Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Advanced Cell Technology, Inc. (OTCQB:ACTC)

Q2 2013 Earnings Conference Call

August 7, 2013 4:30 PM ET

Executives

Gary Rabin – Chairman and CEO

Edward Myles – CFO & EVP of Corporate Development

Matthew Vincent – Director-Business Development

Analysts

Shaukat Khan – Maxim Group LLC

Operator

Good day ladies and gentlemen, and welcome to today’s webcast. Today’s webcast is being recorded and you are 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) We will also be taking questions over the phone (Operator Instructions)

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

Gary Rabin

Thank you and welcome to Advanced Cell Technology’s second quarter financial results call for the period ended June 30, 2013. My name is Gary Rabin and I’m Advanced Cell Technology’s Chairman and CEO. I’m happily joined today by Ted Myles, our new EVP of Corporate Development and CFO; and Matt Vincent, Director of Business Development. As an aside, I want to thank Kathy Singh, our Corporate Controller for helping right the ship and make us a timely and accelerated filer. We inherited quite a mess here and without her we could never have made it to this point. She is a highly valued employee of ACT.

Before we begin, I would ask Ted Myles to read the following statement and to provide a brief overview of our financial results, Ted?

Edward Myles

Thank you, Gary, and good afternoon. Certain statements we’re 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 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, risks 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 risk 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, and the quarterly report on Form 10-Q as filed today, August 7, 2013. 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’d like to provide a brief overview of our financial results, which are discussed in greater detail in the 10-Q we filed with the Securities and Exchange Commission today and in the press release. I trust that you’ve already seen our press release that was issued earlier today, so my financial remarks will be brief.

For the quarter ended June 30, 2013, the company reported a loss from operations of $5.5 million, compared to loss from operations of $4.5 million in the 2012 second quarter. This increase in operating loss was driven primarily by higher level of clinical trial activities, which appear in the Research and Development line item in our income statement.

The company reported a net loss of $6.6 million for the three months ended June 30, 2013, as compared to a net loss of $4 million in the same period in 2012. Net cash used in operations for the 2013 second quarter was $4.2 million, compared to net cash used in operations of $2.9 million in the same period in 2012. This increase in operating cash utilization was directly related to our increased operating loss, which of course, was driven largely by our increasing clinical trial activities, as I mentioned previously. Despite this increase in our rate of cash utilization, we did manage to strengthen our balance sheet slightly. Our cash balance as of March 31, 2013 was $4.1 million and we ended this quarter with $5.5 million on hand.

We believe that the combination of our cash on hand and the $20 million that we have available to us under our agreement with Lincoln Park Capital will provide runway to fund our current operations into the middle of 2014. We are however taking a very strategic approach to the capital markets and we are looking for more permanent sources of capital, as part of our financing strategy, which includes an uplisting to a national stock exchange, we feel the need to resolve the last of our legacy corporate issues. We feel that we are making positive progress on these matters and we’ll update all of our stakeholders as soon as we can do so.

Once we do resolve these matters, we believe we’ll be extremely well positioned to embark on our plan. Our financing strategy includes attracting capital from long-term institutional investors, uplisting to a national stock exchange and funding our ongoing clinical activities and exciting pre-clinical programs through several value inflection points.

To provide more insight into these exciting programs, I will now turn the call over to Gary.

Gary Rabin

Thanks Ted. I would like to take this opportunity to bring everyone up to date on the exciting progress in our clinical trials. As many of you are well aware, we have been very surprised by the results of the treatments. We certainly did not expect to see visual acuity improvements in any one in this patient set. We were resolute in our belief that there wasn’t a possibility of rescuing photoreceptors at this advanced stage of the disease. We are now rapidly approaching the completion of the third cohorts of all three clinical trials to investigate hESC-derived RPE cells for the treatment of dry AMD and Stargardt’s Macular Dystrophy in the U.S. and Europe.

We continue to run our trials in the best ophthalmic hospitals in the U.S. and the top eye hospitals in Europe and are continuing to draw the attention of leaders in the field. We are excited that we have received approvals from the DSMB to complete testing on the third cohort of each of the three clinical trials after an interim review by the DSMB conducted six weeks after the first patient was treated in the third cohort of each trial. The DSMB has not had any concerns which would impede the study.

In what we consider to be a resounding endorsement of the safety of our therapy, the FDA and our Data Safety Monitoring Board, allowed us to treat patients with better vision as good as 20/100. These patients are likely to have more photoreceptors that can be rescued. We remain confident that all surgeries on the remaining patients in this group will be completed in time for a complete data review at the company’s Ophthalmic Advisory Board meeting in early October.

This October meeting will be a chance for the company to gather with its world renowned panel of experts around the data generated to that point. We believe this meeting will be an opportunity for us to really hone in on several strategic elements of Phase II design. We’re excited to have access to the key opinion leaders in the vitreoretinal field, to help us map out our path to commercialization.

We’ve observed no significant safety issues relating to the treatment and the DSMB has approved each planned step in the trial as well as the treatment protocol for patients with better vision, which is now approaching completion. We have observed the persistence of visual acuity gains and the engraftment of the transplanted cells in both the SMD and AMD patients, which is consistent with what was previously reported early on the trials.

