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Cleveland BioLabs, Inc. (NASDAQ:CBLI)

Q1 2013 Results Earnings Call

May 9, 2013 10:00 AM ET

Executives

Rachel Levine - Vice President, IR

Dr. Yakov Kogan - Chief Executive Officer

Dr. Jean Viallet - Chief Development Officer

Dr. Andrei Gudkov - Chief Scientific Officer

Neil Lyons - Chief Financial Officer

Dr. Ann Hards - Executive VP, Regulatory Affairs and Quality Assurance

Dr. Ed Martin - Retired Rear Admiral, Martin-Blanck and Associates

Analysts

Mara Goldstein - Cantor Fitzgerald

Elemer Piros - Burrill Securities

Christian Glennie - Edison Investment Research

Walter Schenker - MAZ Partners

Robert Brous - Wunderlich Securities

Operator

Greetings. And welcome to the Cleveland BioLabs’ First Quarter 2013 Investor Update Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rachel Levine, Vice President of Investor Relations for Cleveland Labs. Thank you. Ms. Levine, you may begin.

Rachel Levine

Thank you, and good morning, everyone. Welcome to our first quarter 2013 investor update call. Joining us today are Dr. Yakov Kogan, Chief Executive Officer; Dr. Jean Viallet, Chief Development Officer, Dr. Andrei Gudkov, Chief Scientific Officer; Neil Lyons, Chief Financial Officer; Dr. Ann Hards, Executive VP of Regulatory Affairs and Quality Assurance; and Retired Rear Admiral, Dr. Ed Martin of Martin-Blanck and Associates.

Before we begin, I would like to remind all listeners that throughout this call, we may make statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Investors are cautioned that any such forward-looking statements are not guarantees of future performance or the successful execution of the company’s strategic plan and involve risks and uncertainties.

Additionally, I want to emphasize that some of the information discussed on this call, particularly our financial and cash outlook, and our forward-looking development plans is based on information as of today May 9, 2013, and that actual results may differ materially from the expectations and assumptions discussed today as a result of various factors, including the risks outlined in our company’s filings with the Securities and Exchange Commission, including our most recently filed Forms 10-Q and K.

The information provided on this conference call should be considered in light of these risks. CBLI does not assume any obligation to update information contained in this conference call.

Dr. Kogan will open this morning’s call with a review of recent corporate changes and hand the call to Dr. Viallet to review his initial thoughts and progress in outlining clinical strategies for our lead programs. Mr. Lyons will then discuss our financial outlook and hand the call back to Dr. Kogan for closing remarks and questions.

At this time, I’d like to turn the call over to Dr. Yakov Kogan, CEO. Please go ahead, Yakov.

Dr. Yakov Kogan

Thank you, Rachel, and thank you to everyone for joining us this morning. I would like to start by reviewing some of our recent strategic changes we have made to strengthen CBLI at both operational and Board level.

As we continue to evolve into a more clinical oriented oncology company, this is pivotal stage for radiation counter measurements. We are intensifying our focus on regulatory affairs and clinical development.

We have lot of guidance and expertise of successful leaders in oncology and biopharmaceutical sector in general. We are deeply gratified that we are so commitment to CBLI and appreciation for foundation we have built.

We recently announced the addition of three new directors to our Board. Julia Brown, Tony Principi and Randy Saluck. Julia and Tony shared long histories of leadership roles in biotech and pharma, and in Tony’s case, the Federal government, as well.

We believe their first-hand experience and understanding of the challenges we face as a young drug development company and a government contractor will help us better navigate the road ahead. Randy has been a shareholder of CBLI since 2009 and brings more than 20 years of experience on Wall Street to our Board.

We also recently announced the appointment of Dr. David Hohn, a current director as Chairman of the Board and planned retirement of Dr. Bernard Kasten and Michael Fonstein from the Board.

We thank Bernard and Michael for their years of dedication and service as Board members and deeply appreciate their commitment to leading our Board and guiding us for their dynamic experience in our development. I want to note that Michael will be continue in his current executive role as President responsible for our foreign operations.

On operational side it’s my great pleasure to introduce Dr. Jean Viallet, our Chief Development Officer who has recently joined our realm. I can say enough about how feel we are to have him on Board.

Jean is a true standout as a unique individual who understands every aspect of oncology drug lifecycle from discovery to clinical development, to regulatory approval and commercialization.

He brings more than 20 years of experience as a Medical Oncologist and Senior Executive at both large and small pharmaceutical companies. Jean knows how to rollout his fleet and take a company to next level.

As an example, he guided clinical and preclinical development at Gemin X Pharmaceuticals as Executive Vice President and Chief Medical Officer, culminating in successful strategic acquisition of Gemin X by Cephalon.

Jean’s mandate is to formulate and execute clinical strategy for oncology pipeline. He is particular focus on Entolimod, CBL0137 and 102. He will also lead the remaining development of Entolimod radiation countermeasure program.

