Sangamo Therapeutics Inc (SGMO) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen and welcome to Sangamo BioSciences first quarter conference call. At this time, all participants are in a listen only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. If anyone should require Operator assistance during the conference call, (Operator instructions). As a reminder, this conference call is being recorded.

I would now like to hand the conference over to your host, Miss Elizabeth Wolffe, Director of Corporate Communications. Ma'am, you may begin.

Thank you very much. Good afternoon and thank you for joining Sangamo's management team on our conference call to discuss the Company's first quarter 2010 financial results. Also present during this call are several members of Sangamo's most 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 recent activities, Ward will then briefly review first quarter financial results for 2010, and finally, Dale and Edward will update you on our ZFP therapeutic programs and our goals for 2010. Following that we will open up the call for questions.

As we begin, I would like to remind everyone that the projections and forward-looking statements that we discuss during this conference call are based upon the information that we currently have available. This information will likely change over time. By discussing our current perception of the market and 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 that our comments from today are still valid. We alert you to be aware of risks that are detailed in thick 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 conference call to discuss our first quarter results for 2010.

Let me begin by briefly recapping the events of the past few months. We began 2010 by announcing important progress in our clinical programs and the expansion of our clinical pipeline with two new trials, a phase 2B clinical trial of our lead therapeutic, SB-509, in subjects with diabetic neuropathy, and a phase 1 trial of our second zinc finger nuclease product which is, which is being evaluated in glioblastoma. The first trial is a double-blind, placebo controled, repeat dosing, phase 2B trial of SB-509 being carried out in subjects with moderate severity diabetic neuropathy, or DN. The design of this study builds on a wealth of data that we have gathered from earlier phase 1 and phase 2 trials which have enabled us to identify a patient population with a level of DN severity that we believe will give the greatest response in approvable clinical end points to SB-509 treatment over 180 daytime period. The study, SB-509-901 is designed to finalize dose, treatment schedule, and primary and secondary approvable end points for pivotal phase 3 trials. I should also note that the juvenile diabetes research foundation, whose science advisors know the SB-509 program and the phase 1 and phase 2 data very well as they were supporters of our 601 trial, have also renewed their support for this program and will provide $3 million in funding for the 901 study. As we have said before, we expect to have data from this study in the second half of 2011.

The second program is an open label multi-dosing phase 1 clinical trial designed to evaluate a ZFN therapeutic for the treatment of glioblastoma, a type of malignant brain cancer. This trial is being initiated by Sangamo's collaborators at City of Hope and is designed to evaluate the safety and tolerability of a modified CDA positive cytolytic T-lymphocyte, or CTL product, that is active against glioblastoma and has been made resistant to glucocorticoid steroids using a ZFN gene editing technology. As many of you know, last week product Dendreon's autologous cell therapy product, Provenge(R), was approved by the FDA for the treatment of prostate cancer. This is an important, long awaited milestone for the cell and gene therapy industry and establishes a regulatory pathway for additional therapeutics of this type. As it is still early days for our phase 1 glioblastoma, we are not yet providing guidance as to when we expect data from this trial, but we look forward to updating you on our progress.

We also announced the presentation of clinical data from our first ZFN therapeutic program in HIV/AIDS. Dr. Carl June, our collaborator on the phase 1 single dose study of SB-728-T, which is being conducted at the University of Pennsylvania, was invited to present preliminary data at a Keystone symposium in January 2010. The data worked from an HIV positive subject treated with SB-728-T who, as part of the study, began a defined structured treatment interruption, or STI, four weeks after treatment. During the study the subject CD4 positive T-cell count, the number of circulating ZFN CCR5 modified T-cells and the subject's viral load were measured. In addition, biopsies were taken prior to treatment and at the end of the STI period to monitor levels of CD4 positive and ZFN modified T-cells in the gut associated lymphoid tissue, or GALT, a major reservoir of immune cells and a critical reservoir of HIV infection. As expected, the subject's viral load increased during the STI period, however, the return of the virus was somewhat delayed. Importantly, CD4 positive T-cells and ZFN modified T-cells were found to be stable and were observed in the GALT suggesting that the ZFN modified cells were able to expand and were circulating and trafficking normally in the body. These preliminary data are encouraging as they are consistent with the preclinical data that we have published.

