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Oxygen Biotherapeutics, Inc. (OXBO)

The Wall Street Analyst Forum Call Transcript

November 18, 2008, 11:10 am ET

Executives

Chris Stern – Chairman and CEO

Unidentified Speaker

For the benefit of all, I would like to go ahead and introduce the next company in this morning’s program; Oxygen Biotherapeutics is dedicated to commercializing innovative pharmaceuticals and medical devices in the field of oxygen therapeutics and continuous substrate monitoring. The company has under development a perfluorocarbon therapeutic oxygen carrier and liquid ventilation product, and an implantable glucose sensor. These products are based upon core technologies that include biomedical applications for PFCs and medical and industrial applications for biosensors. Each of the product candidates is designed with advantages over currently marketed products in major markets, including traumatic brain injury, sickle cell crisis pain, wound care, trauma, acute respiratory distress syndrome, stroke, myocardial infarction, surgery, and diabetes. So, without any further introduction, I would like to introduce Chris Stern, Chairman of the company, and Charles Seeman, Chief Financial Officer.

Chris Stern

Thank you. Well, quite a stretch from electronics to biomedical. We are an 18-year old public company in the sectors of oxygen biotherapeutics. Core technology was developed up until 1991 by Lee Clark. And those of you who have seen the movie via disc may have seen that little rat here. That’s exactly the rat that was actually diving into perfluorocarbon and actually oxygenated by perfluorocarbon and surviving. And you see the fish on top. That’s what’s the fluorocarbon does, they carry oxygen. They are much heavier than water and their molecules are very, very small. Our molecules are four times smaller than a red blood cell. And thus it was logical to conclude that the company could actually develop a product being able to replace blood. So, the company initially was called Synthetic Blood. And we developed indications and it became apparent that synthetic blood probably would not be our primary indication, but carrying oxygen to wherever the body is depressed.

Now in an ischemic situation, where you lack oxygen the body sends a signal. So, if you have a stroke, a heart attack, or traumatic brain injury, body sends a signal to the system and the signal says, send the oxygen. Now in all these cases, one thing is clocked, that isn’t altered. So, there is no oxygen getting to that system. So, you need a bypass. It’s like a New York street. Try to get there is a limo, you can’t, but if you are on a bicycle you can. We have a bike and we are supercharged and superfast, 50 times faster than a red blood cell, and loads oxygen 50 times faster, wherever it’s needed. Now this opens up, of course a vast variety of indications. And that was a problem of the company, so many indications we didn’t focus. For 18 years, the company invested into research, basic research, specific research, some trials, and never made a buck. While research companies have an end point, and these are scientific end points, we want to prove this. We want to prove that – I am not a research guy, I am business guy and I have one signal end point, it is green and it has a number on it. As probably that’s what the investors want.

Now we have a compelling story. Our compound is what business administration feel is that, a blue ocean. There’s hardly any competition, and certainly for the next two or three years we probably won’t see any.

Now, that’s our lead product. It’s called Oxycyte. It’s said to put perfluorocarbon emulsion that has incredible characteristics. It’s probably the best in class perfluorocarbon out there at this point. And it’s metabolically inert, that means it’s totally artificial and therefore not much can happen with it. There is no reaction of the body to it. Once you put it into the body, the body uses the oxygen and it’s basically exhaled, some of it goes through the liver or the spleen, but it just disappears out of the body and after a few days, it’s out. It’s gone. The effect is there, the oxygen is there. And that’s what it does.

