Orgenesis Inc (ORGS) 2021 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Orgenesis Second Quarter 2021 Business Update Call. (Operator Instructions) At this time, it is my pleasure to turn the floor over to your host, David Waldman, Investor Relations. Sir, the floor is yours.

All right. Thank you, and good morning, everyone, and welcome to Orgenesis Second Quarter 2021 Business Update Conference Call. On the call with us this morning are Vered Caplan, Chief Executive Officer; and Neil Reithinger, Chief Financial Officer. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at 212-671-1020.

The conference call contains forward-looking statements, which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. These forward-looking statements involve substantial uncertainties and risks that are based upon our current expectations, estimates and projections and reflects our beliefs and assumptions based upon information available to us at the date of this conference call.

We caution listeners that forward-looking statements are predictions based on our current expectations about future events. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Our actual results, performance or achievements could differ materially from those expressed or implied by the forward-looking statements as a result of a number of factors, including, but not limited to, the risks and uncertainties discussed under the heading Risk Factors in Item 1A of our annual report on Form 10-K for the fiscal year ended December 31, 2020, and in other filings with the Securities and Exchange Commission. We undertake no obligation to revise or update any forward-looking statement for any reason.

I'd now like to turn the call over to Orgenesis' CEO, Ms. Vered Caplan. Please go ahead, Vered.

Thank you, David, and thanks for taking care of the technical problems, and thanks to everyone for joining us on our call today. I'm pleased to report we've achieved over a six-fold increase in revenue from the second quarter of 2021 compared to the second quarter of 2020. We believe this reflects both the progress and the sustainability of our point-of-care strategy, and I'll talk more about this in a moment. But let me first take a minute to discuss and remind you all about our point-of-care strategy, which we believe is the key to unlocking the full potential of the cell and gene therapy industry.

As I've stated in the past, our business is built around 3 key pillars: our point-of-care therapeutics, our point-of-care technologies and our point-of-care network. Each of these components align the interest of the therapy developers, the hospitals, the patients and the companies in a way we believe has not been done before. We are rapidly gaining traction with our point-of-care platform by adding new point-of-care therapies and technologies as well as expanding our global network through collaborations with research centers, hospitals and biotech companies around the world.

Currently, most cell and gene therapies are manufactured using a centralized production, either though in-house production or through the services of CDMOs, contract manufacturers, which is standard in the cost of biotech industry. Centralized production has its limits. It requires massive capital investments. It is very expensive to operate and can take years to bring production online at meaningful scale. At the same time, with the explosive growth of the cell and gene therapy market, the industry faces major bottlenecks and capacity shortages at the CDMOs, internal manufacturing and logistic problems, reflecting the cost and manufacturing delays of these therapies.

Neither of these options, either internal or using a centralized CDMO are cost-effective or sustainable as the industry continues to go. A good example of this is the CAR-T therapies, which have faced supply chain issues and can range in cost in the hundreds of thousands of dollars per patient with rising resistance from payers. As both clinicians and patients go more with these new treatment modalities, demand goes, but the industry lacks the capability to ramp up to meet demand. Some biotech companies are trying to build up internal capacity to meet growing demand. This is a lengthy process. Even if the required manufacturing know-how is in place, setting up GMP facilities based on clean rooms, training new employees and putting in place the required quality systems are extremely lengthy processes. It may take years.

Some hospitals are trying to solve the supply and cost issues by manufacturing those therapies in-house. This is also far from simple. Hospitals set up for treatment of patients and in some cases, for research, but GMP manufacturing is typically a biotech floor. Most half hospitals lack the required infrastructure, not only the clean ones, but the entire quality assurance and supply network required for complex drug production. Innovation is bringing up all around and trying to solve these problems. Many engineering companies are trying to develop closed automated systems that will allow simplified manufacturing of these therapies. This is a great step forward. And we, as a company, collaborate with many of these innovators, integrating their innovation into our platform. But having the proper equipment to manufacture on-site is just one piece of a much more complex puzzle.

In order to enable decentralized supply of cell and gene therapy, much more is required. The key factor is standardization, so that no matter at which site the product is produced, it's exactly the same process. To enable such standardization, several factors are required, and these factors are the foundations of the Orgenesis point-of-care platform. A harmonized quality system, well-established training protocols, audited and consistent suppliers and vendors of materials involved in the production and consistent quality controls, validated, automated solutions that minimize human error and closed units to control infection. No less important is also a consistent manufacturing environment. One of the reasons we like to use our OMPULs, our mobile units. This ensures we are always duplicating the exact same environment no matter where we manufacture.