As many of you know, we have also -- we also have a Sangamo sponsored repeat dosing phase 1 trial SB-728-T-902 that we initiated in September 2009 which is being conducted at a site in San Francisco. In contrast to the UPenn study, in which a single dose of modified T-cells is given, our study is a repeat dosing trial. We plan to present additional clinical data generated from our studies of this ZFP therapeutic by the end of 2010.

In a final piece of clinical news I am very pleased to announce that three abstracts -- the three abstracts that we submitted to the American Diabetes Association, or ADA meeting, this June have all been accepted as podium presentations, and I have asked Dale to outline the studies that we will be presenting later in this call.

In addition to the clinical progress that we have made here at Sangamo, our partners, Sigma Aldrich and Dow AgroSciences, have also announced exciting developments in the use of our ZFN technology in their respective areas. Dow AgroSciences has announced that it has entered into collaborations in crops including tomatoes and casaba, and most recently collaborations with a group working in algae for biofuels. These relationships are serving to rapidly expand the application of our technology into a broad range of plant species and we anticipate that DAS will continue to pursue such agreements. Sigma is also moving quickly to expand its ZFP technology based offerings with cell line kits and important new transgenic rat models. I will give you a few more details about this later in the call.

Finally, we announced the appointment of two new Board members -- or two members of our Board of Directors, who both bring important industry experience to the Company. In March, the Board appointed Dr. Stephen Dilly, who is currently President and CEO of APT Pharmaceuticals, a specialty drug company here in the Bay Area. And most recently, in April, Bill Ringo was appointed as Sangamo's first Chairman of the Board. Until his retirement a few days ago, Bill was Senior Vice President of Business Development, Strategy and Innovation at Pfizer. At -- In that role he was responsible for guiding Pfizer's overall strategic planning and business development activities. I will give you a little more background on Steven and Bill and considerable -- and the considerable experience that they bring to our Board later in the call.

But before going into more detail, let me hand the call over to Ward to update you on our first quarter 2010 financial results as well as our financial guidance for 2010. 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, 2010 and I am pleased to review the highlights of those results.

Revenues in the first quarter of 2010 were $6.6 million compared to $3.2 million for the 2009 quarter. The first quarter 2010 revenues were primarily comprised of revenue from Sangamo's collaboration agreements with Sigma Aldrich and Dow AgroSciences and enabling technology agreements as well as $449,000 in revenue from research grants. The increase in revenues was primarily due to the $15 million license payment that we received from Sigma in the fourth quarter of 2009 as part of our expanded agreement which we are recognizing ratably into revenue through July 2010.

Total operating expenses for the first quarter of 2010 were $10.7 million compared to $10.2 million for the same period in 2009. Research and development expenses were $7.4 million in the 2010 quarter and $7.3 million for the prior year quarter. General and administrative expenses were $3.3 million in the first quarter of 2010 compared to $2.9 million in the 2009 quarter. The increase in general and administrative expenses was primarily due to increased personnel costs including non-cash employee stock based compensation and professional fees. For the first quarter of 2010 we reported a consolidated net loss of $4 million, or $0.09 per share, compared to a net loss of $6.8 million, or $0.17 per share, for the first quarter of 2009.

Turning to the balance sheet, we ended the first quarter of 2010 with $77 million in cash, cash equivalence and short-term investments. Our net cash used in operating activities was $8 million for the first quarter.

