Vericel Corp (VCEL) 2007 Q4 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to Aastrom Bioscience's fourth quarter and fiscal year-end 2007 Investor conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS). As a reminder this conference is being recorded. It is now my pleasure to introduce your moderator, Miss Kris Maly, Director of Investor Relations at Aastrom. Thank you, Ms. Maly. You may begin.

Thank you, Joe. Good afternoon, and welcome to our conference call. Before we continue, it is important we review our Safe Harbor statement. This conference call and webcast contain forward-looking statements including without limitation statements concerning product development objectives and anticipated timing, clinical trial strategies, initiation, completion, results, and anticipated timing, revenue results, potential market opportunities, market development plans, projected cash burn rates, anticipated key milestones, and potential advantages and applications of tissue repair cell technology which involve certain risks and uncertainties. These and other significant factors are discussed in greater detail in Aastrom's annual report on Form 10-K and other filings with the Securities & Exchange Commission. Actual results may differ significantly from the expectations contained in these forward-looking statements. Now it is my pleasure to turn the call over to our CEO, George Dunbar. George.

Thanks, Kris. Good afternoon, everyone. Thank you very much for calling and participating on the call today. Our press release went out a few minutes ago. Many of you may have seen that or haven't had a chance to read it yet. What we will do is walk through and highlight Aastrom's progress since the last quarter and specifically review our fourth quarter and year end financial highlights. Then we'll open the call up to questions from the audience. Fiscal 2007, is effectively my first full year here was a very exciting and productive year for us. In addition to achieving several important clinical milestones, we also added several Best-in-Class executives to our management team. I would like to highlight the clinical milestones we reached during the fourth quarter which ended June 30. In April we announced the initiation of our Restore-CLI clinical trials. This U.S. Phase II B clinical trial is evaluating the use of our vascular repair cells, what we call VRCs, to treat patients suffering from critical limb ischemia, the most severe form of peripheral arterial disease or PAD. Seven of the anticipated 20 clinical sites throughout the U.S. have been initiated for patient enrollment, and as we add additional sites, we will update our website and the website at clinical trials.gov. We intend to treat 120 patients in this trial, all of whom will be followed for a period of twelve months after they have been treated with VRCs.

In May, we announced the FDA had approved our investigational new drug application to initiate our ON-CORE clinical trial. This is 120 patient U.S. Phase III clinical trial for the treatment of osteonecrosis of the femoral head. This trial aims to demonstrate clinical safety and efficacy for the submission of Biologics License Application or BLA for the treatment of these patients. This is our first Phase III clinical trial focused on tissue regeneration and represents the achievement of a very important clinical milestone. Should the results of this trial meet our expectations, we intend to seek licensure and take our Bone Repair Cells, our BRCs product to market under our existing Orphan Drug Designation.

In June the last patient treated in our U.S. Phase I/II long bone fracture trial, completed the 12 month follow up period. Final data collected on all 36 patients enrolled in this trial is currently being analyzed and is expected to be presented by Dr. Matthew [Himenez] at the 23rd Annual Orthopedic Trauma Association meeting in Boston on October 18. Dr. [Himenez] podium presentation will not be webcast from this prestige orthopedic meeting we do intend to fully disclose the final patient results from this clinical trial to other shareholders and other interested parties. In June we also had the opportunity to share our newly expanded facility with local guests during a corporate open house. It was a pleasure to meet those who were in attendance.

Our facility is now approximately 30,000 square feet and the heart of the facility is our new state of the art class 100,000 modular manufacturing clean room that houses our automated proprietary cell manufacturing systems. This clean room is intended to handle all of the production requirements that are anticipated in our clinical trial milestones for the next three to four years. To see video footage of our new cell manufacturing clean room please visit our website and watch our newly released corporate video.

