Orgenesis. (ORGS) CEO Vered Caplan on Q4 2020 Results - Earnings Call Transcript

Orgenesis. (NASDAQ:ORGS) Q4 2020 Earnings Conference Call March 9, 2021 8:30 AM ET

Company Participants

David Waldman - Investor Relations

Vered Caplan - Chief Executive Officer

Neil Reithinger - Chief Financial Officer

Conference Call Participants

Bruce Jackson - The Benchmark Company

Kelvin Seetoh - Slingshot Capital

Jason Revland - Revland Wealth Advisors

Operator

Good morning ladies and gentlemen and welcome to the Orgenesis Fiscal 2020 Year-End Conference Call. At this time, all participants have been placed on listen-only mode and the floor will be open for questions and comments after the presentation.

It is now my pleasure to turn the floor over to your host David Waldman, Investor Relations. Sir, the floor is yours.

David Waldman

Thank you. Good morning everyone. And welcome to the Orgenesis year-end business update conference call. On the call with us this morning are Vered Caplan, Chief Executive Officer and Neil Reithinger, Chief Financial Officer. If you have any questions after the call, or would like any additional information about the company, please contact Crescendo Communications at 212-671-1020. This conference call contains forward-looking statements which are made pursuant to the Safe Harbor provisions of Section 27A the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended. These forward-looking statements involve substantial uncertainties and risks are based upon our current expectations, estimates and projections. And we caution -- we reflect our beliefs and assumptions based on information available to us on this date of this conference call. We caution listeners that forward-looking statements are predictions based on our current expectations about future events. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Our actual results performance or achievements could differ materially from those expressed or implied by the forward-looking statements as a result of number of factors including but not limited to our ability to further develop our products, our reliance on our ability to grow our point-of-care cell therapy platform, our ability to develop cell based antiviral technologies, our ability to effectively using that proceeds from the sale of Masthercell, our ability to achieve and maintain overall profitability. The development of our point-of-care strategy, the sufficiency of working capital to realize our business plans, our partners ability to develop therapies based on a point-of-care cell therapy platform, technology not functioning as expected, our ability to retain key employees, our ability to satisfy the rigorous regulatory requirements for new procedures and therapies, our competitors developing better cheaper alternatives. The impact of COVID-19 on our operations and the risks and uncertainties discussed under the heading “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in our other filings with the Securities and Exchange Commission. We undertake no obligation to revise or update any forward-looking statements for any reason.

I’d now like turn the call over to Ms. Vered Caplan. Please go ahead, Vered.

Vered Caplan

Thank you, David. And thanks to everyone for joining us on the call -- on our call today. This has been transformative year for Orgenesis. Over the past decade, we've been dedicated to the field of selling gene therapies. For us as well as for many in the healthcare industry, it's become obvious that the convergence of areas such as Immuno-Oncology, Genetic Engineering, and Personalized Healthcare has made this field one of the fastest growing areas in biotech. We have developed our expertise in many areas processing engineering quality, clinical development and regulatory aspects, thus laying down the foundation of our point-of-care business. And until though we had grown another one of our divisions, which provided centralized manufacturing subcontracting services to many of the leading cell and gene therapy companies. This business was incorporated into a Masthercell subsidiary, a contract development and manufacturing business.

While gaining and growing understanding of the field, we realized that in order to answer the needs of this industry as it matures to the marketing stage and to capitalize on the full economic value of our expertise, we must pave the way to enable cell and gene therapies for much larger population.

With this goal in mind, we've developed this point-of-care business. We made the strategic decision to sell our Masthercell subsidiary for $315 million, generating approximately $127 million net proceeds for Orgenesis.

Masthercell was based on a centralized approach and traditional claiming’s and while it serves the needs of clinical development stage companies, it cannot provide a viable solution to support our therapeutic partnerships with hospitals and research centres. And we realize it cannot provide the solution for supplying products to the millions who could potentially benefit from a growing pipeline of therapies. We believe that was the right time to sell Masthercell in order to maximize value for our shareholders and to accelerate the roll-out of our point-of-care platform.

I think it's also important to note that within five years revenue from our CDMO business increased the run rate of just $3 million to run rate of approximately $30 million at the end of 2019, reflecting a compound annual growth rate of 59% under our leadership. We believe this is a strong illustration of the value we can build, as well as the tremendous growth this industry has seen.

Based on in-depth understanding of this industry, we believe that our point-of-care business has a potential to expand much farther -- further than the CDMO business. As a result of the sale of Masthercell, we built an exceptional balance sheet providing us the capital to execute on our point-of-care strategy without unnecessarily diluting the shareholders.

In the meantime, we've been hard at work building the foundation of our new point-of-care platform, which we believe will create tremendous value for shareholders and help unlock the full potential of the cell and gene therapy industry.

To provide some historical context, centralized production, which is standard now across the industry, has resulted in extremely high costs to cell and gene therapies. For example, CAR-T therapies can raise hundreds of thousands of dollars per patient. These significant cost of significant -- have inhibited uptake by payers and limited availability for patients. And our goal is to dramatically lower these costs, which will support pay uptake, make these therapies more broadly available to patients. We believe this is a crucial step that is necessary for cell therapies to become widely available.

Let me take a moment to talk about our decentralized point-of-care platform, and why I believe this model is ideally suited for providing autologous cell and gene therapies to patients of point-of-care by lowering costs, streamlining logistics and enhancing distribution.