Julia and Jean are two very capable oncology specialist in the regulatory affairs and clinical operations. Dr. Gillian Miller and Julie Schneider are been fully integrated in this team as Senior Director of Regulatory Affairs and Director of Clinical Operations. Together with Dr. Ann Hards we will partner with Jean to drive our programs forward.

At this time, I will let Jean make a few comments on where we are with some of his initiatives. I will return a bit later to share our priorities for 2013.

Dr. Jean Viallet

Thank you, Yakov. I’m very happy to be here and as an introduction, I’d like to point out that prior to joining the company, I had the opportunity to support the Entolimod radiation countermeasure program for several months as a consultant and during this period it gave me the opportunity to conduct my own significant scientific due diligence on the program and this led me to several conclusions culminating in my joining the company on April the 1st.

First, the Animal Rule is a very complex process, the one that we are engaging on to develop Entolimod and it is a very stimulating scientific and professional challenge.

Second, it’s clear that Entolimod is efficacious for the radiation countermeasure indication that we are pursuing. Having demonstrated the ability to reduce mortality from potentially lethal radiation by protecting both hematopoietic and gastrointestinal tissues, it’s rear at this point in the clinical development process to have derisk an effect this manner on the efficacy front, its typically seen much further along and it’s a source of great motivation for the team to successfully complete our work.

In order to better support the team, I also reach the conclusion in concert with Yakov and the rest of the senior management team that we could channel their energy and their motivation more effectively by consolidating the leadership of all of our product development functions under one roof. We’ll ensure that the strategic integrated vision could be channeled with discipline execution to a successful conclusion and an approved BLA.

So I’m delighted to assume this challenging role of Chief Development Officer of the company and move all of the team’s previous work on the radiation program forward and successfully through the final phases of development.

I’d like to now turn to the technical status report on our various programs, starting with Entolimod for the acute radiation syndrome. You’ve been following our story for many years and you know the enormous amount of work that has been accomplished with extensive exploratory studies describing various aspects of the pharmacology of the compound, ranges of doses involved in its efficacy, further clarification of its mechanism of action, characterization of clinical observations and effects coming from the activation of the toll-like receptor, validation of biomarker and of course, culminating in a significant improvement and survival in a pivotal GLP non-human primates study.

We had achieved agreement on critical aspects of the design of our proposed pivotal animal efficacy studies with the FDA, but we are still working through the design of the final clinical studies needed to fulfill the Animal Rule requirements. And this will be the focus of an upcoming meeting with the Food and Drug Administration which is schedule to take place mid summer.

In order to have an effective meeting, a lot of preparations are underway. In particular we need to integrate all of the secondary pharmacological and biomarker data from our recent pivotal study with all of our analysis of biomarkers and clinical observations from previous human and animal studies.

Our goal is to provide the FDA with a comprehensive view that can help address any remaining questions on human safety and pharmacology and better direct our discussion to focus on a successful ending.

So we spend the last four months compiling these data and reanalyzing historical data in light of the more recent observations and this effort is similar in scope to an integrated summary of safety that will be required for an eventual BLA application.

Since there is little precedence to rely on in terms of the execution and prosecution of an Animal Rule product, we believe that this details and comprehensive analysis should ensure that our perspectives and those of the FDA will be aligned prior to embarking on the next steps of product development.

As part of this analysis and review, we’re thinking through opportunities where we might leverage our next round of oncology studies to support the radiation indication. One opportunity would be to look at an intermittent schedule of administration and a repeat dose Phase 1 study in oncology patients where the intent of the study would of course to offer a therapeutic benefit potentially to these patients in contrast to our historical normal healthy volunteer studies where by definition there is no therapeutic intent to the drug administration.

Our recent PNAS publication demonstrates that the pharmacological affects of Entolimod on the activation of the toll 5 receptor, in particular in the liver organ, leads to both initiation the complex pathway leading to radiation resistance but also to the triggering of immune response horning to the liver tissues which could potentially be of interest to patients with malignancies at risk for liver metastasis.

So we understand and appreciate everyone’s interest and eagerness to push along the FDA process and get these final studies underway. However, and I know that my friend and colleague Ann Hards shares this perspective. We can tell you from personal experience that it is a much more effective strategy to spend adequate time in discussions with FDA and reaching agreements and careful design of the studies in order to facilitate the review process down the line and have a better prospect for successful outcome.

So we will provide you with further updates as everything unfolds, but I can assure you in the meantime that the team is actively executing studies under our current Department of Defense contracts as we await conclusion of the review process of our BARDA proposal.

At this point, I would like to take a few moments to address some recent developments in the radiation countermeasure field specifically some data and discussion that took place last week in conjunction with the FDA Meeting or the Medical Imaging Drugs Advisory Committee joined with the Oncologic Drugs Advisory Committee, and this joint committed discussed the Safety and Efficacy of Currently Approved Leukocyte Growth Factors or LGFs as Potential Treatments for Radiation-induced Myelosuppression Associated with a Radiological or Nuclear Incident.

