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Executives

Gary Rabin – Chairman and CEO

Kathy Singh – Controller

Analysts

Len Yaffe – StocDoc Partners

Advanced Cell Technology, Inc. (OTCQB:ACTC) Q4 2012 Earnings Call March 7, 2013 4:30 PM ET

Operator

Good day ladies and gentlemen, welcome to today’s webcast. Today’s webcast is being recorded and you’re currently in a listen-only mode. Following the presentation, we’ll have a short question-and-answer session. You can ask questions at any time during the presentation.

(Operator Instructions)

It is now my pleasure to turn the webcast over to the host of our call today, Gary Rabin, Chairman and CEO, Advanced Cell Technology. Mr. Rabin, the floor is yours.

Gary Rabin

Thank you and good afternoon. My name is Gary Rabin and I’m Advanced Cell Technology’s Chairman and CEO. I’m joined today by Matt Vincent, Director of Business Development and Kathy Singh, Controller.

Before we begin, I would ask Kathy to read the following statement. Kathy?

Kathy Singh

Thank you, Gary and good afternoon. Certain statements we are going to make on this conference call regarding future financial and operating results, future growth and Research & Development programs, potential applications of our technology, opportunities for the company and any other statements about the future expectations, beliefs, goals, plans, or prospects expressed today constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Any statements that are not statements of historical fact, including statements containing the words will, believes, plans, anticipates, expects, estimates, and similar expressions should also be considered to be forward-looking statements. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including limited operating history, need for future capital, risk inherent in the development and commercialization of potential products, protection of our intellectual property, risks associated with clinical trials and economic conditions generally.

Additional information on potential factors that could affect our results and other risks and uncertainties are detailed from time to time in the company’s periodic reports, including the report on Form 10-K for the year ended December 31, 2012. Forward-looking statements are based on the beliefs, opinions, and expectations of the company’s management at the time they are made, and the company does not assume any obligation to update its forward-looking statements if those beliefs, opinions, expectations, or other circumstances should change.

Now I would like to review our financial results, which are discussed in greater detail in the 10-K we filed with the Securities and Exchange Commission today and in the press release that was issued a few minutes ago.

For the 2012 fourth quarter, for the period ended December 31, 2012 the company reported a loss from operations of $6.2 million compared to a loss from operations of $5.8 million in the 2011 fourth quarter. For the entire year ACT reported a loss from operations of $21.1 million compared to a loss of $21.1 million a year before.

ACT reported a net loss of $10.3 million or $0.01 per share in the 2012 fourth quarter compared to a loss in the same period in 2011 of $12.1 million or $0.02 per share. For the year the company reported a net loss of $28.5 million or $0.01 loss per share compared to a net loss of $72.8 million or $0.05 loss per share in the same period a year ago.

Net cash used in operations for the 2012 fourth quarter was $3.1 million compared to net cash used in operations of $2.8 million in the same period in 2011. The increase in cash used in operations primarily related to the increase in clinical activities. The company ended 2012 with cash and cash equivalents of $7.2 million. We have sufficient cash to support our corporate and clinical activities well into this year and our funding commitment from Lincoln Park should support additional capital requirements if necessary.

Now, I would like to turn the call over to Gary. Gary?

Gary Rabin

Thanks Kathy. Before I talk about the exciting progress in our trials, I want to take this time to reflect on the last couple of years as Chairman and CEO of this company. I’m well aware that many of our shareholders, me among them hope that our stock price will be much higher than it is today.

But with all that we faced two years ago, I really cannot believe how far we’ve come. This is a company that had revolutionary and important scientific assets but was hampered by poor financing strategy, a terrible reputation for meeting its financial obligations to landlords and vendors, sloppy licensing and legal arrangements misleading the 51 warrant holders that financed our capital needs, adverse and opaque relationships with our common stockholders, the company never even held an earnings call or had any open forum for investors. The company had never written an operating budget or any long term strategic plan. In short, it wasn’t a business in any sense of that word.

As we stand here today, this is a completely different Advanced Cell. We make decisions about our programs and opportunities with rigor and discipline. We don’t give away critical company assets for nominal returns. We have a world-class Board of Directors and Ophthalmic Advisory Board that have relevant partnering, operating, entrepreneurial, financial and strategic expertise. It has obviously been painful to suffer the dilution we’ve had to incur to payout hundreds of millions of shares to satisfy obligations that resulted from financings that occurred in 2005 to early 2010. But they were legitimate obligations of the company.

