Sangamo Therapeutics Inc (SGMO) 2008 Q1 法說會逐字稿

Good afternoon, and welcome to the Sangamo Biosciences quarterly teleconference. This call is being recorded. I will now pass it over to the coordinator of the event, Dr. Elizabeth Wolffe, Director of Corporate Communications.

Thank you very much. Good afternoon, and thank you for joining Sangamo management team on our conference call to discuss the Company's first quarter 2008 financial results. Also present during this call are several members of Sangamo's Senior Management including Edward Lanphier, President and Chief Executive Officer; Ward Wolff, Executive Vice President and Chief Financial Officer; and Dale Ando, Vice President of Therapeutic Development and Chief Medical Officer. Following this introduction, Edward will highlight the Company's recent activities. Ward will then briefly review first quarter financial results. And finally, Edward and Dale will up indicate you on our upcoming events and progress in our therapeutic programs. Following that, we will open up 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 market and the 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 our comments from today are still valid. We alert you to be aware of risks that are detailed in documents that the Company files with the Securities and Exchange Commission, specifically our quarterly reports on Form 10-Q and our annual report on Form 10-K. These documents include important factors that could cause the actual results of the Company's operations to differ materially from those contained in our projections or forward-looking statements. Now, I'd like to turn the call over to Edward.

Thank you, Liz, and thank you all for joining us for our 2008 first quarter conference call. On this call I will briefly highlight some of our accomplishments and ask Ward Wolff to update you on our first quarter financial results, Dale will then update you on our ZFP therapeutic programs and upcoming events in particular ADA and I'll wrap up with a review of our objectives for the rest of 2008.

We expect this year to be a busy and important year, and we have set a number of aggressive goals particularly for our clinical development programs. It was therefore gratifying to be able to start the year by achieving one of those goals. In January, we announced the initiation of our third Phase II trial of SB 509. This study is designed to follow-up on an observation made in our Phase I diabetic neuropathy trial in which we observed an increase in the number of circulating stem cells in the bloodstream of subjects after a single treatment with SB 509. Our new stem cell study is a randomized, single blind placebo controlled multi-center Phase II clinical trial designated SB 509 703, in subjects with mild-to-moderate diabetic neuropathy. This study is designed to evaluate the pharmacokinetics of stem cell mobilization into the bloodstream after the treatment with SB 509 as well as the safety and clinical effects of administration.

Early data suggests that SB 509 treatment may mobilize between 100 and a thousandfold more cells than are typically being introduced into subjects in many of the ex-vivo stem cell therapeutic approaches that are currently being tested. Interestingly, the stem cells that have been observed post treatment with SB 509 are highly enriched in cell types that mediate tissue repair. We will have more to say on the topic of stem cell mobilization later on this call, including an announcement of the first clinical data presentation for this program at the International Society for Cell Therapy, Cellular Therapy, Annual Meeting next month.

On the business development front, we entered into a second research and license agreement with Genentech and a new license agreement with Open Monoclonal Antibody Technologies or OMT, for the use of ZFP nuclease technology. Our agreement with Genentech is noteworthy, as it is a significant expansion of an earlier agreement and includes additional VFN targets for potential improvement of production cell lines. We also announced a nonexclusive license with OMT for the commercial use of transgenic animals generated using proprietary ZFN technology. You can expect to see more of these types of agreements and announcements throughout 2008.

We also achieved yet another important research milestone as part of our joint research and commercial license agreement with Dow AgroSciences. This milestone represents the successful application of our ZFN technology in precision genome editing of a native plant gene with the aim of improving a valuable trait in canola, a crop central to Dow AgroSciences business. The ZFP technology and this milestone were featured in a presentation by Jerome Peribere the CEO of Dow AgroSciences at the Goldman Sachs Annual Agricultural Biotech Forum in February.

In terms of our pre-clinical pipeline, we presented important pre-clinical data from our ZFP therapeutic program for the treatment of of glioblastoma multi-form. The data were presented at the new approaches to biological therapy session at the 2008 Annual Meeting of the American Association for Cancer Research or AACR, by Sangamo collaborator Dr. Mike Jensen, Associate Chair of the Division of Cancer immuno-therapeutics and tumor immunology at CIty of Hope. Data were presented demonstrating that treatment of T-cells engineered to kill glioblastoma cells with ZFN specifically targeted to glucocorticoid receptor or GR gene resulted in the knock out of the GR gene creating glucocorticoid resistant T-cells. These betakine positive GR negative T-cells kill glioblastoma cells in vitro as well as in a mouse model of glioblastoma in the presence of the glucocorticoid dexamethasone. We remain on track to file the IND and initiate a Phase I clinical trial for the treatment of glioblastoma later this year.

