Sangamo Therapeutics Inc (SGMO) 2005 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Sangamo BioSciences second-quarter conference call. My name is Michelle and I will be your operator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference. (Operator Instructions). As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's conference call, Dr. Elizabeth Wolffe. Please proceed, ma'am.

Thank you, Michelle. Good afternoon, and thank you for joining Sangamo's management team on our conference call to discuss the Company's second-quarter results and activities. Present for this call are several members of Sangamo's senior management, including Edward Lanphier, President and Chief Executive Officer; Dr. Philip Gregory, Senior Director of Research; and Greg Zante, Senior Director of Finance and Administration.

Following this introduction, Edward will review second-quarter activities, highlighting Sangamo's recent events. Greg will then briefly review second-quarter financial results. And finally, Edward and Philip will update you on several of our preclinical ZFP therapeutic programs. Following that, we will open the call for questions.

As we begin, I'd 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 markets and future performance of Sangamo with you today, we are 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 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 would like to turn the call over to Edward.

Thank you, Liz, and thanks to all of you for joining us on our 2005 second-quarter conference call. The second quarter was another busy period for us, one in which we accomplished several of our goals for the year. This quarter, two ZFP therapeutic programs advanced into the clinic. The first patients have been treated in these new clinical trials, one initiated by our partner, Edwards Life Sciences, for critical limb ischemia, and our own trial in diabetic neuropathy. This brings the total number of ongoing Phase I clinical trials of ZFP Therapeutics to three.

During the second quarter, we also increased the visibility of our technology and product pipeline, with presentations of data at several scientific conferences, including the annual meetings of the American Society of Gene Therapy, the American Diabetes Association and the International Society for Stem Cell Research. This effort was augmented by the publication of an article and an accompanying news and views editorial in the June 2 issue of Nature.

We were also the subjects of two television news segments, one on our newly initiated clinical trial for diabetic neuropathy and one on our program in HIV/AIDS. If you have not seen these clips, let Liz know and we can e-mail you the links. Finally, we have accomplished all of this well within our projected budgets.

Today, I will briefly highlight some of the recent accomplishments and then Greg will update you on the second-quarter financial results. In the second part of the call, I have asked Philip Gregory, our Senior Director of Research, to review the status of several of our preclinical ZFP therapeutic programs.

First, a little more color on the two human clinical trials that began this past quarter. Last month, our partner, Edwards Life Sciences, announced that they had initiated a Phase I clinical trial of EW-A-401 at Duke University Medical Center for the treatment of critical limb ischemia, or CLI, the most severe form of peripheral artery disease, or PAD. Patients with CLI have such poor bloodflow and consequently poor oxygenation in their muscles of their legs they experience pain, even at rest, and their feet and limbs are at high risk of ulceration, infection and amputation.

This is the second human clinical trial that Edwards has initiated for EW-401, the zinc finger transcription factor designed to turn on the expression of the VEGF gene. The first trial, which began about a year ago at the National Institutes for Health, is for the treatment of the milder form of PAD, intermittent claudication. Like the NIH trial, the trial at Duke is a Phase I dose escalation safety trial in patients with the disease.

Edwards has stated that the study will include up to 16 patients with 12 months of follow-up and notably, repeat doses of the ZFP Therapeutics will be tested. The trial primarily seeks to measure safety, but will also include measurements of changes in stem cell populations and the circulation in muscles to determine the extent to which tissue repair can be accomplished. This is a very interesting new trial and, as we have stated before, if you would like further information, I would encourage you to contact Edwards directly.

At the time of our last quarterly call, we had opened the first clinical site for our Phase I diabetic neuropathy study of SB-509. This therapeutic approach to halt or possibly even reverse the nerve loss in late-stage diabetes makes use of the neurotropic and neuroprotective properties of VEGF-A. Patient screening got off to a very good start, and in May, we announced that we had treated our first patient on this trial.

We now have four of the clinical sites open -- one in Texas, two in California and one in Utah, and all are actively screening patients. As we outlined on the last call, the Phase I trial is a dose escalation trial and is primarily designed to evaluate the safety and maximum tolerated dose of SB-509. All patients will be treated with the ZFP Therapeutic in one leg and will receive the placebo in the other leg. Patient safety will be monitored throughout the study, and follow-up visits will also include neurological examination and electrophysiological testing.

