Sangamo Therapeutics Inc (SGMO) 2003 Q4 法說會逐字稿

Good afternoon. My name is Tamra (ph) and I will be your conference facilitator today. At this time I would like to welcome everyone to the Sangamo BioSciences' fourth-quarter and year-end teleconference. (Operator Instructions). Thank you. Dr. Wolffe, you may begin your conference.

Thank you, Tamara. Good afternoon and thank you for joining us for our quarterly teleconference. Joining me are several members of Sangamo senior management team, including Edward Lanphier our President and CEO; Dr. Tyler Martin, our VP of Development; and Greg Zante, our Senior Director of Finance and Administration. Edward plans to update you on our recent activities and review some of our fourth quarter and 2003 accomplishments. Greg will briefly review our fourth quarter and 2003 financial year results, and Edward and Tyler will update you on our ZFP therapeutics program. After our prepared remarks, we will have time for your questions.

As we begin, I would like to remind everyone that the projections and forward-looking statements that we discuss during this conference call are based upon the information that we currently have available. This information will likely change over time. By discussing our current perception of the market and future performance of Sangamo with you today, were not undertaking an obligation to provide updates for 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 filed with the Securities and Exchange Commission. Specifically, our quarterly reports on form 10-Q and our annual reports on form 10-K. These documents include important factors that could cause the actual results of the Company's operations differ materially from those contained in our projections and forward-looking statements. Now, I would like to turn the call over to Edward.

Thank you, Liz. Hello and welcome to our fourth quarter 2003 conference call. You have joined us on a very special day in Sangamo's history. As most of you know, this morning we announced the filing of the very first IND for a ZFP therapeutic. While this is the first step in what will no doubt an incredibly exciting journey, when considered in the context of our goal to become a major new therapeutic product development Company, the filing of this IND represents a giant leap forward for Sangamo, our employees, and our shareholders. I want to thank and acknowledge all of my colleagues here at Sangamo and our collaborators at Edward's Life Sciences who have worked so hard to prepare and submit this IND.

This is just the beginning for this digest is ZFP therapeutic for peripheral artery disease, and for all of our ZFP therapeutics in our pipeline. But with the filing of this IND, we have officially turned the quarter, from being a Company known mainly for its cool technology to an early but bona fide development stage Company. Tyler will give you more detail about the upcoming clinical trial later in this call. However, for those of you who are seeking a bit more quantitative evidence of matriculation, the filing of the IND and other associated milestones triggered a $1 million payment from Edwards to Sangamo.

Although the filing of the IND has been a major focus of ours over the last year, we have been making significant progress in the development of our other ZFP therapeutic programs, including diabetic neuropathy, congestive heart failure, neuropathic pain, metastatic cancer, and our new gene correction programs in X link skid (ph) and sickle cell anemia. I plan to discuss our development plans and objectives for several of our programs later in this call, and will keep you informed of our progress throughout the year.

We also plan to update you and the scientific community on these programs at the annual meeting of the American Society of Gene Therapy in Minneapolis in June.

One notable development from this past quarter was the completion of our license for the Oncolytic vector technology from Onyx pharmaceuticals permitting us to develop a armed therapeutic virus or ATV. The license agreement provides Sangamo with exclusive worldwide rights for all therapeutic uses of ATV, encoding ZFP transcription factors capable of regulating the expression of any endogenous and us human gene.

We're working to engineer an ATV to express the ZFP's design to up regulate the expression of granular site macrophage colony stimulating factor -- or GMCSF. As you know, GMCSF is a powerful activator of the immune system that has been shown to augment antitumor immune responses. Our ultimate goal is to combine these two technology platforms in a development of a potent, systemic cancer vaccine for the treatment of metastatic cancer.

We continue to publish our science in major peer reviewed journals. Sangamo scientists and our collaborators published a total of nine papers in 2003 -- 3 those in this last corner. A paper published in October in the proceedings of the National Academy of Sciences was perhaps the most important in terms of demonstrating the crucial advantages of our technology versus existing therapeutic approaches.

