Sangamo Therapeutics Inc (SGMO) 2006 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Sangamo BioSciences Fourth Quarter 2006 Year-End Teleconference. My name is Tony and I'll be your coordinator today. [OPERATOR INSTRUCTIONS]

I now turn the call over to Dr. Elizabeth Wolffe, Director of Corporate Communications. Please proceed, ma'am.

Thank you. Good afternoon and thank you for joining Sangamo's management team on our conference call to discuss the Company's fourth quarter and year-end financial results. Also present during this call are several members of Sangamo's senior management, including Edward Lanphier, President and Chief Executive Officer, Dr. Dale Ando, Vice President of Therapeutic Development and Chief Medical Officer, and Gregg Zante, Vice President of Finance and Administration.

Following this introduction Edward will review full quarter activities, highlighting Sangamo's recent events. Greg will then briefly review fourth quarter and year-end financial results, and finally Edward and Dale will update you on our most advanced ZFP Therapeutic clinical programs and goals for 2007. Following that, we will open the call for questions.

As we begin, I'd like to remind everybody 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, we are not undertaking 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 filed with the Securities and Exchange Commission, specifically our quarterly report 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.

Thank you, Liz. And thank you all for joining us for our 2006 fourth quarter and year-end conference call. On this call, I will briefly review our fourth quarter accomplishments and then ask Greg to update you on our fourth quarter and year-end financial results. In the second half of this call, I've asked Dale to give you an update on the status of our clinical programs, and in particular, the ZFP Therapeutic angiogenesis programs that we recently acquired from Edwards Lifesciences. Finally, I will wrap up with a review of our 2007 objectives.

2006, and in particular the fourth quarter, was a year of significant milestones for Sangamo. We initiated our first Phase II clinical trial in November. This is a repeat dosing study of SB-509 for the treatment of diabetic neuropathy and follows the completion and presentation of data from our earlier Phase I studies that demonstrated that the drug was well tolerated at dose levels that were effective in animal efficacy models.

In the Phase I trials, we also observed anecdotal improvement in clinical symptoms which, among other things, has prompted us to undertake a second Phase II trial of SB-509 in patients with blocked nerves. This trial will start in the first half of this year.

In December we acquired the ZFP Therapeutic angiogenesis programs from Edwards Lifesciences. These include two clinical stage programs in peripheral artery disease, a preclinical program in ischemic heart disease, and 10 grams of clinical grade material that can be used in both our neuropathy programs and the angiogenesis programs. This has been a great move for Sangamo, as it brings back under our control all clinical applications of our ZFP activator of VEGF. You will hear more from Dale about our plans for these programs later on this call.

We achieved the first milestones in our collaboration with Dow AgroSciences in the fourth quarter. This program, and our relationship with DAS, is progressing very well as evidenced by DAS's recent statement that, "Work at Dow AgroSciences employing zinc finger nucleases confirms our conviction that the ZFP platform has the potential to truly transform the field of plant genetics." You should expect to hear more about our collective progress in the coming months.

Also in the fourth quarter, the Juvenile Diabetes Research Foundation awarded us $3 million to fund our Phase II study -- to help fund our Phase II study in diabetic neuropathy. And earlier this year we were also awarded a $950,000 grant from the Michael J. Fox Foundation to fund the development of a zinc finger transcription factor activator of glial derived neurotrophic factor, or GDNF, for the treatment of Parkinson disease. These grants represent more than just financial support, as they are awarded from two of the most respected charitable research foundations in their respective fields.

Finally, on December 6th, we hosted our annual investor and analyst briefing in New York. I would like to encourage any of you that haven't already listened to the replay from that meeting to do so. It provides a great deal of detail about our diabetic neuropathy programs and our new glioblastoma program, as well as an excellent explanation of the utility of our technology in plant genetics. A link is still available on the Investor page of our website.

So as you can see, 2006, and in particular the fourth quarter, was a very busy and productive time or Sangamo. Before we elaborate further on our progress and discuss our plans for 2007, I would like to ask Greg to summarize the fourth quarter and year-end financial results. Greg?

