Aethlon Medical, Inc. (AEMD) Q1 2017 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Aethlon Medical Inc., First Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note that this event is being recorded. I would now like to turn the conference over to Brad Edwards. Please go ahead.

Thank you, operator, and good afternoon everyone, and welcome to Aethlon Medical’s fiscal 2017 first quarter conference call. Hosting the call today are Aethlon’s Chairman and CEO, Jim Joyce; as well as the company’s CFO, Jim Frakes. Mr. Joyce will provide an overview of Aethlon’s strategy, clinical testing status and recent developments. Mr. Frakes will then make some brief remarks on Aethlon’s financials. After that we will open up the call for the Q&A session. Before I hand the call over to Mr. Joyce, please note that the news release today and this call contain forward-looking statements within the meaning of the Federal Securities Act of 1933, and the Securities Exchange Act of 1934. Forward-looking statements involve risk and uncertainties that can cause actual results to differ materially from those anticipated or suggested by such forward-looking statements. Statements containing words such as may, believe, anticipate, expect, intend, plan, project, estimate, or similar expressions constitute forward-looking statements. Factors that may contribute to such differences include without limitation risk related to the company’s ability to develop and commercialize its products, the ability to fund and complete clinical testing of the company’s products, the company’s ability to raise working capital if and when needed, the company’s ability to protect its intellectual property, the impact of changing government regulations on biomedical devices, the ability of the company to meet the milestones contemplated in its contract with DARPA and other risk factors. The foregoing list of risk and uncertainties is illustrative, but is not exhaustive. Additional risk factors can be found under the caption Risk Factors in the company’s Annual Report on Form 10-K for the year ended March 31, 2016 and in the company’s other filings with the Securities and Exchange Commission. For a more detailed discussion of the risk and uncertainties that could cause actual results to differ materially from any forward-looking statements, please see the company’s public filings are all available on Aethlon’s website. With that, I will now turn the call over to Mr. Joyce.

