Sangamo Therapeutics Inc (SGMO) 2003 Q2 法說會逐字稿

Good afternoon? My name is Tiffany and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Sangamo BioSciences second-quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (OPERATOR GIVES CALLER INSTRUCTIONS). Dr. Wolffe, you may begin your conference.

Good afternoon and thank you for joining us for our quarterly teleconference. Joining me are several members of Sangamo's senior management team, including Edward Lanphier, our President and Chief Executive Officer, Jan Nibel, our Vice President of Finance and Administration, and Dr. Tyler Martin, our Vice President of Development. Edward plans to update you on our recent activities and review some of the second quarter's accomplishments. Jan will briefly review this quarter's financial results and Tyler will update you on our ZFP Therapeutics program. After our prepared remarks, we will have time for questions.

As we begin, I'd like to remind everyone that the projections and forward-looking statements we discuss during this conference call are based upon the information we currently have available. This information will likely change over time. By discussing our current perception of the market and the future performance of Sangamo with you today, we're not undertaking an obligation to provide updates in the future. Actual results may differ substantially from what we discuss today and no one should assume that at a later date that our comments from today are still valid. We alert you to be aware of risks that are detailed in documents that the Company files with the Securities and Exchange Commission, specifically our quarterly reports on Form 10-Q and our annual report on Form 10-k. These documents include important factors that could cause the actual results of the Company's operations to differ materially from those contained in our projections or forward-looking statements. Now, I'd like to turn the call over to Edward.

Hello and welcome to our second-quarter 2003 conference call. On this call, I would like to briefly summarize this quarter's activities and financial results and, in more detail, provide you with an update on progress in our ZFP Therapeutics programs.

A major event for us this quarter -- and actually every year -- was the Annual American Society of Gene Therapy meeting, or ASGT, that was held in Washington D.C. in June. We had a significant presence at this meeting. Sangamo scientists and collaborators made 11 presentations, amongst the most of any industrial or academic groups. While all of the data presented represented important progress for Sangamo clients, two presentations were of particular significance. The first was the presentation of new, preclinical data from our most advanced therapeutic program for the treatment of peripheral vascular disease, or PAD. This study was carried out in collaboration with Dr. Brian Annix (ph), head of the Therapeutic Angiogenesis Research Program at Duke University Medical Center. Dr. Tyler Martin, our Vice President of Development, will discuss these data in greater detail later in the call, but briefly the study demonstrated that our ZFP transcription factor, designed to up-regulate the andogeneous (ph) VEGF-A gene, was extremely efficacious in the rabbit ischemic hind limb model. The data from this study were very well received at both ASGT and at the Annual Meeting of the Society for Vascular Medicine and Biology held that same week in Chicago. For his part in the study and his presentation of these data at the meeting, Dr. Qunsheng Dai, a research associate in Dr. Annix's (ph) lab, was awarded The Society's prestigious Young Investigator Award. We would like to take this opportunity to congratulate Dr. Dai on his success. As you can imagine, we and our partner, Edwards Lifesciences, were very proud of this recognition by the members of the Society for Vascular Medicine and Biology, which represents the community of clinical professionals focused on vascular medicine and other areas for vascular biology and disease.

A second Sangamo presentation of particular note at ASGT described preliminary data from our newest therapeutic initiative, the development of our zinc finger DNA-binding technology for the treatment and potential cure of human diseases caused by genetic defects. ZFP mediated gene correction represents an important new therapeutic approach that may allow a mutated gene sequence to be permanently corrected and thus provide normal gene function. Again, more on this later, but this is an area that we are excited about, as our technology could be used to address genetic diseases such as Severe Combined Immunodeficiency, or SCID, sickle cell anemia, chronic granulomatous disease, hemophilia and potentially many other diseases caused by DNA mutations.