While our current cell manufacturing facility has the capacity to meet our current clinical trial demands we're cognizant of the fact that future commercialization needs will require much greater capacity as well as optimizing efficiencies. To assist us in this endeavor we released -- excuse me, we recently initiated a lean manufacturing training program which came from about our participation in a pilot program called the Commercialization Assistance Program or CAP which is sponsored by the NIH. This NIH funded program supported by the Michigan Manufacturing Technology Center is designed to assist companies as they move from the research and development stage into commercialization. As a result of an active Phase II SVIR grant we were selected to be part of the NIH CAP program. Dr. Burchardt will provide additional details on each of our clinical milestones later in the call. I will now turn the call over to Jerry Brennan our CFO for review of fourth quarter financial results.

Thanks, George. We ended our fourth quarter and fiscal year ended on June 30, 2007, with approximately 28.3 million in cash, cash equivalents and short-term investments compared to 43 million at June 30 of the prior year. Our average cash utilization during the fourth quarter was approximately $1.5 million per month. We expect the average cash spend to increase to approximately 1.7 million per month for the fiscal year 2008. These projections are consistent with our current clinical plan and announced clinical milestones. It is expected that this increase will result primarily from expansion in our clinical trial programs future regulatory submissions, and related staffing additions.

Total revenues for the quarter ended June 30, 2007, consisting of limited sales and grant funding were $165,000 compared to $328,000 for the same period in the prior fiscal year. Research and Development expenses for the quarter ended June 30, 2007, increased to 3.5 million from 2.7 million for the same period in fiscal year 2006. We also reported that our Selling, General and Administrative expenses for the quarter ended June 30, 2007, decreased to 1.9 million from 2.4 million for the same period in fiscal year 2006. The Research and Development expenses and Selling, General and Administrative expenses include non-cash charges related to an accounting standard which requires us to measure the fair value of all employee share-based payments and recognize that value as an operating expense. Now Dr. Burchardt will review our clinical progress since the last conference call. Elmar.

Thank you. We have recently initiated our RESTORE-CLI trial, a Phase II B clinical trial to three patients suffering from critical limb ischemia or CLI, the most severe form of PAD, peripheral arterial disease. This is a chronic disease that progressively restricts blood flow in the limbs and can lead to serious medical complications. It is often associated with other clinical conditions, such as hypertension, cardiovascular disease, hyperlipidemia, diabetes, obesity and stroke. All patients in our trial are critically ill with a high risk of amputation.

Of the 14 million patients affected by PAD, 1 million suffer from the most severe form critical limb ischemia These patients are extremely limited in their ambulatory capacity, experience constant and chronic ischemia induced pain, ulcers, tissue loss, (Inaudible) to the limbs which lead to 160,000 amputations per year. We will only be treating these end stage patients who have no other therapeutic option to address their CLI.

This is the largest and most rigorously designed self therapy trial for the treatment of this critical ill patient population so far. The trial is multi-center, prospective, controlled, randomized, and double-blind meaning that it is comparing patients in the treatment group and the control group at the same time with the the same criteria. Neither the patient nor the treating physician know which patients have received the TRC treatment or the control treatment.

As George mentioned earlier, we have also received approval of our investigational new drug application from the FDA to initiate our ON-CORE trial, a Phase III clinical trial for the treatment of osteonecrosis of the femoral head. Osteonecrosis is a progressive disease that currently has no established effective treatment. There are up to 20,000 new patients per year diagnosed with osteonecrosis and due to the lack of treatment options many of these cases eventually require total lipid replacement. This trial will enroll at least 120 patients, randomized into two patient groups at up to 20 side. The planned treatment approach will include a core decompression surgery in all patients in which a hole is drilled into the femoral head to relieve the internal pressure that builds up with this disease. Then the patients in the treatment group will have a bone repair cells or BRCs mixed with the bone matrix carrier placed inside that hole. The patient in the control group will receive bone metrics carrier without our BRCs. If healthy bone is successfully regenerated in the femoral head it is our expectation that the need for hip replacement could be delayed or eliminated altogether in these patients. All of the patients treated in this trial will be followed for a total of 24 months post treatment. The majority of patients who have osteonecrosis of the femoral head suffer from disease progression that leads to a total hip replacement within these 24 months of diagnosis. The primary efficacy end point of this trial is to delay the progression to a more severe stage of osteonecrosis for at least 24 months which will be measured by X-ray and by MRI.

