Vericel Corp (VCEL) 2013 Q3 法說會逐字稿

Welcome to the Aastrom Biosciences' third quarter 2013 conference call.

(Operator Instructions)

I would also like to remind you that this call is being recorded for replay. I would now like to turn the conference over to Aastrom's Controller and Corporate Secretary, Michael Elliston. Please, go ahead

Thank you, operator. Good afternoon, everybody. Welcome to the third quarter 2013 conference call to discuss our third quarter financial results and the progress of our development programs.

Before we begin, let me remind you that on today's call we will making forward-looking statements covered under the Private Securities Litigation Reform Act of 1995. All of our projections and forward-looking statements represent our judgment as of today. These statements may involve risk and uncertainties that are described more fully in our filings with the SEC, which are also available on our website. In addition, any forward-looking statements represent our views only as of today and should not be replied upon as representing our views as of any date, subsequent.

With us on the call today are Nick Colangelo, Aastrom's President and Chief Executive Officer, Dan Orlando, our Chief Operating Officer and Dr David Recker, the Company's Acting Chief Medical Officer. I will now turn the call over to Nick.

Thank you, Mike, and good afternoon, everyone. During and since the third quarter, we have made significant progress on a number of fronts. From a financial perspective, having successfully brought our operations and expenses in line with the goals of our corporate restructuring, we executed several important initiatives to complete our financial restructuring and strengthen our balance sheet to support our development programs and broader corporate objectives moving forward.

These initiatives included amending our Series B preferred stock agreement with Eastern Capital, which substantially increased our shareholder's equity by approximately $43 million. We also completed an offering of common stock and warrants that raised gross proceeds of approximately $9 million to support our pre-clinical and clinical development programs, our working capital needs and other general corporate purposes. These events together with related initiatives completed during the third quarter, allowed us to finish the quarter with approximately $5 million in stockholder's equity, which positions Aastrom's to meet the NASDAQ equity standard listing requirement of $2.5 million of stockholder's equity. In addition, last month we secured shareholder approval authorizing the Company to affect a reverse split of our common stock. We effected the reverse split on October 16. The reverse split was designed to make our stock more attractive to a broader group of investors, improve our capital structure and increase our share price to a level that reflects the underlying value of our technology platform and therapeutic programs. As a result of this action and as announced at the end of last month, we regained compliance with NASDAQ's minimum bid price listing requirement.

The completion of these corporate and financial restructuring initiatives and our recent public offering and related financial actions have strengthened our balance sheet and enabled us to continue to advance our research and development programs and pursue promising strategic growth initiatives for the Company. Our goal moving forward is to leverage our existing technology platform and assets and broaden our product portfolio as we continue to advance our research programs in the clinical development of our lead product candidate, ixmyelocel-T.

Here to provide an update on our ixmyelocel-T clinical development activities is Dr David Recker. Dave, who has served as our Chief Medical Officer for the past year has more than 20 years of experience in drug development, most recently at Takeda Global Research and Development, where he served as Senior Vice President for Clinical Sciences. Dave has had responsibly for planning and executing multiple development programs across a variety of therapeutic areas, many of which have resulted in successful regulatory filings and product approvals. I'll now turn the call over to Dave.

Thank you, Nick. We are currently focusing the clinical development activities for ixmyelocel-T in three areas. Our lead clinical program and the primary focus of our internal resources is our orphan disease program for the treatment of advanced heart failure due to ischemic dilated cardiomyopathy or DCM. The refractory ischemic DCM market clearly represents a significant commercial opportunity for ixmyelocel-T. We have an opportunity to become the first approved product to market for the treatment of advanced heart failure due to ischemic DCM. We continue to make good progress in the Phase IIb, ixCELL-DCM study. This multi-center, randomized, double-blind, placebo-controlled, Phase IIb study is evaluating the efficacy and safety of (technical difficulty) in patients with advanced heart failure due to ischemic DCM. With the primary end point being major adverse cardiovascular events defined as, the number of all caused deaths in cardiac hospitalizations and unplanned emergency department visits for treatment of acute worsening of heart failure over a 12-month period.

During the third quarter, we submitted a clinical trial application to initiate the ongoing Phase IIb ixCELL-DCM clinical trial in Canada. I'm pleased to report that we received approval from Health Canada to proceed with the trial. We've now activated approximately 25 clinical sites. We expect virtually all remaining sites to be activated in the next month or so. We also continue to engage in several important initiatives designed to support rapid execution of the study. Our recent investigative meeting for the study was very well attended and extremely positive, reflecting the strong commitment of the centers that are participating in this study. We also have the enthusiastic support of the study's steering committee of internationally renowned cardiovascular and cell therapy clinical investigators with whom we continue to work closely on the execution of the study. We remain focused on the rapid execution of the study and as we have previously stated, we are targeting a top line efficacy results from the study in mid-2015.

