Advanced Cell Technology, Inc. (ACTC.OB) Q2 2012 Earnings Call August 8, 2012 4:30 PM ET
Good day ladies and gentlemen, and welcome to today’s webcast. Today’s webcast is being recorded and you’re currently in a listen-only mode. Following the presentation, we’ll have a short question-and-answer session. You can ask questions at any time during the presentation. (Operator Instructions).
It is now my pleasure to turn the webcast over to the host of our call today, Gary Rabin, Chairman and CEO. Mr. Rabin, the floor is yours.
Thank you and good afternoon. My name is Gary Rabin and I’m Advanced Cell Technology’s Chairman and CEO. I’m joined today by Matt Vincent, Director of Business Development and Kathy Singh, Corporate Controller.
Before we begin, I’d ask Kathy to read the following statement. Kathy?
Thank you Gary and good afternoon. Certain statements we are going to make on this conference call regarding future financial and operating results, future growth and Research & Development program, potential applications of our technology, opportunities for the company and any other statements about the future expectations, beliefs, goals, plans, or prospects expressed today constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Any statements that are not statements of historical fact including statements containing the words will, believes, plans, anticipates, expects, estimates, and similar expressions should also be considered to be forward-looking statements. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including limited operating history, need for future capital, risks inherent in the development and commercialization of potential products, protection of our intellectual property, risks associated with clinical trials and economic conditions generally.
Additional information on potential factors that could affect our results and other risks and uncertainties are detailed from time to time in the company’s periodic reports, including the report on Form 10-K for the year ended December 31, 2011. Forward-looking statements are based on the beliefs, opinions, and expectations of the company’s management at the time they are made, and the company does not assume any obligation to update its forward-looking statements if those beliefs, opinions, expectations, or other circumstances should change.
Now I’d like to review our financial results, which are discussed in greater detail in the 10-Q we filed with the Securities and Exchange Commission, a short while ago. I’m assuming you all have got the press release we recently issued.
For the 2012 second quarter, ACT had revenue totaling $218,184 compared to revenue of $153,688 in the year earlier period. Revenue was generated through license fees and royalty payments.
Research & Development expenses for the three months ended June 30, 2012 and 2011 were $2,068,098 and $1,532,271 respectively. Research & Development expenses increased from the prior year period as a result of an increased level of clinical activities.
The company reported a loss from operations of $4.5 million compared to a loss from operations of $3.6 million in the 2011 second quarter. ACT reported a net loss of $4.0 million or 0.00 per share compared to net loss in the same period of 2011 of $4.8 million or 0.00 per share.
Net cash used in operations for the 2012 second quarter was $2.9 compared to net cash used in operations of $3.2 million in the same period in 2011. The net cash used in operations was a result primarily of ongoing clinical activities.
The company ended the 2012 second quarter with cash and cash equivalents of $9.9 million compared to approximately $10.8 million as of March 31, 2012.
The company expected cash utilization to remain relatively constant during the second half of the year, and have sufficient cash for the remaining balance of the year and into next year, excluding any new initiatives that company may undertake or additional funds we may secure through available funding commitments we have.
Now, I would like to turn the call over to Gary. Gary?
Thank you, Kathy. I am pleased unlike our last earnings call, when I spent a fair amount of time talking about litigation and other corporate matters outside of the scope of our scientific activities, that today I can spend most of my time on the progress we’ve made in our clinical activities.
I’m sure many of you have seen several of the recent announcements. First, I’ll discuss the company’s Phase 1/2 clinical trial Stargardt’s Disease, using human embryonic stem cells derived retinal pigment epithelial cells. In the US Stargardt’s Trial the approval we received earlier in the year from the Data and Safety Monitoring Board, and Independent Safety Monitoring Group, paved the way for the company to move forward with enrollment and treatment of additional patients with SMD.