Thank you, Brad, and good afternoon. During our fiscal year-end call on July 29, I referenced the ability of our Hemopurifier to address viral pathogens or beyond we should be treated with traditional drugs and vaccines. And I also review the damping challenging and trying to align with traditional agents with each and every pathogens throughout. In reality only a handful and more than 300 viruses that are known to be infectious to man or address with an antiviral drug agent and only one of the 13 viruses classified as category A terminology pathogens are addressed with a proven treatment countermeasure. For those not familiar with category A terminology, these are infectious agents who pose highest risk to national security and public health as they are easily disseminated from person to person. They have high mortality rates, and they may provide a basis for panic and social disruption. The inability to address such a breadth of threats with traditional therapeutics have contributed to our decision by the United States Department of Health and Human Services to expand our governments focus towards broad spectrum platform technologies that can cross the boundary with different pathogen threat. Based on human clinical and preclinical study, we believe our Hemopurifier in the leading and perhaps only true broad spectrum countermeasure being advanced in FDA approved clinical studies. Earlier today, we expanded our collection of broad spectrum evidence, when we disclose that our research team validated the rapid in vitro capture of Zika virus from both cell culture fluid and human blood serum with our Hemopurifier. I want to emphasize this study was conducting with the strain of Zika that is spread from South America to ravage Puerto Rico and likely responsible for the first wave of infections here in the mainland. While, our research team had access all the streams and Zika for some time, we decided to wait until we had access to the strain that is currently circling the globe. And now regard Zika has been named the global health threat by the world health organization. And according to CDC, more than 7,300 Americans have been diagnosed with Zika, including more than 1,800 individuals in the continental United States and Hawaii. Again, like most viral pathogens Zika virus is not addressed when proven drug of vaccine. In additional concerning factor regarding Zika is that researchers have linked the virus with Guillain-Barre syndrome, a severe neurological disorder that can cause paralysis. In pregnant women, Zika is demonstrated to cause Microcephaly, which results in babies being born with a small head and underdeveloped brain. And earlier this week, researchers reported to connection between Zika infection and Arthrogryposis, which is the condition that results in deformities of joints in both the arms and legs of newborns. Institutional Zika data, we also released Tuesday that we have entered into an agreement with Defense Advanced Research Projects Agency, also known DARPA to validate the vitro capture of Middle East Respiratory Syndrome Coronavirus also known as MERS-CoV. This virus which was discovered to be infectious to men in 2012 and has a mortality rate of approximately 30%, again like Zika MERS-CoV, is not addressed with a proven drug or vaccine. In addition to our confirmation of Zika capture, our broad spectrum Hemopurifier validation now include the mosquito borne viruses chikungunya, Dengue and West Nile virus. We’ve also demonstrated the capture on Vaccinia and Monkey pox, which serve as models for human Smallpox infection and specific to pandemic influenza threats, we’ve validated the capture of H5N1 avian flu, H1N1 swine flu virus and the reconstructed 1918 influenza virus, which represents a model for the strain of influenza that killed approximately 50 million individuals. In regards to human studies, Hemopurifier therapy has previously been administered individuals infected with Ebola, Hepatitis C and HIV. In the case of Ebola, a remarkable response of a comatose physician with multiple organ failure contributed to the emergency use clearance of our device by the FDA and the government of Canada and promote its worth Time Magazine naming the Hemopurifier to be top 25 invention and one of the eleven most remarkable advances in healthcare. At present, our clinical team has enrolled the fifth patient of a 10-patient feasibility study designed to advance Hemopurifier therapy as a treatment counter measure against Zika and other acute viral pathogen that are untreatable with traditional drug therapies. Upon successful completion which we’re targeting for year-end, we will have an opportunity to file a pivotal IDE submission with FDA related to a chronic viral pathogen, such as HIV or Hepatitis C where it’s actually feasible to conduct controlled human efficacy studies. The completion of the study will also set the stage for us to submit an IDE to treat cancer. As it relates to cancer, some of you may have noted that Bristol-Myers Squibb lost $20 billion in market value last Friday based on the report based on immuno-oncology drug OPDIVO did not perform significantly better than chemotherapy and studying patients with newly diagnosed lung cancer. On Monday, Bristol-Myers lost another $5 billion of market value. The Wall Street journal reported that the outcome of the study raises questions about what has been the hardest area in cancer research. Immuno-oncology drugs designed to stimulate the immune system to better combat cancer. Bristol-Myers value erosion should be a wakeup call for the entire drug industry that better understand the more tumor-derived exosomes in inhibiting or causing resistance to emerging immuno-oncology drugs, as well as established chemotherapeutic agents. In the world that was increasingly being published in peer reviewed science journals. We believe that a device, i.e., our Hemopurifier when synergistically combined with these therapies to reduce the presence of tumor-derived exosomes will improve treatment outcome and do so without introducing additional drug toxicity. We made the best to tumor-derived exosomes who played a role in promoting cancer progression a decade ago. At that time, we began to demonstrate that our Hemopurifier recaptured its particles based on an observation that exosomes were cloaking themselves with a surface structure that was the basis for Hemopurifier’s ability to capture viruses. We accurately assess that viruses in Exosomes was deploying this structure as a means to abate surveillance in the immune system. Unfortunately, the consensus of the medical community at that time was that Exosomes were nothing more than cellular degree and had no biological function. Fast-forward 10 years later and the evidence is extremely clear that tumor-derived exosomes play a multitude of deleterious roles in cancer progression, including immune suppression, immune evasion, drug resistance and the promotion of metastasis, which is attributed to 90% of cancer deaths. If you are interested in learning about tumor-derived exosomes and why we’re excited about this field, I encourage you to visit PubMed and search the words exosomes in cancer. If you do so today, you will see that 1,874 publications appear. Most of which has been authored within the last three years. Our publication entitled, exosome removal as therapeutic adjuvant in cancer, which reviews our treatment strategy in cancer has now been cited in 57 other peer-reviewed publications, which is three more publications than what I reported during our June 29 call. Again, like most viral pathogens, tumor-derived exosomes are not addressed with a proven drug agent. Now, before I hand the mike off to our CFO, Jim Frakes, I want to quickly review some of our other initiatives. First, I want to talk about clinical programs. While our primary focus is clinical progression in United States, we will from time to time take opportunities to treat diseases conditions overseas. In this regard, our President, Rod Kenley is preparing to train the principal investigators for the launch of a Hemopurifier study to treat patients with severe dengue infection at the Max Super Speciality Hospital in Delhi, India. Like Zika virus, dengue infection is primarily transmitted by the Aedes aegypti mosquito. In regards to our majority owned subsidiary Exosome Sciences. We have been informed that the recruitment of former NFL players which will be support $16 million NIH grant that was awarded to our collaborators at the Boston University CTE Center is expected to kick-off in September. An objective of this clinical program is to advance a test that could diagnose Chronic Traumatic Encephalopathy or CTE in living individuals. We previously disclosed that we collaborated with the Boston University team to discover what is believed to be the first candidate biomarker to diagnose CTE in living individuals. We trademarked this biomarker to be known as TauSome. If you’re not familiar with CTE, it’s a disease condition associated with repetitive head trauma and at present it can only be diagnosed with post-mortem autopsy. In a previous study of 78 former NFL players and 16 former non-contact sport controlled athletes, we observed TauSome levels to be approximately 9 times higher in the NFL group as compared to the controlled subjects. We now look forward to continuing our validation of TauSome as the first candidate biomarker to identify CTE in living individuals. And finally, we’ve been also active in research and development of new product that leverage our core competency of targeting the elimination of disease promoting target from bodily fluids. In this regard, we filed a new patent on August 3, related to a cerebral spinal fluid processing system. While this is an early stage product candidate it’s successful development could provide a platform to treat a wide range of neurological and central nervous system disorders. With that said, I will now hand off at the time to Jim Frakes, our CFO, to talk about our financials.

