Vericel Corp (VCEL) 2013 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Aastrom Biosciences' fourth-quarter 2013 conference call. At this time, all participants are in a listen-only mode. I would also like to remind you that the call is being recorded for replay. I will now turn the conference call over to Aastrom's Controller and Corporate Secretary, Michael Elliston.

Thank you, operator. And good afternoon, everyone. Welcome to our fourth-quarter 2013 year-end conference call to discuss our fourth-quarter financial results and the progress of our development programs. Before we begin, let me remind you that on today's call we will be making forward-looking statements covered under the Private Securities Litigation Reform Act of 1995, and all of our projections and forward-looking statements represent our judgments as of today. These statements may involve risks 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 relied upon as representing our views at any subsequent date.

With us on today's call 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 the fourth quarter, we completed several important initiatives to enhance shareholder value and strengthen the Company's position moving forward. From a financial perspective, we successfully executed a reverse [split] of our common stock to increase our share price to a level that reflects the underlying value of our technology platform and therapeutic programs and to make our stock more attractive to a broader group of investors. As a result of this action, we regained compliance with NASDAQ's minimum bid price listing requirement.

In addition, based on the completion of several other financial initiatives to increase stockholders' equity in the second half of last year, we regained compliance with the NASDAQ equity standard listing requirements in the fourth quarter.

Completing these initiatives substantially improved the Company's financial position and enables us to continue to rapidly advance our research and development programs and our broader strategic business objectives moving forward. We remain focused on carefully managing our cash utilization rate and maintain a strong balance sheet relative to our annual burn rate.

As Mike will cover later in the call, we ended the fourth quarter with $8.1 million in cash and cash equivalents, which increased to approximately $10.8 million as of the end of February 2014.

In January, we took steps to further enhance our financial position and flexibility by entering into a $15 million equity commitment with Lincoln Park Capital, a longtime investor in Aastrom. Under the terms of the agreement, Aastrom has the right to sell from time to time up to $15 million in shares of common stock to Lincoln Park over a 30-month period on market-based terms, subject to certain limitations and conditions set forth in the stock purchase agreement. This facility provides Aastrom with another tool for accessing capital in addition to potential revenue from future business collaborations, grants, and traditional fundraising. And we intend to use the facility as appropriate to support the achievement of our operational and strategic objectives.

From an operational perspective, we continue to build value in our platform technology and development programs. During the fourth quarter Aastrom was granted a key composition-of-matter patent from the Australian patent office that provides rejection for our lead product, ixmyelocel-T, through 2027. Aastrom now holds patents for ixmyelocel-T in the United States, the European Union, and Australia. The Australian patent issuance expands our opportunity to commercialize ixmyelocel-T in multiple therapeutic markets and to consider a range of partnership opportunities and other strategies to advance ixmyelocel-T through clinical development.

During the fourth quarter, results from two pre-clinical studies of ixmyelocel-T were published in the peer-reviewed journal Stem Cell Research and Therapy. These results demonstrated that ixmyelocel-T contains a population of M2-like macrophages that are believed to play a key role in tissue repair and regeneration and that this unique macrophage population is efficient at maintaining cholesterol homeostasis, representing a potential new modality in the treatment of atherosclerotic disease. Ixmyelocel-T is a highly differentiated product and is the only multi-cellular therapy that contains expanded populations of both mesenchymal stromal cells and M2-like macrophages, and these results provide further indication of the important role 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 of diseases.

And finally, since our last call we have also accelerated advancement of our ixmyelocel-T clinical development programs for the treatment of severe ischemic cardiovascular diseases. Here to provide an update on our clinical development programs is Dr. Dave Recker. Dave?