The other presentations made at ASGT covered a wide range of topics, including data on the delivery of our ZFP transcription factors using different formulations. In that area, our longtime collaborator, Frank Giordano (ph) from Yale, presented work on the delivery of ZFP transcription factor proteins. There were also presentations on regulatable gene expression using small molecule switches and on data that demonstrated the singular specificity of our ZFPs. Viewed from any perspective, this was a very successful meeting for Sangamo and a very useful measurement of our scientific and developmental progress. So with that brief introduction, I'd like to ask Jan Nibel, our Vice President of Finance, to summarize our second-quarter financial data. Jan?

For the second quarter of 2003, our consolidated net loss, or GAAP loss, which includes non-cash charges, was $3.3 million, or 13 cents per share. In the comparable quarter of 2002, we recorded a consolidated net loss of 3.6 million, or 15 cents per share. Revenues for the second quarter of 2003 were $518,000 as compared to second-quarter 2002 revenues of 366,000. The principle components of second-quarter 2003 revenues were revenues from Sangamo's partnerships in the areas of human therapeutics, enabling technology agreements and government research grants. Our Research and Development expenses were 3.1 million for the three months ended June 30, 2003, as compared to 3.2 million for the second quarter of 2002. General and administrative expenses were 1.2 million for the second quarter of 2003. Similarly, G&A expenses were 1.2 million for the same period last year.

We ended the quarter with cash, cash equivalents and investments of 47.8 million and are pleased to report that we our on track to deliver on our principal 2003 financial objective to end this year with at least 40 million in cash. You can find additional detail on our second-quarter financial data in the press release that we distributed earlier this afternoon, and I will be happy to answer any questions you may have in the Q&A portion of this call. Edward?

As you just heard, we continue to keep a tight rein on operating expenses. In these current financial markets, we continue to look for opportunities to streamline our operations and to preserve our cash while still aggressively investing in our core science and therapeutic development programs. As Jan said, based upon our operating philosophy, we our on track to end this year as promised with at least 40 million in the bank and net use of cash and operations of approximately $12 million.

As you have heard me say many times, our number one objective is to move our ZFP Therapeutics programs forward and into human clinical trials. We have invested a significant amount of time, effort and resources in our therapeutic programs and I know that I speak for our entire company when I say that we have never been more confident and enthusiastic about the potential to use ZFPs as effective and differentiated therapeutic agents than I am today.

So, let's talk in a little more detail about our therapeutic development programs and in particular, our lead therapeutic program of VEGF-specific ZFP therapeutics for the treatment of peripheral arterial disease that we are developing in collaboration with Edwards Lifesciences. During our last call, we alluded to encouraging animal efficacy data in the rabbit ischemic hind limb model of PAD -- results described as compelling by our collaborator, Brian Annix (ph). As I mentioned, members of the Annix (ph) lab presented new data at ASGT and at the Society of Vascular Medicine and Biology meetings. I've asked Tyler to describe these data in greater detail and to update you on the progress of some of the specific tasks that need to be accomplished for the submission of the VEGF ZFP Therapeutics IND for PAD. Tyler?

Thank you, Edward. As you mentioned, we are all very excited about the VEGF animal efficacy data that were obtained in collaboration with Brian Annix (ph) and his colleagues at Duke. The efficacy studied were carried out in the rabbit ischemic hind limb model. This model is the gold standard for preclinical evaluation of therapeutics for the treatment of peripheral arterial disease, or PAD. As Edward mentioned, the results of this study were presented at the American Society for Gene Therapy meeting by Dr. Christopher Contos (ph) and by Dr. Qunsheng Dai at the annual meeting of the Society for Vascular Medicine and Biology.

I'd like to briefly explain the study and the data that were presented. In the rabbit ischemic hind limb model, blood flow to the rabbit's hind limb is disrupted and that makes the tissue in the leg ischemic, or starved of oxygen. In this particular study, ten days after the surgery to disrupt the blood flow, the ischemic limb was given a onetime treatment with either our VEGF ZFP Therapeutic or a control agent. Dr. Annix (ph) and his colleagues then collected data at 11 days and 32 days post-treatment. Investigators evaluated several secondary end points, including apothosis (ph), which is a measure of cell death and something one would expect to find in a limb with reduced blood flow. They also looked at the proliferation of endothelial cells, the cell that forms the inner wall of blood vessels. In addition, they counted the number, or density, of new blood vessels in the muscle and as a primary end point, they measured the actual blood flow in the ischemic limb by laser dopplar (ph). What they found was a strikingly positive effect of the VEGF ZFP Therapeutic on the condition of the ischemic tissue. They observed reduced cell death in the ZFP-treated limbs; they found that the number of new endothelial cells was increased in the ZFP-treated limb and that there was a 50 percent increase in the number of new blood vessels observed in the ZFP-treated muscle versus the control. The net outcome and the primary end point was that blood flow was increased by 100 percent in the ZFP Therapeutics-treated limb compared to the control.

