Sangamo Therapeutics Inc (SGMO) 2010 Q2 法說會逐字稿

Good afternoon, and welcome to the Sangamo BioSciences teleconference to discuss second quarter 2010 financial results. This call is being recorded.

I will now pass you over to the coordinator of this event, Dr. Elizabeth Wolffe, Director of Corporate Communications.

Thank you, Tyrone. Good afternoon, and thank you for joining Sangamo's management team on our conference call to discuss the Company's second quarter 2010 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; Dale Ando, Vice President of Therapeutic Development and Chief Medical Officer; and Philip Gregory, Vice President of Research and Chief Scientific Officer.

Following this introduction, Edward will highlight recent activities, Ward will briefly review second quarter financial results for 2010, and Dale and Philip will update you on our ZFP therapeutic and research program. Finally, Edward will summarize our current guidance and our goals for the rest of 2010. Following that, we'll 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 that our comments from today are still valid. We alert you to be aware of risks that are detailed in documents that the Company files with the Securities and Exchange Commission; specifically, our quarterly reports on Form 10-Q and our annual report on Form 10-K. These documents include important risk 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, Elizabeth, and thank you, all, for joining us for our conference call to discuss our second quarter results for 2010.

We reported important progress in both clinical and preclinical programs this quarter. Let me begin by briefly recapping a few of the highlights.

At the American Diabetes Association, or ADA, meeting in June, we and our collaborators at Johns Hopkins presented positive Phase 2 clinical data from our ZFP therapeutic program to develop SB-509 as a disease-modifying treatment for diabetic neuropathy, or DN. The data from our SB-509-601 and SB-509-701B trials demonstrated that that SB-509 treatment resulted in statistically significant and clinically beneficial improvements in subjects with moderate and severe DN as compared to placebo and provided direct histological evidence of SB-509's dual effect on both blood vessel and nerve growth and regrowth.

As you'll hear from Dale later in this call, these data provided direct evidence of both an angiogenic and neural regenerative mechanism of action and further validates our strategy of using multiple endpoints to assess disease severity as we enrolled subjects with moderately severe diabetic neuropathy into our ongoing Phase 2b trial, SB-509-901.

In early July, we had an important paper published in the scientific journal, "Nature Biotechnology" on exciting preclinical data from our stem cell therapeutic strategy for HIV/AIDS. This approach is based upon the use of our proprietary zinc finger nuclease, or ZFN, technology to permanently disrupt the CCR5 gene in human hematopoietic stem cells, or HSCs. Disrupting the gene in HSCs enables us to make this permanent change in all cell types in the immune system and forms the basis for a promising therapeutic strategy.

The work was carried out by Sangamo scientists and collaborators at the Keck School of Medicine of the University of Southern California. You may recall that last September, along with a third group from the City of Hope, we were awarded a $14.5-million grant from the California Institute for Regenerative Medicine, or CIRM, to bring this therapy to the clinic. I have asked Philip to summarize the details of the data and how it relates to progress in this program later in this call.

As you know, Sangamo has two ongoing Phase 1 clinical trials to evaluate the safety and clinical efficacy of ZFN disruption of the CCR5 gene in CD4 + T-cells - one at the University of Pennsylvania and one here in California.

During the second quarter, we received a second round of funding from the Michael J. Fox Foundation for Parkinson's Research, which was an important vote of confidence for our approach and for the positive preclinical data that we have already obtained in a rat model of Parkinson's with our ZFP activator of the growth factor GDNF. The $895,000 award, which will be paid over a two-year period, will support studies in non-human primates for the development of a ZFP therapeutic to treat Parkinson's disease. Again, I've asked Philip to briefly review this program later in the call.

Finally, Sangamo Sciences and collaborators presented data from a wide range of research and preclinical programs focused on the development of ZFP therapeutics at the annual meeting of the American Society of Gene and Cell Therapy, or [ASGT]. Therapeutic areas included ZFP-based approaches in primary human cells and stem cells, infectious diseases such as HIV/AIDS and CMV, monogenic diseases, oncology, and traumatic brain injury. This is a useful scientific forum for us, and the range of presentation provides a good illustration of the breadth of potential therapeutic applications of our technology.

