Aethlon Medical's (AEMD) CEO James Joyce on Q3 2017 Results - Earnings Call Transcript

| About: Aethlon Medical, (AEMD)
This article is now exclusive for PRO subscribers.

Aethlon Medical, Inc. (NASDAQ:AEMD) Q3 2017 Earnings Conference Call February 10, 2017 4:30 PM ET

Executives

James Frakes - Chief Financial Officer

James Joyce - Chairman & Chief Executive Officer

Analysts

Brian Marckx - Zacks Investment Research

Yi Chen - Rodman & Renshaw

Operator

Good day, everyone, and welcome to the Aethlon Third Quarter Fiscal 2017 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note the event is being recorded.

I would now like to turn the conference over to Jim Frakes, Chief Financial Officer. Please go ahead.

James Frakes

Thank you, operator, and good afternoon everyone. Welcome to Aethlon Medical’s third quarter fiscal 2017 conference call. My name is Jim Frakes and I’m Aethlon’s Chief Financial Officer.

Following this introduction and the reading of our forward-looking statement, Aethlon’s Chairman and CEO, Jim Joyce; will provide an overview of Aethlon’s strategy, clinical testing status and recent developments. I will then make some brief remarks on Aethlon’s financials. We will then open up the call for the Q&A session.

Before I hand the call over to Mr. Joyce, please note that the news release today on this call contain forward-looking statements within the meaning of the Federal Securities Act of 1933 and the Securities Exchange Act of 1934. Forward-looking statements involve risks and uncertainties that can cause actual results to differ materially from those anticipated or suggested by such forward-looking statements. Statements containing words such as may, believe, anticipate, expect, intend, plan, project, estimate, or similar expressions constitute forward-looking statements.

Factors that may contribute to such differences include without limitation risk related to the company’s ability to develop and commercialize its products, the ability to fund and complete clinical testing of the company’s products, the company’s ability to raise working capital if and when needed, the company’s ability to protect its intellectual property, the impact of changing government regulations on biomedical devices and other risk factors.

The foregoing list of risks and uncertainties is illustrative, but is not exhaustive. Additional risk factors can be found under the caption Risk Factors in our Annual Report on Form 10-K for the year ended March 31, 2016 and in the company’s other filings with the Securities and Exchange Commission. For a more detailed discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements, please see the company’s public filings, all available on Aethlon’s website, www.aethlonmedical.com.

With that, I will now turn the call over to Mr. Joyce.

James Joyce

Thanks, Jim. First I want to thank everyone who called in to participate this afternoon. Normally, we wouldn’t conduct a call on a Friday, but between Super Bowl week activities in Houston and other endeavors, we really didn’t have many other options on our calendar.

However, the upside of pushing out our call to today is, I can now share at a proxy related to our Annual Shareholders Meeting is about to be filed. The proxy will indicate that we will conduct our annual meeting on Thursday, March 30 in Houston, where we’ve been conducting the first FDA approved study of Hemopurifier therapy. The meeting will start at 3:00 PM Central at the Houston Marriott located within George Bush Intercontinental Airport.

Additionally, as we are closing on the completion of our Houston study, I want to share that we’ve initiated a dialog with the FDA related to post-study guidance on the market clearance pathways, where Hemopurifier again highly virulent viruses for which it is not feasible to conduct controlled human studies. As previously shared, we believe we have an unrivaled collection of data against virulent bioterror and pandemic viruses.

We are also seeking guidance specific to the 21st Century Cures Act, which was signed into law in December. This law establishes new rules that support the priority advancement of medical devices that target diseases that are not addressed with FDA-approved therapies. For those not aware, most viruses that are known to be infectious to man are not addressed with an FDA-approved therapy.

We are also seeking guidance on protocol design for studies against viral pathogens where it is feasible to conduct controlled human studies; the possibility of an expedited access pathway and the requirement for initiating our first human treatment study in oncology related to reducing the presence of cancer promoting exosomes.

Regarding our study in Houston, I’m pleased to report that our clinical team has not reported any device-related adverse events in subjects who met our inclusion/exclusion criteria and were treated in the study. Our clinical team is now working to identify the last patient candidate. At completion of this study, we will begin to quantify the capture of viruses within our Hemopurifier during individual treatments.

