Microbot Medical Inc (MBOT) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Stemcells, Incorporated first quarter 2011 financial results conference call. My name is [Jeff], and I'll be your operator for today. (Operator instructions.)

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host for today, Mr. Martin McGlynn, President and CEO. Please proceed, sir.

Thank you very much, and welcome, everybody. Thank you for joining us. The formal remarks today will come from Rodney Young, our CFO, and myself. Rodney will start off with the discussion on the financials that have just been released, and then I will follow with some formal remarks.

I'm also joined by other members of the executive team here in this conference call, and they can be available as needed.

So I'd like to hand over to Rodney Young, our CFO.

Okay. Thank you, Martin.

Before we proceed, I would like to remind everyone that, during today's call, we will be making some forward-looking statements which reflect our current views and are based upon certain assumptions that may or may not ultimately prove valid. We assume no obligation to update these forward-looking statements any time in the future, and the Company's actual results may differ materially from anything projected during today's call due to risks and uncertainties to which the Company is subject. These risks and uncertainties are described in our public filings with the Securities & Exchange Commission and at the end of today's press release, which you are encouraged to consult.

Okay, so to our financial results for the first quarter of 2011. We reported a net loss of $5.75 million, or $0.04 per share. This compares to a net loss of $6.1 million, or $0.05 per share, in the first quarter of 2010. Our loss from operations was $7.5 million, which was about 1% lower than the $7.6 million we reported in Q1 of 2010.

On the revenue side, total revenues were $221,000, which was a slight decline from the $230,000 reported a year ago. Revenue from product sales were $149,000, which was up 28% from the Q1 of 2010. These of course are sales from our SC Proven business, and this business has been growing nicely now since we took it over in 2009. The growth this quarter was driven by both higher unit volumes as well as by new product launches.

On the expense side, our total operating expenses were $7.68 million, about 1.5% lower than the first quarter of 2010. Our R&D expenses, which came in at $5.5 million, were up about 10% versus Q1 of 2010, but our SG&A expenses, which were $2.1 million, were down 20% compared to the first quarter of 2010. This reflects our continuing focus on cost containment as well as prioritizing our key clinical development and R&D activities.

Other income for the quarter was $1.8 million, which was an increase from the $1.5 million we reported in Q1 of 2010. As you know, this line is driven almost entirely by the changes in the fair value of our warrant liability, and of course, this is a non-cash item.

So our cash burn for the quarter -- which is not in the press release but will be in our 10-Q, our cash burn, which is measured by net cashed -- used in operating activities was $7.4 million.

Lastly, we closed the quarter with $21.6 million in cash, cash equivalents and marketable securities.

So now I'll turn the call back over to Martin.

Thank you, Rodney.

So on November 20th of 2010, I posted an investor newsletter on our website, which was designed to give the investor community a more in-depth perspective on Stemcells, Inc., where we've come from, what we've accomplished to date, and what we were focusing on, going forward. Today we announced an addition to our financials for the first quarter, a 30% reduction in our US-based headcount. This is one element of a much bigger corporate agenda for the Company over the next two to three years, and it's designed to significantly reduce the trajectory of our operating cash burn while at the same time harvesting the fruits of our investments in our technology in the form of human clinical data in spinal cord injury, age-related macular degeneration, and myelination disorders.

Shortly after I joined Stemcells, Inc. in January of 2001 as CEO, the Company embarked on a very exciting, but nonetheless a long, tough, and expensive journey to translate the exciting discovery that had been made by our Company's scientists the previous year, namely the discovery of a highly purified and expandable population of human neural stem cells. Our annual operating cash burn in 2001 was approximately $10 million. Since then, our operating cash burn has grown to $24.5 million as reported in 2010.

And during that time, since 2001, we have invested heavily in research that was designed to do a number of things - firstly, to characterize our neural stem cells in vitro, in vivo assays, and in assay and methods development. Also, we invested heavily in process development and validation of those processes, pre-pinnacle safety and efficacy studies, and the production of a significant and sufficient number of cGNP-compliant cell banks to meet our clinical trial supply needs for the foreseeable future.

We also made the successful transition from lab to the clinic, in that we initiated and completed our first human neural stem cell safety study. We completed dosing in a separate and very exciting myelination disorder study at UCSF, and we initiated the clinical trial in spinal cord injury in Switzerland. And last but not least, we are well on our way to filing an IND later this year for the use of these same human neural stem cells in age-related macular degeneration.

I can tell you today that management is committed to quickly reducing our operating cash burn from last year's peak of $24.5 million to an annual run rate of approximately $18 million. You might well ask how are you going to do that. Well, there are a number of elements in our game plan. This summer, our lease for our current location in Palo Alto terminates, and we will move to a smaller, less expensive corporate facility across the bay in Newark, California, which will house administration and R&D laboratories. The annualized effect of this move will be $1 million.

We have now banked sufficient GMP cell banks for our clinical trial agenda, so we have reduced our cell manufacturing run rate accordingly. The annualized effect of that will be over $1 million, approximately $1.1 million.

We will, through the announcement of reduction in force today, be spending less on research, and then the money we spend on research will be done primarily to support development activities, and we will also have reduced general and administration expenses. The annualized effect of that initiative will be in the order of $2.3 million.

The full effect of consolidation of activities of SCS operations in Australia and the UK will net somewhere in the region of about $1.3 million annually versus the previous run rate. You'll recall that we acquired the operating assets of Stem Cell Sciences, a publicly traded company, and we completed that transaction in 2009.

Our obligations under a lease will terminate mid-2013 for what used to be the corporate headquarters and labs in Lincoln, Rhode Island, when we were doing business as CytoTherapeutics, Inc., with the ticker sign CYTO. The annualized effect of that will be $1.8 million in savings.

We also have plans underway to liquidate non-essential corporate assets. For example, we plan to list for sale number 1 and number 6 Court Drive in Rhode Island, which was a facility that was used by CytoTherapeutics to manufacture products, as well as to do research and development. We also have advanced-staged discussions underway with regard to commercializing our rat ESL technology platform. These discussions are underway with a number of third parties, and they're designed to out-license the technology and appoint a global commercial partner for a very exciting technology that we believe has significant commercial potential. The combined one-time effect this year will be somewhere in the region of about $3 million to $5 million, plus we anticipate, from the transaction, that we would receive significant milestone payments, going forward.

Finally, you should know that we've been invited by the California Institute of Regenerative Medicine, also known as CIRM, to apply for a disease team planning grant, which is, if approved, a precursor to seeking approval for up to $2 million, or somewhere in the region of $5 million per year over a four-year period, to fund our AMD clinical trials, which, if successful, would be awarded in the summer of next year. We also have a number of other initiatives underway that will further significantly reduce our operating cash burn, some of which will also start to kick in next year, but we're unable to disclose the details of those initiatives currently.

So the next question you might ask is, having dealt with our operating cash burn, is what clinical data will we have and when will we have it. So first out of the block will be the results of the four-patient phase I PMD trial conducted at UCSF. The last patient in this trial was transplanted in February of this year. We are hoping to see evidence, by direct imaging, that the transplanted neural stem cells have produced myelin and that the myelin has re-myelinated the nerve axons in the brains of these patients. Clinical data from the six-month time points will be available in Q3 of this year and the 12-month data sets by the end of Q1 next year.

Obviously, if we can determine such evidence, it could have great significance not only for the PMD patients involved in the study and around the world, but for a whole range of myelination disorders, including some of the more obvious ones like cerebral palsy and MS.

Next up should be data from our phase I-II spinal cord injury trial currently underway in Zurich, Switzerland. We expect to dose the first cohort of patients, characterized as ASIA-A patients, this year, and in keeping with the progressive nature of the trial design, quickly progress to the second cohort, known as ASIA-B, and the third cohort, known as ASIA-C, as soon as possible thereafter.

The nice thing about our trial design is that we have the opportunity to periodically evaluate and assess trial data in this one single trial beginning in the second quarter of 2012 all the way through the expected trial completion date in 2014.

And last but not least, we plan to file an IND in Q4 of this year to initiate a phase I-II trial in age-related macular degeneration, and we would anticipate data will start to flow from that trial in 2013 with study completion targeted for 2014.

So in summary, we believe we can aggressively advance our clinical trial agenda, complete this round of phase I-II trials in the period 2012 to 2014, report out that data in that same timeframe, and do so with a significantly reduced operating cash burn versus prior years. Obviously the driving force behind our strategy is to obtain evidence in the most timely and most cost-efficient manner possible that the cells are having a favorable biological effect on patients. In doing so, we will not only reward our shareholders for their support and for helping us get to that critical milestone, but such data will greatly enhance the prospect that we will be able to attract a partner on more favorable terms to help fund the pivotal studies and get this medicine to the market where it's so badly needed by so many.

Those conclude our formal remarks from our CFO and from myself. Thank you. So we will now open the conference to questions.

(Operator instructions.)

Keay Nakae with Chardan.

Thank you. Marty, can you talk about the spine study in the center conducting (inaudible)? How many patients typically are seen by this center? And when you talk about the ASIA-A patients, perhaps completing enrollment by the end of this year or actually seeing some data by the end of this year for that cohort?

So thank you for the question. Actually, we have Dr. Stephen Huhn, who's head of our CNS program, present, so I will as Stephen to address your question. And thank you again for the question.

So the first part of the question concerning the experience of the center at University of Zurich, the PI is Dr. Armin Curt, and he's an internationally recognized clinical scientist, so he has been very much involved in research and clinical trials as well as treatment and rehabilitation of spinal cord patients. His center in Zurich, the Balgrist Hospital, is one of the major spinal cord rehab centers in Switzerland, if not Europe. And in that position, he's also able to network with the large group of European rehab centers that also would be able to funnel patients into Zurich.

Because the study has an enrollment criteria of dosing patients three to 12 months after injury, we have the latitude of getting the patient through their acute injury and then electively having them come to the site for evaluation and transplantation. So we feel very positive that, based upon Dr. Curt's reputation, the breadth of his institution's dedication toward rehab and spinal cord injury and the network in Europe and perhaps beyond, that we'll be able to accrue patients.

In terms of the second part of your question, the ASIA-A patients, there'll be three of them in our trial. And given that we'll be enrolling them at a time when they will have reached their plateau of neurological recovery, we were going -- we will be very closely looking at any changes in their status of recovery after the transplant. And because they're going to be at a plateau, I think we'll be in a position to determine whether we detect a signal of efficacy. When that will come is a little bit uncertain. I would imagine that that will be on a timeframe of within a year or so of transplantation. So it's possible, as we begin enrolling those patients, that we'll begin to have an understanding of whether we're detecting a signal of efficacy or not within the year.

Okay, thank you for that. And then, with respect to AMD, that study, two questions. One, any preliminary thoughts about design such that the phase I-II can show efficacy, how that might be designed to do that? And also, will your decision to proceed, assuming FDA approval of the IND, depend on having the grant funding?

I'm sorry, so the first question -- was the first question with regard to the design of the PMD study or the AMD?

No, no, the AMD study. With respect to the design, will it be such to prove efficacy in the phase I-II?

All right. Okay, so great question. So first and foremost, no, we are committed to apply the IND and initiate this clinical trial with or without the support of the California Institute of Regenerative Medicine. Obviously the fact that we have been invited and we've engaged in interactions with CIRM, the fact that they have invited us to make the submission is encouraging, so we would hope to receive those funds. But nonetheless, we will continue.

And I'll let Dr. Huhn answer the second part of your question.

So without going into too much detail about age-related macular degeneration, we are looking at the dry form, which is the more common form of AMD and accounts for significant amount of blindness. What's known about that form of AMD is that there's a certain rate of visual loss progression that's been well documented in natural history studies, so we'll be able to compare the outcome at one year following transplantation with what I think is pretty good natural history data of loss of visual acuity in patients who are not treated at the various stages of their visual acuity loss.

So AMD and other retinal disorders are very well suited to show proof of concept for cell-based therapy based upon good natural history data, which we can compare to, as well as the fact that there's a contralateral eye, and usually a high degree of [concruence] between an untreated eye and a treated eye in terms of what you'd be looking at in terms of endpoints. So we'll have a control eye to look at as well in that study.

Okay, and one more, if I may, for Rodney. When we think about how the cost savings related to the workforce reduction might be allocated between R&D and G&A, how should we think about that?

That's a good question. Keay, as I think about this, the 20 positions that were eliminated, I think it's about three-quarters or so on the R&D side. I will caution you, though, that we being a relatively small company, we have a lot of people doing a lot of things, so the line between R&D, G&A, even that line is not as clear as you might imagine.

Okay, well, that's a rough estimate. Thanks.

(Operator instructions.)

Stephen Dunn with LifeTech Capital.

Thanks. Good afternoon, everyone, and thanks for taking my questions.

Afternoon, Stephen.

Just -- I've got a few of them here. On the PMD trial, let's say that after six month, and-or after 12 months, we see evidence of myelination. What would be the next step in the clinical pathway, do you think?

So if we see by either clinical evidence or evidence by MRI of, again, proof of concept, that the donor cells result in myelination, I think there is a number of things that we would consider, and one of which would be another trial in PMD with perhaps an expanded patient population. Our initial phase I trial looked at the worst of the worst patients of PMD. There's a spectrum of PMD patients that we would expand, I think, and strongly consider a second trial that had a much broader spectrum.

I might be so bold as to say, with proof of concept, we would begin to consider additional targets that Martin had mentioned. Demonstrating that we can have donor-drive myelination in PMD would allow us to think in very encouraging terms in terms of our other clinical targets, such as cerebral palsy and, of course, whether there's any connection that we could do with regard to multiple sclerosis and even other disorders such as transverse myelitis, where you're seeking donor-drive myelination. So the answer would be certainly a larger second trial with a more definitive aspect to show efficacy for PMD, and then to begin thinking in very strong terms about the other myelination disorders.

Okay. So if I could expand on that a little bit, first of all, I'm going to try to put words in your mouth. Is it possible that the next PMD trial could potentially be a registration trial?

I'll tell you, it's a very complex question, because what we're talking about is a rare disease and early in the field of cell therapy. I think that we would be very committed, depending upon what we were seeing in the data from the phase I, about how we could achieve something that would, if not be close to that, perhaps be a pivotal trial.

I think everyone recognizes the timeframes for cell therapy need to be accelerated, and I think there are mechanisms by which clinical trials can be done that would accelerate this into a pivotal format. We're certainly seeing indications, from the regulatory standpoint, of more support for that type of design as well. And I can tell you, from my clinical perspective, that's certainly what we would be dwelling on.

Okay, one follow-up on this topic, then. Supposing we find very encouraging -- it's a broad myelination on the 12-month data. Would you, at that point, jump over into -- in addition to a larger PMD trial, would you also begin a cerebral palsy or multiple sclerosis trial, or would you wait for those indications until after a larger PMD trial?

So the next direction in terms of the clinical targets that you're talking about, there's some difference in physiology between MS and cerebral palsy that one is slightly more complex than the other, that being MS, of course. I think that we would take the data that we have for the PMD trial and re-enter discussions with the FDA about what those pathways would look like, both for MS and cerebral palsy.

Okay. Since I just got back from ARVO here, I'm going to skip over to the ocular indications. I just want to emphasize to potential investors listening that the whole Avastin, Lucentis, Regeneron, VEGFTrap, that whole issue is for wet AMD, and I believe I heard you say you were focusing on dry AMD, which is much more common and really is not addressed by the anti-VEGF armamentarium. Is that a fair understanding?

Yes. I think that's actually very precise. We see that there's opportunities for therapeutic intervention for wet AMD that, as you know, are effective. The unmet need right now, the great unmet need, or the group of patients which has a higher prevalence for dry AMD, or what's called atrophic, or non-neovascular AMD, there currently -- there's no therapy for that disorder at the moment.

Right, and having just come back there, it's a pretty tough slog right now, so I believe that would be an interesting indication. Would you begin trials in advanced AMD when I already have significant blurred vision? Is that where you're going to go first, do you think?

Can you repeat the question again?

Would you be targeting advanced dry AMD as a vision rescue indication, if you will?

So some of the premise here again, without getting overly complicated, is that if we want to have a neuro-protective approach, you have to intervene at a time when you think you have enough photoreceptors left to salvage. So we very much are interested in not addressing the advanced forms of AMD.

Of course, we'll have to comply with regulatory parameters in terms of doing cell therapy testing in the eye. But there are ways in which a clinical trial can be designed, and which you may have to begin with, perhaps, the more severe patients, but then as you demonstrate safety within the context of that trial, move into patients with less severe disease in which you'll have a much higher impact, or potential for impact of benefit.

And having explored a lot of the aspects of brain, and now spinal cord, we recognize there's very unique aspects to the eye which, if you've been to ARVO, you understand for showing proof of concept. The surgery is much more minimally invasive. We have a spectrum of objective readouts that we can do, as I mentioned previously. We have a control eye. We have really well established natural history data. And more importantly, we have a disease with marked prevalence. And so our accrual for those trials -- and we've seen this from other trials that are being innovative in the eye space -- is on a much shorter timeframe.

Okay, very good. And just one last follow-up and I'll jump back in the queue. Another indication that pops up in my mind would be retinitis pigmentosa. Would that be something you'd be looking at as well in the ocular space?

Yes, because the final common pathway for not only AMD but retinitis pigmentosa is photoreceptor loss, and so a neuro-protective strategy that would be effective for AMD we believe could be potentially equally effective for retinitis pigmentosa and other more rare macular degenerative diseases. So it's potentially one-size-fits-all because, if we have an effect that we can protect photoreceptors in AMD, there would be no reason to believe that we couldn't pursue a clinical trial in RP, as well.

And will you be bringing that up as peripheral items during the pre-IMD process, just to let the FDA know you're looking at photoreceptor?

We've had a pre-IND with the FDA that, without going into detail, covered a very broad scope of retinal degenerative disorders. So that's helping me think about this in very much more confident terms beyond AMD alone.

Great. Fantastic. Thanks so much for taking my questions. I'll jump back in the queue.

Keay Nakae with Chardan.

Yes, thanks. Just some further clarification on some of the other cost saving initiatives, one, the properties in Rhode Island. How much did you think that that might fetch for you?

Keay, we'll probably list those. There are two facilities there, as Martin mentioned. One was a former pilot manufacturing facility. It's about 20,000 square feet, another a 3,000 square foot facility there. We'll probably get those on the market in Q2, but depending on how it goes, a couple -- $3 million, in that neighborhood.

Okay. And then with respect to the engineered rat technology, I assume you've had some preliminary discussions about that, and what's the level of enthusiasm for that?

So I'm going to -- we also have Dr. Ann Tsukamoto with us, who is our EVP of R&D and who's an expert in this field. And I'd have Ann describe this platform and why we're so excited about it.

So thank you. So the rat embryonic stem cell technology is a very recent discovery by an investigator who was at Stem Cell Sciences when he did this work. And if you think back to the mouse embryonic stem cell technology over 30 years ago, it's taken this long to derive the correct rat cells that are capable of making germ line transmissions to create new transgenic animals.

And so if you think about how many businesses respond from the mouse embryonic stem cell technology to create transgenic animals in -- or transgenic mice, it spawned a whole new industry. And the rat, as you know, is the better physiological model for a number of human diseases, and it's the preferred animal model for pharmas and drug discovery and disease modeling, because rats happen to be just better and closer to many of the humans.

So we've had a lot of interest in this technology, and we continue to work with the discoverers of this to improve and disseminate this information and technology.

Okay, thanks for that.

Ladies and gentlemen, this concludes the Q&A portion of the call. I would now like to turn the presentation back over to Mr. Martin McGlynn for closing remarks.

Well, thank you very much, everybody. We're delighted that we're able to have this call today. Obviously we have embarked on a very exciting phase with this company, with this very exciting technology, and we really look forward to starting to bring home the harvest, and we're all keeping our fingers crossed, of course, that we're going to get some really exciting clinical data out of this entire endeavor in the not-too-distant future. And I thank you again for your participation today. Thank you.

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