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Cesca Therapeutics Inc. (NASDAQ:KOOL)

Q3 2014 Earnings Conference Call

May 15, 2014 5:00 PM ET

Executives

Matthew Plavan – CEO

Kenneth Harris – President

Dan Bessey – CFO

Analysts

Jason Kolbert – Maxim Group

Ren Benjamin – H.C. Wainwright

Operator

Good day and Welcome to the Cesca Therapeutics Third Quarter Fiscal Year 2014 Financial Results Conference Call. Please refer to the press release about this conference call on the company’s website, cescathearapeutics.com for further details.

The company has asked that I read the following statement. Management will make comments today that contain forward-looking statements. Forward-looking statements are any statements that are made that are not historical facts. These forward-looking statements are based on current expectations of the management team and there could be no assurance that such expectations will come to fruition. Because forward-looking statements involve risks and uncertainties Cesca’s actual results could differ materially from management’s current expectations.

Please refer to the press release, the company’s Forms 10-K, 10-Q and other periodic SEC filings for information about factors that could cause different outcomes. The information presented today is time sensitive and is current at this time. If any portion of this call is rebroadcast, retransmitted or redistributed at later date Cesca will not be reviewing nor updating this material.

As a reminder all participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. (Operator Instructions). For your information this conference call is being recorded.

I would now like to turn the call over to Mr. Matthew Plavan, Chief Executive Officer of Cesca Therapeutics. Please proceed, Mr. Plavan.

Matthew Plavan

Thank you, operator and welcome everyone to the call. I am pleased to be joined by our President, Ken Harris and our CFO, Dan Bessey. This is our first quarterly call reporting as Cesca Therapeutics and it was one marked by advances in our four key areas vital to the commercialization of our cell therapies that we laid out in our last quarterly earnings call. You’ll recall that they were: first, to integrate our companies into one; second, to expand our clinical expertise within the leadership team and the Board of Directors; third, to innovate technically; and fourth, to innovate clinically.

Perhaps the most important to our ability to advance these objectives were securing approximately $6 million in growth capital financing in January. This has enabled us to keep the merger, the integration and our clinical initiatives on track. With regard to the integration of Cesca and the building out of our management team and Board of Directors, Monday of this week we announce the formation of the company’s Clinical and Scientific Advisory Board and the appointment of Dr. Solomon Hamburg. We are very excited with this appointment. Dr. Hamburg is exceptionally well qualified to lead our hematology and oncology sub committees which we’ll provide additional color on in a moment.

In mid-April we announced the restructuring of our sales, marketing and technical support organization and the appointment of Tim Lee as our Director of International Sales. Tim is very well connected in the regenerative space, having served the medical device and therapeutic research markets for over 20 years. The restructuring is aimed at further strengthening our core blood business and clinical commercial programs through dedicated leadership for each discipline.

And in early March we announced the appointment of Dr. Mahendra Rao to the company’s Board of Directors effective April 1, 2014. In fact prior to joining us as a Director – I am sorry prior to join as a Director of the Center for Regenerative Medicine in the NIH he was a Board members of our ours, so we know Mahendra well, and we are excited to have him rejoin our Board because we know his research and industry experience will be of great value to our mission.

With regard to our technical and clinical innovation objectives achieved during the quarter we identified two new and exciting therapeutic markets in the bone marrow transplant space. In collaboration with our partner, Fortis Hospital we’ve developed a new protocol to significantly improve the odds of finding of viable match for patients in need of hematopoietic stem cell transplant more commonly referred to as a bone marrow transplant.

We believe this new procedure and approach could double the number of patients who find an acceptable bone marrow donor. That would mean another 30,000 very sick kids and adults will survive this treatment. This is very exciting not only for us because of the impact we can have on patient lives but we estimate this is an addressable market for us between a $100 million and $200 million and we think we can begin generating revenues in this market as early as 2016.

Importantly we also advanced two of our key clinical initiatives in acute myocardial infarction or AMI and Critical Limb Ischemia or CLI; two indications representing multi-billion dollar revenue opportunities for our SurgWerks cell therapies. With regard to CLI based on increasing clarity regarding the U.S. regulatory process for cell therapies we now believe our U.S. regulatory pathway for marketing approval is to be an investigational drug exemption or IDE PMA approval process versus the more burdensome biological license process.

If approved this revised pathway will significantly positively impact our speed to market and cost to market which Ken will talk about more in a moment. With regard to AMI, our Phase II feasibility study to be conducted in India was previously approved under the prior rules in India. However in late 2013 as we’ve discussed before newly established rules governing the review and approval of clinical trials conducted in India now require companies to increase the documentations of subject consent, increase financial responsibility for subject adverse events and submit a commercialization plan for the candidate therapy in India.