I also have a few other updates. On January 11, we disclosed that we initiated a study to validate the capture of viruses associated with increased mortality in immune-suppressed sepsis and organ transplant patients. The study was designed to validate the in vitro capture of Cytomegalovirus, Epstein-Barr virus, and Herpes Simplex Virus. We have since validated the capture of each of these viruses, which further reinforces the broad-spectrum nature of our technology. We also had preliminary observations relating to the simultaneous capture of all three of these viruses.

Additionally, we also disclosed on January 11 that we initiated a collaborative study with the University of Pittsburgh Medical Center to detect the presence of these same three viruses in blood samples of intensive care patients who were suspected to be Viremic. At the time we referenced that 10 subjects had been enrolled in this study. At present, we now have samples from 15 study participants.

And finally, on January 25, we announced plans through our Exosome Sciences subsidiary to conduct what may be the largest clinical study in former NFL players, as it relates to a candidate blood test to detect and monitor Chronic Traumatic Encephalopathy, otherwise known as CTE in living individuals. At present, CTE is only diagnosed through an analysis of brain tissue after death.

To support this study, we kicked off an education and awareness program at the Super Bowl in Houston last week. Based on the response, I would say, the kick off was an overwhelming success. We conducted more than 35 interviews with the media, including CBS Sports, the NFL Network, Fox News and a multitude of radio stations, including one interview on WFAN in New York with my former teammate and roommate of University of Maryland, Boomer Esiason.

When we returned this week, we’re pleased to see that our CTE-related endeavors were also discussed in a story provided to subscribers of Wall Street Journal’s Pro Venture Wire. The only trip we also had the opportunity to meet with numerous former players, including the heads of three different NFL Alumni Chapters as a means to enhance the enrollment of our study, which we expect to kick off in the second quarter.

You may recall that, we previously were invited by the Boston University CTE Center, who will evaluate biomarker discovered by our researching team. The study was part of the first NIH funded research program to study CTE. Recording the term Calzone for our biomarker and we believe that could be associated with CTE and other neurological encephalopathy involved an abnormal accumulation of tau protein in the brain. This includes Alzheimer’s disease.

In the study, we measured TauSome levels to be approximately nine times higher on average in former NFL subjects, as compared to same age group controls. We also observed the high TauSome levels correlated with cognitive decline.

We’re now analyzing observations related to the correlation of elevated Calzone levels in both NFL subjects and diagnosed Alzheimer’s patients. If we can demonstrate a correlation, we might feel a qualified former NFL players to participate in the emerging pipeline of anti-tau drug therapies that are currently being evaluated in Alzheimer’s patients. We’re successful. We can potentially cut years of the timeline to get these therapies to individuals with a high-risk of suffering from CTE and we think this would be a significant value.

Now, prior to closing, I want to point out that, we’ve never been more clinically advanced nor have we had such a breadth of opportunities, and I look forward to answer your question during Q&A.

With that said, I will hand the time back over to our CFO, Jim Frakes.

James Frakes

Thanks, Jim. At December 31, 2016, we have a cash balance of approximately $629,000. That cash position combined with capital generated under our $12.5 million at the market financing agreement, based on our S-3 registration statement will continue to be used to fund our FDA-approved feasibility study in the U.S. into our operations.

This arrangement will allow us to raise capital at our discretion at prevailing market prices. We raised approximately $294,000 in the December quarter through the aftermarket financing arrangements and are continuing to use it discreetly. We have approximately $11 million of this arrangement available to us currently. We also raised $577,000 in the December through the issuance of convertible notes.

Our consolidating operating expenses were $1.24 million in the third quarter of fiscal 2017 compared to $1.39 million in the prior year period. This decrease of approximately $150,000, or 10.8% was primarily due to a reduction in our G&A expenses of approximately $200,000, which in turn was partially offset by increases in professional fees of $29,000 and in payroll and related expenses of $21,000.

That $21,000 increase in payroll and related expenses was due to $255,000 increase in our non-cash stock-based compensation, which in turn was partially offset by $234,000 decrease in cash-based compensation due to lower headcounts.

