Fibrocell Science, Inc. (NASDAQ:FCSC)
Q2 2016 Earnings Conference Call
August 4, 2016, 8:30 AM ET
Karen Casey - Investor Relations Manager
David Pernock - Chairman and Chief Executive Officer
Keith Goldan - Senior Vice President and Chief Financial Officer
John Maslowski - Senior Vice President, Scientific Affairs
Keith Markey - Griffin Securities
Joe Pantginis - Roth Capital Partners
Good morning. My name is Neil and I will be your conference operator today. At this time, I’d like to welcome everyone to the Fibrocell Second Quarter 2016 Financial Results and Operational Highlights Conference Call. Today’s call is being recorded. [Operator Instructions] Thank you.
Ms. Karen Casey, Investor Relations Manager, please begin your conference.
Thank you, operator, and good morning everyone. Thank you for joining us.
We issued a press release detailing second quarter 2016 financial results and operational highlights this morning. For those of you who may not have seen the release, it is available on our website at fibrocell.com in the Investors section. Today’s call will be archived. The replay will be available later today and remain on our website until September 2, 2016.
Before we begin, we wish to inform participants that today’s call will contain forward-looking statements under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. All statements that are not historical facts are hereby identified as forward-looking statements for this purpose and includes statements relating to the enrollment, dosing and reporting of results from pre-clinical and clinical studies; the timing of regulatory submissions and the potential advantages of our product candidates, sufficiency of our existing cash to fund operations and other statements regarding our future operations, financial condition, objectives and other future events.
Forward-looking statements are based on our current expectations and assumptions and are subject to a number of known and unknown risks, uncertainties and other factors that could cause actual results and events to differ materially and adversely from those indicated by such statements. These risks, uncertainties and other factors are discussed under Item 1A Risk Factors and elsewhere in our most recent Form 10-K and Form 10-Q filings with the SEC. As a result, you should not place undue reliance on forward-looking statements. Additionally, the forward-looking statements made during the call represent our views only as of today, August 4, 2016. While we may update certain forward-looking statements from time to time, we specifically disclaim any obligation to do so even if new information becomes available.
I’m joined today by David Pernock, Chairman and CEO; and Keith Goldan, our Chief Financial Officer. John Maslowski, Senior Vice President of Scientific Affairs will also be joining us for the Q&A portion of the call. David will now begin the call with an overview of recent corporate highlights. Keith will then provide a summary of our second quarter 2016 financial results. And David will end our prepared remarks with a brief closing, followed by a Q&A session.
I’d like to now turn over the call to David Pernock, Chairman and CEO of Fibrocell.
Thanks, Karen. Good morning everyone and thank you for joining us. This is clearly a very exciting time for Fibrocell as we enter the second half of 2016. We’re now focused on two-gene therapy programs for rare diseases affecting skin and connective tissue. We believe our product candidates have the potential to make transformative differences in the lives of patients who suffer from debilitating genetic diseases that have few treatment options.
With the recent wind down of azficel-T operations following disappointing results from our Phase II clinical trial for treatment of vocal cord scarring, we are now directing our efforts and resources our gene therapy pipeline. We are very focused for the support of the patients, investigators and our staff who participated in these trials.
We are leveraging our proprietary autologous fibroblast technology with genetic engineering to create cell-based gene therapies that are compatible with the unique biology of each patient and have the potential to address the underlying cause of diseases affecting skin and connective tissue.
Here is an update on our program’s progress. Our most advanced program FCX-007 is in development for the treatment of recessive dystrophic epidermolysis bullosa, or RDEB. RDEB as you know is a congenital devastating, painful blistering skin disease with a high mortality rate. In June, we initiated adult patient recruitment in our Phase I/II clinical trial of FCX-007. We are pleased to report the first two adult patients were recently enrolled.