So Cleveland BioLabs was an attendant at the FDA panel this last Friday and we came away with a number of observations that we believe will be helpful in our own discussions with the FDA.

We see two important outcomes from this advisory meeting. First, it was clear that more ours products will be needed and BARDA strategy has always appeared to be aimed at building a portfolio of such products because no one product can meet all needs and all potential scenarios. The reason this approach was reinforced by the advisory committee panel’s discussion of the limitations of Neupogen in the case of a radiological nuclear incident.

Second, the meeting clearly emphasized the need for radiation countermeasures and assigned them priority. It also helped increase FDA panel’s member familiarity with the Animal Rule and reinforced our own approach to the process. In short, we do not believe the outcome of this meeting has negative connotations for our own process and we are fully prepared to continue our work.

As far as our take on Entolimod’s comparative usefulness to these leukocyte growth factor products in a disaster scenario. We believe that our drug has significant advantages.

As was cleared during the FDA advisory panel’s discussion, Neupogen requires daily dosing but high levels of concomitant supportive care plus intensive and continuing medical monitoring, all of which would be in short supply under certain scenarios. In contrast, Entolimod provides one-time dosing with minimal need for supportive care and medical monitoring only at the time of administration.

For example, the NIH sponsored Neupogen study cited involves very high individual levels of supportive care, including hydration, administration of blood products, including platelet transfusions, antipyretics to reduce fevers, antibiotics, as well as ongoing the need for daily dosing for up to 14 days.

And our own pivotal non-human primate study of Entolimod there was only minimal supportive care offered to these animals limited to analgesic patches to reduce the stress and suffering of these animals, in addition to a single-dose administration of Entolimod.

It remains to be shown whether Neupogen provides survival benefit after lethal radiation is given without multiple types of supportive care and intensive medical monitoring, while Entolimod was shown to rescue animals as a single standalone treatment.

As for the Neupogen efficacy data presented, we thought it might be helpful to provide some comparisons to our own recently completed LD70 pivotal GLP study and previously conducted non-GLP studies.

The Neupogen study cited in the recent document involves daily dosing for up to two weeks or 14 doses starting at 24 hours post radiation and resulted in an approximately 1.9-fold increase in survival.

Another study discussed at the meeting failed to show benefit when dosing occurred 48 hours after total body irradiation. This would compare to the Entolimod regimen of a single dose given at 24 hours post-LD70 irradiation which resulted in an approximately 2.5-fold increase in survival from 27.5% in the control animals to 70% to 75% in the Entolimod groups at the higher doses.

Well, the regimen also given at a 48 hours time point post-LD75 irradiation resulting in approximately a 2.7-fold increase in survival from 25% in the control to 67% with Entolimod.

Further, in non-GLP studies Entolimod was shown to work if administered before irradiation while Neupogen was not recommended and not shown to have benefit for pre-irradiation use.

For all of these data points go to the question of the suitability of these interventions in a large scale versus a small-scale casualty scenario. With representatives from BARDA specifically noting in the meeting that countermeasures for a [mobile chemotonis] event in New York City with the target of the interest under such scenario access to platelet transfusions and complex supportive care would totally be limited.

Here again we believe we have strong advantages over Neupogen and other leukocyte growth factor products. We understand and appreciate the government’s move to buy Neupogen or other similar approved and marketed leukocyte growth factor products and they have long histories of use in the clinic. There is a gap in the stockpile that needs to be address while other products such as ours are in development.

We believe these drugs may have their place in the spectrum of treatments as Entolimod and support BARDA’s efforts to build a portfolio of treatments which has always been their stated intention.

So we will now return to our oncology programs. We are in the midst of working up the next clinical scenarios for Entolimod and look forward to sharing them in detail as they are more refined.

In general, we are following two lines of thinking. On the one hand, we are pursuing the obvious direction led out by our PNAS paper and evaluating ways to focus on cancers with tendencies and its exercise to deliver.

On the other hand, we are also looking carefully at other systemic approaches and talking with potential investigators about ways to leverage the toll-like receptor expression data we have accumulated on various cancer cell lines.

In addition, we are looking at ways we can accelerate and potentially enhance the ongoing Phase 1 trial in advanced cancer patients being conducted across Roswell Park Cancer Institute. It’s just been over a year since this trial started dosing and it’s progressed into completion of the fourth cohort.

We are working collaboratively with the principal investigator at Roswell Park to try to move things along and are also currently evaluating the addition of an additional site, as well as making some changes to the protocol to further optimize the schedule to capture the immunostimulatory properties of Entolimod. It will obviously take some time to implement these changes, so we will do our best to update you once we have more information.

As for the CBL0137 and 102 programs, I have been spending quite a bit of time analyzing the enormous value of data we have collected on FACT expression and its role in cancer progression.