We just most recently treated our 26th patient. A critical part of our evaluation is to further clarify what factors will help us to identify the patients who will benefit most. The clearance to complete treatments in patients with higher doses of RPE cells and patients with greater visual acuity represented significant milestones in our clinical trials and we’ll be excited to share those results as soon as possible.

In summary, we have now treated 26 patients so far out of the total of 35 in cohorts 1 to 3, as well as special cohort 2A. I do have to say that we anticipated treating all 35 by this time, as we discussed in our first quarter earnings call.

Because I believe it is important to be candid with our investors I want to explain this in some detail. As you are aware, AMD and SMD are enormous unmet medical needs that affect tens of millions of people. We received multiple calls, e-mails, faxes, and heartfelt pleas, from individuals asking for access to our clinical trials. Due to regulatory requirements and our steadfast commitment to patient safety, these patients are referred to the principal investigators, where they are evaluated for eligibility.

We have very strict inclusion and exclusion criteria mandated by the FDA and DSMB, so obviously, we cannot enroll and treat every patient that would like to participate. The complexity of the protocol and limited treatment slots does create logistical difficulties and has therefore slowed the rate at which we’ve been able to schedule patients for treatment.

Several patients have been delayed or have been unable to continue into the treatment phase due to potential medical risk or requirements for additional evaluation. Until such time that the additional evaluations can be completed and the patients cleared medically, it is unethical and medically inappropriate to treat these patients. Additionally, some patients cannot tolerate the immune suppression and may no longer be eligible for treatment. Unfortunately, this only becomes apparent once the process has started. This is compounded by difficulty in scheduling all patients in the summer, when patients, the site staff and surgeons are taking vacations.

In June, we completed gathering the information necessary for the DSMB to review and make the determination whether we can enroll our next 150,000 cell patients into the study. Several members of the DSMB were traveling and were logistically unable to complete their review until weeks later than expected. This forced us to miss the available surgical slots in the UK in July. In the UK, August is a holiday month. So the surgery slots were not available. Now, that the DSMB has provided its approval, we have these patients scheduled for treatment in September.

Separately, there is greater difficulty in recruiting better vision patients. While gaining approval to treat better vision patients was a tremendous endorsement of our safety profile by the FDA and the DSMB, there is understandably some reluctance on the part of the patients to embark on an experimental procedure. Patients with 20/100 vision are an important crossroads in the disease. They lost their ability to drive, but still have significant function and are therefore concerned about losing what vision they have.

Despite these factors, we are confident that we’ll be able to complete cohorts 2A and 3 by the end of September, and in any case, our Ophthalmic Advisory Board will meet in mid-October to start the course for designing our Phase II trials. The results we have seen lead us to question the value in cohort 4 of the 200,000 cell injections. That said, we are now more confident than even that multiple contemporaneous blebs, maybe two blebs of 100,000 cells each, may be an important part of our therapy. So we need to decide how to bring that into the trials. All of these variables would be addressed by the OAB in October.

To-date, as I said, there have been no significant safety or tolerability issues and trial investigators continue to be surprised and encouraged by the patients’ reaction to the treatment, noting biological reactions such as engraftment of the RPE cells and improvements in patients’ eyesight. The patients have seen improvements in their everyday lives. Some having their vision go from being able to see movements to being able to read parts of an eye chart as well as reporting better color recognition, and there have been multiple reports that the patients have requested that their other eye be treated.

The company’s ongoing success was even mentioned in the May 15 article on Reuters as the most promising human study using embryonic stem cells. Chief Scientific Officer Robert Lanza, M.D., told the paper, which we later confirmed via press release, that a patient’s vision improved from 20/400 to 20/40 after treatment with the company’s RPE cells.

There are many tools at our disposal to accelerate our ability to commercialize our therapy. Obviously, it is premature to make any assumptions about this, but between the advantages of our SMD Orphan indication and the FDA’s new breakthrough technology designations, we see some very exciting pathways. Hearing patient stories of the remarkable quality of life improvements give us a window into tantalizing results and give us resolve that we are on the path to creating a critically important regenerative medicine therapy.

We at ACT are continually driven by a quote from Dr. Carl Kupfer, former Director of the National Eye Institute, who said, in the coming years, age related macular degeneration will take on aspects of an epidemic. We believe that we represent a real hope that something can be done about this disturbing trend. We’ve also had success outside the clinic. ACT continues to position itself to uplist from the Bulletin Board to the NASDAQ Capital Market.

As you know, we recently hired Ted Myles, an experienced Chief Financial Officer, who I expect will guide us through the next steps toward listing on a major exchange. We believe that our business prospects are vastly better than our current corporate structure implies. As a leader in regenerative medicine, we feel that we should be trading on a major exchange and once we resolve the last few legacy issues that we have discussed previously, we think we’ll be well positioned to complete the transformation of ACT.