Recently the DSMB announced that we could increase the dose in our US SMD Trial, requesting the fact that the date our treatment has been regarded as safe and well tolerated. The first patient in the second cohort was injected with a 100,000 retinal pigment epithelial cells, as compared with the 50,000 cell-dose used in the patients of the first cohort, just as in the Dry AMD Trial.
Dose escalation analysis is an important part of most early stage studies and it helps to determine the optimal level for treating patients. And often that is the safety and efficacy of various treatment regimens. Secondly, of course as many of you know, early in this third quarter, we also completed dosing the full first cohort in the UK version of the Stargardt’s Trial.
Shifting to our Dry Age-Related Macular Degeneration Trial, earlier this year, we announced Mass Eye and Ear in Boston and Bascom Palmer Eye Institute in Florida, which is US and News and world report’s top ranked Ophthalmic Hospital as additional sites for the trial.
We know of no early stage company that has four of the top five clinics in the field, involved in a Phase 1 trial. This speaks volumes about what key opinion and thought leaders feel about the potential for our therapy.
To date, we have treated the first four patients in the AMD trial completing the first cohort. And in this quarter, we got approval to treat and then treated the first patient in the second cohort for the Dry AMD Trial. Our investigators are very encouraged by what we have seen so far, and we’ll continue to progress this trial as fast as possible.
To date, we have treated 11 patients over the past year on our Macular Degeneration Program. A milestone we are quite proud of. The linear follow-up for those initial patients indicate the improvements in visual acuity we initially reported are now continuing for a year.
Across the patient population, we are consistently observing improvements in subjective and objective acuity results. We have observed an advancement including even after immune suppression is ended, we have observed clear biological signals in patients. All of this has happened in extraordinarily safe patients with the low dosing cells. And most importantly of course, there have been no significant safety events and especially none, that are related to our cells.
We are so encouraged by these results, that we are now looking at ways to treat earlier stage patients, either from changing inclusive requirements in this trial or potentially advancing to another trial, given that we’ve already treated 11 patients in the aggregate.
This is something that we are working to develop in conjunction with our clinical trial partners and our brand new Ophthalmic Advisory Board. We will give you more information about these impressive new adjuncts to ACT quite soon.
We also continue to expand our intellectual property, which is a key element in any partnering or licensing activity. We recently announced that the company has initiated patents in Australia. Patent number 200-532-5753, improved modalities for the treatment of degenerative diseases of the retina.
The patent broadly covers the use of human retinal pigment epithelium generated from any source included for the stem cells in the manufacture of pharmaceutical preparations of RPE cells and the use of those preparations to treat patients with degenerative diseases of the retina such as AMD.
The patent covers the pharmaceutical formulation of human RPE cells made from a range of pluripotent stem cells including both human embryonic stem cells as well as human induced pluripotent stem cells. We believe by increasing our patent stake that we create barriers to competition and increase to likelihood is ultimately successfully licensing our certified programs to others.
On the corporate front, we employed Michael T Heffernan, to the company’s board of directors. Michael has 25 years of pharmaceutical industry experience. He is a Co-Founder, President and CEO of Collegium Pharmaceutical, a specialty pharma company developing proprietary late stage pharmaceutical products and building portfolio products in the treatment of chronic pain, which uses patent to deter, hamper resistant, extended release drug delivery platform.
Michael’s expertise in product development as well as expertise in capital markets and deal making will help ACT as it moves forward with its clinical progress. I am very proud of the board of directors that we have assembled. They are already working with the management team and pushing us to better this company on every front.
In summary, we are very excited about the progress we’re making clinically. And addressing the corporate issues, that has been uncovered over the past year. With a strong balance sheet sufficient to fully fund our current clinical trials, we believe the coming quarters should allow us to achieve many important milestones.
Now operator, I’d like to open the call for questions.
(Operator Instructions). Your first question comes from the line of Jonathan (inaudible). Your line is open.
Hi Gary and Matt, how are you?
