Brainstorm Cell Therapeutics Inc.
Q4 2017 Earnings Call Transcript

Published: 10 Mar 2018

[Operator:]

Good day everyone and welcome to the BrainStorm Cell Therapeutics' Fiscal 2017 Earnings Call. Just a reminder, today's call is being recorded. And at this time, it is my pleasure to turn the conference over to Paul Errant [ph]. Please go ahead sir.

[Unidentified Company Representative:]

Thank you, Claire, and good morning everyone and thank you for participating in today's fiscal year 2017 financial results conference call for BrainStorm Cell Therapeutics. Leading the call today will be CEO, Chaim Lebovits; Eyal Rubin, Chief Financial Officer; and Dr. Ralph Kern, Chief Medical and Chief Operating Officer. A press release with the Company's fiscal year 2017 financial results became available this morning, Thursday, March 8, and can be found on the Investors Page of the company's website. Before we begin, I'd like to remind everyone that various remarks about future expectations, plans, and prospects constitute forward-looking statements for the purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. BrainStorm cautions that these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated. Any forward-looking statements made on this conference call speak only as of today's date, Thursday, March 8, 2018, and the company does not intend to update any of these forward-looking statements to reflect events or circumstances that occur after today's date. As a reminder, this conference call is being recorded and it will be available for audio replay on the Company's website at www.brainstorm-cell.com. As the operator mentioned, all participants are currently in a listen-only mode and there will be brief Q&A session following today's prepared remarks. With that, I'd now like to turn the call over to CEO of BrainStorm, Chaim Lebovits. Please go ahead sir.

[Chaim Lebovits:]

Thank you very much, good morning everyone, good afternoon everyone from overseas. I'm here today with Dr. Ralph Kern, the Chief Operating Officer and Chief Medical Officer, and with our new CFO, Eyal Rubin and Uri Yablonka, our Chief Business Officer. Over the last 12 months as you are about to hear, we have made tremendous progress in advancing our operational milestones, to bring much needed cellular medicines one step closer to patients with life threatening conditional [indiscernible] and other neuro-degenerative diseases. As you can see, we have achieved important Company milestones in our next slide; manufacturing, successful technology transfer, and non-dilutive funding refute from California Institution of Regenerative Medicine, and the Phase 3 U.S. ALS study launch as you will hear later more detail, all 6 U.S. sites are actively recruiting participants and we've strengthened also our executive team with key hires. Next slide, we are building a strong company that will leverage core capabilities and manufacturing strategic partnership, basic science and a clear patient focus. We believe that we have the most -- the next slide, manufacturing slide. We believe that we have the most advanced technology platform to deliver cellular therapies for ALS and other neuro-degenerative diseases. Our manufacturing process can deliver highly scalable industrialized product which are consistent and reproducible. We're producing clinical supplies for U.S. Phase 3 study and centers are opened in California and reasonably received GMP manufacturing approval in Israel. We have advanced understanding the mechanism of action of NurOwn in ALS through innovative biomarker studies that leverages both, immune modulation and enhanced diffusion of neuro driving [ph] factors. We're preparing to address other neuro-degenerative disease with large alternate needs such as ALS, Parkinson's, MS, Huntington's and ONS [ph]. Building up a strong preclinical streams of neuron in various animal models. Our preclinical studies -- I think we're on Slide number 7 operator? Preclinical studies have demonstrated that NurOwn technology platform is -- can potentially be applied across several other disorders including, as I just said ALS, Parkinson's, MS, Huntington's and ONS [ph]. We believe that the regenerative potential of NurOwn technology can potentially address the growing unmet need. As you can see this unmet need is well documented and includes thousands to millions of individuals in United States and across the globe. Please, the next slide. To high unmet need across the neuro-degenerative disorders and you can see a detail of these numbers. As you can see, the burden -- next slide, please. The burden of ALS is expected to grow across the globe, currently there are no treatment that halt or address these progression. Next slide, please. We have strengthened our IP portfolio with the U.S. noted allowance to include Parkinson's disease and ALS and we continue to expand the strength in our IP portfolio. I believe forthcoming new IPs in the near future. The next slide, please. As you can see, NurOwn has a strong regulatory foundation including our fast-track and orphan in U.S. and orphan drug in Europe, exploring new FDAs, regulatory pathway to accelerate the role [ph] of regenerative medicine products which address conditions that are serious or life threatening, this is called RMAT, The Regenerative Medicine Advanced Therapy designation, it's within the 21st century Cures Act. We believe that our portfolio of advanced product is very well positioned to accept this accelerated pathway under this act. On that note, I would like to move on to the financials before we go into Phase 1 and Phase 3 updates and question-and-answers, we try to move the introduction on this as fast as possible so we have more time to take question-and-answers from the many investors on the line. So I would like now to move this presentation to Eyal Rubin, our CFO.