There is continued interest among big pharma companies regarding a joint venture or some other form of partnership, as every major pharmaceutical company with an ophthalmology program is watching these trials very carefully. While that is exciting to us and we know to you as well, we also know that clinical results will drive those collaborations. These deals take time and we’ve recognized the importance that Phase II trial design will play in the discussions. We expect the designing and getting clearance for our Phase II will represent an enormous value creating moment for ACT. Of course, we look forward to sharing the data with the industry and our shareholders as soon as it is available.

Finally, in an ode to the importance we place on the thought leaders and our shareholder base, I want to express my condolences to the family of Rocky, who passed away in July. He was an important intellectual backbone to the online discourse about ACT. He never once asked an easy question to me and I really appreciated that about him. In so many ways, he was one of ACT’s most engaged constituents.

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

Operator?

Question-and-Answer Session

Operator

(Operator Instructions)

Gary Rabin

While you’re doing that, I will take a couple of questions from the online. First question is Gary, what is holding up the SEC settlements and the uplisting?

Well, in terms of the uplisting, obviously, that’s part and parcel of the SEC settlement, but we’ve been working very diligently with the SEC, making progress, obviously it’s been slower than we hoped, but we feel that we’re heading in the right path. We feel that we’ve got a very strong resolution to this and hope to be able to announce something relatively soon.

Next question, what is the status and update on the scientific paper using MSCs to treat MS in rats?

That paper is working on being published right now. Both our team and our collaborators are working on it, and it is, I guess you’d say it’s in final stages of preparation and then of course needs to be submitted and reviewed. Obviously, an important paper for us, we believe very strongly in the future of our MSC program.

Now, I’ll cut it over to the operator to take some phone questions.

Operator

And our first question comes from the line of Evan (inaudible).

Unidentified Analyst

Hey, guys. Thank you for taking my call.

Gary Rabin

You bet.

Unidentified Analyst

Gary, can you explain why Advanced Cell still maintains a corporate office in California, while the CFO, Research and Development and 30 other employees are located in Mass, I’ll hang up and let you listen?

Gary Rabin

Sure. For a variety of historical reasons, the company is corporate headquartered in California. We do believe in the prospect of ability to get funding in California. Our lead collaborator in the ophthalmology trials is in California and half of our directors are here in California. So the company has a strong history in the State of California and remain here, but I really moved hard to move all of the operations from California to Marlborough, because it really helps the team work better together, and the fact that Ted is on the ground there every day, is very beneficial to the inner workings of the organization.

The management meetings in organizations, the business development meeting in organization, and just generally, having all those financial resources on the ground there, have really streamlined the process for everything, from payables to analysis to business planning. So I’ve been really aggressively moving all the operations to Massachusetts. Next question.

Unidentified Analyst

Thank you.

Operator

And our next question comes from the line of John Redaelli.

Unidentified Analyst

Hi, Gary. Can you hear me?

Gary Rabin

Hi, John, yes, I can.

Unidentified Analyst

Yes, this is John Redaelli twenty2 at investorstemcell.com, always great to talk to you, Gary. Thank you for taking my call. I have a couple of questions, if you don’t mind please. Can you please provide any details, any updates, timing, regarding plans of a rights offering supported by existing shareholders and would this be tied together to a future uplisting to a major market exchange like NASDAQ or happen before? and my final question, can you please update us regarding new employment contracts for you and the good Dr. Lanza. Thank you?

Gary Rabin

Okay, John. Let me take that, I guess, in a reverse order. In terms of the employment contract with Dr. Lanza, we’ve got the Compensation Committee working through a review of that. We’ve obviously begun the process and we expect to be able to sign Dr. Lanza to another contract extension. He’s very happy at the company and obviously, we are very fond of him as well and I expect that we will be able to get that done.

And in terms of a rights offering, I would say that I am very favorably disposed to rights offerings in general. I really especially in a shareholder base like this, when we got 47 - 48,000 shareholders, it would be good and really in the end, because of the way the Lincoln Park financing facility goes, the existing investors to a very large extent, are buying the stock, they’re just buying it via Lincoln Park. I am very well aware of the shareholders’ interest in a rights offering, and I will tell you that it is absolutely a part of our financial thinking in terms of designing our financial plans for the future. But at this point, I don’t want to comment in anymore detail as to precisely what our plans are for doing any future financings.

For now, we continue to fund ourselves through Lincoln Park. It is a very attractively priced deal for us and they’ve been a good partner. And until we resolve the couple of open matters that still remain, we will continue to use them. But I think you can expect that taking into account the interest of our existing shareholders will be a part of future finances.

And then finally, on the uplisting, obviously, as part of the uplisting, NASDAQ wants us to demonstrate that we have significant capital available at our disposal. And so obviously, bringing in additional capital in and around the time of the uplisting will be an important part of our uplisting.

Next question please.

Operator

And our next question comes from the line of Jason Kolbert.

Shaukat Khan – Maxim Group LLC

Hi, guys. This is Dr. Shaukat Khan. I’m calling in for Jason Kolbert at Maxim. Hi, Gary; hi, Ted; hi, Matt; congrats on the good quarter. I have like two different questions. I’ll start off with the first one. Can you give me your thoughts on earlier stage versus late stage treatment of AMD patients?