The company had other income of $22,000 in the third quarter of 2017 compared to other expense of $149,000 in the prior year period. Overall, the net loss for the third quarter of fiscal 2017 was $1,206,000 million, or $0.15 per share compared to a net loss of $1,217,000, or $0.16 per share in the prior year period.

For a more detailed review of movements in our operating expenses and in our balance sheet, I would like to refer you to the earnings release that we quit out after the market closed today, or to our Form 10-Q, which we will file later on today. And in that 10-Q on our statements of cash flows, we will see that the cash used in our operations decreased by approximately $650,000 between the nine months ended December 31, 2015 and the comparable 2016 period, as we continue to monitor our expenses closely.

That cash flow statement shows that we have an average operational cash burn rate of approximately $284,000 per month in the nine months ended December 2017 compared to an average cash burn rate of $356,000 per month in the comparable 2016 period – I meant to say, it’s December 2016 compared to December 2015, my apologies.

I would also like to remind you that we will file two perspective supplements in the next business day or two that related to S-1 registration statements with the SEC, we registered the security that we sold in our December 2014 and June 2015 equity offerings. These perspective supplement filings are not related to any current fundraising or insider sales. They are merely a cover sheet on top of whatever material filing that we have made, in this case, today’s 10-Q filing.

And now Jim Joyce and I would be happy to take any questions that you may.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first questioner is Guy Granes [ph], a retired investor. Please go ahead.

Unidentified Analyst

Gentlemen, thank you for taking my call. I have a few questions, hopefully, several of them are 30-second variety. I want to confirm Aethlon ownership. Does Aethlon still own 80% of Exosome Sciences, or are there any real or contingent obligations to dilute that who owns the rest, and are you talking to any outside firms that might be expressing interest?

James Joyce

Guy, I appreciate your question. This is Jim Joyce. At present, you’re absolutely correct. Aethlon Medical still owns 80% of Exosome Sciences. And at this point in time, we continue – we plan to continue that ownership position, but will consider other investments as we move forward.

Unidentified Analyst

Okay. If I can proceed tell me when to stop, I’ve got four, one you’ve already close to answered. The technical question on TauSome. There were quotes regarding concerns and plans to address them that TauSome hadn’t been demonstrated to be brain-derived, is there progress on that, similarly tumor-secreted exosomes, are there any questions about that they are indeed that?

James Joyce

Yes. So they’re not – TauSome is a tumor-derived exosomes are two entirely different things even though they are both biological markers, as it relates to tumor-derived exosomes, they both are biological marker, as well as a therapeutic target. In regards to TauSome, we are doing work and validate that these particles are brain-derived.

But we’ve seen, I think, as we noted from the data, there’s a tremendous correlation between cognitive decline Calzone levels. And we’re currently working to show that TauSome levels in Alzheimer’s patients, which is another form of tauopathy are also elevated in similar nature as compared to controlled subjects.

Unidentified Analyst

So that the outcome be the indicator that it must have come from the brain?

James Joyce

Guy, you could assume it’s brain-derived, but…

Unidentified Analyst

No one is giving you hard time about that is my thing.

James Joyce

I’m sorry, Guy, what’s that?

Unidentified Analyst

No one is giving you hard time about it.

James Joyce

Okay. Well, you didn’t think so. So I appreciate your question.

Unidentified Analyst

No, I heard the conversation a longtime back.

James Joyce

Okay.

Unidentified Analyst

If I may proceed with the question on the U.C. Irvine 2015 study?

James Joyce

Sure.

Unidentified Analyst

That thing you jumpstart into a really hot topic and you were targeting five tumors in each of nine cancer types. And it seems like a real easy study for the participants in terms of just giving a viral drug. How is data collection going on there? When might we see the first available data and initial cross-sectional information?

James Joyce

Yes, in that study, Guy, nine individuals have been enrolled. At the time, we initiated that study, we were trying to learn things that would help us really kind of hone the focus on appropriate oncology targets, as it relates to tumor-derived exosomes.

