Sangamo Therapeutics, Inc.
Q1 2009 Earnings Call Transcript

Published: 30 Apr 2009

[Operator:]

Good afternoon and welcome to the Sangamo BioSciences teleconference to discuss first quarter 2009 results. This call is being recorded. I will now pass you over to the coordinator of this event, Dr. Elizabeth Wolffe, Director of Corporate Communications. Please go ahead.

[Elizabeth Wolffe:]

Thank you, Miranda. Good afternoon and thank you for joining Sangamo’s management team on our conference call to discuss the company’s first quarter 2009 financial results. Also present during this call are several members of Sangamo senior management, including Edward Lanphier, President and Chief Executive Officer and Ward Wolff, Executive Vice President and Chief Financial Officer. Following this introduction, Edward will highlight the company's recent activities, Ward will briefly review first quarter and financial results and finally Edward will update you on therapeutic programs and goals for 2009. Following that, we will open up the call for questions. As we begin, I’d like to remind everybody that the projections and forward-looking statements that we discuss during this conference call are based on the information that we currently have available. This information will likely change over time. By discussing our current perception of the market and the future performance of Sangamo with you today, we’re not undertaking an obligation to provide updates in the future. Actual results may differ substantially from what we discuss today and no one should assume at a later date that our comments from today are still valid. We alert you to be aware of risks that are detailed in the documents that the company files with the Securities and Exchange Commission, specifically our Quarterly Reports on Form 10-Q and our Annual Report on Form 10-K. These documents include important factors that could cause the actual results of the company’s operations to differ materially from those contained in our projections or forward-looking statements. Now, I’d like to turn the call over to Edward.

[Edward Lanphier:]

Thank you, Liz and thank you all for joining us for our 2009 first quarter conference call. On this call, I will briefly highlight some of our recent accomplishments and then ask Ward to update you on our first quarter financial results. I will wrap up with a brief discussion of our ongoing clinical programs, the nature paper that came out earlier today, and a review of our upcoming events and objectives for the rest of 2009. We began the year with an exciting first for Sangamo, with the opening of the Phase I clinical trial of SB-728-T for HIV. This is the first ZFP nuclease-based therapeutic to be taken into the clinic. The trial is being conducted by our collaborators at the University of Pennsylvania and I will say more about this very important study in a few minutes. We were also notified that the two abstracts we submitted to the American Diabetes Association scientific sessions have been accepted and we will be presenting data from our SB-509-601 and SB-509-701 A trials in New Orleans in early June. I will briefly touch on these studies later in the call. On the research reagents side of our business, we announced the achievements of an important high-throughput milestone in our collaboration with Sigma-Aldrich. This achievement was over a year ahead of schedule and triggered a payment of $1 million. Just as important, this represents a significant step in the scaling up of our ZFP production process. Sigma needs to be able to deliver on the significant increase in demand that they are experiencing for ZFP reagents, as we heard just last week from their CEO, speaking on the Sigma quarterly earnings call. And I quote "Our Zinc Finger Nuclease product line is rapidly becoming one of our star performers, with continued rapid adoption by pharmaceutical companies and university researchers. Zinc fingers are the gene editing tool of choice, enabling researchers to delete a gene, add nucleotides in a gene, and perform other gene manipulations. This is likely to be a multi-million dollar market; and we intend to take full advantage of these opportunities. So stay tuned". He couldn't have said it better, if I had written it myself. Finally, this morning, I am very pleased and proud to say that we and our collaborators at Dow AgroSciences announced a fundamental obligation in the journal Nature that has unprecedented implications for plant biotechnology, and as the CEO of DAS put it, "The potential to redefine the future of plant agriculture". We really are, as our collaborators at Sigma like to say, have endless possibilities for the zinc finger platform and we at Sangamo look forward to continuing to deliver on this spectacular promise. So stay tuned. And with that brief summary of recent activities, let me now hand the call over to Ward to review our financial results for the first quarter of 2009. Ward?

