Microbot Medical Inc (MBOT) 2012 Q1 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Q1 2012 StemCells Inc. earnings conference call. My name is Parita, and I will be your operator today. During the presentation all participants will be in a listen-only mode. After the speaker's remarks you will be invited to participate in a question-and-answer session. As a reminder, this conference is being recorded.

And now I would like to hand the call over to the host for today's call, Mr. Martin McGlynn, President and CEO.

Thank you, Parita. Welcome, everybody, and thank you for joining us today. On our call today, Rodney Young, our Chief Financial Officer, and I will deliver some prepared remarks. Rodney's remarks will include a discussion on the financial results for the first quarter of this year, and then I will follow on with some remarks particularly focusing on the exciting activities going on in the translational agenda at the Company. And then we'll open the lines for a question-and-answer period.

So to begin, I'd like to hand over to Rodney Young, our Chief Financial Officer. Rodney?

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 our actual results may differ materially from anything projected during today's call, due to the risks and uncertainties to which we are 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 all encouraged to consult.

So, into the numbers. In the first quarter of 2012 we continued to control our expenses and our burn rate, which is obviously one of our key goals. The highlights for the quarter include our net cash used in updating activities were down 24% compared to the year ago period. Revenue from our SC proven product sales was up 82%. We ended the quarter with a pro forma cash balance of $13.7 million. That number includes $2.1 million from warrant exercises subsequent to the end of the quarter. The unexercised Series B warrants all expired on May 2, so there are no longer any Series B warrants outstanding.

Our burn rate continues to trend downward. We're anticipating better that our 2012 cash burn will be in the $18 million to $20 million range.

So starting with our top line, total revenue in the first quarter of 2012 was $644,000, which was nearly triple our total revenue in Q1 of 2011. Much of this was driven by licensing revenue, which was $373,000 this quarter compared to just $72,000 in Q1 of 2011. This increase is due mainly to the receipt of a payment from a license agreement we signed in the quarter.

More importantly, revenue from SC proven product sales, which is a recurring revenue stream, increased 82% compared to Q1 of 2011. Now, while we realize this is off a small base, it is worth noting that we have nearly quadrupled sales since 2009, which is the year we acquired the business. And at this run rate this quarter, this is now a $1 million business and growing.

Turning to the expense side, our R&D expenses totaled $3.9 million in Q1 of 2012. This was 29% lower than the comparable period in 2011. SG&A expenses were $1.9 million, which were 7% lower than in 2011. These numbers reflect the actions we undertook last year to reduce our cash burn rate, including the reduction in force we did in May and the relocation of our corporate headquarters.

Overall, then, our loss from operations declined 29% in Q1 2012 compared to Q1 2011. The quarter's operating loss was $5.3 million compared to $7.5 million in last year's Q1.

Our net loss in Q1 of this year was $10.2 million or $0.45 per share. This compares to a net loss of $5.7 million or $0.42 per share in Q1 of 2011. Our net loss this quarter in Q1 2012 includes a $4.9 million non-cash expense, due to the change in the estimated fair value of the warrant liability.

So on a cash flow basis, cash used in operating activities was $5.6 million in Q1 2012. This was a decrease of 24% compared to the Q1 of 2011. And as we said last quarter, our cash burn rate has been on a downward trajectory. It was $24.5 million in 2010; it was $22 million in 2011; and as I said, we anticipate our cash burn to be about $18 million to $20 million in 2012.

So as of March 31, our pro forma cash balance was $13.7 million. Again, this includes $2.1 million in net proceeds from the exercise of Series B warrants subsequent to the end of the quarter. You'll recall that a total of 8 million Series B warrants were issued in our December 2011 financing, with an expiration date of May 2. So of the 8 million Series B warrants, a total of 2.7 million were exercised and 5.3 million unexercised Series B warrants expired by their terms. So there are no longer any Series B warrants outstanding.

Lastly, I want to give a brief update on our opportunities for potential funding from the California Institute for Regenerative Medicine, or CIRM. In January of this year we submitted two applications for Disease Team Research Awards; one application for Alzheimer's disease, and one for spinal cord injury. Each of these awards could be for up to $20 million and are intended to help fund the preclinical development and IND-enabling activities needed for these 2 indications. In the goal is to get those INDs filed within 4 years. We anticipate the funding decisions this summer.