Thanks, Jim. Given our strategy of concentrating on U.S. clinical progression, we are not focused on the generation of revenues at this time and we did not complete any milestones on the June 2016 quarter. However, as Jim Joyce noted earlier, DARPA agreed to change our next milestone to validate the in vitro capture of the MERS virus. We are working on that study now with a help of collaborators. And while we expect to complete that in the September quarter, there can be no assurance that that will occur. At June 30, 2016, we had a cash balance of approximately $1.3 million. That cash position will continue to be used to fund our FDA approved feasibility study in the U.S. and our operations. As Jim Joyce noted earlier, we recently entered into an agreement for a $12.5 million at-the-market financing arrangement. This arrangement will allow us to raise capital at our discretion at prevailing marketplaces without the need to issue warrants or to issue shares at a discount to market prices. We have tested this arrangement and we intend to use it discretely. Our consolidated operating expenses were approximately $1.1 million in the first quarter of fiscal 2017, compared to approximately $1.3 million in the prior year period. This decrease of approximately $146,000 or 11.4% was due to decreases in payroll and related expenses of approximately $113,000 and G&A expenses of approximately $62,000 those were partially offset by an increase in professional fees of approximately $30,000. The $113,000 decrease in payroll and related expenses was primarily due to a $107,000 expense reduction in cash based compensation at ESI due to headcount reductions and the $6,000 reduction in cash based compensation at Aethlon also due to headcount reductions from that 2015 period. The $62,000 decrease in G&A expenses was primarily due to a decrease of $44,000 in a non DARPA related G&A expenses and to a decrease of $17,000 in the G&A expenses at ESI. And the $30,000 increase in our professional fees was primarily due to an increase in our non DARPA related professional fees of $58,000, which was partially offset by a reduction in our professional fees at ESI of $5,000 and in our DARPA related professional fees of $24,000. That $58,000 increase in our non DARPA related professional fees was due to the combination of a $48,000 increase in scientific consulting fees, a $23,000 increase in legal fees and a $2,000 increase in investor relations fees. Those increases were partially offset by a $50,000 decrease in the accounting fees. We had other expense of approximately $1 million in the first quarter of fiscal 2017 compared to $126,000 in the prior year period. The increase was due to a debt extinguishment expense of $616,000 and warrant repricing expense of $345,000 with no comparable expenses in the prior year period. The debt extinguishment and warrant repricing expenses were non-cash charges and were offset on the dollar-to-dollar basis by an increase to our paid in capital. So those charges have no impact on our overall shareholders equity. Additionally, our interest income expense decreased by approximately $84,000. Overall, the net loss for the first quarter of fiscal 2017 was $2.1 million or $0.28 per share compared to a net loss of $1.2 million or $0.18 per share in the prior year period. For a more detailed review of improvements in our operating expenses and in our balance sheet, I would like to refer you to the earnings release that we put out after the market closed today on our Form 10-Q which we will file later on today. In that 10-Q, on our statements of cash flows, you will see that the cash used in our operations increased by only $30,000 from the 2015 period to 2016 period as we continue to monitor our expenses closely. Over the past year, we had a number of questions from our shareholders about the perspective supplements that we filed, as a result of every material filing we do with the SEC. We filed two S-1 registration statements with the SEC to register these securities that we sold in our December 2014 and June 2015 equity offerings. These perspective supplements filings are not related to any current fundraising or insider sales. They’re merely a coversheet on top of whatever material filing that we have made. We are required to update those registration statements whenever we have a material development or filing. So you will see two prospective supplements go out later on today or tomorrow morning and those are again nearly coversheets for a combination of yesterday’s 8-K filing and today’s 10-Q filing. And now, Jim Joyce and I would be happy to take any questions that you may have.