Before we go into more detail about our therapeutic and preclinical programs, let me hand the call over to Ward for an update on our second quarter 2010 financial results, as well as our financial guidance for the rest of the year.

Thank you, Edward, and good afternoon, everyone. As you know, after the close of the market today, we released our financial results for the second quarter ended June 30, 2010. And I am pleased to review the highlights of those results.

Revenues in the second quarter of 2010 were $6.5 million , compared to $4.7 million for the 2009 quarter. The second quarter 2010 revenues were primarily comprised of revenue from our collaboration agreements with Sigma-Aldrich and Dow AgroSciences and agreements in protein production, as well as $315,000 of 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 the end of this month.

Total operating expenses for the second quarter of 2010 were $10.4 million, compared to $9.9 million for the same period in 2009.

Research and development expenses were $7.1 million in the 2010 quarter and $6.9 million for the prior-year quarter.

General and administrative expenses were $3.3 million in the second quarter of 2010, compared to $3 million in the 2009 quarter. The increase in general and administrative expenses was primarily due to increased personnel costs, including noncash employee stock-based compensation.

For the second quarter of 2010, we reported a consolidated net loss of $3.9 million, or $0.09 per share, compared to a net loss of $4.5 million, or $0.11 per share, for the second quarter of 2009.

Turning to the balance sheet, we ended the second quarter of 2010 with $69.3 million in cash, cash equivalents, and short-term investments. Our net cash used in operating activities was $7.5 million for the second quarter.

I am pleased to say that we are on track with respect to our operating plan for 2010 through the second quarter, and we are maintaining our financial guidance, reiterated on the first quarter call in April, of having at least $60 million in cash and investment balances on hand at the end of 2010.

In our last call, we explained that the cash guidance and our usage estimate translated into anticipated GAAP revenues in the $18 million to $22 million range and GAAP operating expenses in the $43 million to $47 million range for the full year 2010. These GAAP metrics remain in place, supporting our yearend guidance of $60 million for cash. As you will recall, this guidance assumes no new financings or partnerships, but it does include anticipated milestones and revenues in 2010 from our existing partnership agreements.

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

Thanks, Ward. Our partnerships with Sigma-Aldridge and Dow AgroSciences continue to provide non-dilutive revenues which offset our ongoing investment in our ZFP therapeutic programs. As such, we are able to carefully manage our cash burn. And, with nearly $70 million in cash at the end of the second quarter, we are on track to meet our goal of ending 2010 with at least $60 million in cash and cash equivalents, all while prosecuting clinical trials in three different ZFP therapeutic products.

As I mentioned earlier, I have asked Dale to provide you with a summary of the SB-509 clinical data that were presented in three oral presentations at the ADA scientific sessions last month.

Thank you, Edward. To start with some background, SB-509 is zinc finger activator of the vascular endothelial growth factor-A gene, or VEGF-A, which has been shown to have significant effects on both nerve and blood vessel growth in preclinical and clinical studies. We are evaluating this product clinically in two indications - diabetic neuropathy and amyotrophic lateral sclerosis, or ALS.

Currently, we have an ongoing 150-subject, randomized, double-blind, placebo-controlled Phase 2b study, SB-509-901, in subjects with moderately severe DN. The study is designed to finalize dose, schedule, and primary and secondary endpoints for pivotal Phase 3 trials and will accumulate data on approvable endpoints, including nerve conduction velocity in the sural nerve, or sural NCV, neurologic impairment score in the lower limbs, or NISLL, as well as quality of life assessments and intraepidermal nerve fiber density, or IENFD.

