Microbot Medical Inc (MBOT) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2011 StemCells Incorporated earnings conference call. My name is Janayda 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. Martin McGlynn, President and CEO. Please proceed.

Thank you, Janayda. Welcome, everybody. Happy you could join us today.

So, 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 has just been released and some of the business points that we've been updating you on. And then, shortly after that I will follow up with some formal remarks. Today I'm joined by some other members of the executive team here in the 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.

Thank you, Martin.

As usual, before we proceed I would like to remind everyone that during the call today 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 anytime 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 SEC and at the end of today's press release, which you are encouraged to consult.

So, I am going to begin by talking about the results for the third quarter first, and then give you some of the highlights for the nine month period. And as a reminder, all the share and per share numbers are split adjusted.

Before the third quarter, loss from operations was $6.16 million, which was 12% lower compared to the third quarter of 2010. On the revenue side, we recorded net product sales of $182,000, which was a 40% increase compared to the third quarter of 2010. The strong growth in our SC Proven business is being driven both by higher unit volumes as well as new product sales.

Total operating expenses were $6.33 million, which was 12% less than the third quarter of 2010. R&D expenses were $4.52 million, down 13%, while SG&A expenses were $1.73 million, down 14% compared to the prior year. The third quarter results are now reflecting more fully the effects of our continuing focus on operating efficiency.

Other income for the quarter was $1.83 million, an increase from the $1.45 million we reported in Q3 of last year. This is driven principally by the change in the fair value of our warrant liability. This is, of course, a non-cash item.

So, the bottom line for the third quarter of 2011, a net loss of $4.33 million, or $0.31 per share. This compares to a net loss of $5.55 million, or $0.44 per share, in the third quarter of 2010.

So, turning now to the nine months ending September 30th, 2011, loss from operations was $20.76 million, which was 4% lower than the $21.65 million reported in the same period of last year.

The highlights for the nine month period include our revenues from product sales totaled $517,000, up 62% compared to the nine months of 2010. SG&A expenses were down 14% and R&D expenses were essentially flat compared to the prior year.

The net loss for the nine month period was $14.02 million, or $1.02 per share. This compares to $16.29 million in 2010, or $1.33 per share.

With respect to cash burned for the nine months of 2011, we reduced our cash burn by almost $3 million compared to the prior year, i.e., our cash used in operations was $16.8 million, down from the $19.7 million we reported last year.

Lastly, we closed the quarter with $12.5 million in cash, cash equivalents, and marketable securities. This compares with cash at the June 30th -- with our cash at June 30, 2011 of $15.7 million. So, the change in cash for the quarter was only a decline of $3.2 million. This was due to a combination of reduced operating burn and approximately $900,000 raised through the sale of stock.

You will recall that we stated earlier this year that our goal was to reduce our operating cash burn to an annual run rate of approximately $18 million going into 2012. I am pleased to report that we are on track to achieve that goal.

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

Thanks, Rodney.

You may all recall that last quarter we stated our belief that the best pathway for growing shareholder value is for the Company to generate meaningful clinical data in a thoughtful, cash conscious way. As our financial results for the quarter show, we are managing our expenses and our cash burn in an efficient manner.

So, I would now like to address the other side of that equation. Therefore, the majority of my remarks will be devoted to putting our HuCNS stem cell translational agenda into context, updating you on the considerable progress we are making in the clinic and on our plans to initiate a US clinical trial in age-related macular degeneration and, in conclusion, giving you an update on our Alzheimer's disease collaboration with Frank LaFerla's lab at UC Irvine.

Let me start by reminding everyone of the remarkable in vivo properties of our proprietary human neural stem cells. They have been shown to preserve neurons in a mouse model of Batten disease, a rare and fatal lysosomal storage disease which attacks and kills the neurons in the brain. They have been shown to remyelinate nerve axons in a mouse that is born without myelin sheathing on its nerve axons, otherwise known as the shiverer mouse, and it is widely used to study myelination disorders.