I hope everything is well as both you and the company. I just had a question for both of you, whoever is best at answering them. When would you say it’s going to be our big, next data announcement for the RPE program, kind of like the last one when it was published?
All right, well, generally speaking our plan is to publish our results in peer reviewed scientific journal. It gives them an element of credibility in the pharma community far above us just publishing some data. And so, as a result, we have be a little careful as to how much information we trickle out on a quarter by quarter basis because that has a potential, having an impact on the sort of publish-ability of that data.
So, we’re going to be sort of cautious about how much data we would get. But the plan would be, once we get a decent aggregation to data, to again go out and put something in front of the shareholders and the pharma community that’s been peer reviewed. We haven’t set a particular time-table on that. But we’re certainly thinking about in terms of this 100,000 cohort is something that’s clearly in our minds.
And let’s see here, the other question was in terms of the other programs, you haven’t really spoken too much about them on this call, I mean, and I understand the main focus right now is this RPE program, which is probably on there, what’s latest with the other programs in terms of potential revenues core system like let’s say licensing or partnership?
Well, in terms of – in terms of partnerships, I think I’ve made clear a number of times that we certainly could partner this RPE program tomorrow. The key is how much value do you leave on the table? There is a bias in large-cap pharma, against significant upfront payments made for Phase 1 studies. Now we have several litigating factors in our favor that could help us in that negotiation.
But generally speaking the greater upfront payments happen in Phase 2 and Phase 3. Now our mitigating factors are, first of all, we’ve demonstrated biological effect and a degree of efficacy that has really never been seen in this completely on that medical need before.
Second, is the number of big pharma and biotech companies that are increasing their focus on the Ophthalmic Sector and the fact that there have been really other than Lucentis virtually no blockbuster drugs in decades in this field.
So, to view our discussions with potential partners, we are working on educating as many potential partners as we can, because just like whenever you have an option for anything, you want to have the most possible and the best educated bias.
So, that’s what we’re doing. We spend every conference that Matt and I can, as well as meetings in our offices and in their offices talking to big pharma companies. And we’ll make a decision to partner this program, at what we consider to be an optimal risk award opportunity for the company. We are not going to partner this program for a small number of dollars, like the kinds of partnering programs that the company did in the past, because it doesn’t help us.
So, you have to simply trust that we will in conjunction with the board, make the best decision as to leave – as to leave the least amount of value on the table. So, that’s what we are on that. Go ahead.
I don’t think that’s the best thing to do. Thank you Gary and Matt.
And the next question, please.
Your next question comes from the line of Thomas (inaudible). Your line is open.
Yes Gary, thank you for the improvements that you – that have been coming to the company. And my question is, in the event that compassionate use cells those come into play. Which countries will be most likely to step forward in the first segment?
Well, compassionate used cells are possible both here and in Europe. And one of the things that we have an advantage in, in both trials for that matter, Stargardt’s is an orphan indication. So, that gives us regulatory assistance, it gives us pathways of abortive treatment in trial, so you could theoretically terminate a trial earlier and advance to the next stage. You can advance earlier to a pivotal trial. But you have some of the disadvantages as well in an unmet medical need which is Dry AMD.
So, in terms of getting to compassionate used cells, that’s something that typically happens at the end of Phase 2. But we haven’t ruled out the possibility of commencing some kind of Phase 2 trial before we’ve even necessarily finished the entirety of our Phase 1 Trial, there are ways in which we could potentially go down that road and find a particular patient population that might fit in.
One of the issues that we have, I think as you will appreciate is, we don’t know what the initial label we would be seeking on this formula we would have. In other words, are we looking to stem the decline of the disease in relatively earlier stage patients, or are we trying to improve the visual acuity in more intermediate stage patients. Those have different clinical endpoints, different patient populations, there are a whole bunch of different factors in the FDA and the agency that we have to deal with relating to that particular issue.
So, the different subsets of patients and the particular label that we would have on this therapy will have an impact on, where we head with that and how we design Phase 2 Trials and when we even begin Phase 2 Trials. So, that’s kind of a overview about our thinking.