These results are impressive and very satisfying for several reasons. First, all of the pieces of the puzzle fit together. We saw a statistically significant improvement in every end point measured, specifically decreased cell death, increased endothelial proliferation, greater vessel density and the 100 percent increase in blood flow to the treated limb. Adding even greater significance to these results, the increase in blood flow was seen at an earlier time point for our VEGF ZFP Therapeutics that has been previously reported in other studies or any other angiogenic agent tested in this disease model. This is significant because in this model, the severity of ischemic disease decreases with time. The early improvement in blood flow that is rescued from a more severe ischemic state suggests that our VEGF ZFP Therapeutic might be effective in patients with more severe ischemic peripheral vascular disease. These results are very encouraging. As Edward mentioned, our enthusiasm for these data was confirmed when the members of the Society for Vascular Medicine and Biology, physicians and scientists who actually treat patients and are involved in the clinical evaluation of new therapies, presented our collaborator, Dr. Dai, with their society's Young Investigator Award in recognition of his part in and the significance of these results. I'd like to add my voice to theirs in congratulating Dr. Annix (ph), Dr. Dai, Dr. Contos (ph) and their team at Duke.

I'm also pleased to report on the progress that we are making along the pathway to filing our first IND with our partner, Edwards Lifesciences. As you know, the vast majority of Sangamo's contribution to the VEGF program has been completed, but we are now focused on assisting Edwards. All preliminary manufacturing activities have been completed. (indiscernible) the master cell bank for the vector encoding the VEGF, a specific construct has been established. The plans is for biodistribution and toxicology studies, as well as the Phase I-II clinical trials have been completed and submitted to Edwards. These are all critical path events. Edwards is preparing to initiate pharmacology and toxicology studies in the manufacturing of sufficient quantities of vector to carry out the clinical trials. This takes us several steps closer to achieving our goal of (indiscernible) the VEGF PAD IND in the first half of 2004. I look forward to keeping you apprised of our progress on this program, as well as our other ZFP Therapeutic initiatives, in future calls. Edward?

Important data and meaningful progress -- as I mentioned in my introduction, at the ASGT meeting, we presented data on our newest ZFP Therapeutic initiative, the ZFP-mediated gene correction. This is a program that we are excited about and are working very hard to move swiftly from the laboratory bench into human clinical trials. As I outlined in last quarter's call, the technical approach to ZFP-mediated gene correction is consistent with everything we already do -- leveraging the same basic principles we have always employed -- the ability to engineer ZFP that will specifically bind to a chosen sequence of DNA and deliver a functional domain that is therapeutically irrelevant. The difference in this new approach, or the application, is that, in this case, the functional domain is not an activation or a repression domain, but is an endo-nucleus, or a DNA-cutting enzyme. By making a very precise cut in DNA, we can facilitate the replacement of an existing sequence of DNA with a new sequence of DNA. This process actually engages the cell's own molecular machinery, a process known as homologous recombination (ph) that has been honed by evolution to provide accurate repair when both strands of DNA are broken. The idea is to target a sequence of a gene that contains a mutation that causes a disease and replace it with a correct sequence, thus repairing the gene and treating the disease. This is useful in diseases where it is well-documented that a mutation in a specific gene causes a disease, so-called monogenic diseases. These include diseases such as severe combined immunodeficiency, or SCID, sickle cell anemia, chronic granulomatous disease and hemophilia to name just a few.

