Orgenesis Inc.

And welcome to the Orgenesis second quarter 2023 business update call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, David Waldman, Investor Relations.

You may begin. Thank you and good morning everyone and welcome to the Origenesis second quarter 2023 Business Update conference call. On the call with us this morning are Verid Kaplan, Chief Executive Officer, and Neil Reitinger, 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 Exchange Act of 1934 is amended. These forward-looking statements involve substantial uncertainties and risks and are based upon our current expectations, estimates, and projections and reflect our beliefs and assumptions based upon 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 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, 2022, 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 our Genesis CEO, Ms. Verid Kaplan. Please go ahead, Verid.

Thank you, David, and thanks to everyone for joining us on our call today. We reported revenue of approximately $7 million for the second quarter of 2023, which reflects the continued activity of our point-of-care strategy. Most recently, we rebranded the point-of-care services business from more genesis to Octomail, which reflects our focus on providing standardized, decentralized, cost-effective development and production of advanced cell and gene therapies. The ongoing expansion of our point-of-care strategy has been enabled in part by the recent investment for Metalmark Capital. This capital allows us to increase our capacity and expand our activity, as well as the rollout of our point-of-care centers and deployment of our all tools in the U.S. The reason our point-of-care business is resonating well in the industry and among those familiar with the industry is quite simple. Our point-of-care platform addresses many of the key challenges facing the industry, including capacity constraints and excessive costs. Despite the fact that the autologous cell therapy market is valued at $13 billion and growing, the centralized production approach is not a sustainable business model, as illustrated by supply shortages, high prices of products, and limited availability of coverage. And because of our experience in this business for the past 10 years, we recognize this fact before the rest of the industry. We're now seeing the industry acknowledge the urgent need to shift production away from a centralized to a decentralized model and towards point of view. Hospital and health systems can't afford to produce cell and gene therapies in a centralized manner. This is a fact, and Octomera, a rebranded service activity, is the only service provider that can offer solutions today. We are also seeing growing recognition and support for decentralized production of cell and gene therapies among the regulators, including the FDA, which addressed decentralized manufacturing for the first time in the draft guidance document, Considerations for the Development of Chimeric Antigen Receptor, the CAR-T Cell Products, which we believe comes as a response to the industry's search for solutions in this space. In fact, a recent article in Labiotech noted that over 9,900 cell therapy trials are currently recruiting. They go on to point out that even if 5% to 10% are successful, a significant number of cell therapies will be approved in the near future. This is extraordinary considering the average number of drugs approved over the last 10 years is around 40. They go on to note that the traditional centralized CDMO model is a capital-intensive approach, essentially a dead end. And I quote, economically, it doesn't work. The cost of centralized manual processes will keep therapies out of reach for patients and payers. They point out a recent example, which was Bluebird's bio-withdrawal of Vintegro, a gene therapy for a rare blood disorder from the German market because it could not agree on a price with the health authorities. They conclude by saying the centralized approach also doesn't work from a clinical perspective because of the complicated logistics, time lags, and failed batches. In contrast, we are poised to capitalize on this growing underserved market and have shown our process work in a decentralized manner. Within the field of cell and gene therapies, our processes apply to regenerative medicine and immunoncology as well as other genetically modified cells. We are now expanding to new customers and moving to more advanced clinical stages among existing ones. As a result, we believe our models based on standardization of the production environment, is uniquely positioned to address industry challenges through a highly innovative decentralized model, which lower costs, streamlines logistics, and expands capacity. In addition, we designed them in a scalable modular format so we can add capacity as the needs of the hospital or biotech companies expand. This process is exactly the same regardless of where the product is produced. We have a GMT platform GMP team with significant practical experiences overseeing the centers and the RPO and working to implement advanced quality management and IT solutions. We'll also be rolling out our new GMP services in the US in the coming quarters. In addition, RPOs can be deployed and operational in three to six months with an existing structure or an available outdoor space. And production capacity can be easily scaled via the additional units. Arm pools are fully integrated, all-in-one bioprocessing production units that can be rapidly implemented as a standardized industrial cleaning alternative at the point of queue. Arm pools shorten the implementation time of new capacity from 24 months to 3 to 6 months. The interior can be purpose-built to include GMP-compliant production space with options for quality control labs and warehouse spaces. We believe our strategy of decentralizing and harmonizing the supply for cell and gene therapies will ultimately become the