I am pleased to say that we are on track with respect to our operating plan for 2010 through the first quarter and we are maintaining our guidance provided at our fourth quarter and end of-year call in February 2010 of having cash and investment balances on hand of at least $60 million at the end of 2010. As you will recall, this guidance assumes no new financing, or partnering, but it does include anticipated milestones in 2010 from our existing partnership agreements.

Thank you and I will now turn the call back over to Edward.

Thanks, Ward.

With $77 million in cash at the end of the first quarter, we are on track to meet our goal of ending 2010 with at least $60 million in cash and cash equivalence. All while prosecuting clinical trials of three different ZFP therapeutic products we are able to achieve this unprecedented level of efficiency by careful management of expenses and because of our unique business model which provides non-dilutive revenues from the non-therapeutic applications of our technology in the form of license fees, research funding, and milestone payments, as well as significant participation in downstream value through sublicense fees and royalties on product sales.

As I mentioned earlier I have asked Dale to provide you with an outline of the studies and type of data that will be presented in oral presentations at the ADA scientific sessions this year. The meeting will be held in Orlando, Florida from June 25, 2010 through June 29, 2010. As Dale will describe, we will present data from our phase 2 trial SB-509-701-B in subjects with severe DN as defined by at least one nerve with an unmeasurable nerve conduction velocity. The presentations will also feature additional data from our SB-509-601 phase 2 study, which addressed SB-509's effect on blood vessel growth using direct histological measurements and on correlations of improvement in nerve health after SB-509 treatment with serum levels of soluble ICAM1 and VCAM1, which are indicators of vascular disease in DN.

Dale?

Thank you, Edward.

Our lead therapeutic SB-509 is a zink finger activator of the vascular endothelial growth factor aging, or VEGFa, and has been shown to have significant effects on both nerve and blood vessel growth in pre-clinical and clinical studies. We are evaluating this product clinically in two indications. Diabetic neuropathy, or DN, and amyotrophic lateral sclerosis, or ALS, and have preclinical programs in other indications such as spinal cord injury and stroke. We believe that SB-509's dual regenerative effects on both nerves and the blood vessels that supply and nourish those nerve, make it a unique disease modifying approach to neurodegenerative condition.

Clinical data generated on our SB-509-601 phase 2 trial demonstrated that SB-509 treatment of subjects with DN resulted in the statistically significant improvement in their intra-epidermal nerve fiber density, or IENFD, a direct histologic measurement of small sensory nerve fibers in the skin. SB-509 has also shown activity in subjects with severe DN whose nerve damage is sufficiently advanced that nerve conduction velocity, or NCV's, cannot be recorded in at least one major nerve by standard neurophysiologic testing. These effects were demonstrated in our phase 2 trial, SB-509-701A, a single blind, placebo controlled phase 2 clinical trial in which thirty subjects were treated intramuscularly in the lower extremities with 60 milligrams of SB-509, and fifteen subjects with placebo at (inaudible) zero and ninety. We observed clinically relevant improvements in the mean change in [seral] NCV at day 180 compared to base line in SB-509 compared to placebo treated subjects. These encouraging results were the basis for an extensive -- extension of that protocol SB-509-701B, a single-blind placebo controlled phase 2 clinical trial in which thirty subjects with severe DN were similarly treated with 60 milligrams of SB-509 and fifteen subjects with placebo, but with three doses at day zero, 60, and 120. At the ADA meeting in June we will present analysis of the full data set including all of the subjects treated in SB-509-701A and B study through the full 180 day period.

The other two presentations will report on data from our phase 2 SB-509-601 study. As you may remember, this was a double-blind placebo controlled study of one hundred and ten subjects randomized in a 2-1 ratio in which subjects were administered three doses of SB-509, or placebo, at days zero, 60 and 120 days in various measures of nerve health assayed throughout the study. These measures include nerve conduction velocity and quantitation of the neurologic exam, or NISLL. In addition, as part of the JDRF funded collaboration with Dr. Michael Polydefkis of Johns Hopkins, we also measured the density of nerve fibers in the skin via direct examination of biopsies.