Since we have received approval from the FDA for our late stage multi-center trials including our 20 size restore CLI trial and our 20 side ON-CORE trial we've focused our efforts on opening up centers as rapid as possible to facilitate patient enrollment. This process involves several stages including the receipt of an Investigational Review Board or IRB approval from each side and training the centers on TRC technology and trial conduct procedures.

In addition, we have set up an effective infrastructure for monitoring and collecting clinical trial data to meet the challenges associated with these complex trials. To further facilitate patient accrual into the trials, we have partnered with the patient recruitment firm. We're currently developing patient outreach tools and strategies to make patients and their caregivers aware of the new potential treatment modalities involving tier three technology that have been previously been unavailable. Important resources such as clinical trial websites, patient screening call centers and printed materials including brochures, posters and fliers will be soon available to promote patient referral, patient recruitment and the patient retention for our clinical trials to treat patients suffering from osteonecrosis and clinical limb ischemia. TRC products have also received an Orphan Direct Designation from the FDA for dilated cardiomyopathy or DCM. DCM is a disease that causes enlargement of the heart and reduces the pump function to a critically low level. Typically patients with DCMs present with symptoms of congestive heart failure including limitations in their physical activity and shortness of breath. Patient prognosis depends on the stage of the disease but is characterized by the very high mortality rate. The New England Journal of Medicine estimates that in the U.S. alone 120,000 people suffer from this disease. Other than heart transplant there are no effective long-term treatment options for end stage patients with this disease.

Scientific and early clinical evidence suggests that high doses of stem and progenerator cells could possibly slow down or reverse disease progress in the heart muscle of DCM patients. It is our intention to utilize our TRC based products as a therapeutic to induce heart tissue regeneration in patients with dilated cardiomyopathy. If successful, TRC-based intervention may improve the patient's condition and even eliminate or delay the need for a heart transplant.

The next anticipated milestone for our cardiac regeneration program is to initiate clinical trial activity in the European Union to treat patients with chronic heart disease. We're also preparing for a submission in the U.S. to initiate a clinical trial that will evaluate our TRC based product in the treatment of DCM. We have also entered into a so-called [M-crater] a or a Materials Cooperative Research and Development agreement with the National Cancer Institute of the NIH. Steven A. Rosenburg, MVPHD, Chief of Surgery at the National Cancer Institute in (Inaudible - highly accented), Maryland will evaluate our proprietary cell manufacturing technology for the production of tumor infiltrating lipidsides or in short TILs, self therapies. Dr. Rosenburg has published results from his work using T-cells from immunotherapies in patients with late stage melanoma.

This work demonstrated a 51% objective clinical response rate in these patients many of whom failed conventional therapies such as chemotherapy, radiation or other biological therapies. Dr. Rosenburg and his team at the NIH will conduct research to evaluate the suitability of using Aastrom's technology to produce these TIL cells. We're very pleased the NIH is exploring our cell manufacturing technology for use in producing immunotherapies for the treatment of late stage melanoma. While we remain focused our regenerative medicine program.

In early October we look forward to presentations from two major German centers who are conducting clinical work with our TRC based products. An investigator from the (Inaudible - foreign language) diabetes center will present interim patient data from the Phase I/II clinical limb ischemia trial going on in Germany. Another physician is using BRCs for treatment of the patients with osteonecrosis of the femoral head and will report on the centers early clinical experience in patient data at the same conference. This is a very exciting time for us as we continue to move forward with our trials. I look forward to the next opportunity to provide an update on our clinical progress. I will now turn the call back over to George.