We also published data demonstrating the use of our ZFN technology for the rapid generation of knock out cell lines. Our partner, Sigma-Aldrich announced the publication which was co-authored by scientists from Sangamo and Pfizer. These ZFN knock out cell lines are powerful tools that can be widely used in research to identify genes functions, in drug development to screen potential drug candidates, and for production of protein pharmaceuticals. The data were published in the proceedings of the National Academy of Sciences and generated a great deal of interest in the media and in the research community. To paraphrase a commentary in PNAS, written by an independent scientist, :It is clear that ZFNs have enormous potential with far reaching applications in basic science and medicine. To date, ZFNs have been shown to work in several mamallian cell lines including human stem cells and in a range of organisms. If it were as easy to get ZFNs as it is to order restriction enzymes, geno manipulation in most organisms would become trivial and the knock out or correction of disease genes in patients or in their stem cells could be seriously contemplated".

Well, I'm pleased to report to the author of this commentary that it soon will be as easy to get zinc finger nucleases as it is to order restriction enzymes. This of course is being enabled through our partnership with Sigma-Aldrich who will make these high value reagents available to the research community at large and facilitate their broad based use and development. You should expect to hear and see a great deal more about these products when Sigma formally launches the ZFB products in the Fall.

Finally, I'm very pleased to announce that Tom Wiggans, who was most recently the CEO of Kinetics Corporation has been nominated to serve on our Board of Directors. Tom's strategic and operational expertise a a senior biotechnology executive combined with his outstanding service on multiple life sciences Boards will be invaluable to Sangamo Board and Management team. We look forward to welcoming him as a member of our Board at our annual meeting on June 4.

And with that summary of recent activities, let me now hand the call over to Ward to review our financial results for the first quarter of 2008. Ward?

Thank you, Edward, and good afternoon, everyone. As you know, after the close of the market today, we released our financial results for the first quarter ended March 31, 2008, and I am pleased to review the highlights of those results. Revenues in the first quarter of 2008 were approximately $2.8 million compared to $1.4 million for the same period in 2007. The increase in 2008 is primarily due to amortizing into revenue the up front payment with respect to our laboratory research reagents license agreement with Sigma-Aldrich, ongoing revenue recognition from our collaboration agreement with Dow AgroSciences, enabling technology agreements in protein production such as with Genentech, as well as research grants, including grants from the Juvenile Diabetes Research Foundation and the Michael J. Fox Foundation. The revenue recognized for the first quarter of 2008 consists of $2.1 million in collaboration agreements and $0.7 million in research grants.

Total operating expenses for the first quarter of 2008 were $11.6 million compared to $7.4 million for the same period in 2007. Included in operating expenses were non-cash employee stock based compensation costs of $1.7 million in the 2008 quarter compared to $0.5 million in the 2007 quarter, with the increase between years due to increased grant activity, higher stock grant prices, and a lower estimated forfeiture rate as primary contributors.

Research and development expenses were $8.6 million in the 2008 quarter and $5.4 million in the prior year quarter. The increase is primarily due to the expanded clinical program in diabetic neuropathy and pre-IND programs in HIV/AIDS and glioblastoma as well as increased R&D personnel costs and labs supply expenses with the lab supply increase primarily related to the Sigma-Aldrich collaboration. Personnel related R&D costs included non-cash stock based compensation referenced above in the amount of $0.9 million in the 2008 quarter compared to $0.3 million in the 2007 quarter.

General and administrative expenses were $2.9 million in the first quarter of 2008 compared to $2.0 million in the 2007 quarter. The increase is primarily due to increased personnel costs including non-cash stock based G&A compensation costs of $0.9 million in the 2008 quarter compared to $0.2 million in the 2007 quarter.

For the first quarter of 2008, we reported a consolidated net loss of $8.0 million or $0.20 per share compared to a net loss of $5.4 million or $0.15 per share for the first quarter of 2007. With respect to the balance sheet, we ended the first quarter with $73.6 million in cash, cash equivalents and short-term investments. Our net cash used in operating activities was $8.4 million for the first quarter and a total decrease in cash and investments of $7.8 million from year-end levels. I am pleased to say that we are on track with respect to our operating plan through the first quarter and we are maintaining our guidance provided at our year-end call in February of having cash and investment balances on hand of at least $55 million at the end of 2008. As you will recall this guidance assumes no new financings or partnering but it does include milestones in the anticipated exercise of the commercial license by Dow AgroSciences in the second half of this year.