The second area of ongoing clinical investigation of ixmyelocel-T is in the treatment of critical limb ischemia or CLI, the most severe form of peripheral artery disease. Our Phase IIb RESTORE clinical study results demonstrated that ixmyelocel-T was well-tolerated and efficacious in CLI patients. We are continuing to evaluate the safety and efficacy of the 40 or so patients who enrolled in the revised study and expect to have results from this study in the second quarter of 2014. We also continued to evaluate the potential initiation of an investigator-sponsored study of ixmyelocel-T as an adjunct therapy to an endovascular procedure in CLI patients. This is another exciting clinical application for ixmyelocel-T that offers the potential to improve the lives of patients, again with CLI. The third area of ongoing clinical activity is cranial-facial reconstruction, where we have studies ongoing in partnership with the University of Michigan.

These studies are evaluating the use of ixmyelocel-T treatment for patients with craniofacial defects undergoing reconstructive surgery. Results from the first of these studies were published earlier this year in cell transplantation and demonstrated that ixmyelocel-T accelerated bone regeneration in patients with craniofacial bone defects. These findings further highlight the potential of ixmyelocel-T to play an important role in repairing damaged tissue in a number of clinical studies. Enrollment in one-third of these studies, a Phase I\II trial in patients affected by cleft palate, alveolar or bone defects due to trauma is expected to be completed shortly.

Thanks, Dave. As you can see, we have multiple clinical initiatives underway, and several important clinical milestones to look forward to in the months and quarters ahead.

Turning to our research programs, promising pre-clinical results are also generating important new information about the therapeutic potential of ixmyelocel-T. Earlier this month, results from two separate pre-clinical studies of ixmyelocel-T were published in the peer-reviewed journal Stem Cell Research & Therapy. Results from the first study, which is entitled -- ixmyelocel-T and Expanded Multicellular Therapy, contains a unique population of M2-like macrophages, showed that ixmyelocel-T contains the macrophage population characterized by the expression of multiple well-known M2 macrophage markers, decreased secretion of pro-inflammatory cytokines after inflammatory stimuli, and efficient removal of apoptotic cells. This population of M2-like macrophages in ixmyelocel-T is believed to play a key role in tissue repair and regeneration.

Results from the second study entitled -- potential beneficial effects of ixmyelocel-T in the Treatment of Atherosclerotic Diseases showed that ixmyelocel-T macrophages are able to influx modified cholesterol, remain anti-inflammatory in the face of lipid loading and inflammatory challenge and display enhanced cholesterol efflux capabilities. This study indicates that the unique M2-like population of macrophages found in ixmyelocel-T is efficient at maintaining cholesterol homeostasis and represents a potential new modality in the treatment of atherosclerotic disease. Together, these results demonstrate the important roll that ixmyelocel-T may play in the repair and regeneration of damaged tissue and other cardiovascular diseases. We look forward to continuing to publish results from these important research programs, demonstrating the therapeutic potential of ixmyelocel-T to treat a wide variety diseases.

As we've discussed, our innovative technology platform generates multi-cellular therapies using a highly automated GMP manufacturing process. This platform is unique in the industry and has demonstrated the capability to expand multiple cell populations for therapeutic use, including bone marrow mononuclear cells, hematopoietic stem cells from cord blood or bone marrow, dendritic cells and T cells, all of which have the potential to play a critical role in the treatment of serious diseases. We believe that this platform is an extremely valuable asset that we can leverage to broaden our portfolio and support our long-term growth. As such, we are exploring opportunities to support the product development efforts of other cell-therapy companies through various forms of collaboration and partnership.

Finally, I would like to mention that we welcomed a new Director to Aastrom during the third quarter. Heidi Hagen is a Global Chief Operating Officer at Sotio LLC, a biotechnology company developing new therapies for the treatment of cancer and autoimmune diseases, using its immunotherapy platform and proprietary cell-based technologies. Heidi brings to our Board outstanding technical and managerial experience in cellular and regenerative medicine. We are confident that she will play an important role in helping to advance our business strategies and maximize the global commercial opportunities for Aastrom in the years ahead. That concludes my update on recent activities. I will now turn the call over to Mike review our third quarter financial results.