This paper, authored by Sangamo scientists and Dr. Judy Kempez (ph) and her colleagues at Lawrence Berkeley National Laboratory, highlights the efficacy and specificity of our ZFP technology platforms. In particular, it demonstrates our ability to build ZFP transcription factors capable of regulating a single gene within the entire human genome.

The scientific team showed that ZFP's can be designed to target and regulate a single disease related gene effectively and with exquisite specificity. Please let Liz or me know if you like to receive a copy of this paper or any of our other recent articles or reviews.

Before we move onto discuss our ZFP therapeutic programs in more detail, I have asked Greg to summarize our fourth quarter and year-end financial data. Greg?

Thank you, Edward. For the fourth quarter 2003, our consolidated net loss or GAAP loss, which includes non-cash charges, was $1.7 million or 7 cents per share. In the comparable quarter of 2002 we reported a consolidated net loss of $706,000 or 3 cents per share.

Our research and development expenses were $2.3 million for the three months ended December 31, 2003, as compared to $2.4 million for the fourth quarter of 2002.

General and administrative expenses were $545,000 for the fourth quarter of 2003, compared with $901,000 in the same period last year.

Revenues for the fourth quarter of 2003 were $1 million as compared to fourth quarter 2002 revenues of $2.5 million. The principal components of fourth quarter 2003 revenues were from Sangamo's partnerships in areas of human therapeutics, enabling technology agreements, and government research grants. Revenues for the year were $2.6 million compared with revenues of $4.3 million recorded for 2002.

For 2003, our consolidated net loss, or GAAP loss, which includes non-cash charges, was $10.4 million or 42 cents per share -- compared with $29.8 million or $1.22 per share for 2002.

Net loss in 2002 was significantly higher than in 2003, due to expenses related to closing of Sangamo's wholly-owned UK subsidiary, Jim Bakke (ph) limited. Excluding these restructurings and non-cash charges, the pro forma net loss was $9.9 million or 40 cents per share for 2003, and $9.5 million or 39 cents per share for 2002. And total pro forma expenses for the year ended December 31, 2003, and 2002 were 13.8 and $15.7 million respectively.

Finally, and most importantly, we ended 2003 with cash, cash equivalents, and investments of $44.3 million -- surpassing our principal 2003 financial objective to end last year with at least $40 million in cash. You can find additional detail on our fourth 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?

Thanks, Greg. As you have heard, while we continue to aggressively invest in our core science -- and ZFP therapeutic development programs -- we also kept a tight rein on our operating expenses, ending 2003 with over $44 million -- well above our promised target of at least $40 million.

Looking forward to 2004, while we will continue to operate the Company in the same focused and fiscally responsible manner, we expect our expenses to increase as we move our therapeutic programs forward and into human clinical trials.

However, even with these increased expenses, we expect to end 2004 with at least $28 million in cash and cash equivalents.

Before I speak about our plans to develop our pipeline of ZFP therapeutics, and the milestones we plan to achieve in 2004, I have asked Dr. Tyler Martin, our VP of Development, to describe the process leading up to the filing of the IND for our VEGF ZFP therapeutic to treat peripheral artery disease. And to provide you with additional detail about the AVENGE human clinical trial that our partner, Edward's Life Sciences, will be conducting. Tyler?

Thank you, Edward. As Edward said, today is a red letter today for all of us Sangamo. As you know, this will be the first clinical trial of an engineered ZFP transcription factor. This important milestone has been accomplished through the efforts of the Sangamo and Edward Teams, as well as our academic collaborators, Dr. Frank Giordano (ph) at Yale and Dr. Brian Anics (ph) at Duke. This phase I/II trial is designed to evaluate the safety and tolerability of a ZFP transcription factor that is engineered to activate expression of the VEGF-A gene. VEGF-A has been identified as the critical gene for angiogenesis, or the growth of new blood vessels.

In nature, the VEGF-A protein predominantly occurs in three different forms. Work by other scientists, confirmed by Sangamo, has demonstrated that all three forms of the protein are required for functionally and histologically normal blood vessels. Earlier efforts to treat peripheral artery disease have employed just a single protein isoform. In contrast, our approach involves the activation of the endogenous gene, which results in all three of the natural forms of the protein being produced.

