ProMetic Life Sciences Inc. (OTCQX:PFSCF) Q4 2015 Earnings Conference Call March 31, 2016 11:00 AM ET
Pierre Laurin - President & CEO
Greg Weaver - CFO
John Maron - Chief Medical Officer
Alan Ridgeway - Scotia Bank
Neil Maruoka - Canaccord Genuity
Prakash Gowd - CIBC
Christopher Lam - Paradigm Capital
Sanjay Jha - Panmure Gordon
Jim Belin - Aldebaran Asset Management
Roger Benson - Number One Corporation
Darshan Patel - Hybridan
Barry Taylor - Webco Management
[Foreign Language] Good morning. My name is Jesna, and I will be your conference operator today. At this time, I would like to welcome everyone to the ProMetic Life Sciences, Inc. 2015 Fourth Quarter Results Conference Call. [Operator Instructions]
Thank you. Mr. Pierre Laurin, President and Chief Executive Officer, you may begin your conference.
Good morning everyone and welcome to our webcast this morning. Before we start, I would like to attract your attention on the mission statement.
On the cover page of the presentation, Biology of Healing. We are the company that effectively can address the entire healing process in a groundbreaking way and using both small molecule drugs and plasma protein therapies, and we are continuously discovering new innovations to regulate the cycle of healing. We do it, not because we have to, but because we are compelled to, and it’s at the heart of our culture to provide a pathway to hope.
This mission statement signals our transition of becoming a fully integrated biopharmaceutical company. We are as of today listening to patients and healthcare professionals expressing urgent and unmet needs that our drug platform can address. We are as of today working with patients and healthcare specialists to generate a clinical data required to secure regulatory approval, and we are preparing the launch of live saving biopharmaceutical products, the first one, plasminogen expected to be commercially available as early as next year.
So again I remind before I invite Greg to go over the financials that I would like to remind you to read the Safe Harbor statement on slide 2 of this presentation, thus contain forward-looking statements about ProMetic’s objective, strategy and business that involve some risk and uncertainties. After Greg’s presentation, John Maron and I will update you on our therapeutic program and expected milestones for 2016. So Greg?
Thank you, Pierre, and good morning everyone. Okay, moving to slide number 3, I would like to remind listeners that this part of today’s webcast is based on the financial information for the fourth quarters of 2015 and 2014, as well as on the audited financial statements for the year ended December 31, 2015. All these statements were prepared under IFRS and the full annual financial information for the Group can be found online at sedar.com.
Finally, all sums in today’s presentation are in thousands of Canadian dollars, except for the per share amounts or where otherwise indicated.
Let’s move to slide number 4, I will begin my portion of the presentation in with a high level overview of the results. This will then form the basis of a more in-depth look at each of these matters.
Revenues for the year CAD24.5 million and we’re reporting a net loss of CAD56.8 million for the year. Included in the net loss are non-cash debt extinguishment expenses of CAD9.6 million resulting from the several amendments made to the long-term debts and the amendment to the warrant liability with Structured Alpha aka Thomvest.
We made R&D investments in 2015 of just over CAD50 million with our focused execution and advancing our clinical programs. And we made investments in our internal resources including team of [ph] facility to support the product development efforts and our active pre-commercialization work as we prepare for plasminogen’s launch next year.
The overall results reflect our strategic intent of investing in our pipeline of plasma derived in small molecule therapeutics, while strategically being selective about the timing and scope of licensing transactions we are entering into, ensuring we retain maximum value of the pipeline for our investors. And importantly during 2015, we strengthened the balance sheet with additional equity financing to the tune of CAD57.6 million. This financing resulting in us ending 2015 with total assets of CAD215.3 million and total equity of CAD145.3 million. And then this provides us with an opportunity to continue with our exciting projects, which Pierre and John will expand upon in their strategic outlook in a moment.
Moving to slide 5, we have two key messages here takeaway, not just regarding our annual revenues first to see that our business to business affinity resin product sales to third party pharma customers have again risen dramatically over the previous year to CAD21.4 million for 2015, which is an increase of right at 100%, just around 100% or CAD10.6 million. This business is again profitable and includes third-party customers with the likes of GSK and others. And keep in mind, this is the enabling technology for our own plasma therapeutics business. So the level of inter-company activity is, while significant is eliminated from these presentations.
And secondly, the highlight, service revenues were CAD1.8 million or roughly CAD3 million lower than in the prior year and this is in-line with the ongoing direction of developing more products for ourselves rather than the third parties. And finally, milestone and licensing revenue reflect a milestone earned from HemoTech in Q4 2015.
Please move to slide 6, and I am reviewing here the adjusted EBITDA performance for each business segment. And we choose to look at the EBITDA as it focuses on the results considering the revenue contribution and key expenditures such as R&D, marketing, admin and selling, and excluding non-cash expenses such as stock-based comp, depreciation and amortization, allowing us to see a true picture of what happened in the business.
So first looking at Protein Technologies, the business segment that combines the bioseparations business and the protein development activities. Adjusted EBITDA was a loss of CAD28 million compared to a loss of CAD15 million in 2014. And allowing me to briefly break this down further, first to look at our bioseparation activities as this presentation is bundling that with the plasma bioseparations business, with product and service revenues growing to CAD23 million and a gross margin of approximately CAD14 million or 62%. And the Protein Tech segment also recognized revenues on R&D services provided to GENERIUM and the achievement of a milestone.
The R&D cost of the Protein Technologies business segment in 2015 were targeted to development of plasminogen and its various pre-clinical and clinical programs as we build the regulatory package of safety and efficacy evidence required, along with the supporting manufacturing and infrastructure necessary to grow the protein franchise. And our IVIG program was also an area of financial investment advanced during the year as our second protein program investing more of our own resources and R&D expenditure for plasma products.
And next looking at the small molecule therapeutics business segment, the part of our business that focuses on small molecule drug developments such as PBI-4050 with an adjusted EBITDA of a loss of CAD10.4 million compared to CAD7.7 million in 2014. And you’ll recall, we have been advancing 4050 through the clinical programs for multiple indications and have therefore as expected increased the R&D spend in this area.
Lastly, looking at the corporate activities, this contains all of our administration and public entity reporting activity. There has been an increase in costs associated with our growing headcount stock-based comp that self-aligned with the rise in share price and additional professional fees.
So in summary, looking at the underlying business, results and costs are in-line with the strategic direction previously outlined and well higher than prior year were expected to be so, and in our consideration, both normal and manageable.
Transitioning to slide 7 and some of the key figures from the profit and loss account for the fourth quarter and full year 2015. Revenues for the quarter increased to CAD14.1 million compared to CAD10.5 million for the fourth quarter of 2014 and year-to-date total revenues of CAD24.5 million compared to CAD23 million in 2014. As mentioned earlier, product sales up substantially with an increase of CAD10.6 million or 100%.
The increase in product sales impacts our cost of goods naturally, which amounted to CAD8.2 million for the year compared to CAD7 million in the prior year. And the other thing impacting cost of goods is each year the mix of products sold in 2015 compared to 2014, so the margin is slightly lower in 2015, but not a concern.
Total R&D costs increased over the same period in 2014 and as I mentioned, there has been a rapid development of pipeline of those plasma derived and small molecule therapeutics, which has led to this increase, focused primarily again on human clinical trial stage assets.
