Microbot Medical Inc (MBOT) 2012 Q2 法說會逐字稿

Welcome to the Q2 2012 StemCells Inc. earnings conference call. My name is Monica 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. Please note that this conference is being recorded.

I will now turn the call over to Martin McGlynn, President and Chief Executive Officer. You may begin.

Thank you, Monica. Welcome, everybody, and thank you for joining us today. On the call with me is Rodney Young, our Chief Financial Officer; and he and I will deliver some prepared remarks. Rodney's remarks will include a discussion on the financial results for the second quarter of this year. And then I will follow up with a discussion of some of the exciting activities going on at our Company. And then, as usual, we will open the lines for a question-and-answer period.

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

Thank you, Martin. Before we proceed, I would like to remind everyone again 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 any time in the future, and our actual results might 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, and we encourage you to consult and review them.

So, to the numbers. In the second quarter for 2012, we continued to make good progress in our clinical development efforts, while keeping tight control of our expenses and cash burn rate. Importantly, we have strengthened our balance sheet, giving us additional capital resources to pursue our clinical development program.

The highlights for the quarter include -- our operating expenses were down 24% year-over-year. Our revenue from our SC Proven line of business was up 14% year-over-year. Cash used in operations, or our cash burn rate, was $5.1 million in Q2, and $10.7 million for the first six months of the year. We continue to anticipate our 2012 cash burn rate will be in the range of $18 million to $20 million, so we remain on track for that.

Our pro forma cash balance was $18.2 million, and that includes $9.2 million from the exercise of warrants and the sale of shares subsequent to the end of the quarter. And lastly -- last week, the California Institute for Regenerative Medicine approved a $20 million award to the Company and our collaborators.

So, a little bit more detail on our financials, starting with the top line. Revenue from product sales increased 14% to $211,000 in the quarter, compared to the second quarter of 2011. For the six-month period of 2012, product revenues are up 44%, compared to the same period last year.

This solid growth in our SC Proven business was primarily driven by higher unit volumes and only modestly by price increases. We expect continued growth in the SC Proven business via the combination of increased unit sales of existing products, and the launch of a number of new products which is planned for the second half of this year.

Our operating expenses declined 24% to $5.5 million in the second quarter of 2012, compared to $7.3 million in the second quarter of 2011. R&D expenses were 26% lower; and SG&A expenses were 16% lower, all compared against 2011.

These numbers reflect the actions we undertook last year to reduce our cash burn rate, including a reduction in force and the relocation of our corporate headquarters. Overall, then, our loss from operations declined 25% to $5.3 million in the quarter, compared to $7.1 million in Q2 of last year.

This quarter, we reported $6.2 million in other income. This is almost entirely due to a decrease in the fair value of our warrant liability; and under warrant liability accounting, decreases in the liability are passed through the statement of operations as income. So you'll recall that $5.3 million Series B warrants expired unexercised on May 2, and the elimination of the Series B warrants accounted for about $4.7 million of the $6.2 million decrease in the warrant liability.

So, as a result, we reported net income of $0.03 per share for the quarter, or $834,000. This compares with a net loss of $0.29 per, share or $4 million, in the second quarter of 2011.

On a cash flow basis, cash used in operating activities was $5.1 million in Q2; and for the first six months, was $10.7 million. We continue to anticipate our cash burn will be $18 million to $20 million this year, and we remain on target for that.

With respect our cash balance, we considerably strengthened our position. Our cash balance at June 30, 2012, was $18.2 million on a pro forma basis. As I said, this includes $9.2 million in net proceeds received subsequent to the end of the quarter from the exercise of warrants and from the sale of shares.

And lastly, last week, the California Institute for Regenerative Medicine, or CIRM, approved a $20 million award to help fund our efforts in developing our HuCNS-SC cells for cervical spinal cord injury. Specifically, the goal is to fund preclinical development and IND-enabling activities needed to file an IND for cervical spinal cord injury, within four years.