In addition during the quarter we announced our collaboration with Cook Medical to incorporate a newly developed intracoronary catheter in to this trial. Therefore we’ll be resubmitting our application with the India drug controller amended per the new rules Schedule Y and inclusive of the Cook Medical technology. We expect approval within the statutory timeline and we also expect to submit this in the early, early in the September quarter.

Now from a big picture perspective we were also quite encouraged by the clinical progress in the overall regenerative medicine market during the quarter. We believe that both the positive clinical results published and those results that showed no superiority to placebo generally validated our autologous heterogeneous cell formulation approach to cell therapy. An example of clinical results validating our approach are the publication in February of 2014 of the Assmus primary investigator Andreas Zeiher’s group that REPAIR-AMI five year follow-up study. This landmark randomized placebo control study demonstrated that intracoronary dosing of an acute heart attack patient with their own bone marrow mononuclear stem cells soon following re-profusion had a significantly positive long-term impact on patients by improving survival rates, reducing hospitalization, re-hospitalization rates and reducing the need for revascularization procedures as compared to the placebo group.

Similar to the BOOST five year follow up study that was published in 2009 this long-term study from the well-respected university of Frankfurt demonstrates the safety and measurable efficacy of treating the patient with a dose of their own stem cells. Therefore approaches utilizing minimally manipulated heterogeneous autologous cell mixtures as does the Cesca SurgWerks approach are leading the way in demonstrating clinical utility and commercialization potential of stem cell therapies.

Now conversely results from the therapeutic methods using specifically isolated and manipulated cells such as CD34, MSCs, [aldogen] bright cells or cardio spheres are proving to be the costliest and riskiest approaches today and continue to struggle with demonstrating measurable clinical benefits. For example a failure of the multi-stem product in a Phase II trial with Pfizer to show a meaningful benefit following a single administration of the cells in patients suffering from chronic, moderate to severe ulcerative colitis who failed prior therapies. MultiStem is an allogeneic stem cell therapy utilizing specific cell isolation and expansion procedures that are really intended to be an off the shelf delivery at the point of care.

Also in the news recently was the trial result of the Phase II RECOVER strokes study where the observed improvements in the primary end point were not clinically or statistically significant. This too was an allogeneic single cell therapeutic approach. Now I want to be clear that we’re not criticizing overall allogeneic and manipulated cell approaches, rather we are highlighting three very important points.

One, that the higher clinical regulatory and development risks to bring these therapies to market. Two, in our opinion the lack of use or under appreciation of controlled and optimized devices in the therapy delivery to-date. And that three there are fundamentally different approaches to cell therapy being pursued today which means the results of allogeneic and single cell trials have no predictive value of the clinical utility or commercialization potential of autologous heterogeneous trials and vice versa regardless of the indication targeted.

Now a great illustration of this distinction is captured very nicely by Jason Kolbert of the Maxim Group in his April initiation report on Cesca Therapeutics. We’re not only very pleased to have Jason, a leading analyst in life sciences space pick up coverage of the company with a buy rating but we’re also especially encouraged to see his enthusiasm for the potential of the SurgWerks program.

In addition to attracting independent research coverage since our last call being an integrated company and combined management team has allowed us to better concentrate our efforts on the business, get more done and generate more news. We have also increased our interaction with investors and our investor relations activities. Combined these developments have helped us increase the overall market awareness of Cesca and the stocks liquidity.

We’ve also increased our presence in important industry events and conferences. One such worth noting and highlighting is our involvement with the Alliance for Regenerative Medicine or ARM and our active support of The Regenerative Medicine Promotion Act of 2014. This Bill S2126 was introduced in the Senate March 13, 2014 by Senators Barbara Boxer and Mark Kirk with a House bill HR4494 also introduced to the House a few weeks back. We have met with the offices of numerous congressional leaders pursuing further sponsorship of the legislation.

The Act establishes a national strategy for regenerative medicine to ensure that the U.S. remains a leader in research and commercialization of these vitally important clinical products. Now the goal of the promotion act is to perform an initial assessment to understand various research and commercialization initiatives that are underway in the U.S., and to identify and recommend policies to overcome barriers and specify priorities for research and product development investments. We think this is very important and something that we’ve got to be focused on as a country again to keep ourselves in the lead, maintain a lead and demonstrate to the world what we have in place and what we’re bringing to market.

A critically important component of this effort for us is to engage CMS or departments of Medicare and Medicaid in order to educate them early as to the tremendous potential for these curative therapies and their ability to lower the overall cost of care while improving outcomes.

Now Arm has formed a sub-committee to begin developing the framework for a national reimbursement strategy that’s going to be aligned with the timing of these therapies moving into commercialization. We play a leadership role in the sub-committee and Ken is going to talk a little bit more about that shortly.