It’s disappointing to have to go to the SEC to settle something that occurred over four years ago. But we must do this to put our past behind us. We’ve emerged from this a much stronger company. A company poised to advance its trials involving one of the largest unmet medical needs in the world.

As we stand here today, we’re planning for efficacy endpoints, labels, patient population, Medicare and commercial payer, or HMO reimbursement strategy. We’re planning for a potential success that seemed laughable to even dream of two years ago.

As Kathy Singh told me yesterday, I used to not answer my phone because it was always somebody we owed money to. Now I don’t answer it because it’s always somebody who wants to invest in the company. And we recognized that this success is in large part due to the patience and perseverance of our shareholders.

We at Advanced Cell are very proud of what we’ve done in two years. We know we have much more to do. But we are convinced that for the first time we see a clear road to success not one paved with extreme bumps and hazards.

We’ve taken these necessary corporate actions so that the progress we make in the clinic can translate to increases in shareholder value. These settlements we made were necessary in order to remove substantial potential liabilities the company faced which were likely to result in much greater cash and stock issuances, even larger legal fees and continuing major distractions to the management team and Board.

Importantly we’re also advancing toward a resolution with the SEC. Once the small number of open issues are resolved, we will again be in a position to carefully evaluate options to listing on a national exchange.

Turning to our operations, and as you may know, our trials have been going well. We recently reported that we’re undertaking the second half of our trials treating Stargardt’s Macular Dystrophy and dry age related macular degeneration.

We have had no reports of safety issues with our RPE cells in any of the 18 patients we’ve treated so far which is very welcome news as these trials are principally about safety in this early phase.

At the same time, we continue to be encouraged with the functional data that we’ve been able to gather on some of our patients. Our surgeons have reported back to us that they are seeing evidence of varying degrees of engraftment, changes in visual acuity, color perception and light sensitivity across the patients treated so far.

At this point, you would have to characterize our result as tantalizing, particularly because we’re seeing some functional outcome in a group of patients who are all very late stage macular degenerative patients.

However, we now have the opportunity to start treating patients who are at an earlier point in the progression of the disease. As we announced earlier this year, the FDA approved a protocol change in our two US trials, which permits us to create a new patient cohort, number 2A that will include patients with visual acuity as good as 20/100. Each trial will now include treatment of four 20/100 patients with 100,000 RPE cells, so that will be total of eight US patients total.

We are only waiting for final DSMB clearance, and for two of the four IRBs to approve at this point. We hope to hear from the DSMB as early as tomorrow but if not next week.

We’ll be able to treat all eight of these patients in fairly rapid order without any breaks in the cohort. We are thrilled to begin treating these patients as we hope to find in these patients areas of non atrophic retina where there is the opportunity to observe rescue of photo receptor function through the advanced retinal scanning techniques available to us.

To put that patient group into perspective, many AMD patients with 20/80 vision are actually able to keep their driver’s licenses while 20/100 patients have advanced to a point where they are no longer permitted to drive. It is our expectation that these patients are more likely to have retained a greater number of dormant but rescuable photo receptors and can be treated in areas of their eyes that will have a greater likelihood of impacting central and peripheral vision.

Through treatment of this group of patients, we hope to see more consistent and pronounced improvements in visual acuity and other aspects of sight. This will give us an opportunity through the acquisition of data that normally does not come available until Phase II of the trial to be able to better formulate a strategy for clinical end-points and patient inclusion criteria in the next phases of these trials.

As many of you already know, not only do we have the top eye hospitals in the US but also the top institutions in Europe taking part in our clinical trials. The input and advice from these groups of surgeons is priceless. They represent the best of the knowledge and opinion leaders in this space. They have been involved in our efforts with the FDA not only with respect to the ongoing trials but it was through this group that ACT and Jules Stein Eye Institute at UCLA succeeded in expanding our RPE program, with the additional approval from the FDA for Phase I/II study in patients suffering from myopic macular dystrophy.