Just last month the CIRM issued a separate request for applications for another set of funding awards, which they call Strategic Partnership Awards. These Strategic Partnership Awards could be for up to $10 million per award and are intended to help fund the completion of clinical trials within 4 years. We have already submitted two applications under this RFA, and we anticipate funding decisions towards the end of this year.

So I'll now turn the call back over to Martin for some remarks on our business activities.

Thanks, Rodney. As I mentioned, I plan to devote most of my prepared remarks to our recently-completed Phase I trial in PMD, which as you know by now, is a fatal pediatric myelination disorder. I also will speak to how the results of this trial bring us one step closer to the execution of a much broader agenda that we're pursuing for the treatment of some of the more common myelination disorders, such as MS and certain forms of cerebral palsy.

The first quarter of 2012 turned out to be pivotal in the Company's pursuit of cell-based therapeutics for a broad array of CNS disorders. An examination of the data from our PMD trial has provided us with evidence, number one, that our cells are having a progressive and durable biological effect, in an appropriate way, in the brains of all 4 PMD patients transplanted with the cells. That is to say, the cells were shown to have myelinated axons in the white matter tract of the patients' brains where myelin and not previously been observed prior to the cell transplant.

Moreover, using direct MR imaging techniques, the trial investigators were able to confirm the presence of myelin at the 12-month time point in all 4 patients. In addition, a clinical effect was observed. Investigators noted small but measurable improvement in neurological and motor function in 3 of the 4 patients who were transplanted, while the fourth patient remained clinically stable.

This is not what we understand the natural history of this fatal disease to be. So, definitely, in context this was a small, uncontrolled study; however, and the results provide us with the clinical breakthrough that we've been seeking for quite some time.

Up to now we have reported on the excellent safety profile of the cells, including the feasibility and tolerability of transplanting large doses, i.e. up to one billion cells into a human brain; as well as how well the surgery and the immunosuppression regimen have been well tolerated. In the past, we've also reported the fact that we were able to confirm long-term engraftment of the cells, even after the planned cessation of immunosuppression in the brain of a BADNIS patient.

Now, however, with the Phase I PMD results, we have the much needed evidence that the cells are biologically active in the human brain and that they confer clinical effect in the myelination disorder.

Now a question we are often asked is, why did you choose PMD? I'd like to take a few minutes to explain to investors why we chose to study ourselves in this very rare disease, and then to explain how we intend to leverage the results of this very successful clinical trial.

So back in December of 2000 we published data in PNAS showing how our cells migrated and differentiated into astrocytes, neurons, and oligodendrocytes in the immunodeficient mouse brain. As oligodendrocytes are known to be the myelin-producing progenitor cells, our scientists then went on and transplanted our cells into an animal model of hypomyelination known as the shiverer mouse model. Shiverer mice are born without myelin on their nerve axons, so our researchers wanted to see if the human neural stem cells could myelinate axons in these mice.

And what we saw was truly amazing. The human cells differentiated into oligodendrocytes in vivo, and in turn attached themselves to the hypomyelinated mouse axons, and then proceeded to produce multiple layers of tightly-wound myelin around the nerve axons.

So this raised another question -- could this in vivo property of the cells have potential in the treatment of common human myelination disorders? So on January 19, 2007, during the 2007 MS Society annual meeting, which was held in San Francisco that year, we shared the shiverer mouse data with people involved with the myelin foundation. We were very excited by the data, and it was suggested that we first demonstrate proof of principle in a myelination disorder that did not have an autoimmune component. That, in turn, led us to PMD.

So we view our just-completed PMD trial as proof of principle that our neural stem cells can myelinate nerve axons in a hypomyelinated human brain, just as we had demonstrated in the shiverer mouse, and that the new myelin was functioning sufficiently well to convey measurable clinical benefit.

Now, obviously, this is great news for the PMD community, as well as for those with other leukodystrophies. We're planning to meet with the FDA to discuss the conduct of a controlled Phase II study in PMD. And as an aside, I would just like to share with you that one of our applications that Rodney spoke of to the CIRM for a Strategic Partnership Award is for a controlled Phase II clinical trial in PMD.