Now there are other oxygen carriers, hemoglobin based and that’s blood based. And if whatever is blood based, there’s certain disadvantages. Of course, there are advantages, it’s a natural compound, but the disadvantage is actually much, much bigger than the advantages of it. And perfluorocarbons, our test better suited for the indications we focused on than hemoglobins. Now 50 times better oxygen solvability and 50 times smallest than a red blood cell, that’s a good story. Where could you use that? Many, many cases. But we focused on two administrations. One is intravenously. So, this is where you put it into the blood system and it does exactly what I just discussed carrying oxygen to wherever it’s needed. That could be used in traumatic brain injury, TBI as you see here; certainly stroke, because that’s very related. We have very promising trials in spinal cord injury, and that would be more than just a medical breakthrough. I’ll get to that. Sickle cell pain crisis, this is where your blood cell sickle and it’s comparable to rheumatism, but in your skin. It’s extremely painful and 1% of the Indian population and a high percentage of the dark skin population carry the gene. You could also use it topically, and how did you co-op with that. As in so many cases in science, completely unscientific, some of our people used it when they had burns or wounds. And based on the outset [ph], it heals. So, there is no scar, and your wound just heals about double as fast as with a typical Band Aid. So, you put it on and it helps, of course it does. It’s carrying oxygen. In this case out of the air; but imagine, if you were to put oxygen into a vessel, little hydrogen peroxide and you can control the release of this oxygen you have a very, very compelling wound device.

Dermatology, acne, what is acne? Lack of oxygen. Put oxygen in there, acne is gone. Dandruff, what is dandruff? A fungus. Well, fungi died of oxygen. Put that stuff into a shampoo, dandruff is gone. Now you say, “This is not medical.” Well, not so, but it certainly would help the company to make a buck. So, we have two avenues. One is the clinical one; well, of course we’re going to burn a few more dollars over the next few years until we have a traumatic brain injury indication on the market. The second one is the topical one, where we are looking for partners actually at this stage to launch products and we intent to have our products on the market next year to make money. The company is yet to have income, so they can spend money.

Now, into development pipeline. Traumatic brain injury is on two avenues. One is the civil avenue and one is the military avenue. Well, traumatic brain injury happens to be the most prevalent injury in modern warfare. Civil brain injury is the most common injury and it accounts more people than heart attack and stroke combined. Only the (expletive) people, if you have a traumatic brain injury and that happens mostly to younger people you will never go to work as you’ve gone before. You are out of the system, you are depended on care and it’s very, very expensive. So, certainly help is needed. Whereas our topical division with the cosmetic and wounds, the indications where we go over-the-counter first and then for medical indication. In Sickle cell pain crisis, we are planning a trial based actually on the traumatic brain trials because it goes a lower doses and that trial most probably be in the Caribbean because there is a high number of population carrying the gene. Decompression sickness, again, you provide oxygen into the body and you take nitrogen out of the body and our compound does both. Now this is entirely developed by the Navy and the Navy will file an IND shortly, that’s a drug application, for decompression sickness and develop this on their own. The market is just not too big because there are not too many submarines on this planet. But once you are in a submarine and that thing is on the bottom of the ocean, you have to get out, that just happened recently with the Russian sub, there is a problem. There is only 60 compression chambers on the rescue vessel. But there are 100 sailors down there. Give them our stuff when they come up, they will survive, at least that’s what we believe and the Navy believes and that’s why they are developing this on their own. In the brain injury sector, you see the military indication. This is sponsored by the military with a $2 million grand.

Now what are the market needs; look at these numbers. Traumatic brain injury, 5 million incidences in Western Europe and North America and this is where actually we got numbers from, you don’t get any numbers from Asia and the rest of the world. But you can fairly say you can just double it to get to the world indices. So, with military, you are talking about almost [ph] 5 million incidences. Burns, of course burns happen, a lots of them. Wounds, you cut yourself, many times. Cosmetic indications, numbers sue the charts. Sickle cell, as I said, it’s smaller. It’s only 260,000 US incidences, but in populations where dark skin prevails, it’s much higher. Heart attack, bypass, stroke, huge numbers, way too big for a small company like ours, so we clearly focused on two things, TBI first and the topical indications later. And we do some things around sickle cell, which is certainly an orphan drug issue and decompression sickness that’s an orphan drug issue. But they are basically focused in the research on TBI.