The primary objective of the open label trial is to evaluate the safety of FCX-007 in RDEB patients. Additionally the trial will assess collagen VII expression and the formation of anchoring fibrils, as well as the efficacy of FCX-007 through evidence of wound healing. We expect to treat six adult patients with FCX-007 in Phase I portion of the trial and six pediatric patients in the Phase II portion of the trial. We also expect to dose the first patient at the end of 2016 this year. Additional adult patients will be dosed after a required 90-day waiting period following the dosing of the first patient.
Given the progress with the eight, we expect to report three months data, post-treatment data for safety, mechanism of action and efficacy for the adult patients with the Phase I portion of this trial in the second half of 2017. Advancing FCX-007 to begin the clinical trials is an important milestone for Fibrocell and represents a meaningful step forward toward the development of treatment of RDEB. We believe FCX-007 has the potential to be the first therapy to treat the underlying cause of this devastating disease.
Moving on, we’re in pre-clinical development with FCX-013, a product candidate for treatment of linear scleroderma, a form of localized scleroderma, a chronic autoimmune disease characterized by thickening of the skin and connective tissue that can be debilitating and painful. In April, we received orphan drug designation from the FDA for FCX-013 for the treatment of localized scleroderma. Orphan drug designation is granted by the Orphan Drug Products Development Office, to novel drugs or biologics that treat a rare disease or condition affecting fewer than 200,000 patients in the United States.
Base upon our proof of concept study, the devastated FCX-013 reduced the dermal thickness of fibrotic tissue in a scleroderma rodent model and the FDA’s feedback on our pre-IND briefing package, we are advancing FCX-013 in the pre-clinical dose ranging study following by a toxicology/biodistribution study. We expect to submit an IND application to the FDA in 2017.
Both FCX-007 and FCX-013 are being developed in collaboration with Intrexon leveraging their expertise in synthetic biology.
I’ll now turn the call over to Keith to make his remarks and provide a financial update.
Thank you, David. For the six months ended June 30, 3016, Fibrocell reported a diluted net loss of $0.26 per share compared to a diluted net loss of $0.37 per share for the same period in 2015.
The 2016 period included $7.5 million in non-cash warrant revaluation income compared to non-cash warrant revaluation expense of $1.1 million for the same period in 2015. The 2016 period also included non-cash intangible asset impairment expense of $3.9 million and restructuring costs of $0.3 million related to the previously announced wind-down of Fibrocell’s azficel-T operations.
Research and development expense decreased to $7.2 million for the six months ended June 30, 2016, as compared to $7.7 million for the same period in 2015. The decrease was primarily the result of reduced costs related to Fibrocell’s ongoing development programs, offset by an increase in process development expenses.
Selling, general and administrative expense decreased to $5.3 million for the six months ended June 30, 2016, as compared to $6.6 million for the same period in 2015. The decrease was primarily due to reduced professional fees.
As of June 30, 2016, Fibrocell had cash and cash equivalents of $8.2 million and working capital of $5.8 million. Fibrocell used $20.9 million in cash for operations during the six months ended June 30, 2016, as compared to $10.8 million used for the same period in 2015, primarily due to the $10 million upfront technology access fee paid to Intrexon in January of this year in connection with the December 2015 Exclusive Channel Collaboration.
Thank you very much. Now I will turn the call back over to David.
Thank you, Keith. This is exciting time at Fibrocell as our team is now focused exclusively on our gene therapy portfolio which offers a strong foundation for growth. The company is well positioned to achieve milestones in the near term beginning with the dosing of our first patient, the Phase I trial of FCX-007 at the end of 2016. We expect to report three-month post-treatment data for safety, mechanism of action, and efficacy for adult patients and the Phase I portion of this trial in the second half of 2017. Additionally we expect to file an IND with the FDA for FCX-007 next year.
We’re excited about the progress of our pipeline and continues to affirm our commitment to developing treatments that have the potential to offer hope and relief to patients and families and bring great value to our shareholders. Operator, we’re ready for questions now. Please open the line.