I will say the initiation of that has been significant evidence in scientific journals are related to some specific indications, especially as it relates to metastatic melanoma blood cancer, ovarian cancer, where these particles are being well defined, not just being immune-suppressive in cancer patients, but also kind of setting the stage for seeding the spread of metastasis in cancer patients, which affect – which contributed about 90% of cancer deaths.

So a lot of the equation we originally sought to collect in the study, it’s become known. When we first started our studies, most people thought these particles were just cellular debris with no biological function of we thought otherwise. And when – we’re pleased to see how well validated these targets are.

So we no need to sit down with FDA. Obviously, we have to complete our current study when we get a chance to discuss with FDA what the requirements are to be able to enroll cancer patients in clinical studies.

Unidentified Analyst

So this gets to the question of standardization, which is my next perhaps maybe last, which is that, we’re seeing NIH studies that are novel approaches to diagnosing Alzheimer’s and predicting progressions. But we’re also seeing studies and standardizing biomarkers.

And it just seems to me that the harvesting patent that you guys have – if the TauSome, it’s present in the heart of the standardization progress that I believe is NIH focus and maybe other organizations, I’m not aware of, it’s going to be hard to be in the front of being chosen first to be the biomarker for generating good collections enroll easy in future clinical trials of further therapies? So how are we doing in terms of the biomarker standardization? Other people using the harvesting patents, et cetera?

James Joyce

We haven’t licensed that patent as of yet. NIH, it sounds like you’re familiar with the breadth of that patent and I appreciate the question, that is certainly as the market unfolds, that’s a growing opportunity. But in standardization, here’s what we recognize about exosome and biomarkers and specific to the TauSome biomarker. They’re really stable. And then we can quantify their presence in circulation.

So we think, as you know, we come from a viral fields, where we think about viral load as an indicator of disease progression. Guy what we would like to think that this would be something similar, where TauSome level would be an indicator for disease progression, as well as a response to therapy. And again, we have some observations. We still need to do a further analysis.

But this marker could be associated with tauopathies in general not just CET, but Alzheimer’s, some forms of Parkinson’s Disease and other tauopathies, where perhaps this could be an effective mechanism the risk can monitor in response to new therapy that advance. But we still have work to do, but we have a unique opportunity. There could be a very high profile opportunity to really accelerate our endeavors in that regard.

Unidentified Analyst

Yes. Look, I have definitely seen NIH grants that were specifically with respect to standardization of biomarkers. And if tau is going to be included, as I think, it should be as a method for the broad brush before you go to something like a PET scan, AV-1451, boy this got to be there in the business of being the standard. So I think the last which is the softball.

James Joyce

[Multiple Speakers]

Unidentified Analyst

Yes.

James Joyce

One thing, Guy, I want to point out you just mentioned something that I don’t want to take you too far under the weeds with our other participants. But you mentioned PET scan technology. And as you talk these PET scans are trying to be evaluated for CTE and other neurological conditions. I think what is exciting is, because if you understand the cost of potential invasiveness of these types of technologies, what’s exciting is, if you have a tau-related biomarker for these neurological conditions, it may be very synergistic with emerging PET scan technology, where you can look at observations related to TauSome levels as an indicator as to distinguish who should be pursuing a PET scan type of diagnosis versus others.

Unidentified Analyst

Yes. That was my softball, Jim.

James Joyce

Okay.

Unidentified Analyst

Translational psychology article just in September making resolutions lauding statements a guy is symptomatic of CTE, and it says, the AV-1451 PET scan shows multi-focal areas, retention of cortical grey matter, white matter junction considered pathognomonic for CTE and you’ve got the same thing, it’s being used right alongside of TauSome in the diagnosed CTE study.

James Joyce

Right.

Unidentified Analyst

So it just seems to me that the next step here is if diagnose comes up with some cross-sectional information that says that the mental and psychomotorability in initial cohort cross-sectional data aligns with TauSome and the broad brush and with AV-1451 PET scans on the very precise stuff that the jumped Alzheimer’s could be just like a real pressure point?

James Joyce

Yes. I absolutely agree and I appreciate your insight.

Unidentified Analyst

Okay. And so get there in standards and I’m done. Thank you very much for giving me this time.