Now just take that TBI situation here. Always want to be a last one, but they are always to the emergency room, from a car accident or as we had one patient in our 2a study falling down a bar stool, a little bit intoxinated because he was a student. Or a little girl in Miami that run a bicycle without a helmet – wearing a helmet, and you get the call from the hospital, she stared, she will probably will never ever walk, certainly not go to school, never ever work. But if that drug, you could give it, it’s not inexpensive, how much? It’s a lot [ph]. There is no doubt about it, you pay any amount. And we will certainly price this drug once it’s in the market, it should certainly in another two, three years for sure, maybe longer, appropriately. This could be a blockbuster, just filling any number you like and you get to staggering amounts.

Now that’s a few years out. But it’s certainly promising and that’s a reason why for 18 years, investors have invested into this company and are believing in it. It is a life saver. Look at this, in civil brain injury, 50% of the survivors have major impairments, they are lost some of the work force. We have an obligation to get something out there and help them. Military blast injury, a largest killer of all, and the war on terrorist, the war of the future, it will not go away. Look at the VA system and those of who live close to a VA hospital, it’s tragic. If we can only help half of these people, we did a great job. I think we have an obligation to get these drugs forward. And we do. And the Army believes in it, that’s why they put their money behind it, $2 million, which will help us to finance the next round of trials for the Army indication. Why would they do that. Well, look at this. What you are seeing here is in the first few columns the impact of the oxygen level of a person with traumatic brain injury, and you will see it is low. It should be at about 70%. You give Oxycyte, this is where the blue arrow is, and look what happens to the oxygen level, it just goes up, it goes up to where it has been. That means brain cells are conserved. That means you save precious amounts of time where you can open the skull and save that patient. It’s just carrying oxygen, it’s not healing it, but it’s preserving brain cells.

Now, this is the outcome. The outcome is measured in traumatic brain injury on the Glasgow Outcome score, where G, stands for good recovery; M, moderate; S, severe disability; V, vegetative; and D, of course, death. Look at this, of course there are a few patients, there were nine patients in treated and 25 in the control group, 50% better outcome in good recovery; 50% better outcome in moderate recovery; 50% fewer sever disability. There is a little higher number in Veg, because two out of nine past away, one of them the family decided to switch off the machine, but even that person showed signs of recovery. And one person probably should have never been in the trial, but got selected anyway and was so severely injured that that person passed away. These left side numbers, are proof that we need to go forward with the development of this drug and we will. While we do that, well, we completed phases I, which is safety in healthy patients and animal trials. In phase II we completed 2a, that’s small study; and we are currently short of a launch of a dose escalation study, which will happen in the US, small doses because we found out that the FDA warranted us to give quite a high dose and (inaudible). So we took over with lower doses, and on our Web site you will find a little link to a publication regarding to this. So, we start with low doses and escalate it a little bit to really find out the proper dose. We will go on with a higher dose in Canada, about 40 patients and we also plan to have a possible study in Switzerland and there are two reasons for that. First of all, the company was actually financed by the Suisse financiers in ’91, and still has a big number of Suisse people as shareholders, but also Switzerland has the most beautiful population, beautiful, of course, clinically, population of TBI probably in the world because these people are extremely healthy. Their health system is superb. They are going sports every weekend. So, you can count on injuries every weekend. It’s tragic, but we believe – one guy, say, from a motor cycle accident, one person, say, from skiing or snowboarding, that’s worst thing. And it will work, they are absolutely convinced.

Sponsors done that, of course, the company is too small for a phase III trial and most probably it will be a combined safety, efficacy, 1,600 patient trial, a big trial. We will have to find partners, but we do have some data for these partners now, with the dose escalation and the Canada study. And some we will probably partner this out at a very early stage and get along. Now, as I said, we have a military grand supporting us on that and we are confident that this study will be extremely successful.

