Plus Therapeutics Inc (PSTV) 2004 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the MacroPore fourth quarter results and year end results conference call.

[OPERATOR INSTRUCTIONS]

I would now like to turn the conference over to Tom Baker. Please go ahead.

Thank you. Before we begin, I'd like to read the Safe Harbor statement. This conference call may include forward-looking statements regarding events and trends which affect MacroPore Biosurgery's future operating results and financial position.

Such statements are subject to risks and uncertainties that could cause MacroPore Biosurgery's actual results and financial position to differ materially. Some of these risks and uncertainties are described under the heading, Risk Factors, in the company's 2004 Form 10-K annual report for the year ended December 31, 2004, which is now available on the SEC Web site and MacroPore Biosurgery's corporate Web site.

MacroPore Biosurgery assumes no responsibility to update any revision of forward-looking statements to reflect events, trends or circumstances after the date they are made.

I will now turn the call over to Chris Calhoun.

Good morning and thank you to those listening today to our year end conference call. On this call, I'm going to provide a brief overview of our business, provide an update on our progress in regenerative cell technology programs, outline our goals for 2005, and report our fourth quarter and our 2004 year end financial results.

Let me start with a brief review of our regenerative cell technologies. Our lead therapeutic program seeks to develop novel therapies for cardiovascular diseases using adipose derived regenerative cells.

In addition, we have therapeutic programs for spine and orthopedic conditions, gastrointestinal disorders, and new approaches for aesthetic and reconstructive surgery. Our technology is based on stem and regenerative cells that exist in adipose tissue, more commonly known as fat.

Adipose tissue is the richest and most accessible known source for stem cells and other regenerative cells. Adipose tissue contains three primary cells types, adult stem cells, cells that promote blood vessel growth which increase blood flow, and other regeneration promoting cells.

In parallel to our therapeutic programs, we are developing a proprietary point of care system called solution to extract, isolate, and concentrate a patient's stem and regenerative cells from their own adipose tissue. Our goal with the solution system is to develop and commercialize a broad-based integrated system that may be used for multiple therapeutic applications.

This will be the only such system that can give a healthcare provider access to therapeutic dosages of a patient's own stem cell and regenerative cells in about an hour. This real time approach to stem and regenerative cell therapy represents the competitive advantage over other stem and cell therapy companies.

In 2004, we achieved several important cell therapy milestones. We received 510(k) clearance from the U.S. FDA for a point of care adipose tissue extraction system. We recorded key preclinical data demonstrating that adipose tissue derived regenerative cells improve heart function following a heart attack. We were awarded $950,000 in NIH SBIR funding for our cardiovascular program.

The United States patent and trademark office issued a broad composition of matter patent for adipose derived stem cells to the University of California for which we are the exclusive licensee.

And we initiated five new preclinical therapeutic studies with academic collaborators to develop treatments for cardiovascular disease, spine and orthopedic conditions and novel approaches for aesthetic and reconstructive surgery. Our regenerative cell technology is rapidly becoming a broadly accepted solution to current limitations in regenerative medicine.

This is being confirmed at major academic research centers around the world. With the active support of MacroPore, increasing numbers of investigator initiatives, human clinical cases and trials have been initiated. In Spain, a Phase II clinical trial is in progress using adipose derived stem and regenerative cells for treating patients with an important complication of Chrome's Disease.

At the University of Tokyo, a Phase I clinical trial has been initiated using our stem and regenerative cell technology for breast therapy and augmentation. Last December, a research team in Germany using adipose derived stem and regenerative cells, reported the successful treatment of a young girl with severe skull damage that was not healing with conventional therapy.

For 2005, our primary goal is to accelerate the translation of this scientific knowledge and these early clinical successes into therapeutic products for as many patients as possible.

To meet this goal, we specifically intend to complete the first generation of our solution device for cardiovascular therapy, conclude our ongoing preclinical testing for cardiovascular disease, finalize our preparations for clinical trials in Europe for cardiovascular disease, form strategy partnerships for regenerative cell applications outside of cardiovascular disease, strengthen our cash position, and list our shares on a U.S. exchange to provide U.S. shareholders better access to MacroPore stocks.

In addition to our core focus on regenerative cell therapy, we are also a leader in the innovation and development of bioresorbable implants. We have developed three FDA cleared families of surgical implants. These products are unique because they are biomechanically strong, they are absorbed naturally by the body as it heals.

In 2004, the bioresorbable product lines generated 16 and a quarter million dollars in cash flow to MacroPore from licensing agreements and product line divestitures consisting of the following payments: $7 million from an initial payment in the second quarter related to the sale of our Thin Film product line to a privately-held medical device company, MAST Biosurgery.

$1.5 million from an initial payment in the third quarter related to the licensing of our related rights to market Thin Film products in Japan to Senko Medical; $1.25 million from the milestone payment in the third quarter related to a regulatory submission as part of the Senko licensing agreement; and $6.5 million for two milestone payments during the first and third quarters related to the sale of our CMF product line to Medtronic.

