Geron Corporation Q4 2007 Earnings Call Transcript

Mar.17.08 | About: Geron Corporation (GERN)

Geron Corporation (NASDAQ:GERN)

Q4 2007 Earnings Call

February 28, 2008 11:00 am ET

Executives

David Greenwood - EVP and CFO

Tom Okarma - CEO

Analysts

Mark Monane - Needham

Joel Sendek - Lazard Capital Markets

Ren Benjamin - Rodman & Renshaw

Graig Suvannavejh - UBS

Operator

Good day ladies and gentlemen, and welcome to the fourth quarter 2007 Geron Earnings Call. (Operator Instructions)

I'd now like to turn the call over to your host for today, Mr. David Greenwood, Executive Vice President and Chief Financial Officer. Please proceed, sir.

David Greenwood

Thank you, operator. Good morning and welcome to the Geron earnings call. I'm David Greenwood. With me is Tom Okarma, CEO. This is an earnings related conference call, and we will begin with a summary of the operating results for both fourth quarter and the year. Our agenda then includes an overview of recent operating highlights at the company and a summary of our operating plans for 2008. Following that presentation by Tom, we will have a general Q&A session.

First, two informational items. In the event any forward-looking statements are made during this call please understand those comments are made subject to the Safe Harbor Provisions of the Securities Act of '95. Any forward-looking statement involves uncertainty, and we refer you to the risk factors detailed in filings with the SEC. Secondly, all participants are currently in a listen only mode. The lines will open for the Q & A, and this call will be available by webcast replay until March 28, and our website has the information for that.

As you can see on the condensed income statement attached to last night's announcement, revenues were up over the comparable 3- and 12-month periods in '06. Royalty and license fee income was relatively unchanged. To that, add $5 million of milestone payments received during the year. Other cash inflows to the company during the year included $10.8 million of interest income and $18.6 million from the exercise of warrants.

Fourth quarter and annual R&D expenses increased period over period, a $13.4 million bump for the year. The increase reflects the cost of expanded clinical trials in the 163 LTI telomerase inhibition program and the vaccine program, the hiring of clinical development personnel and clin ops, regulatory and quality, and non-cash expense related to equity compensation.

The G&A line item also increased quarter-over-quarter and year-over-year, and that is comprised principally of non-cash expense related to equity compensation.

There were no issues with the year-end audit.

We ended the year with $208 million in cash on the balance sheet. Including the warrant proceeds, our net cash burn for '07 was $12.5 million. Our burn in '08 will be substantially higher, driven by the funding of multiple trials with our telomerase inhibitor drug, the AML trial with our vaccine and the initiation of a trial in spinal cord injury with our first anticipated stem cell derived cell therapy.

One final comment, for nine months now we've all been reading about worsening problems in the credit markets. Many investment portfolios will be impacted. We believe, at this point, that our $200 million portfolio of marketable securities will not be impacted. We have conservative investing guidelines and we monitor the paper that we buy.

At this point, I will turn it over to Tom Okarma.

Tom Okarma

Thanks, David, and good morning everyone. Thank you for joining our call today. I'll be restricting my comments to the major news events in the fourth quarter and a brief summary of our milestones for '08, and then open the call to questions.

So, the first major event in the fourth quarter in the beginning of November was a presentation that actually was from data that's in the IND for spinal cord injury that speaks to the long-term survival of the cells and their biological activity in spinal cord injury to animals. And that work showed that after a single injection of the OPC-1cells, the human myelinating oligodendrocytes, we show those cells survive and continue myelination in vivo, in the animal, for at least nine months and we think that probably means these cells are there and functioning permanently and that's really important to illustrate the basic principle for all of these embryonic stem cell based therapies. They are a permanent restoration of function in vivo.

That same presentation also disclosed other data from the IND that speaks to the safety of these cells. As you may know, many patients with both complete and incomplete spinal cord injuries have so-called phantom or neuropathic pain, the medical term is allodynia, and one of the concerns is that the some sort of cellular injection into the spinal cord could amplify that neuropathic pain, or even in the case of patients with incomplete injuries, enhance their reaction to painful stimuli.

