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spk03: At this time, all participants have been placed on a listen-only mode.
spk07: Good morning, ladies and gentlemen, and welcome to the Origenesis Fiscal 2020 Year-End Conference Call. At this time, all participants have been placed on a 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 Wallman, Investor Relations. Sir, the floor is yours.
spk00: Thank you. Good morning, everyone, and welcome to your Genesis year-end business update conference call. On the call with us this morning are Varad Kaplan, Chief Executive Officer, and Neil Reisinger, 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 of 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 reflect our beliefs and assumptions based on information available to us at the 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 a 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 use the net proceeds from the sale of master cell, 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 partner's ability to develop therapies based on our 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 achievable 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 31st, 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 to turn the call over to Ms. Varad Kaplan. Please go ahead, Varad.
spk04: Thank you, David, and thanks to everyone for joining us on our call today. This has been a transformative year for Ogenesis. Over the past decade, we've been dedicated to this field of cell and gene therapy. 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 health care 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 in parallel, we have 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 master sales subsidiary, a contact development and manufacturing business. While gaining a growing understanding of this field, we realized that in order to answer the needs of this industry as it matures to a 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 a much larger population. With this goal in mind, we've developed this point-of-care business. We made the strategic decision to sell our MasterCell subsidiary for $315 million, generating approximately $127 million net proceeds for Genesys. MasterCell was based on a centralized approach and traditional clean rooms, and while it served the needs of clinical development stage companies, it could not provide a viable solution to support our therapeutic partnerships with hospitals and research centers. And we realized it could not provide the solution for supplying products to the millions who could potentially benefit from ongoing pipeline of therapies. We believed it was the right time to sell MasterCell in order to maximize value for our shareholders and to accelerate the rollout of our point-of-care platform. I think it's also important to note that within five years, revenue from our CDMO business increased from a run rate of just $3 million to a 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 an in-depth understanding of this industry, we believe that our point-of-care business has the potential to expand much further than the CDMO business. As a result of the sale of MasterCell, 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 for cell and gene therapies. For example, CAR-T therapies can range in the hundreds of thousands of dollars per patient. These significant costs have inhibited uptake by payers and limited availability for patients. And our goal is to dramatically lower these costs. which will support payer 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 we believe this model is ideally suited for providing autologous cell and gene therapies to patients with 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 align 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 pillar, the technologies. Here we utilize an advanced array of automation technologies that we've either licensed, developed, or partnered with third parties. Using these technologies, we are able to adapt the therapies for on-site, closed 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 technologies, from R&D to clinical development and CRO activity. all the way to commercialization. To date, we have developed, purchased, or in-licensed more than 30 therapies and continue to expand our pipeline through our partnerships with the point-of-care centers. We are in active discussions with many more centers and look forward to providing further updates as developments unfold. We've also invested resources in new point-of-care technologies that we believe address key manufacturing challenges across the industry. These technologies address quality control, scalability, reproducibility, speed, efficacy of cell production, and much more. Our goal is to integrate all of these processes and systems into a single automated unit for efficient and expandable on-site production of cell and gene therapies. What we call our Ogenesis Mobile Processing Units and Labs, or as we refer to them, the OMPOS, And I'll talk more about the OMPOs 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 centers and setting up GMP processing and supply units as the basis for a harmonized supply network for our therapies. It is apparent to us that having a compliant GMP clean room facility is a major, major bottleneck for many of these institutes. Building up of high-grade clean rooms is costly, it's a lengthy process, and running such clean rooms requires highly trained personnel as well as implementing complex and costly maintenance procedures. And even for those hospitals that do have these facilities, they are usually insufficient in size or in quality. I am pleased to report that now we have partnerships with leading hospitals and research centers in 14 countries around the world. These centers are set up for validation of therapies and technologies, but they also provide the basis for our truly global distribution platform. In line with this strategy, I'm extremely pleased to announce the recent unveiling of some of our arm pools. For those of you who haven't seen them yet or haven'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 arm pools 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 significantly advanced the validation, risk analysis, and regulatory and other tasks-related examples. These mobile systems will be utilized to produce the point-of-care therapies at reduced cost without the logistical nightmare