Thank you, Edward. For the fourth quarter of 2006, revenues were $2.2 million, as compared to fourth quarter 2005 revenues of $1.4 million. Our Research and Development expenses were $10.1 million for the three months ended December 31st, 2006, as compared to $2.7 million for the fourth quarter of 2005. General and Administrative expenses were $1.9 million for the fourth quarter of 2006, as compared with $1.6 million for the same period last year. Research and Development expenses in the fourth quarter of 2006 were higher than in the same period of 2005 due to the one-time costs of Sangamo's acquisition of Edwards Lifesciences ZFP Therapeutic angiogenesis program and increased expenses related to our clinical trials and employee stock-based compensation. In December, 2006, we purchased the Edwards programs for 1 million shares of Sangamo restricted common stock, transaction valued at $5.8 million. Total expenses also included a non-cash charge $493,000 during the fourth quarter ended December 31st, 2006, for employee stock-based compensation.

Largely based upon this one-time charge for the Edwards transaction, for the fourth quarter of 2006, our consolidated net loss was $8.9 million, or $0.26 per share. In the comparable quarter of 2005 our consolidated net loss was $2.7 million, or $0.10 per share.

For the 12-month period ended December 31st, 2006, our revenues were $7.9 million, as compared to $2.5 million in the same period of 2005. This represents an over 200% increase in revenues year over year. This increase was primarily attributable to increased revenues of $4.6 million from our research agreement with Dow AgroSciences. Total operating expenses for the year ended December 31st, 2006 and 2005 were $28.6 million and $16.2 million respectively. This increase is due to reasons previously discussed.

As of January 1st, 2006, the Company adopted Statement of Financial Accounting Standards Number 123R and is reporting employee stock-based compensation expense in our GAAP results. The related non-cash charge for the year ended 2006 was $2 million. Our consolidated net loss for 2006 was $17.9 million, or $0.55 per share, compared with a consolidated net loss of $13.3 million, or 0.51 per share in the comparable period of 2005.

Finally, I'm very pleased to report that due to the continued careful management of our cash, we ended 2006 with cash, cash equivalents, and investments of $54 million, which was well ahead of our initial projections. I will now turn the call back over to Edward.

Thanks, Greg. As you can see from our fourth quarter and year-end financial results, we begin 2007 with a solid cash position that will allow us to aggressively pursue our clinical development programs. Looking forward, we expect to end 2007 with approximately $35 million in cash and cash equivalents. This cash projection now includes our plans for the prosecution of the angiogenesis clinical programs we recently acquired from Edwards Lifesciences.

The acquisition of the ZFP assets from Edwards has worked out very well for us. First, it gives us freedom to pursue all indications of our ZFP VEGF activator, and resolved in a positive fashion an issue that we had with Edwards regarding conflicting fields of usage. Second, retaining control of the entire VEGF program will have a positive benefit from a pharmaceutical partnering perspective. It also allows us to consolidate our manufacturing, regulatory, and clinical programs, enabling a coordinated and efficient development strategy.

Finally, the financial terms were attractive. Under the agreement, Edwards transferred all of the assets of its program to Sangamo in exchange for 1 million shares of Sangamo common stock. In the future, Edwards may receive royalties on certain commercialized products; however, these royalties are capped on an annual basis and in the aggregate.

On both the product and transaction front, we are very pleased with this agreement. To provide you with more detail on these programs, I've asked Dale to update you on their current status and our proposed plans for these programs in 2007. Dale?

The ZFP Therapeutic angiogenesis programs that we acquired from Edwards represent a significant addition to our growing clinical portfolio. These new assets include two Phase I clinical trials in peripheral artery disease, or PAD, one of which is fully accrued, a preclinical program in ischemic heart disease, and 10 grams of clinical product.

The first Phase I trial initiated by Edwards is an ongoing randomized double-blind placebo-controlled dose-escalation clinical study of the zinc finger activator of VEGF, EW-A-401, in subjects with intermittent claudication. Intermittent claudication is caused by peripheral atherosclerosis and it results in a cramping pain in the lower limb during exercise that is relieved on resting. The primary objective of this study is to test the safety and the tolerability of the administration of EW-A-401. The secondary objective is to determine whether treatment with EW-A-401 is associated with improved lower limb local muscular blood profusion, as measured by magnetic resonance imaging, or MRI.