As you can see, this powerful new application of our technology has the potential to open up a whole new range of important clinical opportunities and unmet medical needs. However, this is complex science that perhaps, at first, sounds a bit like science fiction. (technical difficulty).

I apologize, there will be a slight delay in today's conference call. Please hold and the conference will resume momentarily. Please resume your conference.

Thank you. Our ZFP-mediated gene correction is applicable for monogenic diseases, which include severe combined immunodeficiency, or SCID, sickle cell anemia, chronic granulomatous disease and hemophilia to name just a few. As you can see, this powerful new application of our technology has the potential to open up a whole new range of important clinical opportunities and unmet medical needs. However, this is complex science that perhaps at first sounds a bit like science fiction. In fact, there has been a lot of basic research done over the past several years by various laboratories on the fundamental elements of this process.

However, until recently, most of the data in the literature had been generated in model systems, where researchers had to manipulate the DNA by inserting a defined DNA-binding site into the DNA that can then be cut by a natural occurring endo-nucleus. While this is fine for experimental systems, it was recognized early on that what was essential for this process to be therapeutically useful was a way of specifically targeting a nucleis (ph) to a site of a particular mutation. This is why engineered ZFPs linked to an enzyme such as the endo-nucleis (ph) (indiscernible) are the only viable way forward.

Two very recent papers authored by current and former collaborators of Sangamo and Gendac (ph) were published in the May 2, 2003 issue of the Journal Science and describe work in model systems using engineered ZFP nucleises (ph) to modify gene sequences through targeted homologous recombination. Going further, in June at ASGT, we presented our first data showing that we had successfully designed and used ZFP nucleises (ph) to specifically modify endogenous mammalian genes -- a first. Team leaders Mike Holmes (ph) and Theodore Earnoff (ph) are spearheading our research effort. Andrew Jamison and Jeff Miller are leading the ZFP engineering work.

These data have attracted a lot of attention. In a news and views commentary that appeared in Nature Biotechnology earlier this month on the recent science papers, the author concluded that "Together, these studies show that zinc finger nucleises (ph) are as effective as the gold standard at enhancing gene-targeting and that they can be designed from scratch to stimulate gene-targeting at a specific genomic site." He ended his commentary with "Of course, ultimately, these zinc finger nucleises (ph) also raise the tantalizing possibility of gene correction as a realistic therapy for human disease."

I can personally assure you that we are working very hard to make this opportunity a reality, not just a tantalizing possibility. Although this is still in the research stage, we have had a great deal of interest from clinical research groups that work with a variety of monogenic diseases and we are talking with several of them about the possibility of future collaborations. I look forward to keeping you updated on our progress throughout this year on this exciting new program.

Finally, I would like to say a few words about recent changes in our scientific management. As you know, Carl Pabo has transitioned from our Chief Scientific Officer into a significant consulting role for Sangamo and back to Chairman of our Scientific Advisory Board. As you will recall, Carl became our Chief Scientific Officer in October of 2001, shortly after the tragic accidental death of Alan Wolfe (ph). He left his tenured position at MIT and his Howard Hughes appointment, stepped in and insured that our science moved forward seamlessly. Under his leadership, we have matured from an emerging technology company into a therapeutic development company, where the core science is firmly established. To a large degree, his worked here facilitated and enabled this transitioned.

Certainly, there will always be more basic work to be done, particularly in ZFP design, and happily, we still have Carl to provide guidance, as he will consult for us for at least 80 days over the next two years. In physical terms, this means that he attends many of our regularly scheduled scientific meetings and is around the Company on a regular basis.

In fact, this transition, as he has pointed out, will give him more time and energy to focus on larger issues, rather than being deluded and distracted by the day-to-day operational matters. These management responsibilities will be assumed by Philip Gregory, Senior Director of Research, and by Casey Case, Vice President of Research Operations. Tyler Martin continues to lead our ZFP Therapeutic development activities.

On behalf of everyone at the Company, I would like to thank Carl for his tremendous contribution to the science at Sangamo, and I know I speak for the rest of the Company when I say that we all benefited and learned from his tenure here as Chief Scientific Officer.