of a centralized production facility or the difficulty of building up and maintaining clean rooms in the hospitals. The response from the industry has been overwhelming, especially at the hospital, where these arm pulls 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 advantage to these systems, but just to name a few, they are designed for a short set-up time, have a small footprint, and lower the cost of production through automated operation and parallel processing. In addition, we designed them in a scalable, modular format. so we can add capacity as the needs of the hospital increase. All of these factors enable us to produce autologous cell and gene therapies along with viral processing capabilities directly at the point of care in a consistent and standardized manner in all locations. We believe that our pulls are an important additional step to expanding our capacity, and we look forward to expanding both the quality and the locations of these systems. We've established point-of-care development and service centers 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 have set up 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 are also helping us develop and adapt our point-of-care systems to local requirements. As a public company, investors often want to put us in a bucket. Are we a cell therapy developer? Are we a manufacturer? Are we a distributor? But if you break down 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 at 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 is optimized for production and distribution. As a case in point, we have our first commercial product, KyloCell, which came to us through our acquisition of Colligo. KyloCell is already a commercial product in the United States for chronic and recurrent acute pancreatitis. But more importantly, Collinger recognized the value of working with our chain assist to unlock the full commercial potential. We're currently working at adapting KyloCell for on-site automated production and supply through our point-of-care platform, or as we say, ampulizing it. In terms of our point-of-care network, just yesterday we announced a collaboration agreement with Dongi University Hospital in South Korea and Q Therapeutics Inc., a developer of immune oncology and cell and gene therapies. Through this collaboration, we plan to deploy our ampoules at this university hospital for point-of-care development of cell and gene therapies and immunotherapy. This agreement follows a recent joint venture agreement we formed with Cure Therapeutics to develop and commercialize the pipeline on a global basis. As we develop, commercialize, and supply our Genesis therapeutic pipeline in South Korea and Japan, we can clearly see the synergies and harmony across all three pillars of our 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 have amassed an enormous patent in IPA states. We currently own or have exclusive rights to 28 United States patents, 36 foreign-issued patents, and 25 pending patent applications in the United States, 45 pending patent applications in countries around the world, and two international PCT patent applications. In addition to our first mover advantage, we are building a defensible moat around our point-of-care platform that will make it advantageous for other industry players to collaborate with us rather than compete with us. Turning to our financials for a moment, I'm pleased to report our revenue nearly doubled in 2020 to $7.7 million. These revenues relate to technology transfer setup and validation of both our therapies and systems for clinical use. As we roll out 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 at hand. In terms of our balance sheet, despite significant investment in the point-of-care platform in 2020, we ended the year with over $44 million in cash. The sale of MasterCell providers is a resource to dramatically accelerate our point-of-care business without having to raise capital. We are very well funded for the foreseeable future, and in fact, we even have a BIPAC plan in place, which we use as the 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 Awareness 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'm 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 even 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 trust in our goals 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 or can't afford life-saving 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 health care systems. We have been very fortunate in the past to receive government support from many countries, and we believe we will continue to benefit from such support. Technologies available today are capable of providing us with 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 and reduce costs, and health care systems are crying out for solutions. So we look forward to sharing more exciting developments to be announced in the weeks and months ahead. On this note, I'll now turn the call over to Neil Isinger, our Chief Financial Officer.
spk12: Thank you, Verid. Our revenues for the year ended December 31st, 2020 were 7.7 million as compared to 3.9 million for the year ended December 31st, 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 services 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 31st, 2020 were $84 million compared to $14 million for the year ended December 31st, 2019. The increase was mainly attributable to expansion of our PO care therapies and our PO care technologies, including our Of note, $17 million of this is stock-based compensation for the purchase of Tamir Biotechnology in April of 2020. Selling journal and administrative expenses for the year ended December 31st, 2020 were $29 million as compared to $11 million for the year ended December 31st, 2019. The increase for the year ended December 31st, 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, we'll now open the call to questions.
spk07: Thank you, ladies and gentlemen. The floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset, if listening on speakerphone, to provide optimum sound quality. Please hold while we poll for questions. And the first question is coming from Bruce Jackson from The Benchmark Company. Bruce, your line is live.
spk02: Hi, everyone. Good morning, and thank you for taking my questions. So first with the arm pools, have you deployed any of them yet? And which development programs are they going to be targeted to?