The function of FACT as a co-factor for diverse oncogenic transcription factors raises the possibility that CBL0137 may function as a targeted agent for tumors addicted to this class of oncogene, a target that has not been druggable today. We are hoping to enrich our study with the enrollment of patients with such tumor types such as lymphomas, hepatocellular carcinomas, renal cell carcinomas and small-cell lung cancers.

CBL0137 also shows great promise for multiple pediatric tumors based on the impressive emerging body preclinical data. And on that basis, we already have initiated discussions with the NCI and its cancer treatment evaluation program, as well as with the Phase 1 Consortium of the Children’s Oncology Group with the goal of designing a pediatric Phase 1 study, which could start following the establishment the adult maximally tolerated dose.

We are actively refining the Phase 1 protocol for IV administration of CBL0137 which was recently cleared by the FDA. We’re recruiting principal investigators and activating sites as we speak. I ask you to stay tuned for further updates as we get this trial ready to launch in the coming months.

In the meantime, the oral study with CBL0137, conducted in Russia, is moving along nicely. They are dosing the third cohort and they have not yet reported any serious adverse event, retracting the data from our diagnostic assay measuring markers for FACT in the patients’ blood samples.

We’re also delighted to report that the CBL0102 study in advanced cancer patients is finishing up. Our clinical team has reported that the sixth and final dose cohort is complete reaching at least an equivalent efficacy of dose as documented in preclinical study.

The final decision of the review board will be made in a few weeks, but the team is recommending that the study be concluded as considerably no patients were enrolled as we planned and they believe that sufficient data has been achieved to reach the endpoints of the study. If the review board concurs, they can start tracking the database and prepare for reporting of study results.

In general, if the CBL0102 data has an opportunity for proof of principal for the Curaxin program and as such are letting individual investigators to take the lead on future trials to see where they can go with this product.

On our end, we will focus our direct efforts on the next-generation compound CBL0137. As we mentioned in our last call, an investigator-initiated trial of CBL0102 administered in combination with Erlotinib in patients with advanced non-small-cell lung cancer is being prepared with plans to open it for patient accrual at the Case Comprehensive Cancer Center and the Cleveland Clinic.

Entolimod, we will of course be providing clinical trial supplies and drug to support this trial and we look forward to seeing the results. As for our pre-clinical programs, CBLB612 continues to be on track for an IND filing and our Panacela programs are also progressing nicely.

So in conclusion, if someone coming into Cleveland BioLab from the outside, I’m quite inspired by the spirit of innovation and the team’s commitment to developing life saving therapies. As Yakov mentioned, I’m a hands on type of manager and I have a long track record of success, coaching teams through complex product development efforts.

I’m very excited about the potential for the pipeline and eager to see how it plays out in the clinics. In my opinion among small companies, our science is second to none. It’s our role and commitment to you to focus on execution and to create value from this outstanding science. I look forward to sharing our future progress with you.

And with that, I will let Neil take you through a recap of our financial results.

Neil Lyons

Thanks, Jean. First, a few comments about our Q1 financial results. For Q1, our revenues are up by $400,000 compared to Q1 last year, due to a $900,000 revenue increase from our Russian grants offset by less U.S. federal government revenue.

R&D expenses are down by $700,000 due to reduced spending with outsourced vendors. In Q1 last year, we had the company’s one-third initiated pivotal study with 179 non-human primates underway, which were considerably more expensive than the current non-eroded non-human primate work we currently have underway with CBMS.

G&A is up $1.1 million due to the increases of $300,000 for both, subsidiary G&A spending and business development activity, increases of $200,000 for both professional fees and compensation-related items and $100,000 for trials.

Respectively, consolidated grant backlog at the end of Q1 is still strong at $8.5 million, which includes $3 million in deferred revenue. These funds will be used to partially fund our development efforts for Curaxins, Xenomycins and CBLB612. We continue to identify sources of grant funding and have several proposals pending.

Now, moving on to cash guidance. During our Q3 2012 call, we indicated that CBLI standalone monthly burn on average would be about $1.1 million to $1.2 million per BARDA, assuming a BARDA contract awarded in the second quarter of 2013. These assumptions suggested our cash at labs into the second half of 2014. These assumptions were also suggesting $9 million cash balance of CBLI standalone at the end of Q2 2013.

Our forecast with these assumptions continued to support this guidance. Of course, we cannot predict when we will see definitive events from BARDA. So forth, our answer will be given that we have now entered the second quarter and do not yet have from BARDA. We thought it better to update our cash guidance based on existing contracts and planned activity.

We had intended to increase spending on additional clinical development effort for Entolimod, as an oncology therapeutic in the second half of this year. Consequently, monthly net spending is scheduled to increase in the second half of 2013, yielding a cash runway into the first quarter of 2014.

Until we have clarity on the BARDA contract, we will carefully prioritize spending. As such, we may not be able to be as aggressive as in additional development efforts as we would like. But as Jean and Yakov had noted, we are focused on those specific efforts that will drive the most value for our shareholders.