We believe our strategy of decentralized supply of cell and gene therapies based on standardization of the manufacturing environment will ultimately become the solution for this industry, enabling lower cost, accelerated development and ultimately provide a scalable long-term option to overcome the industry-wide capacity constraints. And while the rollout of our decentralized point-of-care strategy is in the early stages, once the foundations are well established, it is much quicker and lower cost to expand capacity and increased rollout. Once we have validated the production process in one OMPUL at one point-of-care location, we can add additional OMPULs under the same quality system and infrastructure.

We continue to strengthen the foundations of our point-of-care network via new joint ventures, partnerships with leading hospitals and research institutes across North America, Europe, Asia and the Middle East and are investing our efforts in validating our point-of-care platform within each region. Most recently, I'm pleased to report we entered into an agreement with a local partner to expand our point-of-care network in Australia. We are also seeing growing government interest in our JV partners and have identified a number of potential opportunities for government grants and other supports.

Each of our partners have aligned interest with our own as committed to support the validation, development and clinical trials of advanced therapies utilizing our point-of-care platform within their respective markets. As we have discussed in the past, we grant our partners' geographic supply rights in exchange for future royalties and revenue show agreements whereby Orgenesis provides ongoing support for the operations and deployment of the target therapy. We believe this approach is highly scalable as it derisks developments to outside support from our partners.

If you look at our revenue goals for the quarter, this reflects the first phase of a validation stage of our rollout. Specifically, we are providing our partners and the hospitals we work with directly with technical, regulatory and clinical support to establish our operations and under long-term contracts. As we move into commercialization phase within respective point-of-care centers and potentially launch new therapies, we expect to benefit from revenue sharing and royalty agreements. Once in the commercial phase, we expect that our partners will be in a position to add additional sites and ramp up capacity very quickly to meet the needs of customers and their choice.

Another example of the growth in our point-of-care network is in the U.S. where, in most cases, we work directly with incentives and are expanding our collaboration with a number of leading global health care institutes, such as Johns Hopkins University, where we are establishing a point-of-care development center. Similar collaboration with UC Davis in California. We could not be more excited about these partnerships and the support we oversee from both JHU and UC Davis. We have added additional validation site across the U.S. In fact, we recently began setting up an additional center in the Boston area, which will help expand our presence in the Northeast and expand our capacity.

Together with our partners, we now have a number of sites across Europe and other territories around the world, including Italy, Spain, the Netherlands, Greece and more. Our most recent addition with the premier center in Lithuania. Clearly, our business model is taking hold, and we are doing our utmost to provide all the support to each point-of-care region required. Our goal at the moment is not to add on as many sites as possible, but to also choose the optimal sites for validation of our point-of-care platform. Once we have received the required approvals, we believe we can quickly expand capacity with the support of our JV partners.

Also, keep in mind, we and our partners sold Masthercell not long ago for approximately $300 million when our revenues of Masthercell were roughly $30 million. And although Masthercell was a cutting-edge CDMO, we still face the same industry challenges as other CDMOs, utilizing a centralized approach. In contrast, our annualized revenues based on our initial partnering programs are already nearing Masthercell's at the point we sold it, reflecting the quick capacity buildup that the decentralized point-of-care approach enables and the foundations we are solidly building up for future ramp up.

Turning now for a moment to our point-of-care technologies. We have been very active, adding a number of highly advanced automated technologies into our platform. As an example, we have commenced enrollment for a Phase II clinical trial using the Tissue Genesis Icellator. At the Hospital for Special Surgery in New York, the Tissue Genesis Icellator is designed for the use of point-of-care and is a practical and cost-effective solution for clinical applications of stromal and vascular cells from autologous adipose fat issue.

We are also advancing our point-of-care therapies, which now span immuno-oncology, anti-viral therapies, metabolic autoimmune diseases, tissue regeneration and more. Our strategy involves in-licensing therapies from leading research centers, hospitals and biotech companies, taking on the responsibility of industrializing and supplying these cell and gene therapies in a consistent and standardized manner in all locations.

Orgenesis research and development teams have been working closely with our global partners in academia and industry partners collaboratively progressing towards the goal of enabling the research discoveries to become clinical-grade therapeutics. At the heart of our business model, it's our goal to make these therapies available to a large number of patients that reduce cost. So on-site processing of our therapies using the point-of-care model, which we believe will support payout take.