I want to note that this new IND application took only 30 days to be approved by the FDA. Myopic macular dystrophy is a severe form of macular degeneration that happens in people with severe myopia. You get significant elongation and distention of the eye-ball that causes myopia and also results in stress on the RPE layer which can cause the death of the RPE cells and then in turn a loss of photo receptor function. So it’s a different mechanism of action that begins this disease but progresses similar to that of dry AMD and Stargardt’s disease. And in either of the disease we believe our RPE cells can very positively impact.

It is not lost on us how potentially large this patient population can be when worldwide markets are considered. In large cities in Asia, such as Shanghai for example, blindness due to myopic macular dystrophy affects more people than are affected by dry AMD in part because this disease begins at a much earlier age.

Every major pharmaceutical company with an ophthalmology program is watching these trials very carefully as we move forward. While that is exciting to us and we know to you as well, we need to keep our eye on the types of things we can and should be doing before we engage in any serious consideration of partnering collaborations or the like.

The opportunity to treat these earlier stage patients, to establish and get approval for a Phase II study, including its design and endpoints and to expand into other indications are all activities that help us tremendously both in terms of credibility and most importantly valuation of the RPE program, when the time comes to form a relationship with other companies.

As we continue to move from discovery toward approval and commercialization, we are focusing more and more on the strategy around maximizing the value of these programs.

Now we have a number of other pre-clinical programs that have tremendous potential. One of the programs that I want to give you a quick update on is our platelet program. Platelets are key elements in maintaining blood vessel integrity and so are centrally wound healing in the case of trauma to the body. But they are also able to speed up tissue regeneration and reduce scarring after injury or surgery. The source of platelets today is solely from donated blood and platelets are far and away the most difficult of the blood products to maintain. They cannot be frozen or refrigerated, they must be stored at room temperature and they have a shelf life of only five to seven days.

The consequence is that platelet supplies in most hospitals are minimal. And they are used only sparingly in surgery in order to be maintained for use in the emergency room. After looking carefully at the demand for platelets and seeing this limitation on source, we’ve come to believe that the use of platelets would increase perhaps by millions or tens of millions of units per year if supply were available. This would include expanded use in surgical settings such as joint replacement as well as potential demand for use in the cosmetic market.

As we’ve discussed over the last few months, we’ve developed a manufacturing process for generating platelets using either embryonic or iPS cells as a starting materials. Our platelets look normal under the microscope and importantly function like normal platelets both in bench-top experiments as well as in our animal models. Many of you have seen our mouse model.

We are working on scaling up to bioreactor settings that we hope will eventually permit us to make vast quantities of platelets for commercial applications.

We’re now working towards filing an IND for what we expect will be the first in-man trial using any kind of stem cell derived platelets and perhaps even the first in the world for an iPS derived cell in any human trial. We actually have a pre-IND meeting with the FDA tomorrow and hope that their guidance will help us succeed in getting approval for these very important clinical trials.

On a frustrating note, we continue to struggle with a slow moving resolution concerning NIH registry of eligibility. I was just on a lengthy conference call discussing this matter with a new consultant we have retained to assist us. And we believe we have a strategy to advance to approval.

To us, it is insulting and almost laughable that the only embryonic stem cell lines that don’t actually destroy embryos remain ineligible for federal funding. Not to mention the scientific advantages that our single blastomere derived lines have over all of the inner-cell mass derived embryonic stem cells that we’ve tested them against. We are certain that once our points are clearly understood by the right people, this road block will end.

In summary, we believe that 2013 will be a year of great value creation for shareholders. We expect to achieve significant milestones clinically which would include meaningful signs of efficacy in our lead clinical programs. With most of the issues that created uncertainty for investors behind us, we feel that the market will begin to recognize the potential for our technology.

Now I’d like to open the call for questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions).

Gary Rabin

Operator, while you’re compiling questions I’m going to take some questions now from the Internet. Can you give us a preview of very near upcoming conferences where ACT will be presenting especially in Barcelona, Spain where you will be appearing in a panel alongside Matthias Steger, Global Head of Research & Technology Partnering for Roche? Is it fair to say Roche is a top contender to become our first JV partner?

Well, Shire is also on that panel as an aside as is TiGenix, which is a very exciting osteoarthritis company. Look, it is a big honor to be on a panel with Roche and Shire and TiGenix of course. I think it’s an indication of how far along this company has come. I can tell you for certain that a year ago there is no chance that this company would have been on the panel like that one.