As you know, diabetic neuropathy represents a significant and growing unmet medical need, as over 50% of patients that live with diabetes for 10 years develop the condition, and currently there are as many as 14 million diagnosed diabetics in the U.S. alone. The enthusiasm that we have encountered for this approach from both the clinical and patient communities is well illustrated in a short news story that was aired by us -- by a San Antonio television station. Again, if you would like to see this clip, please contact Liz and she will e-mail you the link.

The preclinical animal efficacy data that underpin this program were presented for the first time by our collaborator, Professor David Tomlinson of the University of Manchester in the United Kingdom. This presentation at the American Diabetes Association meeting in San Diego was one of several presentations that were made at a series of scientific meetings in the past few months that highlighted data from our ZFP Therapeutic programs in both gene regulation and gene modification.

Our usual significant presence at the American Society of Gene Therapy meeting in June was marked this year by a notable event for Sangamo. During the meeting, a Nature article describing data from our zinc finger nuclease, or ZFN™, mediated gene correction program was published. Importantly, this article was accompanied by a commentary authored by the then-President of ASGT, Dr. Kathy High. In her commentary on our ZFN™ mediated gene correction data, which she characterized as, quote rewriting the rules for gene therapy, end quote, Dr. High noted that our approach provided the first method to specifically and efficiently correct the gene, quote, avoiding unwanted integration events and promising safer and more realistic therapies for other forms of SCID and hemoglobin disorders, end quote. And ZFN™ mediated gene correction represents a, quote, considerable step towards a successful genetic engineering approach to treating human disease, end quote.

It has been very gratifying to all of us at Sangamo to have the breadth and therapeutic potential of our technology so widely recognized in both the academic and clinical communities.

And with that quick summary of the second-quarter highlights, I would like to turn the call over to Greg to summarize the second-quarter financial results. Greg?

Thank you, Edward. For the second quarter of 2005, our consolidated net loss was $3.4 million or $0.13 per share. In the comparable quarter of 2004, our consolidated net loss was $3.3 million or $0.13 per share. Our research and development expenses were $2.8 million for the three months ended June 30, 2005, as compared to $2.4 million for the second quarter of 2004.

General and administrative expenses were $1.1 million for each of the three-month periods ending June 30, 2005, and June 30, 2004. Revenues for the second quarter of 2005 were $418,000 as compared to second-quarter 2004 revenues of $132,000. Finally, I'm pleased to report that we ended the quarter with cash, cash equivalents, investments and interest receivable of $26 million. And, on that note, I will now turn the call back over to Edward.

Thanks, Greg. As you can see from our second-quarter financial results, while we continue to invest aggressively in our developing pipeline of ZFP Therapeutics, we're maintaining the strength of our balance sheet and remain on track to meet our goal of ending 2005 with approximately $20 million in cash and cash equivalents.

As promised on our call in February, we would like to take this opportunity to update you on the progress of several preclinical ZFP Therapeutic product development programs. To that end, I would like to turn the call over to Dr. Philip Gregory, our Senior Director of Research, who oversees these efforts. Philip?

Thanks, Edward. The programs that I will summarize for you today are all gene regulation programs and all at the stage of preclinical animal efficacy testing. They include our programs in congestive heart failure, neuropathic pain, nerve regeneration and macular degeneration.

Nearly 5 million Americans are living with congestive heart failure and 550,000 new cases are diagnosed each year. In this progressive condition, the heart becomes a less and less efficient pump. CHF is a serious condition that has no cure, and the current standard of care involves the use of drugs that manage the symptoms rather than addressing the root cause of the problem, which is poor cellular regulation of calcium.

Calcium flux in the heart muscle cells is regulated by the protein phospholamban, or PLN, a target that's been well validated in animal models of CHF. It is known that if active PLN can be reduced, there are positive benefits for the ailing heart. However, phospholamban has proven to be nondruggable by conventional approaches, such as small molecules and antibodies, because of its location and mode of action within an inner membrane of heart cells, making it inaccessible to these types of drugs.