With this context and explanations, when we discuss EBITDA by segment, total R&D costs were CAD17.9 million in the quarter, up from CAD11.8 million same Q last year. And total R&D costs of CAD50 million for 2015 compared to CAD35 million last year.
Admin costs were essentially flat with the fourth quarter compared to prior year and admin costs of CAD5.3 million compared to CAD5.0 million.
Finance costs were also relatively flat year-on-year consistent with the level of financing activity undertaken. During the year we recognized as a result of three separate financial transactions, a loss of extinguishment of liabilities of CAD9.6 million. I would encourage you to refer to the notes to the financial statements and the MD&A where we include a detailed description to the accounting treatments for each significant transaction in the year for those interested in more color.
The year-to-date adjusted EBITDA, as I mentioned on the last slide, shows a loss of CAD45.1 million compared to a loss of CAD24.8 million for 2014. Overall, the Group returned a net loss of CAD12.3 million or $0.02 a share in Q4 versus CAD8.5 million or $0.01 a share in the fourth quarter of last year and this brings a full year loss of 2015 to CAD56.8 million or $0.09 a share compared to profit of CAD2.6 million or $0.01 a share in 2014.
Moving to slide 8 and the key features of the balance sheet at the end of the year, cash at CAD29.3 million as compared to CAD27.1 million at the end of 2014. Accounts receivable stood at CAD8.4 million compared to CAD11.9 million. This begs for an explanation of the primary reason for the decrease in trade receivables was a receipt of a GENERIUM upfront payment of CAD6 million in Q1 2015 are invoiced and recorded as revenue in Q4 2014, so a year-end timing difference of revenue to receivable. Trade AR is actually increasing as you would expect in relation to our ramp in product sales and revenues.
Capital assets have risen by CAD5.3 million since December 2014 representing investments in Laval, Isle of Man and the new investment in our Winnipeg facility.
Intangibles have increased from CAD2.2 million to CAD148 million. This balances primarily the value of the intangibles recognized in 2014 as related to NantPro. Trade another payables are up CAD2 million to a year-end balance of CAD11 million reflective of the increased level of spending in 2015.
The warrant liability of CAD24.7 million in the prior was a non-cash item and was restructured and previously explained, and no longer an issue. The long-term debt showing here at CAD22 million from Structured Alpha, as you know will also likely be repaid by the exercise of warrants in the future. And lastly the deferred tax liabilities on the balance sheet totaled CAD31.5 million, which relates to the recognition of the NantPro intangible as updated, and the timing differences between book value of the asset and the value for tax purposes. This has reduced this year as we recognized offsetting deferred tax assets resulting from the recognition of a portion of the losses incurred in NantPro attributable to ProMetic. So these results bring a total equity to CAD145 million, up from CAD104 million last year and total assets figured a CAD215 million from CAD203 million at the end of last year.
Moving to cash flows in slide number 9, I will quickly review the cash position in light of the activities just highlighted. CAD55 million of net inflow from financing activities was received during the year. Of this, CAD45 million was used in operations, in addition a further CAD7 million used in investing activities related to capital assets. These movements when combined with the opening cash balance of CAD27 million resulted in closing cash position of CAD29 million.
So wrapping up the 2015 financials, the results from the year clearly continued to demonstrate our investment in creating future value for the company.
And moving to slide 10, post balance sheet financial events. I’ll just take a quick moment to talk about our successful completion of raise of CAD30 million with Structured Alpha last month. This latest tranche of convertible debt from Peter J. Thomson’s Toronto-based investment vehicle carries an implied interest rate of 8%, fully repayable with warrants that were priced at CAD4.70 representing an 80% premium with a term of 6.5 years. The commitment and support from Thomvest represents a solid ongoing strategic financial relationship.
So in closing, I would say the overall financial strategy here is to maintain a strengthened cash position required to make the pipeline investments necessary to continue driving shareholder value and the balance through use of a combination of debt equity and importantly business development transactions to accomplish this goal. You’ve seen evidence of our ability to deliver on licensing deals, very compelling ones recently and each one unique and scope and timing sometimes in licensing IP, other times bringing in cash. We will continue to strive to add non-dilutive cash flows and partner where it’s optimal for our shareholders and this is the critical point.
Thank you so much for you attention. And I will now transition it back to Pierre.
Thank you very much, Greg. And maybe to add to your presentation on slide 11, another example of investment in terms of building our manufacturing capacity and our ability to support not only the current product development, clinical trials, but also commercial launch activities. So two key transaction in 2015, one which was the long-term lease of capacity from Emergent BioSolutions manufacturing plant in Winnipeg that increase our overall capacity in addition to our Laval facility and the acquisition of the plasma collection center, which is now getting us the – an existing plasma collection with license from FDA, EMA and Health Canada. Strategically important because that enables us also to start “clone” that collection center and include in our growth for plasma collection – plasma to be collected by our own centers. So this is in part explaining the R&D expense because some of those activities, which are manufacturing in nature, they are currently labeled as R&D contribution to the cost, so that a point I wanted to add Greg to your presentation, thank you very much.
And moving on to kind of the section of the therapeutic update, I would invite everyone to move on to slide 13. I mean, we have reported before, but cannot emphasize enough that our pre-clinical data generated both in-house and in the labs of repeatable research institutions constantly demonstrated the remarkable ability of our lead drug candidate PBI-4050 to reduce fibrosis in the lungs, kidney, heart and liver.
And if you move on to slide 14, we have actually brought everyone’s attention that significant reduction of inflammation in fibrosis in the pancreas by PBI-4050. I mean in a very challenging model developed and performed at the University of Vanderbilt, it’s called the db/db eNOS knock-out mice, these are mice that are pretty bad shaped, they are hypertensive, diabetic, obese, failing kidney, failing pancreas, failing liver, not good. [indiscernible] group confirmed our own data that the anti-fibrotic activity of PBI-4050 was also extended to the pancreas. And you will recall that this led to our decision to test PBI-4050 in patients with metabolic syndrome and Type 2 diabetes. The hypothesis was very simple.
If PBI-4050 is efficacious in human like we observe in numerous animal model, this should also mean that in diabetic patients, we should observe some pharmacological effect quite rapidly. The first scientific improvement we observe in diabetic and compromise animals treated with 4050 is a significant reduction in their blood glucose signaling that the pancreas and the liver are functioning more efficiently. And we also observe a reduction of pro-fibrotic and pro-inflammatory biomarkers in blood and urine, again, precursor evident that the treated animals will outlive, outperform the ones that are not treated. At the end of those preclinical studies, we kind of test of such improvement in the organs by the reduction of fibrosis evidence with histology in our techniques, something we cannot do in human than in clinical trials.
So relying on evidence that biomarkers are effected in the right direction is key to determining whether one had a drug or not. I will let John expand on this over the next few slides starting with slide 15. John?
Thank you, Pierre. I would like to move from the animal to human model now. I think this is a very important slide, people need to understand the dramatic results we saw in treating human patients with Type 2 diabetes on metabolic syndrome with PBI-4050. On the left hand side, it shows the step wise therapeutic protocol recommended by the American Diabetes Association in general.