[Eyal Rubin:]

Thank you, Chaim. So on Slide number 12, research and development expenses for the year ended December 31, 2017 were about $1 million compared with $2.3 million for the year ended December 31, 2016. Included in these amounts were R&D grants from the usual innovation authority that are recorded and asked to the expense, as well as the grand we received from CIRM Chaim just previously mentioned. These innovation authority grants included as an offset to our $1.4 million in 2017 and $1.2 million in 2016 which the CIRM grant included in R&D expenses was $4.4 million in 2017 only. Excluding those grants by both the IAA and CIRM, R&D expenses increased from $3.4 million in 2016 to $6.8 million in 2017. This increase year-over-year was strongly due to expenses in connection with the Phase 3 clinical trial. Moving to the next slide, Slide number 13, general and administrative expenses for the year end December 31, 2017 and 2016 were $4 million and $2.8 million respectively. The increase year-over-year was mainly due to increase in stock based compensation expenses and increase in cost of our investor relations and public relations activities and consultants, as well as an increase in travel rent and other. Moving onto the next slide, Slide number 15, net loss for the year ended December 31, 2017 was $5 million or $0.26 per share which was approximately lined with the $5 million or $0.27 per share, net loss we reported for the year ended December 31, 2016. At December 31, 2017 we had cash and cash equivalents and short-term deposits amounting to approximately $8 million compared to over $9 million at December 31, 2016. For further details on our financials, please refer to our Form 10-K which was filed this morning with the SEC. Thank you, Chaim.

[Chaim Lebovits:]

Thank you very much, Eyal. I would now like to ask Dr. Ralph Kern, our Chief Operating Officer and Chief Medical Officer to provide the Phase 3 study of NurOwn.

[Ralph Kern:]

Thank you, Chaim and welcome everyone. I'm on Slide 17 operator. So as you can see NurOwn has been evaluated in the clinic for the treatment of ALS over the past 7 years to open label studies and previous double-blind placebo-controlled trial, currently where in trails of 200 patients at Phase 3 repeat those study. It's Slide 16, I'm sorry. So we advanced the treatment in two single-dose open label studies in Israel and most recently, in a U.S. randomized double-blind placebo-controlled single dose study involving 48 participants randomized 3

[Chaim Lebovits:]

Thank you, Dr. Kern. I will also want to act over our -- thanks to patients that are enrolling and helping us move on this trail on the pace we wanted and also the centers, the principal investigators and although all the clinicians are just wonderful, we're very happy, we try to pick very good centers and you see it when it comes to enrollment and we really are very thankful to all the centers and we are now having -- all 6 centers are really enrolling and we just updated all of their contacts via clinicaltrials.gov and I think that will even pick up the pace of the enrollment. To Slide number 18; just at high point of the recent additions we had to the Board of Directors. Arturo Araya, Former Vice President and Head of Global Commercial for Novartis' Cell and Gene Therapies; very relevant, obviously, Dr. June Almenoff, Former President and CMO of Furiex Pharmaceuticals, on the Board of many other Biotech Companies; and Dr. Tony Polverino, the current Chief Scientific Officer of Kite Pharmaceuticals which is the latest add-on to the Board of Directors of BrainStorm. And with this, I would like to thank everyone for joining us and operator, we should open the call for question-and-answers. I know that we were quiet since the last quarter and investors have many questions, so this is the place where we want to address them. Operator, you can open the call for question-and-answers.

[Operator:]

[Operator Instructions] And our first question today comes from Jason Kolbert from Maxim. Please go ahead, your line is open. My apologies, we have David Bautz from Zacks Investment Research, first.

[David Bautz:]

I'm wondering if you could talk about the potential for the Company to enter in any type of joint ventures or partnerships in the near future?

[Chaim Lebovits:]

Yes, I cannot speak too much of the joint ventures and partnerships, as you know, when it will materialize, we will be able to discuss more. And we did -- for example, we did have this year quite a very serious offer but at the end of the day the Board of BrainStorm decided to decline that offer. It's always a very strong and hard question when to do the licensing's deal or a joint venture deal where you sell up earlier for a lot of price and what are you going to do later. I can say that we had an offer more than our current market cap which we turned down. I think it was a right advice that the Board took from the experts. We all tell the same because we have enough cash to go on with our activities and we strongly believe that our Phase 3 design is very good design protocol, and the question is why it fell off? So yes, we do have other indications that we want to bring in but we have other opportunities and other possibilities like CIRM non-dilutive grants are better than selling out. We are looking at the time being -- I'm able to mention different big pharma are talking to us for different joint ventures in different area and zones in the world on the globe. Some are more attractive than others and when the two materialize, we'll announce. But strategically, the company -- if a very attractive deal will come up, we may do a deal before than the Phase 3. And we are looking at some interesting stuff but not yet to deliver it more. So it's a long short answer that -- yes, we're looking into this but nothing yet to announce.