Gary Rabin

I’m sorry, Shaukat, could you repeat that?

Shaukat Khan – Maxim Group LLC

Can you give me your thoughts on earlier stage AMD patients versus late stage AMD patients with treatments with hRPE cells?

Gary Rabin

Right. Well, we’ve treated three of the four early stage patients in cohort 2a in AMD, and we are pleased with the results. I don’t want to give any more detail about that. The patients that obviously I met with and with the subject of that Reuters’ article was a late stage patient, and it’s very interesting as you look at the sort of way in which these cells work the comment that the patient that went from 20/400 to 20/40 made to me was that, what was so surprising is that he woke up one morning and it was like a hole opened up in the middle of his eye, which is surprising because the normal action of this disease is that the center of your fovea or mid or central field vision is normally where you first lose the photoreceptor function, where you first get that fuzziness and blindness.

And so, one would have expected that this many years into the disease, those photoreceptors who long ago stopped shedding their outer layers and stopped functioning one would expect that those cells would have no chance of being rescued, that they were gone, dead, cell apoptosis. So it is quite perplexing, but I saw it with my own eyes is all I can say, and really it’s fascinating. We as a field know very little about how long these photoreceptors can lay dormant before the cells die, and it appears to vary patient to patient based on the variety of results we’ve had.

As you know, most of the patients have recorded some visual acuity improvements, but it’s variable. And so, understanding how these photoreceptors function in this dormant period, how there is enough action in the remaining RPE cells to perform the phagocytic activity that’s necessary for these cells to remain in place, is very new to this field and it’s something that we are obviously looking at very, very carefully.

Shaukat Khan – Maxim Group LLC

Thanks. Second question actually is about the costs associated with manufacturing hRPE. How much of the cost [you’d actually] [ph] manufacture hRPE cells for each patient each dose? And the second is where is the manufacturing capacity at this point from moving into Phase II and Phase III?

Gary Rabin

Yeah, okay. In terms of costs, our current marginal cost of manufacturing a dose is sub $100 per dose. That is running just a single shift in the manufacturing facility in Marlborough, and we currently have sufficient cells for all of Phase I and Phase II. With that said, we, as you are probably aware, are considering making a few changes. First, we are talking about moving from MA09, which is an embryonic stem cell line that was derived using our single blastomere technology, but the [inaudible] was discarded after we did the cell removal.

So we’re talking about transferring now, bridging to the line that is called NED-7, NED stands for No Embryo Destroyed, in that case, we also use the blastomere technique, removed a single-cell, but then the embryo is frozen back down. So we’re making that transition and to the extent that we do make that transition between Phase I and Phase II, and we’re working right now with the FDA on getting the approval to do that, obviously we have to manufacture a new line of cells, but the cells that we’ve created from NED-7 to date look and act in every way identical to those from MA09. The other change that we’re making is that we currently store the cells in a non-biocompatible media. What that means is it’s not a media that can be injected directly into humans. So, on the clinical side, there has to be some cell prep where the cells are washed down and put into a fluid that’s essentially like saline with some glucose in it and injected into the patient’s eyes.

We have been working very aggressively and believe we have found an answer to be able to ship the cells in a biocompatible media that we have designed and that will cut out the cell prep and wash down required at each site and that will make the scalability of this trial as we expand to more and more and more sites and head toward commercialization very important.

So we have plenty of cells in place right now but we may change these two particular media and the cell line that we use for a variety of reasons, and to the extent that we do that obviously we’ll have manufacture new cells. Next question please?

Operator

And our next question comes from the line of [Jim Coon] [ph].

Unidentified Participant

Hi, good afternoon, Gary. thanks for taking the call.

Gary Rabin

Sure, Jim.

Unidentified Participant

First thing is, just wanted to say thanks a lot for your thoughts on Rocky, he meant a lot to a lot of the shareholder base. So, we really appreciate you making the statement about him. My question is basically goes back to your blog in January where you laid out kind of goals for the year, laid out seven milestones. And I just wanted to know if you could just give me a quick reading on how the company is tracking to those milestones. The first one, is that okay, Gary?

Gary Rabin

You bet, yeah.

Unidentified Participant

Okay. Before we get into that, the gentleman before he asked a question that prompted something in me regarding the 25 patients, he was asking about improved visual acuity. Can you tell us how many of the 25 patients treated to-date have seen the degeneration arrested, because I know we talk about visual acuity improvements a lot, but a lot of this to me is, if we can stop the degeneration, and I don’t hear a lot about that.

Gary Rabin

Okay. Let me address that. First of all, for a variety of reasons, we don’t want to give out a lot of data, because it is important to us that we have a follow-up final paper that is published in the New England Journal or the Lancet or some very significant peer reviewed medical journal. And to the extent that we release too much information, the view in the community is that, it’s old news. And so as a result, they don’t want to publish it.

Unidentified Participant

All right.