In November 2009 at the Society for Neurosciences meeting, we reported top line data from this study that demonstrated a direct neuroregenerative effect of SB-509 treatment seen as a statistically significant increase in small unmyelinated nerve fibers in the skin. At the ADA meeting this year our collaborator, Dr. Polydefkis, will present further analysis of his work on epidermal nerve fiber regeneration, that were generated during this trial. After the nerves were quote burned out of the epidermis with a capsaicin patch. Capsaicin is the active ingredient in red peppers, and mediates its hot burning effect through elimination of the skin nerve fibers. He has measured regenerative sprouting of these small sensory nerves after capsaicin treatment by assessing their density from serial biopsies, obtained 6 -- obtained 60 days, day 210, following the capsaicin treatment. He has also examined the growth of blood vessels in the same biopsies used for evaluation of increases in nerve fiber density and measured the changes in blood vessels from base line similar to the intra-epidermal nerve fiber density study. These direct measures of nerve and blood vessel regrowth give us valuable insight into the nerve regeneration and angiogenic mechanism of action of this drug, and the duration of its affects.

Our third presentation reports on serum level of soluble ICAM1 and VCAM1, which are blood markers that have been shown to correlate with progression of blood vessel cellular damage and inflammatory disease, including Type II diabetes. These molecules, which are involved in cell adhesion, appear to be a main mediator of interactions, interactions between circulating blood cells and the endothelium in vascular walls, and are secreted into the blood as a consequence of the endothelial cell damage that occurs in diabetes. The study examines the relationship between blood levels of these markers in participants in our SB-509-601 study as an indirect measurement of the amount of vascular disease these subjects have, and allows us to identify these subjects. Along with the approved measures of nerve health, we can correlate subjects with both vascular and neuro disease with a view to facilitating the identification of SB-509 responsive subjects.

We look forward to providing you with further details of these analyses as the data are presented at the meeting in June 2010. In the second half of the year we also expect to present data from our phase 2 study of SB-509 in subjects with ALS as well as data from our HIV programs. As Edward mentioned earlier, we expect to have data from our phase 2B trial of SB-509-901 in the second half of 2011.

And with that update, I will hand you back to Edward.

Thank you, Dale.

As Dale said, we look forward to updating you on the progress of all of our clinical programs at appropriate medical meetings and on future calls. While our main focus here at Sangamo continues to be the development of ZFP therapeutics, our partners Sigma Aldrich and Dow AgroSciences are making significant progress in developing and broadening the exposure of our ZFP technology for non-therapeutic applications in life science research applications and in plants. Both groups have made several announcements this quarter that further demonstrate that our ZFP technology is a significant focus in their growth plans over the next several years. In March 2010, Sigma hosted its Annual Business Review, which served to highlight their new focus on biologic products. Sigma's progress and plans for our ZFN technology featured heavily in this event. The Company is moving the technology along on three fronts, custom ZFNs and kits under their CompoZr trademark, transgenic animals through their SAGE Labs, and improvements in pharmaceutical production cell lines under the SAFC group.

In the last quarter Sigma announced the addition of the award winning CompoZr product offering with the global release of a targeted integration kit. This kit provides a powerful method for the controlled insertion and expression of any gene in any human cell line.

On the transgenic animal front they are making rapid progress. They recently announced the creation of the world's first P53 knockout rat model, an important development that is expected to significantly improve time lines for carcinogenicity screening and reduce time to market for therapeutics. This is in addition to a suite of rat models designed to facilitate more predictive absorption, distribution, metabolism, excretion and toxicity studies, which are expected to help researchers establish the efficacy of drugs more rapidly and with greater accuracy due to the rat's ability to better model human physiology when compared to the mouse models that have been used in the past. To better enable the production, breeding and distribution of these animals, Sigma also acquired Ace Animals, a leading provider of high quality research rodents to the biomedical industry, which will now operate as part of the existing SAGE Labs group.