[David Bautz:]

And could you provide an update on the hospital exemption program in Israel?

[Chaim Lebovits:]

We of course are advancing in that pathway. As you may have noticed, we have announced that we -- the last quarter we got the GMP qualified contract site here in Israel. I think the company is ready to treat patients from the technical point of view, and we have also already obtained most of the approvals needed. It's very hard to give you forward-looking statements when it comes to something so sensitive but yes, maybe the next Q even though we didn't arrive that into the 10-K, we may be a revenue based company, but let's see what the next Q will bring us.

[Operator:]

Our next question today comes from Jason Kolbert. Sir, Please go ahead.

[Jason Kolbert:]

First of all, it's very exciting to see that BrainStorm reported the fourth quarter but that the CIRM grants have kicked-in, so our cash balance is $7.7 million is kind of deceptive. So I'd like to talk a little bit Eyal about how you see kind of the CIRM grants playing out and what the kind of over -- how helpful that cash balance can take you?

[Eyal Rubin:]

As Chaim mentioned, we are -- we've got $16 million from CIRM of which only $7 million were utilized during 2017, obviously, we have $9 million more to go which we believe and we know that we'll get them in 2019, they will obviously support us in advancing the Phase 3 clinical trials. On top of it, as in the last 10 years, we're also getting grants from these real innovation authorities which will also help us and kick-in as early as in the next month or so. So we truly believe that this will bring us throughout 2019 and then we're going to get to beginning of 2020 -- 2019 I'm sorry, throughout 2018 and then this will bring us to the beginning of 2019 by then.

[Jason Kolbert:]

Dr. Kern, I want to talk a little bit about what you learned in the Phase 2 trial, particularly on re-treating patients and how you're planning to apply that in this pivotal trial? And then I wondered if you could speculate a little bit since we're not going to see the topline data till year end 2019, whether there will be a chance to have any kind of look at the data between now and then and see how kind of patients are responding? Thank you.

[Ralph Kern:]

I'll start with the repeat dosing question. As you remember, the Phase 2 study was a single dose. We have some experience with repeated dosing on compassionate treated patients, previously. And what we concluded from the Phase 2 study was that there was a need for repeat dosing and based on some preclinical information and also from the outcomes that we observed in the Phase 2 study, we've estimated that a 2-month dosing interval is optimal. So that's where we are right now, we're hoping that in Phase 3 that that will be confirmed and that we will see the benefits -- hopefully, of repeat dosing in lengthening the duration of the treatment response. So we're very hopeful that that will be informative. As far as the other learning's from Phase 2, one that was very important obviously was the sub-group that we pre-specified which now form the inclusion criteria for Phase 3 which is selecting a group that has a more predictable trajectory and we think that that mitigates some of the heterogeneity that we see in the disease and also allows us to have a more predictable outcome from the study. The third thing that we learned in Phase 2 was biomarkers and that was very informative about both to confirm the mechanism of action of neuron because we believe that neuron has a dual mechanism of action in terms of elaboration of neurotrophic factors, and also modulation. We're able to show that the biomarkers aligned with those mechanisms and we also have incorporated the biomarkers into Phase 3, so we hope to extend what we've learned in biomarkers in Phase 3 and potentially develop biomarkers to help guide the use of the cellular transplantation methods in ALS. I think I've answered your questions. Was there something else?

[Jason Kolbert:]

I just wanted to ask two more follow-ups. One, in terms of second dose, is there going to be -- how will that second dose be prepared? Will there be cryopreservation? And will there be a chance to look at -- say how many patients have been treated with one dose? How many patients have been treated with two dose? Can you give us some idea of what kind of additional information might be flowing as patient enrollment progresses through this year and into maybe second dose into next year?

[Ralph Kern:]

Sure. So I'll take the two questions. First of all, I should mentioned that -- we do incorporate a cryopreservation staff, it's about a single bone marrow expert can produce multiple doses and that's a very important technological advance -- I think it will help us down the road in terms of a commercial application where the need to repeatedly sample cell is really taken away and a single bone marrow expert will suffice. As far as data readout this year, obviously we have a DSMB in place and they will be looking at safety, so we may have some information in the second half of this year that will help address those types of questions.