Thanks, Elmar. We're obviously very pleased with the progress we've made in the clinic during fiscal year 2007, and we're looking forward to moving further ahead during fiscal year 2008. This fall now that Labor Day has passed is shaping up to be a very busy time for us. Tomorrow our VP of Corporate Development Intellectual Property is presenting to a group of potential investors at the First Albany Capital Regenerative Technologies Conference in New York. We're also scheduled to be presenting at both the Merriman Curhan and Ford Annual Investor Summit and also the UBS Global Life Sciences conference in the fall. As Elmar mentioned earlier, during October, two German physicians working with our TRC-based products intend to present their clinical experiences in early patient data from their work with CLI patients and the osteonecrosis patients. As I mentioned earlier, Dr. [Himenez] intends to present the final patient result from our severe nonunion fracture trial at the OTA Conference mid-October in Boston.

During November and December we'll be also presenting at the Rodman Renshaw Health Care Conference and also the Bank of Montreal Conference. Not all of these conferences offer web casting services. However, be assured if anything material is being presented, we will issue a press release and/or file a Form 8-K with the SEC. We hope that you will continue to follow Aastrom's progress as we move through fiscal '08, and we appreciate your confidence in support this past year and also into the future. Joe, we would like to open up for Q&A, right no, please.

(OPERATOR INSTRUCTIONS) Our first question is from Ren Benjamin with Rodman and Renshaw.

Good afternoon, George and team and thanks for taking the call and congratulations on your progress so far. A couple of questions for you guys. One is the conference where the German physicians are going to be presenting at, can you tell us which conference that is in October and then also how interim is interim? So how many patients are we -- will we be hearing about and when might we expect final results?

This is George. A couple of things. The conference itself will be a regional conference being held in Wartsburg, Germany. Elmar is actually in the middle of that, and I will defer to him to give you the specific name of that conference. I think at this stage while he is getting ready to tell you about it, we've not had any physicians present or publish any data yet on our osteonecrosis and our CLI data, so these will be interim results. We're not as close to what they're going to present today as we might be in the future, but I think we're pretty encouraged that what they're going to see is going to show signs of progress. Elmar, do you have the name of the conference?

It is the (Inaudible) Wartsburg stem cell symposium, and it is going to be on in October, and the presenters will be (Inaudible) Diabetes Center going to be presented by Dr. Stroutman and Dr. [Nuet] from Wartburg.

Do you know the dates of that conference?

It is on the fourth of October to the seventh of October.

Great.

There will be limited participation obviously from this country, but we'll inform you of the results.

Right, right. Terrific. Just looking back at some milestones that I still have in my notes and just wanted to get an update as to what might be happening, according to my notes, there was an osteonecrosis trial that's still in progress in Spain, and I wanted to get an update what's happening there and also according to my notes there was the chance that we might see some final or top line results from the sinus lift dental implant study or the jaw reconstruction study and I wanted to see if that was still ongoing and whether we might see those results?

Yes. The osteonecrosis trial in Spain so it is still accruing and on schedule. With regard to the jaw reconstruction trial, these results are going to be published. There is a manuscript in preparation about this.

Okay. That's presumably a 2008 publication? Does that sound fair?

That sounds fair.

And the osteonecrosis trial in Spain, you said it is progressing well. Can you give us an update like how many patients are involved and can you remind me as to the how many patients you wanted to enroll in this trial?

Yes. There is going to be an interim analysis for 10 patients being treated on this trial and a total number of patients is 25.

Interim analysis after 10, and when do you think you might reach that?

We're well into the trial at this point.

We can't really give that data.

Okay. And then I guess maybe some details about the RESTORE-CLI trial. How many patients do you have so far since the first patient was announced back in June and could you just give us-- can you just remind us of the treatment protocol, how exactly these patients are being treated and how long -- I know the follow-up is for twelve months, but how often do you look at the patients to assess them?

Ren, before Elmar answers on the critical protocol, we don't give interim data on number of patients that we've accrued. We do give interim data as to the number of sites that have been initiated, and I think we said earlier we've initiated seven sites in that trial.

Just give it a shot.

Good for you for trying.

Thanks.