Thirdly, these cells have shown that they can restore lost motor function to the hind limbs of mice that have had their spinal cords injured. And last but not least, they have been shown capable of preserving the vision of rats that would otherwise go blind.

So, simply stated, our clinical translation goal is to try to replicate as many of these exciting results in human patients. However, our first responsibility to the patients, their families, and the clinical investigators who sign on to participate in our clinical trials is to demonstrate that the entire procedure is reasonably safe and that the cells and immunosuppression regimens are well tolerated.

Now, unlike the vast majority of clinical development pathways for small molecules where the first-into-man studies are in so-called normal, healthy volunteers, in the cell therapy world our first-into-man studies are really first-into-patient clinical trials where we have to evaluate safety in patients that are afflicted with the targeted disease or the impairment, which is obviously much more challenging.

However, the advantage of being in patients is that you also have an opportunity to look for biological activity or even for signs of clinical benefit. Investors should not underestimate the potential significance of successful completion of so-called Phase I or Phase I/II clinical trials in the cell therapy space because the data that is generated comes from a human patient population, and the next clinical trial could well be a pivotal study that could be used for registration purposes.

Our first clinical trial with HuCNS-SC began in November of 2006 when we transplanted the first Batten's patient. We successfully completed that six patient Phase I safety trial in January of 2009 and submitted the study report to the FDA. The data showed that the procedure, the cells, and the immunosuppression were well tolerated.

However, because enrollment into this first trial was restricted to children with the more advanced forms of the disease, that is to say to children with few functioning neurons that are left to protect, we sought and received in May of 2010 FDA approval to conduct a second clinical trial in newly diagnosed Batten's children who would be in their very early stages of the disease and who would still have most of their neurons intact and who therefore might benefit from the neuroprotective properties of the cells.

We initiated this study in October of 2010. But, to our dismay, unlike the first trial where we had little difficulty identifying children with the very advanced form of disease, this time around we failed to identify even one patient who met the entry criteria for the trial despite six months of best efforts.

So, in April of 2011 we announced that we had made the very difficult decision to shelve the trial because we felt it unlikely that we would find, in a reasonable period of time, sufficient numbers of patients in the earlier stages of the disease that would be required to populate the trials needed for FDA marketing approval for Batten disease.

I would like to emphasize at this point that our endeavors in Batten disease have demonstrated that very fragile children successfully tolerated the transplant procedure and a yearlong immunosuppression regimen combined with doses of up to one billion cells injected directly into the brain. Moreover, there was no evidence of tumor formation, which is of great concern with other stem cell platforms.

We also learned that the cells are capable of migrating deep into the brain structure, are capable of long term survival, at least two years, and very importantly, the cells persist well after withdrawal of immunosuppression, or at least one and a half year, maybe longer.

Sadly, three of the patients that had been enrolled in this trial lost the battle with this fatal disease. However, three of the six patients continue to be monitored in the long term follow up study which they entered one year after their transplant date. Two of these children are now more than four years past the date of the transplant and the third child is approaching the four year mark, all of whom, I will remind you, had been diagnosed with a fatal disease.

I apologize for this longwinded introduction, but I think it is critically important that investors understand why we shelved the Batten's program and that is was not a failure of the technology. We firmly believe that if children with CNS mediated lysosomal storage diseases such as Batten's can be diagnosed earlier, neural stem cell transplants might not only improve the quality of life for these children but might even extend their lives.

Today we continue to evaluate alternative strategies that would allow the program to be taken off the shelf, including possibly partnering with a biotech company with a commercial presence in the lysosomal storage disease space arena.

So, now looking forward to our ongoing clinical development efforts, I'd like to just first of all talk about spinal cord injury. You'll recall that this is a 12 patient study, Phase I/II trial, being conducted at Balgrist Hospital in Zurich. Patients are being enrolled with thoracic level injuries three to 12 months post injury. And we are enrolling patients with complete and incomplete injury ranked ASIA A, B, and C. And this trial, you'll recall, was initiated in March of this year.