Thanks, Nick. As a result of our recent stock offering and reverse split of our common stock, Aastrom now has 6.8 million fully diluted shares outstanding. Please note that our financial results for the third quarter do not reflect the impact of the reverse split of Aastrom's common stock. For the third quarter ended September 30, 2013, Aastrom had a net loss of $2.3 million, or $0.06 per share versus $6 million, or $0.17 per share for the same period in 2012. The decrease in net loss is due to non-cash change in the fair value of warrants and decreases in research and development and general and administrative expenses. Our loss from operations for the quarter, which excludes the impact of warrants and preferred stock, was $3.6 million or $0.06 per share compared to $8.3 million or $0.19 per share a year ago.

Research and development expenses for the quarter ended September 30, 2013 were $2.6 million versus $6.1 million for the same period a year ago. The decrease in R&D expense was primarily attributable to stopping enrollment in the Phase III REVIVE clinical trial, the execution of corporate restructuring that substantially reduced headcount and operating expenses and the reversal of non-cash stock compensation expenses due to the forfeiture of stock options. General and administrative expenses for the quarter ended September 30, 2013 were $1.1 million versus $2.1 million for the same period in 2012. The decrease is primarily attributable to the reduction of operating expenses resulting from the corporate restructuring and the reversal of non-cash stock compensation expense related to the forfeiture of stock options.

At the end of the third quarter, Aastrom had $10.8 million in cash and cash equivalents, compared to $13.6 million at the end of December 2012. Our cash used for operations of $4.1 million during the quarter was in line with our previous forecast of $4 million to $5 million. We expect our cash spend for the fourth quarter to be in the range of $4 million to $4.75 million. That completes my financial review. Now I will turn the call over to Nick.

Thanks, Mike. As you as you can see from our third quarter results, we clearly have brought our expenses in line with the goals of our corporate restructuring. Let me conclude our prepared remarks by stating that we believe that the completion of our corporate and financial restructuring activities has put us in a much stronger position to continue the development of ixmyelocel-T for the treatment of advanced heart failure due to ischemic DCM, explore other potential indications where ixmyelocel-T may have meaningful therapeutic benefits and to pursue promising new business opportunities designed to leverage our existing assets and broaden our portfolio. Now, I'd like to ask the operator to open the call for your questions.

(Operator Instructions)

Steve Brozak, WBB Securities.

Obviously, with everything and all the different moving parts, what people are probably thinking and what I'm thinking and asking is, given the fact that you've got, X number of resources and a whole boatload of different programs, what would you say your primary focus is going to be? What would the secondary focus be in terms of partnering? I will have a follow-up after that.

Clearly our internal focus both for our people and our resources is on our ixCELL-DCM clinical program. We are obviously following patients in the REVIVE study and do have an opportunity to leverage external resources through investigator initiated studies for adjunct therapy in CLI patients, as well as in cranial facial reconstruction, as well. But again, in those cases, the latter two, we're able to leverage external resources while we focus our internal resources on our lead program.

Okay. Using and looking at those parameters, what do you look at? What can investors expect in terms of the funding for completion? Then I will jump back in the queue after that.

As Mike mentioned, we ended the quarter with $10.8 million in cash, that takes us into about the middle of next year. Obviously, we will raise money to continue development of the programs down the line. But, we think we have a pretty healthy runway ahead of us now and can make some strategic decisions on financing in the months ahead.

Now -- sorry, but you still obviously have the significant backing after the conversion. So, it's not -- you still have your same singular investor in there? Is that correct?

Yes, Eastern Capital -- if that's what you're referring to, is the holder of our Series B preferred stock. Yes. They're an owner of common stock in the Company as well.

Great. Okay. Thanks again, guys.

Thanks, Steve.

Jason Napodano, Zacks.

I've got a little bit of a raspy voice, so I apologize for that. Just trying to get a sense of the investigator sponsored trial as an adjunct therapy in CLI. Can you talk a little bit about that patient population? I'm a little confused as to where these patients would fall on that scheme of option, no option that you guys have talked about in the past.

Sure. One of the things that Aastrom found in the original REVIVE trial was that to a surgeon no option, rather, is a very difficult term. Having the ability to partner with another procedure to have the surgeons perform an atherectomy or an endovascular procedure gives them the opportunity to do what they do best, in addition to benefit the patient by adding ixmyelocel-T on to that, where we already know, as I've mentioned from the RESTORE study, the efficacy in -- especially in wound closure in this population.