To address this opportunity, we have developed highly specific ZFP transcription factors to repress or turn off the gene for PLN. In preclinical studies, these ZFP transcription factors turn off the phospholamban gene very efficiently in rat heart muscle cells when delivered directly into the heart of the animal. We have now completed initial animal efficacy studies in CHF models and have obtained very encouraging data that demonstrates an improvement in calcium flux and in the contraction efficiency of heart muscle cells, as well as improved hemodynamics or blood movement into and out of the heart.

We are preparing our preliminary data for publication and will present this work at the American Heart Association meeting in Dallas in November. We're also currently extending these initial efficacy studies and optimizing the delivery vehicle for the ZFP transcription factor.

Our next steps are to test our PLN repressor in an animal model of CHF as to model the conditions that are likely to be encountered in the initial studies of this novel therapeutic and human clinical study. Our approach will include a cold cardioplegia procedure, a standard method of immobilizing the heart by cooling it to 25 degrees C. This procedure is used when patients with endstage CHF waiting for a heart transplant are fitted with a mechanical pump called a left ventricular assist device, or LVAD, that takes over the pumping action of the heart.

These patients are very sick, exhibiting approximately 30% mortality. Therefore, we envision that they make the initial patient population with a significant benefit-to-risk ratio in which to investigate both the safety and efficacy of our ZFP transcription factor repressor of phospholamban.

The degree of assist that the mechanical pump gives a patient's heart can be measured and can be adjusted depending on how well that heart is beating. Thus, by administering the ZFP transcription factor as the patients cold cardioplegia and the fitting of the LVAD, we could subsequently measure the effect of regulating phospholamban on heart function and patient survival. Based on the data obtained from these studies, we will make a decision on the clinical development plan and timing.

A second program that I would like to update you on is our program in neuropathic pain. Pain affects millions of people worldwide with annual sales of prescription medications totaling more than $1 billion per year, although many of these drugs, such as the opiates, are only partially effective and have unwanted side effects.

Using animal models and identification of naturally occurring mutations, several receptors and ion channels, such as TrkA, PN3 and VR1, have been identified as well-validated targets for pain control. One such natural mutation occurs in patients that exhibit a condition known as congenital insensitivity to pain, which is due to mutations in the TrkA gene.

More than one pharmaceutical company has expended significant effort and resources in searching unsuccessfully for specific antagonists of these pain receptor proteins. These are also good examples of nondrugable targets and targets that we believe that we can address with our ZFP gene regulation technology. By very specifically turning off expression of these pain receptor proteins at the level of the gene, we may be able to stop this transmission of the pain signal and provide relief for patients suffering pain from terminal cancer.

That's just what we have been able to do to the TrkA gene. TrkA is the high-affinity receptor for nerve growth factor and is found in the cell membrane of sensory nerves and dorsa root ganglia, or DRGs. DRGs are the bulges located at the sides of the spine, containing the cell bodies of nerves that convey information from sensor receptors in the periphery back to the central nervous system for processing.

We have designed and engineered ZFP transcription factors that we have shown turn off the expression of TrkA in a variety of tat cells and in rat DRGs in culture. We're currently testing the efficacy of our TrkA ZFP transcription factor in pain models including a cancer bone pain model in mice. We anticipate that these data will be presented at the Eighth International Conference on the Mechanisms and Treatment of Neuropathic Pain in San Francisco in November of this year.

We will also finalize our clinical development plan for this novel pain therapeutic based upon the outcome of these experiments as well as ongoing delivery studies.

You have heard about our neurologic applications in pain and diabetic neuropathy. But another area that is of great interest to us is in the field of nerve regeneration. Observations in our preclinical studies from our program in diabetic neuropathy encouraged us to explore the nerve regenerative properties of our VEGF-A ZFP transcription factor, and we are actively engaged in preclinical animal efficacy studies in this area.

Preliminary data from a rat nerve crush model show that treatment with our ZFP transcription factor significantly accelerates the reestablishment of nerve connections with the surrounding muscle that were destroyed during the crush process.