So, since we last spoke in the July call, we announced that we had successfully dosed the first patient in the ASIA A cohort. This patient was a 23 year old German man who was injured in an automobile accident. And I'm pleased to report that the procedure went very well and that the patient is back at home and continuing his rehabilitation as per the protocol.

Plans are in place to dose the remaining two patients in the ASIA A cohort by year-end, and then thereafter we'll assess their progress before advancing next year to dose the ASIA B patients.

Age-related macular degeneration. I'm also pleased to say we remain on track to file an IND by year-end and next year to initiate a 16 patient Phase I/II multicenter clinical trial in the dry form of age-related macular degeneration which, as you know, is a leading cause of vision loss and blindness in people over the age of 55.

I will just remind you that in the Royal College of Surgeons rat model of vision loss, the human neural stem cells preserved vision pretty close to normal compared to the control groups in which all the rats went blind.

Alzheimer's disease. In September of this year, we announced that we'd been awarded the California Institute of Regenerative Medicine, or CIRM, Disease Team Therapy Development Planning Award of approximately $100,000 to allow the Company and its collaborators at UC Irvine to pursue the preclinical development of human neural stem cells as a treatment for Alzheimer's disease.

This collaboration is based on the work of Dr. Frank LaFerla's lab at UC Irvine which demonstrated that mouse neural stem cells enhance memory in a mouse model of Alzheimer's disease. This groundbreaking research was published in August of 2009 in the Proceedings of the National Academy of Sciences.

As everyone knows, Alzheimer's disease is a devastating, progressive neurodegenerative disease for which there is no cure or effective treatment option. According to the Alzheimer's Association, today approximately 5.4 million Americas age 65 and older have the disease. It is the sixth leading cause of death in the US.

The number is expected to rise to 7.7 million by 2030 as the baby boomer generation ages and to be between 11 million and 16 million by 2050. Spending this year by the federal Medicare and Medicaid programs for people with Alzheimer's disease is estimated at $130 billion and projected to top $1 trillion by 2050.

So, we are using the planning award funds that we've received from CIRM to apply for a full CIRM Disease Team Research Award in January of 2012. If successful, we could expect to receive up to $20 million in CIRM funding beginning in the summer of next year that would help pay for the preclinical work that needs to be done to file the IND, which would be targeted to occur within four years of the funding.

So, last but not least, though, I'd now like to turn to Pelizaeus-Merzbacher Disease, or PMD. So, PMD is one of the myelination disorders of great interest to the Company. And these are characterized by the absence of or the injury to the myelin sheathing that surrounds nerve axons and allows the electrical impulses to flow properly.

Pelizaeus-Merzbacher Disease, or PMD, is a rare, fatal myelination disorder that occurs primarily in children. Other examples of myelination disorders include transverse myelitis, multiple sclerosis, and certain forms of cerebral palsy.

As previously mentioned, our Company scientists have shown that our human neural stem cells are capable of myelinating the hypomyelinated nerve axons of the shiverer mouse. The primary goal that we set for ourselves in the clinic was to ascertain whether we could detect donor derived myelin, that is to say myelin derived from the transplanted neural stem cells, using magnetic resonance imaging, or MRI.

We chose PMD for this proof of principle study because it's associated with the lack of normal myelin development and, unlike Batten disease, can more easily be diagnosed at birth. Moreover, as PMD patients are not expected to form new myelin, evidence of new myelin formation after the stem cells have been transplanted could have real significance.

We initiated the four patient open label trial at UCSF in October of 2009. All four patients have been successfully transplanted and the trial will complete in February of 2012.

We have conducted a review of the interim MRI data with the clinical investigators at UCSF and are pleased with the progress of the study so far. There have only been two serious adverse events reported to date, both of which appear related to the underlying disease.

Now, at the time we conducted the interim analysis, only one patient had completed the 12 and 18 month post transplant follow up and MRI evaluations. So, to be conservative, today we are only sharing our observations on that patient, namely that the MRI data for this patient indicate changes consistent with the early development of new myelin in the regions in which the cells were transplanted.