While the advantage of this approach can be clearly demonstrated at the cellular level, the benefits are not limited to that level. Work done by Dr. Giordano in collaboration with the Sangamo scientists and published in Nature Medicine in November 2000, as well as studies conducted by Dr. Anics and presented at the American society for gene therapy meetings last June, demonstrated technical advantages of this approach in animal models and provided compelling preclinical justification for the program.

As a result of these and other experiments, Edward's Life Sciences initiated formal preclinical development activities. Toxicology studies have now been completed, and no safety issues were identified. GNP manufacturing is complete and the product has been released. The product is a plasmid DNA encoding to ZFP transcription factor, formulated in a polymer that increases the number of cells that take up the DNA. As you have heard, the IND has now been filed with the U.S. Food and Drug Administration.

With these tasks completed, Edwards is now beginning -- preparing to begin clinical testing of the VEGF-A ZFP therapeutic in patients. This trial has been designed and will be conducted by Dr. Robert Lederman of the National Heart Lung and Blood Institute at the Warren Grant Magnusen Clinical Center of the National Institute of Health. It's a phase I/II trial and will have a randomized double-blind placebo-controlled dose escalation design. This means that the trial is designed to test the safety of increasing doses of the study drug.

This will be tested in five dose groups of five to eight patients per group, up to a maximum of 36 patients. The trial participants will be patients that suffer from intermittent oncolytication, and who are unable to walk on a treadmill for more than 10 minutes. Patients will be given a single treatment of 10 intermuscular injections per leg of either placebo or the study drug. Some members of the treatment group will receive injections of the study drug in both legs, and others in one leg.

The primary objective of the trial is to determine the safety and tolerability of the engineered ZFP transcription factor. As such, patients will be carefully monitored for any adverse events of the drug, particularly during the first 30 days following treatment.

The secondary objective of the trial is to determine if the VEGF-A ZFP therapeutic increases regional or limb perfusion. Specifically, real-time MRI will be used to determine if there are increases in the number of blood vessels around the site of injection. Patients will also be tested for improvements in the general condition as well as a variety of additional efficacy variables, including -- test for the presence of potential markers of angiogenesis in the blood, biopsy of scalar muscle, treadmill walking times, quality of life assessments, and ankle breakual (ph) index -- that is, the blood pressure measured in the ankle compared to the blood pressure measured in the arm. These measurements may provide an initial indication of efficacy.

Accrual for the trial is expected to be completed in approximately one year. Safety data should be available in the first half of next year and the entire trial is expected to be completed in approximately 18 months.

Finally, on behalf of all of us at Sangamo, I would once again like to extend our sincere thanks and congratulations to our partner Edwards Life Sciences, our preclinical collaborators doctors Frank Giordano and Brian Anics, and the clinical investigator for the trial, Dr. Robert Lederman (ph) on the achievement of this very important milestone -- the first IND for ZFP therapeutic. Edward?

Thanks, Tyler. Let me also add my thanks and congratulations to you and that entire group.

2004 will be a year in which we not only move our technology into human clinical trials, but a year in which we will demonstrate the broad applicability of ZFP therapeutics to multiple therapeutic gene targets across multiple clinical indications.

Let me briefly describe some of our therapeutic development plans for the next 12 plus months.

As I have previously discussed, we expect to file two ZFP therapeutic INDs in 2004. You have just heard about our first. We currently expect our second ZFP therapeutic will be in for the treatment of another significant unmet medical need -- diabetic neuropathy. Diabetic neuropathies represents a family of nerve disorders caused by diabetes. There are 14 million people in the U.S. with diabetes, and it is estimated that 50 percent of those patients have some form of neuropathy. We're focused initially on peripheral neuropathy -- a condition that frequently manifests, initially, as a tingling in the hands, feet and limbs, progresses to burning pain and is gradually replaced by a loss of sensation and numbness in the affected areas.