Moreover, the results from this trial should also give encouragement to the large community of patients, caregivers, and clinicians who are dealing with the suffering and the devastating impact of a whole host of more common myelination or white matter disorders such as MS, and periventricular weight matter injuries seen in cerebral palsy.

So armed with the robust preclinical and clinical data that we now have, we plan to meet with clinical experts in these various diseases to help us develop a strategy to quickly and efficiently evaluate ourselves in other white matter disorders.

And by the way, it is also worth noting here that the myelin sheet is often damaged in spiral cord injury and is a very significant part of the underlying pathology in spiral cord injury, so these recent findings from the PMD trial bodes well for our spinal cord injury trial underway in Switzerland, as well as for the spinal cord injury community in general.

On top of all of this, our other clinical development programs continue to make progress. As you know, we completed dosing of the first cohort of ASIA A patients in our spiral cord injury trial in December. This is the cohort with the complete neurological injury. Our trial is designed to enroll patients with incomplete injury following this first cohort, and we are now engaged in enrollment activities for the ASIA B cohort.

Earlier this week we announce that the principal investigator of the trial, Dr. Armin Curt, will discuss the progress of the trial next week at one of the leading spinal cord injury conferences in North America, known as the Independence 2012 Spiral Cord Injury Meeting. And this is co-sponsored by the Rick Hansen Foundation and the Rick Hansen Institute in Canada.

And then in addition, you'll recall in January of this year, we published our preclinical data demonstrating that our human neural stem cells can protect photoreceptors from degeneration and preserve visual function in a well established rat model of retinal degeneration.

We also received in January of this quarter just past the go-ahead from the FDA for a Phase I/II trial in dry age-related macular degeneration -- based, I might add, to a large extent on the compelling preclinical data that we are proud to say was featured on the front cover of the European Journal of Neuroscience, and we plan to initiate that clinical trial shortly.

So in closing, I would just like to restate our belief here at StemCells Inc. that the best pathway for growing shareholder value is for the Company to continue to generate meaningful clinical data for our HuCNS-SC program in a thoughtful, cost-effective manner.

I think you will agree, our financial results show that we continue to carefully control our expenses and our cash burn. And as I have just conveyed to you, meaningful data from our extensive and expanding clinical development program has begun to emerge.

So all of this takes us step by step closer to achieving our stated goal of providing effective treatments for a broad range of disorders affecting the central nervous system. I thank you for your indulgence, and I'm happy to take any questions you might have.

(Operator Instructions). Stephen Dunn, LifeTech Capital.

Thanks for taking my questions today, and congratulations again on the PMD top-line results.

On PMD, do we have any feel for when we might be seeing that data in a peer-reviewed Journal?

Not just yet, Steve. We're actively pursuing that agenda, but we don't have a firm timeline yet.

Okay. Going on to the Phase II, the pre-Phase II meeting with the FDA, you mentioned that the Phase II will be a controlled trial, and I'm wondering if you could give us some color on what the control arm would actually be? Because as far as objective evidence, myelination doesn't spontaneously occur in PMD patients. So are we looking more for control arm to address the subjective measurements, like motor and cognitive functions? Just a little color on what the control would be in PMD.

Well, quite frankly again, at this stage, Steve, we're not in a position to get into the weeds on that subject right now. There are a lot of questions, and there will be some important issues to be addressed with the FDA. But in the fullness of time, when we've teased our way through those issues, we'll be more than happy to share our thoughts on the design of the study.

So is there any possibility there actually would be a single-arm trial, or it will always have a control?

Our objective and our intention is to have a controlled study.

Okay. Turning on to the financials, Rodney, of the 2.7 million warrant conversions, I may have missed it. How much of that, if any, was in your first-quarter results?

So 900,000 were exercised between January 1 and March 31, Steve. And the remaining 1.8 million of the 2.7 million was exercised post-March 31.

Okay. And looking at your numbers -- am I looking at this right? The warrant revaluations notwithstanding, this is your lowest operating loss in several years, is that correct?

You are correct, Steve. I actually -- I have the chart in front of me. It's certainly in the last three years -- three, four years, certainly it's the lowest, yes.

So what is counterintuitive, I think, to investors would be you've actually achieved the most data or done the most clinical programs simultaneously, while at the same time having your lowest burn. Should we expect to see that going forward?