Now, while this data is preliminary, the results appear to confirm our hypothesis of the type of early MRI changes we expected to first observe after human neural stem cell transplantation in this myelination disorder. So, we're cautiously optimistic about the changes we are seeing, but clearly we need to await the analysis of the MRI and clinical data in all four patients in the trial before definitive conclusions about the outcome of this study can be drawn. We anticipate being able to report final results from the study in Q2 of next year.

So, to summarize then, we are excited and we're encouraged by the progress we're making in our HuCNS-SC clinical program. I said in the beginning of my remarks our principal objective is to generate meaningful clinical data in a timely fashion. In 2012 we plan to report the full results of the PMD trial, make significant progress with patient enrollment in the spinal cord injury trial, and to initiate the Phase I/II trial in age-related macular degeneration. And of course we look forward to reporting on those efforts in due course.

So, I thank you for your attention. And we'd be more than happy to take any questions that you might have.

(Operator instructions.) Joe Pantginis with Roth Capital Partners.

Hi, guys. Good afternoon and thanks for taking the question. Couple questions, if you don't mind. Let me start at the top line on the P&L. With regard to your SC Proven revenue, I was just curious what kind of initiatives or decisions you're looking to make with potentially enhancing the program within the United States. And then, I have a couple follow ups. Thanks.

So, Joe, our primary focus at this stage is to find a more efficient way to gain access to the global markets. We currently are not partnered with a major global distributor of reagent products, and we've spent a fair amount of time pursuing that objective. We've also been looking at ways and means perhaps that we might partner with regional distributors if we cannot negotiate the kind of agreement that we're looking for with a global player.

Okay. That's helpful. Thank you. And just curious -- thank you for sharing the interim anecdotes on the PMD study. As you look to the full four patient data, can you remind us about potential -- any clinical efficacy measures that you'd be looking at?

Joe, I'm fortunate to have Dr. Stephen Huhn with me in the conference room today, so I'm going to hand that question over to him. Stephen?

So, in terms of the metrics that we're looking at in the patients from a clinical perspective, it's the usual parameters of their neurological exam, their psychometrics in terms of a series of neuropsych tests, as well as quality of life and some other measures.

So, there's a broad spectrum of ways to look at their clinical outcome. And it's an awful lot of data that each patient is subjected to and analyses. So, we're going to work our way through that as part of the final aspect of the study.

Sure. Thank you very much. And then, my last one and then I'll just jump back in the queue. With regard to the spinal cord study, just curious what kind of things you might want to share with us regarding behind the scenes activities where you'd look to enhance or even potentially accelerate enrollment in that study.

So, the good thing is that the study is being conducted at one of the major rehab and spinal cord injury centers in Europe, and it's well connected to a larger network of spinal cord injury centers. And so, I think, with the announcement that we've dosed our first patient, I'm confident that the profile of the trial will be raised. And we're going to continue to encourage recruitment throughout Europe and perhaps beyond as well.

Great. Thank you so much.

Stephen Dunn with LifeTech Capital.

Gentlemen, good afternoon and thanks for taking my questions today. Let's start with PMD here. We have one evaluable patient so far. And Martin, you said there was MRI evidence of remyelination. I was wondering, did you see any improvement in movement or motor skills, or at the level of remyelination that we saw, we wouldn't expect to see any improvement in motor skills at that point?

So, the interim data at this point focused on the MRI results because it's a bit more analyzable than the mountains of clinical data that we have for the patients. And at this time we're not going to make any statements about the clinical outcome or its correlation with the MRI. But, obviously that's some of the work that we have ahead of us.

Okay. Could you give us some color around the two SAEs? The statements was they were probably or -- I don't know if they were definitively related to the underlying disease. Could you give us some color on what those were?