In addition to all of the efforts made by Sigma, the proof for scientists comes in the form of results. Publications from Sangamo, and its collaborators as well as independent groups, using reagents bought from Sigma illustrating the broad application of our technology for generation of transgenic animals, solving complex problems in cellular biology, and improvement of [approaching] production cell lines are also increasing the visibility of the technology in both academic and industry research groups.

On the agricultural front this quarter, our partner, Dow AgroSciences, is also announced research licenses with several groups to apply our ZFP technology, market it as exact precision traits -- or excuse me, exact precision technology in crops and plants outside of Dow's area of primary focus such as tomatoes and algae. These licenses serve to place the technology quickly in the hands of experts in the particular plant species and allows them to test for themselves its power and specificity.

With all of the activity and interest generated by our partners and the full plate of clinical programs that we have here at Sangamo, we are reaching a new level of maturity as a Company. For the past six months we have been working to fill two Board seats, two seats of our Board of Directors, and as you already know, we recently announced the appointment of two new Board members, highly regarded industry Veterans who bring significant experience to our operations.

In March 2010 we appointed Dr. Stephen Dilly, who is currently the President and CEO of APT Pharmaceuticals. Prior to joining APT, Stephen was Chief Medical Officer and Senior Vice President of Development of Chiron Biopharma before its acquisition by Novartis, and prior to that he held various senior management positions at Genentech, including Vice President of Development Sciences. In the 10 years prior to that, he held senior management positions and drug development with SmithKline Beecham in the UK. During his career, Stephen has been closely associated with the development and launch of a number of marketed drugs for many therapeutic areas including Paxil, Aventis, Avastin, Raptiva, Tarceva and Lucentis. As you can appreciate, he brings significant expertise in all stages of drug development. Skills which we will be -- which will be very useful to us as we continue the advancement of our ZFP therapeutic platform.

Bill Ringo, who joined the Board in April 2010 as our first Board chairman, was more familiar with Sangamo and our technology. As I mentioned, until recently, Bill was Senior Vice President of Business Development Strategy and Innovation at Pfizer with responsibility for guiding Pfizer's overall strategic plan and business development activities. Prior to joining Pfizer, Bill held a number of senior roles in the biopharmaceutical industry in both management and Board capacities. As President and CEO of Abgenics -- he was President of CEO of Abgenics until its merger with Amgen. Prior to Abgenics, Bill was non-Executive Chair of the Board of Directors of InterMune after serving as interim CEO. He began he career at Eli Lilly and Company and held a number of senior strategic and business development positions until his very successful -- during his very successful career at Lilly. Needless to say, I'm delighted to welcome both Stephen and Bill to the Board and look forward to working with them and the rest of our Directors in our goal of creating significant and sustainable shareholder value.

In conclusion, we have had a great start to 2010 with our first quarter activities. We continue to stay focused on and make substantial progress towards our goal of establishing ZFP therapeutics as a new and highly differentiated class of human pharmaceuticals and we look forward to keeping you informed of our progress. In addition to our data presentations at the ADA scientific sessions in June 2010, we will be presenting at several investor conversations over the next few months. The JMP Securities Growth Conference here in San Francisco and the Bank of America Merrill Lynch Health Care Conference in New York in May 2010, and the Jeffries Global Life Sciences and the Needham Health Care Conference in New York in June 2010. Finally, we will host annual shareholder -- our annual shareholder meeting here at the Company in Richmond, California at 9:00 AM on June 2, 2010.

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

Thank you. Ladies and gentlemen (Operator instructions). First question comes from Charles Duncan from JNP Securities.

Hi, guys. Thanks for taking the question and congratulations of a good -- on a good quarter of progress.

Thanks, Charles.

I had a question on 509. Specifically at ADA you're going to be presenting some data, and congratulations on having three abstracts for three presentations. My question is, Edward, or perhaps Dale, what would you like to see out of these data, not specifically, because they haven't been presented, that would enhance your conviction, or make you feel good about the investment that you're making in the phase 2B?