Okay. So, the patient population is kind of similar to what you were going after. With REVIVE, you've just allowed -- there's just going to be an additional endovascular procedure that's going to be allowed?

Yes, ixmyelocel-T has not been done as an adjunctive procedure. As you know, in the RESTORE and in the REVIVE trial to date in the patients that have CLI who have been treated, it's been the only intervention applied. So, there is going to be some -- it will be probably a Phase 1-ish trial, collecting some efficacy data to understand, primarily the safety of combining ixmyelocel-T with an endovascular procedure. But of course there will be every attempt to gain understandings of just how the combination of a procedure and ixmyelocel-T could benefit patients.

Got you. Then just as far as what you guys are hoping to see from those 40 patients that enrolled in REVIVE, with 8 in the second quarter of next year. Obviously, that's not enough to get statistical significance. But, if you have got some good trends there -- some trends that matched up with RESTORE CLI, what would be your next step? What would be your thought process on how to proceed, if that data comes out and it looks as good as maybe the RESTORE data looked?

I can answer the -- one of the differences -- excuse me, I've got the raspy voice too. Some of the data that we are collecting that were not ostensibly in the REVIVE trial was healing of wounds. Patients, as you know, that are included in the trial have wounds that we are measuring and that we'll be able to demonstrate. So, you're right, there's not enough, probably not enough patients today who'll show a statistical significance. Certainly not for an amputation-free survival. Depending on how the numbers actually play out, it will be close.

We are hoping that there will be a strong trend showing reduction in the amputations, improvement in survival and improvement in wound closure. If that's the case, then obviously, the data are going to dictate where Aastrom goes. Our hope is that we can fully mobilize that into a program that would, again, would be beneficial to patients, getting them not only an improved survival and reduction of amputation, but also healing the wound.

Got you. Let me just ask one question about ixCELL-DCM. 108 patients, I think was the goal there. Would you guys provide any guidance as to where we are now? Or any kind of update as to where we are now in terms of number of patients?

Yes. As we mentioned before, we chose not to give specific guidance on where the study is with respect to enrollment for a number of reasons. These kinds of trials have a lot of variability to them. The study is going extremely well. As I mentioned, we got about 25 sites, about 35-ish sites have been targeted. 35 [No-Go] sites have been targeted for inclusion in the trial.

But 25 of those are up right now. We fully expect most of the rest of those 10 to be enrolled by the end of the month. So, we are quite pleased with the progress. I also mentioned that, in the third quarter, we were able to hold an investigator meeting, there was a majority of the sites with those 36 sites that attended the meeting. Again, a very positive response from them.

Got you. All right guys. Thank for the update.

Thank you.

(Operator Instructions)

Jason Kolbert, Maxim.

You are making progress. I really have the same kinds of questions that Jason N just asked you, which is, if you have 25 of 35 sites open and you've just had an investigator meeting, does that imply that you are actually enrolling and treating patients in DCM now?

Yes.

Okay. You haven't given us any kind of timeline in terms of how long it might take to complete this trial. But, I would like to ask that question again. Then, I'd like to ask the question, once the last patient is treated, how long before we might see top line data? Then I have a -- I really would like to talk a little bit about what the entry criteria is on DCM patients? What the primary endpoint is of this trial?

Let me take the enrollment question, based on our timeline. Then Dave can answer your questions about entry criteria, et cetera. So, as Dave mentioned earlier in the call, we do target having top line efficacy data by mid 2015. So, we've communicated that before. It's a 12-month study. So, working your way backwards, that kind of tells you where we expect enrollment to be. Without giving specific numbers, our timeline for top line data remains the same. Dave -- or Jason, maybe you can ask your enrollment criteria and endpoint question?

Sure. As far as enrollment criteria go, I've mentioned, we are working very closely with the steering committee of well-recognized, renowned cardiovascular individuals, who have an extensive experience in stem cell therapy, have been working to refine the protocol to allow patients who obviously have ischemic dilated cardiomyopathy. So you recall from earlier studies, there was much better results seen in the ischemic subpopulation of DCM that in the non-ischemic. So focusing exclusively on patients with ischemic DCM.

Secondly, on patients who are rather more extreme in their illness, that is New York Class IIIs and IVs. Then, finally, another criteria to, again, optimize the chance that we're going to see events. This is, remind you, an event driven trial. There are 108 patients as was previously mentioned. So in order to show any kind of difference with 108 patients means, you'll need to have a fair number of events.