We have multiple inclusion criteria for this trial, which are designed to exclude subjects with mild disease and select subjects with moderately severe DN who exhibit both neurologic and vascular disease. We believe that this group-- that will show the greatest benefit from the dual angiogenic and neurologic effect of SB-509 and, in a clinical trial, demonstrate the greatest differences in disease outcome as measured by approval endpoints between treatment with drug or placebo.

In June at the ADA's scientific sessions, we made three oral presentations. Two of the presentations focused on data from our Phase 2 trial, SB-509-601, in subjects with mild to moderate DN. And the third presentation was on data from our Phase 2 trial, SB-509-701B, in subjects with at least one unmeasurable nerve conduction velocity.

Collectively, the data provide us with valuable, confirmatory evidence for an angiogenic, as well as a neuroregenative mechanism of action of this drug and further validation of our strategy to use multiple endpoints to assess subjects' disease severity when recruiting into our ongoing Phase 2b trial.

The first presentation of SB-509-601 data at the ADA was given by Dr. Michael Polydefkis, our collaborator at the Johns Hopkins University School of Medicine. As you may remember, our SB-509-601 study was a double-blind, placebo-controlled study of 110 subjects randomized at a two-to-one ratio in which subjects were administered three doses of SB-509 or placebo at 0, 60, and 120 days. Various measures of nerve health were assayed throughout the study, including NCV and NISLL.

In addition, as part of a JDRF-funded collaboration with Dr. Polydefkis, we also measured the density of small, unmyelinated, sensory, nerve fibers via direct examination of biopsies. Dr. Polydefkis and others have shown that this direct, histologic measurement correlates with the severity of disease in DN and other neuropathies.

In our 601 study, skin biopsies were taken at day 0 and day 150, 30 days after the final treatment with SB-509, and at several time points through, to day 360. After sectioning and histologic [stating] of the skin biopsies, nerve and blood vessels in the skin can be counted and their densities calculated. As we have previously reported, SB-509 treatment of subjects on the study resulted in a statistically significant improvement from baseline in IENFD. But the data presented at ADA were further analysis looking at the effects of SB-509 treatment on nerve regrowth and blood vessel regrowth in these subjects.

Nerve growth/regrowth was examined in all subjects using a standardized injury by "burning out the nerves" using a capsaicin patch. At the end of the capsaicin treatment, the neurofiber density under the patch is reduced to 0. Regenerative sprouting of the small, sensory nerves after capsaicin treatment was measured by assessing their densities from serial biopsies obtained following the capsaicin treatment.

The data demonstrated that treatment with SB-509 resulted in an improvement in regrowth of epidermal nerve fibers in subjects. In addition, we look at growth of blood vessels into biopsy sites by taking a second biopsy over the site of a prior biopsy that had been allowed to heal and look for blood vessels sprouting into the healed site.

We observed increased blood vessel growth into a healing biopsy site in SB-509-treated compared with placebo-treated subjects. Interestingly, the timing of these effects on blood vessel and nerve regrowth demonstrated that the therapeutic benefit of SB-509 treatment was sustained several months after the last dose was administered.

The second oral presentation at ADA described an analysis of soluble VCAM-1 and soluble ICAM-1 levels in the serum of SB-509- and placebo-treated patients with DN. These are soluble forms of proteins that are mediators of 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 inflammatory diseases, such as type 2 diabetes. As such, these secreted proteins are useful biomarkers of blood vessel damage and an indirect measurement of the severity of vascular disease.

Along with the provable measures of changes in nerve health, we can correlate subjects based on these biomarkers with a view to facilitating the identification of SB-509-responsive subjects. We observed that baseline soluble VCAM levels were significantly higher in subjects with DN compared to normal non-diabetics. A statistically significant path line decrease, or improvement in soluble VCAM levels, was observed at day 360 in SB-509 subjects compared to placebo-treated subjects. We also observed a statistically significant positive correlation between baseline soluble ICAM levels and the improvement in sural NCVs from baseline to day 180 in SB-509-treated subjects, suggesting a linkage of baseline vascular disease with sural NCV improvement.