This novel non-invasive quantitative MRI method for evaluating regional muscle perfusion around the injection site was developed by Dr. Robert [Liederman] at the National Heart, Lung, and Blood Institute, or the NHLBI. In this technique, a portion of the lower limb is constricted using a blood pressure cuff that interrupt arterial blood flow in the limb and cause part of the limb, bound by the cuff, to become oxygen starved and hyperemic. The cuff also isolates the lower limb from the upper body so that when a tracer molecule routinely used in MRI is injected in the upper body, it is excluded from the lower limb. Once the cuff is removed, there's an enhanced arterial flow and the tracer, which flows into the lower limb, can be imaged by MRI and the flow rate in that region can be determined.

This gives us a state of the art assessment of microperfusion of the tissue. In addition to the MRI measurements, we will also be assessing changes in clinical and vascular function. This is a well-designed Phase I study that is funded by the NHLBI and should provide a good dose-escalation profile of this drug in PAD. Thus far, 11 of the proposed 36 subjects with IC have been enrolled and treated. Two additional sites have been opened to recruit and treat subjects. After treatment, these objects will undergo MRI testing at NIH. Accrual on this trial has been slow; however, with the additional centers now online, we expect enrollment to increase. We should be able to provide you with a more accurate sense of timing for completion of this trial by the middle of this year.

The second Phase I study in PAD was conducted at Duke University School of Medicine by Dr. Brian Annex. This trial was an open-label study of the effect of EW-A-401 in subjects with critical limb ischemia, or CLI. I'm pleased to report that the accrual and treatment phases of this study are now complete.

CLI is the most serious presentation of lower extremity PAD. An estimated 15 to 20% of patients with lower extremity PAD will advance to CLI with resulting resting pain and tissue loss, such as ulcers and gangrene and ultimately the risk of limb amputation. Unfortunately for patients diagnosed with CLI, 40% have major amputations within six months, and 20% of CLI patients die within six months of their diagnosis.

All 20 subjects treated in this dose-escalation study received a minimum of two doses and five of the 20 subjects received four doses. The maximum EW-A-401 dose per treatment and the maximum cumulative dose were successfully administered. Although this Phase I CLI study was primarily a safety study, there appears to be some anecdotal evidence of clinical improvement in the treated limb, including measurements of transcutaneous PO2, or TPO2 or transcutaneous oxygen tension, which is a measurement of tissue perfusion in PAD.

We expect that these data will be presented and published once the follow-up period for these subjects is complete and all the data are collected and analyzed. In the meantime, we are reviewing the proposed protocol for a Phase II study to further evaluate the safety and efficacy of EW-A-401 in patients with CLI.

The primary objectives of this study will be to evaluate major amputation-free survival and complete would healing, as well as changes in ankle/brachial systolic blood pressure index, or ABI, and toe pressure index, or TPI, in a larger group of patients with a placebo control. Secondary objectives are likely to include a [technical difficulties] drug safety and tolerability, and the effect of the drug on a number of revascularizations and pain. Treatment of a greater number of CLI patients in a placebo-controlled Phase II study will help to facilitate further analysis E of the possible promising effects of EW-A-401.

We plan to initiate this trial in the second half of 2007 and we will have more to say about the specific protocol on a future call. One final piece of information, the CLI program has been granted fast-track status by the FDA. In addition to the clinical stage programs, we also acquired a significant amount of useful and important preclinical work, which gives us some very interesting insights and data on stem cell mobilization, tissue remodeling, and wound healing in response to the VEGF ZFP TF treatment.

We expect to complete and publish the studies over the next several months and will update you on our progress on future calls. As part of the asset, we also acquired 10 grams of clinical grade, or GMP Plasmid in coating a ZFP activator of VEGF. This material costs approximately $1 million to produce and it will be useful in both our PAD clinical programs, as well as in our diabetic neuropathy programs.

Last but not least, we were able to recruit several members of Edwards' clinical development team that worked on these programs. This ensures that management of the trials and data will transition to Sangamo seamlessly and that the programs will continue to move forward expeditiously.