So you start with a single drug metformin, if blood glucose is not adequately controlled after three months. Then you had a second drug and if still not controlled after treatments, you had a third drug. If you look at the box on the right hand side, it’s talking about how a trial, the results we saw in the trial. They were patients with Type 3 diabetes and metabolic syndrome, they had an elevated hemoglobin A1c despite the current therapies and current standard of therapy between 7% and 10%. The body mass index was over 30, in other words, a base – full of base and they have all the other features of the metabolic syndrome.
And if you look at the results we show, we look at people who had just single therapy metformin adding PBI-4050 was very effective. If they are on single – sorry, on double or triple therapy, it was also very effective. There is a significant reduction in hemoglobin A1c showing much better blood glucose control and the p value is 0.03. If the hemoglobin A1c was highest at the beginning over rate, there was a decrease of greater than 1%, that’s a very strong clinical results. One of the points about this trial is I have heard people say, well, it’s a 11 patients, it’s only very few patients. I look at that just as much and I say if we can see such a strong clinical result, statistically significant in the small number of patients that indicates that PBI-4050 is having a very strong effect on those patients.
So the other conclusion I would draw from this is that since we see such a strong effect, the next proposed study of randomized double-blind placebo controlled Phase 2 study will actually need fewer patients than I would have thought before I show this data.
If we move on to slide 16, this is really important because it shows some additional data, which relates to weeks ago, but I want to emphasize it with you. It gives us more data around the mode of action and efficacy of PBI-4050. If you look at the heart symbol, you see there is a decrease in two biomarkers, which are associated with the metabolic syndrome and indicate a high risk of cardiovascular events, that’s Pentraxin-3 and Resistin, and they’re both highly reduced – significantly reduced by PBI-4050 in these human patients in this trial. Also IL-18, it’s another biomarker associated with cardiovascular and renal events was also significantly reduced. So people keep asking us about the mode of action we keep on demonstrating more and more effects in the human population.
If you move then to slide 16, I am stepping aside from the anti-diabetic effects of 4050 now and moving to anti-fibrotic effects we have demonstrated in semi-animal models. Here is another animal model, again work from the group at Vanderbilt using PBI-4050 in a mouse model of scleroderma, which is a devastating human disease. If you look at the left hand side panel, you will see a section of what normal mice skin looks like on the low power. If you look at the right hand side, you see that skin is very, very much thickened by fibrous tissue in the mice with scleroderma. The middle panel shows the effect of treatment of the same mice with PBI-4050 and it’s essentially indistinguishable from the normal mouse, a very strong result in this model.
Moving to slide 17 and talking about scleroderma in the human population now and this is going to be our next indication where we would like to study PBI-4050. There are two forms of scleroderma, diffuse and limited. Diffuse, as you might guess, has worse prognosis and the limited form that you would not like to have either. The left hand panel shows in terms of the diffuse organ involvement in these patients, especially the lungs, the heart, the kidneys, the entire vascular system. And the right hand panel shows you that patients have lung involvement with pulmonary hypertension just quite common and has a very, very stronger effect in reducing the life expectancy.
Moving to slide 19, we are talking about another disease which is we are studying PBI-4050. Because PBI-4050 has been demonstrated to have both anti-diabetic effects and anti-fibrotic effects we think it’s important to study patients with this ultra-rare syndrome. The left hand box describes Alström Syndrome in some detail. It’s a rare autosomal recessive disease first described by Dr. Alström in Sweden in 1959. It’s caused by mutations in a gene called ALMS1 and the signs and symptoms appear in infancy and childhood and progresses throughout life.
There is a number of clinical manifestations, progressive loss of vision and hearing, so most of the patients end up blind and with partial deafness. It involves the heart, the cardiomyopathy fibrosis in the heart and the common cause of death is actually heart failure at the age of 40 to 50. It also, in the teens, these patients get early truncal obesity and early Type 2 diabetes with severe insulin resistance. They also get severe liver fibrosis and kidney fibrosis. So for all these reasons, we suggest that the PBI-4050 would be worth trying in these people because of anti-fibrotic and anti-diabetic effects and that study is underway in United Kingdom.
So I think I would like to pass it to back my colleague Dr. Laurin to continue.
Well, thank you, John. I think you are also open to see some preliminary clinical observation from that patient population in the second half of 2016. But turning to slide 20, this slide was prepared to help you understand our strategy behind our clinical program. It does not require to have any scientific background to understand it. It actually probably more appeal to your knowledge of how one can make money with a slot machine. For each indication, we disclose that we are engaged, we can see what organs are affected by fibrosis. On unlike the slot machine where you need a combination to win, here we just need to light up one frame and we have a very, very valuable drug. So now I don’t know about you, but I much prefer our odds of winning big with our PBI-4050 slot machine.
So moving on to slide 21 and some slide on our plasma derived therapeutic starting with plasminogen on slide 21. Our plasminogen has entered Phase 2/3. You will recall that in 2015, our Phase 1 study enabled us to demonstrate that our plasminogen had a prolonged half-life as compared to previously described plasminogen concentrates. This longer half-life will be beneficial to patients and enable for the replacement of plasminogen at home in a manner similar to hemophilia and it was well tolerated by patients with no reports of any drug related serious adverse events.
So I am also sure you will recall the remarkable recovery of the young infant in Germany already in the fall of last year. Our understanding of how plasminogen needs to be administered to achieve a clinical outcome enabled the German team of physicians in Hamburg to quickly reach an efficacious concentration of plasminogen in the blood of that critically ill 20 month infant followed within few days only by a reduction of the lesion and for the patient to be able to leave without ventilatory support.
And we are also very proud of the second case of dramatic and rapid improvement observed in a 36 year old woman who participated in our Phase 1 study. No need to expand on this remarkable case study as you can read on your, suffice it to say that this patient is eager to be on maintenance therapy so she can lead a normal life without the need of recurring surgeries and medical intervention.
On slide 22, our plasminogen Phase 2 trial has been initiated and is designed to confirm the optimal dose regimen to achieve the target blood concentration. Now important to understand not all patients enrolled in the study have active lesions, so the FDA has agreed to an accelerated regulatory approval pathway based on pharmacokinetic data. We expect the clinical trial to be completed and the BLA to be filed this year.
Moving on to slide 23, ProMetic intends to expand the use of plasminogen in other clinical indications and we will inform you about these very soon. Some of these indications are expected to be additional orphan indications. This is in addition to the program pursued with Omnio. The agreement with Omnio provides us with a very complementary intellectual property and as well as comprehensive proprietary understanding of the use of plasminogen in the field of hard to treat wounds.
So this year will be rich in milestones and news regarding plasminogen including the disclosure of new therapeutic indications and as I mentioned some of them being orphan, finalizing the manufacturing dossier that includes new and proprietary formulation specifically for the wound healing, completing the clinical trial designed for the wound healing and initiating those studies in the second half of this year in Europe, so very exciting year for plasminogen.
On slide 24, very quickly, as you know, IVIG trial was also initiated. We are enrolling patients, doing very well. We expect to have completed the enrollment of the adult patient cohort this year. That will enable analysts to earmark by when the BLA should be filed and the market entry. We are right on time with most of analyst reports on that front and we intend also to initiate the pediatric patient cohort. We have a minimum of adult patients and confirmation of safety before we can initiate the pediatric patient cohort. So, so far so good with that program as well.