Let me start and certainly Dale can add if appropriate. I think, Charles, at this point, you know, we are not going to go a whole lot further than what we outlined in the prepared comments in the script, which were, as you can imagine, a relatively carefully reviewed here. I will say to the question, I think to emphasize a couple of the points in the script, I think the data that will be presented both in the 701A and B trial as well as the additional data out of the 601, will continue to emphasize the dual nature of the drug, the -- both the angiogenic as well as the neuroregenerative components of VEGFa and the activation of the endogenous gene. And I think , the continued support around the mechanism of action and the definition of a responder group based upon the (inaudible), but Dale, I'll pause there and see if you want to add

I wouldn't add anything more. I would just say it's important for us to be recognized in this kind of presentation by the experts in diabetic neuropathy for which this session is comprised of.

Thanks, Charles. Go ahead.

So, I guess my question is relative to the patient population in 701, how does that compare to the patient population in your phase 2B?

Yes,I think that's not a part -- actually, it's an exclusion criteria in the 901 trial.

Yes.

Dale, you want to say more about that? That's the main point, is that the 701A and B trial, again, the data will be presented in June 2010, but really I think what's more relevant in terms of the dual mechanism of action and the definition of a responder group around approvable end points is a function of the two presentations that look at the 601 data.

Okay. That makes sense to me. And then if I could ask for an update from the ALS trial? Did I miss it, or were you guys not prepared to give an update?

I think we will just -- we will update now and just repeat we expect to present data, complete data set from that trial in the second half of this year as we have previously guided. That trial is fully accrued and we are now in the follow-up stages of that and on track to present data from that in the -- in the second half of this year. Dale, anything else?

That's it.

And then final question for Ward, your cash guidance, first of all you're doing a great job conserving cash, but your cash guidance for $60 million, if I do the math, if you were to straight line the $8 million per quarter, suggests that you may get roughly $7 million or so in milestone payments or some other form of payments. Is that consistent with what you kind of anticipate this year?

Right. Thanks for the question, Charles. The -- as you know, our primary guidance has been around the cash consumed for the year and cash balance at the end of the year. The -- our operating expense line has been fairly consistent over the last couple of years and if you annualize the Q1 OpEx, that would take you into a OpEx range for the year, potentially into that $43 million to $47 million kind of a number. But, yes, as you know, we did receive cash from Sigma in last year, but if you back into the math, it would show that our cash receipts this year, not GAAP revenue, would be in the -- roughly in the $10 million range.

Okay. That's what I thought. Thanks for the added color, guys.

Thanks, Charles.

Our next question comes from Liana Moussatos from Wedbush.

Thank you. This is for Ward. How are we thinking about collaborative revenues for Q2 with respect to how you're booking the Sigma payment from Q4? Do we expect Q2 to be a lot higher than Q1?

No. Liana what -- as we mentioned at the year-end call, it's fair to say that we are taking that $15 million in ratably so it's coming in over the three quarters. So the amount that will be recognized in Q2 is about the same as Q1, at least for that piece. Again, let me just -- and I'll elaborate a little bit more just to help because I know the models are a little bit difficult when you just have the cash guidance. In terms of top line, a GAAP revenue for the year, we are looking at something akin to last year, maybe a little bit less. Maybe the $18 million to$22 million range in total. As the earlier comment to Charles' question, new cash in, you know, up front as we see it is about $10 million, so that we are picking up two thirds of that Sigma piece, at least for GAAP purposes in Q1 and Q2, totaling about $10 million in total.

Thank you very much.

Our next question comes from Alastair Mackay from GARP Research.

Yes, hi. Just following up a little bit on that, Edward, I wonder if you could say -- or talk a little -- in a little more detail how the revenue or cash flows to you from your major partners as they accomplish things like sub-licenses or come out with new and diversified products, sell those products? Are -- for instance, are you receiving a quarterly checks, or is a lot of this already encompassed in the sorts of payments that you got last year from Sigma?