That covers our recently acquired ZFP Therapeutic assets. Moving on to our Phase II trial for SB-509 for the treatment of diabetic neuropathy, we initiated a placebo-controlled double-blind trial in November, and currently have four sites open and are actively recruiting subjects. As we have stated before, we expect to complete accrual on this study by the end of 2007.

Meanwhile, the accrual stage of our Phase Ib study is nearing completion and we have applied to present data on this trial at the American Diabetes Association meetings that will be held in Chicago and late June 2007.

As Edward mentioned earlier, we're also planning to initiate a second Phase II trial [INAUDIBLE] in the first half of this year to treat a so-called blocked nerve. The genesis of this trial springs from a surprising observation from our initial Phase I results. We noted in three subjects that presented with blocked nerves, which are essentially nerves that, in response to stimulus, had no measurable nerve conduction velocity, or NCV, that a single treatment with SB-509 was sufficient to restore a measurable NCV in all three patients.

We plan to enroll 45 subjects with blocked nerves in a randomized placebo-controlled single-blind study, treat 30 of them with two doses of SB-509, and monitor changes in clinical symptoms, including NCV. We will update you on the progress of this program on future calls.

Finally, for those of you who did not have a chance to heard about it at our analyst briefing, I'd like to briefly introduce our program to develop a ZFP Therapeutic for glioblastoma. We are collaborating with Dr. Michael Jenson, MD, from the City of Hope. Dr. Jensen has developed novel chimeric immunoreceptors called zetakines that can be engineered into human immune cells. These cells can specifically recognize and destroy cancer cells. These modified cells are fused into the brain, following removal of the primary tumor. Frequently, however, glucocorticoid steroids must be administered to patients to control brain swelling and edema after surgery. While critical for the survival of the patient, these glucocorticoids also inactivate, or kill, the tumor targeting engineered T-cells through a protein in the T-cell known as the glucocorticoid receptor, or GR.

This severely limits the therapeutic approach; however, cells without a functional GR are resistant to steroids and are therefore available to destroy tumor cells. Dr. Jensen and his colleagues are collaborating with us to generate zetakine-positive, GR-negative T-cells that can be used in the presence of steroids.

Furthermore, we are developing this as an off-the-shelf product that can be utilized by any patient at an earlier cycle in their therapy. This is another application of our technology in a disease for which there are few options, and we are excited to be working with Mike to move this into the clinic later this year.

Time does not permit a more detailed update on our HIV CCR5 gene deletion program. In short, we remain on track to begin clinical trials at the University of Pennsylvania by the end of this year.

In conclusion, this will be a very busy and very important year for Sangamo in our clinical development efforts. I look forward to keeping you abreast of our progress. Edward?

Thank you, Dale. In the past two years, we have made significant progress in translating the technical advantages of our ZFP technology platform into a highly differentiated therapeutic pipeline. We begin 2007 with one ongoing Phase II trial in diabetic neuropathy and an ongoing Phase I study in intermittent claudication.

By the end of the year, we expect to have completed accrual on two Phase II neuropathy trials and will have initiated a third Phase II study in critical limb ischemia. We will also continue to prosecute our ongoing multi-center intermittent claudication Phase I trial this year, and very importantly, plan to initiate our first two zinc finger nuclease Phase I clinical trials in HIV/AIDS and glioblastoma.

By any measure, these developments are significant advances for our company. You should expect to see data from these clinical trials, as well as our ongoing preclinical programs, published and presented in major scientific and clinical journals and in disease-specific medical meetings throughout the year.

As I mentioned earlier, we view the establishment of additional strategic partnerships as core to our business model. With the increased interest in, and demand for, technology platforms that can be translated into therapeutic product development engines, we believe we are very well positioned for this new wave of corporate collaborations. Additionally, we remain very active in our efforts to commercialize and monetize our technology and intellectual property outside of the ZFP Therapeutic space through additional and expanded enabling technology agreements. You should expect to see activity on all of these fronts throughout 2007 and I look forward to providing you with more information on our progress in this area on future calls.