Now I will tell you that one of the reasons we chose the UK is that – the European trial partner, is that it does have the best pricing option in Europe for compassionate used cells. So, a lot of this is kind of baked into our long-term strategy that clearly defining what those clinical endpoints are going to be for Phase 2 is something we’re working on in real time.
And as I mentioned earlier in the call, in my prepared remarks, this Ophthalmic Advisory Board that we have assembled, there they helped us a lot in giving us guidance and direction in the how to deal not only with the agency but also pricing and reimbursement. So, that’s how we’re thinking about that. So, let’s go on to the next question please.
Your next question comes from the line of John (inaudible). Your line is open.
Good Day Gary, this is John (inaudible), 22, at investorstemcell.com. How are you?
Hi John good to see, how is everything?
Just fine, thank you. Listen, I have to two-part question if you don’t mind. Can you please update any discussions regarding the possible treatment for Dame Judy Dench? And question number two, how often are you meeting with institutional investors, how great is the response, what is their feedback and when are you telling them about possible uplifting? Thank you.
I’ll tell you that. Hi, first of all, in terms of Jane Judy Dench, we have reached out to her because she has wet AMD in her yellow eye we now actually have inclusion criteria that could allow her to be part of the trial. And so, that’s where we are in terms of reaching out to – in terms of reaching out to make her aware. But we of course cannot hitch to any person to join the trial obviously all we can do is make people aware of the trial. And because our AMD trial, not only AMD trials in the US, I can’t due to talk about any particular patient. So, that’s all I would have to I guess say about that.
Let’s talk now about the reverse and institutional education for forth. We have been, I would say regularly meeting with institutional investors, portfolio managers and analysts and so forth educating them about the company. It is as I have said many times before, remarkable, how little it is known in the institutional community about what we do.
But I will tell you that we are being very well received. One of the issues is that as you are aware, in the past, the company has not really been institutionally invest-able because there has always been this overhang of all these warrants and shares and so forth. So, we’re finally coming towards the end of that. And of course, once we’ve kind of finally put the last of those things to bed, our plan is of course to get this NASDAQ listing. We have applied to NASDAQ. We’ve gotten their preliminary comments.
Their comments aren’t really any different than anything we would have expected. And we’re just trying to go in through, trying to put to that the last of these warrant holder issues, this SEC matter, one of the things that they suggested that we would have to have a time line for hiring CFO, we’re working on that right now. And so, it’s all kind of in the calendar and we’re pushing along as quickly as possible.
And it’s a main objective for us to be traded on NASDAQ it will make the stock margin-able. It will allow a whole universe of investors who have never previously been able to buy the stock, to be able to buy the stock plus of course, putting to bed the last of those overhangs related to the past financings and the past sort of misdoings of the company from a financial perspective. Next question please.
Your next question comes from the line of Patrick Cruzio, your line is open.
Hi Gary, I was wondering if you would comment on the removal of Aberdeen as a trial space, and is there any possibility to replace this? Thank you.
You bet. Aberdeen is no longer a trial partner site. We will be very shortly adding a new trial site also in the UK. And the reason that Aberdeen is no longer a trial site is that the clinical investigator there is actually taking some time off. And so, they don’t have any capacity actually to be able to treat patients there. So, but we have new UK trial sites that we are adding.
In the meantime, Dr. Bainbridge has done a great job. He has plenty of potential patients. So, as we’re now kind of getting ready to get the data in for the first cohort, so we can move forward to the 100,000 cell dosage. Jim has been wonderful to work with. The team there, at work fields is – completely state of the art, best in the world. And we just rolled it them there. And as we add this second site, of course it will be another very prestigious site. And we’re working right now. I’m just finalizing documents and so forth with them. Next question please.
Your next question comes from the line of Dominic (inaudible). Your line is open.
Thank you. Hi Gary, how are you?