Our historic and currently fiscally responsible cash management approach has put Sangamo in a strong position to execute on our 2008 operating plan and for the foreseeable future. Specifically, while we fully intend to continue to execute on our hybrid business model by establishing new corporate partnerships in our core ZFP therapeutics business as well as in non-core areas, independent of success in any of these areas, our current cash position is sufficient to enable us to fund our current therapeutic development pipeline through 2010.

In summary, we are pleased to have executed on our financial plan for the first quarter of 2008 with respect to our operating results and net cash used in operating activities. We look forward to executing on our 2008 goals as the year unfolds. We will continue to be focused on advancing our clinical and pre-clinical pipelines while maintaining our historical financial discipline. Thank you, and I'll now turn the call back over to Edward.

Thanks, Ward. As you have heard, we have a solid cash position and are on track at the end of the first quarter with our financial plan which will enable us to aggressively pursue our clinical development programs and advance our pre-clinical pipeline. Looking forward, we expect to end 2008 with at least $55 million in cash and cash equivalents. Importantly as Ward just mentioned I'm very pleased to reiterate that assuming no new partnerships or financing, our cash position represents sufficient resources to fund our current plans and operations through 2010.

Now, on to our clinical programs. As you know, 2008 is a very important year for Sangamo. Our lead therapeutic program is a development of SB 509, a ZFP activator, a vascular endothelial growth factor of VEGF for the treatment of diabetic neuropathy. Peripheral diabetic neuropathy is a major complication of diabetes and a rapidly growing problem around the world. Currently, the only drugs approved to treat DN are based upon blocking a patient's perception of pain. In contrast, we're developing SB 509 to protect and possibly regenerate nerves damaged by the insult of diabetes. At this time, we have completed a Phase I B trial and currently have three ongoing Phase II clinical trials employing this drug.

Looking forward, we are very pleased to have the opportunity to present the complete and final data from our placebo controlled Phase I B study of a single treatment of SB 509 in subjects with mild-to-moderate diabetic neuropathy at the 68th Scientific Sessions of the American Diabetes Association meeting that is being held from June 6 through 10 here in San Francisco. As most of you know, during this trial, we collected a great deal of clinical data, comprising both qualitative data points and quantitative measurements including quantitative sensory testing and electrophysiological data such as nerve conduction velocities. The data that we have presented to date suggests that a single treatment of SB 509 results in a statistically significant and clinically relevant improvement in quantitative measures of neurological health at 180 days after a single treatment.

On this call, I have asked Dale to provide you with a detailed discussion of the type of data we collected in the Phase I B trial. In particular, Dale will discuss the composite end points that are used in this disease setting to measure and determine clinical benefit. This background will be very useful to all of you as you evaluate and consider the data that we will present at ADA, as well as the additional clinical data that we plan to present later this year. Dale?

Thanks, Edward. As you have heard, the current approved drugs for diabetic neuropathy are anti-epileptic and I anti-depressant. They work to lessen the pain of this condition but do nothing to slow the progressive nerve damage that's a characteristic of diabetic neuropathy. They're approved of the basis of the digital analog scoring system for pain or VAS which is a quantitative assessment of a subjects pain symptoms on a scale of 0 to 10, with 0 being no pain and 10 being the worst possible pain.

Our approach is different. Our goal is to directly treat the deteriorating nerves in the leg to protect and possibly reverse some of the damage caused by poorly regulated blood glucose, a consequence of ongoing diabetes. We're activating the production of a potent growth factor VEGF using SB 509, a formulation of a ZFP transcription factor. While we're collecting VAS data as well as other qualitative assessments of patient well being in our trials we're also collecting a broad neurologic data set aimed to more accurately gauge the results of the sensory reflex and motor neurologic examination of the lower extremities. Included in these data sets are quantitative assessments of mechanical sensation and quantitative assessments of the speed of electrical conduction in the large motor and sensory nerves of the lower legs. These various measurements collected at baseline and during subsequent visits post-treatment provide specific metrics to analyze changes from the baseline values.