We and CIRM have begun the due diligence and documentation processes required before actual funding can occur. But we anticipate accessing these funds sometime next quarter.

So, very exciting quarter financially, and I'll turn the call back to Martin.

Thanks, Rodney. Well, this has been a good quarter for StemCells Inc. We've continued to make progress in our HuCNS-SC clinical development program. Let me walk you through some of the significant achievements we've recently announced.

On March 31, we announced topline results from our Phase I PMD trial. And let me remind you of what we saw. PMD patients have a genetic defect that makes them incapable of normal myelination. They have hypomyelinated axons, which impairs their neurological function; and, ultimately, they succumb to the disease, usually in the first decade of life.

Following transplantation of our HuCNS-SC cells, there was evidence of progressive and durable de novo myelination in all four patients that were transplanted with our cells. There was measurable gains in motor and/or cognitive function in three of the four patients, and the fourth patient remained clinically stable. In the context of the natural history of the disease, these are very encouraging results, and they provide the first demonstration of a biological effect of our cells in a human patient population.

I'm pleased to report today that we have submitted a manuscript containing the complete trial data, and that the manuscript is currently under active review at a top-tier scientific journal. And we anticipate the manuscript to be accepted for publication shortly. We continue to pursue plans for a controlled Phase II study in PMD, including preliminary conversations with the FDA, and we have ongoing discussions with outside clinical experts.

In May, we reported interim safety data from our phase Phase I/II chronic spinal cord injury trial, which is underway in Zurich, Switzerland. Dr. Armin Curt, the principal investigator, presented data from the first patient cohort; which showed that the cells, the procedure, and the immunosuppression regimen have all been well-tolerated. Interestingly, he also noted that changes in sensitivity to touch were observed in two of the three patients in the cohort. Dr. Curt plans to present the six-month data for the first cohort at the upcoming 51st International Spinal Cord Society meeting, otherwise known as ISCoS, which is to be held in London September 3 to the 5th, approximately one month from today.

We continue to evaluate patients for enrollment in the second cohort, and are actively engaged in that endeavor. In June, we initiated our Phase I/II trial in dry age-related macular degeneration at the Anderson Vision Research Center of the Retina Foundation of the Southwest. This center, which is located in Dallas, Texas, is one of the leading independent vision research centers in the country, and it see sees a high number of AMD patients each year. Screening is underway, and we look forward to dosing our first patients in this trial in the very near future.

We're also planning to add an additional clinical trial site to the study, and we are in active discussions to do so. In July, we presented preclinical data demonstrating that our human CNS-SC sales cells restored memory in two animal models, relevant to Alzheimer's disease. Now what is particularly striking about this data is that the results did not require a reduction in beta-amyloid or tau burden that are the hallmarks of Alzheimer's disease pathology. This suggests that our neural stem cells may represent a novel therapeutic approach to this devastating disease.

And just to follow up on Rodney's comments about CIRM; so, last week decision's by CIRM to improve our disease team award in cervical spinal cord injury is, of course, very welcome for the financial support that it brings. We were the only company to receive a disease team award. And we view this decision by CIRM as a vote of confidence in our technology, in our program; and, very importantly, in our people. Moreover, I am pleased that the CIRM took the decision to take another look at our disease team application for up to $20 million in funding for the IND-enabling activities that are necessary for an IND approval, and a precursor to initiation of the world's first neural stem cell clinical trial in Alzheimer's disease.

We have always been of the belief that the best strategy for creating shareholder value is to generate meaningful clinical evidence of safety and clinical benefit, and to do so in a cash-efficient manner. With CIRM funding, careful management of our burn, and the additional cash resources that Rodney spoke of, we are now much better positioned to execute this strategy.

So I thank you for your indulgence, and I would like to throw the conference open to questions.

(Operator Instructions). Stephen Dunn, LifeTech Capital.