Again, and consistent with the design of our ongoing Phase 2b trial, these observations suggest that elevated soluble ICAM levels may aid in the up-front identification of a target population with significant vascular disease and, therefore, responsive to VEGF's angiogenic effects.

These biomarkers may also serve as a stratification variable to enable us to balance severity of vascular disease in treatment and placebo groups.

Our third presentation at ADA featured data from the Group B cohort of our SB-509-701 trial in subjects that have at least one major nerve for which an NCV cannot be recorded. SB-509 has already shown activity in this population of patients, restoring an unmeasurable NCV in subjects in early clinical studies in SB-509-401 and -701a.

I should also mention that this is a population of subjects that has historically been excluded from clinical trials of disease-modifying drug candidates, as their nerve damage was considered to be too severe.

Surprisingly, some subjects that met the unmeasurable nerve conduction velocity criteria had relatively mildly DN as measured by the standard lower extremity neurologic sensory examination, or LENSE, which measures perception of pin prick, pressure, and vibration at points from the great toe up to the knee.

Employing this exam when subjects with clear sensory deficits were evaluated - i.e., those with a LENSE score greater than 10 and therefore with moderate disease - we observed a substantial improvement in the mean change in sural NCV from baseline at the day 180 time point in the treated group, with a mean increase of 1.42 meters per second compared to a mean decrease of 1.14 meters per second in the placebo group with a p value of 0.07.

In this same group, we also observed a significant response to SB-509 treatment at day 180, with 9 out of 23, or 39% of subjects, demonstrating a recovery of an unmeasurable sural NCV versus 0 out of 7 placebo-treated subjects, again with a p value of 0.07.

Over this six-month period, the greatest improvements in NCV were observed in those subjects treated with SB-509 who entered the study with a deficit in sensory function and not just an unmeasurable [nerve]. This emphasizes the importance of using multiple endpoints for assessment of DN disease severity for both subject enrollment and evaluation, as we are doing in the Phase 2b 509-901 trial.

Collectively, the data presented at ADA confirmed previous observation that points to SB-509's dual regenerative effects on both nerves and the blood vessels that supply and nourish these nerves, making it a unique, disease-modifying approach to neurodegenerative conditions.

Finally, I'm pleased to announce that we will present data from our completed Phase 2 study of SB-509 in subjects with ALS at the annual meeting for the Society of Neuroscience in November, as well as data from our HIV programs at an appropriate clinical meeting either later this year or early next year. As Edward mentioned, we expect to have data from our Phase 2b trial of SB-509, SB-509-901, in the second half of 2011.

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

Thank you, Dale. As I mentioned earlier, this quarter has had some exciting news in two of our early-stage ZFP therapeutic development programs; in HIV, with the publication of an important paper in "Nature Biotechnology" and in our preclinical Parkinson's program with the renewal of funding support by the Michael J. Fox Foundation. I've asked Philip to give you a brief overview of these events and how they move these respective programs forward.

Earlier this month, we published a significant paper in the scientific journal "Nature Biotechnology." The work provides proof of concept for a stem cell therapy for human immunodeficiency virus, HIV, based on our zinc finger nuclease, or ZFN, technology. The cells that we are using are human hematopoietic stem cells, or HSCs, self-renewing cells that give rise to all of the different types of immune cells in the body.

Our ZFNs for this program are designed to permanently modify the DNA sequencing in coding CCR5, a co-receptor that enables HIV to infect cells of the immune system. We know from several observations that disrupting this receptor makes cells resistant to infection with the R5 strains of the virus, the most commonly transmitted strains of HIV. Firstly, it is well documented that individuals carrying a naturally occurring mutation, which results in the destruction of their CCR5 gene, a variant known as CCR5-delta 32, are resistant to HIV infection.