Thank you, Nick. We currently are focusing the clinical development of ixmyelocel-T in three areas. Our lead clinical initiative is our orphan disease program for the treatment of advanced heart failure due to ischemic dilated cardiomyopathy, or DCM. This program represents a significant opportunity to demonstrate the therapeutic potential of ixmyelocel-T and to produce the first approved product to treat advanced heart failure due to ischemic DCM. The phase 2b ixCELL-DCM study is a well-designed clinical trial led by internationally renowned key opinion leaders in interventional cardiology, and it is expected to deliver meaningful results on a registration quality endpoint.

This study is a multi-center, randomized, double-blind, placebo-controlled trial evaluating the efficacy and safety of ixmyelocel-T in patients with advanced heart failure due to ischemic DCM, with a primary endpoint being a composite of major adverse cardiovascular events in a 12-month period including all-cause deaths, cardiac hospitalizations, and unplanned emergency department visits for treatment of acute worsening heart failure.

While completing important financial initiatives over the past year, we have also maintained a key focus on activating our ixCELL-DCM study sites as quickly as possible and have implemented a number of strategic initiatives to drive enrollment and rapid execution of this study. These efforts are continuing to deliver very, very encouraging results. Our clinical investigators and patients participating in the study are highly enthusiastic about that study.

We have activated more than 30 clinical study sites and enrollment in the study has accelerated, as we have a substantial number of sites actively screening, randomizing, and treating patients. We expect to complete enrollment during the second half of this year and report top-line results approximately 12 months thereafter.

Our 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. We are continuing to progress towards completion of the study to evaluate safety and efficacy for the approximately 40 patients who enrolled in the revised study; and, in line with previous communications, we expect to have top-line results from the revised study in the second quarter of this year.

A third area of current clinical activity is craniofacial reconstruction, where we have a series of three NIH-sponsored studies in partnership with the University of Michigan to evaluate the use of ixmyelocel-T treatment for patients with craniofacial defects undergoing reconstructive surgery. Published results from the first of these studies demonstrated that ixmyelocel-T accelerated bone regeneration, further highlighting the potential of ixmyelocel-T to play an important role in repairing damaged tissue in a number of clinical settings.

We expect the third of these studies, a phase 1/2 trial in patients affected by cleft palate or alveolar bone defects due to trauma, to complete enrollment by mid this year.

That's a brief summary of our current clinical activities. Now I will turn the call back to Nick.

Thank you, Dave. As you can see, we are making significant clinical progress and have several important milestones to look forward to in the months ahead. Our goal moving forward as we continue to advance our research and clinical development programs is to leverage our existing assets and industry-leading technology platform and broaden our product portfolio.

As an example of our efforts in this area, we recently launched operations at Marrow Donation LLC, our bone marrow collection center in San Diego. The center was originally intended to serve as a source of high-quality bone marrow for our internal research and development purposes, but we have expanded our efforts in response to the significant interest across the biopharmaceutical industry in the use of cells as drug discovery tools. We have generated a large pool of potential marrow donors. And in order to capitalize on the industry interest in bone marrow and bone marrow-derived [cells] for research and development purposes, we are now preparing to supply bone marrow bioresearch product distributors for sale to other research organizations. This is a promising new business opportunity for us, and I will provide further updates on this initiative in the coming quarters.

That concludes my update on recent activities. I will now turn the call over to Mike to review our fourth-quarter financial results.

Thank you, Nick. For the fourth quarter ended December 31, 2013, Aastrom had a net loss of $2.9 million, or $0.65 per share, versus $6.7 million, or $3.60 per share for the same period in 2012. The decrease in net loss is due to the decreases in research and development and general and administrative expenses and the non-cash change in our fair value of warrants.

Our loss from operations for the quarter, which excluded the impact of warrants, was $4.9 million, or $1.10 per share, compared to $7.6 million, or $3.48 per share a year ago.

Research and development expenses for the quarter ended December 31, 2013 were $3.3 million versus $6 million for the same period a year ago. The decrease in R&D expenses was primarily attributable to a reduction in clinical trial expenses, the execution of the corporate restructuring that substantially reduced headcount, and operating expenses. General and administrative expenses for the quarter ended December 31, 2013 and 2012 were $1.6 million. However, the quarter ended December 31, 2012 included almost $1 million of expense that was reversed due to option forfeitures during the fourth quarter of 2012.