As you have heard me say in recent calls, our primary goal this year is to make significant headway towards establishing our ZFP transcription factor technology as the first new therapeutic product development platform in the post-genomic era. We are focused on driving our existing ZFP Therapeutics towards human clinical trials and increasing our investment in new therapeutic programs.

In conclusion, during the second quarter, we focused on two major objectives, moving our ZFP Therapeutic programs forward and continuing to manage our expenses to maintain a strong balance sheet. We remain committed to ending this year with at least 40 million in cash and filing three INDs by the end of 2004. I am pleased to be able to end this call by telling you that we remain on track to achieve these goals. This concludes our prepared remarks. Now, we would like to open it up for your questions.

(OPERATOR GIVES CALLER INSTRUCTIONS). Ted (indiscernible).

Congratulations on the quarter. I just wanted to follow up -- with respect to the number of INDs you have coming and sort of what you're plans are really on the collaborative front, going forward, and what we should expect there.

Well, the INDs that we're giving guidance on, Ted, are three in 2004. The one that we've spoken specifically about is the VEGF PAD and you have an update on that on this call. There are several other candidates for INDs in 2004, which include our work in Fossil (indiscernible), a congestive heart failure repression target, a couple of neurotropic pain targets that we are working on in collaboration with Avigen (ph). We are also continuing to pursue the GMC SF collaboration with Onyx, although we are in discussions with them to actually in-license their vector technology. If all goes well, we also hope to have in the race at least one of our ZFP gene-correction programs, probably the SCID program, in 2004. So, those are the horses that are in the race right now, and those will really be data driven in terms of which ones we ultimately take forward into INDs in 2004.

In terms of collaborations, our goal right now is to move all of these programs forward, at least through solid preclinical efficacy, before we move into any new therapeutic collaborations. But it is our goal, over the next 12 to 24 months, to add collaborations in the area of ZFP Therapeutics.

That's fantastic. Keep it up.

John Sullivan.

Edward, can you just talk a little bit more about ZFP gene-correction and some of the -- as you continue to do more work -- some of the steps that investors should be looking for to kind of mark your progress in the gene-correction area?

Sure. I'll give you a couple of points and then I'll look to some of my colleagues here, if they want to add anything. Let me emphasize that as excited as we are about this, this is still early days. This science is, from a clinical development perspective, from a product development perspective, nowhere near where we are from an activation or repression perspective, so let me just state that right up front. One of the real key issues here is not so much the ability to do targeted homologous recombination, but to get the kind of efficiencies of this process in terms of numbers of cells corrected in order to have a therapeutic effect.

That's one of the reasons we are focused on SCID as an initial application. There is a proliferative advantage of corrected SCID cells in SCID patients and so therefore, the total number of cells that we might need to correct -- given the proliferative advantage in vivo, inside the patient -- is relatively low. That gives us a real opportunity there. Ultimately, though, the real challenge for us is going to be to increase the efficiency of this process. If we are able to do that, then it opens up many of the diseases that we discussed -- CGD (ph), hemophilia, and sickle cell anemia.

So let me pause and see if any of my colleagues has anything he would like to add to that. Tyler? Casey? Phil?

I think that covers it very well.

Anything else, John?

Not to distract from all of this, but is there to say anything with respect to the traditional business of collaborations -- gene-tool type collaborations?

You know, it's a good question and you can obviously see from the direction we take on these calls and in our presentations that we really are focusing on applying the technology therapeutically. That's not to say that we don't think there's advantages in leveraging the technology in enabling areas. The areas I would really point out there where we're having tremendous both technical as well as commercial success are in the area of augmenting existing protein production systems; this is highlighted by a collaboration that we have with Medarex to increase their mammalian production system for antibodies. That work continues to go extremely well. We expect to be able to leverage what we have accomplished there with other protein pharmaceutical manufacturers, both recombinant protein pharmaceuticals as well as monoclonal antibodies.