I can also tell you that Roche and Shire are very up-to-date on these trials and know everything about them. But whether or not we’re going to partner with Roche or Shire or anybody else that we speak on the panel with obviously I can’t comment on. But I do think it is very important that the company is advanced to a stage of credibility where we’re now invited to – and know on a first name basis the people that are corp dev heads at the big pharma companies. I think it sort of speaks to what I was talking about earlier in my prepared remarks.

Operator, are you ready to go or shall I take another one?

Operator

At this moment, we don’t have any questions over the phone.

Gary Rabin

I’ll take another question from the Internet here. When do you anticipate starting cohort 3 and cohort 2A?

We’ve begun lining up patients for cohort 2A. As I mentioned only two of the four IRBs have approved the protocol change for 20/100. The other two really just applied in the last few days. So, we’re going to try to spread those patients out sort of relatively equally among the four centers. But we have identified in the two centers that have IRB approval already so potential patients for the 20/100 we’re very excited about that.

Cohort 3 which is the 150,000 cell patient cohort, as of right now, we’re scheduled for treating two patients, let me just open my calendar, schedule for treating two patients in the week of March 18, one Stargardt’s and one dry AMD. Obviously that is predicated though on us getting approval relatively quickly here from the DSMB because we cannot start the patients on immune suppression until we’ve got DSMB approval.

So, hopefully if we get DSMB approval tomorrow or Monday, the patients will begin their immune suppression within a couple of days of that and then treatment one week later. So that’s sort of where we are.

It’s most likely going to be end of March or early April before we can start treating the 20/100 patient cohort, although I think it’s important to understand that we’ve got no DSMB intermediate stopping points in those cohorts. So we ought to be able to treat those eight patients with relative lack of time between them.

In terms of our current corporate schedule for treating the balance of all these Phase I patients, the current schedule has us finishing all the patients in around October of this year. But obviously that is predicated on quick turnaround from DSMB and us then having patients that are ready to go. And so to some extent those things are a little bit out of our control. Obviously we’re working very hard with the institutions to have patients ready immediately after DSMB approval because we now have so many centers online.

I’ll go to the phone now.

Operator

And we do have a question from the line of Jim Kuhn [ph].

Unidentified Analyst

Hi, good afternoon Gary.

Gary Rabin

Hi Jim.

Unidentified Analyst

Gary, I’ve got a question of – let’s see, let me first start by saying I really like the strategy of not giving away the golden goose as you said in one of your e-mail or PR updates, of not giving away the golden goose the RPE program too early weighting to the values there. So, in my opinion that’s all good. But in my opinion what’s not so good is having to continue to finance the company for an extended period of time, while the share price is sitting at $0.07.

So, my question comes back to some of the comments you were making on the platelet program. And some previous calls where you indicated the company had some interest or perhaps was considering maybe partnering platelets or maybe one indication within the MSC program earlier. I just wanted to see how would you guide shareholder expectations regarding a deal around platelets or MSC perhaps earlier than RPE?

Gary Rabin

Let me first say that I like you would love to have some non-dilutive financing come into the company. This year the – both the management team and myself have a significant component in our compensation related to getting some partnering deals done and some financing that will take some of the funding obligations off of our books. So, we have – in addition obviously to our share ownership we have ample incentive to try to make that happen.

On the platelet side, rather than go for a corporate partnership we have decided that we want to pursue – sort of pursue more governmental and quasi-governmental partnership funding focused on the potential battlefield and national needs components rather than any corporate partnership. So that’s something we’re pursuing on the platelet side.

On the MSC side, Matt in particular is charged with leading us down the road of pursuing potential partnerships in indications that appear attractive based on our pre-clinical or animal studies of a variety of autoimmune and inflammatory diseases. And we’re also looking at potential partnering alternatives and opportunities on we’ve talked about these cells before, on these photoreceptor progenitor cells and perhaps sort of developing those and maybe some of the paracrine factors that we can identify so that it wouldn’t necessarily be a cell therapy but maybe some sort of injection or other kind of treatment.

So those are the areas where we’re actively pursuing partnership for this year. Obviously as you get to the close of Phase I, you’ve lined up your Phase II efficacy endpoints. We see what happens with these 20/100 visual acuity patients, we are foreclosing the possibility of any sort of partnership in the RPE program. But we really feel that we need to jealously guard the value of that program because it is scalable into Phase II, Phase III commercialization with very modest financial investments on behalf of the company as opposed to some of these more systemic trials and applications that we’ve just described.