[Ward Wolff:]

Thank you, Edward and good afternoon everyone. As you know, after the close of the market today, we released our financial results for the first quarter ended March 31, 2009 and I am pleased to review the highlights of those results. Revenues in the first quarter of 2009 were approximately $3.2 million compared to $2.8 million for the same period in 2008. The increase in 2009 is due to revenue from our collaboration agreements with Dow AgroSciences and Sigma-Aldrich, and enabling technology agreements. There was no revenue associated with research grants in this quarter. Total operating expenses for the first quarter of 2009 were $10.2 million compared to $11.6 million for the same period in 2008. Included in operating expenses were non-cash employee stock-based compensation costs of $1.5 million in the 2009 quarter compared to $1.7 million in the 2008 quarter. Research and development expenses were $7.3 million in the 2009 quarter and $8.6 million in the prior year quarter. As noted in our press release, the decrease in research and development expenses is primarily related to lower clinical trial expenses in our ongoing SB-509 program in diabetic neuropathy as studies have progressed, partially offset by the ramp up for the Phase I clinical trial for HIV/AIDS, which opened in the first quarter of 2009 and expenses for our planned Phase I clinical trial in glioblastoma multiforme. General and administrative expenses were $2.9 million for the first quarter of both 2009 and 2008. For the first quarter of 2009, we reported a consolidated net loss of $6.8 million or $0.17 per share compared to a net loss of $8 million or $0.20 per share for the first quarter of 2008. With respect to the balance sheet, we ended the first quarter with $57.9 million in cash, cash equivalents and short-term investments. Our net cash used in operating activities was $7.1 million for the first quarter. I am pleased to say that we are on track with respect to our operating plans for 2009 through the first quarter and we are maintaining our guidance provided at our fourth quarter and end of year call in February of having cash and investment balances on hand of at least $45 million at the end of 2009. As you recall, this guidance assumes no new financing or partnering, but it does include anticipated milestones in 2009 from our existing partnership agreements. Specifically, as noted in our February call, we fully intend to continue to execute on our hybrid business model by establishing new corporate partnerships in our core ZFP therapeutics business as well as any non-core areas. Independent of success in any of these areas, our current cash position is sufficient to enable us to fund our current therapeutic development pipeline through 2011. In summary, we are pleased to have executed on our financial plans for the first quarter of 2009 with respect to our operating results and net cash used in operating activities. We look forward to executing on our 2009 goals as the year unfolds. We will continue to be focused on advancing our clinical and preclinical pipelines, while maintaining our historical financial discipline. Thank you, and I will now turn the call back over to Edward.

[Edward Lanphier:]