At this point I would like to turn it over to him so he can discuss our clinical initiatives and elaborate on that as well. Ken?

Kenneth Harris

Okay, thanks Matt. I am going to use the time today to update on the progress we’ve made in our clinical development commercialization programs. First I am very excited that the company has established a Clinical and Scientific Advisory Board. The Advisory Board will serve to help set strategic goals for the advancement of research toward the development and commercialization of our own autologous cellular therapies and to improve patient care in the field of hematology and oncology, cardiovascular and orthopedic indication.

The Clinical Advisory Board will review evidence-based practices, identify training needs of network providers, identify reimbursement processes and monitor clinical guidelines that include cultural factors, important in achieving optimum patient outcomes across the globe. The newly formed Clinical Advisory Board will consist of leading scientist researchers and clinicians drawn from the regenerative medicine field who led landmark clinical research in their own particular fields in hematology, oncology, cardiovascular, orthopedic areas.

We announced first appointment of the Chairman, as Matt mentioned earlier, Dr. Solomon Hamburg of Cedars-Sinai University of California. Professor Hamburg is both a scientist and a practicing hematologist and oncology physician holding both a PhD and a MD degree. Additional appointments on the hematology and oncology committees will be forthcoming as well as appointments in cardiology and orthopedic.

Matt mentioned that the U.S. FDA has granted a pre-IDE meeting in late June for our critical limb ischemia U.S. advanced stage trial under the February 18, 2014 new rules which were published by FDA. The pre-IDE submission is now called a pre-submission meeting. We look forward to this critical dialogue with FDA where we’ll review the pivotal trial IDE design based on our prior Phase I/II studies conducted in India, China and Italy. Our target patient population are no option Fontaine IV and Fontaine V patients facing near term major limb amputation.

This specific population makes the traditional management of the control arm very challenging and we will discuss in particular this challenge in our proposed plan with the FDA experts. We remain focused on submitting the IDE pivotal trial application which incorporates the FDA’s June feedback by mid-late summer of 2014. This is probably the right time to quickly review what an investigational device exemption or IDE is compared to an investigational new drug IND or biological license application BLA, of which many of our competitors have been required to pursue.

First our application process in the U.S. is under the jurisdiction of the Center for Biologics Evaluation and Research or commonly referred to as CBER and specifically the office of cell, tissue and gene therapy. We believe and are seeking concurrence from FDA that our SurgWerks CLI kit which contains our vascular expressed device in compatible disposable cellular bags that in combination with currently approved bone marrow harvest devices fall within the current IDE rules.

As Matt mentioned earlier since our autologous cells are minimally manipulated and never leave the operating room or the surgeons’ control, the cells themselves we believe are not regulated by FDA as prescribed under the Public Health and Safety Act Section 361. Therefore the only regulated components in our opinion of our therapy remain the devices contained within the kit itself. What is an IDE? You may be wondering what exactly is meant by the term investigational device exemption. The term refers to regulatory submission that permits clinical investigation of devices for use in medical practice. It typically only evolves a feasibility study and early person human trials specific to the target indication and then a final pivotal study statistically designed to evaluate both safety and efficacy leading to pre-market application.

Since the cells we are injecting are autologous or from the patient, minimally manipulated and never leave the operating room we believe the entire regulatory focus will be on a safety and efficacy of the devices which process the autologous cells. Once we have FDA concurrence this will allow the company to proceed to the final pivotal study in CLI. This significantly reduces our time to market compared to an IND or BLA study which will require three phases. We believe our approach is reasonable and not without precedent. Both Cytori and [inaudible] Medical have taken similar approach in their point of care cellular therapies to-date.

In addition to the SurgWerks CLI discussion with FDA we will be discussing whether FDA will consider our SurgWerks AMI therapy to follow up in the same pre-sub guidance or whether FDA recommends a separate review of our upcoming AMHERST Phase 2 trial in India. We intend to submit the Phase 2 late feasibility application to the Indian authorities in late summer 2014, based on finalizing our preclinical work on the new catheter with Cook and our early human feasibility 24 months study already completed and announced.

A final but equally exciting area in clinical development progress this quarter was in the hematopoietic stem cell transplant sector. Through our collaboration with Fortis we began evaluating method improvements for pediatric patients suffering from genetic abnormalities such as Beta thalassemia and therefore requiring stem cell hematopoietic replacement therapy. The challenge with this patient population in particular in India and globally is the availability of a suitable donor having the ideal match cell types.

In traditional bone marrow transplant the better the match, the better the outcome. The cell type, the cell type match is critical for two reasons: faster engraftment time and thus minimizing the risk of infectious disease mortality and the reduction of Graft-versus-host disease or commonly referred to as GVHD.