Unlike a traditional biotech with a handful of therapies in the pipeline, we continue to evaluate new therapies at all stages of developments, who are growing partnership with researchers, commercial entities and hospitals. We have built a robust therapeutic pipeline, which includes more than 30 advanced cell and potential gene therapies, and we continue to evaluate new therapies every day. More recently, in June 2021, we achieved a multiple anti-viral development milestones based on the Orgenesis acquisition of the Tamir Biotechnology assets last year.

Orgenesis has completed its pre-IND consultation with the U.S. FDA regarding the development of RanTop, a topical gel formulation for Ranpirnase for the treatments of anogenital wart. We are on track to start Phase II trials in this indication as completing the FDA pre-IND request. We have recently announced that our licensing partner Okogen presented positive interim Phase II clinical design, was also OKG-0301, an ocular formulation of Ranpirnase in acute adenoviral conjunctivitis. This research provides encouraging scientific validation for continued development of Ranpirnase in ophthalmic indications. Okogen plans to progress to the Phase III trial and has presented its plans to the FDA.

Regarding our collaboration with Leidos, we are preparing additional materials that we believe to lead to an IND submission for a clinical trial for Ranpirnase for the systematic treatments of patients infected with COVID-19. We are also planning to test Ranpirnase against other potential target infections, which are high on the U.S. National Institute of Pathology in infectious diseases, emerging infectious and pathogens list, including Ebola in Eastern equine encephalitis virus.

Lastly, we have begun feasibility studies to combine Ranpirnase with Orgenesis Bioxome technology. Bioxomes are extracellular vesicles that we believe can provide some therapeutic benefit of cell without the difficulty of administering the entire cell to the patient. This reformulation of Ranpirnase may enhance delivery of the anti-viral activity of Ranpirnase without increasing the risk to the patient. This is just one example of what we're planning to leverage our Bioxome technology across our platform.

In addition to the therapeutic programs I mentioned, we're also engaging in numerous additional collaborations to advance our pipeline, including collaborations around the development of new manufacturing methods for tumor-infiltrating lymphocytes and CAR-T and NK based facilities. In addition to our technical and manufacturing expertise, we also provide us therapeutic development partners with extensive support for quality assurance, regulatory and clinical development, utilizing our internal expertise with the aim of accelerating the development in commercialization pathway.

So to wrap up, I remain as encouraged as ever by the outlook for the business and believe we are building a sustainable revenue model that will allow us to support our global partners, while that advance our products through the required regulatory steps. We have invested to expand our capabilities and recruited some of the top industry experts to help us capitalize on this unique opportunity to potentially transform the cell and gene therapy market. We also have combined vision of bringing breakthrough therapies to market in a cost-effective way that will ultimately benefit patients and save lives. I truly believe our revenue growth, coupled with our solid balance sheet and the fact that most of our heavy investments are behind us, all bode extremely well for the future.

On that note, I'll now turn the call over to Neil Reithinger, our Chief Financial Officer.

Thank you, Vered. Our revenues for the 3 months ended June 30, 2021, were $10.5 million compared to $1.7 million for the 3 months ended June 30, 2020. The increase in our revenue is attributable to technology transfer, setup, scale up and validation of our therapeutic pipeline and point-of-care systems for clinical use through long-term contracts and our regional partners. Cost of services and other research and development expenses for the 3 months ended June 30, 2021, were $9.7 million compared to $25 million for the 3 months ended June 30, 2020, representing a decrease of 61%. The net decrease during the quarter is mainly attributable to the purchase of the assets of Tamir Biotechnology in 2020.

Salaries and related expenses increased by $1.3 million during the quarter. As we have expanded our internal capabilities, including recruitment of leading industry experts to continue the development of our cell and gene therapy product pipeline as we expand our PSC operations globally. At the same time, we experienced an increase in professional fees and consulting services of $3.3 million. We continue to invest in the development of automated processing units and processes as well as owned and licensed advanced therapies to enable commercial production, while working with our partners to address the field care needs.

Selling, general and administrative expenses for the 3 months ended June 30, 2021, were $2.9 million compared to $3.6 million for the 3 months ended June 30, 2020, representing a decrease of 20%. The decrease in selling, general and administrative expense is primarily attributable to a decrease in accounting and legal fees as a result of decreased corporate investment activities in 2021 compared to 2020. In terms of liquidity, we ended the second quarter of 2021 with cash and cash equivalents of approximately $28.4 million. We continue to maintain a strong balance sheet with sufficient capital to fund development of our OMPULs strategy.

Operator, we'll now open the call to questions. Thank you.