spk04: So the arm pools are, we haven't actually given a public disclosure of where, which hospitals they're in. So I can't say that, but I think we'll be soon announcing that. So you'll get an update as locations. And we also need the hospital's approval always to give significant announcements like this. But they are adaptable actually to most of our therapies, certainly to the immune oncology, the orthopedic, and to the diabetic programs they are now being adapted to as well. So they're very flexible in nature, so they're easily adaptable. Our first focus has been in adapting them to the immune oncology projects.
spk02: Okay. Okay. Great. And then with Coligo, that transaction closed in October, I believe. Did Kiss LaSalle contribute anything to fourth quarter revenue? And then how much do you think it's going to contribute in 2021?
spk04: So, Neil, correct me, but I think there was a minor revenue coming from Kyla. So, but I want to.
spk11: That's correct.
spk04: brings this as an example of what happens in this industry. A wonderful therapy being developed, actually getting market approval or clearance, but so difficult to deploy in many centers. So I think the major change in revenue will be once we've finished adapting KyloCell to an automated mobile system. We're also expanding in them to try to get regulatory approval outside of the U.S. I can tell you there's a lot of excitement about this therapy. It answers a very much unanswered medical need. And not only will it make it more available so we can easily be deployed in other centers, because now I think they're working only in one or two centers, what we can also do is also reduce the cost of none of this therapy and make it easier to get it to patients. So once we finish that technology thing, 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 of 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 centers.
spk02: 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?
spk04: One of our focuses, and first of all, we're really putting our focus on the immune oncology products because there's such a crucial need for patients for these therapies. But also to kind of prove our point, even if we're doing a CD19 that's exactly very similar, let's say, to other CD19s, it does have some advantages. Being a lower dose CD19, 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 than other providers. I think we're going to certainly see that going to the clinic. We want to get the TILS program out as well, and the orthopedic should be in clinical use. And for the other therapies, some of them are 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 two and so on. But I want to point out another thing. Many of these therapies, you know, they've been used in hospital kind of use before. The interesting thing about this space is that the regulatory framework is very different than a typical drug. You can have a therapy being given to hundreds of patients under a hospital exemption, but only at one location. So what we try to do is really adapt these therapies that have even shown clinical benefit and value, but now make them available in many centers. So I hope that kind of answers the question.
spk02: It does. Thank you very much for answering my questions. I'm going to hop back in queue.
spk04: Thank you. Thank you for your questions.
spk07: Thank you. And the next question is coming from Anthony Marchese. Anthony, your line is live.
spk10: Hey, Barry. Congratulations on what looks like a very successful year and sounds like based on the backlog in 2021 as well. Could you do me a favor 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 a genesis, you know, over a you know, 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?
spk04: So look, let me give you a description. And again, we work through our distributors, right? So it's, it's really, I'm going to, what I, what we'd like to happen. Okay. In this scenario is for the hospital, let's say they begin with one arm pull and that arm pull can, uh, generate a product for, let's say, 70 or 100 patients a year, because that's our goal, right, to maximize 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 per patient, right? We've kind of missed our goal by that, right? Everything we're doing is to reduce cost and expand capacity. So Once that system is working, though, if we can, you know, 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 Roth profit, because for those of you who remember MasterCell and discussions on the financials, We made about a 50% gross profit, right, Neil, on MasterCell. That's more or less the numbers. And maintaining that type of profitability but allowing that capacity to grow very quickly, okay, that I think is the basis for what we believe can be a really good financial model for us or revenue model for us. So once a system has already installed one arm pool, 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 these sites, we begin with two or three of these home pools. So the idea is to really allow these leading centers to expand, and then we can expand in parallel to additional centers. So I hope that kind of gives a framework.
spk10: Yeah. Yes. Yes it does. And I just, my 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 and then I'll, I'll sign up. Or what, what do you find them to be the impediments, if any, to growth in the United States?
spk04: Well, it's basically the validation issue, okay? It's a 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, you know, I have not received any negative feedback from regulators. And if you think of it in a kind of very straightforward, 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 clean room every time and you're basing your quality on their training and their reliability. So I don't think we're going to find a regulatory issue here. And I think once we have the first validation centers, there's no point in validating in 50 centers at the same time. It just doesn't make sense economically. You want to do your validation in a few select centers. 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 of the therapy. It doesn't mean we have to go through a full FDA-compliant drug. We have shown that the regulatory agencies agree, and we are compliant with GMP requirements at point of care. That's the idea.