At the end of the fourth quarter, Aastrom had $8.1 million in cash and cash equivalents compared to $13.6 million at the end of December 2012. Our cash used for operations of $4.3 million during the quarter was in line with our previous forecast of $4 million to $4.75 million. We have continued to manage our cash position carefully, and we have utilized our existing ATM facility during a period of price and volume strength for our stock, which enabled us to increase our cash position to $10.8 million at the end of February 2014. We expect our cash spend in the first quarter to be in the range of $4 million to $5 million.

That completes my financial review. Now I will turn the call back over to Nick.

Thanks, Mike. With the completion of a number of operational and financial initiatives in 2013, Aastrom is well positioned to continue to build on our momentum in advancing our ongoing clinical programs, exploring new indications for ixmyelocel-T, and pursuing promising new business opportunities in 2014.

Now I would like to ask the operator to open the call to your questions.

Steve Brozak, WBB Securities.

I'm going to go in something that hasn't been asked and answered in a while. And that specifically has to deal with your manufacturing and how differentiated you are in your manufacturing. Because, obviously, you are talking about facilities in San Diego and you are talking about the advantages your offer there. And frankly, I don't think anybody is giving you credit for it. So could you follow through on that? And I've got one follow-up after that, please.

Yes, well, I will start, Steve. And thanks for listening in and for the question. So as I mentioned, in San Diego we have launched our operations at the Marrow Donation Center. And that's simply a collection center that, again, was intended to provide high-quality bone marrow for our research and development purposes. We were a large purchaser from others in the industry previously, and obviously that's a way, as we talked about on our last call, as we look across our assets and our value chain, to leverage those assets that we have and generate revenue and operating income.

In terms of our technology platform, as I think you are aware, we certainly have what I believe is an industry-leading, highly automated, scalable, closed GMP manufacturing system where we've demonstrated the ability to expand a multiple -- or multiple cell types, including dendritic cells for vaccines, hematopoietic stem cells for bone marrow transplants, T cells for oncology applications, and, of course, mesenchymal stromal cells and M2-like macrophages for our current product, ixmyelocel-T.

So this is a very broad platform. At the heart of it is our bioreactor, which is the core of the technology and used in incubator systems that, again, are highly scalable and automated. And so I think that those position us uniquely in the industry. And as the industry moves forward into later-stage clinical development and commercialization, we believe it's certainly an advantage for us and one that others in the area should be thinking about.

So the follow-up is, in terms of your operations and potential collaborations that you might do with anyone else, this would be an integral part for anyone that wanted to come into the space and work with you or that you would work with into the future or in any kind of combination. Is that an accurate statement? And I'll hop back into the loop.

Yes, I think that is an accurate statement. Obviously, there are those who are moving towards commercialization who have inquired of our interest in working with them because, obviously, at commercial scale some of the more rudimentary cell expansion technologies like expanding cells in flasks are not optimal at commercial scale. But the more forward-thinking companies also obviously would like to work with us earlier in the process so that we are part of their process as they go through even the earlier stages of clinical development.

Great. Again, thanks, and I just wanted to make sure that I understood this because it's an item that, frankly, I don't think you've gotten enough credit for in the past.

Yes, we agree. Thanks.

Jason Napodano, Zacks.

I'm going to build off little bit from where Steve Brozak left off, and let's specifically talk maybe about the economics of your manufacturing. I know, if you look in the marketplace and you look at what the market is valuing the allogeneic players versus the autologous players, the allogeneic players are multiples of the autologous players. And I think it's because they have been successful and cunning in using the word off-the-shelf. And I know, Nick, we have talked about neither of us are big fans of the word off-the-shelf. I personally think it's kind of a disingenuous way to describe it.