(Operator Instructions) And our first question is from Bruce Jackson.

If we could take a look at the revenue number in a little bit more detail. So you mentioned tech transfer, scale up, set up, validation. Is this -- could you give us a little bit more on the composition of that revenue number? Is it primarily related to the JV partners? Or is there anything else in there?

Well, yes, because remember, most of our therapies are being deployed through our JV partners and clinical trials, right? So the first step before you start manufacturing a product, and this was the same type of revenue we saw in Masthercell and the centralized services we used to give. You have this initial step where you're doing actually the tech transfer and you're preparing everything in the environment so you can begin manufacturing. It's actually this initial step. Sometimes you do validation on, sometimes you do quality control validation, all kinds of steps is required in order to validate the manufacturing process before you begin your clinical work. So this is very standard in the industry.

And of course, when we charge our partners, we charge it with an overhead, but we really want them to get to the clinical stage. But they are paying us and this is why we believe this is a sustainable model because as they begin their clinical work, the manufacturing they need, they need our constant support on these services, just as we gave the support before to our customers or biotech companies where we were working through our centralized CDMO structure. I hope that kind of answers the question.

Yes, it does. That clarifies things. And then if I can ask a follow-up question on the mobile processing units. Just curious to know how the rollout of those units is going? And do you have anything operational yet?

Yes. So we haven't actually made any public kind of disclosures about the entire rollout and the numbers. But I think we're very much on plan as we discussed. And I think we'll get our, at least most of the systems out and working. What's important for us is the rollout itself, like sending a system is quite simple, right? You ship it out and its position. I think what we're trying to achieve here is a validation of manufacturing in the systems and making sure we're aligned with all the regulatory requirements around that. And that, I think we're doing good progress.

We're getting good feedback from regulatory and from other government approvals needed. So I think there's really an understanding both regulatory and economically and from the different governments and health care institutes. But this is actually a good way to manufacture. This is no -- you don't have to give up, let's say, quality or safety, maybe the opposite when you are working with such mobile units.

Okay. That's helpful. And then last question and I'll hop back in queue. So the revenue has been growing quite nicely here. To the extent that you can provide some guidance on where the next couple of quarters might fall, would you anticipate that revenue continues to run at this level? Or could it be somewhat variable?

So the viability, these are long-term contracts we have with our partners, right? So typically, until the first stage of clinical, and then they continue for support and there's numerous therapies for each partner. So we kind of more or less know that this is the level of revenue that is sustainable for us as a business and make sure that we are sustainable as we continue giving support because we want to make sure that even during validation stage for each partner, we are not financially at risk here. And so we kind of more or less know that this is the expected revenue per quarter. And the new ramp up will begin -- or we believe it will begin once they start the clinical work, once they start receiving revenue from the hospitals or different payers. And as this goes and expands, -- and today's ratio is much more on the validation side.

But as they get more present in the each region, that moves more and more to payment on this side. And then we are getting additionally to the service payments we get and the support we're giving them. We also get the loyalty payments and additional payments we have in our agreements with them. So I think for the -- again, we don't give any guidance on it. But if you look typically at this industry, these type of contracts, that continues for the next year. That usually the first tech transfer phase is anywhere between 6 months to 24 months, depending on the therapy, the complexity. And as I've explained before, our goal now is not to really charge our partners as much as possible. But clearly, we take a continuous overhead over our cost to make sure we are sustainable as a business.

Our next question is from Kelvin Seetoh.

Vered and Neil, we have been following the progress of Orgenesis, and I continue to be a strong supporter of what you do. I think earlier on in your remarks, you made a good point. When you sold Masthercell, it was earning about $33 million in revenue, and it was sold for $315 million to Catalent. So it really shows that the OMPULs strategy is ramping up. So I think in our previous earnings call, we've discussed about Kyslecel. So currently, we are looking to perform automation and seeking approvals, additional approvals for this product. So could you share with us more updates in terms of the business plan and the growth of this business in the next 2 to 3 years?

So as I said -- and I remember this question, and thanks for bringing it up again. We're very committed to Kyslecel. And we can see there's a lot of interest from other regions around the world and introducing it. But again, Kyslecel is just the exact example of the challenges this industry faces. It's a great product. It's approved to market, and yet, it's very limited in its capacity. So we are still working on the automation and the, I'll call it, OMPULization of this therapy. And as I said, I think this is not a trivial process, but I think we are making steps forward.