As in other neurological studies these multiple measurements serve as both individual end points as well as components of composite scores designed to quantify symptoms and changes in neuropathy. These composite scores include the total neuropathy score or TNS and the neurological exam score, the NIS LL which stands for neuropathy impairment score lower limbs. These composite scoring systems have been developed in the last decade to facilitate quantitative assessment of the neurologic evaluation and exam to evaluate clinical patterns of disease progression neuropathy and potential ameliorative effects of Novel treatments. The TNS is a composite DN score that combines three separate symptom end points, four separate neurologic end points, and three quantitative sensory testing or NCV end points. Each of the 10 individual components of the TNS is graded out of 4 points for a maximum score of 40 points. But TNS is especially useful in exclusion of candidate patients into the trial, and classifying their degree of diabetic neuropathy as mild-to-moderate to severe.

On the other hand the NIS LL is a more specific quantitative score for the neurologic exam, of the lower legs and measures motor strength out of a total of 64 points, reflex exam and sensory exam out of a total of 24 points. The use of these composite scores provides a quantitative approach to the complete neurologic evaluation, comprising neurologic symptoms, examination and instrument testing, this is the TNS, or the neurologic exam, this is the NIS LL. For comparison between serial evaluations for an individual subject, and between multiple subjects in a trial. This is especially important in developing quantitative metrics that are reproduceable in a clinical trial between patient visits and between different investigators. The NIS LL is a specific score for the physicians neurologic exam and useful in evaluating the efficacy of potential neuroprotective or neuroregenerative treatments for DN. That's why we believe the NIS LL is particularly relevant for SB 509.

While you will hear more about the NIS LL at ADA, this composite score focuses on the motor sensory and reflex examine in a summation fashion for both lower limbs and provides up to a maximum of 88 points in these evaluations. In contrast, the TNS which covers all aspects of the neurologic evaluation has only 4 end points for a total of 16 points in the neurologic exam. The neurologic exam is a key clinical instrument to detect neurological changes in DN trials. For that reason the neurologic exam measured by the NIS LL was the primary end point in Genentech's 1,000 subject Phase III trial of nerve growth factor or NGF in patients with DN. An improvement of only 1 point in the NIS LL was the objective treatment and approval with NGF. While that different was not achieved in a Phase III trial, this is a well accepted and approvable end point of clinical benefits for diabetic neuropathy.

The data we will present at the ADA meeting in June from our completed Phase IB study will include measurements of change in motor and sensory NCV, changes in QST, and improvements in nerve health as judged by the TNS and the NIS LL. Just to remind you, we enrolled 24 subjects in the Phase I B trial, 12 received a single treatment with SB 509, and 12 with placebo. Subjects were examined and tested at baseline 30, 60, 90 and 100 days post-treatment and we'll present data from all of these time points.

Turning to our Phase II SB 509 study, over the past several weeks we have been asked about the presentation of Phase II data at ADA. I can tell you that data will not be presented from our double-blind repeat dosing trial in subjects with mild-to-moderate DN, SB 509 601 as we do not expect to present those data until the fourth quarter of 2008. We have, however, submitted a late breaker abstract to ADA and if that is accepted we'll present interim data from our SB 509 701 trial. Our repeat dosing single blind study of subjects with moderate to severe DN. In any case, ADA will be an important meeting for us and one that I believe you'll find most interesting.

Finally, I'd like to announce a presentation a clinical data from our critical limoschimia, or CLI program. In approximately two weeks, Sangamo collaborators will present clinical data at the International Society for Cellular Therapy Annual Meeting in Miami. These date which entered at Duke University in an open label study employing our ZFP activator of VEGF in subjects with CLI. In the study clinicians measure tissue oxygen profusion or TCP02 as a key clinical indicator of angiogenesis, as well as levels of aldehyde dehydrogenase bright stem cells in the bone marrow and bloodstream before and after treatment. Data will be presented on the clinical effects of ZFP VEGF activation and the correlation with stem cell mobilization.

As you know, stem cells are of interest as potential therapeutic agents as they can be induced to become cells with a special function of the body such as nerve and blood vessels. And can potentially migrate from the blood circulation into areas of injury or degeneration to participate in the bodies repair response. The stem cells that have been observed post-treatment with our VEGF activator are highly enriched cell type that immediate tissue repair. These are very intriguing data and could provide additional insights into our ongoing Phase II stem cell mobilization study SB 509 703. I look forward to updating you on the specifics of our data and progress on future calls. I'll turn the call back to Edward who will update you on our goals and expected milestones for the rest of the year.