[Operator Instructions] We’ll go first to Keith Markey with Griffin Securities.
I was just wondering if you could tell us a little bit more about what you intend to provide to the FDA in order to move forward into the Phase II portion of your trial. Is it going to be three months only for all six Phase I subjects or for a portion of them and do you intend to also provide some six months data?
Basically the way the process works, Keith and John can add if he likes little bit later. We dose the first patient, before the end of the year this year, then wait basically three months of the appropriate basically safety data and assuming everything is okay, we can proceed to dose the other patients.
Right, but what I am thinking of is what actually do you have to provide to the FDA after you’ve dosed all of the adult patients, do you have to have –
I am sorry, you’re talking about Phase I, he’s talking about moving from Phase I to Phase II.
Moving from Phase I to Phase II. Okay, John, do you want to answer that?
Hi, Keith, it’s John. I’ll be happy to talk about what the expectations are for Phase II. So the request from FDA is that we provide two pieces of information prior to moving to Phase II and our protocol is written with some rules around what time point of data will be submitted minimally. So firstly from the clinical trial itself, we have to provide both the activity and safety data on the adult population and I’ll talk about the population shortly and how that breaks out into two separate cohorts. And we have to submit those data and from at least three months time point, in order to provide the clinical side of the data for the requirement to move into the pediatric.
The second piece of information the FDA has requested is some follow-up data on our skin and mouse [ph] toxicology study we have been running ongoing. We’ve submitted one month of data as part of our IND but we had continued a couple of cohorts at three and six months beyond that FDA would like to see the result of those data for some ongoing toxicology data along with the clinical Phase I and that will be the package of data required to move into the pediatric portion.
However, before we talk more about those data, I would like to talk a little bit about the Phase I population. And as you know, we have six adults in Phase I and let me talk about how they actually break technically down to two cohorts, and how we can control those patients as we move into Phase II. So are the patients in our trial classified by the way they are collagen VII protein is categorized. And they are known as NC1 positive and NC1 negative patients. The NC1 stands for non-collagenous domain. It’s the domain on the molecule that sits in front of the collagenous portion, it’s also known to be the anti-genic portion. And most RDEB patients, up to 75% produced at least this NC1 domain and still don’t have functional collagen VII because they don’t form either truncated or improperly for collagen VII.
The NC1 negative patients who were rare and new like 25% or below. Those patients are completely null. And so the reason we’ve done this is now we’ve broken up into three patients into each of these cohorts, 3 NC1 positive, 3 NC1 negative. Before we need to look at patients who produce the anti-genic portion, just for a safety announcements to make sure we look at this separately. The reason I bring this up is we can actually enroll one of these cohorts and move that cohort into Phase II, even though we haven’t say fully enrolled the other one. For instance, we enrolled three patients in the NC1 positive which are clearly, they are more of, and we still have one or two in the NC1 negative which are rare, we can actually submit those data and then start looking into the Phase II portion in the NCI positive cohort, does that make sense? I just want to make sure I was clear, I know that was a lot of information.
When you move that particular group of patients into the Phase II, then are you restricted to treating that same patient population within the pediatic group? In other words, if you have NC1 positive completing first, can you only do NC1 positive pediatric patients?
Keith, that’s correct, because the FDA will want to see the safety data on the NC1 negative specifically. So we can begin enrolling our kid in the NCI positive now, luckily from a recruitment standpoint, that’s the more prominent population of pediatrics obviously. So we can discern moving now into – as you know our manufacturing process takes some time and we can get the main start manufacturing in these thousands sort of cyrogenetically while we catch up on the NC1 negative population. So that will be the recruitment plan going forward.
Fantastic. And the mouse follow up data, the three and six month data that you were talking about earlier. Is that what David was referring to when he said you would be providing a mechanism of action data?