spk10: I got it. All right. Thank you very much. Congrats again.
spk07: Thank you. And the next question is coming from Kelvin Seto of Slingshot Capital. Kelvin, your line is live.
spk09: Hey, Varad. Congrats on your first earnings call. I think you're a special leader who really cares about the industry and the patients. Really blessed to be your shareholder. I just have one question, right? I think in 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 consist mostly of on-pills revenue? So I think any colors on that would be really great.
spk04: Okay, thanks for your question. So, and I'm actually glad to explain that. And again, you know, going back to our master sell times, right? So what happens when you want to get a SERPI like this to market? There's several stages. the first stage, you have to do kind of a tech transfer. 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. So that's a very important step, and that's an initial step to get going for supply and manufacturing of these products. Another thing is actually training. In our case, we try to minimize 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 or when we out-license 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, and we were paid for that as a subcontractor as well for big tech companies. And the typical kind of life cycle of a product like this would be first the initial payments, so the tech transfers and the training and the 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 if 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 licensed out and are initially getting these payments or 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 if they're funded by our partners, and we will be getting a loyalty once they start 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 set up, 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 a future revenue kind of line or contract. financial income that will be based on the work we're doing at this stage. Does that answer your question or do you have any, would you like more?
spk09: I think that's really great. I just want to touch on, so within this 40 million revenue, is there any licensing fee that's really part of the 40 million revenue?
spk04: No, because it's not a licensing fee. It's on the support payments until the validation actual processing. So that's kind of the model. But we don't typically take from our partners a licensing fee for a distribution partner's licensing 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 a license fee. But in this case, we feel that it's better to wait for the royalties and make this really a joint partnership.
spk09: All right. Yeah, thanks for the extreme details. I think that really helped us to understand the business a lot better. I also have another question. Could you speak to us about the numbers of new employees that we had 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?
spk04: 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're really trying to make sure we have a very strong expertise in that. Also, you know, 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 our quality system our 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, you know, standard operating procedures that everybody reads. It's actually about implementing, doing gap analysis, and making sure everything is harmonized 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're also, because we're getting, you know, 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, I'd say, engineering, clinical development, quality systems, and GMP. That kind of summarizes it.
spk12: To answer your question further on the numbers, we have about 110, 111 employees at the end of the year. I'd say in the last quarter, maybe we've hired 20.
spk09: Thanks a lot. Just one last question. I actually have been looking at many companies such as Power Technology, IAC. 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 originacies and I'm thinking that that's exactly what is happening. You have an on-field business, you have a portfolio of promising therapies. So is there a likelihood whereby you will consider showing some
spk04: documents or 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 so strategically we felt it's very important to for us to have the ownership on the surface 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 decade, I mean, we're a very partnering 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 all comes down to the final cost, right? So if there's an option for us, for instance, to have a good partner on a therapy program and on the marketing side, why not? I mean, if that can reduce the time to market to patients and can bring, you know, at the end of the day, our goal is to be a supplier of these therapies, a distributor. The fact that we have ownership of these therapies does not mean that in the future we cannot partner with others on 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.
spk09: All right, thank you. Just want to add that I've spoken to many CEOs before, and I think you're one of the more outstanding ones, so I'll just hop back to the queue. Thank you.
spk04: Thank you. Thank you for that. Very kind of you.
spk07: Thank you, ladies and gentlemen. Don't forget, if you have any questions, please press star 1 on your phone. And the next question is coming from Bjorn Ng from NX Capital. Bjorn, your line is live. Hello.
spk08: Hi, Varad. Thanks for taking the congratulations on your first earnings call. I followed your company for a long time, and I can feel your passion to create affordable gene therapy for all patients. So, Vera, 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?