An excellent example of our ability to successfully monetize our technology is our relationship with Dow AgroSciences. Our collaboration with DAS continues to go very well, and we intend to provide further updates on our progress as more milestones are achieved in 2007.

From a financial perspective, we have put ourselves in a strong position to start 2007. You can expect us to continue to carefully manage our expenses while working hard to build value through clinical development and thoughtful strategic partnerships. While we expect our clinical development costs to increase significantly in 2007, we still expect to end this year with approximately $35 million in the bank. This is inclusive of the plans Dale outlined for the recently acquired ZFP angiogenesis programs.

Finally, I look forward to providing you with additional updates at the BIO CEO Conference in New York next week, and at the SG Cowen Healthcare Conference and the Future Leaders in Biotechnology Conference in March.

In conclusion, 2006 was a year of matriculation and transformation for Sangamo. Our first ZFP Therapeutic clinical data were presented in the first quarter, and our first Phase II trial was initiated in the fourth quarter. Our accomplishments over the past 12 months have positioned us very well for what will likely be the most important and significant year in our corporate history.

We are well launched and on our way toward our ultimate goal: to establish ZFP Therapeutics as a new and highly differentiated class of human therapeutics. We sincerely appreciate your help and support along this journey and we look forward to keeping you informed of or progress.

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

[OPERATOR INSTRUCTIONS] Your first question comes from the line of Mr. Charles Duncan with JMP Securities. Please proceed.

Hi, Edward and other folks. I wanted to First of all congratulate you on a great year of progress.

Thanks, Charles.

I also wanted to ask you, or ask Dale a question about the first PAD program. He said that you had opened up a couple of more sites. Could you give us a little more insight? Is this an issue with kind of the incidents or the patient availability or what do you think about the protocol that was being run by Edwards as you took it over?

So I think your question's specifically about the intermittent claudication trial at NIH and about additional centers and the design of the trial. Dale?

Yes. So Charles, at the NIH, or in the Maryland area, it's actually quite saturated with physicians and there was a significant difficulty in trying to get the type of accrual that we needed. And it's not unusual for these types of trials to have several sites throughout the country. So we have basically opened up additional sites in Alabama and Wisconsin, areas that are less saturated with the high density of surgeons in order to increase the accrual of the trial. The patients will be accrued and have the initial treatment there, but the long-term follow-up over a year and these critical MRI scans, they will actually be taken to the NHLBI in Bethesda and evaluated there.

Design? You want to talk about the design?

Yes. So the design of the trial is a placebo-controlled dose escalation and patients will be injected either in the affected leg or both legs. And there will be initial treatment at days 0 and 4 and they will be followed up approximately every three months for a year.

Thanks, Charles.

With Leerink Swann, your next question comes from John Sullivan. Please proceed.

Hey, guys, this is Isaac in for John. How are you?

Good, Isaac. How are you?

Good. Thanks for taking the question. First one on the CCR5 program, could you give us an update on the -- I think the viral vector work that was going on last time we spoke? Where are we with that right now?

We presented those data initially at [ICAC] and why don't I ask Philip to give you a sense of both where we are with that and what our timelines are.

Well, so we have essentially completed the research phase of testing the viral vector that you're referring to. Things have worked out very well with that vector certify and Dale's shop is basically working on the process development of that in large scale with T-cell manufacturing at the University of Pennsylvania to move that into clinical operations.

Great. Okay. And then you may have mentioned this earlier and if I missed it, I apologize. When we talked about the dosing for the SB-509 and DN trials, could we talk about -- remind us how you guys arrived at that dosage and you know, just a little bit more on how you got to that amount?

The precise data for that is actually the subject of our clinical presentation that will occur during the mid year, but suffice it to say that in our dose escalations, we noted that the top dose of 60 milligrams appeared to be the best dose with respect to both clinical and neurologic end points. So we have evidence based on the dose escalation and those end points that that's the appropriate dose.

Thanks, Isaac.

One last question, if you don't mind. How should we think about pacing for potential milestones From DAS this year? If you could lend any color on the amount there.