From an electrical physiological perspective, the peripheral nerves of patients with diabetic neuropathy are less efficient at conducting information. While there are currently no therapeutic options for these patients, we believe that stimulation of VEGF-A expression could address the underlying biology of this disease. VEGF-A has been shown to have positive effects, from maintenance of nerve function, and for the restoration of nerve integrity. Additionally, VEGF-A has been shown to stimulate nerve cell migration, and to protect nerve cells from death or apoptosis.

We have begun preclinical efficacy studies, using a rodent model of diabetic neuropathy, and expect to complete these studies in the next few months. Based upon the successful conclusion of these experiments, our goal is to submit an IND for the treatment of diabetic neuropathy in the fourth quarter of this year. I look forward to updating you on the progress of this program in the months ahead.

In our congestive heart failure program, preclinical animal studies to explore delivery options and dosing are underway. The target -- the gene target in this program is fosphulamban (ph), a key regulator of calcium flux in the heart and a protein that has a direct involvement in CHF.

This is a highly validated target that may be intractable to conventional small molecule drug discovery; and for which ZFP transcription factors may provide a unique solution. We have designed and selected ZFPs that repress fosphulamban expression with singular specificity in both rat and human cells. We anticipate that will have preclinical animal efficacy data in the second half of 2004.

Our gene correction program in X link skid (ph) has moved into testing in CD 34 cells. The cell type that will be the target tissue for treatment in these patients. This represents a significant step closer to obtaining the proof of concept data that we need to begin discussions with the FDA regarding our formal preclinical development plans.

As for these and other developments in 2004, once again, the annual meeting of the American Society of Gene Therapy will be a major event for us and one at which we plan to present data for most of our therapeutic programs.

In addition to the scientific presentations, the Sangamo sciences will deliver during the meeting, we're also planning to sponsor a major scientific symposium that will highlight the breadth and power of our technology, and describe in more detail ZFP therapeutic applications in cardiovascular disease and gene correction. We'll have more details for you on our first quarter call in April.

So, in summary, while we continue to invest in new therapeutic programs and expand our pipeline, focusing on gene targets for which we believe our ZFP technology has unique and differential technical advantages over other approaches, our near-term focus is to demonstrate the clinical utility of our ZFP platform. As such, our principal objective for the next 12 plus months is to rapidly and cost effectively establish clinical proof of concept for our ZFP therapeutics, both in gene regulation and gene correction. And thus, validation of our technology as a major new therapeutic platform in the post genomic economic era. In order to realize this vision, we have, once again, set some very ambitious goals for ourselves in this year.

In 2004, we will focus on three major objectives. Filing our second ZFP therapeutic IND. Expanding and advancing our pipeline of ZFP therapeutics, and continuing to manage our expenses -- ending the year with approximately 28 million in cash.

I look forward to updating you on our continued progress at the bio CEO and Investor conference in New York, during the last week of February, and our quarterly conference call in April. This concludes our prepared remarks and now we would like to open it up for your questions.

(Operator Instructions). Winton Gibbons, William Blair & Company.

Congratulations. I have a number of questions but I think I'm going to limit myself to four. First of all -- can Tyler talk a little bit -- you said that you will finish patient accrual in 12 months and then -- but it will take a full 18 months to complete the study. Can he talk a little bit about the process from 12 to 18 months and what exactly you have to accomplish in that period of time?

We can and he will. Let me start with an opening caveat. This trial and this program, as you know, is being conducted by Edward's Life Sciences, our partner. They're the sponsors of this IND. And, to a great extent, the information that we have discussed on this call is the amount of information that we are both collectively comfortable at this point in discussing.

I believe Edwards will have more to say about the program as it begins to -- as it goes forward. But in large part, the information that we have discussed in our prepared comments is consistent with the scope of disclosure that Edwards is comfortable with us making at this point. With that said, I am delighted to have Tyler talk about the kinds of information that is generated in a safety study and in an initial efficacy trial in general, post accrual of all the patience.

Thank you for the question. Basically, what will happen -- what happens in a safety study after a patient gets doses, there are certain observation intervals that have to be assessed in order to call a dose safe. That is typically a few weeks to a month.