So I think that’s where you’re going to see us working towards partnership. And look, it is not lost on us that for all of the big opportunities this company has, in our history we’ve never done any form of partnership or collaboration with any big pharma company. Although we have of course collaborated with some of the most prestigious university research labs in the country and the world.

So, it’s not lost on us. And we recognize that there is an element of credibility that will inure to us in the shareholder base and with institutional shareholders if we can begin to create some partnerships which will justify and really add credibility to our scientific and operating platforms.

Unidentified Analyst

Thank you.

Gary Rabin

And next question please. I’m going to take a question from the website here. When will we see published data on the first eighteen patients?

We are considering a variety of publishing strategies. One thing that we’re considering is an update publication on the first two patients that were described in the lancet, obviously we’ve got exciting and good things to talk about with those patients, so that’s something we’re considering.

We’re considering some kind of mid-term publication on the first 18 patients, though truthfully with the opportunity of the 20/100 visual acuity patients sort of going on at the same time, to us really that’s the more relevant patient set. So, I think what our plan is in the interim, other than the potential for some sort of reviewed and written update related to the first two patients, is that we’ll continue to feed you information about the patients periodically on earnings calls and through press releases.

We actually have several of our doctors that are speaking at a variety of conferences including the most prestigious of all the sub-retinal conferences which is called Vail Vitrectomy, so there we have two – three of our doctors presenting in about two weeks. So, they will be talking about what they see in the patients and where they see this trial going. I mean, I think it speaks volumes that you’ve got the world’s premier vitreoretinal surgeons walking around sort of promoting our cell therapy. So, I mean, in a way that’s the best endorsement you can have.

But, and then I think you should expect to hear something from us once we’ve got some data around these 20/100 visual acuity patients as well. But I think that – I think the presentations that are going to be done with Vail Vitrectomy by Steve and Carl and Jim, I think it’s very exciting, it’s good data, and I think it’s a very strong endorsement of the potential of this therapy. Next question.

Operator

You have a question from the line of Len Yaffe.

Len Yaffe – StocDoc Partners

Yes, this is Len Yaffe, StocDoc Partners, thanks for outlining the excellent clinical pathway that you plan on taking over the near future. I was wondering if you could comment regards to your capital structure sort of a follow-on to a prior question if you have any plans once you achieve exchange listing for a reverse stock split that could make your stock more attractive and be eligible to be bought by institutional investors?

Gary Rabin

Certainly, certainly Len, nice to hear from you. Certainly, we want to add to the potential universe of potential investors in the company. Getting a stock that is listed on a national market that is marginable will bring in mutual fund buyers, hedge fund buyers. It will expand the potential investor universe by $150 billion or more.

So, obviously that is a critical plan for us. At the same time, we obviously want to [jealously] (ph) protect any friction that will happen around a reverse stock split. So, we would want to plan for having good news and the opportunity to share exciting results, whether it be in partnering or in actual efficacy results and so forth time to coincide with that kind of an investment -- that kind of a reverse.

So, we’re monitoring all this stuff very carefully. We’re going to time this thing in such a way that it makes sense for us and for our shareholders. And we have spent a lot of time talking to and meeting with potential investors, institutional investors in the company, and I would say that there is starting to be a groundswell of enthusiasm about the investibility of this company now that we’ve put these sort of serial periods of massive dilution to the warrant holders behind us.

So, we’re working with the NASDAQ, we’ve reopened discussions with them now that we’ve solved almost all of the items that were on the checklists for them in order to get listed. We’re working closely with IR as well as investment banks, who have been setting up non-deal road shows to introduce the company. We’ve been talking to equity research analysts that are well known and well respected and getting very good feedback.

So, we’re formulating a strategy to get there, and at the right time, we’ll do it because there is a lot of fear in the shareholder base about the reverse split, but it is really not – from our point of view and from the statistics born out, we’re very investible, institutionally eligible to be invested-in company but for the fact that we’re trading at $0.07 and we are on the OTC.