Thanks, Ward. We began 2009 in a strong cash position and at the end of the first quarter, are on track with the financial plan which will enable us to pursue our clinical development programs, advance our preclinical pipeline, deliver on our partnered obligations, and end the year with at least $45 million in cash and cash equivalents. Achieving this financial stability does not happen by accident. As you have heard from the CEOs at Sigma and DAS, we have an extremely robust technology platform that we have successfully and broadly applied across several different business areas, maximizing the value of this platform as we have done over the past several years by establishing strategic collaboration that enable us to monetize our technology in non-therapeutic areas has enabled us to operate Sangamo in a manner that makes us very different from many other biotechnology companies that are pursuing only human therapeutics. Our business model allows us to aggressively prosecute our therapeutic programs to point to the significant value inflection, while maintaining a relatively modest burn rate, which I'm sure you realize, is particularly relevant in the current economic environment. And now let me give you an update on our clinical programs. Our newest clinical trial, Phase I safety trial of our ZFP therapeutic for HIV/AIDS opened in February by our collaborators at the University of Pennsylvania. This trial is important for several reasons, not the least of which is that it is the first human clinical study of the zinc finger nuclease. It also represents a new and very exciting approach to CCR5, a highly validated HIV target, that has proven challenging to drug effectively with conventional small molecules. We believe that this makes CCR5 and ideal candidate for our ZFP therapeutic approach, an approach that functions uniquely at the DNA level. In this study, we are taking immune system cells, specifically CD4+ T cells from infected HIV patients, treating those cells using zinc finger nucleases that modify the CCR5 gene, so that the cells produce a non-functional CCR5 protein and after fully characterizing the modified cells, infusing them back into the patient. We believe, based upon our preclinical data and work that our collaborator called June has carried out previously with other T cell transfer approaches that these cells will provide the infected individual with a population of modified T cells that cannot be infected by HIV may selectively expand and be available to fight off both the infections normally associated with AIDS and the HIV virus itself. At the foundation of our approach of several successful experiments that have been carried out both in nature as well as in the laboratory. Briefly, CCR5 is the co-receptor that enables HIV to enter and infect cells of the immune system. Individuals that have a natural mutation in their CCR5 gene, CCR5-delta32, are highly resistant to infection by HIV, but otherwise immunologically normal. In addition, a patient in Germany presented with both an HIV infection and leukemia received a bone marrow transplant from a donor carrying the CCR5-delta32 mutation. After the bone marrow transplant, doctors could not find any evidence of HIV virus up to two years after the procedure. Our ZFN technology could potentially provide an outcome similar to the German transplant procedure, while simultaneously avoiding the dosing and toxicity issues associated with systemic small molecule therapy. The Phase I trial ongoing at Penn is designed to evaluate the safety and tolerability of a single infusion of a patient's own CD4+ T cells that have been modified with our CCR5 specific zinc finger nuclease. This autologous T cell product is called SB-728-T. A total of 12 subjects with HIV will be enrolled in this trial in two treatment cohorts. These two cohorts represent to patient populations that in addition to safety data will give us the most information about the potential for the ZFN modified cells to survive and expand as well as their effective immunological potential. While our primary interest in this trial is safety, we are also collecting data on how well the ZFN modified cells survive in the patient, whether or not they expand preferentially, as we have seen in our preclinical animal experiments that we published in June of 2008 and evaluate their effects on both infections normally associated with AIDS and the HIV virus itself. As we have said previously, at this stage, we are not providing guidance regarding timing to complete the accrual of this trial or the presentation of data from the trial. However, we look forward to updating you on the progress of this open label trial at appropriate medical meetings in the future. Turning to our most advanced therapeutic product, SB-509, as you know, we are conducting several Phase II trials for the treatment of diabetic neuropathy, a major complication of diabetes and a rapidly growing market around the world. In early June, at the 69th scientific sessions of the American Diabetes Association meeting in New Orleans, we plan to present data from two of our three Phase II clinical trials, SB-509-601 and SB-509-701 Part A. SB-509-601 is a double-blind placebo-controlled repeat dosing Phase II trial in subjects with mild to moderate DN. In November 2008, we released new logical top line data, which did not reveal any significant differences between treated and untreated subjects. However, as we have previously discussed, we have continued to analyze the very significant amount of data we collected from this study and we have now completed the subgroup analysis. We plan to present the data at ADA. We will also present the analysis of new histologic top line data from skin biopsies that were collected during the 601 trial in order to measure the direct effect of SB-509 on the density of sensory nerve fibers in the skin and their ability to regenerate after treatment. Reduction in numbers of these sensory nerve fibers has been shown to be a sensitive indicator of both DN onset and progress and is an excellent direct histological measurement of nerve regenerative activity. We will also present data at ADA from our SB-509-701 A trial, a single blind repeat dosing study in a group of subjects with more severe DN. You will recall that last year, we expanded this trial to test a more frequent dosing regime, which we have designated 701 Part B. While we will present the complete 701 A data set at ADA, we have previously mentioned that interim data from this trial demonstrated continued improvement in the nerve conduction velocity measurements in all nerves. Additionally, we observed clinically relevant improvements in NCV measurements in the (inaudible) nerve in SB-509 treated patients compared to placebo treated