Unless the donor and the patient are perfect match in both their red blood cell type called an ABO match and their white blood cell type called an HLA match, additional laboratory and pharmaceutical steps are required. Each of these manipulations and therapies comes with their own risk. One specific risk in red blood cell mismatch is a necessity for depletion of the unwanted red cell blood cells in plasma. In normal routine practice today as one depletes the red cell blood cells in plasma they also inadvertently deplete certain numbers of the desired stem cells. The lower the stem cell count becomes the longer the patient takes to reestablish a newly engrafted blood immune systems resulting in increased risk of illness and potential death.

Our AutoXpress and MarrowXpress systems can effectively address the inadvertent stem cell loss and more efficiently prepare transplant unit. Specifically our stem cell yields are between 30% to 40% higher than the current methods leading to an anticipated better engraftment rate. Typically engraftment rates for U.S. centers for matched units are around 93% but in mismatched units can be as low as 70% according to two separate recent studies by Mattson [inaudible].

We are currently evaluating the performance of our product in two different studies. The first study, a 10 patient major ABL mismatch, pediatric open-label study with the intent of submitting a 510(k) to the U.S. FDA and the second study, a ten patient halfway identical related donor pediatric open-label study with the depletion of the T-cell receptor alpha beta cells commonly referred to as TCR depletion which minimizes the DVHD in the less then perfectly matched transplant.

We anticipate concluding these studies in the June-July timeframe. As Matt mentioned in his earlier comments we estimate this to be a sizeable market opportunity. The global market for the devices alone could exceed several million dollars while the BMT services inclusive of the TCR depletion we provide to Fortis could tap into a potential 6,000 treatments per year which equates to a $100 million to 200 million addressable market opportunity. Thus far we have completed 37 stem cell therapy or laboratory process for Fortis and Memorial Research Institute and anticipate this to grow each and every month.

I would now like to turn the call over to Dan for a review of the quarter’s financial performance.

Dan Bessey

Thank you Ken and good afternoon everyone. As Matt noted earlier we are pleased to have completed the merger with TotipotentRX in February. This transformative merger marks the creation of what we believe to be the first fully integrated regenerative medicine company Cesca Therapeutics. With that we have refocused our Investor Relations towards increasing the knowledge of and visibility to our new company.

In March, we launched our new social media platform so that our investors could have real time access to our ongoing progress and announcements. You can now follow us on Twitter, Facebook, Google+, StockTwits and Stocker. We also recently presented at the Second Annual Regen Med Investor Day sponsored by the Alliance for Regenerative Medicine and are scheduled to present at the Marcum MicroCap Conference on May 29 and LD Micro Conference on June 4th. We plan to also present at other targeted investor conferences in the coming year that focus on regenerative medicine.

Another key element of the successful IR program is research coverage. We are very pleased to have Jason Kolbert of the Maxim Group initiate coverage on Cesca. Jason is a well-respected leader in the regen-med space and we look forward to an ongoing relationship with him. We also anticipate that as we continue our outreach program other analysts specializing in the regen med space will initiate coverage on Cesca. For those of you who are new to Cesca Therapeutics I would like to provide a brief background of our financial operations.

We have approximately $16 million to $17 million in annual revenues derived primarily from the sale of our automated and manual sell processing and storage systems to cord blood banks and hospitals. This cell processing product line generates approximately $6 million in annual gross profit which we use to partially fund our clinical trial programs and overhead.

So with that let’s take a closer look at our financial results for the third quarter. Revenues were $4 million quarter ended March 31, 2014 compared to $4.9 million for the same period in 2013. The decrease in revenues of $854,000 was due primarily to lower sales of our cell processing systems in Asia resulting from construction delays at the facilities at a Cord Blood bank customer in China.

We expect product demand from our China customers to remain robust but will likely fluctuate from quarter-to-quarter in the near-term due to the impact of the construction delays – due to the impact of the construction delays had on their migration from a manual system to our automated cell processing systems. This decrease in Asia sales was partially offset by the sale of five [inaudible] in the current quarter versus two in same period in 2013.

Gross profit for the quarter ended March 31, 2014 was $1.5 million, compared to $1.7 million for the same period in 2013. The slight decrease of $138,000 resulted primarily from lower sales in Asia. Gross profit margins for the quarter of 38% increased nicely from margins of 34% in the same period in 2013 due to the mix of products and services sold.

Operating expenses for the quarter ended March 31, 2014 were $3.4 million, compared to $2.8 million for the same period in 2013. The increase in operating expenses of $600,000 is attributable to cost associated with the acquisition of TotipotentRX, development cost associated with our bone marrow cell processing platforms that will be used in our AMI and CLI clinical trials and a one-time gain on the sale of our THERMOLINE, our THERMOLINE product line in the prior year.