But maybe you can give us a sense of -- you've covered the manufacturing and the scale, but maybe you could talk a little bit about the cost of goods and the economics and the competitiveness of your product compared to some of the allogeneic products out there. Because, as Steve said, I don't think you guys are getting credit for that. But I don't think the market understands the competitiveness that you have and the economics that you have compared to some of the allogeneic players.

Great. Well, thanks, Steve. It has been good to hear from you, and hope you're well. We certainly take a broader look at the whole business model around cell therapy, starting with pursuing compelling commercial opportunities, making sure cell therapy is justified for those indications, looking at the reimbursement potential, and then obviously having low cost of goods sold to be able to drive profitability. And I think a number of the early entrants in the markets failed at one or more of those parameters, either high cost of goods sold that didn't allow for a profitable business; commercial opportunities where there wasn't a great unmet medical need.

And so we think we are well-positioned along all four of those parameters. Our cost of goods sold -- obviously, you know, the story people talk about is Dendreon and the high cost of goods sold there. But even the autologous therapies in our space or closely related cardiovascular spaces are multiples of what our cost of goods sold are.

So we expect that commercial scale will be in kind of low single digits in term -- thousands in terms of cost of goods sold, which places us much more in line with allogeneic therapies and certainly in line with other biologics across the industry.

I think that's helpful. And let me just ask a question about revised top-line data coming in the second quarter. I think that will be interesting to see. Can you give us a sense of -- what it looks like there is that you've essentially got the -- you've had a successful phase 2b trial with RESTORE. You've got this data. Give us a sense of what you can do if this data comes in and it's at least consistent with what you saw with the positive data from RESTORE. What do you think the next steps are there in CLI?

I will let you start and I will follow-up.

Sure. It's an answer that in the clinical world we give often: it depends on the results. It really does; it depends on what we see. As you suggest, if we see data that are consistent with the RESTORE data and the revised data, that would give us -- add an emphasis for pursuing this indication.

It's an indication that I think you know is very, very, very poorly treated. There's not a lot of options for these poor patients, short of amputation. Patients and clinicians are looking for anything to possibly help them along. And so it really depends on the results of that study and what we do going forward.

And so I think the idea, Jason, is that we will get a look at the data. Obviously, we will have discussions with investigators and the FDA, and we will seek to craft a path forward, depending on the data, that makes sense. We certainly wouldn't intend to run the same playbook that the Company previously ran. And so we are obviously thinking pretty critically about that now.

Got you. Okay, guys. Thanks for the update.

(Operator Instructions) Jason Kolbert, Maxim Group.

This is [Susan Lee] for Jason Kolbert. Our question is, is there a lot of competition for the patients at the sites?

For the DCM trial, for the ongoing DCM trial?

Yes.

Actually, we have been very, very pleased with our response from our investigators and, frankly, from the patients themselves. We know that there are always competitions for trials, for whatever trial you happen to be doing, whether it's a trial for dilated cardiomyopathy or for glaucoma or for anything else. We, as I said, have had a remarkable interaction with our investigators; our investigators are enrolling strongly for us.

As I mentioned, too, and our patients are actually seeking us out; they are actually looking for this trial. To our knowledge, this is the only trial that represents or that offers patients the possibility of an open-label extension at the end. These folks are very smart; they are very astute. And, again, they are actively seeking participation in this trial.

So right now there has not competition that we've been worrying about; and, again, things are going very well with enrollment.

That sounds great. Thank you for that.

Thank you. And I have no further questions from the phone lines. I would like to turn the conference back to Aastrom for any concluding comments.

Okay. Well, thank you, Karen. And thanks to all who are on the lines for your questions and continued interest in Aastrom and our programs. As we mentioned, we have a number of important milestones coming up this year, and I look forward to reporting on our progress towards those goals on our next call. Have a great afternoon.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone have a good day.