Q3 Geron Earnings Conference Call
Monday, October 30, 2006
11:00 a.m.
phx.corporate-ir.net!WebCastId~586134!StreamId~789903&pp=IROL-BasicWebCast&ppdp=EventId~1402946!WebCastId~586134!StreamId~789903&pph=339&ppw=270&upv=2
COORDINATOR: Thank you for your patience ladies and gentlemen and welcome to the 3rd Quarter 2006 Geron earnings conference call. My name is Candace and I'll be your coordinator for today. At this time all participants are in listen-only mode. We will be facilitating our question-answer session towards the end of today's conference. At that time if you wish to ask a question, please press star followed by 1. If at any time during the call you require assistance, please press star followed by zero and a coordinator will be happy to assist you. I would now like to turn the presentation over to your host for today's conference, Executive Vice President and Chief Financial Officer, Mr. David Greenwood. Please proceed, sir.
MR. GREENWOOD: Thank you. Good morning and welcome to the Geron earnings call. I am David Greenwood. With me is Tom Okarma, President and CEO. This is an earnings related call and we will begin with a review of the numbers. Our agenda then includes an overview of recent operating highlights at the company and a brief summary of our operating plans for the remainder of 2006 and early 2007. Following that presentation by Tom, we will have a question-answer session.
First to informational items. In the event any forward looking statements are made during this call, please understand those comments are made subject to the Safe Harbor Provisions of the Securities Reform Act of ‘95. Any forward looking statement involves uncertainty and we refer you to the risk factors detailed in filings with the SEC.
Secondly, as the operator indicated we are in a listen-only mode. The lines will open for the Q&A and this call will be available for webcast replay until November 30. Please go to our website, www.geron.com for information.
To our financial results. As you see on the condensed P&L attached to this morning's announcement, revenues for the third quarter were up 7 percent over the comparable 2005 period. Year to date revenues are lower insofar as 2005 included a substantial upfront payment related to the formation of a joint venture. Other cash inflows to the company during the quarter included 2.3 million of interest income and we ended the quarter with $175 million cash on the balance sheet. R&D expenses declined in the quarter on a comparative basis, comparative basis, but that is coincidental depending on the timing of drug purchases and other supply contracts. 9 month R&D expenses are up 15 percent year over year which does reflect the cost of clinical trials. The G&A expense line item increased quarter over quarter because we are expensing stock options in 2006. This is of course a non cash charge. Finally, I estimate our net cash burn for the year at about $31 million, a number which will increase in 2007 as we fund additional trials. At this point I will turn it over to Tom Okarma.
DR. OKARMA: Thanks, David, and good morning everyone. Thank you for dialing in this morning. In my comments I'll pretty much follow the order of events that are in today's press release in terms of third quarter highlights. So first, starting back on the 5th of July when we press released a summary of about a dozen presentations that our people and our collaborators made in Toronto at the ISSCR annual meeting which is really the year's main event for stem cell research. First, turning to our lead stem cell program, the OPC1, or glial cell for spinal cord injury, we presented some important results that define a second mechanism of action of these cells. You will recall that we have demonstrated exuberant myelination by these human cells when they're injected into an animal model of spinal cord injury which is the reason for the animals' persistent and dramatic regain of locomotor function. But in addition to that remyelination, we've documented that these cells appropriately secrete both in vitro and in the animal spinal cord injured tissues neurotrophins. These are biologicals which impact axonal sprouting and survival. So in vitro we have identified a number of neurotrophin factors that these cells secrete, including TGF Beta 2, although there are others, and in vivo we have over 2-1/2 times more neuron survival and sprouting in the tissue that receives OPCs compared to controls. So this is really important and the significance of it is that these neurotrophins which clearly have activity in vivo will significantly enhance the development of alternative new circuitry in the lesion in addition to the myelination effect which would restore axonal tracks that are in fact intact. So, in sum, these cells actually provide to the injured spinal cord literally all of the appropriate stimuli that are required for repair. That's a really important finding.