In addition, if you're going to do a phase I Trial, you have to have other follow-up in order to look at some of the other end points around potential efficacy benefit, and that also gives you the opportunity to collect additional safety information about things that might come up longer than 30 days after dosage. So those of the sort of things that you would think about the in a phase I, II dose escalation kind of a study.

Okay and that's about as much as you can talk about at this point?

Well I think, again, in general, your question is -- what are we going to be doing post patient accrual -- and there is a period of time to collect the safety information. There is an incremental period of time to collect the efficacy data. I think Edwards will have more to say about the study and study design and timelines later on.

Okay. Can you talk a little bit about -- there might be two questions that are related. One, the incremental 6 million, let's say burn over kind of your average over the last number of years going from 10 to kind of 60 million burned. I know you burned less than 10 last year but the average has been about 10. So what that incremental 6 million is going to do? And again like I said it relates to the other question I have, which is -- how are you going to go about conducting trials on your own? Like the diabetic neuropathy trial? And building your own capabilities to do that -- or is your intent to only get that trial started, or do just a phase I trial and then licensed it out, or what have you? So those two might be related questions. Was I clear?

Yes. So the incremental burn is pretty straightforward. We do not have any plans to significantly expand headcount within the Company, except in the development group reporting into Tyler. I will ask him to just list off in a second maybe some of the open positions, or ones that we have recently hired in the opening positions. The vast majority of the incremental expenses, Winton, won't be surprising to you. They relate to manufacturing and production of both GLP and GNP materials. They relate to the kinds of toxicology and bio distribution studies that need to be done for incremental IND filings. They relate to the animal efficacy studies that will need to be supported. So those are the major areas of incremental costs that we will be incurring in '04 and moving into '05. (multiple speakers)

So basically you're going to have to prepare the entire preclinical package on your own nickel, for example, for diabetic neuropathy (multiple speakers)

That's our plan, that's right. And again, Tyler is building out a group -- Tyler, you might just want to comment on the position that you're filling in development --?

Winton, in the last several months, have recently appointed a head of preclinical development -- he's the person responsible for animal studies and a head of product management, a head of manufacturing -- we're currently still recruiting for a head of regulatory and head of quality and a clinical trial manager. Those -- our basic structure is to have those senior people be internal employees to the Company, and then to use contracted resources via CMOs or CROs, to actually conduct the operational activities around our programs.

But, Winton, for the financial part, the financial guidance we've given in terms of year-end cash, is assuming that we will take all of the costs ourselves going forward with the diabetic neuropathy program.

Okay. And then going -- and I know you hate talking about like even a year extra out. But going into '05, do you know how much your cash will have to increase if you continue with the diabetic neuropathy program yourself?

There is two answers. Yes we do. And no we're not going to talk about it. Are we going to give guidance on that at this point? Probably not. But I think we're in good financial shape, in terms of really being able to prosecute the diabetic neuropathy program through its initial clinical trial.

Okay, and then one last question and then I will get into the queue -- is regarding the diabetic neuropathy. This is more of a kind of a scientific question -- which is, diabetic retinopathy seems to be caused by an over expression of VEGF and so I understand the diabetic neuropathy might have to do with (indiscernible) consolation issues and what have you. But can you explain kind of that disconnect whereas diabetic retinopathy is over expression of VEGF but somehow expressing VEGF you think would solve the neuropathy problem?

Winton, this is Tyler. That's an excellent question. The difference is fundamental to the different disease states in the diabetic neuropathy patient, versus a diabetic retinopathy patient. You're right -- diabetic retinopathy is associated with an over expression of VEGF-A in the eye. Diabetic neuropathy, on the other hand, is associated with an under expression of VEGF-A in the leg. So that's reason why a regional treatment that is intermuscular administration of VEGF-A into the leg would be expected to have a beneficial effect on diabetic neuropathy, and not have a systemic effect that would have an adverse effect on the eye.

Okay, thank you very much.

Charles Duncan, JMP Securities.

The company is really at the end of the beginning. And it's a pretty exciting day. I have a couple of questions on the PAD trial and then and then couple of others on some of the other product development initiatives. First all, I don't know if I caught it, but did you tell us the time-frame over which this series of doses will be given?