subjects. Finally, to update you on our progress, we expect to conclude the accrual and treatment phases of our expanded 701 Part B study in severe DN in 2009, and to present data from our stem cell mobilization study, SB-509-703 at an appropriate medical or scientific meeting later this year. Beyond our DN programs, we expect to complete the accrual of our Phase II study to evaluate SB-509 for the treatment of ALS by the end of 2009. We are also on track to file an IND for our second zinc finger nuclease-based therapeutic for the treatment of glioblastoma later this year. I look forward to giving you more information on both of these programs on future calls. We also continue to advance our ZFP therapeutic preclinical pipeline. We have ongoing studies in validated animal models of stroke, traumatic brain injury, and Parkinson's disease, and expect to publish and present preclinical data in spinal cord injury, neuropathic pain, and zinc finger nuclease-mediated gene modification throughout this year. Turning to our partner programs, our hybrid business model of establishing strategic collaborations that allow us to monetize our technology in non-core areas enables us to own and aggressively move our therapeutic programs forward, has been very successful. In the near term, the establishment of collaborations with both DAS and Sigma has been extremely useful as a source of capital and validating from a technology and commercial perspective. Going forward, as we have said before, we expect to see partnerships for our ZFP therapeutic programs at points of significant value inflection. However, for those of you looking for even more external validation, the past few days has provided it and then some. As you have heard, the value of our technology platform and business model is becoming increasingly apparent. The CEO of Sigma-Aldrich spoke last week of the composers ZFN mediated gene editing product as becoming one of its "star performers" and likely to be "a multimillion dollar market". This morning, in announcing the publication of data from our collaboration in plant agriculture in the scientific journal Nature, Jerome Peribere, CEO of Dow AgroSciences said "EXZACT precision technology based on utilizing proprietary zinc finger nucleases has the potential to redefine the future of agriculture, driving productivity gains globally and greatly enhancing the sustainability in a major food crops such as maize". He went on to say "this technology provides flexibility and versatility in plant biotechnology research, enabling developers such as Dow AgroSciences and our collaborators to enhance the discovery and development of novel traits for the crop production industry". The lead scientist to be exact, at Dow AgroSciences went further. "Conventional agricultural biotechnology has been a laborious, time consuming and unpredictable undertaking. However, results of the EXZACT precision technology showed that zinc finger nucleases can be utilized in any plant species amendable to DNA delivery, including commodity crops, vegetables, ornamentals, trees, and biomass crops. This establishes a new, rapid, and efficient strategy for precise plant genetic modification in basic science and agricultural applications. Additionally, it provides a new and efficient path to market, reducing the cost and complexity of product development". I'm sure it is not lost on many of you that in their press release, Dow AgroSciences also makes the point that it is making EXZACT precision technology accessible to all segments of the plant agricultural industry. So as they say, "stay tuned". As for the details of what was published today in Nature, the paper describes the uses of zinc finger nucleases to add a herbicide tolerance gene into a specific predetermined address in the maize genome. Researchers chose to place the herbicide tolerance gene into a region that resulted in the disruption of a gene that isn't important in the biosynthesis of phytate, to produce a herbicide tolerant and reduced phytate maize plant. Phytate is a natural component of corn and is economically and agriculturally important, because it is difficult to digest for certain animals such as pigs and chickens and leads to discharge of excess phosphate in the animal's waist, a source of significant environmental pollution. In a rapid, single step process, the gene involved in phytate production was disrupted and permanently linked with the acquisition of herbicide tolerance i.e., stacking the two desired characteristics in the plan. Moreover, as the paper demonstrates, this is a permanent change that is carried through into the seed of the crop. Importantly, this outcome can be replicated for any other gene with other zinc finger nucleases, targeting and inserting any gene and rapidly enabling the generation of seed stocks with multiple desired traits, stacked into known addresses in the plant's genome. As Dow AgroSciences points out in their release, this is a very different process compared to the current shotgun approaches that use land immunogenic events and random insertion of genes, followed by laborious selection and breeding programs to try and sort through the products. So, needless to say, we are very pleased and proud to share these data and more importantly, the breadth and power of our zinc finger approach for the rapid and efficient generation of improved foods, fiber, and fuel with the world today. You should expect further visibility of this kind from both our DAS and Sigma-Aldrich partnerships as well as further progress from our zinc finger nuclease technology in cell line engineering and the generation of transgenic animals during 2009. Finally, from a balance sheet perspective, we remain in very good shape. You can expect us to continue to carefully manage our expenses, while working hard to build value to a maturing clinical pipeline and thoughtful strategic partnerships. We plan to end the year with at least $45 million in cash and cash equivalents, which we believe represents cash through 2011. In conclusion, we remain focused on our goal of establishing ZFP therapeutics and a new and highly differentiated class of human therapeutics, while developing the technology as a powerful platform for drug development and in collaboration with Sigma-Aldrich and Dow AgroSciences, in research reagents and plant agriculture. Thank you for your attention this afternoon. We will provide additional updates at the 8th Annual JMP Securities Research Conference in May, and at the Needham 8th Annual Life Sciences Conference in June. We will also hold our Annual Meeting on June 4 at 9 AM Pacific Time here at our company headquarters in Richmond, California. This completes our prepared comments. I would now like to open up the call for your questions.