Thanks, Dale. As you have heard, we are entering a very important period for Sangamo, with several upcoming clinical data presentations over the next couple of months and multiple commercial milestones to look forward to later in the year. Moving beyond our DN programs for a moment, we remain on track to initiate three more clinical trials this year. We're moving forward with plans to initiate a Phase II study to evaluate SB 509 for the treatment of Amyotrophic Lateral Sclerosis or ALS. As we have said before we'll have more to say about the specific design of this trial when it is initiated later this year. We are also on track to file the first INDs for our ZFN based therapeutics and initiate Phase I clinical trials for the treatment of glioblastoma and for HIV/AIDS later this year and I look forward to giving you more information on both of these important programs on future calls.

In addition, we continue to advance our ZFP therapeutic pre-clinical pipeline. We have initiated studies in validated animal models of stroke, traumatic brain injury, and Parkinson's disease, and expect to publish and present pre-clinical data in spinal cord injury, neuropathic pain, and ZFN mediated gene modification throughout this year.

From a commercial perspective, our hybrid business model of establishing strategic partnerships that enable us to monetize our technology in non-core areas enabling us to own and aggressively move our therapeutic programs forward has been very successful. As you heard today, we have already established new agreements and have expanded existing relationships this year. You should expect further progress around our ZFN technology for cell line engineering as well as increasing visibility from our DAS collaboration as we continue to achieve significant milestones and as we approach the exercise of the commercial license.

We also expect to see increased visibility for our ZFP technology as a result of our research reagents collaboration with Sigma-Aldrich. Sigma has already begun selling ZFP based products to commercial entities and will launch a more general sales and marketing campaign focused on the academic community later this Fall.

In this vein, as most of you know, we view the establishment of additional strategic partnerships as core to our business model. We have been successful at partnering the non-core areas of our business in plant agriculture, research reagents, and cell line engineering; however, with the evident increased interest in technology platforms that can be translated into therapeutic product development engines we believe we are very well positioned for future collaborations and transactions. We currently own 100% of our therapeutic programs and have amassed a dominant intellectual property position. These are definitely interesting and dynamic times in our industry and I believe that we are well positioned to realize the value that we are creating.

More specifically, our business model has also assumed that we will partner our therapeutic programs as they reach points of significant value inflection. For our lead therapeutic program, SB 509, Phase II data represents such a point. You can and should expect to see activity on these fronts as the year progresses and I look forward to providing you with more information on future calls.

Finally, from a balance sheet perspective, we remain in very good shape. You can expect us to continue to carefully manage our expenses while working hard to build value through a maturing clinical pipeline and through strategic partnerships. While we expect our clinical development expenses to be somewhat higher in 2008 than in previous years, as we stated earlier, we expect to end the year with at least 55 million in cash and cash equivalents which we believe represents at least two years worth of cash.

In conclusion, we remain focused on our goal of establishing ZFP therapeutics as a new and highly differentiated class of human pharmaceuticals and are entering an important and exciting period in the realization of that goal.

Thank you for your attention this afternoon, we will provide additional updates at the Banc of America conference, the JMP Securities Annual Research Conference, and the Citi Investment Research Healthcare Conference all in May. We also will hold our Annual Meeting on June 4, at 9:00 a.m. Pacific time here at our Company headquarters in Richmond, California. This completes our prepared comments. We would now like to open up the call for your questions.

Certainly. (OPERATOR INSTRUCTIONS) We will go ahead and take our first question from Ted Tenthoff, with Piper Jaffray.

Great. Thank you, can you hear me okay?

Hi, Ted.

Hi, how are you? Congrats on a good quarter. Can you just go into a little bit more detail on maybe (inaudible - audio difficulties).

I apologize. We are unable to hear you at this point. Your phone line is breaking in and out.

Ted?

We have lost him. We'll go ahead and move on to Pamela Bassett with Cantor Fitzgerald.

Hi, thanks for taking my call.

Hi, Pam.

Hi, congratulations on having so much cash on hand to go through 2010. It's a great time to be able to say that. You ended the call with a discussion of potential partnering and it sounds like you're suggesting partnering around SB 509, yet I wonder about some of the earlier stage programs whether they're SB 509 or other. Are those potentially assets that might be partnered this year?