As we've described in the past, our business is built around three key pillars; therapies, technologies and the network. These pillars aligned the interests of the therapy developers, the hospitals and the patients in a way that has not been done before. From the perspective of therapy developers our first pillar provides a much more streamlined and efficient path to market. Our goal is to partner in-license or acquire therapies where we have the ability to adapt these therapies to our point-of-care production utilizing our second pillars the technologies.

Here we utilize an advanced array of automation technologies be it the licence developed are partnered with third-parties. Using these technologies, we are able to adapt the therapies for on-site, close production and supply. Our integrated process allows us to support all stages of development and validation of this combination of the therapy and the processing technology from R&D to clinical development and CRO activity, all the way to commercialization.

To-date we have developed those are in-licence more than 30 therapies and continue to expand our pipeline through our partnerships with the point-of-care centres. We are in active discussions with many more centres and look forward to providing further updates as developments unfold.

We've also invested resources in new point-of-care technologies, which we believe a brief adverse key manufacturing challenges across the industry. These technologies address quality control, scalability, producibility, speed, efficacy, off-cell production and much more. Our goal is to integrate all of these processes and simple systems into a single automated unit for efficient and expandable on-site production of cell and gene therapies.

What we call out Orgenesis Mobile Processing Units and Labs or as we refer to them the OMPUL. And I'll talk more about the OMPUL’s in a moment. But before doing that, I'd like to explain the third pillar of our point-of-care platform, which involves partnering with these leading hospitals and research centres and setting up GMP processing and supply units as a basis for harmonized supply network for our therapies. It is apparent to us to having a compliant GMP cleanroom facility is a major bottleneck for many of these institutes, building up of high-grade cleanrooms is costly. It's a lengthy process and earning such cleanroom requires highly trained personnel, as well as implementing complex and costly maintenance procedures. And even for those hospitals that do have these facilities, they're usually insufficient in size or on quality.

I am pleased to report now we have partnerships with leading hospitals and research centres in 14 countries around the world. These centres are setup for validation of therapies and technologies, but they also provide the basis for all truly global distribution platform.

In line with a strategy, I'm extremely pleased to announce recent unveiling of some of our OMPUL’s for those of you haven't seen them yet or hadn't had a chance to discuss them with us, I would direct you to the latest Investor slide presentation on our website, which has images of these OMPUL’s and illustrates the small footprint, allowing them to be rapidly and cost effectively deployed at hospitals around the world.

In a short period of time, we have significant advanced validation, risk analysis and regulatory and other tasks related to the OMPUL’s. These mobile systems will be utilized to produce the point-of-care therapies at a reduced cost without the logistical nightmare of a centralized production facility or the difficulty of building up and maintaining cleanrooms in the hospital.

The response from the industry has been overwhelming, especially at the hospital will these OMPUL’s allow medical institutions to overcome the historical challenges that have made it difficult to provide these therapies to patients in a timely and efficient manner. There are a number of advantages to these systems, but just to name a few they are designed for short setup time, have a small footprint and lower the cost of production through automated operation and power of processing.

In addition, we design them in a scalable modular format, so we can add capacity as the needs of the hospital increase. And all of these factors enable us to produce autologous cell and gene therapies along with viral processing capabilities directly at the point-of-care and a consistent and standardized manner in all locations. We believe the OMPUL’s are an important additional step to expanding our capacity. And we look forward to expanding both the quality and locations of these systems.

We've established point-of-care development and service centres in the United States, Belgium, Israel and South Korea. We've established 10 joint venture agreements with regional partners that are financially committed to validate our therapies according to local regulatory requirements. Through our regional partners, we've setup an international network of hospitals.

As I mentioned earlier, we now have partners in 14 countries and we expect to sign agreements with many more in the coming weeks and months. These partners also helping us develop and adapt our point-of-care systems to local requirements. As a public company, investors often want to put this in a bucket are we a cell therapy developer? Are we a manufacturer? Are we a distributor? But if you breakdown each component of our business and see how these pieces fit together, we believe there’s a tremendous unrealized value in each of our pillars.

What do I mean by this? If you just look the first pillar of our business, we believe our pipeline with 30 therapies and growing is on par with many of the world's premier cell and gene therapy companies. But more importantly, each of these therapies are optimized for production and distribution.

As a case in point we have our first commercial product Kyslecel, which came to us through our acquisition of Koligo. Kyslecel is already a commercial product in the U.S., United States for chronic and recurrent acute pancreatitis. But more importantly, Koligo recognize the value of working with Orgenesis to unlock the full commercial potential.

We're currently working at adapting Kyslecel for on-site, automated production supplies to a point-of-care platform or as we say OMPULIZING it. In terms of our point-of-care network, just yesterday, we announced the collaboration agreement with Dong-a University Hospital in South Korea and Cure Therapeutics Inc a developer of immuno-oncology in cell and gene therapy. Through this collaboration we plan to deploy our OMPUL as these university hospitals for point-of-care development of cell and gene therapies and immunotherapies. This agreement follows a recent joint venture agreements we formed with Cure Therapeutics to develop and commercialize our pipeline on a global basis. As we develop, commercialize and supply Orgenesis therapeutic pipeline in South Korea and Japan, we can clearly see the synergies and harmony across all three pillars of a point-of-care platform.