[Operator Instructions] Our first question is from Brian Marckx of Zacks Investment Research. Please go ahead

Hi, Brian.

[Audio Gap] some clarity on that is the MERS portion of it essentially replacing part of the sepsis portion of it or is the MERS portion of it incremental to the sepsis portion of it.

Hi Brian, this is Jim Joyce. We missed - I missed on our side the first part of your question we didn’t hear at the beginning, but it sounds like your question was specific to the milestone arrangement was it substituted out or was it exchanged for another milestone?

Right. It is the news MERS portion is that as essentially a substitute for part of the sepsis portion or is this incremental to the sepsis contract?

Yes. It’s a substitute, but it’s also - it’s not incremental to the contract or it’s incremental to advancing our products under the DARPA DLT program. And I think, sometimes people forget that this program was not just specific to sepsis, but it’s specific to viruses and other types of pathogens, and our program manager who was a virologist, we have to discuss with him the importance of expanding our infectious viral pathogen data, and I am a bit concerned to him and perhaps others with the emergence of MERS virus which was identified to be infectious to man in 2012. So we have the opportunity to change our milestone that really wasn’t still relevant for something that was more timely and DARPA has worked with us in the past in part of this program those change out other milestones that really were created and trying to be projected five years ago what it would be in the future. So an example would be in the last year or so we were able to change our milestones that didn’t turn out to be a great importance we will change it for being able to help establish GMP manufacturing Aethlon Hemopurifier, which is a very important milestone, which is a better use of DARPAs money in something we leveraged to our benefit. The other thing I’ll add as part of this program and this is just related to sepsis in general, because people predominantly, think about DARPA DLT program it has been just specific to sepsis. I would point out that when we initiated our sepsis contract or this DARPA DLT contract, there was a belief that sepsis the primary cause of sepsis was a proinflammatory response as a result of blood infection whether its bacterial or viral, and it created this proinflammatory response, sometimes the cytokine storm that can cause mortality in sepsis patients. Hence the beginning of the program, there have been publication we have demonstrated that in reality that early proinflammatory phase is not a deadly phase of sepsis, but there is a transition from that phase to a long phase of a new suppression, and that in reality a majority of sepsis patient actually die from a immunoparalysis inverse on the cytokine storm. And that during this immunosuppression phase, there is an activation of many different latent viral pathogens where they’re cytomegalovirus, Epstein-Barr virus, it could be simplex virus, TTB virus, there is an activation of latent viral pathogens, and majority of people who die from sepsis actually die with the activation of - significant activation of latent viral pathogens. So people are now reviewing as to why 41 previous clinical studies that were targeting modally the cytokine storm, they’re now reviewing that the possibility to failure those studies could be attributed through the fact it is a better understanding of sepsis today, and perhaps the majority of mortality rates attribute by immune compression is not hyper activation of the immune system. So all of these viruses become very important we believe to DARPA and the overall ability to treat sepsis.

Okay, good. How much of the DARPA contract remains unfed through the fifth year?

I’ll let Jim Frakes to address that.

Hi, Brian, there are two milestones left one of which is this MERS that were substituted in, and they’re both approximately $195,000, I can’t remember the exact amount, it’s a couple of thousand from that number.

Okay. That’s what I had as well. Okay, thanks for that. Relative to the feasibility study, Jim, you said, you have five of the expected 10 enrolled currently the year prior guidance was that you though that the study could conclude by the end of the current year, is that still your expectation?