So we devised a pretty complex experiment to look at that and we are happy to see that the cells had no effect on neuropathic pain, either mechanical or cold stimulation. They did not in any way amplify allodynia, another statement of the safety of these cells in vivo. So that was a very important presentation.

Later in November, we published in the Journal of Neuroimmunology a really important paper as well and this speaks to the fact that OPC-1 cells evade direct attack by the human immune system. We've all heard lots and lots of chatter in the literature about human immune system rejection of cells made from embryonic stem cells. Well, we have published before, as have others now that the undifferentiated embryonic stem cell is immune privileged and we think we understand why that is. What's reassuring is that in this case, the OPC-1 cell derived from human embryonic stem cells is also immune privileged. There is no reactive it in vitro with human NK cells which tests the innate immunity.

There is neither any activity on cytotoxic T-cells or B-cells, which test the adaptive arm of the immune system nor is there any reactivity from allosera, serum taken from different individuals. That speaks to another misnomer in the literature claiming that any embryonic stem cell derived on mouse feeders was permanently and irrevocably contaminated with these new five GC cyanic acid residues which are commonly reacted to in human sera. While we've shown, A, that there is no such animal in our cells and, B, directly no allosera has any impact on the cells.

We further characterize the fact that in an inflammatory environment, which is likely to be what these cells will see when they are injected into the spinal cord injured site, by incubating these cells with inflammatory cytokines like gamma interferon and TNF alpha, there was no induction of class 2 and none of the reactivities in vitro were changed. We have some notion of the mechanism of this.

There are some factors with which these cells secrete that have been shown animal models to enhance engrossment across allogeneic barriers so this has, of course, major implications for the upcoming clinical trial and the dose and duration of immunosuppression that we'll be using at the beginning of the protocol. So it's more evidence that the gold standard here, human embryonic stem cells, do not, are not subject to attack by the human immune system.

Turning to the cancer side of the company, at the end of November, we announced that we had initiated probably the most important trial for 163L to date, and that's studying the drug as single agent in patients with multiple myeloma who have failed at least two prior courses of chemotherapy. There are four premier centers in the United States recruiting subjects into this trial. We have now finished the first cohort and are enrolling patients in the second. The reason the myeloma study is so important is really threefold.

First, like many of the other diseases that we're studying, the amount of telomerase in the myeloma cell is a predictor of poor outcome, both in terms of progression of the disease and in terms of resistance to standard therapy.

Secondly, in robust animal models of human myeloma, xenographs, 163L was extraordinarily active as a single agent and, in addition, was additive with Velcade, and that actually forms the rationale for a study we plan to initiate later this year in myeloma, studying 163L in combination with Velcade.

And lastly, and perhaps most importantly, we've published, and there's a number of manuscripts floating around in press, that in addition to our drug hitting in the mature myeloma stem cell -- myeloma cell, excuse me, and this is both from myeloma lines and primary bone biopsy specimens from patients, the drug also was extremely active against the myeloma stem cell, again purified from myeloma lines and purified from primary bone marrow biopsy specimens. As you know, the stem cell is sort of the new concept in tumor biology that is thought to be responsible for relapse and resistance to chemotherapy.

So, this trial is enrolling rather well, and we do expect to have data for it by third or third or fourth quarter this year.

And lastly, our licensee, Merck, on the vaccine side, in December we received a $4 million milestone from them which was triggered by their filing their IND under our license which allows them to use non-dendritic cell vaccine technologies that target telomerase. They had initially filed the IND for a liquid tumor and in January, they amended that IND to expand the target, the clinical targets to include non-small cell lung cancer and prostate cancer, a change that we are actually quite in support of. While I'm not privy to give you a lot of details about their protocol, I can tell you that it is robust.