So, we’re going to make these changes, it’s kind of the last stage of the company growing up. And the great thing about the investors who buy early and mid-stage biotech stocks is that they’re very event driven and they’re very patient just like the shareholder base we have now, and we’re eager to be able to get into that to that market. We want to do what’s best for the shareholders. What’s best for the shareholders is increasing the potential pool of investors.

Len Yaffe – StocDoc Partners

Great, thank you so much.

Gary Rabin

I’m going to take a question from the internet now. Where do you stand on your hunt for a CFO?

We actually have about four very good candidates, some of whom at this point have met with some of the members of our Board, and we’re advancing to hiring a CFO. Our requirements for that person are rigorous. We want them to be steeped in strong financial background in terms of financial accounting and being able to help augment our financial reporting.

But also operating discipline, managing to a budget, experience in the industry, strategic experience in deal making in the industry for both partnering and M&A. So, we have got very high expectations and we found some great candidates, all of which I would be proud to announce as the CFO.

In the past, the company has made some senior management level hires that have not worked out culturally at the company, and making sure that they fit in and everybody is happy is really critical. So it’s not just about satisfying NASDAQ, it’s not just about satisfying me, it’s not just about satisfying Bob, but we have a culture at this company that is very valuable and collaborative and important, and we need to make sure we find the right person.

So, my goal, my timeframe is to have that person hired and on by the end of April. But just because that’s my timeframe, if I don’t get universal buy-in from the Board and from the management team, and if it takes longer, it’s going to take longer. So, but – right now, as we sit here today, I have four candidates that I think are compelling, that have great experience, and I’d be proud to have any of them as the CFO of this company. And I know that the shareholders will be pleased with the backgrounds of these people.

I’m going to take another question from the internet. Do you anticipate an increase in authorized share this year, and will you be sending out proxy material for a reverse split and whatever?

Look, at some point the company is going to have to get more shares authorized. We’ll make a decision based on where we stand in terms of partnering, where the stock price is, how much capital we feel we need in the intermediate term, where we stand with the NASDAQ and so forth. I’m not going to rush into anything. And we’ll make a decision based on where we are at the time.

The reason that we haven’t filed the proxy materials concurrently with this is – I really do want to get the SEC matter put to bed and maybe the CFO position put to bed, so that that’s all material that we can have as part of our proxy and part of our Annual Shareholder Meeting. So, that’s sort of why we’re holding off a little bit. And I hope that that sends a signal to you guys that we’re eager to try to get those two things to closure relatively soon.

Let me go back to the phones and take another call.

Operator

Our next question comes from the line of Tobey Broadwater.

Unidentified Analyst

Hello.

Gary Rabin

Hi Tobey, how are you doing?

Unidentified Analyst

Fine, thank you. I see discussion on your reverse stock splits, I understand that. Doesn’t that seem compelling that if you kept it and did – make some advances and stock would just go up in the event, that’s [multiple speakers] --?

Gary Rabin

Undoubtedly, undoubtedly we think the stock would go up in the event. But for us to become NASDAQ listed, we would have to get the stock to – without a reverse, we’d have to get the stock to $4 which would be a market cap of $9 billion basically, and that is unlikely to happen until we’re close or into commercialization of the AMD market, and assuming we’ve got a very broad label, I mean, that’s a big market cap.

So, this isn’t something we’re going to be able to do without a reverse. And I will at some point in the future share with you guys either through the website or through a release or something like that – data about reverse splits that involve up-listings. And there is really just not that much to be afraid of.

Unidentified Analyst

Okay.

Gary Rabin

I mean, there is friction that happens in the time of the announcement, and a lot of companies – they do lose shareholders in the friction. I mean, we’ve gone from 25,000 to 42,000 to 48,000 shareholders, and it’s the extraordinary patience of this shareholder base that gives me confidence that people aren’t just going to walk away from this company. It doesn’t change your economic upside as a shareholder from holding a $0.07 stock to a $7 stock.

When you get to real market capitalization, valuation is all that matters, and valuation whether it’s at $0.07 or $7 is irrelevant, the difference is at $7 you can have fidelity and all the biggest hedge funds in the world investing in your stock, but at $0.07, you can’t. So your marginal buyers are that much bigger.

Unidentified Analyst

Okay. Second question is that you have got enough capital to go how far out in the future without new revenue?