Now I would like to review our financial results. Total revenues for the fourth quarter of 2004 were 1.15 million compared to 4.76 million for the same period in 2003. Of the total revenue in the fourth quarter, 972,000 was attributable to sales of HYDROSORB products to Medtronic.

Total revenues for the year ended December 31, 2004, were 6.8 million compared to 14.1 million for the same period in 2003, a decrease of 51.6%. Of the total revenue in 2004, 3.8 million is attributable to sales of HYDROSORB products to Medtronic.

The decline in revenue for the fourth quarter and full year 2004 is primarily attributable to Medtronic stocking patterns for HYDROSORB products during the second half of 2003, which provided Medtronic with sufficient inventory for 2004. Net loss for the fourth quarter and full year 2004 was 4.3 million and 2.1 million, respectively.

This compares to a net loss of 1.1 million and 9.3 million, respectively, for the same period in 2003. The 2004 full year results benefited from the following one-time items related to the previous divestiture of the CMF product line: the receipt and recognition of a $1.5 million payment in the third quarter for completing the final milestone related to the CMF product line sales.

A $5 million milestone payment related to the CMF product line sales received in the second quarter of 2004 as a result of completion of the clinical research program regarding faster reserving polymers; and the recognition of 7.38 million in the third quarter of 2004 associated with the completion of all obligations related to the September of 2002 sale of the CMF product line to Medtronic.

Total operating expenses for the fourth quarter of 2004 were 4.8 million compared to 4.6 million for the same period in 2003. Total operating expenses for the full year 2004 were 19.5 million, which was level with our 2003 total operating expenses of 19.5 million. However, in 2004, we shifted the allocation of operating expenses.

2004 research and development expenses increased over 2003 as a result of our increased investment in the regenerative cell technology program. This was partially offset by a significant decrease in sales and marketing expenses as a result of the sale of the Thin Film product line to MAST Biosurgery.

We ended the year with 13.4 million in cash, cash equivalents and short-term investments compared to 14.3 million at the end of 2003. In 2005, we expect bioresorbable technology related revenues of 6.0 to 9.0 million.

This is due to ongoing market demand for the HYDROSORB product family and from anticipated stocking orders for the radiographically identifiable Spine System products, which received FDA clearance in August, 2004. R&D expenses for 2005 will be 11 to 13 million, the majority of which will be invested into the regenerative cell technology program.

We may also receive other financial considerations and milestones in 2005 related to our previous Thin Film transactions with MAST Biosurgery and Senko Medical.

At this time, I would like to open up the call for questions.

Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press the star, followed by the one, on your pushbutton phone. If you would like to decline from the phone process, press the star, followed by the two. You will hear a three-tone prompt acknowledging your selection.

Your questions will be pulled in the order they are received and if you are on a speakerphone, please lift the handset before pressing the numbers. One moment please for the first question.

Our first question comes from Steven Dunn with Dawson James (ph) Securities. Please go ahead.

Good morning and thank you for taking my call. Just one question on Medtronic, on the inventory reduction it sounded like. Is that like - do you feel that that's a one-time inventory adjustment and then we will not see another downward adjustment going forward?

I'd like to have Sharon Schulzki, who's on the call as our Chief Operating Officer, answer that question for you. Thank you, Steve.

Okay.

Good morning, Steven.

Good morning.

There is Medtronic inventory in some products where we know that it has run down to a significant point, or to a low enough point that they are placing new orders with us. So I can't speak to your question as it relates to every component in the portfolio, but for many of the higher moving sizes, we've seen them reorder inventory from us already.

Sounds like I put words in your mouth. Do you think a significant portion of that inventory adjustment is now complete?

I think a significant portion of the inventory that they purchased in 2003 in the more popular sizes has been depleted.

Okay. Thank you very much.

Our next question comes from John Robun (ph) with Gagnon (ph) Securities. Please go ahead.

Hi guys. Maybe you could help me understand what the next milestones are as it relates to the resorbable business, what we should anticipate for clinical work approvals for the device and such?

Good morning Jonathan. Sharon, we'd like you to answer that one as well. That's your (inaudible).

Okay. Good morning Jonathan.

Good morning.

I think the most significant milestones coming up for us as it relates to product launches are the (inaudible) launch that's just about getting under way of the Mystique Anterior Cervical breast containment system.

The additional significant opportunities coming up are the promotion of the HYDROSORB shield stem cell by Medtronic (inaudible) based on some new preclinical studies that are about to be published.

And lastly, in the area of interbody (ph) applications for which we have the CE mark in Europe for lumbar and cervical as you know, there is an opportunity based on the awaited guidance documents from the FDA pertaining to the down (ph) classification of interbody cages (ph) from Class III to Class II for us to submit as a Class II device, a clinical study to get regulatory clearance in the U.S. for an interbody indication.

I think those are probably the three most important opportunities in the near future.

Okay. And how about on the stem cell line, the actual device itself and clinical work that you guys are anticipating for '05?