Yes, to our expectation in that’s the guidance that we are getting from our clinical research team.

Okay. Okay, good. And I mean in terms of Zika, the data or the announcement this morning sounds encouraging maybe talk about what you see is potential next step is that something that you think that is - you think that you may pursue?

Yes, well, first thing we know we have to do - was do obtained data related to current strain of Zika in circulation and that strain the virus the clinical testing has been very hard to access and our research team get a good job to get access to that and conduct our studies. But Zika like, other pathogens are not well understood, when they breakout, we’re learning a lot about it, I think in reality, it doesn’t seem to be a very severe infection, only 20% of patients actually show symptoms or those infected only 20% show symptoms. But there it’s emerging knowledge of other conditions that the disease seems to be triggering, especially the horrific conditions before seeing in pregnant women. The other concern is that Zika is very closely related to dengue and that present in the current outbreak there’s only been one viral strain of Zika identified. However, if this virus mutates like dengue has where there is different distinctive strains of dengue involved development stream, there is the potential or individual to become infected second time to suffer from severe infection must like in the case of dengue, where it can transition to dengue hemorrhagic viral infection or dengue shock syndrome, which can be highly fatal. And then the other challenge you have and again, you could just speculations of potential things then we’re concerning about the virus. The other thing is that is if it does evolve other strains and that similarity between dengue does evolve, dengue have a problem potentially with vaccines. Whereas there is an example of a vaccine at the World Health Organization pushed out into testing in 35,000 individuals of couple of years ago. That designed to protect the individuals from future dengue infection. Now let’s some of the data is being reported a couple of years later. We are seeing that the vaccine may have actually prime certain populations to suffer from severe dengue infection and in fact the latent severe dengue infection in young children were participated in the program is five to seven times higher than that is non-vaccine participants. So it just a multitude of things to be concerned about our opportunities to treat Zika, much like opportunities to surface and other viral pathogens like Ebola, we knew that antivirus emerges that we would need to have validation data in hand much like we do with Ebola and our studies with researchers into CDC and Yusemerit [ph] that we would need validation data in hand before we’re going to pursue the treatment of individuals affected with Ebola. So this statement is important from that perspective, but our research much like many others is watching disease, what we learn if the virus continues to unfold.

Jim, can you talk a little bit more about the dengue treatment program that you referenced in your prepared remarks in terms of why you’re expectations are, I guess, in terms of how many patients could run through that program. And then is this going be structured in a way where you can actually collect data to get some sort of essence in terms of efficacy or at least safety or any other measures that you can kind of ballpark the effectiveness of Hemopurifier and dengue?

Yes, Brian, I don’t anticipate will be collecting data that will be statistically significant to the extend to come any good caution regarding efficacy in the larger picture, we would anticipate that we’ll be treating somebody to improve their health and to expand their dossier of human treatment experiences to demonstrate broad spectrum viral capabilities with the Hemopurifier. But in this case, we don’t have high expectations for a large recruitment based on the fact we are looking at severe dengue infection, which are typically occurs is the result of second infection in dengue patients. And study is being conducted there is one clinical site. So we are looking to expand our universe of human data for demonstrate the ability of Hemopurifier to capture the virus. And we also gives us the ability to look at the performance have been vitro studies which modeled capture of the virus with actual no human treatment outcome. And we notice the disease conditions like HIV and Hepatitis C, sometimes the reduction viral load in humans parallel something to similar and what we saw in vitro. And then other times like in Ebola where we have a rate reduction probably similar in vitro as well we’ve now seen in Zika, when we went and treated an actual Ebola patients, so not a 50% reduction of 5.5 hours to 6 hours, we saw a 98% reduction of viral load when we got to human. So it just gives us some broader treatment experience in different disease condition and as to our knowledge and then helps us to further support condition that we are trying to pursue if the U.S. government is advancing our technology as a broad spectrum countermeasure against these threats, and again most people have recognized either tropical threats that are also becoming more and more prevalent each year in the United States.

Okay, great. Thanks a lot guys.

Okay. Thank you, Brian.

Our next question comes from Marc Robins of Catalyst Research. Please go ahead.

Thank you. Hey, some good surprising dose. Congratulations.

Hi, Marc. Thank you.