[Operator:]

(Operator instructions) We will go to Charles Duncan with JMP Securities.

[Edward Lanphier:]

Hello? Why don't we go to our next question please?

[Operator:]

We will take our next question from Eric Barma [ph] with Leerink Swann.

[Eric Barma:]

Hi, good evening, guys, can you hear me?

[Edward Lanphier:]

Hi, Eric.

[Eric Barma:]

So I have three questions, two of them are in the Nature biotechnology publication; congrats on that first of all. Now, looking over one of the quotes that Dow AgroSciences CEO had mentioned "and our collaborators", when they're speaking about their crop production industry, do you know who they might be referring to there?

[Edward Lanphier:]

I think they were trying to both collaborators in academia as well as collaborators in the plant biotechnology industry.

[Eric Barma:]

And anyone specifically for corn or for this trial that might make sense?

[Edward Lanphier:]

I don't think it would be appropriate for me to name names beyond what Dow has said but I think there is contact information on the Dow AgroSciences press release, so I would refer you to that to Dow.

[Eric Barma:]

Okay, perfect. And then is there also a theoretical limit for the number of genes that can be stacked in corn or any other plant?

[Edward Lanphier:]

Let me ask Philip Gregory, who I think is on the call to answer that. Philip?

[Philip Gregory:]

Sure. So I think in principle, one could imagine stacking a very large number of different traits into an address. I think we're probably at this stage more limited by knowledge of the types of genes that we would like to stack together rather than the technology that we will need to stack them.

[Eric Barma:]

Okay, great. And then if you can target a specific spot in the gene, do you think potentially regulators would be less concerned and require less regulatory scrutiny; you know, there's not a chance for that plant to have undesired characteristics?

[Edward Lanphier:]

Well, I think it is a very good point, Eric, and one that I think is talked about a great deal. And I don't again – and I apologize if I sound evasive here, it is just that exactly the area where Dow is not only expert, but also very, very active. I would however maybe refer you to something that is published – an article on the Nature website today, which is a quote from a scientist at the Swiss Federal Institute of Technology, and he says, one argument that is often used in part correctly is that when we create transgenic plants, we insert genes somewhere in the genome when we don't exactly know where it happens to insert. And he goes on to say, now when you can target the transgene to a specific location. And I think conjecture and I will just leave it at that, that this could have positive impacts from a development timeline perspective and potentially from a regulatory perspective are consistent with the outcomes. But again, I would encourage you to contact the folks at Dow with exactly those sorts of questions, because I think they are good ones and important.

[Eric Barma:]

Okay, perfect. And then one quick question on SB-509. Can you give us any clarity on what subgroups might be looked at for the 601 A trial?

[Edward Lanphier:]

I think what we said in recent public presentations is that when we look at patient stratification in the 601 trial, when we look at patients that have mild disease versus patients that have more moderate disease, that stratification is informative and that patients with more mild disease had more robust responses in the time frames – the six-month timeframe of the study. And so I think that is probably the best characterization of stratification in a subgroup analysis that I can give you at this point. Obviously, the complete data set will be presented at ADA.

[Eric Barma:]

Okay, great, I look forward to that data.

[Ward Wolff:]

Thanks, Eric.

[Operator:]

We will go next to Joe Pantginis with Merriman Curhan Ford.

[Joe Pantginis:]

Hi, guys, thanks for taking the question. If you can let me fast forward a little bit to your next anticipated IND for glioblastoma, the recent FDA advisory panel for vastin, which ended up being positive showed, at least in my opinion and some others as well, that the bar is still relatively low for glioblastoma therapeutics. Can you give a little color again as we are getting closer to the IND as to how your approach for using a zinc finger nuclease can really add to the armamentarium?

[Dale Ando:]

Yes, Joe, this is Dale. What we're using is a chimeric T cell receptor. So we are arming cells called (inaudible) T cells to basically attack a very common antigen in glioblastoma, and the cells will be infused into the part of the brain after the glioblastoma has been resected. And you may not know, but one of the problems with resection of glioblastoma is that there is basically little fingers of cancer sticking into the brain and you can't pick it out completely. So what we're basically doing is turning these T cells into anti-glioblastoma (inaudible) little scalpels, and what the zinc finger does is that it protects these T cells from steroids, which is commonly used in these patients. When they present with their glioblastoma, they often have seizures and a lot of brain (inaudible). So we're basically allowing the anti-glioblastoma T cell to go into the brain and kill it. So it is very different from the evac type of approach, which is really looking at the blood supply or the general chemotherapy.