And in parallel, we're also working on understanding the clinical regulatory requirements for other regions. So we're working in parallel. So as we continue to automate and OMPULize and validate that, which is very important, we are also expanding the market for this. So we believe there will be a synchronization between the OMPULization and the automation and the ability to regulatory-wise expand to additional market.

All right. I have a follow-up question for Neil. So compared to quarter 1 2021, using the cost of services alone, I came out with a rough number of the gross profit margin of roughly 34%. In quarter 2, similarly, using our cost of services alone, our gross profit margin is 7.8%. So could you share with us what are some factors leading to this change in gross profit margin? And were there any one-off costs? Or is this just a ramp up in expenses in anticipation of future revenues?

Sure. So did you -- I didn't hear your second figure. What was your second figure for gross profit?

7.8% in gross profit margin. I'm using the cost of services alone.

You came to a gross profit of 74%, you said?

7.8%.

7.8%. Yes. I don't know where you might get that. Yes, I don't know where you might get that number, but…

Neil, why don't you let me answer that? And I'll give a bit of explanation, and then you can go into the financial thing. When -- I don't -- I'm not sure which formula used to kind of -- because we don't have really -- because this is a kind of R&D development, remember. Even though our partners are selling these products, right, and now pushing them into the market, we still benefit greatly from royalties and other things. We still have an ownership stake in these piece. So in the way accounting-wise it works is that actually it's not considered as COGS, okay? It's not considered as cost of goods, the work we put in. It's actually considered cost of services and R&D.

So when you look at our financials, and Neil can explain that more, it's difficult to differentiate what is R&D investments that we are doing internally and what are -- how, I would say, so to speak, COGS, even though you can't call them that or what are our cost of services. I can tell you that in terms of cost of services -- for us, it's quite simple because we take a clear overhead. So our gross profit, so to speak, has not really changed. What may have changed, we may have invested a little bit more in R&D. Maybe we've finished some R&D work or finished paying suppliers for work that's ongoing. So I'm not sure these numbers you have really reflect our kind of gross profit. Neil, do you maybe want to add to that?

Yes, correct. There's no real thing as gross profit in our business. It's not like building a car. It leaves the production line, and obviously, it's done, and you could see it's a contained unit. This is a very complex process by which we provide services by which we develop and also see the result of those because some of these benefit us as well, like research and development. That may be a benefit to a partner or to a customer "customer" JV partner, but it also benefits us. So this becomes more of a collaboration with those costs as well that we recognize as our own expense as well as the benefit of that JV partnership, right? So yes, there are labor, there's services, there's lab costs and so on, that could be, so you could quantify those into identifiable amount.

But our business doesn't operate by way of a gross profit amount where you literally see that as a line item. It's really a matter of the collective revenue and what it takes to drive that and also make us successful along with them and benefiting from each of those, mainly -- especially that R&D is sort of a -- is not based on a gross profit model in terms of how costs are accounted for. Okay? So that's not just Orgenesis. That's -- in the cell and gene therapy world, that is -- that becomes more of a holistic type of measurement in terms of what costs are because it's a complicated delivery of a service and an end result, okay?

And let me -- maybe I'll give an example to make sure this is clear. Let's say, we've licensed a therapy, a specific CAR-T from a specific hospital, okay? Let's say we've just licensed the CAR-T for pancreatic. And we've brought it in. Now we have a stage when we're not yet licensing it out to our partners, and we're not getting revenue from it from our partners/distributors, okay? So we're still working on that product in-house, preparing it for the next stage when we start licensing it out. So let's say, this quarter, we've been doing a lot of work on new products that we've licensed in, okay? But we -- they are not yet ready for licensing out and receiving payments on. But they still become part of our R&D and cost and services.

So you could say, not in an accounting manner that we are investing in our pipeline because once we in license the therapies, that becomes revenue generating. For us, once we license it out to our partners, distributors because then they need our support to manufacture it and to propel it for manufacture and to make it available in their area. So this is why you will see maybe a difference. So I think this quarter, we had a bunch of new therapies that are almost ready for out licensing. And I think next quarter, we have some of that. But these therapies, we believe, and we know this because we actually ask our partners, if they're interested in licensing. But these will soon become revenue-generating assets to us. I hope that explains kind of a bit more. But if not, let me know, and I'll try to add more detail.

Our next question is from [Meghan Han].

So in July, I believe you put out some interesting news about your RanTop topical gel, and there seems to be quite a number of users for it. So could you share with us, should this product become commercial? Does it have a material impact on your business? For example, the unit economic or some range of margins?