No. The sort of payments that we got last year from Sigma are really part of that new license agreement, but on an ongoing basis, incremental to the license fees, we receive a milestone payments, sublicense fees, or royalties on product sales on a quarterly basis. Ward, you want to comment further on that?

No, that's right. We have a quarterly reconciliation process, Alastair, and so we are -- we are able to track the broadening customer base in quite a level of detail, but those occur on a current basis and they aren't baked into the payments received from Sigma ,or at least the expansion piece, the $15 million received last year.

And are you receiving as part of that any payments for ZFN or ZFP included -- including biopharmecuetical cell lines, or cell lines at all, that are not -- that were not essentially transferred to Sigma last year?

I'm not sure I'm going to -- I'm not sure I have the question completely right. So we did the license agreement with Sigma in October that gave them the rights to develop and market cell lines for protein production, protein manufacturing, so they will go out and sell that and we will receive milestone payment and royalties on those product sales.

Got it. And do you have any update on that? Or is that pretty much a modest but ongoing business in terms of royalties you're receiving?

It's certainly an ongoing business and what I refer to you is what I discussed in the script and that is Sigma's annual business review where they spend I think a good deal of time talking about the focus and the future of those three business units including a discussion of their goals in terms of growth for the whole biologics area of their business.

Okay. Great. Thank you .

Our next question comes from Ted Tenthoff from Piper Jaffray.

Great. Thank you very much and thanks for taking the question. Ward, I just want to follow up on your comments. Did you say revenues for this year would be similar to last year in the $18 million to $22 million range? Did I mishear you?

Right. Well, as I said, Ted, in order to give a little more color to the cash guidance which remains essentially the bedrock of our guidance.

Yes.

I was trying to model and whatnot and I just want to make sure that people are generally understanding how our model evolves. And as Edward pointed out, certain revenues with respect to Sigma and cell line engineering and whatnot, we certainly have those in our model, but it's, it's -- we will see how that plays out when we get to actual. But yes, I think it's fair to say if you stand back and just look at the various pieces, and I think we have laid most of this out, but with the new cash inflow and the $10 million of amortization, largely this new (inaudible) will be recognized this year and the amortization from the prior year. So, yes, revenues in the $18 million to $22 million range would be something that I think can be derived from that cash guidance model.

Got you. That's super helpful. I know from the K (inaudible) there's an M word of about $200,000 or so. Is that throughout the year or is that kind of all being recognized in the first half of the year? How should we be thinking about that? Because what I start to do is I kind of back into a collaborative revenue number of a couple hundred thousand which, in my calculation seems to be down from sort of the annual, or even quarterly rate of last year. So was there anything different in the collaborative revenues of 1Q versus 2009, you know, versus last year?

Right. Well, the -- I think it's -- I think what you're saying, and correct me if I'm wrong, but the DAS, of the DAS amortization was largely winding down at the end of 2009 because we extended the agreement, the piece that was the unamortized piece does get recognized throughout 2010.

Okay. Cool. That's helpful. And then is there anything different from the collaborative line? Because I have that coming out at about $600,000 to $700,000 in the first quarter versus what was really $1 million to $2 million, to even almost $3 million per quarter last year. Are there any major changes there on the collaborative side?

Well, again, the milestones are the -- become somewhat the wild card here.

I got you.

So we did have significant milestones in Q4 that synced up with our research team meeting of these milestones, et cetera. Those can be -- those aren't ratable across the year. They tend to be a function of when these milestones are achieved, but yes, in Q4 last year in terms of the $10 million plus of revenue, you know, there was a couple million there in terms of Sigma milestones.