Management is very aware of spending and is very carefully evaluating all of our sources and uses of cash. At this point of process, it is premature to suggest a change in the cash runway guidance, we just mentioned. But we assured we are intensely focused on our cash runway and minimizing costs and continuing to realignment, or right sizing of our organization for oncology clinical development.

And moving on to the upcoming Annual Meeting and our Proxy. We have some new items proposed for the shareholder’s votes mainly three new directors would grow up an industry, federal government and Wall Street expertise and increase in authorized shares and a new employee stock purchase plan.

Yakov has already mentioned our new directors. I will discuss the other two items. Understandably, our shareholders are curious as to why we have requested an increase in authorized shares, so to address our reasoning and then a question we expect our shareholders were asking.

Presently, we have about 17 million shares available to issue, comprised of 80 million shares authorized less 45 million outstanding, 10 million reserved for warrants, 5 million reserved for outstanding options, 3 million reserved for potential equity issuances under our 2006 equity incentive plans.

So we can say, we are running a lot of available shares. Typically request of this nature are infrequent. The less time we made this request was four years ago. We can fill the proxy’s solicitation specialist to advise if this request should be a one X increase initiative.

Management intent with this item is to simply provide for long-term financial flexibility. We have no current plans to use these shares, but we believe we will advise to pass those proxies solicitations by without making a request and risk running out of shares, sometime over the course of the next year.

There are numerous field structures in addition to a straight sale of equity securities that may require us to issue equity, including strategic alliance with Big Pharma, strategic M&A, other forms of corporate development activity. If an attractive offer presents itself, we want to be able to move quickly and be in a position of negotiating strength.

We would now want to have to incur the added costs in time to stop negotiations and hold the special stockholder vote midyear in an effort that would cost about $150,000 and take at least sixty days to execute.

Now for a shareholder concern, BARDA contract is not forthcoming. We plan to execute a large dilutive raise with these newly authorized shares. If we try to raise money in the circumstance, we suspect that rates will be at a discount and we would be limited to NASDAQ 20 Percent Rule on what types of offerings we can do without a broad covered solicitation or alternatively shareholder approval

With approximately 45 million shares outstanding, 20% is 9 million, which maybe required to include warrants issued in the financing, depending upon their terms and as I have already noted, we currently have 17 million available today. So there would be no reason to request an increase in authorized shares just for that purpose.

If now we are on this topic, let me also provide our thoughts about financing in general. First, a traditional ways to the street is not our preferred option. Yakov will next talk about our thoughts including financing in the event we do not receive a BARDA development contract. But if we do receive a BARDA development contract, our financing options will clearly improve.

We could strengthen our balance sheet through monetization of one of our product Canada and ownership stake in one of our subsidiaries, or venture debt financing for example. We may also consider a financing coupled with a strategic alliance or other significant corporate development initiatives.

On this last point, we cannot obviously discuss specific details but we can confirm that we have a few discussions in process. Additionally, we continue to apply for appropriate grant opportunities in support of our development plans.

Now back to the proxy and the last new item, the employee stock purchase plan. We view this plan as shareholder friendly that is promoting share ownership by our employees. Last summer, we made a similar offer to our equity incentive plan and over 50% of our employees including all executives participated at levels up to 20% of their salary for a six month period.

Moving now to the proxy shortly and we will ask your support for this matters. With that, I will turn the call back over to Yakov.

Dr. Yakov Kogan

Thank you, Neil. Before I conclude, I would like to take few more minutes to address what I know is on everyone’s mind for the proposal.

I had some sort of a special insight to share but I don’t. We are rating on the agencies to finish for a review process. We’ve heard Jean explain what we -- our discussions and give our view of the last week at Cancer Research Meeting on new opportunities and similar approve leukocyte factors.

We believe that this is a strong evidence to support the continued development of Entolimod as well as the Asian counter measures. And simply hope what vendor proposal process with you to conclude in the federal.

In the meanwhile, we are keeping our heads down and doing everything in our power to move forward to FDA, using our existing resources and rules we have from Department of Defense.

I want to assure everyone, we have spent a good deal of time, thinking about our options. But further outcome of review is hoisted or not. If we are unsuccessful with the proposal, we will just need to know the reason, why the contract was not awarded? To control the action, we will take. For example, do we have no interest in Entolimod whatsoever? Do they want the results or meet somebody, before making a decision.

Our other formal government delays, each reason would suggest a different reaction. Regarding the opposition, there is no interest in Entolimod aggregation counter measure whatsoever. We believe this position is to be unlikely, even when going before the Department of Defense and the last week Neutropenia advisory meetings.

The BARDA sponsored for the (inaudible) event in New York City is a baseline for our counter measure solution in the national stockpile. And Jean has already reviewed the comparative and we have the ability to superior drug profile of Entolimod versus mucigen Neupogen in this indication and for such event.

If the agency wants information, they would have to meet somebody at the meeting, then we would continue as we have been and decide on the course of actions, once you know the outcome of our meeting. Before our government delays, then we might pursue term debt financing to keep development underway.