Adjusted EBITDA loss was $1.4 million for the quarter ended March 31, 2014 compared to $1 million for same period in 2013. Our net loss for the current quarter was $1.9 million, or $0.07 per share compared to $1.1 million or $0.07 million for same period in the prior year. The increased adjusted EBITDA loss of $412,000 and the increased net loss of $738,000 were both due to a decline in AXP consumable sales in the Asian market and increase in costs associated with the acquisition of TotipotentRX and an increase in costs associated with advancing our AMI and CLI cell therapies.

We ended the third quarter with $6.6 million in cash compared to $6.9 million at the end of fiscal 2013. Lastly, as a result of favorable conditions in the capital markets we successfully raised net proceeds of approximately $6 million by completing a private placement in January of this year. We issued 3.3 million shares of common stock at $2 per share plus $1.7 million in cash warrants at a strike price at $2.81. We are very pleased with this financing as it provides us with the necessary growth capital to begin the next phase of our clinical trials and to grow our bone marrow transplant program in partnership with Fortis.

In closing, I would like to briefly comment on our expected cash burn and financing planning. Looking forward to intend to invest $15 million to $20 million in our clinical program over the next 18 to 24 months as we position them to begin commercialization in 2017.

I’ll now turn call back to Matt for his closing remarks.

Matthew Plavan

Thanks, Dan. Having seen the dramatic impact our therapies are having on the lives of patients enrolled in our trials we are highly optimistic SurgWerks will meaningfully change the healthcare has delivered in the near future by introducing curative low-cost, autologous therapies to large patient populations within multiple chronic disease indications. We see these as blockbuster therapies. We are pleased with our progress during the quarter in accomplishing our stated objectives to integrate, expand our team and innovate technically and clinically.

Moving forward the continued advancement of our therapies through the regulatory approval process and beginning the development of mechanisms for private and public payer reimbursement are objectives also critical to the successful commercialization of our SurgWerks therapies.

With regard to future clinical milestone achievements let me summarize those in the near term we are tracking to. By June of this year we expect to obtain concurrence from the FDA with our IDE PMA pivotal trial approach that Ken spoke of which we view as groundbreaking. In the September quarter we expect to one, submit our CLI pivotal trial to the FDA for formal FDA approval; two submit our request for approval of our AMI feasibility study in India; three, submit our bone marrow transplant 510(k) application to the FDA and release the data for the 10 patient trial ABO mismatch study. And in December quarter we expect to begin our enrolment of the CLI pivotal phase trial.

With that I’d like to now turn the call over to the operator to open it up for questions.

Question-and-Answer Session

Operator

(Operator Instructions). First question comes from Jason Kolbert of Maxim. Please go ahead.

Jason Kolbert – Maxim Group

Hi guys and thank you so much for the kind remarks. I am excited and thrilled to be covering Cesca. You know that I truly believe that you represent an Achilles heel in the entire industry and I’d just like to talk about that a little bit, because at one point during the call you talked about analogies to Cytori. But I just wanted to make it clear that while this is point-of-care help me understand the importance of and what it really means to say not manipulated and analogous use of cells, and what that means clinically in terms of a pivotal trial design and approvable requirements in critical limb ischemia?

Matthew Plavan

Well Jason we are happy to have you cover the company as well as we mentioned and that’s a – this is Matt, that’s a good question with many sub small questions in it. So let’s see if we can parse this out a little bit. To starting with your question is how does Cytori’s approach differ or is similar to ours? And then how does our approach that is autologous and homologous affect the regulatory cycle.

Jason Kolbert – Maxim Group

Or that’s exactly right or really hope me draw the lines on what does it mean to be not manipulated or autologous in point of care and how does that change the regulatory pathway? And are you the only company that falls cleanly into that spot?

Matthew Plavan

So the FDA has defined what minimally manipulated is and I think it’s section 361 in the regulations and if you are taking cells from a patient and you are not adding any chemical additives to it other than those that are known to be safe like any coagulant that there is very few others. If you’re just simply pulling those cells and concentrating them into the stem cell fraction and introducing them back into the patient they consider that to be minimally manipulated and as a result are going to require less data and demonstration of safety than if you are actually manipulating or expanding those cells in a lab or taking those cells out of the OR. And so I believe we are the only therapeutic out there that meets those criteria that specifically.

When you look at Cytori, although they are autologous therapeutic they are actually using enzymes to digest the fat tissue and disassociate the stem cells from the fat tissue so that would be considered by the FDA to be manipulated at some level. And so therein lies the departure between our two therapies just simply stated I don’t know Ken you would you add anything specific to that.