James Joyce

Guy, thanks for your questions.

Unidentified Analyst

Sure.

James Joyce

Next question?

Operator

Our next questioner today is Brian Marckx with Zacks Investment Research. Please go ahead.

Brian Marckx

Hi, guys. Jim, since we’re on the topic of the – of CTE, can you talk about what your expectations are in terms of the design of the study. Do you expect it to be essentially similar to the first study, but larger, or do you expect that there may be some substantive differences?

James Joyce

Yes. No, it will be similar to the first study, but it should be much more efficient And as we previously disclosed, we’ve been invited to continue our TauSome testing as far as the next NIH-funded study, which is a $60 million seven-year study. But that study is looking at a wide range of information and a lot of academic information related to understanding the pathology and CTE.

And the one thing I would point out about CTE is that, this is not – it hasn’t been so long where this has been actually clinically defined as a disease. It’s a new disease. It’s a tauopathy, so there’s still a lot to be learned about this disease conditions. But what we recognized is that, a seven-year study, where this is just one part of the focus is very slow, and we recognize that if we can accelerate the process, we might be able to get folks either high risk for CTE qualified or the new pipeline of anti-tau therapies and so far in CTE.

The information team has indicated it’s – that it’s a most one-dimensional disease condition, where it’s really, really is the aggregation of tauprotein versus a multifaceted aggregation of proteins like you might see in Alzheimer’s. So what we recognized is, we have the ability to very efficiently conduct studies to enroll former NFL players to take blood samples.

We also want to look at urine. We’ve had some success. We haven’t talked about this any great extent. But we’ve had success in isolating other exosomal biomarkers from the urine and they can be very effective in identifying into these condition. So we want to look at urine as well. But as it goes back to the previous studies, we want this to be meaningful study from a data standpoint.

So we want to collect the same type of information in these subjects that are enrolled related to the memory test, psychomotor test, so we can continue to use that analysis going forward. But unlike the new study for the seven-year study, where somebody needs to commit three days of the time to participate, we recognize that we can enroll subjects take up about an hour of their time, go through a battery of cognitive tests, obtain a blood sample then a urine sample and it would be very efficient in advancing information. And with the Suppository blood samples from former NFL players who are at high risk for suffering from CTE, we also have the opportunity to potentially look at other biomarker candidates as well.

Brian Marckx

Jim, where do you expect the study to take place? Is this – well, can you use essentially sort of the same set up that you had in Boston, or is it a different location?

James Frakes

No, we’re going to take control of the study ourselves. First site location is that the Translational Genomic Research Institute in Phoenix, Principal Investigator is Dr. Ken Jorgensen [ph]. Phoenix is an area where there is a high concentration of former NFL players. You will see us likely establish a site location here in Southern California one in South Florida.

These locations are going to be driven by the concentration of former NFL players in these geographical areas. And our goal is to enroll up to 200 individuals, which would make us the largest significantly the largest such study in former NFL players.

Brian Marckx

Okay. In terms of the U.S. feasibility study, just can you talk about timelines again in terms of when you think you’ll have a final patient enrolled? And then you did talk about the Shareholder Meeting being in Houston. I assume that there’s some meaning to that. Is that related to potentially having something you talk about in terms of the results of the feasibility study at that time?

James Joyce

Sure. We’d like to think so, but it’s also driven by the fact that we have a shareholder base that’s widespread. We now have over 8,000 shareholders in the company. We have a large concentration of shareholders in the Northeast and another regions in the U.S. And we find that sort of lot of people traveling from the East Coast to San Diego, it’s a day to get here and day to get back. So we’re trying to find a more central location and based on the status of our study.

We thought Houston would be a great location. We also have other ongoing endeavors in Houston. We’ve – as you might – may have noticed when you come going to not only very active in that area not the Texas Medical Center right here in Houston, which is the largest such collection of medical institutes in the world.

So Houston took a place for us to conduct the study. One thing I would share, I think we previously talked about the challenge that in terms of study pace, which study implosion is not as important as study pace. But something that’s important to share is that, while we have disclosed that we had to change our principal investigator, we discovered that clinical nurses. It’s a very competitive market for clinical nurses in Houston.