We're currently extending these observations and expect to present some of these data at the European Society for Gene Therapy meeting in Prague in late October. We're also working with academic collaborators to test the ZFP transcription factor in more severe models of nerve damage, such as spinal cord injury and amyotrophic lateral sclerosis, or Lou Gehrig's disease.

Finally, I would like to give you an update on a program that we have not discussed in previous calls, our program in macular degeneration. Patients with wet macular degeneration develop abnormal blood vessels under their retina. These blood vessels leak their contents under and into the retina, causing progressive blindness. Our program to develop a ZFP therapeutic for macular degeneration makes full use of the versatility of our ZFP technology. Unlike all existing monoclonal antibody and gene therapy approaches that target a single component of the pathology of this disease, our technology can be used as a two-pronged attack on the abnormal blood vessel growth in the eye.

We have designed a ZFP transcription factor that turns off the expression of all of the isoforms of the most potent angiogenic factor, VEGF-A. In addition, we have designed another ZFP transcription factor that can turn on the most potent antiangiogenic in the eye, pigment epithelial derived factor, or PEDF. Like VEGF-A, PEDF also has neuroprotective roles.

In the healthy eye, levels of PEDF are high and VEGF are low. But in the ischemic conditions that provoke development of AMD, that balance is upset, and VEGF-A levels increase. We believe that our ability to simultaneously regulate both of these genes within the eye may have significant advantages over monoclonal antibody and cDNA approaches that are designed to control the levels of just a single protein.

Furthermore, we believe that regulating the expression of these proteins by regulating the gene allows more complete control of the protein level, rather like controlling the spigot rather than mopping up the floor. Our preliminary animal efficacy studies in a mouse choroidal neovascularization model demonstrated that we can achieve a significant duration of expression of our ZFP transcription factors in the eye and that they turn off VEGF-A expression and turn on PEDF expression.

Moreover, eights weeks after treatment, we have observed efficacy of each ZFP transcription factor in this model measured as reduced vascularization of the retina. We're now initiating further studies with our academic collaborators to extend these observations. These data are very encouraging, and we intend to present them at the Ocular Cell and Molecular Biology conference in Sarasota in September.

In conclusion, we continue to make significant progress on several highly differentiated ZFP therapeutic programs, and we're preparing to publish and present much of these data in peer-reviewed journals and at scientific and medical meetings later this year. We look forward to updating you on our progress with these programs, as well as our therapeutic programs in gene correction and gene disruption, particularly our HIV/AIDS program, in future calls. Edward?

Thank you, Philip. Although we have not given much airtime in recent calls to the programs that Philip has outlined, as you have heard, we're working hard to move our ZFP therapeutic pipeline forward towards the clinic.

So, to conclude and summarize this second-quarter update, patients were treated in two new clinical trials for ZFP Therapeutics that were initiated this quarter, one by our partner Edwards for critical limb ischemia and our own trial in diabetic neuropathy. We now have three ZFP Therapeutics in Phase I clinical trials.

We have published data in a high-impact journal and made presentations at several scientific and medical meetings. These activities have prompted an increased interest in and visibility of the Company, promoting awareness of the significant differential technical advantages of our gene regulation and gene modification therapeutic product development platforms.

We are advancing our pipeline of therapeutic products through preclinical testing towards the clinic, and we have accomplished all of this while continuing to carefully manage our cash.

In our call today, we have intentionally focused on updating you on our preclinical programs. But I would like to take this opportunity to remind you that we expect to present data from our program to develop a ZFP Therapeutic for the treatment of HIV/AIDS at the ICAC meeting in late September. We intend to follow that scientific meeting with an update to the financial community at our second analyst and investor briefing in New York on September 27. Please save the date.

In the meantime, I look forward to updating you on our progress at our next investor presentation, which will be at the Americas Growth Capital Investor Conference on August 1 in Boston.

This complete our prepared comments. I would now like to open the call up for your questions.

(Operator Instructions). Ted Tenthoff, Piper Jaffray.