Well, if you hadn't included the last two words, this year, a broader discussion of our overall plan, and let me just start there, but the short answer to your question is no, I wouldn't guide to any additional pharma partnerships, therapeutic partnerships this year, but overall, Pamela, that is core to our business model and as I think we reach points of of value creation, value inflection, and particularly for opportunities where it really makes sense, strategic sense to bring a partner who has the kind of focus and infrastructure and core competencies that can really accelerate clinical development and commercialization, we're going to look for those opportunities.

Can you tell us a little bit about your priorities and your criteria, the kind of criteria that you'll use to secure the appropriate relationship?

Well, there are a couple. I just mentioned probably some of the major ones for us. What we're really interested is a partner who has a real passion, real interest, real enthusiasm around the product and the indication, and that typically is where the partner who has experience in that space, and has a track record for developing drugs with these kinds of, in these kinds of indications. It's also important for us that that partner have a marketing sales and a distribution capability and calling on physicians that are consistent with that indication. So those are probably the main criteria. Obviously, there are important financial components that go into any collaboration, and finally, there are probably issues around geographical exclusivity, but first and foremost it's really partners with strong core competencies and ability to really accelerate the development and commercialization of the drug.

So just two quick follow-ups to that. Is the Company's experience with biologics a key factor or is it more their competency in the marketplace and what they can do from a launch standpoint and selling and distribution? And second, will you be looking for anything in terms of co-marketing or is it too soon for Sangamo to start thinking about that?

Well, in terms of the Company's experience, as you know, the vast majority of the top 50 pharmaceutical companies have experience in biologics broadly defined but it's not a requirement here. What we're really looking for is a partner who has again strong development experience in the indications of interest and a marketing and salesforce that call directly on that the physician group. In terms of our, of deal terms at this point, Pamela, while we have had extensive discussions internally and otherwise, I think it's probably too early to give any guidance in terms of specific individual deal terms. Thank you.

Moving on we'll take our next question from Liana Moussatos with Pacific Growth Equities.

Do you think you'll start the Phase II for ALS and the Phase I for glioblastoma for Q2 or will it be later this year? And then I have a couple of other questions.

Thanks, Liana. I think what we've guided to is this calendar year, and I think as we said, I'll leave it to that until we've actually started the trial and at that point, we intend to give much greater information about the trial design and so on.

Okay, and do you expect, you mentioned that Sigma has already started selling ZFN products to commercial entities in the Fall, do you expect revenues from this in 2008?

Yes.

Okay. And have you guided to what amounts?

No.

Okay, all right

Guidance, as you know, is pretty high level from a financial perspective.

Okay, and when will you guys know whether the late breaker ADA for the moderate to severe diabetic neuropathy trial will be expected?

Well, we will know in a certain time frame, but I don't think we're going to announce that. We, like everybody else, I think this is public, will know in May whether the late breaker was accepted, but we will not announce that.

Okay, and you mentioned in two weeks the Miami meeting for the CLI data from the Phase I trial. What are you going to do with it, with the product after this data comes out and what's the status of the the Phase I for the intermittent claudication trial?

Sure. Well, we've already begun the Phase II trial in terms of the broader stem cell mobilization and that was a function of pre-clinical data, data we had seen from our own DN trial and our insight into this critical ischemia study that was conducted at Duke so the first answer is that the Phase II SB 509 703 trial is a consequence of all of those combinations. The intermittent claudication trial is still ongoing at the NIH and there's no update on that as that's a double-blinded trial.

Okay.

We should probably give others a quick shot but we'll to to get you back in the queue.

I only have one knit picky question for Ward.

Okay.

You added up the stock option expenses to $1.7 million but for R&D and SG&A they were each 0.9 and that adds up to 1.8.

Right. They basically rounded up, Liana, when you look at them separately, but on a combined basis, they rounded down to the 1.7 if that's helpful.

Okay, were they about the same level? Or were some higher than the other?

They were pretty close to the same.

Okay. Thank you.

Yes.

Thanks, Liana.

We'll go and take our next question from Joe Pantginis with Canaccord Adams.

Hi, guys, good afternoon. Two quick questions. First, on the CLI study, Dale was mentioning about the correlations between VEGF activation and the stem cells obviously, what are the clinical measures from that study?

I'll start and then see if Dale wants to expand. The only thing that we mentioned on this call was the tissue oxygen levels, and I think that's all that we're talking about at this point. Dale, anything else you want to mention?

No.

So I guess I'd just say stay tuned for the presentation at ISCT in May.