It’s very unlike that we would try to raise money from the speed of the situation. As the money needed to finish development in competitive to our market cap, we would make such a raise prohibited. And as Neil already mentioned, shareholders would be in control of every transaction that is covered by another 20 Percent Rule.

Alternatively, we are evaluating several options such as possible funding through Department of Defense, potential foreign sales based on all current dossier of data, for partnering the product whereas relating partner access to the portion of future sales revenues in exchange for development financing. We will also consider monetization of our sales including product candidates, additional indication for this product candidates or ownership in our subsidiaries.

Noteworthy, we have covered the negative possibility. I would like to spend few minutes to review -- spend a few minutes discussing our efforts of other successful conclusion of BARDA proposal review. In this case, our focus will be to complete development of 502 and their partnership is BARDA and Department of Defense on the most expedited manner and to gradually grow our oncology pipeline.

I worked on this call, I myself and other members of CBLI management and the Board, our significant CBLI shareholders. All our decisions are driven by focus on maximizing value for our shareholders. And I want to assure you this is much more than just a phrase of CBLI. We are dedicated to be a successful innovative biotechnology company, to give a significant return to our shareholders as we look before each of these goals.

At this point, I would like to turn our attention to priorities for 2013. First, of course, is to achieve progress. This is a pivotal study for Entolimod Radiaton Countermeasure program.

As John said, we continue to progress in our discussions with FDA. We’re executing studies funded under DoD cultures. And we are waiting the conclusion of BARDA proposal review process.

Second, and one of the main reasons for bringing John and the rest of his team on board is advance in clinical oncology development for Entolimod, 137 and 102. We are steadily making progress and now that John is fully engaged, we will share more specifics on directions and indications they are pursuing as they are confirmed.

Third is to submit an IND for 612 and get into the clinic. So we might gather initial data on its potency as a stimulator of hematopoietic stem cell proliferation and mobilization.

Fourth is our constant pursued of additional funding, grand funding for drug development. And underpinning these goals, is our commitment to enhancing our clinical capabilities and maximizing operational efficiencies. We are very cognizant of our needs to deliver clinical results while keeping a tight control on operational costs.

We believe our fundamental characteristics would define Cleveland Biolabs and broad drug pipeline based on breakthrough signs. Worldwide commercial rights to each of our products, an innovative approach to develop and fund it, an experienced team who will lead to increased value and success of our company. As always, we thank you for ongoing support. I look forward seeing some of you at our annual meeting on June 14 in Buffalo.

We will now open calls to questions. Operator, please begin the Q&A

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Mara Goldstein with Cantor Fitzgerald. Please proceed with your questions.

Mara Goldstein - Cantor Fitzgerald

Thank you very much for taking the question and thanks for all the disclosure which is really great. I guess, if maybe, I could just ask this question and see if you can answer it and that is the lack of -- or rather the lack of decision on BARDA’s part. Do you or would you like to speculate if that was related to the FDA Advisor committee? And I guess, I’m a little bit confused just around the discussion, should BARDA choose not to continue funding for Radiation Countermeasure. Would you still continue to develop Entolimod in this indication and if you chose not to, how would then that change the development plans for human studies and oncology?

Dr. Yakov Kogan

Hi Mara, this is Yakov.

Mara Goldstein - Cantor Fitzgerald

Hi Yakov.

Dr. Yakov Kogan

I’ll answer your first question. We have no information about -- which is coming from BARDA on the delay on review. So I couldn’t comment on your first question.

Mara Goldstein - Cantor Fitzgerald

Okay.

Dr. Yakov Kogan

So on your second question, again we -- at this point, we do not want to speculate on our intent of continue -- in order to continue development. I’ll then integrate level of details during their call to describe some of their potential outcomes and how we may respond to this outcomes but I would like to see the conclusion of a review process and progress accordingly. And so last but not the least, we remain very hopeful what outcome actually would be poised.

Operator

Thank you. Our next question comes from the line of Elemer Piros with Burrill Securities.

Elemer Piros - Burrill Securities

Yeah. Hi. Good morning. But I’d like to better understand maybe, I missed that Jean, I’m sorry. In what ways would development in oncology and I think you referred to intermittent dosing. What facilitates the radiation program?

Dr. Jean Viallet

Well, to eventually have a successful laboring negotiations with the FDA beyond all of the data required to establish the efficacy in the animals and the data required for the dose conversions from animals to human, there is also a necessity to have sufficiently large safety beta base that they’re able to describe what the frequency of adverse events associated with the administration of the drug. And that experience could come from a data from oncology studies.

So one of the thoughts is that we might be able to utilize the same clinical study protocol to meet both ends addressing a cancer question and progressing the drug along that passive development for an eventual oncology indication but also use some of the data from the same trial to complete the clinical data package to support the radioprotection BLA.