Got you. That's incredibly helpful. And just to ask one last thing. If you kind of think about this going forward sort of moving out the amortization rates, on revenues and commercial milestones, or royalties and commercial milestones from Dow and Sigma, how far out do you think until that would get you to kind of a breakeven, or to offset the therapeutic burn? Do you think about it that way?

Ted, I think as you know, we have and we will continue to give annual financial guidance. Looking out to breakeven points and so on and projecting the revenues associated with that and even projecting what our additional clinical trials might be at that point I think is premature.

Yes. Understood, Edward. I appreciate it very much and, Ward, thanks for the extra color. That's really helpful.

Okay, Ted.

(Operator Instructions) Our next question comes from Joseph Schwartz from Leerink Swann.

Thanks for taking the question. I was wondering if you could give us an update on you research activities for SB-728T since you received the $14.5 million grant in October last year from the CIRM? And how does the treatment strategy for these AIDS-related lymphoma patients compared to what you're doing in the ongoing phase 1 study for this agent?

Let me start and then Phillip and Dale can jump in. So, Joe, thanks for the question. There's two programs, the SB-728T is a program involved in modification of autologous T-cells and, as you know, that's ongoing and we have guided to having data, preliminary data from those studies, presented in this calendar year. So that's ongoing.

As you pointed out, we also have received, along with collaborators at City of Hope and USC, a $14.5 million grant from the California Institute for Regenerative Medicine to apply the zinc finger nucleases that disrupt the CCR5 gene in hematopoietic stem cells. And so that grant is moving forward in gaining collaboration with those groups, and I guess let me stop and pause and see if that covers your questions, or if you want more color around any one or -- of those programs.

Yes, I guess, you know, is there an actual clinical trial enrolling subjects here? And is it -- what cells are they targeted against? Anything that you --

Sure. Why don't I let Philip give you a little more color, then.

Sure. So in the serum funded work we are working with hematopoietic stem cells, so these are CD34 positive stem cells that have the capacity to regenerate the entire hematopoietic system. So unlike the T-cells which essentially remain T-cells, these are true stem cells that have this regenerative capability. And so the studies are aimed at putting our CCR5 ZFN reagents into the stem cell class for patients who would normally be receiving a bone marrow transplant for AIDS-related lymphoma.

Quite analogous, Joe, to the patient what was treated in Berlin a couple of years ago who both had lymphoma as well as HIV and received transplant of CD34 positive cells from a donor that was naturally -- had a natural delta 32 mutation. So quite analogous to that clinical setting, that clinical experience.

In terms of we are at the research level for this program and the grant is to fund activities that take us from the early pre-clinical efficacy data, which we already have, through the sort of iron DN enabling studies that will allow us to go to clinics. So that is the stage of research that this particular program is at at the moment.

It's certainly intriguing. Do you have a time frame over which you expect to be able to foresee an IND submission?

So this, Joe, this is Edward, you know, this is the I guess what you would call from an external point of view the non-sexy part of the program. This is the process development work, this is the development of release criteria and assays and optimizing the expansion of these cells and modification and so on and so forth. So there's a lot of blocking and tackling to go on here, number one. Number two, this is the first time a zinc finger nuclease and hematopoietic stem cell therapy has been moved forward into formal preclinical development. So, you know, we hope to -- we will be moving it forward as quickly as we can, but I think to put a specific time line on an IND expectation a little bit premature.

The way in which you get it into the cell, does it differ with 728T? I recall that took a while to get into the clinic and there might have been a change with the vector that was used or your strategy somehow. Can you help us understand what hurdles need to be overcome, technologically, for this aspect of the program?

Yes. So the work envisions exactly the same vectorology that was used in the T-cell manufacturing process. So we are, we are -- that particular aspect should not confound the rate at which we can get this IND.

Great. Thanks.

Thanks, Joe.

This concludes our Q&A session for the call. I would now like to turn the conference back over to any closing remarks.

Thank you. We'd like to thank you for joining us and 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.

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program for today. You may all disconnect and have a wonderful day.