On slide 25, as you know, we have a cohort of products that follow plasminogen and IVIG both Alpha ‐ 1 Antitrypsin and C1 esterase inhibitor are on schedule to have manufacturing scale up and the GMP process confirmed for the IND filing by the end of this year. Fibrinogen, we are working on the clinical program and this one is earmarked for clinical trial in the first half of 2017.
And you will hear much more about inter-alpha inhibitor protein. That’s the drug that we actually have partnered with ProThera. This is a very exciting orphan protein, so we are looking at disclosing our orphan indication in humans. The clinical program is currently in preparation with the KOLs and we are looking to initiate those clinical trials in the first half of 2017, but you will have – you can expect lot of noise and news about this exciting, this promising product in partnership with ProThera.
So, slide 26 and 27 summarizes our rich pipeline. PBI-4050 being pursued in several indications and again emphasizing that we are focused on the underlying reason why those patients with those different conditions, pathologies, those patients have complications because of the fibrosis being the underlying reason why the organs are failing to function normally. So as - recall my PBI-4050 slot machine analogy, we are testing in that around indications to secure evidence of anti-fibrotic activity and by increasing those conditions we are remaining focused on the mechanism of action of 4050 and increasing beyond achieving these objectives very quickly.
The slide 27, I don’t need to go over this, but provides you a very details status of where we are for each indication, each protein as well as the next milestone to be expected during the year.
On slide 28 we republish an adapted slide that you’ve seen before for some of you – some people ask us the question, guys you are doing a lot of clinical trials, we’ve built the team in-house that is part of our ongoing R&D expense, but also help us not having to resort to CROs for those call it niche clinical trials. So you can see that the overall external clinical cost is not exorbitant, something we can very well manage and kind of heavier in the second half of 2016.
You will notice that the PBI- 4050 Phase 2 clinical trial and the pivotal IPF trial both following IND filings planned for this summer and the year. It may require adjustments and we met with the FDA with pre-IND meetings. They were very, very helpful in advising us on the clinical trials. There could be some adjustments as we file the IND and as for that point here we are saying that we will get back to you with more detailed information on what those costs could be, but in any case, they are likely to be minimal in the second half of ‘16 and mostly impact ’17 and ’18.
So again you are looking at very manageable budget to create significant value. Plasminogen IVIG and other plasma proteins that are follow-on extremely low risk and PBI-4050 increasing and part of being a successful and quite lucrative drug as we continue demonstrating safety and good tolerance in patients and more evidence of efficacy both on the diabetic biomarker, but also now the pro-fibrotic prone inflammatory biomarker.
So in summary, before we move to the Q&A period, the outlook for 2016. I have broken down those key points in five chapters or five items. Obviously as described before, the clinical trial milestones, we will be busy on that front. The plasminogen as you expect study completion for the congenital conditions that several new indications to be announced. IVIG completion for the enrollment of patients and therefore making the predictable – the BLA filing more predictable. The clinical results in plasminogen and PBI-4050 will obviously be communicated in the November and flashing throughout the year as we do have open label studies both Alström and IPF trials right now and more data coming from the metabolic syndrome group in Canada.
The regulatory milestone of course expansion of the clinical trials in Europe for plasminogen and we are looking to now approach EMA with the plasminogen program. Hopefully they will concur with the FDA in terms of our strategy to get the product approved that we are adding in any case some centers in Europe to increase the European content in our program. The new indication for 4050 in plasminogen will not come unnoticed.
We are very excited about the prospects of 4050 being effective at the core, the underlying cause of some organ failures and plasminogen is one of those products will fascinate the audience as we move forward, but first let’s get it approved in the congenital deficiency that understand that plasminogen as far as we are concerned is a product that will have to demonstrate efficacy in several conditions, including the one in partnership with Omnio.
So we will inform you of the orphan indications that we are targeting for inter-alpha 1 and we are anticipating therefore new orphan drug designations for these lead drug candidates. The product pipeline is growing in a very manageable fashion. We have the infrastructure to grow the pipeline and as you can see from the clinical trial point of view, once we finish the plasminogen and finish the IVIG, the other one kicks in, so it’s not necessarily a straight line increase of clinical trial cost as we are actually developing those products sequentially.
Partnering activities, as Greg mentioned, very much on our mind, but as we are advancing the value of these assets are increasing. Both on our plasma derived and our small molecule drug candidates are attracting a lot of discussions and we can expect – we want to do what’s right here for our shareholders, so it’s very much part of the mix in our strategy and continue for good infrastructure growth.
I guess at the AGM we will update everyone as to our strategy regarding the marketing organization. We foresee putting in place in the US, again launching a product like plasminogen requires a conscious approach, as I call it. This is not an exhaustive marketing sales for us, but much more one that involves medical liaison and work with healthcare specialists, payer groups and the patients, so more on this in few weeks when we explain our plan to have boots on the group in the US and preparation of the launch for plasminogen.
So, operator, perhaps we could open the lines for the question-and-answer period.
Certainly. [Operator Instructions] Your first question comes from the line of Alan Ridgeway from Scotia Bank. Please go ahead.
Hey, good morning, guys. Thanks for taking the questions this morning. Maybe I will start on the clinical side. Can you guys talk to us a little bit about the Alström study, what exactly you guys are looking at in this study, what you are measuring, what the end points are and maybe so what we have a bit of an idea of what to expect when you could start reading out some data here in the next few months or so?
Yes, John, I was going to say, my answer would be simple, so we are measuring everything, but I will let John be more specific.
Yes, Pierre is correct; we are measuring all of the above. Because of the anti-fibrotic effects and the anti-diabetic effects, we are looking at both those areas very closely. For the fibrosis we are looking at MRI of the heart and liver, biopsies of skin, we are looking on the anti-diabetic side very detailed studies of glucose and insulin metabolism that sort of effects that we see in animals in the relatively short space of time.
So one of the issues we had when we were discussing this with Ethics Committee was how many investigations we were doing. The principal investigator pointed out the complexity of this syndrome. As you’ve seen, it involves many, many organs and pointed out that what we are doing is not a lot more than the conventional studies done on these patients once a year when they come to the specialty center. So we will be able to look at these patients going forward, but we will also be able to look back and see what effect we’ve had on their previous condition.
So there are long term histories in relation to some of the MRIs for the heart and liver and maybe even some historic biopsies on the skin?
Yes, these patients are looked after one specialty center in the UK which looks after both the kids with this condition and then when they get older, they transfer to the care of an adult physician, but it is all the center. So we’ve got huge amount of detailed history in these patients.
Okay, great. That sounds very exciting. On the C1 trial, the C1 inhibitor trial and on the AAT trial, the Alpha-1 trial, what are the trial lengths for those two programs that the regulators are asking for? How long is the follow-up?.
Well, they are pretty short. In the case of Alpha ‐ 1 Antitrypsin it is a little bit more straightforward, Alan, because it’s clearly a follow-on with a non-inferiority protocol that very much all companies follow, so it’s PK with a CT scan, 12 week exposure, cross over trial, so it’s really, really straightforward. We expect about same, although we have yet to meet with the FDA with C1, but our product is actually a very purity and high yield. So in the case Alpha ‐ 1 Antitrypsin, our product has the high yield that’s quite similar to what is on the market. In the case of C1 we have, let’s put it that way, different product, we have a higher purity product. So we expect the FDA to not ask us to do things to prove its safe because it actually has a higher purity, but we will report back after our pre-IND meeting with the agency.