I can give you some detail about treatment. This is a treatment that involves intramuscular injection of these cells. These VRT, vascular repair cells directly into the calf muscle, but also above the knee that's the kind of special aspect of these trials and we're trying to restore micro circulation in these patients because it has been shown that these earlier Stem pregenertor cells are very useful in reestablishing blood flow and micro circulation levels in these kinds of patients.

So what's the primary end point, I guess, in these studies and are these established end points?

There are a couple of end points. First understand point is of course safety, and this is what everybody will tell you on these trials, but we of course do look since the Phase II B trial look very closely at several end points. Among these end points, and this is one of the unique aspects of this trial, is the incidents of patients who are going to undergo amputation. We hope that our VRC therapy has a strong impact on the percentage of patients who are going to require a major amputation of the foot. We also are looking at several (Inaudible) perimeter like some blood pressures indices in the effected limb. So it is a number of things for example looking at wound closures, any complications and so on for comprehensive clinical data we're collecting.

One last question regarding future aspects. If this were to move to a pivotal design or registration quality trial, what would be the end point then? Would it also be decreasing the number of patients that require amputation or more like treadmill time or --

Let me clarify one thing. These patients are beyond treadmill. They're constant rest paid. It is hardly possible to keep them walking. These are really sick patients. If you can do a treadmill test with these patients at all, this would be a terrific result, so these are very, very sick patients, but let me also comment on one thing. It is very good point you're bringing up there. It is very important that we look at these heart clinical end points here, and what this trial is actually designed for so this is one of the first trials really are which really are evaluating this cell therapy has an effect on these very hard end points like amputation rate and so on, but anything in these patients is actually going to be helpful. We're also measuring quality of life. These patients are extremely sick. And it is going to be ongoing discussion also with the FDA, what they think is the appropriate end point for a pivotal trial.

Perfect. Thanks very much, guys, and good luck. Thanks, Ren. (OPERATOR INSTRUCTIONS)

The next question is from Diane Bederbach a Private Investor. Please go ahead with your question.

Hello. I notice on the German website the limb ischemia had the anecdotal patient which was given the TRCs in September '05 and they showed photo in February '06, and it looked to me like total wound closure and on the ASTM site it had a photo showing 44 weeks, and appeared to be the same patient. Can I assume that with that one particular patient wound closure occurred in six months as opposed to 11 months?

There aren't different patients accrued in this trial. So far there are nine patients that have received TRC cells at this point, and some of them had have experienced wound closure.

And is that the same patient or am I assuming too much?

I cannot comment on individual patients here. I am sorry.

I understand that. I also want to know if it is as successful as the German photo, is the FDA have any allowances for people who are in the placebo group to get the TRCs so they don't have that kind of suffering that you have talked about?

I think you're bringing up a very good point. This German trial was actually a open label trial, so patients actually knew that they were in the control group, and we have seen requests for people to move over into the treatment arms. This has been one of the early experiences we had with these our cells.

That's wonderful. Does the FDA for our U.S. trials have that same kind of provision?

Yes, because we have a 12-month follow-up period in the trial. We intentionally included an interim analysis, so we are have a very prominent data safety monitoring board, so in case , we are going to see the to groups differing very much from each other, there is always the possibility that patients can change over or that a trial is terminated early, but this all depends as you know on how the trial is actually going.

And, Diane, because this is early stage in the U.S., you asked a very good question. It is hard to predict what the FDA will say, but you can certainly be assured that if the data continues to come in very strong and efficacious, that we will be in discussions with the FDA about that.

Does that hold true for non-healing bone fracture and osteonecrosis as well?

I think it applies across our product lines, yes.

Terrific. I also had a question about or maybe a complaint on some of the articles I have read recently about cardiac repair, and Aastrom is never mentioned or seldom mentioned or is even some other companies have been mentioned that aren't even doing cardiac repair. Seems to me the area of (Inaudible) stem cells that Aastrom is the oldest elevator of stem cells and certainly should be mentioned, and I feel like somehow that's a short coming in Aastrom that we haven't really got the word out that the possible pipeline that Aastrom has.