So I think that it will take time because it has to go through full regulatory approval. I think it's -- as we develop this product, part of the reason we are very interested in this active kind of product was because we wanted to combine it with some of our cellular products. I think one of the things that happens because we work with so many different cellular therapies, we also have developed a lot of technologies that are based on cells. Cells can be used as a whole product, but they can also be utilized and to be made delivery systems. Our Bioxome technology is an example for that. That's an industrialized way to actually make a delivery vehicle from cells, which what we've seen so far in preclinical work is that we are enabled to utilize this to get drugs that are active in themselves in a better way to the desired location in a much more efficient manner.

So this, we've seen in preclinical work. And we're hoping to see this also in clinical work. But it doesn't mean that the active molecules themselves are not efficient. Now at the moment, this clinical trial is focused on the RanTop, the one that is planned to be made as a product that is to be used for an indication. It's a leading -- not a lot of products, good products out there. And we believe that once it gets approved, it will be a superior product to other products. But we also believe this holds a lot of potential to be utilized together with our delivery systems. So this kind of a double impact here on the company.

All right. So it also seems like you're also opening up multiple conversations with the U.S. FDA. And do you still see such conversations being pushed back due to COVID-19? Or is the FDA becoming more responsive these days?

No, I personally have not noticed a change in the responsiveness. I think they're always very responsive and continue to be so. I think they're especially responsive to patients that are afflicted by COVID or other indications. But the fact that COVID doesn't mean -- isn't a cancer. And I think they're really trying to do a good job in just making sure that all patients and all therapies and companies get the response they need.

All right. That's really great. I just have one last question. So well, we are not short term in our investments. We realize that there are really a lot of corporate developments, which increased the intrinsic value of Orgenesis, but yet the market is not recognizing it. In fact, I believe your revenue now is quite close to the revenue of Masthercell. So from your perspective, do you have any views on this disconnect? Or any thoughts on this topic?

It's a question, of course, I ask myself. And I asked experts in the market about this. Why does the -- how the stock price does not reflect what goes on as we develop quickly? So I don't know. I think it's really a matter of things need to catch up. I mean, I think we're working in a sophisticated industry. I think it takes time for people to realize how quickly this industry is going. And I think it takes time for people to realize what an impact we can have on this industry. So -- and I remember, if you -- and I don't know how long you've been following Orgenesis, but if you may remember, Masthercell's revenue was doubling every year, quite consistently. And still, only when we sold the company for the valuation we did, I think the market realizes.

So I think because it's a new industry, most of the products have only been approved in the last 2 years. It takes time for people to understand those hundreds and maybe even thousands of great therapies in the clinical stage now. Many of them are starting to get approved. I don't think people understand what a huge problem actually capacity is. What a tremendous lack of capacity is in this industry to actually supply these drugs, whether centralized or decentralized. We believe that the decentralized not only allows you to build up capacity, but it allows you once you've validated it to ramp up very quickly. And that's what I think is so important in what we're doing. Because, okay, you can build clean rooms, so you can build the OMPULs.

But the difference between adding another OMPUL to an existing one compared to the difference of building another GMP facility is huge. So we really think that the issue is building away, building a platform, and this is why we're so invested in this that can quickly ramp up. You can quickly -- in 3, 4 months, you can add another OMPUL. You can add more sites. So this is what will allow these therapies actually to get the market. Now if you're inside the industry and you are a therapy developer or a biotech company or a hospital, it is completely obvious to you, this problem, this lack of capacity. But if you are a financial analyst, and this is a new industry.

If you're just a shareholder or somebody out there that is not involved in the industry, it's a bit more difficult to understand what a huge problem is and how this personalized genetically modified therapies are really taking a huge space in biotech. How they're going from indication to indication, more and more cancers.

And some people think the problem will be solved by making shelf products. But the whole beauty of these therapies is that they are personalized, and that would make them so therapeutic and have such great clinical effect on patients. So even though maybe some shelf products will be produced, most of this industry is still and will probably be in the future, mostly personalized. Maybe even only half the [drugs] will be personalized, but still, it's a tremendous amount of products getting out to the market, getting market acceptance and having no way to manufacturing. So I think once this kind of a general more public understanding that this is the new wave of biotech, that this is the way biotech is going, personalized genetic capability to use your own cells to make the proteins you make to treat the ailments you have.

And they will understand that the biggest issue here is not the clinical and the scientific step because that's -- a lot of work is being done, but actually to provide a way to these products to get to access to market, then they will realize the value we have in terms of just financial value and of course, what I believe is value to people and patients all over the world.