[Joe Pantginis:]

Great, thanks for the update.

[Ward Wolff:]

Thanks, Joe.

[Operator:]

We will go next to Charles Duncan with JMP Securities.

[Charles Duncan:]

Hi. guys. Sorry for missing the last one, thanks for taking my question. I had a question regarding the T cell modified by ZFTs. I think you mentioned that it was going to be not perceived as a foreign antigen. Can you give us some additional color on that, Edward?

[Edward Lanphier:]

Sure. Again, I think we have discussed this previously. Dale, is there anything further you want to add on it?

[Dale Ando:]

You mean whether the genetic modification is seen as a foreign antigen?

[Charles Duncan:]

Yes.

[Dale Ando:]

Basically, what we are doing is cutting the gene and actually causing a patient for the rest of the protein will not be made. So we are not really adding in any new epitopes. We're basically just taking a protein and genetically cutting it out of position, so that it is not actually altered. So in those types of situations, it is unlikely that you will get a immune response, et cetera.

[Charles Duncan:]

So the thesis that a mighty antigenic which has floated around the market is probably doesn't make sense to you at least scientifically?

[Dale Ando:]

That is right.

[Edward Lanphier:]

Let me just ask – you keep doing this back and forth because Philip is actually over in Europe and he has called in. Philip, is there anything you want to add on that?

[Philip Gregory:]

All I would say is that we in fact look to see whether there were any CCR5 truncation products in T cells that had been treated with zinc finger nuclease targeting CCR5 and that data was published in the Nature biotechnology paper in the supplementary information and we – by several different approaches did not see any truncation products that would indicate the type of antigen that could be recognized as foreign. So, as Dale says, based on what we know for the types of mutations that are generated, we find this very, very hard to understand how this would be a problem.

[Charles Duncan:]

Okay, thanks for the added color, guys.

[Edward Lanphier:]

Thanks, Charles.

[Operator:]

We will hear next from Alastair Mackay with GARP Research & Securities.

[Alastair Mackay:]

Hi, I was wondering if you could say anything about the progress with the use of ZFNs in biopharmaceutical cell lines; there is over and half a dozen companies that have expressed interest and have programs going. Any updates on any of them?

[Edward Lanphier:]

Hi, Alastair, sure, happy to give you an update. Just out of curiosity, where does the half-dozen companies come from?

[Alastair Mackay:]

Well, if I count a list, nine all, maybe two not active.

[Edward Lanphier:]

From previous groups that we were working with. I thought you were talking about in our pipeline.

[Alastair Mackay:]

No, I am sorry. The agreements that have been characterized over the past couple of years?

[Edward Lanphier:]

Fair enough. I will certainly respond and Philip you can remind me in a moment maybe where we are with regard to publication or presentation on some of the data, certainly the Pfizer Group has been presenting a lot of this data and maybe Philip you could talk about that. But, as you saw Alastair, this is a business unit that is something that we think we can monetize very effectively and in a way that is highly leverageable, because the structure of the fields are nonexclusive and so while the Pfizer deal is somewhat unique, the deal we announced in December I think is representative of the kind of outcomes that we can create, the uniqueness of those outcomes and the value of those outcomes. So just to remind you, we license on a non-exclusive basis to Pfizer the rights to use cell lines, a specific cell line of theirs that had a zinc finger induced knockout of the GS gene. GS as you know, is just a selectable marker, so a relatively low value target. In this case, we did a $3 million nonexclusive all in license. In other situations such as our Genentech collaboration, where we are looking at targets of potentially greater value, we will lower the up front but we will retain rights and milestone payments both in terms of their ongoing development activities on a pro-product basis, as well as commercial milestones. So it is a highly leverageable business for one. Again, we expect to be doing more deals around. And before I stop, Alastair, let me just ask Philip to say – maybe characterize some of the data that have recently been presented.