We have many similar collaboration agreements underway that we expect to announce in the coming weeks. Supporting the three pillars of our point-of-care platform, we've amassed an enormous patents in IPS space. We currently own or have exclusive rights of 28 United States patents, 36 for an issued patents, and 25 pending patent applications in the United States 45 pending patent applications and companies around the world and two international PCT patent application.

In addition to our first mover advantage, we're building a defensible moat [ph] around our point-of-care platform that will make it advantages for other industry players to collaborate with us rather than compete with us.

Turning to our financial for a moment, I'm pleased to report on revenue nearly doubled in 2020 to $7.7 million. These revenues related technology time for setup and validation of cell therapies and systems for clinical use. As we allow the point-of-care platform and expand our capacity globally, we have good visibility into our future revenue growth. In fact, we anticipate more than doubling our revenue in 2021 based on just existing contracts that we have.

In terms of our balance sheet, despite significant investment in the point-of-care platform 2020, we ended the year with over $44 million in cash, the sale of Masthercell providers of resources to dramatically accelerate our point-of-care business without having to raise capital. We have been very well funded for the foreseeable future and in fact we even have a biotech plan in place which we use as an opportunity arises, and we will consider using in the future.

As I mentioned earlier, we feel our assets are significantly undervalued by the state. But our goal in 2021 is to build the wellness for the company. We look forward to holding quarterly conference calls going forward and plan on attending a number of upcoming investor conferences our lines are always open and we're happy to answer any questions investors may have.

So to wrap up, I am more than encouraged -- more than ever by the outlook of the business, I'm truly appreciative of the support of our shareholders during this transition period. I'm also extremely grateful to all our employees, advisors and industry partners that have helped us accomplish everything we did in 2020 especially given the personal and global challenges created by the global pandemic.

I am very confident we will achieve more in 2021, which will not only be meaningful for our shareholders, but equally important for the patients in need of cell and gene therapies. I believe that our progress is driven by our strong commitment to our shareholders, appreciating the patient and personal growth and our genuine desire to help patients. There's no reason children or adults around the world should be dying because they don't have access to can't afford lifesaving therapies that cost hundreds of thousands of dollars. This is not a sustainable model for the cell and gene therapy industry. It's not a sustainable model for our healthcare systems.

We have been very fortunate in the past to receive government support for many countries. And we believe we will continue to benefit from such support. Technologies available today are capable of providing us required solutions and the technology providers are eager to collaborate with us. The regulatory agencies are open to adopting innovative pathways that can expedite market approval in the used cost and health care systems are crying out for solutions. So we look forward to sharing more exciting developments and to be announced in the weeks and months ahead.

On this note, I'll now turn the call over to Neil Reithinger, our Chief Financial Officer.

Neil Reithinger

Thank you, Vered. Our revenues for the year ended December 31, 2020 were $7.7 million as compared to $3.9 million for the year-ended December 31, 2019, representing an increase of 96%. The increase is mainly attributable to growth in revenues related to technology transfer, setup and validation of both our therapies and systems for clinical use. It's also important to note that we have already signed master agreements with partners in the aggregate amount of over $38 million for services to be provided from 2021 to 2022.

Research and Development expenses for the year-ended December 31, 2020 were $84 million compared to $14 million for the year ended December 31, 2019. The increase was mainly attributable to expansion of our POCare therapies and our POCare technologies, including our OMPUL’s of note $17 million of this is stock-based compensation for the purchase of Tamir Biotechnology in April 2020.

Selling general and administrative expenses for the year-ended December 31, 2020 were $29 million as compared to $11 million for the year-ended December 31, 2019. The increase for the year-ended December 31, 2020 is primarily attributable to the increase in accounting and legal fees of $4.6 million, which is mainly due to additional legal fees incurred for recent business and collaboration agreements and an increase in business development expense of $2.4 million as a result of increased activities to establish our presence in new markets.

We expect growth in revenue in 2021 based on contracts already in-hand, which will substantially offset our R&D and SG&A expenses going forward. In terms of liquidity, we ended our year with cash and cash equivalents of approximately $44.9 million and have no long-term debt. Overall, we believe we are in a solid financial position and expect our investments in 2020 will be realized in a meaningful way beginning in 2021.

Operator will now open the call for questions.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen the floor is now open for questions. [Operator Instructions] And the first question is coming from Bruce Jackson from the Benchmark Company. Bruce your line is live.

Bruce Jackson

Hi, everyone. Good morning and thank you for taking my questions. So first with the OMPUL’s, have you deployed any of them yet and which development programs are they going to be targeted to?

Vered Caplan

So OMPUL’s are -- we haven't actually given a public disclosure of which hospitals we are in so I can't say that. But I think will be soon announcing that. So we -- we'll get an update as locations. And we also need the hospitals approval always to give significant announcements like this. But they are adaptable actually to most of our therapies certainly does immuno-oncology, to paediatric and to the diabetic programs are now being adapted to as well. So they're very flexible nature since they are easily adaptable. Our first focus has been in adapting them to them to the immuno-oncology products.

Bruce Jackson

Okay. Great. And then just on Koligo, that transaction closed in October I believe, did Kyslecel contribute anything to fourth quarter revenue? And then how much do you think it's going to contribute in 2021?

Vered Caplan

So, Neil correct me, but I think there was a minor revenue coming from Kyslecel.