Nice quarter. A lot of good progress so far this year. That was a great update from Phil. I'm going to direct my question sort of to the deal front. We saw how some of the new protein production deals are really contributing to the topline. What else can we look for along those lines through the remainder of the year, as well as potential ZFP drug partnerships?

Sure. Good question. And let me just start off by saying, and I didn't put this in the prepared comments, but on our third-quarter call, we are going to focus, as we did on this call, on the preclinical pipeline. We're going to focus more on business development, and in particular, the protein production program, as well as more broadly our business development strategy and opportunity.

So, I will answer your question specifically, but I just wanted to give you a heads-up that we expect to be talking more about this as a larger theme on our next call.

So the protein production work is going well. We're on track, as we mentioned before, to have another couple -- two or three more deals announced in this calendar year, both in the area of the activation work in the chosen cell line as well as employing the zinc finger nuclease technology in production cell systems.

Let me ask Eric Rhodes, who is our Senior Director of Business Development, who really heads that group from a business perspective, if there's anything you want to add in terms of protein production.

We've made several presentations over the last quarter or two in both scientific meetings and some of the business development meetings in this area. I think we're talking to most of the players now involved in biologics manufacturing, and so we continue to see interest and sort of acceptance of the new technology, especially the nucleus technology, since the publication in Nature came out. And so, I don't think I have anything more to add as far as (multiple speakers)

Real quick, can I jump in there? Eric, what is the general interest level and what are kind of -- conversely, what are kind of the hurdles that you're noticing in some of these discussions?

The interest is broad. The interest is primarily in, obviously, biologics antibodies being primarily what most folks are talking to us about, although that doesn't exclude any of the other protein groups. As far as hurdles, I guess you could say for most of these folks, it's getting comfortable with the technology. It's new for them. It's not something that they've been using before. Most of these folks are detached from any of the research groups that might have been using zinc fingers in the past. And so we generally begin with sort of an evaluation where we transfer some of these reagents and these cell lines to them to use for a period of months. That takes, then, some time to build their proteins into those systems and then test them. And then we eventually start talking about how they can take that and scale that towards the commercial process.

I will say this, Ted, that some of the groups that we've announced that we're collaborating with have taken particularly the chosen cell line that we've reported on that gives us 2 to 3X increases in protein production yields and have repeated that same result in their own hands. And so that's the sort of thing that Eric is referring to when he says we're going to these evaluations, but our goal is to convert those into full-blown license agreements.

Navdeep Jaikaria, Rodman & Renshaw.

Thanks for the update. A quick question regarding any upcoming presentations or publications that we can see before year-end? And also, the timeline of when can we expect to see data from the Edwards Life Sciences trial?

Sure, let me take the latter first while Philip scribbles notes on some of the presentations that we expect. In terms of Edwards, Navdeep, I'm afraid all I can do is reference the things that they have said in the past. As it relates to the intermittent claudication trial, at the time of beginning that trial, I believe they said it would be a 12- to 18-month accrual and a six-month follow-up, and at the initiation of this critical limb ischemia trial, I don't believe they gave any guidance with regard to accrual timeframes, but said that they would be a 12-month follow-up with all patients.

Beyond that, and I just have to refer you to them for any additional visibility or timing guidance. And with that, I will turn it over to Philip and he can maybe give you an update on scientific conferences and presentations.

Sure. So we expect -- we have submitted a publication for review on the diabetic neuropathy work that was recently presented at the American Diabetes Association meeting. We will be, Edward mentioned in the prepared statements, at ICAC with our HIV program. We have submitted a publication to Nature Biotechnology that will -- again for peer review on our secret motor work (ph), which is the work that underpins the activity on our protein production side, and we will be at the AHA meeting in Dallas in November of this year, talking about our phospholamban program. We should be at the neuropathic pain meeting that will be held in San Francisco in November of this year, talking about our pain program, primarily on the TrkA program that I updated on, and we hope to be at the ESGT meeting talking about some of the work on our nerve regeneration program. And finally, we have a presentation already that will be given by Steve Zhang on our AMD program at the Ocular Cell and Molecular Biology conference in September. So, there's a fair amount of activity towards -- in the second half of this year.

Winton Gibbons, William Blair & Company.

