the question, Patrick, I just wanted to also correct something earlier in the prepared remarks. In the -- in my section, I spoke I said the consolidated cash as of March of 2017, I misspoke when I said it was approximately $24 million. What I should've said was it was approximately $25 million. So I think at a high end we look at, we expect the AgeX programs as they are being independently funded at this point we would estimate that the BioTime expenses related to those programs would reduce -- would be reduced by probably, I'm going to say roughly, around $5 million a year. Now hopefully, when you saw our press release, if you saw at the end of the press release, you saw 1 more step in our goal of simplicity and hopefully, transparency in our financials. We provided a table that showed some GAAP and non-GAAP numbers. And the idea is at least within the limits that we're allowed to, to provide certain metrics and certain statistics that are meaningful to investors that look at development-stage biotech companies as opposed to revenues and sales. So we clarified in that table our cash/noncash expenses as well as breaking down those expenses by entity. So hopefully, you find that very useful. But what I do want to say is the savings that BioTime expects to get from AgeX certainly were not included in that table. Those we'll see in the future, but just when you look at that realize that does not take into account the cash savings that we would expect from AgeX going forward. And then you asked about the investment. Is that good, Patrick?

Yes, I think that's sufficient.

Ladies and gentlemen, we have reached the end of our question-and-answer session. I would like to turn the call back to management for closing remarks.

Thank you, Darrin. And thank you, everyone, for joining us today. We think that we're taking great strides moving forward. Appreciate all your time. Look forward to coming back and reporting on our clinical progress, on our AgeX progress and all the other wonderful things in our pipeline. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.