[Jason Kolbert:]

And Chaim, can you talk a little bit in terms of manufacturing, how you're going to supply the 6 sites and what that looks like? And as you look towards commercialization, you must be thinking a lot about how you would meet the potential demand?

[Chaim Lebovits:]

For an analysis we're providing all 6 sites and the pace is as we fore planned and we're happy with our pace for the moment. We may be adding on another manufacturing site as a backup to make sure that there is no hiccups and the trail moves on as fast as possible. And yes, we are planning, we're putting the basis of building our own manufacturing center and we maybe recruiting an additional [indiscernible] or some people with experience with building fast-clean rooms that have experience with getting approval from the FDA. And cryopreservation was a very important piece of it but we're -- in our R&D we are -- had a lot of more work that we were doing simultaneously while their trial is ongoing to make this simpler and easier, we're also trying bioreactors. I hope we have some news during 2018 how we'd simplify and make it cheaper also.

[Jason Kolbert:]

Terrific, thank you so much. I'm so excited to see these strengthening the management team with Dr. Kern and AL and Eyal, and I'm very excited to see the board members, particularly the involvement of someone who has experience at Kite; that's really exciting. Thank you and good luck.

[Chaim Lebovits:]

Thank you very much. Next question, please.

[Operator:]

Our next question today comes from David Sherman from LifeSci Capital. Please go ahead.

[David Sherman:]

I was just wondering if you had anymore color on the rate of enrollment and how things are going there and if that's in line with expectations?

[Chaim Lebovits:]

Yes, there is enrollment as we've said in the previous call. It's more like dictated on that from the manufacturing point of view, more or less. Of course we'll serve an exclusion criteria but if -- I think we are on the pace we want to be. We fielded about over 30 patients and some of them even got a second treatment, we have also patients some got one treatment, some got even two treatment; and we're planning the DSMB to be after an x percent of patient that got a second treatment, so that will be in the beginning of the second half of 2018. So we're on-track.

[Operator:]

[Operator Instructions] Our next question today comes from Garry [ph], private investor. Please go ahead.

[Unidentified Analyst:]

Do you plan to use the biomarkers to identify patients who would respond better or less better to the investigational drug?

[Chaim Lebovits:]

For now we have not included the biomarker results in the exclusion-inclusion criteria of the patients. We have looked at different top groups in the previous trail. Dr. Kern?

[Ralph Kern:]

Again, I'll reiterate what Chaim said that it's not a selection criteria, we've got -- anticipate we may learn a few things. First, we may learn which patients may respond best to treatments and I think we need larger datasets to maintain these around the use of biomarkers in that direction. We also are learning a lot about the rate of progression of the disease and I think we're learning with everyone else in the field that measures of the immune system seem to indicate which ALS stations are progressing more rapidly or less rapidly, and as our treatment is immunomodulatory, we're obviously looking at that very, very carefully. And thirdly, we're looking at the whole spectrum of biomarkers, so in other words in addition to neurotrophic factor secretion and immunomodulatory biomarkers, we're looking at other molecules that cells -- share with each other such as microRNA and some of the genetic material that cells communicate with each other. So I think we're going to be sharing some scientific information later this year as you know, we have a couple of very important biomarker abstracts that were accepted for platform presentations at AAN, I encourage you to attend or listen in if you can. The two presentations will be on the biomarkers, looking at microRNA as a biomarker and the second one will be looking at subscale analysis of the ALS functional rating scale. So stay tuned there, we're very interested, it's a great question; I think we need to learn a little bit more.

[Unidentified Analyst:]

The BRM [ph] markers maybe relevant to patients with multiple sclerosis for example, and are you getting any research samples from MS patients who are undergoing lumbar punctures to study the same biomarkers which may be relevant in future therapeutic trials?

[Chaim Lebovits:]

Ralph?

[Ralph Kern:]

I'll let you answer this one. Go ahead.

[Chaim Lebovits:]

Yes. I just wanted to make sure -- from your second question I understand that if you're giving us an advice what biomarkers to look at. So we have a lot others from the Phase 2 on the biomarkers. We know what to look at. What Dr. Kern was just saying is, it wasn't enough to exclude patients based on that and from this trail we are going to collect biomarkers far more than the previous trial and that will give us far more definite results.

[Unidentified Analyst:]

The question is to you and Kern to examine biomarkers and other neuro-degenerative diseases like multiple sclerosis?

[Chaim Lebovits:]

Well, then we do those trials, definitely.

[Unidentified Analyst:]

Maybe possible to obtain samples in MS patients? To look at the same biomarkers in terms of progression disease in those patients outside of a clinical trial. But thank you for answering.