In addition, a study published in the "New England Journal of Medicine" in 2009 reported a potential "cure" when an AIDS patients with leukemia, known as the Berlin patient, received a bone marrow transplant from a matched donor with this disrupted delta 32 CCR5 mutation. Transfer of the HSCs residing in the bone marrow from the delta 32 donor provided a self-renewable and potentially lifelong source of HIV-resistant immune cells. After transplantation, this patient was able to discontinue all anti-HIV drug treatments, his CD4 counts increased, and his viral load dropped to an undetectable level, demonstrating effective transplantation of protection from HIV infection with CCR5-disruptive stem cells.

The data reported in our "Nature Biotechnology" publication replicate these findings for a ZFN-based treatment in a preclinical model. We demonstrated that a one-time exposure to our CCR5-specific ZFNs resulted in permanent genetic disruption of the CCR5 gene, resulting in the generation of an HIV-resistant population of human HSCs. These ZFN-modified human stem cells were then engrafted into mice that lack a normal immune system, and they're able to tolerate engraftment of human cells and tissues. The engrafted ZFN-modified human cells produced all the different immune cell types in the peripheral blood, demonstrating that the ZFN-modified HSCs differentiated normally.

Importantly, the ZFN-modified HSCs could be harvested from one mouse and engrafted into a second animal, confirming that the modified HSCs retained their "stemness," or ability to differentiate.

In HIV challenge experiments, we found that the ZFN-modified cells had a selective advantage over unmodified HSCs and not only survived infection but expanded and appeared to traffic normally to various tissues in the mouse. Moreover, the presence of ZFN-modified cells controlled HIV replication in the animals. These data suggest that human HSCs can be modified with ZFNs, expand and differentiate, and have a selective advantage in the presence of HIV, allowing them to evade infection and destruction, leaving them able to fight opportunistic infections and, potentially, HIV itself.

The work was carried out in collaboration with a group of scientists at the Keck School of Medicine at the University of Southern California, who, along with clinicians and scientists at City of Hope and Sangamo, are part of the multidisciplinary team of investigators that was awarded a $14.5-million disease team research award by the California Institute for Regenerative Medicine, or CIRM. The award funds the preclinical development of our ZFN CCR5-targeted HSC approach to the stage of completing an investigational new drug, or IND, application for this potential stem cell therapy for HIV.

The published work is an important first step, and we are now engaged in the formal, preclinical development of this novel approach.

Due to their ease of isolation and their ability to differentiate into all cell types in the blood, there has been an explosion of research into therapeutic applications of HSCs, which are being developed for use in immunodeficiencies, such as x-linked SCID; diseases of the blood, such as sickle cell disease; and other monogenic diseases, such as ALD.

The data published in the "Nature Biotechnology" paper demonstrate that we can achieve specific and efficient ZFN modification of HSCs, which has broad potential therapeutic application in other diseases.

This quarter, we were also pleased to report that we were awarded a second round of funding by the Michael J. Fox Foundation for Parkinson's research to support the development of our ZFP therapeutic to treat Parkinson's disease. Our approach uses the ZFP transcription factor to up-regulate the gene for glial cell line-derived neurotrophic factor, or GDNF, a growth factor naturally produced by the body to support the growth and survival of nerve cells. In animal studies, it is well documented that factors such as GDNF can protect dopamine-producing nerve cells, the cells which are selectively lost in PD.

We have generated positive, preclinical data demonstrating a neuroprotective effect of treatment with our GDNF-activating ZFP transcription factors which results in the release of Parkinson's-disease-like systems and that validated rat model of the disease. These studies were supported by our first award from the Michael J. Fox Foundation. The latest award of $895,000 will fund studies of our ZFP GDNF activator in a primate model of Parkinson's, which is the critical next phase in this drug's development as we move towards an IND.

We are again working with a group at the University of California at San Francisco at the Department of Neurosurgery and Neurology who have a great deal of experience in drug testing for Parkinson's. We look forward to updating you on our progress in future calls.

Thanks, Philip. In conclusion, our second quarter's activities demonstrate our progress and continued focus and execution on 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 the second half of this year. In addition to data presentations for our ALS program at the Society for Neuroscience in November, we will be presenting at two investor conferences in September - the UBS Global Life Sciences Conference and the JMP Securities Healthcare Conference, which are both being held in New York City.