Okay, great. And then maybe just the last one for me. On the randomized studies or the placebo controlled studies for PBI-4050, I guess there is four of them planned now. Can you just give us ballpark patient numbers as far as what the size of each of those trials are maybe for the chronic kidney, the IPF, the CFRD and the scleroderma?
Well, in the CFRD, it’s about 90 patients. These patients would be randomized on the 4050 and placebo but based on three different level of being a glucose intolerant pre-diabetic and diabetic. Okay, so these are very well characterized patient profile, so it’s about 90 patients overall for the CFRD. You heard John talk about probably they need to have a smaller study than expected to have a sufficient power in the Type 2 diabetic placebo control. Metabolic syndrome Type 2 diabetic metabolic syndrome I think we are still working right now on using our open label data to challenge our original assumption on the number of patients. So I guess we will update everyone in few weeks from now.
The other two again we are filing with the FDA and the other two protocols are going to be designed in a way that we want to establish after six months or so of drug exposure that there is a trend shift or a clinical trend that we can then enroll more and expand the study from a Phase 2 to a Phase 3. So this kind of adaptive design is welcome by the FDA, but then it provides different answer depending on where you are in the trial. You could start a trial with a 100 patients, you see a trend and then you are allowed to enroll more and that study Phase 2 becomes a Phase 2/3, so once we have full response from the FDA on our adaptive clinical trial design, which we know they support, we want to have a biostatistician of the FDA to concur with our own, then we will be able to provide more detail on that. John, you want to add anything to this.
No, I think you’ve covered it very well. Thank you, Pierre.
Your next question comes from the line of Doug Miehm from RBC Capital Markets. Please go ahead.
Guys, this is Joe on [ph] for Doug here. Thanks for taking the questions. First could you elaborate quickly on some of the implications from the reorganization of the intellectual property of your small molecule segment kind of how that may affect things going forward?
We have looked carefully at how the group needs to expand to be successful with this program and it's clear that we saw some efficiencies in leveraging our infrastructure in the UK. And because I mean there is a big market out there in Europe and that’s certainly a place where we could actually leverage our infrastructure and create some synergies within the existing ProMetic structure. So I would say that one of the first thing to bear in mind here that reorg is one that leverage our existing structure and therefore create synergies and efficiencies. Obviously that comes with the added bonus of additional tax efficiency because this reorg as a result of our restructure provide for a more efficient tax treatment upon generating revenues. I think Greg could expand on that but I think that depending on where we [Technical Difficulty] is going to be between 18% to 10%, as low as 10%.
That’s a sizeable swing and I think we can follow up to the extent that there is some modeling you’d like to do but I think that it can be a significant advantage to the company as we look forward to the day in the not-too-distant-future where we're driving profitability out of these marketed products and the geography where we locate the IP and licenses and taking advantage of particular structures is the appropriate thing that you’d want for us to do.
And then second question, so how do you expect things to grow going forward, and we haven't seen any 2016 guidance so far, so do you have any you know at least want to highlight in terms of growth for this year?
I think we'll update the group around the AGM time, we expect our product sale by separation to still this activity segment to still be strong but we also expect this year to have a much more color around financial transaction and licensing agreements. There are some of those assets that are becoming quite ready for such move. So it's going to be a plan, so we can always count on that background growth of our bioseparation business. As we said before and as you can see lumpy from quarter to quarter but growing certainly as it is evidenced by Greg’s presentation. But I can foresee that this year and this is where the forecast is more difficult to predict based on revenue recognition of some transactions sometimes when we involve license fee or funding, but there will be substantial in my mind in terms of what ‘16 has for us. So more around the AGM time on that one Jim.
Your next question comes from the line of Neil Maruoka from Canaccord Genuity. Please go ahead.
First question just on IVIG, I mean this clinical trial has been a little bit slower coming than what you’d hope a lot of it out of your hand but I think from our perspective, we are expecting the enrolment to be progressing a little bit faster, have you encountered any challenges there in recruiting patients?
No, no, no. We are not whatsoever. I mean, there were some delays and back and forth when we filed IND and quite frankly we took a hit financially somehow in keeping all the sites active and they're doing everything we could to have business as usual short of enrolling not enrolling but short of converting patients on our products. So as you appreciate, this is a non-inferiority trial and as part of the design, patients have to be on a commercial IVIG for a minimum of three month period before crossing over to our products and follow that for 12 months. So, we maintain all of that life, so there is absolutely no delay on the enrolment. In fact enrolment is doing very well, where we’re earmarking this as a simple tool referred to benchmark Neil, completion of enrolment would mean then there will be in good position to file the DLA as planned for a launch in late second half of ’18. So that I think we’re honoring our previous guidance on that front.
And just on R&D, your manufacturing at least in 2015 from my understanding consists a lot of, sorry the R&D consists a lot of the manufacturing and clinical material and that was a significant component of the R&D spent last year. How should we look at that for 2016 and can you provide some guidance as to how much you expect to spend an R&D for this year?
Well, I mean it’s an interesting question and thank you for it, I mean it’s just quite a flat line but almost because now you have an infrastructure that is there costing money whether you do 2, 5 or 6 bucks, right so. There are some variables costs but for the most part your infrastructure in Laval, the infrastructure we’re putting in place in Winnipeg have a ramp up there but overall that infrastructure is pretty much not something that you will see grow substantially, it is capable of handling all the program we’re talking and with cost almost the same whether you do nothing and watch paint dry or do what we’re doing. Now the variable cost is what we outline is when you start hiring consultant, CROs, clinical sites, and that's the variable cost that is incremental year over year given the number of products in the clinical stage and/or the number of trials ongoing.
So that's why we chose to highlight specifically the clinical trial that has been - people tend to think that they - I mean they’re quite low when you look at the value that such low investments can create, it's almost embarrassing but that’s what it is. We do not have to spend a lot of money to validate an non-inferiority on the plasma derived product and it's very low regulatory risk and as you can see we are cautious in using a very systematic approach to prove PBI‐4050 efficacy in humans, increase the value, enable us to move forward with lower risk and that will favorably keep everybody informed as to what the pivotal studies in the space represent and again on that front several options ahead of us that are so. Hope I answered your question?
Can you provide a bit of range as to how much you expect to spend overall in total on R&D early next year -- this year?
Well I think it's, it’s certainly closer to $60 million, $58 million to $62 million range I would say. We had $50 million last year but already some program ongoing we are adding a bit of clinical trial, what's hard also for me here and Greg is that some of those expenses will be capitalized because hardly expensing through some equipment. So overall if you look at a overall cash probably in the ballpark range.
I think so and as Pierre mentioned, we’ll come back at the annual shareholders meeting the AGM to give you a little more color and granularity perhaps but I think expect an increase and to be modulated based upon fixed versus variable, number of programs in the clinic and again anecdotally I worked at few other companies on oncology for example $50 million spent could just represent one or two trials in this case, we have a whole portfolio for that same spend it’s a lot of value add for an efficient use of capital.
Your next question comes from the line of Prakash Gowd from CIBC, please go ahead.