Neil Reithinger

That’s correct.

Vered Caplan

But I want to bring this as an example what happens in this industry, a wonderful therapy being developed, actually getting market approval clearance, but so difficult to deploy in many centres. So, I think the major change in revenue will be once we've finished adapting Kyslecel to an automated mobile system, also expanding in them to try to get regulatory approval as always in the U.S., I can tell you a lot of excitement about this therapy to answer very much unanswered medical need. And not only will it make it more available, so we can easily be deployed in other centres, because now I think we're working only in one or two centres. What we can also do is also reduced the cost of then of this therapy, we make it easier to get it to patients.

So, once we finish that technologies and which I hope will happen in the next six months, I think we'll see a major change in revenue. And this is very typical for the industry, right. Great therapy available to patients, but can't be distributed widely, because it's not adapted to automated closed systems and cannot be deployed easily in many centres.

Bruce Jackson

And then moving to the pipeline, you’ve got a great pipeline chart on your website, a lot going on, many of them are being prepared to go into the clinic for clinical trials. Are there any particular programs that you'd like to highlight as being the ones that are most likely to begin trials here in 2021?

Vered Caplan

So one of our focuses, and first of all, this will really putting a focus on the immuno-oncology products, because such a crucial need for patients for these therapies. But also to kind of prove our point, right, even if we're doing a CD19, that's exactly very similar, let's say to other CD19 it does have some advantages being lower dose CD19, and we believe it has less risk for many reasons. But the whole goal is to show that we can provide this therapy at a fraction of a cost and other providers.

So I really -- I think we're going to certainly see that go into the clinic. We want to get the close program out as well. And the pedics should be in clinical use. And for the other therapies, some of them already in clinical stages. So we're waiting for regulatory feedback, to see if we can get the agencies to kind of get us to the next stage to Phase II and so on.

But I want to point out another thing as many of these therapies, that's been used in hospital kind of use before. The interesting thing about this space is that the regulatory framework is very difficult -- different than a typical bug. You can have a therapy being given to hundreds of patients under hospital exemption, but only at one location. So what we try to do is really adapt these therapies that I've even shown clinical benefit and value that now makes them available in many centres. So I hope that kind of answers the question.

Bruce Jackson

It does. Thank you very much for answering my questions. I'm going to hop back in queue.

Vered Caplan

Thank you. Thank you for your questions.

Operator

Thank you. And the next question is coming from Anthony Marquez [ph]. Anthony, your line is live.

Unidentified Analyst

Hey, there. Congratulations on what I looks like a very successful year and it sounds like based on the backlog and 2021 as well. Could you do me a favour and take us through an example of what the economics might look like for a hospital and more importantly, what it might look like, for Orgenesis over -- from the point where you have one of these units in the hospital to, let's say, five years down the road, what kind of revenue potential does that have?

Vered Caplan

So, look, let me give you a description. And again, we work through our distributors, right. So it's really I'm going to -- what I -- what we'd like to happen, okay, in this scenario is so the hospital, let's say the beginning was one OMPUL, and then OMPUL can generate product for, let's say, 70 or 100 patients a year, because that's our goal, right to maximise utilization of these systems. And once that system is working and these patients, so we don't want to be selling a product for $500,000 to patients, right that we've kind of missed our goal by that everything we're doing is to reduce costs and expand capacity.

So once that system is working well, if we can -- we're hoping to get these therapies to actual patients to $100,000 per patient. Now, that's kind of to begin with that and hopefully even lower, okay, and that's a major reduction. Now, if we can achieve that, if we can achieve that goal, which I personally believe is very achievable, and maintain the same loss profit, because for those of you remember, Masthercell and now discussions on the financial we made about 50% gross profit, right, Neil on Masthercell, that's more or less the numbers, and maintaining that type of profitability is but allowing that capacity to grow very quickly.

Okay. That I think is the basis what we believe can be really good financial models for us or revenue model for us. So once a system is already installed one OMPUL, okay, you've got the quality system in place deployed, you have the GMP regulation, you've got the system all wired up and connected and everything working smoothly, it's actually quite easy to add another one of these systems into the same site.

And even in our planning today, some of the sites we begin with two of this OMPULs. So the idea is to really allow these leading centres to expand and then we can expand in parallel to additional centres. So I hope that kind of gives the framework.

Unidentified Analyst

Yes, yes, it does. And I just might one follow up question, within the United States, what is, if any the impediments to growing, is it? I don't want to go first, let me see how the other hospital, let me see another hospital do it then I'll sign up? Or what do you find to be the impediments, if any to growth in the United States?

Vered Caplan

Well, it's basically the validation issue okay, the regulatory thing. Once we place them, we validate them, I have not seen any impediments so far in terms of the interest from the hospitals or from -- I have not received any negative feedback from regulators. And if you think of it in a kind of very straightforward of logical way, it's actually if you're doing exactly the same process in an automated manner in exactly the same unit, it's actually safer than a bunch of biologists working in a cleanroom every time and you're basing your quality on the training and the reliability.

So I don't think we're going to find a regulatory issue here. And I think once we have the first validation centres, there's no point in validating in 50 samples at the same time just doesn't make sense. economically. You want to do your validation, and a few select centres and once that's done. And when we say validation, what do we mean? Validation is actually using these units, these systems for clinical use, it doesn't mean approval for therapies, it doesn't mean we have to go through a full FDA compliant drug we have shown to the regulatory agencies agree and we are compliant with GMP requirements as far as point-of-care. That's the idea.