Edward, could you clarify what differences there are between SB-509 and the EW-A-401 if any?

Sure. Let me give it a go and then Dale or Philip can chime in. The basic zinc finger backbone and the target is the same. The principal difference is the formulations that are being used, and it's a slightly different poloxamer that is between the two. Do you guys want to add anything to that? That's it.

So it's basically just a different --

Formulation. Different poloxamer.

Poloxamer.

Yes.

Can you -- is it possible to give us a feel if not an exact number of the number of patients that have been treated to date across all three trials?

It is not. And again, as you well know from the earlier conversations, Edwards is responsible for updating on their trial, and we don't intend to talk about the status of the diabetic neuropathy trial until we've completed accrual.

Okay. Would it be safe to say that you've not seen any safety signals across all three trials?

Again, that's something that I think is fair to say, but it's not something that Edwards has reported on, and certainly not something that we've needed to report on.

Okay. Then getting back to the cash position (multiple speakers)

Oh good -- I win the Snickers bar.

Right, because I'm the one who was supposed to bring this up.

Let's just say I win the Snickers bar.

Okay, I'll split it with you. Okay, so 20 million year-end seems like you are either going to have to slow down spending or you're going to expect more in the way of revenues -- kind of net revenues in the second half of the year?

I would agree with that.

Okay, so more in the way of net revenues (multiple speakers)

No, I would agree with your assumption, that we'd either have to slow down expenses or increase revenues.

But you're not going to tell me what it is?

I will tell you, because again, it's consistent with the guidance that we have given and continue to give in terms of focusing on the bottom-line cash. So we expect to end the year with approximately 20 million in cash and cash equivalents.

So you're not going to say how you're going to get there?

No.

Okay. Then where we stand right now at the current cash burn rate, you are just right around two years, maybe even slightly less if the burn rate stays the same, the net burn rate.

Right around two years, I would agree with that.

Yes, now, is there anything you could do to either extend that or given your plans of either slowing down expenditures or more deals, even if they are just kind of the six-figure deals on protein production, what is your internal timeline? Is your internal timeline 2.5 years, given your current plans? Or three years? Or (multiple speakers)

Let me go back to 30,000 feet. You are exactly right. There are two things we can do. And certainly given our enthusiasm for the science and what you've heard about our pipeline and where we're headed in the clinic both with diabetic neuropathy and HIV, I wouldn't anticipate a significant reduction in expenses. We're going to aggressively invest in our science. So, the growth is really -- and new monies are going to come from two sources. One, our nondilutive sources. And as I mentioned, our plan is to have a relatively thorough update on business development activities on the third-quarter conference call. I think that will be good timing across programs from the enabling technologies, including protein production, as well as in the area of therapeutics.

The other is obviously diluted financings, and one thing that is certainly true about biotech companies, we will raise money, and that is certainly something that is in our future. But, as you know, we'd like to get some of the things that we're working on and think will be quite evident of the value we're creating, out and published and presented and disclosed in the process of thinking about going out and doing the financing.

Again, netting it out, and then I'll get out and get back in the queue, if need be -- from an internal perspective, and kind of internal, I guess, modeling, externally again it looked like two years. Internally, are we talking that you've got plans that get you out three years -- let's (multiple speakers)

Well, we have plans that get us out far beyond three years.

(multiple speakers) Decades, but let's say without raising any money?

Right, so again, I'm not going to give guidance that far beyond saying we intend to raise money, both from dilutive as well as nondilutive sources, and those are all things that we'll been talking about, as I said, particularly in the nondilutive part, on the third-quarter conference call.

John Sullivan, Leerink Swann.

Congratulations on preclinical and clinical progress in the quarter. I had a couple of quick questions, and I understand that you are constrained regarding talking about partner programs. But let me ask some broader questions. What is the clinician's therapeutic option today for treating critical limb ischemia?

Let me give Dale a few seconds to collect his thoughts and then turn that question over to him.

And then let me ask you kind of a related question while he's doing that. The reason why I'm asking is I'm wondering if there would be a chance that the Edwards-Sangamo partnership therapeutic candidate would receive orphan drug designation from regulatory agencies like the FDA.