There are two arms, one testing the plasmid alone, the other testing a plasmid and live adenovirus and within each arm there are two different dosing schedules. They also plan to expand this trial to add a toll-like receptor agonist to the plasmid and the adenovirus, so it is a rigorous test of the telomerase target, as seen through their platform, which will enable us through our joint development committee to compare those clinical results with our own testing RNA loaded dendritic cells in a different disease, AML.

With that, let me give a brief summary of what we hope to accomplish in 2008 and then I'll open to questions. The, on the cancer drug, we do expect to determine our Phase II dosing regimen based upon the two ongoing Phase Is. We had actually thought we would be there by this time but we're still able to dose escalate, which is actually good news. We will have the final data on these Phase I studies and the CLL and solid tumor by the end of the year. We do expect to complete the accrual of the ongoing non-small cell lung combination trial studying a standard dose of carbotaxol with 1630 and, as I mentioned earlier, we expect data on the most important study for this year, the Phase I single agent trial in myeloma.

We will initiate two additional trials in '08. The myeloma combination trial that I mentioned earlier and a breast cancer combination trial, and that will probably include the newly approved Avastin as one of the combination regimens. So a lot of activity on the drug and this is really the year to have evidence of its single agent activity in one or more indications. The cancer vaccine, we expect to have at least safety and immunological data on our Phase II ongoing AML trial. Depending on enrollment kinetics, we may even have some evidence of its impact on residual disease.

We would hope that the Phase I solid tumor trial for Merck both initiates soon and perhaps we have immunologic data from that by end of year, and as I mentioned for the first time in the BIO CEO talk a couple weeks ago in New York, we've announced that we now have proof of concept in vitro for our second generation cancer vaccine. So-called GRN Vac-2 which based on dendritic cells that we scalably produce from embryonic stem cells, and you'll be hearing a lot more about that as the year progress.

On the stem cell side, of course the big event will be FDA's concurrence of our IND and then the subsequent initiation of the Phase I trial in acute spinal cord injury. We would hope by year's end, therefore, to have interim safety data on that trial. The cardiomyocytes, we expect to have large animal proof of concept and if we fail there, in terms of engraftment in these large animals which are difficult, we are in parallel looking at a different animal model but the same goal to be sure that we are not inducing arrhythmias after the injection of these cells in the myocardial infarction setting.

That's the important goal for this year to enable us to then initiate the manufacturing of the master cell bank and to initiate IND enabling studies. Lastly, on the islet program, we announced in New York a few weeks ago an important breakthrough in understanding how to produce islet cells with high specific activity of insulin secretion, and we expect that preparation then once it moves into animal models with diabetes to finish the proof of concept that we can stably normalize blood glucose by a single injection of these embryonic stem cell based islet cells.

Lastly, I would call your attention to a second press release that came out today for us that's important. We have now gotten word that the patent and trademark office has upheld the validity of one of the three key Wisconsin patents covering embryonic stem cells.

As you recall, when we consummated this license quite a few years ago we did very heavy due diligence on the patent estate, which is why we went through with the license agreement, and there has been a challenge of all three of them and the first challenge has now been rejected, and we are quite confident that that will be the outcome for the other two which will occur in the very near term.

So, once again, this protects our license from Wisconsin and is a part of the patent portfolio that includes other licenses from Wisconsin and other institutions plus Geron owned and filed IP that puts us again in a very dominant position with regard to embryonic stem cell therapies. So, with that, I'll open to Q & A.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions). Your first question comes from the line of Mark Monane of Needham. Please proceed.

Mark Monane - Needham

Thank you, good morning and thanks for reviewing the progress for 2007 and plans for 2008. Can you talk about dose escalation in the 163L trial? The side effect profile has been pretty reasonable. How do you know when you're really at the right dose? Is it really based on toxicity or are you able to have some marker of telomerase in activation that would help guide for the optimal dosing?

Tom Okarma

Thanks, Mark. That's a great question. We have made I think two important findings so far in these dose escalation Phase Is. The first is that with a lot of sophisticated modeling, as you know, generally speaking, the potency of the drug in man is related to the area under the plasma concentration curve and for most drugs, the input to that relationship of maximal concentration and time are both linear. They're equally important. It turns out for telomerase that's not the case, that the impact on C-Max is exponential whereas the impact of time is linear.