Gary Rabin

With that said, I will tell you that first of all, we’ve treated 26 patients as of today, just so we’re clear on that, we’ve just treated 26 patients. And we except in the case of patients that had, the patients developed a cataract or in the case of one patient that developed Wet AMD in a different area than where our bleb was we’ve really not seen deterioration in the visual acuity of any of the patients. So that’s pretty surprising from our perspective and something we’re very pleased with. This is a degenerative disease.

Unidentified Participant

Right.

Gary Rabin

It’s a disease where you would expect a year and two years out that there would be continued degeneration. And I’ve been very pleased with the maintaining of the visual acuity improvements that have been demonstrated across the board in patients that have seen visual acuity improvements. So that’s all I really want to say.

Unidentified Participant

Okay, good. I won’t press anymore, that’s great. That tells me exactly what I thought and what I wanted to hear, so that thank you, Gary. So that’s a…

Gary Rabin

On the issue the milestones we will give you an update on the milestones. At this point, given where we are in the year, the only milestone that I am concerned about us meeting is the uplisting, because it has simply taken longer to put this SEC matter to bed than we had expected. But I don’t want to give you any guidance at this time of what I believe the timing for the SEC matter, because we are in advanced discussions with them.

Unidentified Participant

Okay.

Gary Rabin

Nor do I want to then speculate what the timing of the uplisting would be. So, but I really do feel that we will get this SEC matter put to bed in some reasonable period of time. And that will hopefully and presumably set off a chain of events that will allow us to get that uplisting done.

Unidentified Participant

Did something happen with the SEC, I know back in February, you mentioned that, you thought you were kind of in the final stages of finalizing that settlement is it just initially dragging on or did something get in…?

Gary Rabin

No, there are no – I’ve been asked many times, does the Form 4 filing, late filings impact the SEC notes; got nothing to do with it.

Unidentified Participant

Okay.

Gary Rabin

Did a problem develop? no, not at all. It is unfortunately a very methodical organization, and they have many parties to this complaint, we’re not the only one and in many ways, we’re the small fish, and so things just does not happened at the pace that our lawyers had advised us that they would.

Unidentified Participant

Okay, okay, all right. And just last, just follow-up on the milestones just on the initiation of the Phase II. So when you say initiation of the milestones, does that kind of mean submitting the application to the FDA, is that feasible to get done where we’re at given the delay in some of these injections in the 2a and cohort 3?

Gary Rabin

I think the bigger question is, what are we going to do about cohort 4?

Unidentified Participant

Right.

Gary Rabin

That will color more than anything else our submission time for Phase II. If we decide to do the 200,000 cell injections or try to get a protocol change to allow us to do 200,000 cell blebs that would obviously change it, but other than that, our goal is in October to design the Phase II trial, set the endpoints and it’s probably multiple trials. So that’s an important part of how we’re going to move forward from here.

Unidentified Participant

Okay.

Gary Rabin

Next caller, please.

Unidentified Participant

Okay. Thanks, Gary.

Gary Rabin

Yes.

Operator

And our next question comes from the line of Anthony [Petrone] [ph].

Unidentified Participant

Hello, Mr. Rabin.

Gary Rabin

Hi. How are you?

Unidentified Participant

I’m doing good. Hey, once again, thank you. When we’re talking like this, does that guy who mentioned my name, does he – does my name get out over everybody that’s listening on this?

Gary Rabin

Yes.

Unidentified Participant

So the public would know my name, correct. So I shouldn’t use my id name on a computer, correct?

Gary Rabin

I’m not going to advise you to what to do.

Unidentified Participant

My question is …

Gary Rabin

It is public. When you say your name, it’s public.

Unidentified Participant

I have been with this outfit, I don’t know, when they were down in the pinks long, long time ago, before you came on, and everything I - you say and everything that I’ve been hearing, I’ve been seeing this all promising. I mean, it’s like all giggity giggity. I mean, it’s got people just - but I got to ask you sir, and I say that and I’m not just a nickel dime stockholder.

Let me say this, a couple of million I’m proud to say, so I want you – and maybe, that’s not a lot of money, that’s not a lot to some people, but I don’t know, to me, that’s a lot, I firmly believe in what you’re doing here, what’s going on, but can I ask you something and I hope not to be redundant, where is the money at in this? I mean, you would think where are the big dogs at, Pfizer, Merck, I mean anybody from ACTC kind of had lunch with one of these guys? You know what I mean sir, any big dogs looking, I mean, any prospects of – but that’s what I wanted to ask you, because this all sounds exciting.

Gary Rabin

Okay.

Unidentified Participant

all great, but where is the money?

Gary Rabin

Okay. I appreciate the fact that you’ve been a long time holder in the company, and we feel very optimistic about this. One thing that’s important for you to understand is, and I said it in my opening remarks and I said it at every conference that I attend, there is no big pharma or biotech company that has an ophthalmology division, that doesn’t know everything about these drugs.

This company is in Phase I. We’re a Phase I biotech company and the inflection point of value creation, the transition from Phase I to Phase II, and then from Phase II to Phase III, and then from Phase III to commercialization are enormous inflection points in value, logarithmic jumps and I have made it clear on every conference call that we are not going to enter into a joint venture with what looks like the golden goose, just to get $10 million in the door.