In terms of pacing, we expect to achieve additional milestones this year. We have not and really cannot give you a lot of color at this point, Isaac, in terms of either what those milestones are, although we will when we achieve them and DAS is looking forward to those announcements, as well. And then in terms of potential financial impact, as you know, we really don't give a whole lot of revenue guidance, but we will both achieve technical as well as financial milestones in that agreement this year.

OK, thanks very much.

Sure. Thank you.

With Piper Jaffray, your next question comes from Ed Tenthoff. Please proceed.

Great, thank you very much and my congratulations, too, on a very strong year and it looks like the stock's finally starting to reflect that a little bit.

Thanks, Ted.

I apologize if you answered this or even just answered this during the Q and A part, but Dale, you had mentioned in the Phase II CLI -- or Phase I CLI -- what were the doses that were given and the total number of patients that were in that trial?

There was a total of 20 patients and the dose escalation basically went from very low doses -- I think from 3 milligrams, to a total dose of 106 milligrams. And the 106 milligrams was separated over four deuces.

I see, so now five patients received that 106 at 4 doses?

Right.

And now, is that -- well, I guess we'll have to wait for the results. So you said that follow-up period was six months?

It's a year.

One year, okay. So we should anticipate data by the end of '07 or early '08?

Probably the end of '07.

End of '07. Okay, great. That's helpful. Also, just secondly, are you guys going to have a new name for the EW-A-401?

It's a hot topic, but at this point, to keep things so they don't get too confusing, we're going to keep it the same for now.

And then lastly, again, I know financial guidance is typically left to cash utilization, but can you give us an idea of what you think R&D might look like for '07?

Yeah, and Ted, I refer you to some of the guidance that I gave at the analyst briefing in December, but R&D, if you break it out, the research part of things will stay relatively flat, and the development side of things will be up probably in the 200% to 300% range. So a significant increase in the development costs.

Great, excellent. Thanks.

Yep, thanks.

Next with Cantor Fitzgerald, you have a question from Pamela Bassett. Please proceed.

Hi, thanks for taking my question. Actually my question was answered, but I would like to say congratulations on a great year and looking forward to more successes in '07.

Thanks, Pamela. Thanks for all your help.

Your next question comes from Alistair Mackay with GARP Research. Please proceed.

Yes, thanks for the call -- taking the call and most of my questions are answered, too. I did, Edward, wonder if you could say anything about what's chugging on in the background with the pharmaceutical cell lines? Any sign up of new pharma customers or any progress there?

Yes, yes, yes, and yes. It's an area, to quote my colleague Philip Gregory here, that 2007 is likely to be the year of the nuclease, both on the clinical side as well as in the cell line engineering side. And you should expect in virtually all the categories that we think about, new deals, revenues associated with those deals, announcements of those deals, publications around this work, presentations around this work. It's an area of significant and increasing visibility and importance for us, Alistair. And just to use that as an opportunity to reiterate, you know, we will continue to look for opportunities to thoughtfully leverage our technology into areas where we can monetize the technology and intellectual property value and still retain the large parts of the Therapeutic platform. So the cell line Engineering space really represents a great example of that.

Oh, great. And let me ask one clinical question, too. As you think beyond Phase II, if we were going to speculate that some of the Phase I successes would be followed by successes in Phase II, do you have any sense of when you might be thinking about starting your first Phase III?

Well, it would require a lot of speculation, but let me just tell you what we have said out loud and maybe you and others can take it from there. We expect to complete accrual on the Phase IIs in the neuropathy work -- both the blocked nerve and the diabetic neuropathy -- this calendar year, and we've guided to data from those studies in the second half of 2008. So under your hypothetical, that those data are compelling, one would want to move as quickly after the second half of 2008.

Great, okay. Thanks very much.

Thank you, Alistair.

Your next question comes from Grant [Zing] with [Vax] Equity Research. Please proceed.

Also my questions have been answered, but I just want to emphasize another one. For the R&D expense, because if you are going to develop the EW-A-401 For your own, the R&D would increase dramatically this year. Do you have any guidance for the R&D costs for this year?

Yes. Thank you, Grant. We've looked at the expenses that we will incur in order to prosecute the new angiogenesis assets. The Phase I intermittent claudication trial that's ongoing is largely -- although not completely -- but largely funded by the NIH and so our incremental costs there, particularly given the infrastructure that we're building out now in our own clinical management group, is not significant.