spk04: Yeah, so, I mean, look at CD19, okay? We truly believe that our CD19... And the reason for this is when you look at these therapies, it's not because we think we're superior scientists or anything like that. It's because when you look at the industry and you look at the difference between different CD19 therapies, there's not that tremendous a difference, right? The difference is in the detail. And why do we believe they are maybe superior? Well, because we believe we can supply them at 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 dendritic vaccines, pills, or other types of immuno-oncology products, when you look at what's being done, it's been done under, like, hospital exemption. It's been done in the hospital. in a lab setting, and that's very expensive and very unexpandable. 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. Even if we're not better in clinical efficacy, and some of these products have amazing clinical benefits, but still they're just too expensive and they cannot be supplied to a wider population. And that's why we believe that, you know, taking the same, very similar processes, maybe, you know, we've licensed it. Each one has its unique IP angle, and that's very typical of this industry that, you know, because every one of these therapies has, you know, 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 there's a difference. One likes to put in a bit more of that. One likes to put in a bit more of this. But at the end of the day, they're 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 that patients can actually use these therapies? So have I answered your question well enough?
spk08: Yes, thank you so much, Verit. That has been very helpful. So I just wanted to find out more about the Calacea product. So I understand that we have acquired calling goal to export their Calacea product. And it may not be easy to achieve breakthroughs easily. But I just wanted to hear your opinion. How are we progressing on that front? Would 8,000 patients as a target be possible? And would there be any current developments to share?
spk04: So we haven't put out anything about the Kylosol product yet because we're still in process there, but we will update once we're kind of providing it in the new settings. And we're working on it. Typically, 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 adapting them to a more automated fashion. But I have to say that the Collegiate team were 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 acquired on the way, where we acquired them. And they're an incredible team of engineers. So they've already done a lot of interesting work on this and a very sophisticated team. So working now with our engineering teams, I'm really hoping we can get to this goal as quickly as possible.
spk08: All right, thanks, Vera. I just got one last question regarding the on-pews. So I can see how on-pews can help clients to manage costs, and each on-pews are modular. It can be customized towards clients' requirements as well. So on average, how long does it take to complete the validation stage of an on-pew? followed by the actual utilization and revenue generation of it?
spk04: So it's really based on the regulatory agencies. I can tell you those regulatory agencies are very quick, right? You go in, you give them the paperwork, and once you do a first run or two, they're happy, and that's it. Other regulatory agencies take their time. So it's very different from one regulatory agency to another. You know, just a point that 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 there's not, we'll be getting clinical work and there's no external agency coming to kind of audit, 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 for a therapy. And depending on the therapy, it can take, let's say it takes a month, or 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 years. And I think we have very good teams on the ground to help this happen as quickly as possible.
spk08: All right, Verit, 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. Thank you very much.
spk04: Thank you. Very much appreciated.
spk07: Thank you. And the next question is coming from Ellen Litsack from Forest Capital. Ellen, your line is live.
spk05: Thank you so much for taking my question. Can you please comment on opportunities for grant funding?
spk04: Yeah, 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 country like Korea, for instance, or Greece will be active, or Belgium will have been tremendously supported, it's part of the government's need to reduce health care costs, right? They see very much eye-to-eye with us in 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. So many of the grant funding we've had so far has come from governmental agencies. And we on our part are tremendously appreciative of it, and we like to have them involved. So grants in this space just typically around 50% of investment, either in R&D or in CAPEX or in 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 health care 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 to see how we can expand on that.
spk05: Well, thanks again, and great job, Berit. Thank you.
spk07: Thank you. The next question is coming from Nicole Kaufman from Blackridge Capital. Nicole, your line is live.
spk01: Good morning, Varad, and congratulations to you and the Orogenesis team on the tremendous progress you've made this past year. Can you speak in more detail about the response from hospitals to the point-of-care model and where the new therapies will come from? and how this model will accelerate development of new therapies.
spk04: Okay, thank you for your question. So just to give you a bit of kind of background, for me it's obvious, and 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 their side. The cell and gene therapy industry has not grown out of big biotech companies. It's oncologists, immunologists, researchers working inside hospitals trying to improve therapies, whether it's an oncologist working in a bone marrow transplantation center, which is an immune therapy, right, but without genetic modification of the cells, or whether it's an orthopedic surgeon who's trying to get a better therapy to his patients for cartilage, or whatever that therapy is. These scientific... have come out of the big research institutes and hospitals. So as time went along, the regulators 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. It needs to be regulated. It needs 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 center, you know, or hospital, you'll see there's five, ten different researchers that are, some of them are already doing clinical work, but they can't move to the next step, right? So from their side, they're really eager to get these therapies, a platform to, you know, to get to patients. So when we partner with them, when we license with them, right, 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 hospital, right? They will get a royalty 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, they have, you know, everybody, at least not everybody, but most patients today, they get on the internet, they read about new therapies, they read about new programs, right? And when they come to a center, you know, everybody wants the latest and the best, obviously. But if you're a leading research center or hospital, right, and you may have the most leading programs in radiology, okay, or chemotherapy or even immunology regular antibodies 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 or they need to pay $500,000 or even a million dollars per therapy from one of their approved products or they need to find some other way to get these products. So when we come in We're 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 rational cost. And most importantly, we're cutting down times. Because imagine what it is for a hospital 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 do you have another aspect of that you'd like me to elaborate?