Okay, great. And then just going to your lead program obviously in diabetic neuropathy, whether you're -- the late breaker is accepted or not, I think it would be very helpful to go over real quick what I consider to be the promise of the moderate to severe type of population, obviously you had some early stage data which prompted you to go after this type of population, that is I guess generally recalcitrant, if you will, there's nothing out there to treat but you have had some real quantitative data to show that you could have an impact in this population so just wondering if you could go over the rationale again?

Yes, so, the Phase I trial, we had three patients who had blocked nerves upon entry into the trial, and just coincidentally all three were treated with SB 509 and over the course of six months follow-up, had return of a measurable blocked nerve. Two had consistent return and one patient had a return for a blocked nerve for over the course of say three months and then it reverted back to blocked nerve after six months. So with this very very high incidence of being able to actually redetect a nerve that was no longer measurable that was the rationale for design of the blocked nerve study in the moderate to severe patient.

Sure and that's still your data is after only a single treatment, so presumably with the multiple treatments you could have a better benefit there at least the way I view it?

Yes. That was the plan.

Okay, great. Thanks a lot, guys.

Thanks, Joe.

We'll go and take our next question from Charles Duncan with JMP Securities.

Hi, guys. Congratulations on a good quarter of progress.

Thanks, Charles.

Let's see. I had a question regarding the cash statements that you guys were saying regarding the fully funding the therapeutic plan through 2010. I like that. I agree with an earlier person that this is a good environment to be fully funded, but could you lay out some of your assumptions with regard to clinical trial starts within that time period? Or is it just covering the current ongoing trials and the ones you plan to start this year?

The latter, Charles.

So in terms of the diabetic neuropathy program, you are not planning on starting additional trials or you're just including the funding for the ongoing trials?

Again, you said it correctly the first time, I'm going to repeat what you said. That the guidance we gave on this call about cash through 2010 includes the funding of the ongoing trials as well as the trials that we expect to start this year.

Also, let me ask you, Edward, in terms of the current design of say the mild-to-moderate trial. Remind us, it's basically a six-month duration dosing trial and then a one year follow-up or so?

No.

Charles, this is Dale. So the treatment is every two months with three treatments so that's a baseline at two and four months, and the primary analysis is at six months and that's designed to be at a what could possibly be the summation peak of efficacy of those three single treatments. The trial, we'll have follow-up throughout the year because we would like to see the durability of effects but the primary analysis is that six months after the entry of the first patient, and that's basically two months after the last treatment of the last patient.

Okay, so just to be clear, you are encapsulating the entire durability portion as well, so you're fully funded for those programs?

Yes. The last part of just following up and checking on those patients that's not very expensive and for the amount of money that is sunk into the trial it's well worth to see what the durability of the effect is.

Okay. And then also I wanted to touch on the composite end scores or composite scores that you talked about in terms of the clinical end points. Thanks, Dale, for going through those, although you went through pretty quickly. On the NISL score just to be clear, those were. well, both of those were composite end points that you have or have not put together and have or have not been used in pre-base clinical trials with drugs?

Well, those have been used in many previous trials, and basically, it's a quantitative assessment of the neurologic exam, so it puts what a neurologist does with his hammer and measuring strength and measuring reflex and using pins and cotton swabs into a quantitative fashion. It's been used in , it was developed by Peter (inaudible) at Mayo Clinic and modified by Vera Brill, using 1,000 patient Phase III trial by Genentech is the primary end point so of the scales that measure the clinician or the neurologic expert exam, this is one of the best accepted sort of scoring systems.

Okay, that's helpful, and then with regard to that Genentech end point, I know that you folks did not sponsor that trial, so I'm sure you don't have any particular insights here, but it was a large trial. Do you have any sense for why you missed the end point, was there a pretty high dropout rate in that trial?

Yes, no, there wasn't. In fact, the major reasons given in the publications were basically, they changed their manufacturing of the product and secondly, they used the lower of two dose levels in the Phase II that gave sort of a maximal efficacy and at the top dose level in Phase II gave about a 1 point difference whereas the lower dose level gave about a 0.5 point difference. In this clinical trial, which is probably the largest DN trial ever performed recently in the U.S., there was absolutely no difference in the NIS LL or neurologic exam between placebo and treatment.