Gary Rabin

Right. Right now, with Lincoln Park deal in place and assuming the –assuming that we don’t change anything, we don’t radically accelerate our plans or anything like that or all of a sudden go to a – all of a sudden if the results were so good in the 20/100 patients that we want to go right to a pivotal trial in the Stargardt’s or something like that. I mean, obviously that could cost more, although obviously if that happens we’re not going to be sitting at $0.07.

So, we’re funded right now into about the second quarter of 2015. So, lot is going to happen between then and now. We’ll be well into if not through with Phase II assuming we don’t skip Phase II in Stargardt’s, we’ll know a lot more about where we stand with platelets. So, our annual burn rate for 2013 will be in the $16-ish million range and just a little bit higher in 2014, so maybe $19 million.

So, we’re pretty comfortable with where we are right now. Obviously, as we discussed earlier in this call, we would love to get some non-dilutive capital in the form of some kind of partnership or another. And we are working on it, and like I said, we are highly incentivized to get there.

Unidentified Analyst

Is any non-profits interested in donating money so to speak, because it is such an important issue?

Gary Rabin

No. We’ve looked at some of those structures, they’re very hard to do. We’re more focused on the governmental, quasi-governmental, and the big corporate partnerships that’s really the area, it’s much more attractive to us.

Unidentified Analyst

Okay.

Gary Rabin

Yeah.

Unidentified Analyst

Well, thank you. I appreciate your time.

Gary Rabin

Yeah. And my next question is on the internet, it’s about elaborating on the office expansion in Marlborough?

Any of you that have been to Marlborough and walked through the offices would know that not only were we extraordinarily tight on our office space, but we were basically sleeping on top of each other in the manufacturing and in the lab. And we’re at a point now where we need to actually be manufacturing two different products, right. We need to be manufacturing platelets for human trial use and manufacturing RPE cells for human trial use. So, those two things require a lot of manufacturing space. So, obviously we need to create a manufacturing suite that can satisfy that.

And then in terms of lab and research space, we were very tight. A lot of our equipments are very old. And so, we did this at really very marginal incremental cost to the company. I mean, it increases the new space when you factor in giving back our old space or 60% of our old space anyway. It only increases our annual burn rate by about $200,000.

And it gives us – it gives the FDA much more comfort in our manufacturing, it gives us redundancy, gives us more room to expand our core research programs. So it really does a lot for us.

And, in a perfect world would we have gone from the number of feet we have to the number of feet that we’re going to. May be, it’s a little more space, but honestly the space was so inexpensive compared to any alternatives, and a couple of years ago, when the company moved from Lister to Marlborough, we lost almost a month of work because we had to shut down, freeze. Here, we’re literally going to be walking things right across the hall. So, it makes a big difference in terms of the cost of moving and so forth, I mean, we’ll save probably in moving costs what we’ll spend in the first year on incremental rent. So, we think this was really a no-brainer.

Kathy Singh

Gary, if I’d just add. It’s also important to note that that is laboratory space that we’re moving into which is really difficult to come by in Massachusetts. So, it’s got chemical hoods and it’s got bench space and it’s got the appropriate HVAC systems for labs. So, we were actually quite lucky to have found that.

Gary Rabin

All right. I’m going to take another question from the web. The question is this. It’s not expanding for some reason, okay. Is ACT completely finished with all lawsuits and the issue with the SEC?

Okay. The answer to that question is, we are completely finished with the 51 warrant holders, which was by far the most difficult thing to finish. What we have left that is outstanding is the SEC matter. I want to make it clear that in the SEC matter, they are seeking no censure, no fines, and no penalties. What they are asking us for is essentially disgorgement of the cash that the company got through an exemption in the Securities Act. So, they are asking for $3.5 million. And they are asking for a cease and desist that we never do that again. Well, obviously I would never do that again.

It was done before me, I had no involvement in the management or the decision making at the time it was done, and so we would never do that again. So the cease and desist is a giveaway. And from our perspective, we are trying to come to a resolution that requires us to pay less than $3.5 million to settle this matter.

There are a variety of legal grounds that we are taking to try to pursue that. But of course, the risk is, if we can’t sell it with them and ultimately go to court, they could decide to seek penalties and censure and so forth.