No, we didn't. What we said was that the doses would be given at a single visit. And so it's a single visit, 10 injections.

Okay so 10 different injections into the person's leg.

On a single visit.

Okay. And how you decide where to put those injections?

Again, I think we're going to leave those kinds of questions and incremental information that we did not talk about to Edwards.

The other thing is, can you compare to the Lintus Coratos (ph) and Genzyme (ph) programs in PAD and tell us how yours is different?

Again I think it's a good question. The difference goes back to the fundamental mechanisms that we're pursuing here. And the ability to -- in a highly specific way -- activate an endogenous gene that we can generate all the normal ISO forms of what is I think acknowledged to be the most relevant or most cogent of the endogenic factors which is VEGF-A. We can certainly talk about hip one alfo (ph). We can certainly talk about some of these other ones, but I think the fundamental difference is based upon the mechanism.

With regard to the diabetic neuropathy program, what else has to be done before you file that IND and how do you expect to deliver that ZFP?

We're on the track that is what we would normally do -- we're completing our animal efficacy studies. Based upon that, will move into GLP, GNP production. We use some of those materials for toxicology and bio distribution studies. And we will move those forward into for the IND into the human clinical trials. So completion of the efficacy studies, which we expect in the second quarter, completion of manufacturing and toxicology -- bio distribution, which we expect in the third and fourth quarter, and then filing of the IND in the fourth quarter.

And that is a similar program that was pursued with Edwards?

That's right. In terms of events or tasks, it is virtually identical.

Okay and then two quick -- two additional quick things. First, the GMCSF program. With ONYX -- one, does that become more visible to the street? Any guidance?

No specific guidance at this point. We're making a lot of progress on that program. We are in the process of completing production of vector that we want to evaluating in cancer cells. Once we see that we can keep the replication confident aspects of the vector and get good GMCSF secretion, that's the sort of data that we need to move forward with a pre IND meeting with the FDA. So, we expect to have that kind of data in the next several months, and then we will use that in conversations with the FDA.

And then, finally, just a follow-up to Winton's question. Could you run through, again, the assumptions behind your cash equivalents expectation for the end of '04?

Sure. The question was, what is the incremental round numbers? 6 million in expenses. And the answers really are -- increasing in headcount, in the development part of the organization, and then external expenses in product production, manufacturing, and then in toxicology and bio distribution studies done in third parties. And the animal efficacy studies done with third parties.

Actually, you give guidance for ending the year with about $28 million. Did that include any assumptions on partnering and or cash raises?

It does not consume assume any incremental assumptions regarding new partnerships or new cash.

Okay excellent. Thanks again.

John Sullivan, Stephens, Inc..

A couple of questions just regarding the PAD programs. How did the -- how was a decision reached regarding a phase I/II trial versus other trial designs that might have been considered?

It was driven a lot by the clinical investigator -- the principal investigator, Robert Letterman. He really is a -- I think he would be uncomfortable with this characterization -- but a world expert in the area of vascular disease. And in a particular, has developed technologies, he actually presented some of this work last year at ASGT using MRI imaging to look at blood vessel formation.

And so he is really taken the that's what would have normally been a normal dose escalation, looking for maximum tolerated dose study, but being able to look now at not only a noninvasive MRI imaging of these patients, but also then applying additional kinds of potential measurements that could give us an inkling of efficacy, blood pressure measurements, molecular markers of angiogenesis, and peak walking times. So, it was really driven by -- I think it's fair to say the expertise of the principal investigator.

Okay. I appreciate that. Can you just talk a little bit about PAD and about different presentations of PAD, and what -- are there subsets of the populations where conditions are more acute? How should we think about a potential market for this?

Sure. Let me ask Tyler, too, maybe talk to you a little bit more about the disease.

The sort of natural progression for a patient with PAD has been fairly well described in a variety of different publications, so I will just give you one example of the generic progression of a patient with PAD.

If you start off with, lets say, 100 patients who have -- who present their physician with intermittent placation -- which is the typical presenting complaint. 75 percent will have basically stable disease overtime, and 25 percent will deteriorate over a five-year period. That deterioration includes progression to breast pain and or ulcers and or gangrene and finally to amputation.