Hi Dom, fine, thanks.
I have two questions that are somewhat related. One, what is the progress over the reverse split to date and also whether the SEC penalty that was assessed is impacting or delaying the progress on that initiative?
Okay. In terms of the reverse split, the reverse, I’m holding off on doing the reverse as I said from the very beginning until we resolved these, the last of these warrant holder and debenture issues. I’m hopeful that we’re going to be able to put those to bed relatively soon because we’ve done a lot of other things to get ready for our uplifting and for our reverse.
In terms of the SEC matter, we only recently got the – so, although the complaint was filed quite some time ago, we only – about a week and half ago, got the waver of service, which allows to respond and to get access to the discovery materials, so that we can understand the SEC’s linkage between the 3A10 transactions and the proceeds that came back into the company and understanding that linkage is critical for us for a variety of corporate reasons.
And then we will quickly move to settle with the SEC, while we don’t like the headline certainly of an SEC investigation as to past company practices. This is something that happened four years ago. On the government management team and we want to put into that as quickly as possible.
Of course $2.5 million or $3.5 million depending on how you look at it, penalty is a significant number although it’s certainly not something that’s going to jeopardize the future of the company. So, but we want to have as much information about the SEC case against the company as possible before we get to that settlement. And the SEC would not agree to disclose all that information pursuant to any pre-complaint settlement. So, that’s where we’re out now.
Okay. Thank you very much.
Yeah. Next question?
There are no further questions in queue at this particular time. (Operator Instructions).
I will take a couple of questions from the internet queue here. The first question I have here is, do you expect a joint venture before H2 because 30 months is a long time. Well, first of all, I think as I detailed at the beginning, we will evaluate whether or not this to be partnered in Phase 1 in such a way that we’ll maintain significant value. I should say without the loss of significant value to the company.
But in terms of 30 months, we’re not anywhere near 30 months away from our perspective, from a Phase 2 Trial. And I think as I laid out the potential different ways that we can talk about structuring Phase 2A and so forth kind of the trials. And obviously the more patients that we treat, and as we treat them with the greater dosage of cells and as we potentially treat earlier stage patients, of course who had a much greater proof of concept about this issue about whether or not we’re treating earlier stage patients to stem decline of the disease or intermediate term patients to show improvements in multiple lines of visual acuity. So, that’s how we’re approaching that.
I’ll take another question here from the board. This is about the mesenchymal stem cells, and mice studies, can you give us an update on that?
Yes, we have some very interesting findings in mesenchymal stem cells. There are couple of hundred MSC trials going on worldwide. All of those trials, the MSCs are from either an allogeneic source of adult stem cells, who are from an (inaudible) source of the patient’s own stem cells.
In the case of our MSCs, because they are derived from embryonic stem cell tissue, we are seeing much more robust factors being exhibited, much more youthful tendencies, much more like you would find for example from a field kind of mesenchymal stem cell tissue.
So, the robustness of these factors has shown us some remarkable results in the lab. We’ve spoken a little bit about how in an autoimmune encephalitis model which basically mimics multiple sclerosis, we basically stopped that disease deadness tracks. And people are of course probably aware of the massive chemo-pharmaceutical drug Copaxone. And the results that we’ve seen in our early animal studies exceed the results that Copaxone demonstrates, but of course very early in animal studies.
So, right now, we’re working on creating a plan for how to get those MSCs into the clinic, and exactly into what indication, whether it’s some kind of auto immune disease, or many other different methods that we can choose, we can go after pain, there are all different kinds of ways that we can pursue the MSC market. And that is something we are looking at very carefully right now.
And getting into a pre-ING discussion with the FDA about exactly what they would be looking for in terms of animal studies and the length of, the follow-up on those animal studies is something they were going to be focused on having that kind of discussion with the FDA, either late this year or early next year. As we further define specifically what indications, including the MSCs were going to pursue.
I’ll go back to the phone, any more questions operator?