Good afternoon, everyone, and congratulations for another great quarter. Just a couple of questions here; some are timing. Martin, you had mentioned you were in discussions for the Phase II of the PMD trial. Should we look towards the design to be somewhat similar than the first one; except, obviously, in, let's say a slightly healthier patient population?

You know, it's difficult at this stage to be definitive about study design. But I can say that the first study was focused on recruiting exclusively those patients with the co-natal form of the disease. In our discussions with the FDA, with the excellent safety profiles in these patients; we will, of course, be speaking with them about broadening the patient enrollment criteria to include patients who not only had the classic form -- who have been co-natal form -- but also the classic form of PMD.

Question on the Phase I/II for dry AMD. You're looking to enroll your first patient relatively soon. Because it's an open-label trial, will we be seeing data from the cohorts over time? And are we expecting -- I guess, according to the filing, final data is expected by the end of 2013. Are we going to see some interim data between now and then?

Yes. We will probably pursue the same approach that we have with our spinal cord injury study, where we reported interim data on the first cohort already.

All right. And then, at the end of 2013, does that include the data crunch, or is that just the last follow-up data point of the patient?

Well there is a 12-month follow-on period, and so it's a study -- the study can't close. You can't have a data lock after 12 months after the last patient has been dosed. So it's all depending upon when the last patient is dosed. Then you have a 12-month follow-up period before you can do a data lock.

Good. The thinking on the cervical spine indication -- obviously, that's high up on the spine there. Are you looking to do more of that work in the US, or keep it all in Switzerland like it is today?

Well, the specific award from CIRM is to find IND-enabling activities, and to file an IND within four years. So the goal of that particular program, and of that funding award, would be to fund the submission of an IND here in the US with the FDA.

Well I guess the question was, is most of the preclinical work still going to be done in the United States? Or are you going to have some preclinical work done in Switzerland, where the trial is currently enrolling?

The preclinical work will be done in collaboration with our partners at UC Irvine, with whom we collaborated with to do the preclinical work that led to the existing spinal cord injury trial in thoracic spinal cord injury.

Okay. Two quickies. On Alzheimer's, you have an appeal to CIRM, where they'll be hearing on September 6 I believe. If there is no CIRM funding, is there still a future for the Alzheimer's program to continue? Or what do you foresee there?

Well, quite honestly, Steve, I don't want to speculate on that right now.

Fair enough.

We'll wait until we see what the final outcome is with CIRM, and then we'll address that specific question.

Okay. Final one here. You had mentioned -- you had issued a press release that you were granted a keystone patent in Japan. And I was wondering, do you have -- what's your strategy in Japan? Are you looking to begin programs there as well?

At this stage, we don't have any plans to conduct clinical trials in Japan. We have our hands full, quite honestly, at this stage, with the trials that are under way here in the US and in Europe, as well as those that are contemplated. The Japanese market has its own specific requirements, including clinical trial data from Japan and/or bridging studies that would involve data that could be used for submission and approval in Japan. But we have no immediate plans to initiate trails in Japan.

Okay. Thanks so much. You've got a lot of balls in the air. And, again, congratulations on the great quarter.

Thanks, Steve.

Joe Pantginis, Roth Capital Partners.

Hi, guys. Good afternoon, and congratulations on getting late Grant. Couple questions, please. First, Rodney or Martin, could you be able to drill down with regard to the CIRM grant regarding funds flow? You have a certain, say, work plan. Will you be conducting the experiments, and then billing CIRM? How should we view the receipt of funds?

Joe, it's Rodney. We don't know for sure, because the CIRM has done things differently in the past. If you use the Geron example, what we think may be a way it will work is -- obviously, there was a budget compiled that we and they will review. And so you have an expected spend rate. Under the Geron example, it looked look like they were allowed to take an initial draw at some point, either quarterly or six months apart, versus what the budget says. And then, again, at regular intervals, either quarterly or six months, something like that, you kind of square up again and see what progress you've been making. So, our anticipation is, it's going to be something like that, but we don't know for sure.