What that means is that when we go from a six-hour infusion to a two-hour infusion with the same amount of drug, which produces a much higher C-Max obviously with the two hour infusion than the six, and because the doses are the same, the linear area under the curve would be identical, but because concentration for this drug is more important than time, the change from six hours to two hours actually gives 50% more telomerase inhibition because of the highly weighted impact of the increase in C-Max, so that's really important and in lay language that means with a shorter infusion at the same dose, you get more telomerase inhibition.

Now, key to your question is to optimize that with some BIO marker and there we've had difficulty inaccurately and reproducibly measuring telomerase inhibition in vivo in these patients, because you're correct, we haven't seen that much toxicity yet. We're seeing some impact on platelets and that we think can be easily handled by changing the dosing regimen from once a week times eight to two on and one off and we're now actually looking at that in our combination study in non-small cell lung, but the real heart of the answer to your question is to have a real BIO marker that enables us to optimize not only the dose but the dosing schedule, and at the CEO conference a couple weeks ago I announced we've now found one and it turns out to be the hair follicle.

Simply plucking one or two scalp hairs provides a very rigorous telomerase signal that has the same inhibition kinetics and dose sensitivity as tumors in vivo, so we've demonstrated that by literally incubating the human hair in vitro with the drug at different concentrations, showing the IC 50 to be equivalent and, more importantly, using a xenograph model where we gave the animal a human tumor dosed to an IC 50, plucked the rat whisker and showed same degree of inhibition.

So we now have a pretty straightforward BIO assay that's independent of the place and physiology of the tumor burden that we can use as the BIO marker and we are already receiving hair samples from one of our sites to begin looking at this. So, the good news is that because we continue to be able to dose escalate, we now have the kinetics well in hand, in terms of our understanding, and now have an in vivo BIO assay to connect all of the dots, we're quite optimistic now that we will be able to optimize the dose and the dosing schedule not just as a function of toxicity, your question, but in terms of the maximal duration and degree of telomerase inhibition, so thank you for that question. It was a long answer but it's important that you understand our progress.

Mark Monane - Needham

No, I appreciate the added information. One more concrete question. And not as big picture. Can you give us any more guidance on the timing of such data from the 163L trial? I heard you say 2008, but I don't think that I heard you say what time period in 2008.

Tom Okarma

Well I did say that given the robust recruitment in the myeloma study, we think we'll have our arms around how we're doing in the third to fourth quarter of this year. And what I forgot to say, but have said before, this is really important study for us because if we show single agent activity, as we expect to in myeloma, then that positions us to initiate very early next year a pivotal study in myeloma of 163L as a single agent and that's really the importance of the data flow for the myeloma study this year.

Mark Monane - Needham

And would that be in first line or second line or third line, what's the optimal, which is the best patient population?

Tom Okarma

Second line probably.

Mark Monane - Needham

Thanks again for reviewing everything with us.

Tom Okarma

You're well come, Mark. Thanks for listening.

Operator

Your next question comes from the line of Joel Sendek of Lazard Capital Markets. Please proceed.

Joel Sendek - Lazard Capital Markets

Thanks a lot. So I have a couple questions. The first on the spinal cord injury drug, when might that start? When might the trial actually start?

Tom Okarma

Well, it's a $10,000 question that everybody is trying to be clever to get me to answer. So the reality is that we've decided to not disclose the date of the IND filing and that's simply to remove any sort of pressure from the outside on the agency to allow them to go through their review process unfettered by anxious folks. The IND is enormous. It has 85 volumes, each volume is 250 pages so it's a 20,000 page submission, and the bar in that IND is extraordinarily high. The bad news for that is that it's taken us awhile to complete all of this. The good news is it's an extremely strong application.