Our first product on the market is a wound product, and here you will see our patented wound system. You see the wound it has a little rayon mesh and there is a different section down there, it could be copper oxide. We have Oxycyte, and this time it’s mostly gelled, and the covers, which is semi-permeable membrane and we have a patented technology which we in-licensed from Virginia Commonwealth University, where we actually produce our oxygen, the hydrogen per oxide. It’s a little pouch, you press it and we control nearly, we put in 3% oxygen. So, the Oxycyte gets oxygen, you press it on, it gets into the wound, it goes deep into the wound and healing will happen from the back. Now there is a non-permeable cover, like a bandage and we could even make this in colors so you see when there is no more oxygen, the color changes. Imagine this for a kit, there is a little Mickey Mouse on there, the Mickey Mouse actually changes colors as soon as the oxygen is gone. You have to replace it. It’s a front label product, but not only this we can simplify this product and just use it with alkyl hydrogen peroxide as a bandage or with a gel and put it in there, and we have many, many prototypes out there and we are currently just short of the required safety trials and filing the 510k application for a wound device and we have a group of people working on this.

You could go on, of course burns. As I said, for acne they have to spray gel. We put in a little booster with an applicator and you just use it for people with acne. And it’s inexpensive, just a few hundred thousand dollars, and we will have the product in the market. Remember, our little Labratier [ph]. Well, you’ve seen, you have to hold it down into the perfluorocarbon. Perfluorocarbon has an extreme specific weight. It’s carrying oxygen. Its healing substances help you get the wound healed. What about burn wounds? What about a person 60% burnt? You can have ladies people on the bed, this is exactly where you have the infection and die. What about putting them into perfluorocarbon, it’s completely inert, nothing can happen. What about doing this in a little bath tub, a splotch tub, what about bubbling oxygen in there. And then you call it deep immersion fluorocarbon treatment, a patented technology, we intend to develop at a later stage.

Incredibly diverse our compound, but the effect is always the same, it carries oxygen. So, sickle cell pain crisis was under the radar screen from the beginning and a small patient population will be orphan drug. It’s highly (inaudible), we have to find a solution here. And with our dose escalation we get the data needed to find a proper small dose sickle cell pain patients need. Sickle cell pain patients actually get a sickle cell pain attack every about six months. It’s very similar, it’s actually related to malaria. And it’s a cause of malaria few generations ahead, changing actually a gene. Very inexpensive, the first round, very promising.

Our strategy, as I discussed, is very simple. Get TBI forward, wound healing will be the moneymaker as of next year. Getting into sickle cell disease, and of course on the side through the Navy IND, which the Navy does on their own. And do this through partners. Once we have data from TBI, partner it out. Same with sickle cell, same with decompression sickness. IP is secured all across and is a core topic of our management team. We will make more money, some of it probably won’t be from income, some of it won’t be from our capital structure where we have warrant based out there that still actually have about $30 million in warrant income potentially.

The business model is a tree. And the company should actually become an annuity at one point in time. We have much more interesting intellectual property like the glucose sensor, this is out-licensed already. And we go on with harvesting intellectual property, we do not use of dose, and they are in-licensed but they will make sense in oxygen carriage. And we have a first break from Virginia Commonwealth University to in-license oxygen therapeutics and we are certainly using this license arena. Through the Oxycyte study in TBI, get the big guys in, get payments, reinvest it and so on. They will deal with one person at a time, they will be a dividend company, and that will be in 2010. TBI will be in phase III with a partner. Sickle cell will be completed. We hope to have a revenue stream. And we hope to set a standard with our blue ocean product, Oxycyte. If you are fast enough, you’re in for competition.

Where are we standing? We are well capitalized, our burn rate, of course because we are investing, is at 300, so we go on for a year and we believe within a year we will have income enough to keep us going. We may need more money for travels and benching out, but we are fairly confident that we can get them from partners and from our warrants outstanding.

We believe that these are the reasons why we will succeed. We have the best in class compound, we have the best in class management team, and we have the best in class researchers in every sector we are in. In traumatic brain, Sills Phillip [ph], who is leading the trial. And he won the Oliver Bichrono [ph] prize; that’s the prize for the best neurosurgeon in 2007. In wounds, Dr. Edelman [ph]. Dr. Edelman wrote the book every medical student needs to read in medical about wound treatment. The kind of work what’s he is doing. Our regulatory team is excellent. And we are a dynamic small company. We have great areas and great potential. If there is lack of oxygen, it will be us.

Any questions?

Okay, thank you.

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