We’ve seen them come and go as different organizations are competing for them. What slows things down. But really when this study was established, it’s important to recognize that neither FDA nor us would have envisioned a difficulty in enrolling these patients at an efficient pace. But the reality is, these are ESLD. They – so that means they have a organ, specifically the kidney that’s failing and they also have multiple other conditions, including many of them have cardiovascular disease.

So a lot of the people that we originally qualified were really we couldn’t get underneath the inclusion/exclusion criteria because of how sick they were, or if they have a cardiovascular disease, they were on ACE inhibitors, which is an immediate exclusion criteria for their participation. Then if they are healthy enough, oftentimes when they have been healthy enough to meet our inclusion/exclusion criteria, we ran into the issue that in the last couple of years, the new anti-viral drug that indicated for dialysis patients or some of them did.

so many dialysis patients that were infected with Hepatitis C, if they were healthy enough to endure a drug regimen, they initiated their drug regimens, which also affected the inclusion/exclusion criteria. So it’s often is the case in clinical studies. We have unexpected challenges, but we stay the course. Now, we’re going to wrap up this study and move forward. And the beauty of this study is the fact that, this is not a disease-specific study that provides us a next step to advance our therapy for that single disease condition.

This study tentacles out into potentially multiple disease indications going forward, and hopefully people will recognize the value of that. And it also helps reinforce the advancement of what we’re doing as a broad-spectrum, countermeasure, and our focus is to meet the objective of Health and Human Services [indiscernible] to advance broad-spectrum countermeasures against viral threats, as well as other threats.

Brian Marckx

Yes. Thanks, Jim. I appreciate the explanation. And I certainly can understand and relate to the difficulties of enrolling the study with very sick patients. Can you just talk about a little bit about the decision-making process, I think, it’s fair – maybe safe to assume that the – that you’re not going to have any significant safety issues based on the fact that you’ve gotten this far with the study, and assuming that’s the case, can you just maybe kind of just a little bit more about how you make a decision on where you go next?

Is it more, I guess, FDA-driven based on your discussions with FDA, or do you have sort of a preference on which way you go? It sounds like potentially it’s pandemic threats, or somewhere kind of in that category. But as you mentioned, it’s difficult to enroll for the patient population like that. So if – maybe you can just kind of talk about sort of how the decision-making process goes forward after the study is done?

James Joyce

Sure. Well, a lot of it is driven by dialog with the FDA and we’ve initiated the post-study dialog with the FDA and there’s really multiple pathways for us to pursue and we don’t have to choose any specific pathway. We would like to think based on some of the regional language that was originally brought forth under Project BioShield, as it relates to devices, which we’ve worked hard on Capitol Hill to get that language into Project BioShield, which then reflects throughout other government legislation.

We’d like to think that as we are a device that we can move forward based on safety and potentially based on demonstration of capture of the virus in vitro. If we were a drug mechanism, we would have to be reliant on what’s called the animal rule, which requires the demonstration of efficacy in two different animal models, which in many cases for many of these pathogens two different animal models don’t exist.

So we believe there’s a possibility to navigate forward in these bioterror or pandemic threats as a broad-spectrum countermeasure to meet the Health and Human Services goal against treating bioterror and pandemic threats. And we like to think on label indication designed for – our product is designed for the Single-Use Removal of Viral Pathogens from blood between safety and demonstration of the actual virus capture that potentially could provide a pathway.

The other unknown right now really is this 21st Century Cures Act, which was signed into law in December. And basically, if you read the language in this Act, it is very specific through the advancement of medical devices that can target diseases that aren’t addressed with FDA-approved therapy, which I mentioned earlier, most viruses aren’t.

So, what we’re waiting for right now quite honestly is FDA to get a new director and get that person in-house. So that FDA can interpret how they’re going to move forward under the 21st Century Cures Act. But this is going to have a significant impact on our programs moving forward. And then no doubt, we’re going to conclude with FDA a pathway, where we can run efficacy studies, where it is possible to run controlled humans studies and demonstrate treatment efficacy as compared to controlled subjects.