I have two questions around PBI-4050. First one perhaps it's for Dr. Maron that around ongoing safety data collection. I'm wondering if you can just elaborate on collection as we go forward also just you know if you're going towards some of these more chronic indications related to diabetes, the suspect of the FDA would have a requirement for longer-term safety data, have you had those discussions with the FDA and what do you think would be required?
To answer the last part first, no we haven't had discussions on diabetes itself at the FDA yet. As I said during talk I think that to show clinical benefits we will need a relatively small study but as you are suggesting, we will have to discuss with the FDA what they need to see in terms of long-term safety. At the moment we have seen no safety signals at all, we’ve had no drug-related serious adverse events in any of the trials. We have very strong preclinical toxicology data in both rats and dogs and I would not promise you that we are going to see problems in the long term but there is nothing to suggest that we will.
When you think you might start having those discussions?
Probably the next quarter maybe you should ask my boss.
Well it's an interesting dilemma Prakash because you know let's ask ourselves collectively and I don't have the answer but that's one question we’ll have for the FDA. As we manage our glucose going down, is called diabetes but we are actually measuring the improvement of pancreas function. Are we going after diabetes or going after fibrosis in the pancreas, I mean how one wants to label the drug. We are more interested in anti-fibrotic activity because this is the underlying cause of several conditions diabetes may end up being the kind of backstop easier indications to secure faster I’m not sure about fast because of the requirement of longer trials fir safety purposes. But then step back and look at what else we’re seeing when we’re tweeting those metabolic syndrome type-II diabetic patients, everything that people worry about is a drug, there is a drug increased cardiovascular risk. Well guess what we’re reducing it. Does your drug increase ototoxicity well guess that we’re used liver enzyme, we reduced fibrosis in the liver, okay. As your drug have any renal ototoxicity, well guess we reduced fibrosis in the renal, the kidney.
So as we’re building our file here we are also building our case of a drug that is rather unique in its mode of action. We did have a meeting with the cardio renal division of the FDA who were concerned that if we enroll patients with chronic kidney disease and type II diabetes which is the plan by the way diabetic neuropathy or diabetic chronic kidney disease patients with type II disease, the agency ask us to make sure we would monitor very closely to avoid any case of hypoglycemia in those patients. Well we have none, those patients do not have hypoglycemia right now. So that's also another safety signal that the FDA will feel very comfortable. But we don't have hypoglycemia as a safety signal but we reduced glycated hemoglobin to the same level as the product that are commercially available. So it's now interesting because we will have to meet with endocrinology group at the FDA. We've met already with the long division for IPS which are very favorable for allowing the drug to move forward in this add-on study and the cardio renal division. So, we may end up having the entire FDA looking at the drug eventually but it's very promising. I think as John pointed you know we are happy to see biosignals, we are happy to see efficacy that is not only specifically significant but comparable to improved drugs, albeit the small number of patients and what is also quite comforting is it is a very well tolerated, no patients have dropped out of the trial because they couldn't tolerate the drug and this is something that we seen in IPS. For example, IPS is a challenge for patients to see whether they can tolerate currently commercial therapy, commercially improved drug. So very promising program Prakash.
Now, certainly it definitely is. So maybe it kind of leads to the second question I had again on 4050. It’s around your clinical program strategy and I guess your multiple indication strategy that you're referring to on slide 20. Can you tell me to what extent is your multiple indications strategy being driven by some of the discussions you're having with potential partners and which indications would you say are more higher level with those partners?
Well it's a very good question I mean a part of my answer and I can’t disclose it because of some confidentiality nature but some of the general statement I will make is it colors the reality. Idiopathic pulmonary fibrosis for instance is a very difficult condition. However it is a condition that the regulators have approved two drugs. They’ve approved two drugs that have some benefits and we outperform those two drugs into clinical model. So there is you know an interest around that because it is a defined pathway for approval. We have pretty good probability of outperforming the other drug at the very least perform equally to the other drug and therefore ITF could very well be perceived to be an easier indication to grab. However it will take a while the ITF is a study that takes while to show the progress minimum six probably up to 12 months to show the progress. So there are some other indications which are not smaller in size scleroderma for example is certainly not smaller in size you're talking 300,000 patients with scleroderma that’s double the size of ITF. This scleroderma uses not as large as scleroderma but it is in the 100,000 and evidence of efficacy could be achieved faster.
So we’re looking at different indications because they are supportive of each other. Sometime the same specialist, the same KLO look after those patients and it's very interesting to see how the dynamics currently lead everyone to realize that our drug actually is working at the core of the fibrosis process and how casting the net around those indications make it manageable for us. The long and the Holy Grail I would say Prakash is probably in the kidney - chronic kidney failure and diabetes but these are trials that again will require some time before you show evidence of efficacy compared to standards of care. So, these indications for us perhaps a regulatory pathway for approval of less resistance and/or decent partnership accounts decision of, do we keep some indications for ourselves partner the big one, big indications with pharma. There is also follow-on to be PBI-4050 that will join the pack as well and provide us with the ability to consider partnering or licensing out different franchise, different pathologies. We have a lot coming here, so 4050 right now is our lead champion but there are others right behind and we will be technical in clinical stage by the end of this year, so stay tuned on that front too.
Your next question comes from the line of Christopher Lam from Paradigm Capital. Please go ahead.
Just wondering if I can just jump back to the Winnipeg plasma collection center and you said better than model for potentially setting up other centers, wondering if you can share some more thoughts of that in terms of what are my costs to set up another center, the regions you’re thinking about and potential timing?
The intent for us has always been to have a combination of relationship with existing plasma collection companies with whom we collaborate right now and also have our own centers. We are interested in specialty plasma, so plasma that you can improve, select, vaccinate donors so you can also focus on some hyperimmune programs. Having a center that is licensed by Health Canada, FDA, and EMA and allow us to clone our SOBs and blueprint I call it more efficiently. So when you open a center, you can do everything right but until you’re inspected you cannot use a plasma that you're collecting and it's a far more expensive cost. Somebody starting a center right now would cost an average of $5 million per center. And will much as couple of years, so having one already that is licensed is derisking the whole operation and reducing significantly the cost to set the rollup. But I think going forward by 2020 we are looking at having 75% of the plasma we would process or the sales of our biopharmaceutical products 75% acquired through take or pay agreement with existing collection center and about 25% with our own in-house plasma collection center, in that range.
Can you talk about I guess the average cost per leader versus buying in the market and what you can get from the own collection centers?
Well, it's an interesting question I would say that it is something that we don't worry too much given our yield advantage and the nature of products we’re focusing on if we were only on commodity products, we would be as eager as the larger companies in the field that are seeking to be fully integrated for the most part because their margins matters much more - margins matters to everyone but much more significantly. A center that you own may not necessarily provide you with cheaper plasma, you have simply better control on certain key programs and you need a critical mass of centers to actually make good use of your analytics and logistics. So I would say that the average cost is in the range of $150 US right now and if you look at a company like Grifols who have several of their own analysis center, they report that that cost reduced maybe to 120 when they processed themselves versus spot price or contract prices for plasma collection centers. For us, these differences are rounding the similars.
Maybe just another question just on Fibrinogen, can you just update us and remind everyone where the status is regarding GMP grade cells?