Kenneth Harris

Yeah so I think the trigger for whether you have a drug or are a drug in your therapeutic is really it is the manipulation trigger do you fall within that. We do not trigger we are minimally manipulated. Cytori triggers that trigger. Second question is homologous or not? Although in some of our treatments we are non-homologous the fact they never leave the operating room is an area that under the practice of medicine doctrine and its codified in the U.S. the physician can move tissue from any part of the body to the other part.

So again we don’t trigger that. So our cell product never triggers a drug definition as we understand and have been advised today. So it leaves us only with the device component of our therapy which is controlled and does require a PMA process. And the PMA process for a device compared to a drug is a two trial process versus a three trial process.

Jason Kolbert – Maxim Group

Thank you, that’s really helpful. And just let’s can we zero in a little bit on critical Limb Ischemia and just remind me what kind of efficacy you are hoping for based on the Phase I trial that will lead you to the next trial in terms of powering and differential on that way we can get a handle on the time and duration of the larger program?

Kenneth Harris

Okay, so the trial is designed to – it’s statistically powered; it’s in the mid-100 range number of patients. The open question remaining which I outlined in the discussion was the question of the Placebo control or the control arm. And our question put in front of the FDA is can we use a standard-of-care or a no-treatment option as a control? Or do we actually have to do a sham or placebo control which we believe one is not ethical and two, is not approvable through an IRB. The FDA’s patterns are to move away from requirement of placebo control in these no-option patients. So we believe we are on strong ground, we have strong precedents with other trials that we will cite. And to sum that all up we are pretty confident we are going to be in the mid to high 100 number of patients to enroll and if the patient doesn’t – isn’t forced into a sham procedure then we also feel enrollment will be much, much faster than our competitors have been. So we’ll get to the end point quicker.

And then what do we expect from an efficacy standpoint, I mean we saw an 82% response rate and major amputation free survival on our Phase I/II study. We have no reason to believe that that will change. It will be obviously different patient population it will be – we were in Asians or Indians before, now we will be Caucasian Americans. While we haven’t seen any reasonably genetic differences will change the response rate. So I think we are pretty confident we’ll see the same sort of responses.

Jason Kolbert – Maxim Group

Terrific, thank you very much. And can I just close with one last question which is help me understand how you can leverage Totipotent in terms of this trial and other trials and in terms of the speed to the market place?

Matthew Plavan

Well for purposes of the transcript I want to make sure I felt that to point out who was answering the last question. I’ll just start with this one, this is Matt, since the AMI trial will be Indian-based we will continue to leverage the Fortis network and utilize those assets that we have and those capabilities which should allow us to enroll quickly and maintain good oversight of the trial through that network and that relationship. And as I mentioned we are going to submit we hope in July to the DCGI our request for approval for that feasibility study.

And if we are successful with the statutory timeline and the government meeting that statutory timeline we could be investing or we could be beginning to enroll patients as quickly as December. And I guess the other thing to keep in mind is that the cost associated with this trial because we will be utilizing the Asian infrastructure will be a major advantage for us to provide what we like to think of is anti-dilutive funding from an investor standpoint when you look what that cost would have been or would be for 30 patients in the U.S.

Jason Kolbert – Maxim Group

And one then Ken if I can squeeze one last question in, because you just mentioned that it’s – help me understand that cost proposition, because I’ve always tend to think of Allogeneic as the cheapest product and autologous as very expensive processed over many days and a long period of time. Because this is point of care can you just go over with me how the cost proposition is different here?

Matthew Plavan

Yeah I appreciate the question, this is Matt because it is significantly different and we find as we talk to investors that we need to do more to help them understand how significantly different our therapy is from the others that are out there even those that are autologous. So we are utilizing the technologies that we’ve developed in the past 10 years for cell separation. So those investments have been made and we’ve cornered the market with regard to cell separation at the point of care using centrification and we’ve demonstrated the freedom to operate in this space.

So it’s a great asset for us to be able to source cells as we do in the SurgWerks process from a patient’s hip essentially. And we’ll take using basically a bone marrow aspiration system which is also a unique system that we have developed or have license to develop. And we’re able to pull about a 120 ml of bone marrow, 60 from each hip and that is a step that’s typically what we need for to begin each of these procedures. We use our technology to concentrate these stem cells from those draws to somewhere between 6 ml to 10 ml of bone marrow.

And immediately following that concentration we’re using online diagnostics to make sure that we have a sufficient number of cells for therapeutic dose which we need to do in every one of the these procedures because as you know everyone’s biology is different. So we’re using a point of care mobile diagnostic device, slow cytometery device to be able to do that in a matter of two to three minutes. So the physician has the go ahead or knows if he needs to draw a little more bone marrow to make sure he has a therapeutic dose.