spk01: 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. Thank you.
spk07: Thank you. The next question is coming from Megan Hahn. Megan, your line is live.
spk06: Hi, Barrett. Congratulations on your first early call. I'm just really blessed to be a shareholder of such an organization which drives for the noble cause of creating such affordable cell and gene therapy for all. And I'm really glad to be able to speak with you today. Okay, so many investors are looking at Ogenesis that is incurring high cash burn every quarter. Like the previous quarter, you had $58 million in cash and for the current quarter, you are left with $45 million. So the cash burn seems to be really high, and based on my single calculation, the cost of R&D is roughly around $47 million. So could you elaborate whether this was due to any one-off expenses, or do you expect similar levels of expenses moving forward? And also, could you elaborate on what were such expenses? Thank you very much.
spk12: Let me let me take a couple.
spk04: Yeah, no, that's fine.
spk12: 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. OK, because that was expensed all as R&D based on based on how it need to be treated on the financial statement. So 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 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 in – in 2020 more of a burn rate if you will because i think that's what you're driving at right of about five million per quarter now going forward we expect those two things i pointed out number one is won't exist on the tamir side obviously that was a one-time uh 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 20. 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 and D, but 2020 was a, a, a, a, a year in which we expended more in that regard for, for investment in this platform. Okay. So, sorry, go ahead, Barrett. I just wanted to give out some numbers.
spk04: Yeah, thank you, Neil, for bringing that up. 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, you know, we can drag that expense out on three years or we can just get it done. And that's what we wanted. We wanted to get it done because there's a timing issue. Every time you wait, there's overhead for the company, there's other costs involved, there's 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 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 in 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 the 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 generate revenue. And I really feel that every dollar in that expense will generate us revenue at least in the coming year or two, but certainly 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 our JV partners for the validation of the drugs and the regulatory work, which is less on our kind of balance sheet, but it's their commitment to get that done. So I expect the R&D to be reduced just because I think the team here has done a tremendous job at getting things done. I hope that answers the question well enough.
spk06: Yes, thank you very much. Okay, so building on that, could I ask if you would have any visibility on when Ogenesis would likely be on a break-even basis?
spk04: So our goal is this coming year to be so. I don't know if, you know, 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 the revenue in the context is realized, we should be fine.
spk06: All right. Thank you very much. Thank you.
spk04: I wish you all the best this year. Thank you very much. Much appreciated.
spk07: Thank you. And the next question is coming from Jason Revelland from Revelland Wealth Advisors. Jason, your line is live.
spk11: Thanks for taking my call. My question has actually already been answered, so I will not take up any more valuable time, but I would say congratulations and I'm very excited for what the future holds for the company.
spk04: Thank you so much. Thank you.
spk07: Thank you. And we had Bruce Jackson come back from the Benchmark Company with a follow-up. Bruce, your line is live.
spk02: Hi. Thanks for the follow-up question. Going back to the R&D spend, did the Caligo acquisition contribute to the fourth quarter R&D number and how much?
spk04: I don't have exact numbers, but I don't think it was very material. Neil, do you have the exact numbers of?
spk12: No, it's not material because the portion of that, the difference with Caligo was that increased our intangible assets because the expense, the acquisition of that 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, yeah, you don't have a material impact on the P&L on the Caligo acquisition.
spk02: All right. Got it. Thank you.
spk07: Thank you, and there are no other questions at this time. I would now like to hand the call back to Vered Kaplan for any closing remarks.
spk04: Okay, thank you. First of all, I'd like to thank everyone for participating on our year-end business update conference call. We really are very excited about the business and the outlook, and we always appreciate the strong support of our shareholders. And we look forward to 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.
spk07: 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.
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