This completes our prepared comments. We'd now like to open up the call to your questions.

(Operator instructions). Charles Duncan, JMP Securities.

Congratulations on a nice quarter of progress. The first question that I had was perhaps for Dale. First of all, thank you for that thorough overview of what was presented at ADA. But what we'd like to hear some more color on is perhaps what we didn't see, and that was maybe your impressions of meetings that may have been had with clinicians and their interest in this program and/or corporate partners. Could you let us know if you had any corporate interest that-- you know, not definitive but perhaps could point to an interest in the program as it matures?

Charles, I'll jump in first. I don't think we'll comment on the corporate partnering discussions or interest there, except to say that ADA was well attended by a lot of groups that follow this program very closely.

But I think it is a good question to Dale in terms of the clinician and investigator and real key opinion leaders who do attend the conference. And, Dale, maybe you can give a sense of the response to that population.

I think people were quite excited. And a lot of the findings that we showed really moved this product into the neuroregenative type of product, which is quite unique. Most of the other products being studied in diabetic neuropathy really treat symptoms. And the only other one that has any effect on the nerve process is the aldose reductase inhibitors. So I think this sets us out as a very, very unique product in this field.

Also, I think the fairly comprehensive analysis of the multiple endpoints at baseline-- I think, for the first time, we have a truly, very, very accurate viewpoint of what comprises a moderate severity or a severe diabetic population. I think this supports our Phase 2 efforts in using these multiple baseline endpoints to select a patient population that would be responsive.

So, you're saying that you had pretty good interest from investigators. Do you think that that could result in-- or, at least in clinicians, do you think that could result in interest in enrolling patients in the program?

Certainly, this has been very, very useful in our getting investigators and sites interested in the program.

That, Charles, we absolutely know to be true.

Okay. Then my next question was with regard to HIV. First of all, thanks for the overview on the rationale on that again. But what's your sense of data timing? And, secondly, have you ever given some thought to-- I don't even know if this is technologically feasible to, basically, doing trait stacking within that program and being able to look at putting several targets or upping the number of targets that you could target within an HIV-oriented product?

Charles, I'll just repeat the guidance on the SB-509-728-T trial to say that we plan to present interim data from that work in-- late this year or early next year but at an appropriate scientific or clinical meeting for those data.

As it relates to the ability to use ZFNs to do, as you say, trait stacking, from a plant term perspective, with multiple targets, I'll ask Philip to speak to that. We have, actually, quite a bit of data around that.

Sure. Charles, we actually presented at the ASGCT meeting data demonstrating the ability to add genes in a site-specific manner to the same cell type, HSCs. And so it's quite clear that one could use this approach to add genetic matters, at least, for further restriction of HIV entry. So, yes, this is an area of active research.

And, as you know, Charles, in other mammalian systems, we've shown the ability to do one, two, and even three knock-outs; in this case, in CHO cells. And we published that work last year with Genentech.

And that presentation you mentioned, could that be at the annual HIV meetings, which are held in December, or don't you know yet?

Again, I think as soon as we have clear confirmation on that, we will announce that, or we'll notify people on a call.

Okay. Good. Thanks for taking my questions. I'll hop back in the queue.

Chad Messer, Piper Jaffray.

You mentioned-- You reiterated your guidance for greater than $60 million cash at yearend and said that that includes some milestone payments. I was wondering if you could just remind us what milestone payments remain outstanding from your various collaborations.

I think what we've said in the past, Chad, is that milestones will be achieved based upon commercial activities from Sigma, as well as Dow. And, in the Dow collaboration, there are annual minimum sub-license payments. Beyond that, I don't think we have a whole lot of additional specificity to add. Ward, is there anything else we'd add to that?

No. I think that's right, Edward. And, Chad, it just depends when in the calendar year some of these kick in, in terms of minimums and those kinds of things. So that's why our cash guidance is what it is in terms of expecting some increase from the first six months.