Sure. Just by way of perspective, the Phase I NCL trial that we had had a total of 16 SAEs. And so, we're almost three quarters of the way through the year follow up for all these patients and we only have two SAEs in the PMD trial. So, from a SAE standpoint, again, everything in the NCL trial as well as what we're seeing in the Batten's trial are related to the events from their underlying disease.

In other words, if a patient is hospitalized with a respiratory tract infection, which these patients are known to have, that gets counted as an SAE in the trial. But, we can look at the data and conclude that it's not related to the intervention from the study.

Well, I realize that. So, to put words in your mouth, then these were UTIs?

One was a respiratory tract infection, and I believe the other one was a tracheitis.

Now, were these SAEs in the one evaluable patient or were they in the other patients, or can you identify which patients those were in?

No, we know precisely where the SAEs occurred. And one was not in the evaluable patient and the other one was.

Okay, great. Let me move on to spine real fast. I guess on the ASIA A patients, correct me if I'm wrong but really what we're looking at is the key driver on the ASIA A patients will be when the immunosuppression, the temporary immunosuppression ceases at nine months and then we see how well the graft holds. Is that correct? That's really what we're looking for in the ASIA A patient?

Well, so the observations that we're going to have in the trial relative to when the immunosuppression comes off is going to be applicable to all the groups in the study, the ASIA A, Bs, and Cs. And if you --.

Well, I understand that. But, I guess what I'm saying the data that investors would consider important at this -- for the ASIA A patients would be what happens when the immunosuppression ceases.

Well, first of all, we don't expect there to be any safety concerns, obviously. And you have to remember that the ASIA A patients are the ones that have the most severe injury. They have a complete loss of motor and complete loss of sensory function. So, any changes that might occur secondary to the stem cell transplantation in those patients are going to be incremental.

And again, based upon the data that we see from our NCL trial where we can show that the cells survived after the immunosuppression was stopped by more than one and a half years, we're not expecting as -- our hypothesis would be not expecting to see changes that would occur with the result of removing the immunosuppression. We expect there to be a durable change, if one does occur.

Steve, is your question focused with regard to cession of immunosuppression? Just by way of clarification, is it focused on safety or is it focused on the potential of being able to pick up some clinical benefit?

Safety. I would be -- I guess where I'm sitting is in the ASIA A patients, I'm not sure what clinical benefit is going to be visible at that point. So, I would -- my expectation is if I have a good clean safety data point for all the ASIA A's, that's a win.

Right. Well, obviously we would hope for a good clean safety outcome in all of the patients. If we look at our experiences in NCL and in PMD, there have been no -- there has been nothing remarkable or notable in any of the patients who underwent immunosuppression and at the time when immunosuppression was withdrawn.

So, I think it's a reasonable question because one always wonders what happens in other transplant settings when you remove immunosuppression. And the central nervous system is a bit unique because we believe, as do others, that you can remove immunosuppression and get long term survival of the graft itself.

And so, obviously one of the ways that this was first tested was what Martin had referred to in the NCL study, where we placed up to a billion cells inside the brain in eight different locations and then monitored the patients closely around the time the immunosuppression was stopped. And we couldn't tell that there was any deterioration or any adverse reaction to stopping the immunosuppression.

If you compare that to the dose that we're going to test in spinal cord injury of 20 million cells, I think it gives us a lot of confidence that the immunosuppression withdrawal will be an important milestone for the patient, but we don't anticipate any safety concerns.

Okay. And one last one on dry AMD. Is the proposed trial design thinking of starting off with the -- let's just say the calculated therapeutic cell concentration, or is this going to be almost a dose ranging study in the first 16 patients?

No, it's a dose escalation study. It's difficult to speak to the details right now because the IND hasn't been submitted. But, suffice it to say that there'll be two doses in the study. And the first dose will be tested in a much smaller group of patients, and the larger dose will be tested in the greater proportion of the subjects in the trial.

All right. Thanks very much, guys. I'll jump back in the queue.

Keay Nakae with Chardan.

Yes, thank you. A couple questions. First, Marty, when you present the 12 month -- or the full results for PMD, are you targeting a specific scientific conference to do that at? And if so, which one?