[Philip Gregory:]

Sure, so Pfizer has announced providing updates on some of the work that we have done with them, specifically around the GS knockout chose cell line and they are licensed, in fact. But the collaborations are also going very well and there has been data presented by Genentech at conferences using our technology and what happens in these collaborations is that is that the nuclease are created, the cell lines are created and then obviously they go through a panel of evaluations and those are in progress. Everything is going very well at this stage.

[Alastair Mackay:]

Thanks for the update. And any similar update on prospects for transgenic animal progress?

[Edward Lanphier:]

I think there is a thing I would say there and again, Philip may have some more color here, but I think we don't want to get too far ahead of ourselves is that that is an area of significant opportunities for the technology and significant activity, both with Sangamo and our collaborators, as well as Sigma-Aldrich and their collaborators as well as in that business. And so I would just sort of stop and just say stay tuned. Philip, anything you want to add to that?

[Philip Gregory:]

Yes, just to say that we have of course published on the use of the technology in Deeper Fish and (inaudible) of course the transgenic model was used in drug discovery and what I was referring to is the effort that is ongoing to move that into other species and we look forward to updating you shortly.

[Alastair Mackay:]

And then, Edward, last if you have any comment on the licensing agreement with (inaudible) in terms of what these new strategies for therapy might be in the foreseeable future?

[Edward Lanphier:]

Alastair, this is the announcement they made this morning. You know, to be perfectly honest, these days for us are somewhat hectic and I haven't sat down and looked at it. But I'm happy to talk to you maybe later in the week or next week about it.

[Alastair Mackay:]

Yes, fair enough. Okay, thanks very much.

[Operator:]

We will hear next from Bill Nasgovitz with Heartland Funds.

[Bill Nasgovitz:]

Hi, good afternoon. Well, it sounds very exciting. When you talk about a star performer, Sigma-Aldrich CEO talking about the zinc finger platform, star performer gene editing tool of choice, did you say rapid deployment, or rapid uptake?

[Edward Lanphier:]

Let me see, I said rapidly becoming one of four star performers with continued rapid adoption by pharmaceutical companies and university researchers. And Bill, I think you can find that language in the Sigma-Aldrich first quarter conference call transcript.

[Bill Nasgovitz:]

So – but it left me a little bit cowering when you just millions of dollars, it is still a pretty small market, what you think the potential of this market is, looking out years?

[Edward Lanphier:]

Yes, Bill, the quote that I'm looking at says this is likely to be a multimillion dollar market and we intend to take full advantage of these opportunities. You know, I am not in a position to put a harder number on multimillion dollar for you. We are – and as Alastair just asked about transgenic animal models and cell engineering, there really is a – just to quote the Sigma advertising campaign, endless possibilities for the application of technology in the research reagent and life science research area and I think Sigma is thoughtful and aggressive about how they are developing and deploying the technology commercially.

[Bill Nasgovitz:]

That is great to hear. So how do you get paid again? I know you have gotten upfront money from them.

[Edward Lanphier:]

Upfront monies and then milestones, both from a technical deliverables perspective and then commercial milestones. Technical milestones totaled $5 million and we received $1 million of that so far. The commercial milestones totaled $20 million and those are on points of total sales, total product sales and then we receive a 10% plus royalty on all product sales.

[Bill Nasgovitz:]

And when you think that might be meaningful to you, to us as shareholders?

[Edward Lanphier:]

Meaningful is a kind of a qualitative word, Bill – I mean, I think it is going to grow over time. It is $10 million in sales for them is $1 million or thereabouts in revenues for us on the royalty basis plus milestones. So I think it is something that will grow, but I think it is an area that is getting a lot of visibility and it is going to be area of major effort by our partner Sigma-Aldrich and certainly, if you look at their transcript, as far as I can tell, it is the major thing that they highlighted in their prepared remarks.

[Bill Nasgovitz:]

Well, that sounds great. Now just turning to – am I mistaken in the past, have you not indicated and maybe I missed it, so clear me up here, I apologize – have you not said that you expected a major collaboration or fee upfront money in 2009 in the past or just clear me up on what you have said and where we are today.

[Edward Lanphier:]

In our Sigma-Aldrich collaboration, Bill?

[Bill Nasgovitz:]

No, I thought that was perhaps in the therapeutic area.

