StemCells, Inc (NASDAQ:STEM) CEO Interview

StemCells, Inc
CEO: Martin McGlynn

Interview Transcripts:

Juan Costello: Good day from WallStreet, this is Juan Costello, Senior Analyst at the Wall Street reporter. Joining us today is Martin McGlynn, the CEO for StemCells Incorporated. The company trades on NASDAQ and the ticker symbol is STEM. Thanks for joining us today Martin.

Martin McGlynn: Happy to be here Juan. Good morning.

Juan Costello: Good morning. Now, starting off. Bring us of a speed on the recent announcement about the neural stem cell transplant on the spinal cord injury patient.

Martin McGlynn: Sure. Well we’ve just announced that we have successfully transplanted the first spinal cord injury patient at Balgrist Hospital in Zurich Switzerland. Which is one of the world’s largest for injury and rehabilitation. We initiated the study at in March, earlier of this year. This study was approved by Swiss Medic in the University of Zurich of which the Balgrist Hospital is affiliated. 12 patient study with Thoracic injuries, Thoracic being in the chest area from T1 to T12 vertebrae. The unique attributes of this trial is that we are recruiting individuals who have reached what is described as the chronic stage of the injury. It is not immediately after the injury which is a very very difficult environment itself but approximately 3 months post injury and up to 12 months post injury. We are seeking to enroll patients who have probably considered the most in this or the most severe complete injury and they’ve essentially no more motor function below the injury. These are referred to as [Phonetic] [0:02:22] A subject. So as soon as we complete dosing on the first 3 subjects of the complete injury we’ll move on and enroll another group of patients who are less severely injured called the Age of B’s and we’ll complete the study with enrolling the, or are referred to as the Age of C patients who have less severe injuries that either the A or B cohorts. Our intention here is to transplant a significant into the spinal cord of these patients. When I say significant, we’re talking about up to 20 million cells for each procedure. So it’s a very exciting study, we’re looking to first of all and foremost as retain the safety elements of surgery, the cells and the immune suppression and we’re looking for evidence of biological activity of the cells. We’re looking for evidence of advocacy and the end points that we will be looking for would be improved sensation, some restoration or evidence of improved motor function as well as restoration or improvement in vowel and bladder function. So this is a very exciting study, it’s the first time that anyone has planted neural stem cells into the spinal cord of a patient so it’s really a breakthrough for the company and quite frankly it’s a very exciting development for patients who have chronic spinal cord injury.

Juan Costello: Certainly. And so yeah, in regards to HU CNS HC which is the main platform. Describe to us you know, what it is regarding, you know, Purified Neural Stem Cells and some of the other applications.

Martin McGlynn: Sure. Sure. So what it is not, it is not an embryonic derived stem cell. It is what described as a tissue derived or adult stem cell. It is a highly purified population of neural stem cells, the cells are not genetically modified in any way and they do not give rise for tumors. They’re essentially, because they come from brain tissue, they are lineage restricted form neuron astrocytes [Phonetic] [0:05:05] which are the main cast of characters if you will in the cellular world in the central nervous system and we have done an incredible amount of work over the years to demonstrate that these cells or robustly in graft in various animal models and that they also migrate robustly in the both, in various animal models and [Phonetic] [0:05:32] some very exciting properties of the cell in a whole range of disorders and disease that affecting the central nervous system.

Juan Costello: Certainly. So there’s also an application for an AMD to help cure or treat blindness?

Martin McGlynn: Yeah. So you know, retinal disorders are linked to degeneration of the photo receptor cells and it is known that progressive loss of these photo receptor cells in the macula lead to the central vision loss which is otherwise referred to as age related macular degeneration or AMD. It’s the leading cause of vision impermanent in folks aged 55 and over for some 25 to 30 million worldwide as opposed to about 1.3 million chronic spinal cord injury patients which will give you kind of a reference point. So it’s a significant huge and growing market and there’s no medical or surgical treatment for dry AMD. We have plans to initiate a study here in the United States in age degenerated macular degeneration because we’ve shown that ourselves protect these photo receptors and they preserve vision loss and we’ve reported the results of this pre-clinical studies and we also have shown that our neural stem cells protect both the rod and foam photo receptors and we presented that data in the society for Neural Science annual meeting back in 2009. So essentially when we put these cells into a rat model of visual function, what we see is that in the, these rats are genetically, they’re genetically altered so that they start to lose vision over a period of time and eventually they go blind. And what we’ve shown that in the treated group with the cells that essentially we’re able to preserve visual function pretty well close to normality as opposed to the untreated group in this rat model of blindness that they eventually go blind. So the pre-clinical data is very striking and it’s a very exciting initiative for the company. So our plans are to file an IND by the end of this year and to initiate the study here in the US probably in 2012. It’s a very very exciting initiative for the company.