This is George. Let me short of reflect on what you just said. I think we are -- we have communicated to investors and shareholders and the public at large what our intentions are going forward. I would also put our intentions to get into a nero program, spinal cord injury in the same context, and as we develop our plans and as we generate data we will certainly talk about it. I think while we clearly have programs that are getting under way, until we have data it is really just talk and good intentions at this stage, and I think the other people who have data will I think quite appropriately be excited to talk about their data. We're just not there yet.

Sure. Well, I would have liked to have seen a mention in some of the articles that we were granted orphan status with the cardiac trials and also I would of like to see some of this new information today in print rather than just SEC filings with the grant from the NIH, this is fabulous, I am very pleased with the Company. Don't miss interpret my complaints. They're minor in the whole picture and congratulations on everything.

Thank you for your comments.

Okay. That ends my call. Thank you.

Thank you.

The next question is from Ren Benjamin with Rodman and Renshaw. Please go ahead with your question.

Thanks for taking the follow-up question. The DCM trial, you mentioned that the EU and the U.S. trial you're going to start in 2008, can you comment maybe a little bit more as to if you have some better clarity as to when in 2008 it is going to start and then maybe Elmar can comment a little bit on how -- what's -- how the trials are going to be designed and whether they will be interim analysis in those trials as well and how many patients we're looking for and things along those lines and primary end points.

Sure. Elmar can talk about those details. I think generally as you know when you are entering a new area and this is new for us, we need to work through and screen and talk with collaborators in this case throughout the EU and Elmar spends a very considerable amount of his time in Germany and elsewhere doing just that, so once we are ready to start and that includes what he is going to talk about next in terms of design and protocol, and I think you'll be pleased with the groups that we believe we will gain traction from, but it is just too early to talk about it at this stage.

Let me give you some detailed information here. In the European Union we're actually in a very privileged situation because the regulatory restrictions, there are fairly low, and so at this point for clinician to use our product in clinical practice, they do not require a specific marketing authorization, so therefore we have a number of centers in Europe who approached Aastrom asking to have access to the TRC technology because there is a recognition that stem cells dose and progenerators dose may presenter cell dose may have very important effect on the clinical outcome that is seen in these patients, so we will be focusing on patients with dilated cardiomyopathy because of our designation as an orphan drug cure in the U.S. we're going to utilize all data we can get in the European Union in patients with DCM, and we will be approaching this fairly broadly because we have a number of centers that are interested in our technology. You're going to see different kind of approaches. You're going to see the combination of the product with the established surgical approaches like coronary arterial bypass grafting, but also as stand alone therapies we will also be evaluating this approach. In the U.S. for our initial trial we will be working again with very prestigious centers. This will be an ICH GCP of course guided trial. Again, looking at patients patients with DCM. There are a number of going to be in early Phase II trials here for DCMs. We will be looking at a lot of parameters and there will be sophisticated imaging end points. There will be liability end points. There will also be very sophisticated technology used to evaluate regional blood flow in these kinds of patients, so it is going to be very interesting trial with a lot of data to report hopefully.

Thank you.

We are currently doing the preclinical work in the U.S. in anticipation of submitting our application to the FDA.

So if the preclinical work is still being done, I assume this is pre-IND work, is it fair to say or fair to assume that it might -- the trials may be initiated closer to the second half of '08?

We're not giving any guidance on that just yet. Stay tuned.

Okay. Great. Thank you, guys.

There are in further questions in queue. Back to George Dunbar for a wrap up on today's conference call.

Thank you very much for taking the time to listen to our presentation and for the questions. I hope that both what we've formally put together in our press release, the discussion today, and then the Q&A helps add some color commentary behind some of the very exciting programs that we have ahead, and I think you'll find that 2008, our fiscal year, will be a very exciting year, again, we appreciate your support, and look forward to giving you the next formal update on our progress. Thank you very much.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.