We don't have teratomas, we don't have toxicity, we have durability of the engraftment and the effects both physiologically and histologically, so we're quite confident in the eventual approval or concurrence but until it happens, it's a prediction. Now, we do not think the agency can review this application in the 30 days, which is another reason why we're being a little quiet about a submission date, so we want the process to go unfettered also by external pressure.

Once we get approval, we have all of the sites and all of the clinical protocols are all done but you have to go through at least two committees at each center, the traditional IRB, which really focuses on the clinical protocol and the consent forms, and a new animal called an escrow committee, the embryonic stem cell research oversight committee which looks at a variety of things and for them this will be their first exposure to a clinical trial based on embryonic stem cells. So there will be some time between the FDA green light and the initiation of the first trial, so that's the detail. The quick answer is we hope to be able to begin this trial in the summer. That's a guess based on what we hope to be a reasonable process of review, approval and initiation.

Joel Sendek - Lazard Capital Markets

Okay. And when you say the approval, you mean the acceptance of the IND?

Tom Okarma

Yes.

Joel Sendek - Lazard Capital Markets

Okay. And --

Tom Okarma

Concurrence is the correct word, sorry.

Joel Sendek - Lazard Capital Markets

Okay.

Tom Okarma

You concur that you can begin the trial based on the data and protocol you submit.

Joel Sendek - Lazard Capital Markets

Can you give us an estimate as to how long it will take from that concurrence to getting through all of the IRB and escrow committee?

Tom Okarma

I just addressed that, Joel. It's hard to predict. You can't control it. They meet once a month, if they have questions you have to answer the questions and they don't meet again for another month so I'm not going to give guide aps on that because I can't control the process. I can say that the PI's are extremely excited to get going on this.

Joel Sendek - Lazard Capital Markets

Yes.

Tom Okarma

And I would hope that through their offices and our offices, we can move this thing as quickly as possible.

Joel Sendek - Lazard Capital Markets

And will you issue a press release when you get the concurrence?

Tom Okarma

Well we haven't made a decision on that yet.

Joel Sendek - Lazard Capital Markets

Okay. All right, well enough on that. On the financial side, you mentioned significant increase in spend. Can you give us anymore detail on what significant means?

David Greenwood

Yes, I can give you a ballpark. We don't try to project too much guidance forward when we, when bracketing is subject to a lot of uncertainty, including enrollment kinetics and getting sites online and things we were just talking about, but I'd sort of bracket it in the 45-50 million range.

Joel Sendek - Lazard Capital Markets

Okay. All right, that's it. Thanks a lot.

Tom Okarma

Welcome.

Operator

Your next question comes from the line of Ren Benjamin of Rodman & Renshaw. Please proceed.

Ren Benjamin - Rodman & Renshaw

Thanks, and thanks for taking the question. A couple of questions, I guess starting off with 163L. You mentioned that the first cohort for the multiple myeloma study has been completed and I assume it's a standard dose escalating study with three patients per cohort. What was the dose that you started this study off with and did you, did the cohort have to be expanded at this early stage?

Tom Okarma

Right, the dose was the first cohort in myeloma was equivalent, identical, to the dose in the fourth cohorts of the CLL and solid tumor trials, so we did not have to start at ground zero. It is a standard 3 X 3 expansion. We did not have to expand the first cohort.

Ren Benjamin - Rodman & Renshaw

Okay.

Tom Okarma

We're now putting into peoples 4.8 mgs per kilo.

Ren Benjamin - Rodman & Renshaw

4.8. Great. And just to tighten up maybe some of these timeliness, as best you can, you mentioned that the non-small cell lung cancer combo trial would complete enrollment in 2008 and that there will be a myeloma combo and breast cancer trials that will initiate. Can you give us an idea as to when in 2008 these events will happen?

Tom Okarma

Well, the initiation of the two combination trials will be third, fourth quarter of this year so, for example, we were almost ready to submit the protocol for the breast study combination with which was going to be 163L Taxol, but with the FDA's recent approval of Avastin, we have to modify that to include Avastin to capture the best standard of care that's out there. That will cause a bit of a delay, but I think that's appropriate. So we're going to try to be a little closer to the chest in terms of predicting quarter by quarter when things are going to p happen. We'll give you guidance first half, second half, as I have today, but that's about as granular as we're going to get.