Juan Costello: Well, great. And so what’s the market opportunity with the product?

Martin McGlynn: Well, if you take human neural stem cells and you look in all the global potential for using these cells as a therapeutic, it runs in a billion dollars. Because these neural stem cells are the cells that provide functionality and restore loss function in the central nervous system. And by the central nervous system we’re talking about brain, the eye and the spinal cord. So if you can imagine all of the various injuries and diseases and conditions that affect the central nervous system, you’ll begin to understand that the market potential for these neural stem cells as a therapeutic agent or treatment of a significant menu of these disorders and injuries is a very very large market, it’s in the billions of dollars.

Juan Costello: Right. And so what do you say or some of the factors that makes stem unique from some of the other players in the sector?

Martin McGlynn: Well, I think the quality of our science, the tiredness of the scientific endeavor, we do things right, we invest a lot in getting things right and making sure we’re sure footed as we move from scientific observation to pre-clinical experimentation and then at the clinical trials. And I think we’re unique in the sense that we’re leading the field in terms of cellular intervention in to the central nervous system. We have 3 clinical trials that have been initiated with [Phonetic] [0:10:45] disease, spinal cord injury and another fatal neural degenerative disorder called [Phonetic] [0:10:52] disease. So prefer ahead and we’re, I think we’re the only company that has a program that has transplanted into the brain as well as into the spinal cord and shortly we’ll be transplanting these cells into the eye for age related macular degeneration. So prefer these along, we’ve got the broadest platform and we have a very very robust intellectual property portfolio, very deep, very broad and very global so all of our investment in this research and development is protected by a very expensive patent portfolio. So our investors do know that we can demonstrate that these cells really provide clinical benefit, that we’re able to protect our investment, we’re able to protect their investment through the use of our patent.

Juan Costello: Certainly, and perhaps you could walk us through your background and experience Martin and a little bit about the management team there.

Martin McGlynn: Sure. Well, I supposed I could be described as a veteran of the health care industry. I have worked with such companies as [Phonetic] [0:12:24] Laboratories, British Oxygen Corporation, it’s [Phonetic] [0:12:35] healthcare business where I run the [Phonetic] [0:12:37] Therapharmatheutical business before it was sold off to Avid and Baxter. I was also part in partial of [Phonetic] [0:12:41] Biotech Company. I was developing a new class of anti-inflammatory agents. And in January of 2001 I joined [Phonetic] [0:12:57] to help take these incredible scientific discoveries through the clinic and into the market place and progress has been slow but very steady, very encouraging and very exciting. The individuals and our management team, we have a really strong and very impressive group of people. The executive vice president of RNDM Sue Comodo has — track record in the stem cell world. Her credentials go back all the way to the —- stem cell where she is the first name on the —- stem cell patent. Dr Nebuko Yushida who is also involved in that endeavor is the primary name on the on the patent for this human world stem cell population that we have in the clinic. The head of our central nervous system Dr Steven Hune is former head of pediatric neuro surgery at Stanford. The head of our manufacturing and development activities — industry veteran and subject matter expert in the field and highly regarded and well-known. He’s been in a whole slew of stem cell companies that have employed all kinds of platforms and technologies to process and develop the stem cells, so a very very experienced individual there. And then we also have a liver program which is — but is coming along and that’s headed up by very talented woman Dr Maria Mallan who is the former head of Pediatric liver transplant at Stanford also. So that’s a very powerful team. Our CFO Rodney Young, former investment banker with Cowen and Leeman in the US and in Europe and has a lot of experience in investment banking activity. So that’s just the senior team, the leadership team of the company and you know, we have tremendous bank strength and we have a great group of people throughout the company. Over in Cambridge in the UK, we have a very experienced RND executive Dr Paul Bello who runs our Cambridge UK operation where we research, develop, manufacture and sell a whole range of stem cell re-agents and self-culture media products, so very very extensive, very experienced and very successful group of people.

Juan Costello: Certainly. So what are some of the goals and milestones that you and the team there are hoping to accomplish over the next year?