Sure, that's fair. And how would you look to recognize that revenue?

From an accounting perspective, I'm not sure it will be revenue. It will depend on how the award is structured.

R&D revenue, or something along those lines?

Yes. To be honest, it's not something that we've looked at in detail yet.

Okay. That's fair enough. And then, since a lot of the studies are all preclinical, and they are geared towards the IND in the US, I guess it's too early to project the timing of a potential IND, since this is a four-year plan here?

Yes. I mean, the goal of the award is to file an IND within the four-year time period. So we will be working to that goal, or better.

Okay. And then, just on your current revenue with regard to SC Proven, obviously you're still bringing in a -- for these types of reagents, a decent amount of revenue. Just wanted to see if there were any changes in efforts or initiatives on the program -- on the overall program for SC Proven, and any future plans? Because I know you were looking at potential options in the past, about what to do with that platform.

We're always looking at -- we're always keeping our options open, Joe. Quite frankly, the very strong growth that we are experiencing is very welcome. And we also have some plans in place to launch a series of new products. So we're very, very happy with the progress we're making in the business, and the growth. And we anticipate that there will be continued growth from the business, as Rodney has earlier stated. But you never know; we always keep our options open.

Okay, that's great. And then, just lastly, I know you do talk about the plans for the controlled PMD study. Could you just reiterate? I'm not sure if you had mentioned potential timing for the initiation of that study.

Well, it's a step-wise process. We've already begun discussions with scientific experts, as well as clinicians who are expert in the field. We've already begun that process. The next step will be to file a complete study report with the FDA, and formally request a meeting to discuss the design of the Phase II study. And that's on our agenda for this year.

Okay, great. Thanks a lot, guys.

Jason Kolbert, Maxim Securities.

Hi, Martin and Rodney. Yes, it's me, back on the sell side.

Hey, Jason.

Hi, how are you guys? You certainly have a lot going on. And I'm a little bit confused. So I just want to back up a little bit. Taking the CIRM Grant out of it, at about a $5 million-a-quarter burn rate; $18 million in cash; and you're going to take on a Phase II PMD trial, a Phase I dry AMD trial. And remind me, what is still going to be happening on the spinal trial going forward? How do those -- it seems like that's an awful lot of programs to be running.

So, the spinal cord injury trial is already up and running. And we've no plans to change course or direction with that trial.

What does it take for that trial to finish, though? Help me understand how far in you are; and what it means that there was a sensitivity assessment; and what kind of data we might see in September, and how that program will evolve.

So, we are one-third of the way through, in the sense that we've dosed the first cohort. The sunk costs in the investment and getting the study up and running has already been taken to the P&L. So we've already incurred those expenses. The incremental marginal costs of dosing additional patients is not a material or significant item. What was the other question?

And help me understand, as you move forward in terms of data. You mentioned that some of the clinicians have reported anecdotal data of sensitivity improvement. Help me understand how the first cohort that is dosed and how many -- how remind me how many patients are in that, versus what we should expect for the second cohort; and how many additional cohorts, and what the enrollment rate of these cohorts -- whether that might change.

All right, Jason, we'll get you caught up.

Sorry, I'm a little behind. Thanks, guys.

Okay, all right. So it's a 12-patient study. Three cohorts, ASIA A, B, and C. ASIA A had three patients; ASIA B is four; and ASIA C is five. Okay?

Got it.

We reported, in May, in Vancouver, on the preliminary safety data, which was a three-month interim look. And in September the PI, Dr. Armin Curt, plans to present interim data on the study for the three ASIA A patients who were dosed in the first cohort, which will be at a six-month timeframe.

Got it. So that sounds really exciting. Why not really focus on this trial? I'm a little bit confused as to how to read a $20 million four-year CIRM Grant that gets you to a US IND, when you are seeing much more advanced than that in this trial.