Ren Benjamin - Rodman & Renshaw

Okay. Regarding presentations of data, you mentioned that we could see some results from the ongoing Phase I by the end of the year. Can we just go through maybe the timeline, do you have any abstracts that have been submitted or do you plan on submitting for presentations in the first half and the second half of this year?

Tom Okarma

Yes, there will be a couple of presentations at AACR, and the big event in terms of organized oncology events will be ASH at the end of the year.

Ren Benjamin - Rodman & Renshaw

Okay. And I guess one final question just having to do with the embryonic stem cell IND. You mentioned that you're not going to talk about when you're filing it and so I assume that it hasn't been filed already. If you can confirm that, that would be great, but then also there's an FDA meeting coming up in April to kind of I guess the best way to characterize it is flush out questions they may have regarding embryonic stem cells in man, and I wanted to know if you had any opinion, any insight into that meeting, are you guys going to be there or have you been called to participate in that meeting and what do you expect to get out of that meeting? What does the FDA expect to get out of it?

Tom Okarma

We are actually playing a very central role in that April meeting. At the invitation of the FDA, we are giving a major presentation that will include the major chapters and major findings and degree of diligence of the world's first embryonic stem cell IND, and that is being used by the agency to publicly set the bar for what they will expect for subsequent INDs. So, this is a measure, Ren, of the relationship between this Company and the FDA so far. We have given them everything they've asked for and it's quite a long list, so I don't think the meeting, Ren, will have any bearing on their decision of our IND. That's really not what's happening. This is to disclose within the formal context of an FDA sanctioned event sort of the lay of the land for what they expect for embryonic stem cell INDs.

Ren Benjamin - Rodman & Renshaw

Okay, great. Thank you very much for answering the question.

Tom Okarma

You're welcome.

Operator

Your final question comes from the line of Graig Suvannavejh of UBS. Please proceed. Sir, your line is open. You may proceed with your question.

Graig Suvannavejh - UBS

Hi, sorry about that. Good morning, guys, thanks for taking my questions. Several questions I have. First if we could just revisit the good news on the patent which came out this morning. Can you give us some context as to the order of importance. The decision today was on this particular patent might be in relevance to the two outstanding patents that are under --

Tom Okarma

Sure. So we've been highly engaged in this process along with Wisconsin. We are colleagues in this event. The opinion that came out yesterday is 85 pages from the Patent and Trademark Office, and it details in exquisite detail their process and their review of the claims of the folks who challenge the patent and we know that the same arguments that were used to confirm the validity of this patent are identical to those that will come out very soon for the other two.

One is not really more important than the other. They are three very similar kinds of cases. They are bunched in terms of the one today and the other two because of the temporal date of submission. The opinion that comes out, came out yesterday and today is on the case that is ex parties which has to do with when the application was filed. The other two are intra partes, which has a different kind of consequence in terms of the process of appeal, but that's a technicality and that's actually why the office released one and not the other two. The other two will be bunched and will come along soon and we predict will have identical outcomes.

Graig Suvannavejh - UBS

Okay, great. Thanks for that clarification.

David Greenwood

Just one sort of follow on.

Graig Suvannavejh - UBS

Yes?

David Greenwood

A little color on context?

Graig Suvannavejh - UBS

Sure.

David Greenwood

At the end of the press release you'll note some numbers that indicate the overall size of the patent portfolio that applies to the ES platform, and those are substantial numbers of 36 issued patents, 68 patents granted around the world and still 130 applications pending, and imagine the claim sets behind each of those filings, so these are very broad claim sets that cover composition of matter, lots of methods claims to make this technology platform work, as well as applications use and this just reflects eight or nine years at work and about $165 million invested so I think we should have the leadership position that we've earned in this sector.