Jonathan, thanks. Marc, would you please answer that one?

Yes. Hi Jonathan. Yes, as Chris said during the call and as we've said previously, we intend to continue to have 510(k) clearances on the device itself and then in late 2005 or early 2006, we anticipate having completed our preparations for clinical trials for cardiovascular therapy in Europe.

And we'll begin those clinical trials once that paperwork and documentation is complete.

Thank you.

Thank you. Our next question comes from Brian Dagnon (ph) with Dagnon Securities. Please go ahead.

Sorry guys. We're double-teaming (ph) from different parts of the states. Two questions for you. On the stem cell side, you specifically mentioned the possibility of partnering. When do you think that might be able to happen for you?

Hi Brian. How are you?

Good thanks.

Hi Brian. It's Mark Saad. How are you? I think we've consistently told folks that this is a priority for 2005 and it's an ongoing objective for us and something that we're focused on during your (ph) term. While we don't have anything to tell people immediately, we believe we're on track for achieving or exceeding our goals for 2005 on that.

So while we can't give you a specific date or a party or area, it's something we believe we're very much on track for, Brian. And we'll be telling the street as soon as we have something material.

Do you suspect that you'll be partnering in other areas other than cardiovascular and orthopedics first?

Yes, I think that's true.

Okay. The second question is for Marc Hedrick. You said that you hope to begin clinical trials in Europe in cardiovascular in early '06. Do you have the centers picked out that you'd like to work with and are they working through their regulatory process to be able to move that forward?

Hi Brian. Yes, we do, and although nothing is completely formalized, we've made trips to Europe to identify and inspect those sites and we're working in parallel on the clinical trial development side with the development of the solution device that Chris discussed, and both of those parallel pathways will merge in the timeframe that we outlined in the call.

Okay. Actually, I lied. It's three questions. For Sharon, on the resorbable side, it sounds like the numbers are beginning to trend upward again nicely. I assume some of that is from new launches of products. You had a slight problem in '04 with - I shouldn't call it slight, it was a big problem, with numbers coming down and eliminating guidance.

Do you feel like you're being conservative enough in these numbers? And there's a possibility that if some of these new products are very successful, that these could be on the low side?

Well, that's a tough one because it's certainly speaking to the extent to which Medtronic (inaudible) infiltrates the market with these new products.

But I will say that I think that the opportunity for the Mystique Anterior Cervical breast containment system is many times more than what's currently being stated, and I know Medtronic (inaudible) is extremely enthusiastic about this product and the competitive advantages that it offers.

Brian, may I add that the numbers that we've projected for the year are consistent with the forecast that we have as of right now. So that may change and we'll see how these option rates take. These are the best numbers that we know right now, and we think that they're solid numbers.

When do they actually expect to launch Mystique?

Probably in the April, May timeframe, and the reason why I can't give you a specific date is because it's not just a function of our delivery of products to Medtronic, but also instrument sets (ph).

Okay, which is always the hardest thing to get done, right? How is the first quarter going for you?

I really can't comment on that at this time.

Okay.

Yes, Brian, it's Mark. I think we talked about how orders were returning in the business and we were seeing, as we show now, a meaningful improvement in the fourth quarter over the third quarter, and we see that trend continuing I think is the best thing I can tell you, Brian.

Terrific. Thank you, guys.

Thank, Brian.

Thank you. Our next question is a follow-up from John Robun. Please go ahead.

Sorry guys. We just really can't leave you alone today. You had mentioned that in '05, you're going to see NASDAQ listing, or at least a U.S. listing. Could you expand upon that, about what kind of timeframe and how you want to go about doing that?

Sure Jonathan. That's a good question. I think we're going to play read and react a little bit to this year, and we have multiple - it is certainly an objective for us to move to the exchange where we believe there's a robust and meaningful life sciences sector and we don't think that exists right now for us in Germany on the exchange.

They're based on any kind of a comparable universe, which frankly just doesn't exist. So we think that the company will be much better served and our shareholders will be much better served for us being on the U.S. Exchange, so that is a priority.

I think we're going to play read and react as the year plays out, either through a straight listing as our developments and accomplishments play out this year, or if certain circumstances warrant and our valuation makes it meaningful, we may consider to come over with some kind of an offering later in the year.

But that would be only under significantly more favorable valuation circumstances. In a world where we are in line with our current valuation or close to it, we would see it really more as just a listing versus any kind of a transaction. So we'll see how things play out and we'll elect one versus the other.

Great. Thank you.

Thank you. Ladies and gentlemen, if there are any additional questions, please press the star, followed by the one at this time. As a reminder, if you are on a speakerphone, please lift the handset before pressing the numbers.

Okay management, I am showing there's no questions at this time. I'm going to turn it back over to you.

Okay, thank you. If there are no further questions, I'd like to conclude today's call by thanking everyone for your participation today and for your support in MacroPore Biosurgery.

Ladies and gentlemen, that concludes today's teleconference. You may now disconnect.