I mean this one is pursuing several discussions as you know there is two type of opportunities here, those who are developing products and therefore require small amount right now but looking to integrate our Fibrinogen in their products. Those who have existing business may have to go over new clinical trial to show that our [Technical Difficulty] is by equivalent to the one they used. So stay tuned on this one by far the value for Fibrinogen is going to be the one used as therapeutics but we look at this as contributing earlier as well. So it's something that will abate during the course of the year in this year.
Okay then just my last question on plasminogen. Are you continue to use this plasminogen in other compassionate use cases and do you have any other successful cases that you’d want to mention?
This was a test – this case is on the main case basis it's very unique for few countries in the world Germany being one of them. So, other than having that genetic complication that stars lined up that day with everybody collaborating in Germany, Custom and so on. So, it is something that we can entertain a little later more profusely. Right now, we’re really focused on executing on our clinical program, making sure we deliver data, get our DLA filed. That’s our objective right now. We have a lot of request, that’s right in the center and it’s comforting to know that for those patients, the solution is about to come for real. But we are really right now focused on closing that pivotal trial and finding the DLA.
Your next question comes from the line of Sanjay Jha from Panmure Gordon. Please go ahead.
Hi, guys. I don’t have many questions left, but I just wanted to get my head around -- you just mentioned earlier that you might be looking at licensing agreements this year, I’m guessing you’re talking about plasma products here?
You’re -- well, I mean we’re in discussions on many fronts. I mean, there is interest for most of our product assets and it’s for us to make the right move and the right decision for where we’re going and growing as a company.
So with that in mind, could you sort of give us some update on the [indiscernible] project? Are you still expecting to come on stream in 2017?
Well, they have made a lot of progress on the construction of their building. We’re meeting them on a biweekly basis almost and the interesting thing with this group is obviously their interest to take part of our growth story and supplying us with additional capacity. So we will update everybody on the progress at the AGM, we’ll have nice pictures of their facility and so on. So, it’s clear that our strategy and focus is to advance the clinical program because that in turn then drives the revenue and the value for any other facilities including theirs.
So we’re collaborating on the clinical program on IVIG, they will initiate an aspect of the IVIG clinical trial that they have to do to get approval in Russia. So there is a lot of joint activities there, programs that they’re developing on their side, as you know, coagulation factors are being developed by them and shared on a global basis. So a lot of activities, but right now, they’re kind of below the radar, because we’re not driving them and they will pop on the radar when they hit the clinics, but again the clinical trials on that front is funded by them. So more and more to come. But we’re moving on with them.
And could you also tell me what do you see at the current planned increase in headcount in 2016, based on the programs you have already sort of planned and how far you can see?
I can take that one, Pierre. Sanjay, thanks. So the headcount, we added roughly 70 employees in 2015 and the total is roughly 270 at the end of 2015.
Right. And what do you -- I mean, have you got any targets for 2016 that you need to do?
We haven’t disclosed the number that we’re hiring this year, but it will -- I think in the context of maybe more or less 50, give or take, Sanjay. I think that level of precision is going to be month-to-month based upon our internal needs, marrying that up with our programs.
Just one final one, I think Pierre you earlier mentioned troops on the ground in US, I’m guessing you’re referring to kind of when Plasminogen becomes, when you launch it. I mean, is that -- are you thinking of hiring people or are you using third parties, what’s the thinking?
Well, the thinking is really to have our own dedicated salesforce. But it’s not a typical salesforce, I call it all kinds of things make everybody smile, but it’s medically own sales person. We are already working with consultants to put that in place, but we intend to have our own group. I mean as you can imagine, when we look at this, and you look at the PBI-4050 slot machine, Sanjay, and you start adding the other compound, the other drugs, you start looking at, well, guys, it sounds like you’re having several drug assets and/or indication that revolves around our launch and/or revolves around the endocrinologists. And I think that you shouldn’t see be surprised to see ProMetic evolving into becoming a recognized, to be strong franchise in the specific therapeutic area. Right. And so when we say boot in the ground, it’s also with the intent to have work prepare actually work for the group and other products, right. It’s not -- Plasminogen being the front runner, but definitely going to be hospital based, right.
Okay. All right. Thank you, gentlemen.
Your next question comes from the line of Jim Belin from Aldebaran Asset Management. Please go ahead.
Thank you for taking my question and congratulations on your progress. I want to ask you today about trading activity in your stock, my clients and I are long term shareholders, the last big part of our position was purchased in 2012. But as a biopharmaceutical company, expect there to be volatility in the share price. If there have been days when the market has been hit by a blizzard of 100 share lot sale orders, it’s almost as if there’s been a concerted effort to cap the share price and on these days, the share price might only go up one penny. That kind of trading does not strike me as something that would happen in a truly free market. And in other days, when it appears that there has been a concerted effort to drive down the share price in order to trigger stop loss orders that have been placed by small retail investors, my question is this, is there anything that ProMetic can do to make the Toronto Stock Exchange aware of these abusive practices by people who are shorting your stock?
Well, thank you for your question and comment which we share. We -- and I am probably the oldest longest shareholder and how many times did we raise complaint, raised the flag, pointed to these types of practices. And most of the time, if not and I would say -- but I hate to use the word never and always, I would say 99% of the time, we get back, we don’t see anything abnormal in the trading. I guess because they see it any other company that they’re monitoring. But it’s frustrating, computer generated trade and Frederick Jamar [ph] as you know is our IR specialist in the company is on the line all the time with surveillance asking those questions, what the heck, what’s going in and it’s -- I’m not pleased nor proud to report that doesn’t seem to be much helped on that front.
Okay. I will be interested on that, but I’ve been investing in Canadian stocks for over 20 years and some of the things that I’ve seen going on in ProMetic is just outrageous. So just last week, there was someone who was through in a 1 million share sale order, like 2 minutes before the close. That’s someone who is trying to drive the share price down, that’s not someone who is trying to get out of the position like a normal, someone profitable way?
Absolutely. And we can start speculating which is something we like to do between the office and the parking lot. Like funds and or managers or shareholders who are playing on the side of creating the scare of an iceberg and inviting people to sale and collecting the shares on the other side cheap, I mean hedge funds are experts at these type of tactics. I mean, we’re building a company here. We’re focused on fundamentals. We have somebody monitoring this all the time and complaining when we share the same frustration as you. And unfortunately, some of our regulators come back to us saying I don’t see anything abnormal here. So we’ll keep calling and complaining. But all I can tell you is that the only way, the biggest solution for us is keep executing and taking the train beyond that point. It’s not something that will ultimately affect the long term value and a few fundamental shareholders like you appear to be and I welcome you in our club, but I think that we will prevail despite these shenanigans.
I appreciate your answers. Thank you.
Your next question comes from the line of Roger Benson from Number One Corporation. Please go ahead.
Hi, there. Two quick questions. We have in the company 7 designated orphan drugs, now they’re not approved yet, but in my opinion, they will be, because they’re all derived from plasma and natural substances and so on. Now, there is a lot of value here. Orphan drugs don’t trade very often, but when they trade from one company to another, they sell for about $4 billion a copy. As far as I know, none of the analysts who are following your company are focusing on this at all. I mean, 7 times 4 billion is 28 billion, that’s 14 times the market value of the whole company and it gets ignored by the analysts? Why do you suppose that is?