Unidentified Participant

Right.

Gary Rabin

This is a potential multi-billion dollar therapy, and obviously, we’ve got a long way to go from here to commercialization. But you are incorrect if you think that I’m going to rush out and do a deal with one of these guys that you mentioned, just to get a deal done, can’t be foolhardy. We’ve seen too much promise in this therapy to just partner it out for a small upfront payment, it will be crazy. So I recognize that what that means for shareholders is that you could be holding the stock for a while, before we announce the partnership agreement. but there are plenty of value-creating inflection points between now and then, so that’s where we’re focused on. Next caller please.

Unidentified Participant

Very good, sir. Okay.

Operator

And our next question comes from the line of [Louis Smal] [ph].

Unidentified Participant

Yeah, very good afternoon. In the last – I’m assuming you can hear me correct?

Gary Rabin

I can.

Unidentified Participant

Okay. Gary, in the last conference call, regarding the patient that went from 20/400 to 20/40, you mentioned that I don’t recall the exact words, whether it was a rare occurrence or a unique occurrence, a couple of questions here, do all Macular degeneration patients go through the deterioration where their receptors be dormant before they die, that’s the first question.

Gary Rabin

Yes.

Unidentified Participant

And second, what is the size of the market for people who do have dormant but not yet dead receptors? Have you been able to or your accountants have been able to determine what the size or that market would be?

Gary Rabin

As I said about two questions ago, this issue of how long photoreceptors are in this dormant phase before cell death is something that very little is known about; but surprised us, the variability surprised us, and obviously, it’s something that we’re looking at very closely. But I think as you’ll understand ultimately, we want to be treating patients that have much better visual acuity than 20/400 and worse. We want to treat early stage patients to stem the decline of the disease, we want to treat mid-stage patients to give them visual acuity improvements. So as you look at the breakdown of those patient populations, that’s where we ultimately want to be. These late stage patients, it’s very interesting, the variability that we’ve seen patient-to-patient in photoreceptor function after the RPE cells are injected and engrafted. Next question, please. Next caller please.

Operator

And our next question comes from the line of Matt (inaudible).

Unidentified Participant

Hi, Gary. I had a question about the cohort 2a, my phone had broken up shortly earlier and I know somebody else asked. So I apologize if this has been covered, but my question was, I know you can’t give us any details on the patients that have been treated thus far but what I was wondering is, is there any information you could give us as far as the correlation between the late stage patients that have already been treated and the new cohort 2a patients. Is there any similarities and the results for those patients that you’ve seen thus far?

Gary Rabin

It’s very early in the treatment of those patients; I mean most of them have been only in for a couple of weeks, so premature for me to comment on that. We will obviously talk about this more around our October meeting. Next caller, please.

Operator

And our next question comes from the line of [Arthur Crowther] [ph].

Unidentified Participant

Hi, Gary. I may have misunderstood the instructions, but I have another question regarding NIH, at the last conference call you did say that you were consulting or is making the lot of progress and you’d had meetings with the Secretary of – well the cabinet officer as well as someone in President Obama’s office. I’m wondering has there been any other progress. I then have a follow-up question, has there been any progress, I realize there is sort of an ivory tower, NIH in a sense, but has there been any progress going forward?

Gary Rabin

We have been frustrated despite our access to the highest levels of government; we’ve been frustrated with the pace of change at the NIH. The rules are ready to be published and the lack of publication of them has perplexed us and our consultants despite the access we’ve had to senior members of Congress, cabinet, White House and it’s very frustrating, but we continue to push forward. And as you know, the NIH really is more about the likelihood of getting funding for people that would license or use our technology than us ourselves. We are unlikely to seek or get NIH funding for the RPE program for example. So, but obviously future programs that are at early stage, there is the potential for it, and the pace at which the NIH has been working and this has been very frustrating for us. And so we’ve been continuing to push ahead. Matt, do you have any additional comments?

Matthew Vincent

No, I mean, that’s what is, and it’s we’ve regularly reached out to the folks at the NIH, to see what’s happening, sometimes we get back answers, other times we don’t. There - each time it’s a different excuse, and I think we just keep pushing at it and we hope that we’re not too far off to actually see the guidelines promulgated as rule.

Unidentified Participant

Okay, thank you. Here is a related question, in terms of taking legal action, I know from my little bit of reading I’ve done, is that government agencies are very well protected from being sued. The only people whoever can sue a government agency is like personal liability like in construction someone drops a metal, piece of metal on the toe or something like that. But I’m wondering you really can’t sue them for dollar amounts, but I wonder if you can sue them for function, in other words, these people who want to be able to use your process are prohibited from gaining funds or you’re prohibited from gaining future funds. I just wonder if there’s any legal course that you can attack them on the function end of it that they’re prohibiting you from your normal functioning or other people from normal functioning and accessing federal funds as opposed to dollar amounts, it’s just that they’re preventing the flow of funds from the federal government to these different receptors, including yourselves and other people?