Right. Second-half events.

Right.

Thank you very much.

(Operator instructions). Liana Moussatos, Wedbush Securities.

What was the stock-based compensation in Q2? And can you review the clinical data releases coming up again?

Sure. Let's start, Ward, with stock-based compensation. Or do you want me to jump into the guidance?

Why don't you jump in, and I'll come back.

I think the two guidance in terms of additional clinical data are the data set from the ALS trial will be presented at the Society for Neuroscience meeting in November and that we'll present interim data from the SB-509-728-T trial at an appropriate meeting either late this year or early next year.

And, Liana, on the stock comp, it was $1.9 million in the quarter, which was the same as Q1; so, $3.8 million for the first six months.

Thank you very much.

Charles Duncan, JMP Securities.

My question is related to the industrial use of the technology platform; specifically, Dow agriculture collaboration. I know you don't usually talk much about that. But do you have a sense of what particular crops may be in the lead in their development program-- Is it tomato, or is it another one-- and when we might see increased visibility on that, Edward?

Charles, I'm going to largely duck the question. But I'll ask Philip if he wants to add to it, and I really mean if there's more to add.

I'll go based upon what they've said publicly, and that's maize and canola being the major internal efforts that they've talked about. I will also refer to some license agreements that they've done, both in the vegetable space-- tomatoes and vegetables, as well as in the forest products space. And they've also announced what I think is interesting, although it's an academic collaboration, in the area of algae and biofuels. Philip, anything to add to that?

No. That's pretty much the visibility that we have.

But I do think, again, Dow AgroSciences being a wholly owned subsidiary of Dow Chemical and Dow Chemical, obviously, being a Fortune 50 type company, it's difficult to get a whole lot of visibility from a required disclosure perspective. But I think, if you look at their Website and you look at the number of presentations, publications, and activities that are going on there, you get a real sense of the-- Is centrality a word? Okay. -- centrality of this technology to their research and development in future commercial efforts.

That makes sense. I understand why you can't say a lot. You don't-- There's a lot on that Website. I guess, one question that you could perhaps answer is - Has there been any change in the interaction over the course of last, call it, year or so in terms of the frequency or, call it, the group that you're interacting with? And how do you feel about that partnership at this point?

Charles, I can address that. I can tell you that the interaction has changed substantially since Dow took out the commercial license. We interact with a much broader range of folks within the organization at this point as the technology is deployed in different areas of their business. And so there has been a material change I think. There was a very much focused project team initially, and now it's a much broader group.

And, Charles, one thing-- I'll kind of expand your question in terms of industrial applications just for a moment because I think it's important to note. I don't know how many people have had a chance to listen to or even normally would follow Sigma-Aldrich. But, on their July 22 call, both in their prepared remarks and in some questions at the end, I think there's good information there and good emphasis in terms of the role of zinc fingers and zinc finger nucleases in their internal and strategic development. They put emphasis on the new P53 [RAP], which has just been launched and coming out in the first half of this year, and spoke directly to the role of zinc finger nucleases in their SAFC division.

One thing that I think is perhaps not completely understood about our royalty income from Sigma is that the income that we report - i.e., in the second quarter - is derivative of the revenues that they have in the quarter before; so, royalties from income or revenues that they generated, in this case, in the first quarter.

As you can hear or read from the Sigma transcript, there's been a great deal of activity in building up multiple models, which are just really commercialized in the first part of this year. And full circle back to Chad's question, we do expect to see a ramp up of both milestones and royalty revenues in the second half of this year.

Excellent. That's good news. Thanks for the added color, guys.

Thank you. And I'm showing no further questions or comments at this time. I would like to now turn the call over to Edward Lanphier for any closing remarks.

We'd like to thank you for joining us, and we look forward to speaking with you again when we release our third quarter financial information. We will be available later today if you have any follow-up questions. Thanks very much.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Have a wonderful day.