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Fibrocell Science, Inc. (NASDAQ:FCSC)

Q2 2014 Earnings Conference Call

August 11, 2014 08:30 a.m. ET

Executives

Karen Casey – Investor Relations Manager

David Pernock – Chairman and CEO

Greg Weaver – Chief Financial Officer

Analysts

…(starts abruptly) skin diseases. This important work is being done in close collaboration with the Intrexon Corporation, in which we combine Fibrocell’s autologous fibroblast technology with Intrexon’s synthetic biology tools and expertise to create fibroblasts that express a specific protein that targets the underlying condition.

I will focus my comments now on genetically-modified autologous fibroblasts for Recessive Dystrophic Epidermolysis Bullosa, commonly referred to as RDEB, which is our lead orphan program, and also Linear Scleroderma, which we have identified as our second priority for genetically modified opportunities. As many of you may know, RDEB it is the most severe form of Dystrophic Epidermolysis Bullosa. It is a debilitating genetic disorder that causes severe blistering and patches of missing skin.

Most patients unfortunately do not live beyond age 30, and unfortunately there are currently no treatments available for this disease beyond basic wound care. In June, we announced that the FDA had branded us Orphan Drug Designation for genetically modified human autologous fibroblast to treat RDEB. Fibrocell is working with leading medical centers, led by Stanford University, to advance development of our lead therapeutic program for RDEB.

We had a great meeting, pre-IND scheduled meeting, with the FDA last week, which represented an enormous collaborative effort between PCT, the contract cell manufacturer of Fibrocell and Intrexon, and of course, Stanford University. As a result of our discussions, we have a green light to begin our preclinical proof of concept animal studies in the fourth quarter of 2014. We expect these results by year-end 2014 with the goal of filing an IND in the early part of 2015. This is a major step and we are excited to move forward from the research stage to the development stage. We are also very pleased with the technology transfer and the ability of PCT to manufacture our unique fibroblast therapeutics for RDEB.

We have also made tremendous progress from regulatory and manufacturing standpoint for RDEB, as well as fostering strong relationships with patient advocacy groups. In fact, we recently were honored to present at the 2014 Patient Care Conference of Dystrophic Epidermolysis Bullosa Research Association of America, commonly referred to as DebRA, which is the lead RDEB patient advocacy group in the United States.

As a result of all of our efforts and as a result of our autoimmune collaboration with Intrexon, we have identified another excellent product opportunity for the treatment of Linear Scleroderma. Linear Scleroderma is a rare, devastating and chronic autoimmune disease that causes tightening and hardening of the skin as a result of excess production of extracellular matrix. These lesions oftentimes appear across major joints impairing motion and may cause permanent damage.

Our goal with our program is to use an externally controlled gene program to remodel the abnormal connective tissue in linear scleroderma. The fibroblast is the ideal delivery vehicle because we can remodel the local site directly, while avoiding systemic administration. That is a very important point. We will share more about this exciting program as our development program progresses.

Let us now turn autologous fibroblast – let us now turn our attention to autologous fibroblast, which is levering our existing BLA through supplemental drug applications to develop treatments for serious scarring conditions. As you know, we are currently running Phase II trials in vocal cord scarring and restrictive burn scarring. Vocal cord scarring is a serious condition that occurs following surgery on the vocal folds, following cancer radiation therapy or other vocal cord trauma, in which either case the vocal cords are damaged and thus the fibroblast layer is damaged. Therefore as a result there is scarring and often edema.

The scarring and edema limits the airflow resulting in severe voice disorders and oftentimes complete loss of voice. By replacing the fibroblast we believe we have the ability to reorganize the injured tissue, thereby reducing the scarring and edema and improving voice quality. Enrolment in our Phase II clinical study for vocal cord scarring is well underway with patient enrolment nearly halfway completed. As we have already said, we anticipate results from this study in the second half of 2015.

Restrictive burn scarring occurs after a burn injury in which burn scars appear over major joints, oftentimes causing severe pain and limiting mobility. In fact, to many of these patients restrictive burn scars are the most troublesome complication after burn injuries. By treating the scars with fibroblast we have the ability to reorganize the collagen matrix making the scars more flexible, thereby improving joint mobility and relieving associated pain.

We are making progress with patient enrolment in our Phase II clinical trial for restrictive burn scarring. One third of the enrolment is completed, and we expect to be fully enrolled with 21 patients in late 2014 or early ’15. This update to our enrollment timeline is driven by feedback and experiences by the [Indiscernible] who see burn patients choose surgery rather than experimental drugs, and also they have the fear of getting into placebo arm, which is included in our trial.

As we have said in earlier communications to address enrolment for this study, we have expanded the number of sites and we have also broadened the exclusion – narrowed the exclusion criteria. Despite the challenges we have had over the past months with enrolment, we remain on target to deliver results within the established timeline at the end of 2015.

Finally, we extended our collaboration with UCLA to continue to make advances in personalized biologics, and we are also continuing discussions with Walter Reed regarding a potential wounded warrior program using autologous fibroblast to strengthen the skin on the stump of amputees.

Now, I would like to turn the call over to Greg Weaver for the operational and financial update.

Greg Weaver

Thank you David, and thanks for joining the call today. It is first regarding the Q2 numbers and beginning with cash. We have reported a total cash balance at June 30, 2014 of $49.5 million, which compares to $54 million at the quarter ended March 31. The $4.5 million used in Q2 2014 and $10.3 million for the six months year-to-date funded our core business drug development initiatives.

Looking ahead, we anticipate expenses will continue to track roughly consistent with prior quarters, and the run rate on cash used to be approximately $6 million per quarter going forward, and we expect that our cash balance today meets the company’s operating cash flow needs through next year 2015.

Our reported GAAP operating loss for Q2 2014 was $6.6 million with R&D costs in the quarter of $2.6 million, representing an increase of $1.1 million over the same quarter last year, driven by investments in our orphan drug program. You will note the run rate in Q2 is consistent with what we experienced in Q1.

G&A expenses in Q2, $3.5 million, an increase of $1.2 million over the same quarter last year, again tracking consistent with what we saw in Q1 of 2014. I will note that Fibrocell’s management will be presenting a company update tomorrow at the Wedbush Life Sciences Conference in New York City, which will be webcast live and available on our website, and also for your calendars, you might note September 24, where we are hosting an R&D Day in New York City with important key opinion leaders in each of our programs, making presentations, which will also be webcast live.

It is a relatively small venue, space limited. If you are interested in attending, I would ask you to please reach out to Susan Noonan, who is coordinating the event and her phone number and email are noted in the earnings press release we issued earlier this morning.

Thank you very much. I will turn the call back to David.

David Pernock

Okay. Thank you very much Greg, and basically as you could see we made a great deal of progress in advancing our platform of autologous fibroblast, and especially our genetically modified autologous fibroblast programs. We remain focused on continuing our forward momentum for the months to come. We greatly appreciate your interest and support in Fibrocell, and Tanetha we are ready for questions now. Please open up the line.

Question-and-Answer Session

Operator

(Operator Instructions)

David Pernock

Apparently there are no questions. I like to thank you very much for participating and listening in on our call, and we look forward to sharing more exciting progress with you on next quarter’s call. Thank you again for calling and have a good day.

Operator

Thank you ladies and gentlemen and that concludes the conference today. You may now disconnect.

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Source: Fibrocell Science's (FCSC) CEO David Pernock on Q2 2014 Results - Earnings Call Transcript

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