Gary Rabin

Matt, could you make a very quick comment on this.

Matthew Vincent

Sure. The short answer is you can go after the government for what’s called violations of the Administrative Procedures Act. I don’t think that we are in a position where we feel like that would be the right route here. I mean there still is an active dialog with the folks at the NIH. And our belief and understanding that they are still trying to push this along, but are dealing with other issues relating in earlier this year to sequestration and then just dealing with the dispatch of the (inaudible) case. So I think litigation is always an option, but I think litigating with the government even if there is a way to do it, just is not a good option.

Unidentified Participant

Okay. Thank you very much for your responses, I appreciate it.

Gary Rabin

Next caller please.

Operator

And our next question comes from the line of Patrick (inaudible).

Unidentified Participant

Hi, Gary. Thanks for taking my call. So thanks very much, much appreciated. I’ll be real quick, could you can give us an update on the platelet IND and if things have been ironed out with that and if you expect it this year. Can you talk about the plans of doing the two 100K blebs in cohort 4 versus Phase II and just [inaudible] Annual Meeting this year? Thank you.

Gary Rabin

I’ll take the questions in reverse order. The issue was - we couldn’t really do the two 100 blebs as part of a Phase II because we’d have to conduct a safety trial about it first. So it will have to be done in Phase I, but that doesn’t necessarily mean that we couldn’t commence Phase II, but not using obviously two separate blebs, all things that were seriously considering and are discussing with our investigators and the independent members of our [OAB] [ph].

In terms of the platelet IND, one of the most important things there is identifying the disease pollution and we are working through that and we think our Platelet program is showing great promise. We’ve made some very significant steps in improving the efficiency from which we can derive platelets. At first we were getting one, two or three platelets from megakaryocyte which is very inefficient compared to the body’s close to 10,000. We are now looking like we can get that to 30 to 50. So this is obviously, the scale of efficiency of this is a very important part of this program. We’ve been working on that with some people in Dr. Langer’s microfluidic lab and we think there is a lot of promise there. So we are absolutely are spending time on it and it’s something that we are very interested in.

Next caller please.

Operator

And our next question comes from the line of [Fred Waldman] [ph].

Unidentified Analyst

Gary, how are you today?

Gary Rabin

Good, how are you doing?

Unidentified Analyst

Good. When you see that the RPEs attached to Bruch's membrane or when you are able to get it to happen, would you say that the patient has a very good chance or you are seeing that they are seeing some vision improvement due to the fact that the cell is attached to Bruch's membrane.

Gary Rabin

Well, and we’ve seen a lot of patients where we continue to see the proliferation of the RPE cells that we inject. Some of those patients – obviously most of those patient are showing visual acuity improvements, some not. The reason why some not, there is no photoreceptor left to rescue. So that’s a little bit of the variability and gets to this question of why does it work for some people and not others.

Why do the photoreceptors lie dormant for, in some people longer than others, and it’s something we are obviously thinking a lot about talking to the docs about, so and it’s a very important issue, no question about it, especially if you’re treating later stage patients, and we get to be intermediate stage patients, we would expect that you’ll have a lot more rescuable photoreceptors.

Unidentified Analyst

Now are we able to obviously, you can treat patients 20/100, but are you also, can you treat if you wanted to somebody that’s 20/200 right now or is it basically, obviously that cohort 1, 2 and 3 were 20/400 for AMD. In 2a, can you treat somebody 20/200?

Gary Rabin

Yes we can. It’s 20/100 at the best. What we are trying to do is select patients that appear to have reasonably large areas that – of no efficacy. So being able to attack areas where we think that we show promise of visual acuity improvement that’s the trial design idea.

Unidentified Analyst

Okay.

Gary Rabin

And our next question comes from the line of [Richard Mularo] [ph].

Unidentified Participant

Yeah. Hi Gary, can you hear me?

Gary Rabin

I sure can. Hi, Richard.

Unidentified Participant

Okay. Hi, in reference to the MSC program and the platelet program, I know that you had spoke previously about some quasi-governmental funding and you did also speak about possibly getting some of these retinal progenitor cells maybe partnered out. Is there any way that you are going to be able to get money in, so you’re no longer diluting shareholders and, one other question, is there a possibility of doing maybe a partnership deal for small influx of cash with clinical milestones, so you can at least get some money in the door, so we’re no longer diluting shareholders.

Gary Rabin

I guess I would say that we are a Phase I biotech company that has some very promising programs. And we will partner the programs when we think we’ve got significant value from them, relative to the risks that lay ahead, and the unfortunate truth about Phase I biotech companies is that, they dilute shareholders. But we believe that every dollar we spend in this company will represent a very attractive return on capital.

So the concept of dilution to us is, we look at the long-term value proposition and believe that as we draw this capital down $0.075 and $0.08 a share while we obviously would rather finance at much higher prices we believe represents a very strong returns on this capital. So, that’s the way I would approach it. And sorry, just a second, Ted, do you want to chime in there at all?

Edward Myles

No, I think it was perfectly well phrased.