For CLI?

Right. For critical limb ischemia.

Okay. Let me turn those over to -- at least the first one over to Dale.

Yes, for critical limb ischemia, these are patients who are presenting with, in the earliest stages, symptoms of pain, usually on the bottom of the foot. And your therapeutic options really depend on how rapidly the vascular obstruction is occurring. If it's fairly rapid, then the really only options are to see if there is something that I call bypassable from a surgical procedure or sensible from a more radiologic type of procedure to open up a particular stenosis.

If it's more gradual, then there is basically some time for medical intervention, which could focus around basically some elimination of risk factor such as smoking, control of diabetes, use of medication such as toxifylline, which alter the viscosity of red blood cells, and then a program of gradual exercise to see if you can increase collateral flow through the area.

Now, if there is an acute clot in the leg, then that's a slightly different situation, where you can use thrombolytic therapy to open up the clot and see if you can preserve the limb. But you're pretty much getting to surgical alternatives, of which the initial ones are some kind of vascular bypass. None of those are really long-lasting efforts and the definitive -- unfortunately, the definitive surgery is an amputation.

So that's a quick review on alternatives. In terms of the orphan status, again, I would refer you to Edwards, although I will say at least by our market research or the numbers we've seen, total amputations in the U.S. are around or under 100,000 a year.

Okay, thanks very much. Let me ask you this related question. You described endpoints in this study in your earlier comments, stem cell proliferation being an interesting one. Are there clinical endpoints that might be more immediately relevant to patients and observable to patients than stem cell proliferation?

Well, again, as I think as it relates to the CLI trial, I would love to refer you back to Edwards -- and you all I think, you know, who, as well as I, hosted a great call that had Brian Annex, the principal investigator of that trial, on it. So I would prefer to refer you back to Edwards on that.

Okay, fine. We'll chase them. Let me just ask you one last question regarding, in this case, diabetic neuropathy. I see that a competing -- well, another company in the business of seeking to advance gene therapy-related therapeutic programs is initiating a trial and using local delivery of electroporation as a way to increase the uptake of the drug candidate into cells. Is that something -- and it has nothing to do with diabetic neuropathy, by the way, the competing drug candidate. But is that something that you would foresee having to employ at some point in your drug -- diabetic neuropathy program or are you confident in your ability to ensure good uptake of your drug candidate into cells without having to resort to something like local electroporation?

My understanding of the human clinical application of electroporation is primarily for vaccines, where you are trying to expresses microgram amounts of material in a fairly local area in the muscle. What's been developed in the field is these poloxamer formulations of which we're using, which help increase the movement of the plasma DNA along the muscle and actually increase transcription of any type of DNA. But at this point, I think the amount of vector and the poloxamer technology really far supersedes the amount of material that is deliverable with the electroporation.

Charles Duncan, JMP Securities.

Most of my questions have been asked. It's been an awesome call so far. Quick question, however, on diabetic neuropathy. When do you anticipate finishing that trial?

I think the guidance we've given there, Charles, is that we expect accrual to take approximately 12 months and that there will be a six-month follow-up from the last patients.

Now, when you say that you have four centers open now -- and congrats on that progress, does that mean that you have treated patients in at least four centers or are they just ready to go?

It means that four centers are open and screening patients. We haven't talked about how many centers have actually treated patients.

I see. Would you just tell us how many centers (multiple speakers)

No, again, that's the full extent of the guidance, and Dale is pleased with us sticking to that characterization.

What is the rate limiting step in turning a screened patient into a treated patient?

As with any clinical trial, there are a series of tests that have to be done. For all the VEGF trials, there has to be what's called a full ACF screening for any potential cancers. So, from the beginning, when VEGF was being used by Genentech, there was the fear that some type of -- if somebody had a pre-existing tumor, the VEGF could actually increase the growth of that tumor. So what is different from other trials that I have done is that we do a screening, evaluate the patient with blood tests, physical exam. We then undergo a full ACF screening, which can include mammograms or colonoscopy, etc., and then finally, we do the neurologic evaluation, which includes an EMG. So it generally takes about three to four weeks to get all these tests in.

How many patients have you screened?