Obviously, this portfolio protects the asset, if you will. We don't view that offensively or defensively, that's just protecting shareholder value, and we will as we go forward in development with the different cell types for different indications, we'll partner appropriately. Those are different sorts of strategic and economic decision-making, but it's important today for people to start to understand and appreciate the significance of Geron's patent protection for this technology.

Tom Okarma

That's very true and I'll make one more comment to reinforce what David just said. Remember that as pioneers of human pluripotent stem cells, Geron funded the invention of two different kinds of human pluripotent stem cells, embryonic germ from Johns Hopkins and embryonic stem from UC and Wisconsin. So we knew at the very beginning that there was more than one kind of human pluripotent cell which, for us, is only the starting material from which to make a therapeutic product. So the important portion of our own patent estate turns on literally any human pluripotent stem cell regardless of how it was derived.

So the take-home point here is that if there is some day some alternative to the gold standard human embryonic stem cell that we would find attractive, we are already positioned to be able to apply our scalable production differentiation technology to it. In fact, the so-called induced pluripotent stem cell paper from Japan actually used our patented cardiomyocyte preparation to demonstrate in the micro titer well at least that those cells could turn into cells that were beating. They weren't well characterized but the point is our process seemed to, at the superficial level, work on those kinds of pluripotent human cells as well.

So again, the power of the patent portfolio has a lot to do with the fact that we were first in the field, and we had the cat bird seat as to how this field would develop both with regard to making products and in terms of how the technology might evolve in terms of the starting materials, so we are well positioned for any outcome in the future.

Graig Suvannavejh - UBS

That actually makes me think about just IEP and expirations. We know that it takes a long time for stem cell development and do we get to a point where there's a concern potentially about your intellectual property running out before you're able to monetize on some of the advances that are being made?

Tom Okarma

Well that's funny, we usually get that question on 163L, and our 163L patents protect the drug until at least 2023. The story will be even more robust on the embryonic stem cell side, as you heard David cite the number of pending patents which extends the degree of coverage well through and beyond commercialization. So as we invent, we file, and we invent and file before we put the technology into the clinic, so we are well protected in terms of scope and in terms of time.

Graig Suvannavejh - UBS

Very helpful, thank you very much. My last question actually has to do with the recent I guess the third annual stem cell moment that just happened in New York a couple days ago. Were there any particular highlights or things that you noted, I think you guys had a presence there and was just hoping to get your perspective on some of the things that might have happened at that.

Tom Okarma

Well, I wasn't there and I've not yet received the presentation book. What made the news was a presentation by a private company that claimed to have used proteins to induce pluripotency.

Graig Suvannavejh - UBS

It made the press, I saw that, yes.

Tom Okarma

And that's not hit the peer review press. And the people who use genes to induce these cells recognize that they are randomly integrating and so you can't do that because you're bound to have carcinogenicity, not just teratomas, so people think that well if we just put the protein in these genes code for maybe you could do the same thing. Well, I mean that's a little silly, because as soon as a cell divides, what happens to that finite quantity of protein? It's diluted in half, and then diluted by a quarter, and so on as the cells divide, so you would have to continually somehow put in these proteins while you were expanding the cells in the undifferentiated state and then what happens when you try to differentiate them?

So I mean, it's fraught with so many practical problems. All of these attempts are done by scientists who are trying to circumvent the funding restrictions from the White House federal policy, which I understand, but none of them are experienced in or are trying to create therapies, and to do that, you need what the we have, the pure, naturally occurring gold standard human embryonic stem cell.

Graig Suvannavejh - UBS

David just one quick question, when you had answered Joel's question on cash burn, I just want to make sure I heard you correctly, you were saying that cash burn in '08 would be in the range of 45 to 50 million or 40-50% higher than in '07?

David Greenwood

$45 to $50.

Graig Suvannavejh - UBS

Okay, thank you very much.

David Greenwood

Thank you, Graig.

Operator

This concludes the question and answer session and today's conference. You may now disconnect.

Tom Okarma

Thank you all for joining us.

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