Unidentified Analyst

I got it. All right. Thank you very much. Congrats again.

Vered Caplan

Thank you.

Operator

Thank you. And the next question is coming from Kelvin Seetoh of Slingshot Capital. Kelvin, your line is live.

Kelvin Seetoh

Hey, Vered. Congrats on your first earnings call. I think you're a special leader who really cares about the industry and patients. I really blessed to be a shareholder. I just have one question, right. I think the previous quarter, we see that there's a press release saying that there's a possibility of us earning about $40 million revenue over the next three years. So could you speak to us about the nature of this revenue? Is it -- are there any one-off revenue or is it repeating revenue does it consists mostly of OMPUL’s revenue? So I think any colors on that would be really great?

Vered Caplan

Okay, thanks for your question. So, and I'm actually glad to explain that. And again, going back to our Masthercell times, right? So what happens when you want to get a therapy like this to market there are several stages, the first stage, you have to do kind of a tech transfer, okay, so you've got everything working nicely in your own labs, and then you're deploying it into the site where you need to set it up.

And so that's a very important step. And that's an initial step to get going full supply and manufacturing of these products. Another thing is actually training. In our case, we try to minimise personnel, but there's still training you have to do. And there's also some kind of validation that are required for regulatory purposes.

So when we deploy these therapies, when we out licence them, and let them be used in our systems, as part of that agreement, we are being paid for both the support for doing that, which is very typical of this industry in this, we were paid for that as a subcontractor as well for big tech companies. And the typical kind of lifecycle of a product like this would be first, the initial payments the tech transfers, and the training and validation. And making sure kind of validation runs until you get the final approval to get working.

And the next stage is actually the processing and the supply during the clinical stages, or in other cases under hospital exemption or is the product is already approved. So this is kind of these revenues are the initial step.

Now, for all of these therapies that we've kind of licenced out and are initially getting these payments or these this revenue, we of course, expect and it's reasonable and logical to expect that the next stage, they will be generating revenue as during the clinical stages, when if the funded via our partners, and we will be getting a little royalty once they start being generating revenue as well. So I think what -- when I see this revenue, it gives me a very comfortable feeling, because I know, each one of these revenues setup, and I think it was about I don't remember exactly, but I think it was about 10 contracts. Neil, you can correct me on that. But I think it's in the range of that. So every one of these contracts, I think what it lets us do is build up future revenue kind of line or financial income that will be based on the work we're doing at this stage. Does that answer your question or you have any -- would you like more?

Kelvin Seetoh

I think that's really great. I just want to touch on so within this $40 million revenue is there any licencing fee, that's really part of the $40 million revenue?

Vered Caplan

No, because the way we -- it's not a licencing fee, it's on the support payments until validation actual processing. So that's kind of the model. But we don't typically take from our partners a licencing fee for distribution partners, licencing fee or through the hospitals, because remember, we're all in validation stage now. So we do not take an approach. Maybe if we were partnering with a large pharmaceutical, we would ask for licensee but in this case we feel that it's better to wait for royalties and makes us really a joint partnership.

Kelvin Seetoh

All right. Yes, thanks for the extreme details, I think that really help us to understand our business a lot better. I also have another question. Could you speak to us about the numbers of new employees that we have for this quarter? And what are they focusing on? And also, what are some areas where you believe that we need to hire more people?

Vered Caplan

So we've hired more people, basically for processing. And exactly doing the work we do, which is adapting the biology to the engineering. So we've -- we're really trying to make sure we have a very strong expertise on that. Also, you can't underestimate the importance of a quality system in this type of business because it's all about quality. I sometimes like to call a quality system or ethical backbone, right, because this is what allows us to make sure that the products reaching the patients are the best.

Now, when we build out a quality system, it's not only about putting in, standard operating procedures that everybody reads, it's actually about implementing the gap analysis and making sure everything is harmonised across the different units. So we've also invested in that in terms of just making sure we have the highest quality people. And we'll also -- because we're getting -- we're doing more clinical work, we've had to expand our clinical resources to make sure because we do have like our internal clinical research capabilities, which we don't usually subcontract that out, we actually support the therapies by our own people. So that's kind of the basic, so I'd say, engineering, clinical development quality systems and GMP that kind of summarizes.

Kelvin Seetoh

Right.

Neil Reithinger

And to answer your question further on the numbers we have about, as of December about 110, 111 employees at the end of the year, I'd say in the last quarter, maybe we've hired 20, okay.

Vered Caplan

Yes, yes. We…

Kelvin Seetoh

Yes. Thanks a lot. Just one last question. I actually have been looking at many companies such as power technology IAC [ph], I think these companies really have several businesses of different nature in it. So I guess, investors really find it quite hard to understand the value of each company. And as a result, sometimes they are not being valued appropriately to the peers in the industry.

So I'm actually looking at Orgenesis and I'm thinking that that's exactly what is happening, you have an OMPUL business, you have a portfolio of promising therapies, so is there like me who whereby, you will consider showing some documents of slides in your investor presentation or probably down the line, you're separating the company so that, I think investors can understand the value more accurately.