We're not giving that information out.

Okay, so is it fair to say that you you've not treated patients in all four centers?

We're not giving that information out.

Do you anticipate opening additional centers this year?

Four is what we anticipate opening for this Phase I trial.

Four is sufficient? You said 12 total patients.

12 total patients to be treated on the trial.

How many do you expect to have to screen before you can get to 12 treated?

The glib answer is more than 12, but I don't know that we know at this point or have enough to say how many we'll have to screen in order to get the 12.

But each one of them serves as its own control, right?

That's right. Dale, you want to talk about that design?

So each patient has -- is treated in one leg with SB-509 and the other leg with placebo, so there will be a control, a baseline and a control with the alternative leg at any individual assessment point.

And will there be multiple doses?

No. This is a single treatment. There are multiple injections and there are four dose levels.

And those are low, medium-high and higher? Or--?

Low, low-medium, medium and then high.

Okay, and is it based on the size of the patient or the extent of their disease? Or age?

It's based on the relative doses that were required for efficacy in the animal studies.

Is that based on extent of disease or size of the patients?

No it's not based on those parameters.

It's based on the data that we observed in some of the animal efficacy models and then obviously starting at very low doses and moving up to what we think are higher or potentially efficacious doses.

So what's kind of the baseline measure to establish dosing?

I'm sorry, Charles, what?

I say what is the baseline measure to establish dosing for any one patient?

The patients will be randomized into set dose levels. But each patient doesn't get a customized dose. The dose level to start off is basically determined by what's called a no-effect level in the toxicology study and that's a standard way of approaching safety studies.

Right. And then how do the animal study data translate into the amount of drug that's given to a human?

Well, it really just serves as a bracket in terms of the dosing. So obviously you have to treat humans to figure out what happens in humans. So between the efficacy and the toxicity, we bracket, just like if you're going to take a picture of all the different conditions, so that we have a wide enough range to cover the efficacy and then even beyond.

Okay. I think that's it for my questions.

(Operator Instructions). Ted Tenthoff, Piper Jaffray.

I have to say listening to the back and forth between you guys is like a good rally at Wimbledon. So Charles, thanks for all the good questions and Edward, thanks for the skillful dodging of them. Just one real quick follow-up. I know we really didn't focus on the HIV program today. There's been a lot in the news out and -- who are in in terms of presentations. I just want to make sure that -- is that still a goal for an IND by year-end and what should we be expecting at ICAC in September?

I'll give you a little bit and then Dale and Philip can give you a little more color on ICAC. The goal right now is to really update you all on the status from a clinical development perspective, post-ICAC, at the Analyst and Investor Conference the 27th of September. So, I think that's where I'll leave the guidance in terms of timing. In terms of ICAC, Philip, you want to take a first shot at that?

Sure. So we are heavily engaged internally on fine-tuning of the nucleases from a CCR5 cleavage perspective and we've been extending and actually ramping up our collaboration with Carl June with respect to the T-cell applications. And those activities will culminate in the challenge assays, where we challenge those corrected cells with real live HIV virus. And those data are what we're hoping to have for -- what we intend to have, in fact, at the ICAC meeting in September. So, that's sort of where we are from a research perspective. Dale, do you want to add anything?

I could say that we're working very hard on getting in place the appropriate cell expansion methodology and gene transfer methodologies to -- and really this will require sort of a -- initial selection of the zinc fingers and then very rapidly developing the actual manufacturing process of the T-cells. So, that's what we are heavily involved with at this time.

So a lot of work both internally and at the University of Pennsylvania with our collaborators. It's a multidisciplined sort of approach. And I think again, scientifically, we'll update at ICAC and then following very shortly at the analyst briefing on the 27th of September.

Great. Very helpful. Thanks again.

Ladies and gentlemen, this does conclude the question-and-answer portion of today's conference call. I would like to turn the presentation back over to today's speakers for closing remarks.

Thank you. We'd like to thank you for joining us and we look forward to speaking with you again at our Analyst and Investor Briefing on September 27 and when we released our third-quarter financial information. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference call. This does conclude your presentation. You may now disconnect. Good day.