Gary Rabin

All right.

Unidentified Participant

Okay. So you haven’t had any conversations with any [inaudible] about possible partnerships with clinical milestones, maybe like a short influx of cash on that and can you also answer the question about the governmental - quasi-governmental funding for the platelet program, is there any progress in that area?

Gary Rabin

We continue to talk to U.S. and foreign government entities about significant funding opportunities for the platelet program. And in terms of MSCs and the retinal progenitors, those are not governmental opportunities, those are really private sector opportunities and that is something that we are pursuing, I guess, you could say aggressively.

Operator, we’ll take two more callers please.

Operator

And our next question comes from the line of [Louis Smal] [ph].

Unidentified Participant

Gary, regarding the presentation that you made earlier, when you said I believe or Ted had said there is $20 million left in the Lincoln financial line, I know you have a Shelf registration for another $35 million of preferred shares, how long…

Gary Rabin

Sorry, $35 million of anything.

Unidentified Participant

Okay. How long do you expect to have the cash available for the $20 million that you have and the potential of taking additional $35 million down, which obviously would give additional dilution. How long do you expect to go through that money? In other words what is your cash burn rate one through the $20 million, and then if you have to go for the next $35 million?

Gary Rabin

Ted Myles will take that.

Edward Myles

Sure. So that, just to clarify that, $20 million we have available under the Lincoln Park arrangement that’s secured, that’s a signed deal and we have that available to us. Of course, it’s dependent on the stock price and with stock price stable, we expect that that money will last us more than a year at our current burn rate. As I mentioned earlier, we are certainly looking at our financing plans from a strategic and kind of holistic approach, the $35 million Shelf registration was set up to enable flexibility, so that we could pursue more permanent sources of capital, and broaden our shareholder base to include long-term fundamental based institutional shareholders. We are having those discussions, but of course, we feel that we want to resolve the SEC matter first and then we’ll be able to get deals done with parties like that under better terms, so we’ll be able to mitigate dilution from those types of deals.

Unidentified Participant

Okay. All right. Thank you very much, gentlemen.

Gary Rabin

I’m going to take one call from the Internet and then I’ll take the last caller, operator. The question is can you give us an update on Mr. Rabin’s Form 4 transactions? The only thing I can say is that the Independent Committee of the Board continues to do a very thorough review of this and as we said on the last earnings call, we will give you an update as soon as they have concluded their investigation. But they have done a very thorough job looking at documents and talking to lawyers and brokers and so forth, and they are making progress in their investigation.

Next question, operator, and this will be the last one.

Operator

And our final question is a follow-up question from [John Redaelli] [ph].

Unidentified Participant

Hi, Gary, again. I want to also thank you for your kind remarks. Regarding the tragic loss of a great soul, Rocky, what a tremendous asset he has been for our forum at investorstemcell.com and won’t be easily replaced. My follow-up question is regarding when you anticipate the next shareholder meeting in Palm Springs? And my final question, what progress or what can we expect with regards of pursuing compassionate use? Thank you for taking my second call, Gary.

Gary Rabin

You bet. We will have a shareholders meeting. It will be in Palm Springs and we plan to announce something relatively soon obviously. We are very disciplined about getting these thing done. Our hope was to have everything cleaned up on time for the shareholders’ meeting, so that we could basically come with a plan for uplisting and we continue to strive for that. But yes, we will have a shareholders’ meeting and we will provide you the date in the near future. Your second question was about the – could you repeat that question?

Unidentified Participant

Compassionate use.

Gary Rabin

Compassionate use, we are evaluating with our partner in Europe, our regulatory partner, the possibility of a Phase II pivotal trial, and that’s something that we’re in discussions with. We have some meetings over there in September. And obviously, we like you we’d like to get this into compassionate use and commercialization as quickly as possible.

So we’re doing everything we can. As I said in my prepared remarks, we have many interesting pathways with the agencies, both because of the Orphan designation and a possibility of this breakthrough technology designation and it’s something that we obviously are going to aggressively pursue. We think that we’ve demonstrated - we’ve been very facile with the agencies; we’ve gotten all the protocol changes approved that we asked.

we are treating much earlier stage patients now, which is really amazing for a Phase I trial, and I think speaks volumes about what the DSMB and the FDA feel about the safety of this trial today. And we’re continuing to push forward and we remain very excited about the results that we’ve seen, despite the fact that this is a very early stage trial with very late stage patients. So we’re very cognizant of it, but I couldn’t begin to give you guidance, it’s just far too early for me speculate yet but we’re absolutely pursuing every pathway.

All right. Well, look this has been a very long quarter. We’ve been slogging through a lot of things and we are very excited that we feel we are about to wrap Cohort 2a and Cohort 3 and advance to this very important meeting in October. I think that that will give us a lot of things to talk about the next time that we are with you.

And thank you all for spending the time. I will speak to you on the next earnings call in three months. Thank you all.

Operator

Thank you again and thanks to all our participants. We hope you found this webcast presentation informative. Have a good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Advanced Cell Technology's CEO Discusses Q2 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts