Microbot Medical Inc (MBOT) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2011 StemCells Incorporated earnings conference call. My name is Kendall and I'll be your operator for today. At this time, all participants are in a 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. Martin McGlynn, Chief Executive Officer. Please proceed.

Thank you, Kendall, and thank you very much and welcome, everybody. We're happy that you could join us today. The formal remarks today will come from Rodney Young, our Chief Financial Officer and myself. Rodney will start off with a discussion on the financials that have just been released. And then, I will follow up with some formal remarks. I'm also joined by some other members of the executive team here in our conference call and they can be available as needed. So to begin, I'd like to hand over to Rodney Young, our Chief Financial Officer.

Okay. Thank you, Martin. Before we proceed, I'd like to remind everyone that we will be making some forward-looking statements during today's call. These statements reflect our current views and are based upon certain assumptions that may or may not ultimately prove valid. And we assume no obligation to update these forward-looking statements anytime in the future.

And the Company's actual results may differ materially from anything projected during today's call, due to the risks and uncertainties to which the Company is subject. These risks and uncertainties are described in our public filings with the SEC and at the end of today's press release, which you are encouraged to consult.

Okay. So, onto the numbers. For the second quarter of 2011, we reported a net loss of $4.04 million or $0.29 per share and that EPS number is on the post-split basis. This compares to a net loss of $4.61 million which we reported in the second quarter of 2010 which was $0.38 per share. Our loss from operations was $7.09 million, essentially flat compared to Q2 of 2010, but recall that our Q2 2011 results also include approximately $260,000 for severance and expenses related to the reduction in force that we effected in May.

On the revenue side, total revenues in the second quarter of 2011 were $234,000 which was a slight decline from the $244,000 that we reported a year ago. But revenues from product sales were $185,000 which was a 155% increase, i.e., more than double, compared to Q2 of 2010. And this reflects the very strong growth that we're seeing in our SC Proven media and reagents business. And we are continuing to see growth driven by both higher unit volumes as well as by new product sales. It's worth mentioning that nearly a third of our current product portfolio was launched within the last couple of quarters. And so we expect these products to continue to ramp up as the year progresses.

On the expense side, our total operating expenses were $7.27 million, which was essentially the same as they were in the quarter of last year 2010. Again, those expenses include the roughly $260,000 in severance and related expenses. The R&D expenses were $5.05 million, up roughly 4% compared to Q2 of 2010. SG&A expenses, however, were down 8%. They were $2.1 million in the second quarter of 2011, down 8% compared to the year-earlier quarter. These results again reflect our continuing focus on cost containment, while prioritizing our key clinical development and R&D activities.

Other income for the second quarter was $3.06 million. This was primarily due to the change in the fair value of our warrant liability. This compares to other income of $2.44 million in Q2 of 2010. And of course, this item is a non-cash item.

So for the six-month period, first half of 2011, I'll just give the highlights. Our net loss was $9.78 million or $0.71 per share, again on a post-split adjusted basis and this compares to the first-half 2010 net loss of $10.73 million or $0.90 per share. Loss from operations in the first half of 2011 was $14.6 million and this is essentially flat with the $14.65 million operating loss that we reported in the first half of 2010.

Again, I think the themes and the highlights for the first six months of 2011 are similar to the second quarter themes. For the first six months of 2011, revenues from product sales, which totaled $334,000, that represented a 77% increase over the six months of 2010, again reflecting the very strong growth in our SC Proven business. And similarly, SG&A expenses were down 15% compared to the first six months of 2011, while R&D expenses were up 7%.

So on a cash burn basis, for the first six months of 2011, our cash burn was $13.1 million. That was down from about $13.8 million in the first six months of 2010. Lastly, we closed the quarter at June 30 with $15.66 million in cash, cash equivalents and marketable securities.

So you can see in our second quarter numbers, some of the effects of our recent initiatives to reduce our operating cash burn. You will recall that we stated in our Q1 conference call that our goal was to reduce our operating cash burn to an annual run rate of approximately $18 million, down from the $24 million that we reported in 2010.

Let me just take a moment here to give a status report of where we are on some of the initiatives we've undertaken to address our burn rate. First of all, just this month, in July, we successfully relocated our corporate headquarters and research laboratories to our new facilities here in Newark, California. This new space was custom designed and built for us, allowing us to operate in new state-of-the-art facilities at much less expense. We expect to save approximately $1 million on an annualized basis from this relocation. This benefit should be seen from September onwards with the full effect showing in Q4 of this year.

Second, we effected a reduction in force in May from which we expect approximately $2.3 million in annualized expense reduction, and we've already seen payroll reduced in June and the full effect of this [ref] a should be seen starting in Q3.

Third, we have targeted a significant reduction in our cell manufacturing costs. As we stated previously, we have now banked sufficient GMP-quality cell banks to supply our foreseeable clinical trial agenda. So we can scale back our cell banking activities and consequently, we expect to reduce expenses on the order of about $1 million annually relative to last year's spend.

And lastly, we are pursuing the monetization of non-core corporate assets such as our facilities in Rhode Island and our rat embryonic stem cell technology. The timing of these kinds of transactions is also difficult to predict, but efforts are underway now to bring these monetizations to fruition in the near future.

So in addition to the monetization of these non-core corporate assets, we are pursuing funding through the California Institute of Regenerative Medicine or CIRM. We expect to get a first read regarding our applications in the fall of this year, with a more definitive answer in early 2012. And if we're successful in these applications, we may be awarded a significant amount of funding, which would of course be non-dilutive capital.

So as we look to the second half of 2011, our operating cash burn is likely to be near our target rate of $4.5 million per quarter by the end of the year. Again, that's before any monetizations or cash in.

So that's the financials for the second quarter and first half of the year. And now, I'll turn the call back over to Martin.

Thanks, Rodney. Just a few introductory remarks before I talk some specifics on our clinical trial progress. The Company's management and Board of Directors remain keenly focused on the successful execution of three key business objectives, namely the timely generation of clinical trial data from our groundbreaking clinical trials for our human neural stem cell being conducted in all three elements of the central nervous system, the brain, spinal cord and the eye.

Secondly, to significantly reduce our operating cash burn. And lastly, the monetization of non-core corporate real estate and intellectual property assets. Those are the three key business objectives that management and the Board are focusing on.

I want to say that even with the continued uncertainties in the capital markets, the difficult financing environment for small-cap biotechs and the downward price pressure we've been experiencing recently on our stock, we firmly believe that our approach of working towards meaningful clinical data in a thoughtful, cash-conscious way is the best pathway forward for the growth of our stockholder value.

Already this year, we've taken a number of steps to materially reduce our operating costs, while at the same time, advancing our clinical development program. Quite frankly, given this, it's difficult to explain the striking disconnect between our current market value from what we believe is the significant potential value inherent in the Company's technologies.

So let me be more specific about our human CNS stem cell clinical development program and progress. First of all, with regard to spinal cord injury, we're seeing a lot of interest in the study by spinal cord injury patients from all around the world. You'll recall that we're planning to transplant a total of 12 patients with varying degrees of injury, starting with patients who have both sensory and motor complete injury, referred to as ASIA-A and moving to patients who have retained some spinal cord function, the ASIA-Bs and then onto the ASIA-Cs.

The clinical trials site, Balgrist Hospital in Zurich, has received enquiries from approximately 154 patients from 27 countries around the world, and the doctors there this week began on-site screening of patients for possible enrolment into the first ASIA-A cohort. So I'm happy to report that we remain on track to achieve our goal of transplanting the three ASIA-A patients this year.

Secondly, Pelizaeus-Merzbacher disease. Recall that we transplanted the last patient in this four-patient study in February of this year. So far, we've been very pleased with the post-transplant course in all four patients and we plan an interim look at the six-month data in September with the full data from that trial expected in early 2012.

With regards to AMD, we are planning to conduct an open-label, multi-centre Phase I/II study in age-related macular degeneration in the United States and we remain on track to file the IND later this year. AMD, I'm sure you know, is the leading cause of vision loss and blindness in people aged 55 and over. There is huge unmet clinical need and a very sizeable market opportunity.

The preclinical data for our human neural stem cell is very robust and exciting. In our rat model of vision loss, our neural stem cells preserved the vision that approaches normalcy, compared to untreated animals who progress to blindness. And then, last but not least, we have a significant program underway focusing on Alzheimer's disease. We have a collaboration with Dr. Frank LaFerla's Lab at UCI, Irvine in Southern California and that is moving along nicely, and is already yielding some very interesting observations about which we'll have more to say on this subject later this year.

[Though] as you can see, we have made significant progress, targeting very, very significant unmet clinical need and increasingly focusing on larger market opportunities for the technology.

Now, I thank you for your patience while we got through these opening remarks, and now we will be happy to take any questions.

(Operator Instructions). Stephen Dunn, LifeTech.

Good afternoon, and thanks for taking my questions today. On -- let's start with PMD, I seem to recall there was a possibility of having an interim six months look at the PMD patients, is that not going to happen?

That is still the game plan, Steve, yes.

Okay, so we would be expecting that close to this quarter, Q3-Q4?

Well, our expectation is that we will have the data in our hands in September.

That's great. And then, that's obviously followed by the final 12-month results?

Correct.

Okay, great. On the spinal cord then, so the trial was initiated earlier this year, I guess that was to be IRBs and no patients have actually been entered into the trial yet. Once they are treated and the first tall order for patients in the ASIA-A, you will be reporting the one-year follow-up on just the ASIA-A as interim results, right?

I'm sorry, Steve, could you repeat that question?

Sure. You are expecting to -- they are expecting to treat the first four patients, the first cohort, which is the ASIA-A patients. We would have --

It's three patients, Steve.

I'm sorry, three.

The ASIA-A cohort is three, yes.

Yes. As I stated, Steve, we would expect to transplant all three of those this year.

Right. And then, we would -- and then, you're going to report the results of the ASIA-A cohort 12 months following that, is that correct?

At this stage, quite frankly, we haven't communicated or we haven't settled on any particular plan in terms of how we're going to report out the data. We will be very closely monitoring these patients, the ASIA-A patients as we move through the year. And of course, we will be transplanting into the next cohort, the ASIA-Bs as we do so. So to the extent that there is anything materially remarkable about these studies, of course, we will keep our shareholders fully informed.

Okay. On the retinal indication, again, that's for dry AMD, which is the precursor to what AMD is. So are you looking to -- I guess, this will be your first indications, we would actually try and -- it looks like you're trying to get in before the worst of the disease hits. Is that a new thinking for you guys, try to get the implantations in before disease gets too severe?

Great question, Steve. It so happens, I have Dr. Stephen Huhn, who heads up our CNS program, I have him here with me. And Steven, would you like to address that question?

So very briefly, you're correct that we think a lot of the regenerative medicine potential that's offered by cell therapy is best conducted earlier in disease courses than later. And so as we think about the specific patient type or AMD, we are very much mindful that the most appropriate time is going to be before the late stage of the disease, for sure. And in terms of dry AMD, you are right, it is a precursor to the wet AMD. But there are a very large number of patients with dry AMD, who continue with that particular disease course. And we will be looking to try to alter that disease course by slowing the progression of the loss of vision in those particular group of patients. And part of that obviously is trying to get in at a time of the disease when they have a measurable vision retained.

If I could put -- if I could think far ahead now, what do you see is the possibility -- as we saw in ARVO at wet AMD in the CATT data that Avastin was roughly equivalent to Lucentis at a much, much lower cost. Do you foresee a possibility of combining regenerative cells in combination with an anti-VEGF like Avastin farther down the road? Do you see that possibly as a combination therapy?

No, it's a difficult question to answer, but I think that if you look at some of these diseases, a combinational approach has a certain rationale, and as we begin to understand more of the impact of the cell therapy strategies that we're trying to explore, there might well be opportunities to think about a combinational approach. So I think that there is definitely a reason to think about that, and as you point out, that's something that's down the road, but it's certainly within the realm of possibilities.

Okay. Great. And just a final question for you, Martin. You have additional assets, you have your liver engrafting cells program. Is the Company looking to partner that out or outlicense it, or what are your plans with all that intellectual property?

Thanks, Steve. Yes. So we have been working under the hood for a while now on the liver cell technology. We have made a great progress and we remain excited by the prospect for this technology. But quite frankly, it's not yet ready for prime time. But we remain very interested in advancing this platform and we are spending resources on it.

So is it even too early in its development that it wouldn't even be, say, an outlicensing candidate or something?

No. I wouldn't rule out licensing arrangements or collaborations per se, but we don't think that the technology is sufficiently advanced at this stage to start talking about development pathways into the clinic, et cetera. But quite honestly, the prospect of a partnering opportunity or a licensing opportunity for this technology [where once] present itself that made sense to us and that we thought was in the best interest of the shareholders, then we would obviously seriously consider it.

Okay. Great. Thanks very much. I'll jump back in the queue.

Thank you.

Keay Nakae, Chardan Capital Markets.

Thank you. A couple of questions. First, Rodney, with respect to the CIRM grant, can you give us an idea of what the magnitude of that might be if you're fortunate enough to receive one?

Yes. Keay, these are pretty sizable grants. Would be part of a team or a consortium, but the size of the grants could be in the 15-ish -- $15 million to $20 million range over a handful of years, three, four years. So it's significant funding.

And as far as the process, the Moscow [news] fall, is that simply saying that you've made the cut for a final consideration, if you're -- if you get to that point, or what exactly are you looking to hear back on this fall?

Okay. This is Martin. So we've already been in the process and we were invited to make the submissions. So we made the submissions in outlined form and the next step would be a communication from CIRM that would -- if we're still in the game and the hunt as it were, we would receive a planning grant, which in turn would be used to pay for the development of the full-scale Disease Team application which in turn, if that went through and was successful, we would expect to see funding -- a decision and funding somewhere in the region of maybe this time of next year.

Okay, great. So we'll look forward to that milestone. With respect to the AMD trial, can you give us an idea of what type of design of the trial you're looking at at this point?

So we're still on the process of putting a lot of these things together and working with our team of retinal consultants, but this is a Phase I/II Open-Label trial, that will involve the usual order of magnitude of subjects for that scale of trial, in which we'll be dosing the worst eye of the two eyes for the patient. And then, looking at a number of outcomes with the first year after transplant. So an Open-Label Phase I/II study, dose-escalating, multi-center, patient numbers will be somewhere in the 10 to 20 range and very well defined end points.

Okay, it's helpful. And then, with respect to spinal cord, obviously it sounds like a number of inquiries, is it that the center itself wasn't ready to move forward or what's the hang-up or gating item there?

No, the center in fact was fully initiated back in March of this year. But the process is quite complex given the nature of the disease. So in the first instance, after contact is made, there is an immediate classification decision and then there are communications that take place between the patient and the patient's clinicians. And then, in time, medical records are submitted to the institution to the investigation site. Then, there is a thorough review of the medical records and maybe even a further follow-up exchange with the patient and patient's physicians. And then, finally, there is an invitation for the patient to present to the institution for the full on-site workup.

So it takes a little bit of marshaling and of course, given the nature of the condition and the severity of the injury, it is something that has taken a little bit of organizational skills, but I'm pleased to say that there's just tremendous interest in this study from all over the world and there seems to be quite a large population of patients from which we can make enrollment decisions upon. So we're very encouraged.

Okay, great. And then, a final question for Rodney. I know you said this, but can you repeat what the expectation is for the cash burn for the balance of the year and then also, what else do you still have flexibility on in terms of lowering operating costs?

Okay. I think we're looking at getting down to our target burn rate, which if you do it per quarter is $4.5 million per quarter, that's the $18 million per year. We'll probably be pretty darn close to that by the end of the year. What do we have control over? Obviously, a lot of the discretionary types of things on the G&A side, we've been focusing on those kinds of things with a razor-sharp focus. On the other hand, we are obviously looking to accelerate and prioritize clinical development and late preclinical activities as well. So it's a balance between pushing resources at those kinds of goals versus managing our cash burn.

Okay, very good. Well, thanks for the update.

And that concludes our question-and-answer portion of today's call. I would now like to turn the conference back over to Mr. Martin McGlynn for closing remarks.

Just again, thank everybody for joining us. We are delighted to have the opportunity to present you with updates on our business activities and our financial status and our progress in our clinical development. Thank you for joining us and we look forward to talking to you again in the not-too-distant future. Thank you.

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