What’s the story with DARPA, and I want to know the back story of DARPA and MERS. I guess my question is that has DARPA help to fund any kind of viral investigations other than those directly related to sepsis and now this MERS opportunity.

We have done other viruses previously in the DARPA study or in the DARPA program that weren’t specifically related to sepsis as part of milestone deliveries.

And the reason for my query there [indiscernible] I’m trying to - it seems to me like DARPA attempting to, and then maybe it’s best luck - best opportunity of luck. That your coordinator is for virologist, maybe what DARPA is trying to do is reinvigorate and re-back-door the bio-shield opportunity that was prevalent back in 2008.

Yes, the - what the bio-shield opportunity certainly DARPA and other agencies have significant interest, it’s advancing countermeasures. DARPA really is sponsored to develop technology, not participate in funding products that may come out of the DARPA program for clinical studies. I mean, they need to have a handoff through different agency or different funding parties. They’re not involved in funding human studies. So looking for - I can’t speak for DARPA as to where the DARPA DLT program is going. I suspect it is going to be some nice advances come out of that study, the people will appreciate. But I think, at this point in time on a few months down the road, DARPA would possibly discuss on their own how they plan on transitioning that program.

Okay. Has it been decided, how many dengue patients are going to be treated in dengue?

Yes. At the Max Super City Hospital, we basically stated that we would treat up to 10 patients, but we’re not again this is more of an opportunity to obtain treatment experience, and perhaps significantly help somebody with dengue infection. But again, as I mentioned to Brian, we don’t have high expectations for collecting enough data that would be statistically significant, just data that would add to our portfolio of blood pressure validations.

Previous in the year, I saw NIV was going to be doing some dengue/chikungunya possibly zika trials or experiments, was I misinterpreted that this is what we’ve been looking for or has there been some NIV work?

No, we did do work with the national institute of virology which is the government of India’s primary infectious disease laboratory and at the joint venture with the World Health Organization. We first worked with the NIV number years ago they provided us our first in vitro validations of capturing dengue virus. In this last year, we’re able to reestablish that collaboration with NIV for them to validate to capture chikungunya virus, which is another one of the orthopoxviruses transmitted by the same mosquitoes that transports zika and dengue. So we have did that work, and the original work we repeated some dengue studies during the last year as one of our DARPA milestones, and we validate again the capture of dengue virus in a current strain that were a bit newer than what was accessed a couple of years ago when we treated. So yes, we’ve worked with the NIV again, they’re a research lab, they’re not a human treatment site or anything of that nature, but they can be very supportive as they have been in conducting studies with small scale Hemopurifiers the model, how well the device can capture the target pathogens.

Okay. Very good. And then - and my last question, could you explain a little more about the cerebral spinal fluid processing system. Can you give us little more detail on how that works and what it implies?

It is a - I can’t say too much about it, other than we’re not aware of any product that actually has been developed. They can access and circulate the cerebral spinal fluid and there are many disease promoting particles that can reside in the cerebral spinal fluid and really if you can access circulation, it’s an interesting area to treat, because we don’t have as many challenges as we knew in treating blood where you have lots of activation factors blood cells, immune cells things of that nature that we have to navigate around. If you can access the cerebral spinal fluid with the ability to remove things perhaps at more efficient manners, because you don’t have many things to compete with or to avoid. But there is a multitude of neurological conditions as well as the central nervous systems and viral infections, I mean your encephalitis viruses that diseases promoting particles to come prevalent CSF, and there is not a mean to eliminate their presence. So I’d say it’s a bit of far reaching project would be from most organizations, but there is a lot core competencies, it’s something we evaluate it internally some initial development spec work are very extensive and expensive patent. It’s something we think we should try, so it’s an early stage product, but if we can demonstrate we can safely access and certainly to the cerebral spinal fluid. I think it could be a real game changer in the whole host of diseases. It’s also fine as we start getting into it, start learning about the CSF and learn then when you’re younger this will return over on average about 2.5 times a day, but as you get only the time of slower, and slower, and slower to an almost stagnant. And if you think about host of neurological conditions and over individuals one of the things you’d have a problems with CSF with no longer returning over is it doing so, it’s doing in a very slow rate, which could complicate neurological condition. So we are exciting about the program, we are not going to over promote something at this stage, but it’s something to keep an eye on and it’s something as we advance it, we have the opportunity to demonstrate facture of different targets and with really cool our guys are - our research team is in the process of building an artificial cerebral spinal fluid system and with artificial brain and all, that’s a cool modeling system, where we have entirely new model design, cerebral spinal fluid access design. This has a whole multitude. This has been well thought out, a whole multitude of different moving pieces. And again, I just leave it that for right now.