There is another question from the line of Patrick Cruzio. Your line is open.
Hi Gary, Outside of the RPE program, are any of the indications you’re working on in the lab, such as the MS and board programs, indications that would not fall under your JV agreement with CHA, in which CHA would institute be the minority owner outside of North America?
Hi Patrick, I don’t know if you are on a cell-phone or a speaker phone. But most of that question cut-out. Can you try that again?
Sure, hopefully you can hear me now?
Outside of the RPE program, are any of the indications you’re working on in the lab, such as the MS and board programs, indications that would not fall under your JV agreement with CHA, in which CHA would institute be the minority owner outside of North America?
Okay. So, let me clarify a couple of things about that joint venture. So, outside of North America, the joint venture is 60-40 for, 60-40 in favor of CHA. However, improvements that are made are not owned 60-40 by CHA, it’s only the license to use in the human labs. So, if the cell that you’re goes through the demand of your life line, then outside of North America, we would need some (inaudible) to operate license from the joint venture. But just so we’re clear, the improvements that we make which are really substantially all where the value is are not subject to that joint venture’s ownership. So, I just want to make that very clear.
There are no further questions in queue at this time. I turn the call back over to the presenters.
Okay. I will ask couple more questions here from the internet. One question is, will we be using multiple blood injections in Phase 1 or when if we do not?
This question gets to whether or not we will be doing multiple contemporaneous or simultaneous injections into the retina, rather than one larger injection. And this issue of whether or not we could use multiple injections to cover the entire view of the fovea, given the fact that these 150 micro-liter injections that we are currently doing would cover the entirety of the full year when we can start injecting in the central part of the fovea.
We’ll be experimenting with multiple blebs. The answer is, that is clearly something we’re looking at. What now, we’re dealing with patients that have so much atrophy within the fovea that we’re injecting via the edge, and it jumped outside the fovea. If you’ve seen that video, you can see that the blood is popping up just outside the fovea. Now, we’re evaluating exactly how and at what time we are going to start treating earlier stage patients.
And we’ve got two things that we have to evaluate there. First how many cells we would be injecting per grab and second should we be making the blood itself larger, and – or should we be doing multiple blebs. And this issue of the larger blood versus multiple bloods, for those of you that can sit back to your geometry and the volume of a cylinder and how much space a cylinder takes up in terms of diameter relative to volume. We’re looking at all of those things right now.
Those were things that we’re in active discussions with our clinical trial partners. And it’s something that is definitely going to be a focus of our new Ophthalmic Advisory Board. But it’s sort of too early to say right now exactly when we’re going to be pursuing that study. But clearly the issue of either multiple bloods or larger bloods is something we are focused on because it is clear the single 150 micro-liter blood would not cover the entirety of the fovea in earlier stage patients.
And I’ll take one more question from this here too, but from the internet board here too. It says, please look at MS it is similar to other neurological disorders that impact more people. MS is in fact the mouse model for autoimmune encephalitis. It is precisely that model we’re pursuing it is precisely that market that is such a significant part of the Copaxone sets.
Next question, can you comment on 100,000 SMD patients blog? Can we expect continued updates?
We cannot comment on any particular patient. It is against the law. We are aware of that patient’s blog. The patient is certainly well within her rights to publish under that blog. And I would be reading those updates just as you will. We have no direct contact with her related to that blog. It would be again a lot for us to do that.
All right. Well, with that, I’m going to wrap up this particular conference call. I feel that we really made quite a lot of progress on the corporate front as well as on the file front. And I want to thank everybody for their time today and their continued support of to Advanced Cell. We will of course be speaking at several conferences this fall. I think you can expect regular updates from our sides to the progress of the patients. The treatment chairs what we’re treating, information on this Ophthalmic Advisory Board information on the MSCs as well as our blood program.
And of course we look forward to speaking with you when we report our third quarter results in early November. Good afternoon.
Thank you for joining us. This ends our formal presentation. You may now disconnect.
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