solution for this industry, lowering costs, streamlining logistics, and accelerating development of therapies through on-site processing. Through these steps, we are clearly executing on our strategy to make cell and gene therapy products and services more accessible, affordable, and available to patients than traditional centralized models of production. In terms of expenses, our goal over time is to reduce the cost of these therapies to tens of thousands versus hundreds of thousands of dollars. On a related note, it is important to point out that some of the growing pains we went through to get where we are today. When we started out our point-of-care strategy over three years ago, decentralized production was a topic discussed as a distant option at industry events. with various bioreactor companies taking initial steps to provide systems for use in hospital cleanings. We had already tried this approach and realized that though this was important, this was not the full solution the industry needed. Our first clients were smaller, earlier stage companies that couldn't even access production capacity due to supply constraints within the market. For this reason, they were willing to take a risk with us. while this was still an early-stage concept, and recognize the value proposition we would be able to offer in terms of more rapid, lower-cost production if and when successful. But because many of these smaller companies were early-stage and undercapitalized, we were also willing to provide greater flexibility in payment terms and mutual support in working with them. They were and are our partners, and we appreciate the support while we were still in the development stages. This approach has impacted our accounts receivables, but we believe that we have achieved our goals, and hopefully, as these companies mature, we hope to continue providing the products in more advanced clinical phases. We have also advanced and matured and have validated our approach across several product types and can now work with companies at more industry-sustainable levels. With the deconsolidation of Octomera, We believe our decentralized service platform can now function as an independent entity as it continues to expand its reach globally. It has been rebranded as Octomera, with the name Octomera expressing the unique characteristics of the octopus, its capability to adapt and integrate to a wide range of spaces, its decentralized intelligence, Octopuses' arms can actually think independently of their central brain, their ability to regenerate their limbs, and their ability to reach out in all directions. The Mira part of the name comes from the word chimera, which signifies our ability to genetically modify cells. Because of the Head Start, this has given us in the market, we have now proven our model, and Octomira is positioned as a clear leader in terms of providing decentralized services. The industry itself is also maturing, and cell and gene autologous therapies, once considered almost a science fiction, are now becoming a viable approach for therapeutic treatment with more and more therapeutic areas targeted. A good example is the CAR or chimeric antigen receptor approach, in which the patient's immune cells are genetically modified so they may target a specific target. CARs were first used only to treat blood cancer, making history by enabling patients unheard of clinical results in extremely ill patients and have now expanded to multiple modalities, including autoimmune diseases and even cardiac disease. As the number of therapies grows, as more and more patients require these treatments, it has become obvious that the industry must find solutions to reduce costs and enable capacity. And we believe OptoMirror will play a significant role in providing this solution. Also, Once these customers start working with us, as I have discussed in the past, we become central to their entire production process and regulatory approval. This leads to a long-term collaborative relationship and interdependency. As they progress through various stages of clinical trials, so do we, and ultimately into commercialization together. Our strong process development capabilities coupled with our going GMP capacity enables us to decentralize the supply of cell and gene therapies in various regions. By initially developing a robust production process programmed into our proprietary agnostic and flexible arm pools, the production can be efficiently scaled and transferred to various locations in the manure network. We have our initial locations, which are operated directly by us, but we have also identified regional partners, at which we can work that can support the expansion of the network to meet local demand. This allows us to reduce regional overhead and expands our reach in providing decentralized services. It is also part of our strategy of providing a standard for the industry and utilizing available resources and integrating innovative technologies into the platform. We have successfully implemented implemented a certified academic program to support additional recruitment and are performing multiple tech transfer to additional sites for production stage products supplied at existing sites. We continue to support the growth of our network, which now spans North America, Europe, and Asia and the Middle East, compromised with both point of care centers, which serves as hubs for the entire region, In Europe and Asia and the Middle East, Octomera is already providing production services. It is still setting up point-of-care centers and strategic hubs in the U.S., implementing procedures and GMP in the international hubs. In order to maintain Octomera's value as an industry leader, it must not rush at the cost of not complying with its stringent quality requirements. There can be no compromise on this issue, as this boasts of a legal and an ethical duty. Octomera recently reached an important milestone in its collaboration.