No, that’s actually clinical data from our trial. So the data going back to the package that we will provide moving to the Phase II padiatrics, includes some clinical benefit data as well, that’s – for any new pediatric trial, in that we will provide the mechanism of action end points for more adult population which is one of the end points we’re running secondarily including the AMI, analysis of biopsy punches taken from dose areas, collocation counts of seven.
And then I was wondering, does – is the FDA under any kind of predetermined time limit for how long they can take to review the data and allow you to move forward into the Phase II program?
Since this is a license product, Keith, there isn’t a technical timeline but I can just – from our experience with FDA working through the IND, I don’t expect it to be a prolonged period of time that would sort of prevent us from moving forward in a expeditious fashion. So our work with the FDA, we try to be as kind of work with them hand in hand and keep on top of them to answer any questions they may ask to keep review moving forward. But there was not a technical time clock as it was in another PDUFA mandated filings.
And then just one last question, you mentioned, that you've got two patients enrolled in the trial right now. Are they mostly NC1 positive or is there a mix?
Yes, they are both NC1 positive.
We’ll go next to Joe Pantginis with Roth Capital Partners.
I had a question regarding your internal operations. You have a great facility set up that was purposed for azficel-T. Was just curious as the RDEB program moves forward or 13, are you looking and how are you looking to repurpose your current facility? And I know you even had some potential plans to expand. Do you still need to do that and just talk about your overall manufacturing infrastructure?
Sure. Hey good morning, Joe. Thanks for the question. So with respect to the facility and the operations, we’re considering multiple options right now. Obviously as you say we have cGMP being inspected – so there will be a manufacturing facility that we believe has value. So we’re engaged in discussions with multiple parties as to how they could pronounce leverage and utilize that space for that operations. And as we said it in the Q, we’re also in discussions with parties to find a partner. We're going to acquire for LABIF [ph], so we have multiple discussions going on in trying to leverage what we build here.
[Operator Instructions] We’ll go to Almar Pious [ph] with Cantor.
So now that you have two patients enrolled. Would you please describe the process that they'll take place before actually treating the first one?
Right now what we’re doing is for basically we have the biopsy for culture – the product will go through cell culture, and we’d also do know absolutely transaction process. That entire process including testing at the end takes about four months.
So on an ongoing basis to our patient number 2, 3, 4, would this be a four-month process that you would estimate?
Yes, that's right. What we’re also doing it is we’re trying to roll those as soon as we can so that when we get the clearance after patient, 13 want some data, we’ll be ready to go expanding those patients as fast as we can. We could except on the biopsies – while we’re at the waiting lot.
This is John Maslowski. In case you are curious about the patients themselves, while their cells are incubating they do still engage with a clinic, they’d come in and have their wounds matter over the period of manufacturing, the point of the wound monitoring, so we show we have stable wounds that we can treat, upon dosing. So the four month period, as they grow and sort of we see the patient again in about four months, we’re then actually in the clinic getting 3D imaging of their wounds completely, there is time points during that – during the manufacturing time.
So do you designate a treat, a target wound at the time of the biopsy or at the more closer to the actual treatment?
We actually – at the time of the screening and the initial monitoring we target a number of potential candidate wounds, and then those wounds are monitored through the period and then upon dosing that final determination is made by the principal investigators on the proper wounds that meet our requirements and our protocol.
End of Q&A
With no additional questions, I will turn the call back to David Pernock for any additional or closing comments.
Thank you everyone for joining the call. Thanks for your questions. Clearly really exciting time for us, very happy that we have two patients enrolled in our trial, and we’ve been making a good progress on this portion to help these patients who are having a very dreadful disease, a very difficult time which is basically the daily life. We hope to be able to make a transformative difference for patient and for families involved and we think it will be transformative step for patients and for the company as well, we’re also very happy with the progress we’re making on FCX-013. Our team is focused on these exciting gene therapy programs and we look forward to providing updates on a quarterly basis and thank you very much for your support.
And that does conclude today’s call and thank you for your participation. You may disconnect at this time.
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