A second paper described the scalable production of these same cells, OPC1, from our master cell bank. So this paper demonstrated a production process that's completely consistent with current good manufacturing processes - which is made from our pathogen free H1 ES master cell bank. If you recall, our master cell bank is made from a cell line that is fully qualified for human use and the cell bank is maintained without feeders, without any serum and contains only human or highly purified recombinant reagents, namely, a completely chemically defined media. We demonstrated over 9 months cell survival in the animals with spinal cord injuries - that number is now out to 12 months, which is an important point to document the permanent nature of the survival kinetics of these cells after they are injected into the spinal cord injury.
The last point in this presentation is that the scalability of the process is quite good. Today we can make over 2500 full doses of OPC1s per run and that scale is easily increased.
Thirdly, on the OPC1s, and this is an issue that of course crosses all of our ES derived cell types, has to do with the potential for immune recognition of the cells after they are placed into human subjects. In ‘04 in Stem Cells we published that the undifferentiated embryonic stem cells are immune privileged – namely, they are not detected by human T cells, B cells or sera. This presentation extended those results and showed that the OPC1 product, the very cell we plan to inject into patients is also immune privileged and shares exactly the same characteristics as the undifferentiated line from which it's produced. So the OPC1 does express low levels of Class 1 antigens, but no Class 2 – just like the undifferentiated ESCs. Functionally, there is no reactivity of the OPC1 in a standard mixed lymphocyte reaction from multiple disparate donors, there is neither any activity against human NK cells and sera from over a dozen different individuals had little or no lysis effect in vitro on the OPC1s, and that addresses the misinformation that was published a year ago about these cells potentially being contaminated with murine cyalic acid residues. We find no evidence of that on our lines, directly or indirectly. And all of these immune privileged data were repeated with multiple GMP production runs of OPC1. So we are highly confident now that the low dose cyclosporine transient immune suppression will completely prevent immune recognition of these cells in vivo until the actual lesion heals or a course of a few weeks post op at which time once again the cells will be in the immune protected central nervous system.
Turning to the islets for diabetes. This poster really documented that we have the cell. These islet-like clusters produce insulin which is responsive to glucose concentrations, as well as glucagon and somatastatin, the three main islet hormones. They also express the right transcription factors, giving us a pretty elegant molecular fingerprint that these are the right cells. These cells are now highly enriched, both by sieving and by a more precise production method and are now in Canada at our Edmonton collaborators in the animal models of hyperglycemia, so stay tuned for more news about the in vivo activity of these cells later in the year.
Turning to cardiomyocytes. We've now moved that cell type into the second position for entry into the clinic behind the glial cells. We've demonstrated now scalable methods to produce cardiomyocytes in a very similar serum-free and defined growth factor containing medium as OPC1. There are again no co-culture steps and we achieve now 80 percent purity of cardiomyocytes without any further purification steps. We've demonstrated that these cardiomyocytes can be frozen and thawed and they retain the same electrophysiology, drug responses, and in vivo survival activities as cells injected into animals without prior freezing. These cells have now been adapted to our MCB production methodology and cells made that way when transplanted into the infarct zone of infarcted rats engraft, survive and clearly prevent heart failure. Later this year we expect, or early next year, a publication documenting these effects using ECHOs as well as MRI. It's really a, a seminal paper and I think will show proof of concept for the cardiomyocyte prep that is as elegant and compelling as last year's publication of the glial cells in the spinal cord injured rat model.
We had a few other publications from the Geron Bio-Med operation in Edinburgh that focused on liver cells, further characterizing their molecular markers and their function and the first demonstration that osteo progenitor cells – cells that form bone in vivo – are capable of repairing a full thickness, critical size skull lesion in animals with much greater degree of closure than derived from mesenchymal stem cells as a comparator.
So these papers really emanate and sort of document the multiple shots on goal that we're creating in the embryonic stem cell side of our business which are protected by 63 issued or allowed embryonic stem cell patents and over 221 patent filings worldwide.
TBC |