Yeah. It’s interesting comment, Roger. Good morning or now good afternoon actually, we’re now 12:30 and thank you for your comment and question. I concur, I mean quite frankly, Roger, the companies that have been acquired at the multiple you’re talking about, we keep hearing the market noise better but then they are acquired as a multiple of what they were trading at. So the strategic value that you’re implying, ProMetic will gain, it will get there. We’re structured in a very interesting way, where some of those orphan drugs could be spun off and sold and create huge cash events. We have a unique structure here, unique ability as you say to advance several of those orphan. So I have no doubt in my mind that these values will be recognized eventually, but somehow, you have to also ask yourself where were the analysts when company was valued at 4 billion on the market and then company X come and buy it for 11 billion. So it was right, it was wrong, there is a strategic value somehow for those orphan products that the market is now willing to pay the trade every day. So that could be one explanation somehow. But we’re also a bit early in the game. As we’ll progress every quarter, I suspect analysts will have adjusted their discount factor, the discount ratio and I completely expect as we perform, we need to perform, continue to perform that the analysts will see a need to reflect and update their targets.
Great. And the other question is somewhat similar, there is a company called Intercept that has made some statements earlier this week about their potential drug for fibrosis. Now, their drug as far as I understand it, does not cure fibrosis such as we believe our drug does, their drug slows the rate at which people get fibrosis. That’s all it does. It doesn’t cure the people and yet, the company has got a market more than 50% higher than our market value. We have all these other products as well. Their stock is today for example up CAD6 and people think this is wonderful and it’s got virtually nothing compared to what we got. What do you think about that one?
Well, I think they’re slightly more advanced in their clinical program compared to ours. There have also been speculation around that name that they were interested in being purchased. So there is probably some front running speculation that is probably not related to the real market value of the product, but more about the potential takeover scenario here I would say. There’s been a lot of volatility with that company as well and I’m not going to convert myself into a biotech analyst, but they seem to have a sound program. We’re completely biased here, we see 4050 as being a far superior product, but that us believing in what we do. All we can do Roger is kick everybody out of the ballpark and prevail. But I think in this case, as you know, we’re not for sale and we’re not spreading the world that we could be up for acquisition, so there is no such activity on our stock, but there is on theirs. So that’s the only big difference they could see here.
Thank you very much.
Your next question comes from the line of Darshan Patel from Hybridan. Please go ahead.
Hi there, guys. Thank you for taking the questions. I’ve got two questions for you. Would you think the rough cost of PBI-4050 in the Phase 2 CKD trial and pivotal IPF trial would be in H2 ‘16?
I think that right now, as we said, we will be in a better position to provide that guidance around May during our AGM. By that time, we will have had feedback from our IND filing and we’ll be in a better position to explain if and how much it could impact and I would say even just Q4 probably not even Q3. That’s why we’re saying that with confidence that most of the material aspect of any of those two trials would be ‘17, ‘18 event. I mean you still have, you file your IND, you get your IND cleared, you still have to have your ethical review committee on the various sites that you’re going to operate. You get all the meeting lined up, you are not spending a lot of money still. When you start enrolling patients and you sign those sites, this is when you start spending more money. So I think that that’s how you can imagine that it’s very latter part of the year and mostly impacting ‘17, ‘18.
Understood, thank you. And another question, on your slot machine analogy that you said, do you expect to fill in the board with other projects or do you expect to add more rows?
Well, I mean there is a limited number of organs obviously. I think -- I do expect one more that we’re really eager, we’re waiting for new results and confirmation results to give us all the confidence before we go live with this, but again, we’ll fall smack in between all the conditions that we’ve just been talking about and you’ll see the connection between all those joint, I mean, all those conditions are called different things, but they’re seen in so many different patients. As we’re cross referencing and cross validating in different models that, yeah, the drug worked also in those models or those conditions, then it gives us the appropriate ammunition to request for an orphan drug designation and or discuss with the regulator on a new regulatory pathway. So I’m expecting not too many more organs, I would say, except the brain maybe and certainly one more row as we go forward.
Okay. That’s great. Thank you very much.
Your next question comes from the line of Barry Taylor from Webco Management. Please go ahead.
Good afternoon, there. Congratulations on Plasminogen and IVIG, it’s great to see them coming down on the home stretch. I was wondering if you had an estimated value of those two markets.
That’s a good one. The IVIG is an established market, growing at about 9% to 11% depending on the geography. It’s close to $9 billion in annual revenue now. As you know, we will sell as much IVIG that we make when we produce Plasminogen and other drugs. So we’re not going, the business plan is not to go after capturing a significant market share, but it’s certainly going to contribute a very nice 150 mil to the top line and significant to the bottom line, good companion products to our Plasminogen and other products. Plasminogen, market size varies considerably with the indications. I will not speculate on the value of the congenital deficiency, because for that, we need to be more confident on their reimbursement price.
Right now, we’ve provided guidance with the analysts that they’ve used in their model of a conservative reimbursement price per year per patient in the tune of about CAD40,000, CAD45,000 per patient. So I mean, the value of the congenital deficiency therefore could be as high as CAD150 million, CAD200 million. When you start and if we’re successful in showing Plasminogen efficacy in other indications like wound healing, now you’re talking billions, billions of dollars required and spent every year by Medicare and healthcare systems to treat those hard to treat wounds. There are a few other indications as we mentioned that we’re going to disclose in the coming weeks, months, and they’re going to be measured in billions as well. So Plasminogen, we fully expect to be a big product, not just a niche product. But we’ll have to confirm efficacy in each indication we’re pursuing. So very, very promising future for those two products.
Fantastic. Glad to see them in the home stretch. It’s great news for ProMetic.
Your next question comes from the line of [indiscernible]. Please go ahead.
Hi, good afternoon. Congrats on the quarter and I have a very quick question. This is on IVIG and I was looking at some of the materials from the Canadian Blood Services, and it looks like some of their plasma product contracts will expire around 2018, maybe 2019. I was wondering if you plan to participate in those RFPs or is it more of a US focus.
Well, it’s a very good question and we’re monitoring all those. I mean being a Canadian company, playing in the Canadian market would make sense. The Canadian and the US markets are very, very I would say synchronized in terms of value and consumption, quality standards and everything. For the simplicity of the model, we are using US as a very simple market to unload our capacity, which would not even move the needle for the big guys who are talking of 1.2%, 1.5% market share maybe, but it is very much in our mind to look at through the Canadian market and to see how we could consolidate our position here and actually IVIG is maybe not the most striking opportunity.
Products such as Alpha-1 antitrypsin, which reimbursement cost in the US makes it mostly prohibitive and most formula reason in Canada, there is no reimbursement to that product. So patients who are affected by Alpha-1 antitrypsin deficiency do not have the benefit of a product treatment that is established, reimbursed. So we’ll be looking across all products and then after that, I won’t use the word bundle, but almost strategy that has to take into account the critical mass of product offering to make sense. But we’re in Canada and we’re going to make the best use of this and to serve the Canadian patients.
Thank you. That’s all I have.
There are no further questions at this time. I turn the call back over to the presenters.
Well, thank you very much operator. Thank you everyone for your questions and long call today, almost 1 hour and 40 minutes. We really appreciate your interest. As we explained, lot more to disclose on our way to the AGM, look forward to see some of you personally and to update everyone and provide more guidance during that meeting. Thank you again.
This concludes today’s conference call. You may now disconnect.
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