Other speculation from people that we've discussed with is that the whole area of nerve growth factor, protein nerve growth factors and their ability to get into the nerves and in fact, have significant concentrations on neurological effects has been very minimal. So at that same time, NGF did not work, nurotrophin 3 was in large trials at Amgen and that did not proceed. So I think the whole field of protein, neurotrophic factors really had a major difficulty in pharmacologic delivery into the site of action.

And then really--?

Charles we should, if you don't mind, we should probably get you back in the queue and get other people a chance to ask some questions.

(OPERATOR INSTRUCTIONS) Next we'll hear from Brian Rye with Janney Montgomery Scott.

Well, good afternoon, guys, and thanks for taking my question.

Brian, how are you?

I'm doing well, thank you. Most of my questions have been answered and I guess just one at this point for Dale. And that is in regards to the glioblastoma program and I know, Edward, you mentioned that you'll certainly give more details about the specific protocol for the first Phase I study once the IND is filed and Phase I trial begins but just curious looking at how the ZFNs are employed in that setting to essentially treat the T-cells, Dale I'm wondering if you could just maybe generally talk about in either the Phase I trial or future studies, mechanistically if a patient enrolls in the study, what would the treatment regimen hypothetically look like regardless of what is used in combination with or what have you?

The treatment regimen was the ZFN?

Yes.

So basically the trial is designed as an infusion into the brain tumor, either through a reservoir that's basically a result of drilling a hole in the skull or commonly if the patients are eligible for tumor resection they undergo tumor resection, maybe some radiation surgery and at the time of tumor resection, that reservoir can be put in and then it's envisioned basically as an infusion several times a week over the course of two weeks with some added T-cell growth factors and during that time, the T-cells will basically act as cellular scalpals killing the tumor within the brain and then basically the T-cell support cytokine will be withdrawn and the cells will be dissipated. And what it's designed to do is really kill the parts of the tumor that the surgeon or radiation can't get at because these tumors grow like fingers into parts of the brain and you can't really just cut out whole pieces of brain without having a significant effect on the patients function.

Would you plan out essentially two weeks hypothetically of treatment ahead of time or would there be some sort of monitoring with potential adjustments to the administration or I guess the infusions during that time?

My guess in previous trials using these types of T-cells without the GR modification and it looks like this two week treatment time is probably an optimal cycle and cycles are very commonly used in chemotherapy, and depending on how the patient does, cycles can need to be repeated or not.

As you mentioned right up front, Brian, it's a little more of an overview than I expected but our plan is to go into more detail on these new programs as we announce the INDs in the start of the clinical trial.

Sounds great. Look forward to the data the rest of the year.

Thanks, Brian.

We'll go back to Charles Duncan JMP Securities.

Thanks for taking my follow-up question. So Dale, just wanted to understand, with regard to the Genentech trial, I guess the question is then do you believe the drugs weren't working which is what you're suggesting with regard to the protein based growth factors? Or is the composite end point an inherently variable difficult to measure score? It wouldn't seem to be given that it's quantitative but could you kind of compare and contrast really why that was a large trial?

Well, they're two separate issues, Charles. The NISL is a quantitative evaluation of neurologic exam. Neurologic exam is a standard in medicine, okay? It just gives values for what you find on the exam and then you compare those values from visit to visit. So there's absolutely a standard in what we do when we treat patients or follow neurologic disease, so the spinal cord injury or diabetic neuropathy or any neurologic condition, the neurologic exam is basically the mainstay evaluation tool, right? We've just quantitated what a physician does into a numeric scale.

The issue with the protein factors was both pharmacologic delivery, half life, and ability to penetrate the blood brain barrier. The difference is the half life of nurotrophin 3 in a rat was 1.2 minutes so it was extremely difficult to provide constant infusion regimens to basically get adequate concentrations that could be equivalent to in vitro tissue culture concentrations for effect. So those are actually separate issues.

I get it. So it sounds like the end points are not inherently variable and what you just said pretty well illustrates the big differences with your approach over the past approaches on a molecular level?

Yes. To give you an example for the sensory exam, each modality is graded either as normal, decrease, or absent. Those are the three points. These are huge clinical differences, all right? So the variability in those kinds of end points is very minimal.

Okay, good. That helps, thanks.

Thanks, Charles.

At this time we have no further questions. I'll hand the conference back to management for any closing comments.

Okay, we would like to thank you for joining us. We look forward to speaking with you again when we release our second quarter financial information. We will be available later today if there are any follow-up questions. Thank you very much.

And that will conclude our conference. Again thank you all for your participation. We hope you enjoy the rest of your day.