Then also in the area of small molecule discovery -- increasingly, as more and more gene sequences are validated and patented, there's an increasing role for our ability to activate the endogeneous gene and provide cell lines that not only over-express a validated target but also provide an intellectual property work-around to existing (inaudible). So those are the two areas where we feel like there's the greatest amount of leverage for our technology. Increasingly -- and we think both from a differential technical advantage perspective and from a value-creation perspective, establishing the utility and data of our technology in human clinical trials with direct ZFP Therapeutics is really the principle focus, going forward.

Okay, terrific. Let me just shift you back, if you don't mind, to the program, the VEGF program in the rabbit ischemic heart model. In your mind, is that the -- does that mark the total amount of free clinical data that will be needed in order to make a decision on whether or not an IND needs to be filed or is there any additional preclinical data that you think would be additive to this decision-making process?

Let me give you a very short answer and then let me turn it over to Tyler (inaudible) response. On the efficacy side, in terms of showing activity in the model, yes, we believe that these data are actually more than sufficient from an IND filing. But obviously, there are additional animal studies that will be required from a toxicology and distribution perspective. Let me ask Tyler to comment further on that.

I would just repeat exactly that; there is one biodistribution study that will need to be performed, and the toxicology studies have already been designed and submitted to Edwards. So, with the exception of those more formulaic sorts of studies, this package is now complete.

Okay. If your partner were to move forward as immediately as possible to expedite these studies, how long would these studies take, in your opinion?

(Inaudible). Well, both the tox and the distribution studies are designed as 28-day studies, so ordering animals and so on -- but there are actually 28-day studies. They could all run in parallel.

Thank you.

Winton Gibbons.

I have a bunch of questions of you.

I'm shocked and amazed!

So if you want, feel free to kick me off and I'll just get back on. Let's talk about the kind of more vanilla ones. With Edwards, can you talk a little bit about the progress in that relationship, and kind of what -- I know it's hard for you to kind of read their minds and understand where they are headed, but can you talk about how their decision-making is going to affect the timing? Is there anything that you can do to kind of spur that along?

Well, the first answer is, as time goes on and as this program matures, we're going to have to defer more and more questions to them. I will give you direct answers to your question but increasingly, I would encourage analysts who follow Edwards to ask them exactly those questions, because we really can't and shouldn't speak for them.

With that said, I can tell you the following -- that they had an internal scientific advisory board meeting at the very end of June, and we understand that out of that meeting, there was enormous enthusiasm for the Annix (ph) data that Tyler described for you, and there was strong, strong support for moving forward quickly, appropriately to an IND filing for PAD. It's our understanding that based upon those recommendations, that Edwards is doing the kinds of things that need to be done in order to do that. Our reiteration of the guidance of a first half IND filing is predicated on, based upon both the enthusiasm that came out of their SAB meeting and the communications we've had with them post that meeting.

Okay, so they are very enthusiastic about where it stands; it's just they have their own "I"s to dot and "T"s and to cross, so to speak.

Yes.

Do did have any devices (indiscernible) holding about? Originally, there were looking at using microcatheters. Is there something else on their mind that -- (indiscernible due to multiple speakers) -- price perspective?

I think the answer is no and yes. First, the no -- there was very broad-based enthusiasm for moving forward with the existing non-viral formulation in its existing formulation structure. Those are, again, based upon these very, very compelling data that came out of the Duke study. That is the process that is moving forward now; that is the path that both Sangamo and Edward are pursuing. The incremental answer is that Edwards remains interested in -- and we remain supportive of -- them evaluating additional delivery technologies, both for peripheral disease as well as for ischemic heart disease. As you know, we have a lot of enthusiasm based upon the mechanism of action of our approach for their application of this in ischemic heart disease as well as peripheral arterial disease.

If they were to choose to move ahead with other delivery technologies and you had to get involved to get involved in formulations or vector development, would there be incremental milestone payments to you?

Well, the vector is very, very well characterized and that would not have to change. There are other issue -- the basic plasmid. So, if there are other formulations that get evaluated, we would help them evaluate that, but the principle milestones for us in VEGF program are a preclinical milestone, which we anticipate meeting in this calendar year, and then the IND filing milestone. Otherwise, those are the two -- those are the only two milestones that would -- that we have -- we are expecting to receive.