Yes, well, of course, we are. But this trial is focused on thoracic spinal cord injuries. And the majority of the spinal cord injuries occur in the cervical region of the spine, which is further up the spine. And that's where the highest incidence is, in cervical spinal cord injuries. I mean, the paradigm has always been, for therapies, that they will first have to demonstrate a safety profile in thoracic spinal cord injury before moving further up the spinal cord, which comes with additional potential risks, from a safety point of view.

It just seems like four years is a long gap for a safety assessment, to make a move from thoracic to cervical.

Well, that is the regulatory paradigm here in the United States. And in order to file an IND to initiate a trial in a particular targeted condition, you do need to have all of the preclinical done, and the GLP safety and [tups] package done in the area of the spinal cord that you intend to pursue. So, the initial preclinical data that was generated in collaboration with UC Irvine, that was in the thoracic spinal cord region. And that's what led to the approval to open up a trial in thoracic spinal cord injury.

Right. So why not drive towards expanding that trial, or maybe jumping that trial into the US?

Well, we're not precluding any of our options, in terms of what we do in Europe. That is always an open proposition. And data is transportable, provided data meets the GCP requirements and the GLP requirements that are in the regs. So, preclinical data that we might acquire here in the United States, in the cervical spinal cord models, could well be transportable into other jurisdictions. And human clinical data that we generate in Switzerland, similarly, would be transportable into other jurisdictions, including the US.

Thanks, Martin. I realize I'm a little bit behind. I'll reach out to you in the next couple of weeks and really catch up. It sounds exciting.

You're welcome, Jason.

Luca Pancratov, Roth Capital Partners.

Hi, guys. Thank you very much for taking the question. And congratulations, once again, for the CIRM Grant. I was wondering, for the PMD patients that were treated in the Phase I study, can we expect to see a presentation of clinical data for the longer-term safety follow-up?

I'm sorry, Luca, I'm not quite too sure I understand your question.

For the patients that were treated in the Phase I PMD study, do we expect to see the presentation of the longer-term safety follow-up?

Yes, so we are following these patients in a separate long-term follow-up study, which is a four-year observational study. And we will continue to provide updates at various checkpoints along the way. Yes.

Great. That's very helpful. And then, just moving on to the other disease CIRM therapy award, for Alzheimer's. So one of the concerns that the reviewers had was the use of a localized injection to treat a diffuse disease. But I think some of the data that you gathered to date actually speaks to the mechanism of action of the transplanted neural cells. Maybe can you summarize for us some of the evidence that these cells have the ability to migrate?

Yes, so the kind of generic question that exists is, the strategy of addressing a diffuse disorder of the brain with localized injections into a specific region -- and in this case, into the hippocampus. And so, that's the generic question, okay. Now StemCells Inc. has a considerable body of data in animals, and as well as in humans, that our neural stem cells not only transplant and graft, et cetera, but they also migrate throughout the brain.

Right.

Now, so then the question comes back to migration from the hippocampus into other regions of the brain, in an Alzheimer's disease model.

That's right.

And our collaborator has indicated that a paper has been submitted which shows the migration of mouse neural cells, neural stem cells, out of the hippocampus in an Alzheimer's-relevant model. And that is -- that manuscript is under active review. And he informs us that he expects to have a publication from that top-tier journal in the not-too-distant future.

Great. I'll be looking forward to seeing it. Thank you very much.

You're welcome.

(Operator Instructions). I'm showing no further questions in queue. I will now turn the call back over to Martin McGlynn for any closing remarks.

So, thank you, Monica. And thank you, everybody, for taking the time to speak with us today. It's a very exciting juncture for the Company. And we look forward to talking to you and discussing our progress for Q3. And we look forward to that. Thank you again.

Thank you for participating in the Q2 2012 StemCells Inc. earnings conference call. This concludes today's conference.