Out of the 25 percent that progress, 5 percent will require a vascular intervention -- typically, that's a surgical intervention -- and 2 of those 25 will require a major amputation of their limb. So that's kind of the way that the disease progresses. In terms of what's the incidence of the disease in the population, of course, the incidence changes with age. And 3 per 1000 is sort of the typical number that people have cited in the literature.

And just to add to that part of the answer, John, and again this is just to quote the source. The American Heart Association said that PAD effects between 8 and 10 million Americans. The reason it's such a broad range is that it's a very poorly diagnosed disease. And again, arguably, with an effective therapy, it can be something that can be addressed in a much more aggressive way.

Okay. Terrific. You talked about the drug being in a polymers that improves a number of sales that take up the DNA in the local area -- I assume. Is it -- I assume that that is part of how you get to the point of how many shots you have to give etc. Is there any thought that that part of the drug will continue to evolve or improve, to the point where you would potentially have to give fewer shots?

Again, I think that's a very good question. We and it's the royal we here -- Edwards Life Sciences, Frank Giordano, Brain Anics, are preclinical collaborators in this -- spent a lot of time evaluating different formulations, different delivery technologies. And you'll recall -- I can't remember -- a year ago, maybe less. There was a discussion of an energy assisted approach, and so on and so forth. Those studies could well overtime bear out to be more effective in terms of transfection efficiencies.

But for all of the work that was done, from an efficacy outcome, this formulation that's going forward was the most potent. So certainly not -- never say never in terms of improvements, but I don't think anybody is -- I think very people are very enthusiastic about the current formulation.

Understood. Okay, thanks again.

David Wood, Rodman & Renshaw.

Three questions, I think. One is -- I know you're deferring a lot of these questions regarding the trial to Edwards. I'm going to assume that if I try to call up Edwards, they probably would not return my call. So, in lieu of that, do you think it's fair to maybe go back and look at some of the Letterman studies -- the rave -- or the traffic studies -- would those be kind of a good proxy as to how the study is designed, and what you can sort of look for in the study? And hopefully, for the rave study, we'll have a better outcome? That's the first question.

The second question is -- you talk about this noninvasive imaging MRI. How should be looking at that in terms of what the FDA -- is this something that the FDA may consider as being part of an endpoint? Any thoughts on that would be great.

And finally the third question -- just from sort of a competitive standpoint -- and this is probably related to some of the other questions -- but, there was some news from sharing, the end of January -- talking about stopping enrollment with their SGI (ph) gene therapy product, and if you had any comments or any insight as to why you think that trial was stopped? It doesn't seem to be safety. So I am assuming there is sort of some sort of efficacy issue. If you had any comments on that, that would be great as well. Thanks.

Okay. So let me take them one at a time. First, we will definitely get your phone call returned from Edwards. Not a problem. Secondly, in terms of other trials and that Dr. Letterman (ph) was involved, and, Tyler, I will certainly defer to you on that.

David, I would say that it would -- that it might be useful to look at those studies. In particular -- that you mentioned, rave and traffic (ph).

Okay, thank you.

They are excellently designed studies and one would imagine that people might learn from them.

Second, your question regarding, sort of, surrogate endpoints relating to the phase II, or efficacy component of this, and the MRI work. Again, I will ask Tyler to comment on that.

David, just to summarize that whole issue. The MRI gives us a very powerful way to determine whether or not there is endogenic (ph) biology going on within the skeletal muscle of the patient. It will not be a FDA approvable endpoint, however.

And on that subject -- I mean again -- I will defer and continue to defer on to Edwards to comment more on this. But, this is primarily a safety study. I don't think we are looking for this to be significantly beyond looking for maximal tolerated dose.

And then finally, you asked a question about the FGF trial -- I will just start and then Tyler can comment. Ed Rebars (ph) is here with us as well, and has quite a bit of perspective on other targets -- other gene targets. First off, bluntly say, we don't know any thing more than you do. In terms of what's been said -- however, with that -- I think we have a point of view about that program. And I will just leave it to Tyler, you want to talk about FGF?