But based on our dialog, we’re not forced to make that decision as to what the indication will be today. We would rather talk through a few different indication opportunities with the FDA and let those dialogs kind of lead us to what we think might be an efficient [indiscernible] pathway.

Brian Marckx

Okay. Just maybe one or two more, if I could, I apologize for taking so much time. Do you think that potentially you could g, you could file for humanitarian use with the feasibility study data in using the IRB at the Houston hospital. Is that a possibility, or are maybe not?

James Joyce

At this point in time, I would just – I would say that FDA has given us guidance that we might want to look at it more potentially a collaborative opportunity through an expedited access pathway that if we can create instead of kind of one-off types orphan conditions that if we could create more of a cohesive pathway through expedited access collaboration with FDA.

These are similar programs through the innovation pathway that FDA got started up a couple of years ago that was part of our – it was a wonderful program that our DARPA team participated in, where you have kind of real term collaboration with FDA versus submitting a document and waiting to hear back a few months later. So if we can establish that type of pathway we really believe that that could be the most cohesive method you get kind of extensive number of indications moving forward.

Brian Marckx

Okay. All right. That’s it for me. Thanks. I appreciate it.

James Joyce

All right Brian. Thank you.

Operator

Our next questioner is Yi Chen with Rodman & Renshaw. Please go ahead.

Yi Chen

Hi, thank you for taking my questions. Jim, did you mention when you can possibly report results from the CTE study?

James Joyce

We didn’t – we don’t – we just kicked off the education awareness part to kind of feed the enrollment of individuals for this study. We expect this study – final or IRB approval for the first site in a coordination of study be put us in a position to kind of kick off enrollment in the second quarter.

The upside is that, the qualification of TauSome levels and the other testing is putting efficient. And it’s not a – don’t believe, it’s a challenging patient population to recruit from. In fact, in a lot of the communications, we have had with NFL groups. I think we’ve educated them to recognize that at present CTE is a rare condition and it’s only been diagnosed in individuals kind of participated in activities involving repetitive head trauma and that we really need to get these guys to come back on the field to play and particular in these clinical studies.

So, I think it’s going to be efficient. But in regards to other data that we may have already collected, I wouldn’t be surprised if we assess – if we complete a further assessment of that data looking at Calzone levels in former NFL players, as compared to controls as compared to TauSome levels in Alzheimer’s patients.

Yi Chen

Is there any sort of interim data readout planned?

James Joyce

That for the current study that we’re looking to wrap up in Houston related to Hemopurifier.

Yi Chen

Right, right.

James Joyce

Yes, no, we upon completing that study, I think we would have some type of interim report. The unique thing and we have to come to a conclusion internally is, I think I’ve shared a number of years ago that that in our discussions with FDA, there was a question as to how we knew our device was capturing the virus regardless of seeing bioload reduction. And if you will look at Hemoperfusion devices the gold standards around the world is the FDA and companies have to meet challenges that are beyond what you would need to achieve elsewhere around the world, but if you can meet those challenges, it can be a significant value driver, just based on clinical progression.

So one of the things that we did that we developed to reinforce the performance of our device was the creation of an actual novel assay it allows us to [loop] the biological fluid out of our device after treating and we can quantify the magnitude of viruses captured in the cartridge and no longer circulating in the patient.

And that is a, I hesitate to say bulletproof, but there is no better representation that your product is meeting the label indication of single use removal viral pathogens from blood than that type of assay and I believe I’m pretty – I can strongly state that I believe we’re the first group that really had demonstrated for FDA with the Hemoperfusion device that we can specifically quantify the elimination of the target how much of the target we eliminated that was in the cartridge no longer circulating in the patients. And as it relates to some of these virulent viral pathogens some of these pathogens, one copy of the virus for example Hepatitis C virus could make upwards of a million copies of itself.

So if we have a six hour treatment experience, which we’ve documented before and we capture a few hundred billion copies of the virus. We did a heck of a good job in inhibiting the continued progeny replication of those viruses. So that to me is probably the one data point that’s perhaps most exciting this year on an interim report, because it really tells you beyond the safety.