[Operator:]

[Operator Instructions] Our next question comes from Anthony [ph], private investor.

[Unidentified Analyst:]

Obviously, we have indications for ALS, can you speak for the potential size of the markets that are available not only in the United States where we know there is about 25,000 people affected with this disease but can you speak to the potential of the markets that are available worldwide? And then could you possibly speak to the potential markets that are available for the other indices that you have NurOwn slated to possibly treat? And finally, if there is an opportunity to gain FDA approval here? Have you had any indications from any healthcare companies whether or not this would be an elected therapy or if it would supported wholeheartedly by these healthcare companies? Thank you.

[Chaim Lebovits:]

Dr. Kern, you may answer the last half of question and I'll answer the first half of the question. So the first half of the question is, how many patients -- so, that is approximately 20,000 to 30,000 patients in the U.S. and 220,000 patients globally for ALS. I would love like to give a number of an amount of how much we'll be charging even though I think we will be able to bear an indication once we will announce hospital exemption treatment but we're not ready today to do that, even though we are getting close to a number on what that would be. On the other question, Dr. Kern?

[Ralph Kern:]

If you look at -- if you just take the U.S. and you can multiply the U.S. by 10 so you get the rest of the world. In the U.S. there are about 20,000 ALS patients currently with an assessment. Parkinson's disease is about a million, progressive MS is about 200,000 and Huntington's about 30,000. So there is a huge potential to address the unmet need in all of these areas. I think as you previously had asked, the biomarker overlaps between these diseases, and the answer is yes, and biomarkers that we've looked at in ALS seem to be relevant in other diseases as well. So we're encouraged by their common mechanism of action and by the unmet need; and obviously we're thinking about how we could address some of the other diseases with our technology.

[Chaim Lebovits:]

He asked a second question Ralph, that is this really a standalone treatment or not? And the answer is yes, of course but I wanted to see it more times with us.

[Ralph Kern:]

Yes, I think that repeat dosing paradigm could be a standalone treatment, absolutely.

[Operator:]

Thank you. We have no further questions today. I'll hand back to Chaim Lebovits for any closing remarks. Thank you.

[Chaim Lebovits:]

Maybe you can even route other investors to ask questions that may have fallen off because I did get some messages while we were speaking that investors are trying to get through and they are not getting.

[Operator:]

Absolutely, sir. We just have one coming through now. We have coming through here from Jeffrey [ph] from ALS. Please go ahead.

[Unidentified Analyst:]

Congratulations on all the momentum and all the success, very happy to hear all the updates. I was hoping if you are able to provide or share a fiscal year end update regarding BrainStorm's lease announcement to shareholder back on February 21, 2017 seeking approval to distribute NurOwn in Canada or as a press release at that time. And I was just wondering if we can get an update?

[Chaim Lebovits:]

As you know, we are refraining from giving more information on that for various reasons but I do have something good to share with you. You should follow our announcement in the next few weeks. We are going to give -- we are going to allow Canadian business to be popping on the trial in the U.S. in one of the centers. We didn't announce as we're waiting for the final approval of that for the center [ph]. So even though we'll not bring it to Canada, we will allow Canadian patients to be part of the trial. So, I think that's definitely the way we're looking for. So I think we're heading back, in two or three weeks you will see. I don't want to talk about Canada and I think you understand yourself.

[Unidentified Analyst:]

Absolutely, I can respect that. If there is anything we can do as an organization to help mediate any conversations, please let -- do know that we are here and we're willing to help in any capacity that we can. And again, I thank the group and the new Board of Directors. I congratulate everybody on a tremendous success. Thank you very much.

[Operator:]

[Operator Instructions]

[Chaim Lebovits:]

Okay operator, I think we can close with this call. I want to thank all the investor's consultations and on the call I see that there are so many still on the call, and I thank you very much for your support and ask you for your continued support. We are very excited to what's happening and I think just like 2017 was a very outstanding year with a lot of accomplishments, we already know that 2018 also will have many more accomplishments which we can talk about today. Of course, we're able to talk about our major Phase 3 trials enrollments and how we are proceeding and where we think it is going and we are very, very confident that trial design and the manufacturing is all as planned and that's very good news to have but still so much more is happening and it is an indication that there is no product joint venture has to exempt, etcetera, etcetera. So we thank you for your support and follow-up closely end up straight at the Phase 3, it will be successful or even better than our Phase 2. Thank you very much.

[Operator:]

Thank you. Ladies and gentlemen, that will conclude today's conference call. Thank you very much for your participation today. You may now disconnect.