And in that context, an intermittent schedule of administration such as that which we are under development for the capture of the immune stimulatory potential of Entolimod would allow isolating the manifestations of the first dose in order to integrate that with the previous data from 150 normal healthy volunteer subjects from our two initial studies.

Elemer Piros - Burrill Securities

I see. And so this initial dose that you would have in the oncology stepping, how different that is -- as compared to the dose on vision for the warmth only treatment?

Dr. Jean Viallet

Currently, we’ll be -- we're thinking of conducting further dose escalation in the current ongoing phase I study to progress to phase II and beyond. We would obviously take great pains to align these two doses that the dose, it would be claimed on the radiation mitigation BLA would be the dose that we’re also exploring and studying in the oncology indications.

Elemer Piros - Burrill Securities

I see. And maybe just one housekeeping item to Neil. Neil, if I look at the cash (inaudible) fourth quarter and one, first quarter, it appears to be about $7 million. I’m just trying to reconcile that going forward, the guidance of monthly bearing for $1.1 million to $1.2 million, which item should be expect to decrease for the cash to last at the end of first quarter ‘14?.

Neil Lyons

For the cash to last into the first quarter of 2014, we would continue, kind of, unfettered from the designs that are currently in our plan which as I mentioned in my talk would increase spending largely to expand development efforts. So our -- we want to be more cautious. We’re not going to go ahead and approve, starting some of these developments until we get more comfort although we are with the BARDA contract. So I view that forecast as a conservative forecast. Does that answer your question, Elmer?

Elemer Piros - Burrill Securities

Yeah. R&D spend should decrease and that maybe the only item that could decrease significantly -- not significantly but just to lead you into that -- into the first quarter if the BARDA contract is delayed or not received. Am I correct in saying?

Neil Lyons

Let me just review. So our cash flow forecast into the first quarter, the BARDA contract not in there at all. It’s our current resources and our current spending, our current headcount, our current relationship with various centers, all left pretty much as they have been historically.

Management is going to be looking at all of that and making appropriate changes and as we always to do to properly manage our cash resources. So there is a fair level of items that are under our discretion to spend or not spend. But this will certainly just continue to forego with everything. So again that’s why I say it’s really conservative, it’s suggesting a cash increase in spending per month and we most likely are not going to let that happen until we are better sure where we are with this contract.

Elemer Piros - Burrill Securities

Understand. Good luck in receiving the contract and thanks for taking my question.

Neil Lyons

Thank you.

Operator

Thank you. Our next question comes from the line of Christian Glennie with Edison Investment Research. Please proceed with your question.

Christian Glennie - Edison Investment Research

Hi. Good morning. Thanks for the information and update on the advisory panel overview last week. Just as far as you’re aware, what might be the next step on the FDA side of things in terms of that review and for example, you’re sensitive whether somebody’s company might file for approval of the [LGF]?

Dr. Yakov Kogan

I would like to ask Dr. Andrei Gudkov to answer your question.

Dr. Andrei Gudkov

Yeah. Hi. We can’t really predict what FDA is going to do but it was clear during the committee meeting that they do not at this point have BLA from any of the sponsors of these products.

There was a great deal of instruction and recommendation from the committee itself on additional things that they would like to see. So I think we can say whatever will happen, we’ll take some time to accomplish but FDA has the prerogative of either accepting committees’ advice or not accepting their advice. They can pretty much feel anyway they want. But without BLA in hand from any of those companies, it will take some time for whatever they finally decide to do to work it play through the system.

Christian Glennie - Edison Investment Research

Okay. Thank you. And just on the BARDA decision, I mean, is there a sense that they will have to make a decision either way putting a certain timeframe, given the sort of three options or will they potentially for example just wait until the outcome of the -- your meeting with the FDA in mid summer over the sort of the next stages, certainly your clinical side of things or will they have to give you decisions (inaudible) that?

Dr. Yakov Kogan

Yeah. We are not in the position to speculate on what our agencies can or cannot do. There are no rules other than operation (inaudible) publicly available and I believe many of you of have chance to review. So we are waiting agency’s decision. I’m ready to respond to any question you may have.

Christian Glennie - Edison Investment Research

Okay. Thank you.

Operator

Thank you. (Operator instruction) our next question comes from the line of Walter Schenker with MAZ Partners. Please proceed with your question.

Walter Schenker - MAZ Partners

Hi, guys. First, I will make a statement. I have a question with respond to a question. Let me just -- many people have heard my name on these calls for long time. Let me just say that Randy Saluck, who believe would be very advantageous towards his shareholders on the board, who is brought forth by me. And it’s truly some one I think will be happy to have on the Board and truly is a shareholder representative.

Our Board of Directors are suppose to be shareholder representatives. But Randy is someone who comes from a very good background. And I think we all should be very happy. Someone ask who was he yesterday and did management sought to set him up but I just want to get him understand. This was some one I brought forward to go on the board.