That whole process takes about 30 minutes from that point depending on the procedure we will reintroduce the cell formulation that we have concentrated and it’s different to formulation concentration is different for each therapy.

We’ll introduce that back into the patient in the area for the treatment whether it’s the heart, if it’s the heart we use an intra-coronary catheter to dispense the cells according to our protocol. If it is critical limb ischemia we use a specifically designed syringe to deliver the cells in a particular matrix intra muscularly. And so you are talking about the use of three or four different devices, a diagnostic capability and an overall process that has been homed over the past five years in these eight different trials to have created this SurgWerks process that can be performed in an hour and have a cost to the hospital between $10,000 to $15,000 per procedure.

It’s a single procedure, cells never go out of the OR and the patient in terms of the procedures we’ve designed so far has simply to go through that one procedure.

Kenneth Harris

So this is Ken. I just would say to – I mean to what Matt was saying. To sort of summarize that compared to a laboratory process system like most of our competitors have where the cells are taken from the patient even an autologous cell taken from the patient and sent back to allow the process and then we turn to the operating room may be the next day. Our assumed selling price is going to be at or below very simple cost of goods.

So that…

Jason Kolbert – Maxim Group

That’s fantastic guys. I think you made the point; Matt, Ken, Dan thank you so much. Really excited to kind of watch you execute the turnaround of and kind of the rebirth of Cesca. Thanks guys.

Matthew Plavan

Thanks Jason.

Operator

The next question comes from Ren Benjamin of H.C. Wainwright. Please go ahead.

Ren Benjamin – H.C. Wainwright

Hi, good afternoon guys and congratulations on the merger and the progress. A couple of questions, I guess just off of what Jason had asked just so understand it correctly this CLI trial that you are proposing this could be the pivotal study that is performed prior to registration is that correct?

Matthew Plavan

That’s correct.

Ren Benjamin – H.C. Wainwright

Okay, and so if everything goes according to plan you sit down with the FDA and they give you the go ahead regarding the study and I should say no placebo control how long do you think that study could last or it will take you to enroll the patients, how long would the follow up be? And when do you think you could be filing for a potential approval?

Matthew Plavan

So if everything goes according to plan and we’ve factored in statutory timelines to estimate. We could have approval for the pivotal study by September and then begin enrolling in that pivotal phase trial in December. We would expect that we would need six months to enroll all the patients and that it’s a 12 month study so in 18 months which would put us just into 2017 we could have the results back and submit for approval for PMA approved study in 2017 and actually have a therapy and begin marketing it in 2017.

Ren Benjamin – H.C. Wainwright

Okay, and then as data drives everything in biotech. And we have some preliminary data that’s been disclosed, is there any potential for follow-up data in both the earlier CLI or AMI studies anytime this year?

Matthew Plavan

That’s a great question I am going to ask Ken to answer that.

Kenneth Harris

Right so we’ve done in our protocol deviation and we’ve followed up specific to CLI all the patients on an additional six months post the protocol requirement which was a 12 month follow up. So we’re now at 18 months and the patients have come back we have not released those results yet, but we will.

I can just tell you that there are no surprises there. It continues to be very, very good; the therapy looks to be sustainable without any additional adverse events. So we don’t have any plans of extending the follow up on those original 17 patients still beyond the 18 month time period.

Regarding AMI that was a single patient pilot trial. We did follow it as requested by the regulatory agencies to 24 months that guy is doing very, very well and he continues to see the primary investigator on a regular basis but we haven’t formalized any additional check up with him.

Ren Benjamin – H.C. Wainwright

Okay, regarding the CLI program and jut the results that you’ve seen so far especially in the Fontaine IV and V patients can you give us a sense first of all is this a very niche small indication these Fontaine IV and v patients? And then if it’s not, if it’s really potentially meaningful and healthcare cost savings is there the potential to apply for breakthrough status or take some of the regulatory pads that allow for quicker path to market.

Matthew Plavan

Ren, this is Matt I will just take a quick fly over the market size that we have estimated and then I think you can speak to the break through designation that we’re actually pursuing. Right now this trial is targeted for U.S. and Europe. And we think that the Fontaine IV and V candidates number between 100,000 and 160,000. That would be folks that are at a stage where they’re looking at a major limb amputation.

And so that really is our addressable market. And so we talked earlier that our therapies could be between $10,000 and r $15,000 so gets you to somewhere between $1.5 billion and $3 billion addressable market opportunity in just that classification. So very excited about the size of that market and how quickly you might be able to penetrate it. With regard to the breakthrough designation I’ll ask Ken to address that one.