How well the cartridge capture virus there’s a lot of moving pieces in normal therapies to understand if there was benefit what caused the benefit. In our case we figured out how to define specifically what our benefit was based on a magnitude of virus captured.

Yi Chen

Got it. Based on your prepared remarks as it was stated in the press release, should we expect Aethlon going forward that they will develop the Hemopurifier in parallel above for the highly virulent viruses for which it is not feasible to conduct clinical trials, as well as pathogens that it is required to conduct the clinical trials?

James Joyce

Yes. Very good question the answer is absolutely yes. Our devices – there’s no modification devices. The device has a specificity to capture viruses through a mechanism that’s buying through a unique structure that virus is pulling the surface during replication or evade the surveillance of the immune system. So it’s a commonality amongst viruses in general. So the answer is yes.

We believe we’ve gotten it to the point where there are government programs government support that can help us to advance this as a countermeasure against bioterror and pandemic threats, but in many cases those are very esoteric or exotic types of viruses. So we also recognized the need to build or address disease conditions where there are unmet needs. But the market is sizable so it’s a parallel pathway.

Yi Chen

Okay. Got it. Final question, are you aware of, do you know anything about a company called Exosome Diagnostics. Is their technology potentially competitive to your technology?

James Joyce

Yes, I know the folks at Exosome Diagnostics quite well. In fact I – three weeks ago I had a meeting with their founder who’s no longer with the company, big fan of what they’re doing. You got to understand we both started at a time when most people didn’t think. Exosomes, much more than cellular debris with no biological function, so yes we know them. Going about things in a different manner they’re doing a great job looking at understanding the cargo of Exosome to help, design, personalize therapy and disease conditions different types of oncology conditions.

And you really kind of these particles are stable and you can explore their cargo, because – and it’s important cargo because it carries information from the sourced disease. So, I think they’re a leader in that area.

Whereas our incentive if we get involved in Exosome wasn’t as much to explore cargo as it was to develop a potential companion diagnostics. So, we were looking at Exosomes more from the standpoint of Exosomes that could express cargo on their surface where we could specifically instead of cracking them open and look at what’s inside, where we had the potential to specific capture those particles.

So the best example is on oncology where if you have an indication of a certain type of cancer that an Exosome expressing certain markers specific to that tumor could be something we can capture to identify and quantify. First of all to identify the disease exist, and to quantify the disease stage. What’s known today is the quantity of Exosomes in circulation, really equates to stage of disease. If you don’t have a certain type of cancer it’s not going to be [preference] of that type of Exosome in the circulatory system.

If you have advanced stage cancer quantities of these particles are going to be massive quantities. But what we looked at from our perspective, which was totally unique was that we envisioned importance of a companion biomarker at some point in time when we sat down with FDA.

As it relates to treating cancer, because in our case we’re looking at the target that maybe a biomarker is also being a significant therapeutic target. And if we can show its present that identifies when to treat. And if we can quantify changes in tumor derived is Exosome levels we can distinguish response to therapy whether it’s with our Hemopurifier or other types of therapies coming from drug companies.

So we just thought that was a very important factor and some of these things kind of marry up I mean we started working at biomarkers or CTE a number of the night after former teammate of mine became the second person diagnosed with CTE by the Boston University CTE Center, but it was really a work we’re doing related to Exosomes and other areas that caused us to believe that we might be able to find an Exosome biomarker that’s moving across the blood brain barrier that could represent allopathy. So a lot of this is kind of interconnected.

Yi Chen

Okay. Got it. Thank you very much.

James Joyce

You’re welcome.

Operator

This will conclude the question-and-answer session. I would like to turn the conference back over to Jim Joyce for any closing remarks.

James Joyce

I appreciate everyone’s participation, especially those on the East Coast who stuck around on a Friday afternoon to participate on our call, really appreciate your support. I appreciate your patient as we work through this – the last part of our study in Houston and we’re very excited about the next step with FDA.

And we’re very excited what the activities being advanced by our Exosome Sciences subsidiary and I would say that perhaps the value of those endeavors have not yet been recognized. And with that, I wish everybody a nice weekend. Take care all.

Operator

The conference is now concluded. Thank you all for attending today’s presentation. You may now disconnect your lines.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!