Coming to you Neil, I still can’t reconcile the K. Since the third quarter issue in the discussion of the $1.1 million to $1.2 million monthly burn. Have you been meeting that since the third quarter and both the fourth quarter and the first quarter or is that now a target which will required adjustment going forward since it seem to me a burn in the first quarter of March was probably 50% or higher than that in looking at the cash available to the company away from the subsidiaries?

Neil Lyons

We have the meeting as I went back to the cash on September 30th, I added to that actual cash balance. The net proceed from our raise to the call and deduct a $1.2 million per month for nine-month period from October (inaudible) 30th and the number is $9 million and our model currently as I said on the call continues to forecast $9 million.

If you recall in our session last time on our year-end call that the cash position was stronger than we had filed because of some changes in the cash refunds that we got. That’s certainly I thought we would get. The cash balance at the end of March, if you do the math, probably would be $12.8 million and $13.4 million again due to the more capital issue.

Cash spending in Q2 is growing per month on average as forecasted to be more than a $1.2 million. Again these are -- the $1.2 million is averages we’re trying to bake into our forecast (inaudible) not just the actual, since it is shown on the P&L but also the impact of working capital adjustments that happened over time. So to summarize and confirm, our guidance has been 120 and the new information today is to go beyond the second quarter, as noted -- emphasizing within capital spending for the second half of the year is always to increase if we let it and if we the let it increase, the forecast of cash in the first quarter of next year but that’s under strict watch in our view right now.

Walter Schenker - MAZ Partners

And just one follow-up on that, the spending to increase -- you originally said if you get BARDA, the spending would go down to $0.5 million a month possibly. That money was to be redirected to other spending and so the total wouldn’t changed that much, or if you get BARDA, the $0.5 million you say more around number you don’t have to and other money would beyond that be used to expand cancer research?

Neil Lyons

There is lot of dynamics to various transactions and assumptions within our model. The model -- the base model what I call the CBLI spending, that has been in our model from the GetGo has naturally assumed about a start additional development programs over time, and had assigned certain amounts of money, budget money for those additional activities overtime, so that’s foundation. Now overlay is out with BARDA coming into the picture and we are able to build, as you well know the labor cost and indirect cost of the company, which fall straight to our bottom line.

So when you pull all those together, you have that forecast of cash lasting into the second half of next year, assuming a BARDA contract got awarded and started paying us in Q2 of this year. Now, I’m just taking that out, that cash resources from BARDA altogether and saying okay, what’s left in that base model, if we continue unadjusted more cash that’s scheduled to last in the Q4 of next year and that’s hit several times. A lot of that’s discretionary and we are looking at it very closely.

Walter Schenker - MAZ Partners

Thank you, Neil.

Dr. Jean Viallet

I just want to take an opportunity and thank you and maybe our shareholders, many of which are I believe on the phone right now or would be listening to the replay of this to thank you for all the input, which you gave us for all productive discussions we had over last number of months. And I want to assure you everyone on the call, what all the decisions the management and the Board would be taking, strategic, financial, operational would be always viewed and judged, how we maximize value for our shareholders and this would then ease the mode of our operation. Thank you, Walter and thank you, everyone.

Operator

Thank you. Our next question comes from the line of Robert Brous with Wunderlich Securities. Please proceed with your question.

Robert Brous - Wunderlich Securities

Thanks for taking my call. I appreciate management providing all the additional detail. Ann, could you provide additional detail or clarity on what remaining items need to be address with the FDA or whether agreed to with the FDA?

Dr. Ann Hards

So that really hasn’t changed since our last phone call. We had submitted a protocol for FDA review last year on which we receive their advice in September. And I believe we have mentioned on another phone calls. Part of their advice was to perform two clinical trials instead of one.

One looking at the reminder of those convergence situation and the other one looking at safety. And as Dr. Viallet mentioned earlier, we refused a rival of the companies, some of the strategy about the acquisition of that safety data. It has been revised somewhat. Anyway, so the questions are still the same. We do now though have the meeting scheduled for mid-summer, as it’s already been said to get back with FDA and get their feedback and reach an agreement on those remaining elements.

Robert Brous - Wunderlich Securities

I guess my follow-up question on that is why, why is it taken so long till now to schedule this summer, to address those questions with the FDA?

Dr. Yakov Kogan

I will let, Jean to comment on this

Dr. Jean Viallet

Okay. As I indicated in my earlier remarks, we are preparing to have a successful outcome to this meeting. And the noted information that needs to be organized, filtered and structured in order to have an effective conversion with the FDA is quite considerable. So, we are staging it in such a away that all of the issues can be laid out and effectively discussed and also having a successful meeting.

Robert Brous - Wunderlich Securities

Thank you for taking my call in your interest.

Operator

Thank you. Dr. Kogan, there are no further questions. I would like to turn the floor back to you for closing comments.

Dr. Yakov Kogan

I just want to thank everyone for joining us today. And we can follow-up to see some of you in Buffalo on June 14th. Thank you.

Operator

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. This call will be available for reply on digital replay via telephone and web. Thank you for your participation.

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