Our next question comes from [Oric C.]

Yes, I fully agree with you that the what you are doing, it's not fully recognized by the market. Especially when you have, in my opinion, the OMPULs that you have done, that's a very good product in terms of scalability. However, we do not see much publicity on the implementation of OMPULs. Would you be able to share with us the adoption or the implementation of OMPULs up to date? And also, how are you planning to make the public more aware of what you are doing with OMPULs?

So look, we haven't given any public kind of information. We -- I will -- and I can tell you that our goal, and we have showed this. For this period, we believe the 35 centers really kind of map out the regional kind of areas we want to cover. These are validation centers. And as I explained before, our goal now is not to ship out as many OMPULs as possible. Our goal is really to find the best hospitals as reference of excellence, right, to validate the manufacturing in these OMPULs, and that does not mean getting clinical approval for them. It means being able to manufacture, as I said, in a standardized manner in all of these sites in a mobile unit or in some of the mobile equipment we use, okay?

And to show we can generate the same product in all these sites because 35 sites really covers quite a -- covers the globe more or less. I mean, we're just looking for -- we're kind of setting up and looking for the best therapies to implement in Australia, okay, for instance. So we're really trying to make this a global distribution kind of availability. And what we really -- and because there's such a big need and because of such a lack of capacity, we continuously get requests. So even though we decided on 35 validation centers, we may go up a bit because if those are great research centers that wants to get involved now, I don't want to say no to it because it's -- we can already get rolling though.

But that's our goal. Because once we validate, once we really make sure 1 center is working properly in that legal regulatory region, then it's much easier to quickly ramp out and expand to as many centers or as many OMPULs is needed. So that's why I don't think -- a lot of the time, people are asking, well, how many have you got now? That's not the issue. I think we've covered the ground we want to. And now we really have to focus on validation. And I think our model of being kind of sustained and paid for all the services we give in these units by our partners makes us sustainable during the validation mode.

Now for public awareness of this, many cases, we're working with very high-level research institutes and hospitals. Not -- when we want to, let's say, put out an announcement, we always have to ask the commission. Now most serious research institutes are not in a hurry to put out PR. Oh look, we put in an OMPUL. We put into this until everything is rolling smoothly and validated. And we have to respect that. So we're really focusing now on validating everything, making sure things are in place. And I think as the hospitals we work with, as the research institutes we work with, we'll feel that we've got everything running and we're already manufacturing, they will feel more comfortable.

And of course, as we start rolling out, we are less, I would say, reliant on the hospitals because we can roll out an early location. So in numbers, this is like our beta site. These are validation sites. And for me, I think it's really wonderful that even during the validation mode, we are sustainable, which means we can add more sites if needed. But this is our goal. So I think you can deduct from that more or less where we are at the rollout.

Yes. I think that is clear. I take -- I fully agree that validations so that you get more confirmations that this is working solution. This is a working solutions. So when you say to the validations, will you also shed some colors over the next few quarters, how this may surface or how we expect that? And the last question is, when you're answering one of the investor's questions on licensing, would you mean that the next -- how do we expect for the next few quarters appearing? Yes. That is my last question.

Okay. So validation is really something that is kind of regular to redefine, right? The way you do this, you usually take a product and you run it for full validation ones. Typically, this will take 3 to 6 months, okay? That's kind of how it works. And that's kind of the typical validation process, okay? I hope that answers your question. And doesn't matter if it's you. And why do it take at least 6 months? Because that's the time it takes to manufacture most of because you're making free runs. And -- okay? So that's kind of a validation time lines and how much that takes.

As for -- in terms of the second question about licensing. Look, we have so many requests to give us the piece, okay? Not even for us to pay for them, just to -- for people that are struggling. Even and not only hospitals, by the way, small biotech companies, bigger companies that have these great therapies and have shown, even in many cases, clinical validity. But I'm really stuck at a point where they can't make these products for more than 5, 10, maybe at most 20 patients, right, using a typical cleaning. And we really try -- I mean, we really -- when we in-license something, what we try to do, we really have a quite a huge network and expertise in this field, right? Because we've got all these centers and all these people, well, such great expert in this field.

So what we typically do, we kind of ask the opinion, of course. So we have a great model for actually assessing. Is this product something that is clinically useful? Does it have a good regulatory pathway? Can we be supportive on the automation and the rollout? And these are typically the questions we ask ourselves if we want to add in a product. So we typically license in some things that we already know we have a lot of interest from our global platform to utilize. Sometimes it needs some work from our side, as I explained before to Kelvin, but we know that in a short term, we can get this out to our partners, so they can start pushing it into different clinical ways. Is that -- did I answer your question?