Steve, a lot of the costs and the investment in preparing for and executing clinical trials took place in those years where we were ramping up the burn. So our burn peaked in 2010 and came down in 2011. We're projecting it to continue in that trajectory.

We don't anticipate any significant and immediate jumps in the burn rate over the next couple of years. We do see further opportunity to reduce operating expenses. So the greatest analogy I can give is that essentially we've invested in the programs to be able to initiate clinical trials and to get them up and running.

Now we're very much in a harvesting phase. We've harvested from the BATMIS trial. We've harvested data from the PMD trial. And we'll be looking to this spinal cord injury study carefully, particularly now that we've got such good and exciting data from the PMD trial in myelination. And the AMD study in the eye -- it's an external organ, and that should provide us with an ability to harvest more data in the relatively short term.

So a lot of investment getting us to where we are today, investing in QA systems, QC, manufacturing, production of cell banks. We put all the cells away in the banks, and they're sitting there. So we have de-risked the project greatly. We're going to continue to try and do both -- deliver more meaningful data and really keep a handle on those operating expenses.

Okay, great. One last quickie. Could you give us a little color on the tools and technology revenue? It had a really big bump. I wonder if you could shed some light on what is selling, and what we should expect going forward. Is this a new plateau, or we still have more growth to go in the tools and technology?

No; I think the sector is a growing sector. We are supplying products into the research part of the field. We're not in the GMP business. So the products that we're using are specialized products that are used for specific purposes by researchers in academia as well as in industry. But the majority of the sales go into academia and research institutes and foundations.

You know, we launched a bunch of new products since we acquired the business in 2009. And they certainly have helped grow revenues, but also some of the products that have been on the market now for a number of years are starting to gain traction, are starting to get support; they are starting to be referenced and in scientific literature. And so as that takes place, more and more people want to try the product.

So it's a growing sector; strong growth in our business, and we're doing some cost-efficient things to generate added revenue and added sales.

All right, great. Again, congratulations on both the clinical and the cash control, cash efficiency, and I'll jump back in the queue.

Thanks again, Stephen.

Joe Pantginis, ROTH Capital Partners.

This is Luca Pancratov. I'm in for Joe, and thank you for taking the question. Congratulations also from me on the PMD data.

So I have a bunch of questions regarding the participants in this study. Can you share some details on how often these participants will be followed up? And do we expect to see data presentations?

So each of these patients has been enrolled into a long-term follow-up observational study which will last for 4 years. And they will be evaluated not as frequently as they were during the actual Phase I trial itself, but carefully monitored and carefully evaluated at least a couple of times a year, as I understand it.

And, I'm sorry, what was the other part of your question?

Right. So do we expect to see data presentations and any updates?

Yes. We plan to -- as Steve alluded to in his question -- we plan to publish the data. And we do have plans to present the data at appropriate conference settings.

All right. And can you also share with us, maybe, what kind of feedback have you gotten so far from key opinion leaders or from physicians, either at the LA meeting or otherwise?

Well, the feedback from folks that we have interacted with has been very encouraging. We, in turn, are very pleased with the introductions that we've had with those key opinion leaders, but we're feeling very good and very confident about the study design, the data, and the results.

Okay, thank you. And then I have one more question regarding the CIRM awards, specifically the Strategic Partnership Awards. What is the procedure for awarding these grants?

So the procedure -- it's a multi-step process. The first step is that applicants submit a letter of intent, and they give a general description of the project, and what the intention will be, and how the funds might be used.

Then that in turn leads to the next stage, where you are greenlighted or otherwise to submit a full application. And then that application in turn is reviewed for in scientific, technical, and clinical merit. And then in turn, the outcome of that is deliberated on by the board of CIRM, which is known as the ICOC. So as Rodney said, we anticipate the entire process that I've just described to you to take us through towards the fourth quarter of this year.

All right, thank you very much. And I'm looking forward to the data next week from the spinal cord injury.

Well, thank you very much, and we look forward to it, too.

Thank you for your question. We have no further questions.

All right, thank you, Parita.

That concludes the call, then. Thank you.

Thank you. Thank you for your participation, ladies and gentlemen. This concludes the presentation. You may now disconnect and have a good day. Thank you.

Thank you.