Kenneth Harris

Right so I am going to give some numbers here and I am recalling them from my – I have it from a presentation so they will be accurate within 20%. I saw a presentation last month by FDA on breakthrough designation in the cell therapy space alone. They’ve received 11 applications nine of them have been rejected, three of them are still pending a decision.

So although it’s an interesting path for us to go down we don’t understand at this point why FDA is rejecting so many of them. We need to better understand that before we consider that an exciting viable path for us. It sounds very exciting on its surface but underneath there are some things that FDA must be looking for that our industry is not fulfilling. But I’ll say this is a major priority because it would be a fantastic benefit to us if we could achieve that status. So I think certainly by the next time we are talking to our investors we are going to have an answer to this.

Ren Benjamin – H.C. Wainwright

Okay, regarding the upcoming meeting I think you mentioned Ken a couple of times in the prepared remarks that we believe that it will be not regulated by the FDA right so this is minimally manipulated. I assume that this is not kind of like a thought process that’s taking place within a vacuum and that you’ve talked to with other people. Can you give us a sense as to why you believe that this will be regulated under an IDE and not go through any of the other path?

Kenneth Harris

Yes, so this is Ken. First of all the two precedent cases of Cytori and [inaudible] or harvest that are intra operative use have fallen within in some indications IDE paths. We like [our] harvest our minimally manipulated and although it’s non-homologous use that’s where the Section 361 of the public health safety act gets triggered in the U.S. the physician can under their direct control use any bodily tissue to re-transplant into the same body during the same procedure and it doesn’t trigger a drug status. We vetted that through three different independent FDA consultants and based on the FDA findings on our competitors where we have a high confidence that that’s that we are an IDE.

Ren Benjamin – H.C. Wainwright

Got it okay. And just one final question for me, partnerships and any potential discussions going on or the potential for partnerships, is it a corporate goal or is it something that you would rather like to entertain once you’ve gotten through this the regulatory date and may be even start of the trial?

Matthew Plavan

This is Matt, Ren. I think there are a couple of types of partnership opportunities we look to; Fortes is a great example of a meaningful long term strategic partnership that we expect to continue to expand and grow in. And I think we have our eye on and are in discussions with a couple of companies that could represent those kinds of relationships, but I would think that in the nearer term another type of partnership and that is with our therapies there are multiple different devices that are required for cell harvesting, processing, diagnosing and administration and Cook is an example of one of those.

And as we look at ways to be more mobile and to facilitate more rapid delivery of these therapies there are other technologies that are out there that with some modification could really serve us well. So I would expect to see that some of the discussions we are having around those types of capabilities will result in new partnerships and of course as we’ve talked about before I would say a third potential partner would be there are eight indications that we have done pilot and Phase I trials for in India with our partner Fortis and there are only three of those that were pursuing aggressively right now.

The others remain very viable and valuable to us and we have we are regularly evaluating how we want to advance those therapies and one option is to license those to other parties who may have the financial wherewithal to progress those particular SurgWerks indications into the future.

So business development is a major focus for us in the coming couple of years. So I think partnering is that something you’ll see us doing more of.

Ren Benjamin – H.C. Wainwright

Okay and I just thought of one other one if I could sneak in. You have the two BMT studies for which we should get the completion in June, July and potential data in September if I am remembering what Ken said correctly. Can you just comment on the regulatory process for transferring data or the results from one country to another? And could those results potentially be used here in the U.S. for an approval? Or would it should we really be thinking about it as a Indian market specific sort of product?

Matthew Plavan

Good question for Ken.

Kenneth Harris

Right so specific to the BMT program, we are pursuing a 510(k) which is a medical device that has some prior equivalents on the market. We will be pursuing, showing superiority equivalence to or superiority to the current approved devices where I mentioned they actually get rid of about 60% of the target stem cells. We have more got than 70% recovery. So I think it’s a pretty easy hurdle for us to go over for the 510(k) and yes the Indian data is absolutely acceptable for a medical device 510(k) here.

Well specifically to the IDE path, part of every trials needs to be run in the pivotal stage needs to be run locally with local physicians and local community. And so yeah when we do the more difficult studies like IDE’s we do have to bring those back to the U.S.

Ren Benjamin – H.C. Wainwright

Perfect. Thanks very much guys and good luck.

Kenneth Harris

Thanks Ren.

Operator

(Operator Instructions). This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Mathew Plavan for any closing remarks.

Matthew Plavan

Well thank you again for joining us today. We are excited and highly motivated about the future of Cesca Therapeutics. We believe our therapies will meaningfully change patient lives for the better and the future of healthcare delivery. But even more gratifying will be the reward generated for our stockholders and so we thank you very much and have a good evening.

Operator

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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Source: Cesca Therapeutics' (KOOL) CEO Matthew Plavan on Q3 2014 Results - Earnings Call Transcript

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