Not at this stage, no, we're not. We'll start looking around when we get to the other side of 2012. When we start preparing and running up to the data lock, then we'll start looking for appropriate venues and appropriate methods to communicate the results of the study.

Okay. On the second question, a follow up on the spine study. Previously you've given out some qualitative numbers related to the level of interest. Has that increased? What did the effect of enrolling the first patient do to those numbers, if you can give us qualitatively what the level of interest is at this point?

So, we track all the contacts that the site gets. And what's really interesting is that we see inquiries from just about every country in the world, if you will. So, it's a worldwide interest in the study.

And what we have noticed is that, over time, the level of interest is obviously naturally high in the beginning. But, it's continuing. It's persistent. And, if anything, it continues to grow with patients now that are even more appropriate for possible inclusion in the study.

Okay. And finally, with respect to your Alzheimer's data, in humans obviously we're concerned about plaque and tangle formation in the brain. So, to what extent are the effects that you have seen in your mouse model related to the therapy's effects translating the mouse model to humans on those same types of protein buildups?

So, I will allow Steven address this in a little bit of detail. But, we have, some years ago, completed work at the McLaughlin Institute with these neural stem cells where we've shown that the neural stem cells are in fact capable of surviving in a plaque-riddled mouse brain. So, that in and of itself was a surprise in many respects, but there it is.

And so, on that basis, we're quite enthused with the prospect of collaborating with Frank LaFerla who has shown that mouse neural stem cells enhance memory performance in the mouse. And of course we're going to be very interested to attempt this work where we can put the human neural stem cells into the mouse brain and replicate the work that he has done in those mouse models.

So, I'll have Stephen talk in a little bit more detail about the Alzheimer brain and short-term memory enhancement.

So, just to address your question, if you look at the data that Dr. LaFerla has with a mouse neural stem cell into these disease models, what's important in his results, which we are hoping to explore as well, is that he has an affect on memory that does not need to modify the plaque load of the patient.

So, this is a fundamentally slightly different approach than, if you will, others that have been exploring Alzheimer's disease. So, this might be a way of looking at Alzheimer's that's independent of the plaque load but still results in a clinical benefit. And so, that's the area of research that we're looking to parallel in our collaboration with Dr. LaFerla.

Okay. Very good. Thanks.

(Operator instructions.) Joe Pantginis with Roth Capital Partners.

Hi. Thanks for taking the follow up. Got a quick question on the potential CIRM funding next year. Obviously you have some real potential here for highly significant funds to bring your program forward, especially in Alzheimer's disease. I was just wondering if you could provide some sense of what is the competitive landscape for the CIRM grant that might be awarded next year. Thanks.

Yes. So, I think there were four companies who received planning awards in this go around. So, presumably all four of those companies will submit for a full disease team grant application.

As to competition for neural stem cells in Alzheimer's, I think that's very limited. And I'm not aware --.

No. Sure. I meant more -- mainly for the actual grant applications. No, that's very helpful. And then, it's not -- is it -- with the grant parameters, it's not necessarily looking at an all or none. I mean, potentially all four companies could get significant grants or various levels of grants, or how do you look at it?

So, we do know that CIRM has set aside $240 million to fund up to 12 disease team grants in this round. So, the possibility exists that one company could get more than one, and the possibility exists that they could spread the funds around larger numbers of companies.

So, it remains to be seen how they're actually going to conduct business. And we will know later -- we'll know in 2012, sometime in the spring of 2012, what the landscape will look like. And then, those successful companies should start to anticipate funding sometime in the middle of the summer of next year.

Okay, great. Thanks so much for the follow up.

Sure.

And at this time we have no further questions. I would now like to turn the call back over the Martin McGlynn for any closing remarks.

So, thank you very much, everybody, for joining the call. We appreciate the opportunity to update you on our programs. And we look forward to keeping you apprised of our progress.

So, I thank you all again. Thank you very much.

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