On the gene-correction, could you -- I mean, you kind of indicated that it's possible you might get into clinic in '04. Could you talk a little bit about kind of more on a milestone fashion, even though this may be internal rather than external, about how you seeing that play out, both for whatever the lead program might be but also kind of follow-on program?

I'm glad that I was that (indiscernible) in terms of guidance. We're very enthusiastic about this technology. We're working real hard on it but it's still early and to give you any definitive timeline would be somewhere between difficult and irresponsible. So with that said, our main emphasis and what is most likely to be the first application is in SCID. I talked a little bit about why that's the case in terms of its proliferative advantages for (indiscernible) stem cells and re-engraphment (ph).

Beyond that, it is really a function of diseases where, again, there are monogenic targets, where there are single hot spots; sickle cell anemia is probably the best example of that. But in order to address that, we're going to have to make significant basic technical progress in terms of the efficiencies of gene-correction in total (indiscernible) numbers.

Okay. Can you talk a little bit about that kind of basic science timeline that you're going to be doing that work on?

Well, I can tell you that it's a very, very high priority here. Given our enthusiasm for it, all I can do is promise to give you updates at least once a quarter.

Okay. On the other potential for the INDs, you talked about the GMCSF (ph) program is still viable. Do you have any feeling for kind of what sort of deal you might have to strike if you're going to in-license?

Yes, I do; we have very good idea. I don't want to say too much, but I can tell you that it's just a good deal for both companies. I'm pretty confident that we're going to come to -- I hate the expression -- but a win-win for both groups.

It won't affect your cash guidance or anything?

It does not affect our cash guidance.

Also, when you're talking about Medarex on the manufacturing, are you still working with Medarex on the G-protein coupled receptors? Is that kind of -- where does that stand as far as a potential IND? Is that more out '05, because I didn't hear you mention that?

Really, the resources that we had in that program -- we've established the technical feasibility of that program, but the resources that we were working with on that have really shifted to the protein production programs. Until we really accomplish everything we want with them on protein production, we are probably not going to give a whole lot of visibility on the antibody generation programs.

Timing -- when you think you'll be able to do that?

We have had really significant progress over the last 6 to 12 months in the protein-production program. We have an important meeting coming up with them in August to present some of the findings. So, we're very pleased. We started off with them in that program with the objective of increasing their existing production (inaudible) line by 25 percent; twenty-five percent was going to be a home run. At the RNA, level we've seen increases near 300 percent and translating to protein, close to 200 percent. So, we feel like we've done an awful lot -- made an awful lot of progress there, so that's really been the main emphasis with them.

Are you still working at all with Renisent (ph) on new programs or --?

I'm looking at Casey. As far as I know, we've completed everything that we had to in that program and transferred that to them.

That's right.

So no, there's no ongoing new efforts with Renisent (ph).

Then one last question and I will be done. On the diagnostic front, I know you had a couple of different programs moving, (indiscernible) of ZFP's but also with the kind of like hypersensitivity mapping and automated version of that as it relates to oncology. Are you still doing anything on the diagnostic front, or is that very far back-burnered?

More the latter than the former. Let me just use that as an opportunity to talk a little more broadly about some of areas where we feel the technology has some strong technical arguments for its utility, both from a science point of view and the commercial point of view. We really are very, very focused, and we've done that because you have to be focused if you're going to move therapeutics forward.

But also, we're trying to manage the burn rate and really develop a structure that is very lean but very focused. We'd love to pursue the technology and plants. The data we have -- and I will be publications on this -- are absolutely unbelievably impressive. Similarly in the area of regulatory DNA, we think that there are some very interesting opportunities to look at regulatory DNA as a predictive diagnostics in various diseases. But at this point, those really are back-burnered as we focus on moving the technology forward therapeutically.

Okay, thanks.

At this time, there are no further questions. Are there any closing remarks?

Yes. We'd like to thank you for joining us and look forward to speaking with you again when we release our third-quarter results. We will be available later today if there are any follow-up questions. Thank you. (CONFERENCE CALL CONCLUDED)