So, it is incumbent on us to sell this. I’m not going to – I have no intent of letting years slip by and not have this resolved, because it’s an overhang on this company. And it’s something – it’s a black hole from the past. And so, we’re going to put it to bed. And I’m trying to do it in the most cost effective way possible. One of the things you have to consider of course is that we have to continue to pay legal fees to the extent that this stays open, so we’re eager to set this aside.

The other open matter, the suits from Aronson and Gorton who invested in the company back in the 2004 timeframe, those are open matters. We’ve gotten lot of their claims dismissed. We are hoping to get the balance of their claims dismissed and/or come to a settlement with them. It has been hanging over the company for years and years. And it’s something we’re eager to try to get resolution to.

So, those are the two things left in our litigation section. And when you go back and you look at what that litigation section looked like a year ago, I mean, it’s incredible how much we’ve accomplished. So, I’m thrilled to say that we really do see the light at the end of the tunnel on that.

Operator, do we have any more questions from the phone lines?

Operator

We do have a question from the line of Francis Gamo.

Gary Rabin

Okay.

Unidentified Analyst

Hi Gary, thanks for taking the call. My question is with regards to clinical trial for MMD, I was wondering when that was going to start when the first injections are going to happen, and if we’re going to have a cohort with this 20/100 patients?

Gary Rabin

Excellent question. The plan for treating the MMD patients, our deal with Jules Stein is that they are working to try to find separate private financing for that trial. Though we have told them that if they can’t, we’ll be there to try to support it. For a variety of reasons, they want to try to get some separate financing so the team there is working on that.

We’ve not yet set a time-table for the beginning of first injections in that trial. I will tell you that it will be a very inexpensive trial to run because it’s running off of almost the same protocols, same testing, same data aggregation, as the AMD and SMD trials. So, the cost of the trial is going to be under $2 million to whoever puts the money up and that includes screening and a year of backend follow-up, so it’s not like you’d be writing a check for $2 million this year.

In terms of a 20/100 cohort, they want to see the results of the first few patients before we go ask for a protocol amendment as you’re probably aware we applied for the protocol amendment for our US trials and the IND for the MMD at virtually the same time in December. So, we couldn’t really go in for 20/100 patients in the MMD trial because we didn’t know if they were even going to approve in the AMD trial. So, we were a little subject to the timing there.

But in any case we want to treat some earlier stage myopia patients before we go into the earlier stage cohort. But given the way that that disease works, I mean, we think we’re going to learn a lot from the 20/100 patients we treat in Stargardt’s and AMD.

Unidentified Analyst

My second question is with regard to the platelets partnering that you mentioned, and you mentioned that you are looking at government organization and similar organizations. Now, would the NIH approval of our net lines be an obstacle to that?

Gary Rabin

Well, one thing you have to remember is that in that trial we’re doing IPS cells and separately ES derived cells. So, we don’t need NIH approval for the IPS cells.

Unidentified Analyst

Okay.

Gary Rabin

Yeah. So, the two trials would be filed separately. We would plan to run them concurrently, but in order for the ES cell trial to be funded Federally, we would need the lines on the NIH registry.

Unidentified Analyst

Okay. So, what still typically – what kind of organizations are we looking for to partner with?

Gary Rabin

I think I’ve said all I really care to say at this time on that. It’s governmental and quasi-governmental organizations that have the cash to be able to pay for a big opportunity like this, so I don’t think I want to comment on that.

Unidentified Analyst

The reason I mention this is because there has been talks on ICell about maybe getting some kind of cooperation with the Blood Banks and the Red Cross, and maybe some kind of funding from them?

Gary Rabin

I don’t think – I don’t think I’m going to say anymore. At this time, we’re in a sort of sensitive period of trying to resolve that.

Unidentified Analyst

So, thank you for your answers Gary.

Gary Rabin

All right. We’re coming up on the hour mark now. So, I’m going to close this down now. I really appreciate everybody taking your time and asking these questions. I continue to be amazed and astonished by how many people dial-in, both on the web and on the phone to these calls. It’s really a great testament to the opportunities that this company has. And I really do hope that we’re going to be able to meet the expectations of the Board, the management, and the shareholder base.

So, with that I want to thank everybody for their time today and their continued support. We’ll be speaking with you again when we report our first quarter results in May, and of course I’m sure you’ll be following the conferences and so forth that we have got in the interim. Thanks very much. Have a good day.

Operator

Thank you for joining us. This ends our formal presentation. You may now disconnect.

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