Vered Caplan

So, strategically, we felt it's very important to -- for us to have the ownership on the therapies, the technologies and the supply network, right. Why? Because. this allows us to actually bring it all together, as these, and even in the past decades, I mean, we've -- we're very puzzling type of company, because we're a network company, right? So we love partnering with companies, we love partnering with other companies that have a capacity and capability to do things maybe better than we do. So it's all comes down to the final cost, right?

So if the option for us, for instance, to have a good partner on a therapy, and on the marketing side, why not I mean, if that can reduce the time to market to patients and can bring, at the end of the day, our goal is to be a supplier of these therapies and distributor. The fact that we have ownership of these therapies, so that means within the future, we cannot partner with others than that. So it's really about validating, getting to a point where we feel you know that our business model is not questionable.

For us, it's obvious that we're doing the right steps. But it's also important we show that in a very kind of practical manner. And as that goes ahead, I'm sure there will be many partnering opportunities. And as always, we're always open to these opportunities.

Kelvin Seetoh

All right, thank you just want to add that I've spoken to many CEOs before, and I think you are one of the more outstanding ones. So I'll just hop back to the queue. Thank you.

Vered Caplan

Thank you. Thank you for that. Very kind of you

Operator

Thank you. [Operator Instructions]. And the next question is coming from Bjorn [Indiscernible] from NX Capital. Bjorn, your line is live.

Unidentified Analyst

Hello, hi, Vered. Thanks for taking -- congratulations on your first earnings call. I follow your company for a long time, and I can feel your passion to create affordable gene therapy for all patients. So Vered in your press release I quote, you shared that our expensive therapeutic pipeline is on par or superior to many of the world's premier cell and gene therapy companies. So pardon me for my ignorance. But could you elaborate by sharing with us which are the therapies that we are on par or superior, please?

Vered Caplan

Yes. So I mean, look at CD19, okay, we truly believe that around CD19. And the reason for this is when you look at these therapies, it's not because, we think we're a superior scientist or anything like that. It's because when you look at the industry, and you look at the difference between different CD19 therapies was not that tremendous a difference, right.

The differences is in the detail. And why do we believe they are maybe superior? Well, because we believe we can supply them with a much lower cost, even if the clinical efficacy is the same. And I think that's extremely important. We have taken into consideration other things as well. For instance, such as the lower dose we believe we can do from the existing approved market products. And let's take other technologies, so many hospitals whether it’s been DUVAC vaccines or other types of immuno-oncology products, when you look at what's been done, it's been done under like, hospital exemptions, it’s been done in the hospital, in lab setting, and that's very expensive and very expandable, okay?

So the difference here is actually, and the reason we believe we can have a more beneficial and a better product is because it's expandable, okay? Even if we're not better in clinical efficacy and some of these products have amazing clinical benefit, right. But still, they're just too expensive, and they cannot be supplied to a wider population. And that's why we believe that, taking the same very similar processes, maybe, if we've licenced it each one has its unique IP angle.

And that's a typical of this industry, that, because every one of these therapies has it's kind of -- and I like to compare it to a recipe, okay. So they all have a recipe for making the same type of cake, okay. But this difference, one likes to put in a bit more of that, or like to put in a bit more of this. But at the end of the day, they are reaching more or less the same goal. But can we reach this goal in a way that once we have the clinical approval, we can quickly expand to many patients. And can we get the cost down to make it reasonable patients can have -- can actually use these therapies. So have I answered your question well, enough?

Unidentified Analyst

Yes, thank you so much Vered. That has been very helpful. So I just wanted to find out more about the Kyslecel product. So I understand that we have acquired Koligo to explore the Kyslecel product, and you may not be easy to achieve breakthroughs easily. But I just wanted to hear your opinion, how are we progressing on that front? With 8,000 patients as a pocket be possible? And would there be any current developments to share?

Vered Caplan

So we haven't put out anything about the Kyslecel product yet because we're still in process. But I -- we will update once we will, kind of providing it in the new settings, okay. And we're working on it. Typically, I don't want to kind of -- I don't want to promise a certain amount of time. But I can tell you that typically, in the past, when we look at different therapies, it's taken us between six months to a year to kind of work on more on adapting them to a more automated fashion.

But I have to say that the Koligo team already thinking about this before, and they have -- I don't know if you've noticed, but they also have the Tissue Genesis, which they had acquired on the way while we were acquired they are an incredible team of engineers from this already done a lot of interesting work on this, and they are very sophisticated team. So working now with our engineering teams, I'm really hoping we can get to this goal as quickly as possible.

Unidentified Analyst

All right, thanks for that. I just got one last question regarding the OMPULS. So I can see how OMPULS can help our clients to manage costs. And each OMPULS are modular, it can be customized towards client’s requirements as well. So on average, how long does it take to complete the validation stage of that OMPUL, followed by the actual utilization and revenue generation of it?

Vered Caplan

So it's really based on the regulatory agencies. I can tell you, the regulatory agencies that are very quick, right? You go in, you give them the paperwork. And, once you do the first one or two, they're happy. And that's it. Other regulatory agencies take the time. So it's very different from one regulatory agency to another. Just the point is may be interesting in the U.S. for instance, hospitals are not even obliged to show they have I mean, there's no inspection of the GMP systems. So even though no outside regulatory agency for us, it's extremely important to comply with our quality system. And even if it is not we will beginning clinical work. And there's no an external agency coming to kind of audits, it's still very important for us to have our own validation runs.