Martin McGlynn: Well, let’s go through some of the things that we’re looking for over the next, say 12 months. Number 1, we will have the results of the —– disease trial that was conducted at UCSF. We will have the results of that study in the first quarter of 2012. We also intent to complete —- in the spinal cord injury by the end of this year so that we would, our plan there is to, those 3 patients in the — by the end of the year. And then quickly and smoothly transition in to enrolling and transplanting — B and then in time on to the —- C so that we can complete that study in 2013. We will also, of course we’re looking to get approval for our clinical trial in retina disorders and AMD and initiate that study early in 2012. We have been approved by the California Institute Regenerative Medicine with a planning grant that will intern allow us to submit — disease team grant application to the California Institute Regenerative Medicine to fund a very exciting project in Alzheimer’s disease in collaboration with a group of really excellent scientist in the field led by Dr Frank Laferlla and we’re hoping that in the middle of next year that we will receive funding for that Alzheimer’s program. The firm has allocated about $240 million to fund 12 disease team and this round of funding will be made available to applicants such as ours sometime in the middle of next year. And the amounts for these disease teams are very significant, I mean we’re talking up to $20 million to fund the — activities and to get the sponsor into a clinical trial within 4 years. So this is serious money, this is significant amount of money. And we’ll also be looking to the — to fund some other programs that we have in our — as you say and we’re certainly looking to serve and continue the great work that they’ve started some years ago on funding stem cell research. So in summary I would say complete the dosing for —- spinal cord injury, report out the results of the PMD study in the first quarter of 2012, initiate the age related macular degeneration early next year, initiate that study. And you know, it’s also exciting that we’ve initiated project in Alzheimer’s disease so I don’t need to tell you what the market opportunity is there.

Juan Costello: Right, and when it comes to investors and the financial community, Martin. Do you believe that the StemCells Inc story and your message and ultimately the company’s upside are completely understood and appreciated by them and if not, what do you wish investors better understood about the company.

Martin McGlynn: Well, the short answer is no. I don’t think the street better understands what the stemcell’s inc all about. I really don’t think they appreciate the value that has been created in this company today. Quite frankly, I don’t think they appreciate the potential to — significant shareholder value in the non-too distant future. We’re a leader in a very very exciting field, stem cell therapies and cellular transplants are here to stay, like it or not. It’s only a question of time before one of the many companies that are now in the clinic with various candidates for cell therapy actually have a breakthrough and show that the use of cells as therapeutic agents is very very potentially valuable and significantly alter practice of medicine. You know, if we can succeed in what we’re doing, the price would be a paradigm shift and will fundamentally transform the practice of medicine and healthcare economics. I really do believe that this technology can bend the cost curve when it comes to health care —- and no doubt about that in my mind. Stem cells, unlike drugs or proteins self-renew and differentiate in the fashion that’s regulated by the body and this is been voiced by Dr. Irving Weiseman who’s member of our board and he’s the Chairman of the Scientific Advisory Board and the co-founder of the company. I mean essentially, he has stated that stem cells hold the potential to regenerate systems for life from a single therapy. And I actually sit down and think about that, really think about it. And what the potential for this technology is, we’ll have to tell you that in my view, the market can only arrive at the right conclusion and that is that they’ve got it wrong. That they really do not understand or appreciate what the potential is for this technology and for this platform. It’s only a question of time before it happens and not a question of it. At the stem cells inc, I think a very very precursory look at relative market caps for stem cell company in the States and the evaluation of relative market caps between the various companies I think will lead investors to a question mark and say, “My Goodness, why is it that this company, why is it that’s it’s marked and capped significantly lower and some other companies who are not even halfway where this company is doesn’t have the breath, doesn’t have the focus and doesn’t have the track record and the team to pull it up”. So yeah, I don’t think the market really understands what the stem cell inc is all about. I don’t think they really appreciate the potential for the platform and, but honestly I think they’re missing one heck of the tremendous investment opportunity and —- knows in these markets, everybody is looking for winners. And I really do think that StemCells Inc is uniquely positioned and will emerge in the stem cell world.

Juan Costello: Great. Excellent. So once again, joining us today is Martin McGlenn, the CEO for StemCells Incorporated. The company trades on NASDAQ —- is STEM, currently trading at 215 as share, the market cap is north of 29 million. And before we conclude Martin, to recap some of your key points here, why do you believe investors should consider the company as a good investment opportunity today?

Martin McGlynn: I think we’re at a typical point for the technology in neuro stem cell field and in this DNS arena. We have successfully manage the transition from scientific discovery to pre-clinical research and now we have successfully manage the transition from pre-clinical research to clinical research and investors can make a choice and they can say, “Well, we’ll wait until the results of the clinical data are in and then we’ll buy shares in the stock”, or take a look at the pre-clinical data and the track records of this company in the market potential and say, “You know what, you know I think I’m just going to speculative buy as the analyst would call us but I’m going to go in and get into the ground floor as an incredibly depressed evaluation and put the money in to this company”. I really do think that it has tremendous potential, it is an investment decision, it has no guarantees. But I have to tell you, it’s a compelling story and the market cap and the relative valuations are very attractive. So I think this is a really tremendous investment opportunity for folks who have the appetite for speculative buys in the Biotech and in the Stemcell world.

Juan Costello: Well, we certainly look forward to continue to track the company’s growth and report on your upcoming progress and I like to thank you for taking the time to join us today Martin and update our investors on StemCells Inc.

Martin McGlynn: Well, thank you Juan and I’m delighted to do it.

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