In terms of the costs related to the Phase II CLI trial that we just guided that we would start in the second half of this year, again, two points. One, we will realize most of those costs in 2008 and the manufacturing costs, so much of the up-front costs of the materials are already invested in part of the acquisition that we made. So net net, the prosecution of those programs is a 2008 -- I'm sorry, 2007 expense in cash impact. Do not materially change the cash guidance that we gave earlier.

Okay, so are you actively looking for a new partner for EW-A-401?

Well, again, broadly speaking, partnering is -- and strategic relationships -- are core to our business model. And those are the sorts of relationships that you should look for us to do over the next several months and several years. It's really the way we've built our business model. And so we're looking at points of value creation and those inflection points, and we'd like to realize the value that we're creating. So we're in a mode now of really getting our hands around these consolidated assets. I can tell you that consolidation of all of the VEGF activation rights into Sangamo has been already, and will be, going forward, a significant positive for us in our corporate partnering discussions.

Thanks a lot.

Thank you, Grant.

Next we have a follow-up question from the line of Charles Duncan with JMP Securities. Please proceed.

Hi, it's Felicia Miller.

Hi, Felicia. You're not in the same wind tunnel as Charles?

[laughing] I actually had a same question regarding the corporate partnerships, if you could provide any more insight on timing or as far as what you're looking for out of a partner?

I think I've largely addressed that in the last question, Felicia, so I really don't have a whole lot to add beyond what I said in the prepared remarks. It really is those sorts of relationships are core to our business model both on the therapeutic side as well as the enabling technologies side. You should expect to see activities out of us.

Thank you.

Thank you.

And now a follow-up question from the line of Ed Tenthoff with Piper Jaffray. Please proceed.

Great. Just one quick kind of housekeeping, a little detail oriented here, but on the SG&A side, was there anything in the fourth quarter that caused that to jump a bit with respect to the Edwards deal or anything along those lines?

I'm looking at Greg, Ted, so I'm deferring.

Ted, we had some increased legal costs, and a lot of gearing up for year-end work. That's about it, though.

Okay, great. Thank you.

Sure, thank you.

Next we have a question from Sean Wu with Rodman & Renshaw. Please proceed.

Congratulations on very good fourth quarter. I have a question about your cash burn for the year. You said right now you have 54, so you end the year 35, so that burned 19, or you're expecting some kind of cash infusion from financing? What I wanted to get is what is your cash use for '06?

Good question, Sean. Thank you for the opportunity to clarify this. So as you've seen from our financials that we released today, we ended the year with slightly less than 54 million in cash. We've guided to ending '07 with approximately 35 million in cash and you're correct, that's a $19 million delta. That assumption is based upon revenues that are relatively flat year-over-year and with obvious increase in expenses.

Incremental significant new partnerships that we bring on will affect and reduce the overall cash used. And as the year goes on and as some of those relationships are announced, we will take that opportunity to adjust, as we have in past years, in a positive way, our cash guidance. But right now, based upon what we know about existing revenue streams and consistent with the expenses associated with prosecuting the plans that you've heard about on this call, we expect to end 2007 with the approximately 35 million in cash.

So your R&D for this year is like 22 million, so you said your "R" is going to stay about the same but "D" will increase 2 to 300%.

Please, and here I refer you to the slides that we used at our analyst briefing. They're still up on our website. What I said is the research component of our expenses will remain relatively flat. The development component of our expenses will go up significantly. And I broke that out on the earlier slide. So R&D will not go up that percentage.

So can you just give a quick break down --

Well, I'd actually like to just go back and answer the question the way I did in the beginning, which is to say under an assumption that we do not have a significant increase in revenues, we will end this year with approximately 35 million in cash.

Great, thanks.

Thanks, Sean.

Okay. There are no further questions in queue.

Thank you. We'd like to thank you for joining us and we look forward to speaking with you again when we release our first quarter financial information. We'll be available later today if there are any follow-up questions. Thank you.

Ladies and gentlemen, thank you for your attendance in today's conference. This concludes your presentation. You may now disconnect. Good day.