And again, typically a validation on a system, you'll do like three validation runs, and for therapy, and depending on the therapy, it can take -- if, let's say it takes a month. So if you can do a few in parallel, so it really depends on the therapy and the regulatory agencies. But again, we're not talking about it okay, and I think we have a very good teams on the ground to help this happen as quickly as possible.

Unidentified Analyst

All right, Vered. Thank you so much. It is a privilege to be your shareholder. And we are supporting you all the way. Thank you for all your hard work.

Vered Caplan

Thank you very much. Okay, thank you very much appreciated.

Operator

Thank you. And the next question is coming from Allen [Ph] Lezak from Forest Capital. Allen, your line is live.

Unidentified Analyst

Thank you so much for taking my question. Can you please comment on opportunities for grant funding?

Vered Caplan

Yes. So thanks for asking that. Because I really think it's part of our strategy, right? I mean, from day one, we've always worked together with governments. Why is that? Because when you go for a company, a country, like Korea, for instance, or Greece where we are active or Belgium where we've been tremendously supported. It's part of the government's need to reduce healthcare costs, right? They see very much either I was -- and our goals to achieve what we want to do.

And we've been very lucky so far in having that understanding of our activity from government people that issue a lot of these grants, right. So many of the grant funding we've had so far has come from governmental agencies. And, we on our part are tremendously appreciated. And we like to have them involved, okay. So grants in this space, just typically around 50% of investment, either on the – or on CapEx on OpEx depending on the different grant programs.

And the reason is not just financial, that we like to get them involved. It's also in terms of strategy. Once you have the government involved in what you're doing, and updated and understanding that we're trying to benefit this country's healthcare system, then you also have a supportive approach on the regulatory front, and you have a supportive approach from the government hospitals. So that's when we say about grants. In the past, we've managed to fund in many of our programs about 50% from grants. And we are working very closely with different agencies and to see how we can expand on that.

Unidentified Analyst

Well, thanks again. And great job, Vered.

Vered Caplan

Thank you.

Operator

Thank you. The next question is coming from Nicole Talisman [Ph] from Blackridge Capital. Nicole, your line is live.

Unidentified Analyst

Good morning, Vered, and congratulations to you and your Orgenesis team on the tremendous progress you've made this past year. Can you speak in more detail about the response from hospital to the point-of-care model? And where the new therapies will come from? And how this model will accelerate development of new therapies?

Vered Caplan

Okay, thank you for your question. So just to give you a bit of kind of background. For me, it's obvious because then for our teams, because of all the time in hospitals, but let's look at what's happening in hospitals today. What the situation is from rural side.

The cell and gene therapy industry is not grown out of big biotech companies, its oncologist immunologist, researchers working inside hospitals tied into therapies, whether it's an oncologist working in a bone marrow transplantation centre, which is an immunotherapy, right. But without genetic modification of the cells, or whether it's orthopaedic surgeons who's trying to get a better therapy to his patient for cartilage, or whatever that therapy is, these scientific developments have come out of the big research institutes and hospitals, right.

So as time went along, the regulator said, hey, you've got to stop this. These are not treatments, these are drugs, these are products. So these therapies that were being used as just a treatment have suddenly become a product that needs to be regulated, it needs a GMP. And this is not something typically a hospital knows how to do. And the amazing thing is, every time you go to a major research centre or hospital, you will see this 5 10 different researchers at all, some of them have already doing clinical work, but they can't move to the next step, right.

So from their side, so really eager to get these therapies platform to get the patients. So when we talk over them, when we licenced with them, right? They -- for them this is -- in most cases, the only way to get these therapies out of the lab into the general population. Now, there's also economic value for that -- for the hospitals, right, they will get a loyalty stream as these therapies get to market. But there's also a research interest and of course, the basic clinician goal of getting therapies to patients and making patients feel better. So that's one aspect of it.

On the other side, okay. That they have -- everybody the whole at least not everybody, but most patients today, they get on the internet read about new therapies they read about new programs, right. And when they come to a centre, everybody wants the latest and the best, obviously. But if you're leading research centre or hospital, right, and you may have the most leading programs in radiology, okay, or chemotherapy or even immunology regular antibody and your patients are really asking to get a therapy, that's a cell and gene therapy, you now have to tell them to wait three years until this hospital builds up a GMP unit is able to provide all they need to pay $500,000 or even a $1 dollars per therapy from one of the approved products or they need to find some other way to get these products.

So when we come in, we'll solving more than one problem, right? We're solving a way to get the IP out. But we're also solving a way to get other therapies in at a regular, at a rational cost. And most importantly, we're cutting down times, because imagine what it is for hospitals to now start becoming a biotech company. It's just not the expertise. It's not what they're meant to do. So we become actually the biotech kind of background. Does this answer the question or would you have another aspect of that you'd like me to elaborate?

Unidentified Analyst

No, I think that's great. And thank you for clarifying. And taking my question. If I have another one, I'll jump in the queue. Thanks very much.

Vered Caplan

Thank you.

Operator

Thank you. The next question is coming from Megan [ph] Han. Megan, your line is live.