[Edward Lanphier:]

Okay, so we have guided to a partnership around our SB-509 program in 2009. I don't think we have characterized the terms of the deal at all, either going front or anything like that but we have certainly and repeated on this call a guidance that we are – we will partner our therapeutic program to the points of significant value inflection.

[Bill Nasgovitz:]

So you still anticipate at least one new partnership in that SB-509 area in 2009?

[Edward Lanphier:]

That is right.

[Bill Nasgovitz:]

Do you think there is a possibility? I guess there is always a possibility. Is it probable that you might have more than one?

[Edward Lanphier:]

You know, Bill, I'm not going to go beyond our guidance at this point. I think we have said that we anticipate a partnership in that area in 2009.

[Bill Nasgovitz:]

Okay, thank you very much and good luck.

[Operator:]

(Operator instructions) We will hear next from Liana Moussatos with Wedbush.

[Liana Moussatos:]

Thank you. So how many potential partners are you talking to about SB-509 and when you say therapeutic partnership, you mean specifically SB-509 program right?

[Edward Lanphier:]

Hi, Liana, how are you?

[Liana Moussatos:]

Good.

[Edward Lanphier:]

Yes, when I say therapeutic partnership – I am looking at David Ichikawa, who heads our business development program here, I would say 99% of our discussions around therapeutic partnering are around the SB-509 program or at least start from that. In terms of giving you a specific number, Liana, of the companies that we are talking to, I think I will not give you a specific number. It is certainly an area of significant activity for the business development activities of the company and also for Dale's clinical team. And the other thing I would say is that there is a lot of activity going on in the industries and a lot of mergers and obviously the Wyeth Pfizer deal, the Mercer and Cloud deal, the Genentech Roche deal and so on and so forth and so that creates a lot of noise in the system. But it is a priority for us and one that gets a lot of attention from our business development team here.

[Liana Moussatos:]

Okay, and I have some questions for Ward. Was the whole $1 million payment from Sigma included in the $3 million collaborative agreement revenue in Q1?

[Ward Wolff:]

Actually, Liana, that $1 million was in late 2008. We announced it during the quarter, so I think that is why it was summarized by Edward but that particular milestone was actually in Q4 and I think as Edward inferred, we have additional milestones that we are tracking for receipt in the remainder of 2009, including starting with Q2.

[Liana Moussatos:]

Okay, and will those milestones be as collaborative agreements or licensing and royalty revenue?

[Ward Wolff:]

They will be in the one line that we have for collaborative agreements I think.

[Liana Moussatos:]

And any research grant revenue expected in 2009?

[Ward Wolff:]

We do have – we have been given guidance on it, but yes, in our internal plans, we do have some grant revenue in our model.

[Liana Moussatos:]

Okay. And R&D, do you expect it to go up the rest of the year or go down?

[Ward Wolff:]

Well again, we have been fairly level in that category to look at the quarter over quarter activities. So Q4 of 2008, we dipped a bit and part of that was the reverse for the bonus accruals and other things. So I think that level that you've seen over the last four quarters could be viewed as instructive as you look at the remainder of 2009.

[Liana Moussatos:]

And when will the 10-Q come out? I am specifically looking at deferred revenue in the balance sheet.

[Ward Wolff:]

The 10-Q, we anticipate filing around 5 May, I believe.

[Liana Moussatos:]

Okay, all right. Thanks very much.

[Operator:]

And we will go next to Eric Barma with Leerink Swann.

[Eric Barma:]

I had one quick follow-up on SB-728 B. and this is an open label trial, will you be giving us any update on patients and how their safety and tolerability and potentially efficacy looks in this trial? And also if you can give us any sort of update on enrolment of the 12 patients.

[Edward Lanphier:]

All I will do is repeat what we said in prepared text, Eric and that is that at this point, we are not planning to give updates on accruals or on timing for data presentation. Obviously, as time goes on, we will have more visibility and that might change but for now, we're not giving any updates on either accrual or timing to data.

[Eric Barma:]

Okay, perfect. Thanks very much.

[Operator:]

And there are no further questions at this time. I will turn the conference that over to Mr. Lanphier for any closing remarks.

[Edward Lanphier:]

Thank you. We would like to thank you for joining us. We look forward to speaking with you again when we release our second-quarter results.