David, I guess fundamentally, from our perspective, we have a better target than FGF. That, Jeff, we think is both potency issues as well as biological specificity issues that make it a better target than FGF.

Furthermore, as we've talked about many times, the ability to activate the angiogenous (ph) gene in getting the multiple isoforms is another intrinsic advantage of our approach over a single isoform CDA (ph) approach. So for all those reasons, we think fundamentally, we have a better target.

I think it's, in summary -- we could've gone after, because of our platform, any gene we wanted. And we think that VEGF-A is the most appropriate, most potent, of the angiogenic factors. So I guess it's fair to say -- we're not shocked and amazed.

Okay. Thanks for your comments.

(Operator Instructions) Winton Gibbons, William Blair & Company.

I'm going to try to get something for 2005 yet out of this call.

Okay. Good luck.

Can you give us a sense of, first of all, qualitatively -- will there be a milestone payment, either for the successful completion kind of midyear next year, of the phase I/II trial and or the start of the phase II/III trial -- will there be a milestone payment for either of those events?

(inaudible). So no -- I don't expect a milestone in '05. We were just looking amongst ourselves here about the next milestone. And I think it's for completion of a phase II trial. So, this trial would not trigger a milestone payment from Edwards around that.

Phase II defined as a -- because you're doing maximum tolerated dose now. So phase II was some measure of efficacy?

Yeah, no, this would be a formal phase II trial.

So a small trial, but there would be some sort of efficacy endpoint in it (multiple speakers) not just a dosing trial.

Rights. Post a formal phase II trial we would receive an incremental milestone payment. And we do not anticipate that in '05.

Do you expect that that trial -- whether, again, whether you combined with a pivotal trial or not -- do you expect that trial will take 18 months, similar to this first trial, or will it take longer?

Again, if we start talking about diabetic neuropathy, when we start talking about some of the programs that we're prosecuting, we will do our very best to give you our thoughts and expectations about our clinical development plan, timing, costs, so on and so forth. This is a program that's being prosecuted, and I think prosecuting very well by Edwards. And so in terms of future clinical development plans, I truly will defer to them.

Okay. Then, I will ask one more question on your diabetic neuropathy trial, which is -- can you talk a little bit about the timing of that trial, at least as you're currently conceptualizing the trial again? Is that going to be an 18 month trial? Or because of the specificity of the disease will be slightly different?

Our current expectation, and again -- you are dragging this stuff out of me. We have a second quarter meeting here, with what? A half a dozen clinicians? Where we're going to review and discuss with them our initial clinical development plans and strategies.

So out of that, we will have a lot more, as they say, granularity around this. But from a planning point of view, Winton, I think that kind of scale, 12 months for accrual, 18 months for final data, is a reasonable expectation.

Okay, thank you.

Thank you. And, Winton, thanks for the note this morning.

David Wood, Rodman & Renshaw.

Just, Edward, can you kind of go over again the CD 34 skid (ph) program? Can you just lay out again what the ongoing cell-based studies are? And assuming they are positive, can you kind of walk us through what the next step would be following these studies?

Yeah, I mean, I can give you a general sense of this and then I will ask Philip Gregory who is here, and that group reports in to him, and Tyler, who will be obviously heading the development part of it -- right now, as we speak, and this is truly the royal we -- working on showing proof of concept in CD 34 positive cells.

When we have the data, that will trigger our submission or generation of a submission to the FDA for a pre-IND meeting. That meeting will inform us collectively about what incremental or what preclinical data the agency recommends or would like to see in an IND filing.

So we think we're on track with what I said before to have proof of concept data in CD 34 cells in the next several months. That will lead to pre-IND meeting -- or, a request for a pre-IND meeting with the FDA. Post that, we will move expeditiously to generate those data and try and move this into human clinical testing as quickly as possible.

Okay, thank you.

At this time, there are no further questions.

Great. I have a final comment. That is, we would like to thank you for joining us. And we will look forward to speaking with you again when we release our first quarter results. We will be available later today if you have any follow-up questions. Thanks very much for joining us.

This concludes today's conference call. You may now disconnect.