Unidentified Analyst

Hi, Vered. Congratulations on your first earnings call. [technical difficulty] shareholder of [technical difficulty] a noble cause of creating such affordable cell and gene therapy for all. So I'm really glad to be able to speak with you today. Okay, so many investors are looking at Orgenesis that is incurring high cash flows every quarter, like just third quarter you made -- million in cash. And for the current quarter, you highlighted $45 million. So the cash burn to be really high. And based on my earlier calculation, the cost of [Indiscernible] is roughly around $47 million. So could you elaborate whether this was one of the expenses or do you expect real levels of expenses fully [Indiscernible]? And also, could you elaborate on what was such statements [technical difficulty]? Thank you.

Neil Reithinger

Vered, let me let me take a couple of these…

Vered Caplan

Yes, now that's fine.

Neil Reithinger

Yes, let me offer a couple of details on that. And then you can expand on sort of other parts of it. So correct. So you -- well in 2020, there was a $20 million was related to on R&D was related to the Tamir acquisition, okay, because that was expensed on R&D based on how it need to be treated on the financial statements. So, I do want to call out that as one area, okay, because the total on these expenses on R&D was about $84 million, okay. You mentioned the $47 million as far as your calculations; it's probably more like $40 million to $41 million of procured services that were part of that R&D as well, okay.

So, those two numbers right there constitute essentially, when you strip those out, you were looking about this in 2020 more of a burn rate, if you will, because I think that's what you're driving at right of about $5 million per quarter.

Now, going forward, we expect those two things I pointed out number one is one exist on the Tamir side, obviously, that was a one-time charge, an expense related to that, and on the procured services, that's going to be reduced as well, because we invested a lot in these relationships in order to build the foundation we have now, okay.

So moving forward, we haven't given any guidance on the total expenses, but it will come down significantly, but it will also not be at the $5 million either per quarter based on 2020. It will be higher, I wouldn't say significantly higher, but because we will continue to invest in other areas that we have to for R&D, but 2020 was a year in which we expended more in that regard for investment in this platform, okay. So sorry, go ahead Vered I just wanted to give out some number that…

Vered Caplan

Yes thank you Neil for giving that. But as Neil explained, we had a total value of what we needed to invest in development. And for us, it was really important to get that done quickly. It would have been -- we can bag that expense out and on for years. We can just get it done. And that's what we wanted. We wanted to get it done because this was a timing issue. Every time you weight overhead for the companies, as other costs involved with patients waiting for these therapies.

So for us, it was better to do it quickly. I'm actually very proud of our teams and our subcontractors and our -- and a lot of this was done with the help of our joint ventures and our partners who understand the local regulatory needs. And I'm very proud of the tremendous effort they've put us to actually get this done this year. So we can really be ready for this year for deployment. And, it's at least been my strategy. And I think management's -- rest of management supports me on this, that, if you're going to have an expense, it's better to get it done quickly, and get ready and make -- and generate revenue. And I really feel that every dollar in that expense will generate a revenue in the coming -- at least in the coming year and after that.

And I also believe that this investment actually covers a lot of this validation and development of these systems. And once we've done this, now, we can really rely on the JV partner for the validation of the bugs [Ph] and the regulatory, which is less than now kind of balance sheet. It's very commitment to get that done. So I expect the R&D to be reduced because I think the team has done a tremendous job of getting things done. I hope that answers the question well enough.

Unidentified Analyst

Yes, thank you very much. So building on that today, could I ask you, you would have any visibility on when Orgenesis would like to be on breakeven basis?

Vered Caplan

So our goal is this coming year to be so. I don't know if Neil -- I mean, that's our goal. And I think, with the hard work of all our teams and hopefully there's no unexpected things, I think if we look at what we hope to achieve this year in terms of revenue, we should be fine. If this -- if the revenue realized in the context -- if revenue in the context is realized we should be fine.

Unidentified Analyst

All right. Thank you very much. I wish you all the best.

Vered Caplan

Thank you very much, much appreciated.

Operator

Thank you. And the next question is coming from Jason Revland from Revland Wealth Advisors. Jason, your line is live.

Jason Revland

Thanks for taking my call. My question is actually already been answered. So I will not take up any more valuable time. But I would say congratulations and very excited for what the future holds for the company.

Vered Caplan

Thank you so much. Thank you.

Operator

Thank you. And we had Bruce Jackson, come back from the Benchmark Company with a follow up, Bruce, your line is live.

Bruce Jackson

Hi, thanks for the follow up question. Going back to the R&D spend, did the Koligo acquisition contribute to the fourth quarter R&D number and how much?

Vered Caplan

I don't have exact numbers, but I don't think it was very material, right. Neil, do you have the exact number of those?

Neil Reithinger

No, it's not material because the portion of that -- the difference of Koligo was that increased our intangible assets because the expense the acquisition of that was had a balance sheet effect rather than a P&L effect which was different than Tamir because of the way the in -process R&D was treated, okay. So yes, you don't have a material impact on the P&L on the Koligo acquisition.

Bruce Jackson

All right, got it. Thank you.

Neil Reithinger

Yes.

Operator

Thank you. And there are no other questions at this time. I would now like to hand the call back to Vered Caplan for any closing remarks.

Vered Caplan

Okay, thank you. First of all, I'd like to thank everyone for participating on our year-end business update conference call. We really already excited about the business and outlook. And we always appreciate the strong support of our shareholders. And we look forward providing as much update as we can and progress in the coming weeks and months. And we're always available for questions. And thank you very much.

Operator

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.