In order to optimize a chance of seeing that, patients can be enrolled if they have had one of three additional criteria. Either having been hospitalized within the past six months for exacerbation of their congestive heart failure, or have a brain natiuretic peptide or pro-BNP, a marker for congestive heart failure exacerbation greater than a pre-specified amount, or having limitations in a six-minute walk, which is a relatively common assessment done in patients with a variety of diseases.

Having a limited six minute walk due to cardiac burden would allow these patients to enroll into the study. Sp, patients with ischemic DCM, who are New York III or IV, who have, I forgot to mention, an ejection fraction of less than 35% by echocardiography, and who have either been hospitalized in the previous six months for exacerbation of the heart failure, have a BNP or pro-BNP greater than a pre-specified amount or have a six minute walk of less than a pre-specified distance.

Thank you, that is really helpful. On the backside, can you just list off what the endpoints are, you're tracking? Is there a primary endpoint associated with the trial?

Yes. So the primary endpoint is actually a composite: it's death; it's hospitalization for exacerbation of congestive heart failure; or it's out-treatment evaluation and treatment of congestive heart failure. Any one of those three would qualify as an endpoint.

In addition, there are multiple secondary and even exploratory endpoints being looked at in the trial, including -- improvement in six-minute walk time; improvement in New York Heart classification; improvement in ejection fraction; reduction of BNP, or a change in BNP; a number of secondary endpoints that are also being looked at, that should, again, in totality give us, and more importantly give the cardiovascular community a better idea of exactly what's happening to these patients.

Thank you very much. So, help me understand one thing. So, I can understand this is an exciting trial. I can understand that it's a trial that could end up with some pretty important informative data towards the pivotal trial. But I'm a little bit nervous because, even with the reverse stock split, the capital on hand is not really adequate to fund this trial all the way through to completion. So you know that there's another financing in here.

So is the strategic goal to kind of get data good enough and then find a partner? Remember that I'm asking this in the wake of news such as Dendreon hiring a banker to find a partner. The autologous model is certainly in the crosshairs these days. So, help me understand strategically what the plan is to keep the Company alive? What data will be good enough to attract a partner or set up another financing?

Yes. Jason, first of all, the fact of Dendreon hiring a banker, Dendreon's got its own issues. I think it's a rather broad stroke to say that influences all autologous cell therapy companies. You know we have a very different cost of goods structure, et cetera. So, that is, what it is. But I don't think it's indicative of all autologous therapy platforms.

Clearly, we talked about previously a financing strategy where we would raise funds during the summer, execute on a few financial restructuring initiatives to resolve our NASDAQ listing issues and so on, and then focus on the financing strategy for the Company going forward. As I mentioned, we do have capital into the middle of next year, plus other resources at our disposal, facilities, et cetera. So we will determine our financing strategy some time down the road.

The data that will support a partnership would come out of this study, clearly. These are registration quality endpoints. Clearly the two of cardiac hospitalizations and mortality are provided in the FDA guidance. So this isn't sort of a surrogate or secondary efficacy endpoint study. The one that Dave mentioned that will require some discussion with the FDA is the outpatient treatment in emergency rooms of acute decompensated heart failure.

But that's an interesting discussion to have moving forward, as payers and government agencies look to limit hospitalizations, so these patients may very well be treated in different settings going forward. So -- but, bottom line to answer your question is, we absolutely believe data coming out of this study would support partnering the program if that is what we decide to do.

Okay. Thanks, Nick. You are right. It's not fair to compare Dendreon with such a macro broad stroke. But, it is relevant at some small level. But your point is well taken. Thank you.

Okay. Well, thanks, Jason.

Thank you. With that, there are no further questions in queue. I'd like to turn it back to Nick Colangelo for final comments.

Thanks again everyone for your questions and continued interest in Aastrom and our program.

As we talked about, we have several important milestones to look forward to in the months and quarters ahead, including the completion of patient enrollment in the Phase 2b ixCELL-DCM study, completion of patient follow-up in the REVIVE CLI study, completion and potential launch of investigator initiated clinical studies with ixmyelocel-T in additional indications and further reporting of pre-clinical findings that may open up new avenues of clinical investigation for our cell therapy technology.

So we remain excited about the opportunities ahead for the Company. I look forward to reporting on our progress for these initiatives on our next call. That concludes our call this afternoon.

Thank you. Once again, thank you ladies and gentlemen, for joining today's conference. You may now disconnect. Have a great day.