(Operator Instructions) Our next question is from Bjorn Ng.

I followed your company for a while, and I respect your mission to make gene therapy affordable and accessible for patients. So I have 3 questions. Thorough our channel checks, we saw that Orgenesis recruited a Head of Global R&D Operations and VP of Global Business Development. So it seems like Orgenesis has a strong ability to attract talents to the company. Could you share advance the background of these leading industry experts that you have recently recruited? And how will these strategic hires help to push forward or accelerate the therapies and OMPURs deployment globally?

So I mean for our business development, we've come to a stage really that even though -- it's not like -- it's not an issue of marketing, okay? For us, it's -- because as I said, there's such a lack of capacity. And so it's not that we need to go sell ourselves too much because I think we have too much. We -- I wish we could take on more hospitals even today. That's kind of what I wish, but I think we have to kind of finish the validation stage. But for us, it was very important to take Greg, who is our VP of R&D and he was a great guy. And he's very, very experienced, both in blood banking, different cellular products. And he has worked in decentralized approaches before on diagnostic issues on different blood products. So he understands very deeply the concept of decentralization.

Now when you are offering a decentralized service, I think it's very important that when you build it up, you build it up in a way that is, first of all, sustainable. And as you grow, you don't harm any of -- you keep the same level of quality. And I think Greg is doing a wonderful job in really aligning and making sure everything is kept at the same level and making sure what are the components we need to continuously monitor and ensure, so we are, as a business, as we go and as we expand, we keep the same level of service to each of our partners. So that's on that side.

And so head of -- for R&D. So people have tremendous know-how in biotech today, many of them. So other people will now. We have a wonderful team with a lot of know-how in R&D, in biotech, in development of cell and gene therapies. But I think for us, it was important because we have different development units in different areas to have just a centralized, making sure the information flow between the different R&D units is flowing clearly because at the end of the day, that's what's important when you have a decentralized approach. With any information, any development you're having at one location can quickly come back and benefit the rest of the location.

All right. Vered, so my next question is really for joint venture partners. So are there any updates with these joint venture partners in other regions, such as in Europe, Korea, Japan, so and so forth? What I'm referring to is in terms of like collaborating with more hospitals and research institutions.

So we're working according to a plan. In each regional plan, we try to take 2, 3 major institutes. And I think we have well targeted institute as we will. So I think in terms of that, everyone is working according to plan. What I do think, and interestingly enough as this industry, and that goes back to kind of the -- I think the governments and the health care institutes are realizing more and more, but there is an issue. So I think what we were seeing is more government support to our JV partners in terms of even easing the way regulatory wise, even willing to support financially, listening to them. So they're becoming, I would say, more permanent in the region. Not all of them, but at least certainly, some of them and ones that are more advanced, we can see how they are kind of gaining recognition as an important player in where they're working.

And of course, their success is our success. So for me, it's great to see how they are growing and expanding the activity, how they're working more closely, how they're working more closely with the regulators, how they're getting more support locally, how they're becoming, I would say, a leading pillar in the cell and gene industry in the region where they are active. Each with own expertise, of course.

Okay. Vered, so just one last question is based -- is regarding the (inaudible) on our pipeline. So based on the pipeline together with Kyslecel, (inaudible) is by tariff sale. It's also at the clinical new stage. So could you share with us how is the market demand for this? Which stage are we at right now? And are there any plans to push it ahead and commercialize this?

Yes, yes. So this is again a same issue of automation. It's being marketed in one site, and we're working very hard to complete the OMPULization of this. And I'm hoping this will be quite soon. And then we'll do like a full IND for it.

Okay. Vered, it's a privilege to be your shareholders, and you have my full support ahead. Thank you for all you hard work.

There are no further questions at this time. I'll turn it back to the management for closing remarks.

Okay. So first of all, thanks, everyone, for the questions, really, for participating. And I know many shareholders call me up even not during the earnings calls, and I'm always happy to chat and talk to them. So thanks for participating in our second quarter 2021 business update conference call. We're very excited about the outlook for the business and appreciate the strong support of our shareholders. Looking ahead, our goal is to continue the validation of our point-of-care platform, while building the foundation for our market expansion in the various geographic regions. We look forward to providing further updates as we work in close collaboration with our partners to deploy our point-of-care strategy worldwide. Thank you.

Any further remarks? Okay. Thank you. This concludes today's conference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.