Yes, it sounds like a lot of fun. Okay, thank you. I’ll get back in queue.

Okay. Thanks, Marc, take care.

Our next question comes from Yi Chen from H.C. Wainwright. Please go ahead.

Hi, thank you for taking my questions. So for the feasibility study, after five patients that have already been received the therapy. How many therapies each of them have received and how often to the receive that? Thank you.

Okay, I appreciate the question. In this case the protocol design was driven collaboration between us and FDA. And FDA wanted us to enroll patients that were health compromised, and already had blood access. So that put us into the category of enrolling dialysis patients even though our focal point is not the treatment of dialysis patients, this becomes the patient population that we have enrolled. And then as a model for demonstrating safety and health compromise patient, whose is widely infected the most prevalent virus in that dialysis patient population is Hepatitis C virus. It differs in about 15% of dialysis patients. And that dropping new lower number as the emerging all the immune-oncology, I mean the antiviral drug regimens continued to become more and more prevalent. But the strategy and treating the protocol that was created as a strategy to move this forward as a broad spectrum countermeasure, against acute viral threat as well as chronic threat was to recruit this patient population. And for the first three treatments they act as their own control. So that means is during their normal dialysis treatment, which occurs three times a week, with four hours of treatment that we are monitoring their blood chemistry changes in viral load, and we are doing their normal dialysis treatment. Then for the next six treatments, we are adding the Hemopurifier in series with their dialysis cartridge, to measure and quantify any changes in blood chemistry. This protocol is very similar to the very first protocol we ever ran overseas and we ran that with success, but very similar to that protocol. But after the three controlled treatments, we then add our Hemopurifier for a series of six treatments. And again, we are just - we are inheriting the treatment regimen of the patient’s dialysis schedule, which again is three times a week, four hours of treatment. So we’re monitoring a total of nine treatments of each recruited patient, of which the first three in just their normal dialysis and the next six has the inclusion of the Hemopurifier.

Our next question come from Amit Tandon from SeeThruEquity. Please go ahead.

Hi, guys. Congratulations of the promising Zika virus findings.

Thank you. How are you?

Hey, good. Just one question, could you comment on the competitor environment? What is that like in terms of the Zika virus? I think you mentioned some other research teams out there. Could you elaborate on that?

The competitive environment, we are - I think there is a lot of groups like us that may have strategies to treat, but are trying to navigate through this better understanding of the virus. Often times, viruses that are not well understood aren’t really learned about until there is an actual outbreak. And in the case of Zika, you have a virus that was first discovered in 1947. And I think there was an outbreak in 1964, and one in ‘70s and - but nothing to any great extent. And then out of nowhere there is an outbreak. It’s just not virus that many people will study, so people are learning on the fly. We’re not really aware of other groups that have anti-viral drug strategies. We are aware of a vaccine strategy. But again, our view point is that you don’t wait for outbreaks to occur and then to then start vaccine research or treatment programs. And the challenge with all of these countermeasures is the ability to demonstrate efficacy, especially viruses that have higher mortality rates. You can demonstrate safety if you can recruit patients, but in the absence of an ability to run efficacy studies, controlled efficacy where you recruit people and actually infect them with the virus, it’s very difficult to demonstrate efficacy. And for drugs and vaccines in the absence of human to demonstrate efficacy, you have to rely on animal models and demonstrate the efficacy of your treatment in two different animal models. And unfortunately for most of the viral pathogens we deal with is not through animal models. And in many cases, it’s not even one animal model. So it becomes a very difficult challenge. In most cases, animal models don’t result in efficacy in human. So as a device, we follow a different pathway, it will be to demonstrate that we’re safe in humans. But our label indication is the use for removal of viral pathogens from blood. And in that regard, we have the ability to create these replicated in vitro studies to demonstrate that we can indeed remove the virus that’s infectious to man. So I think we believe based on our previous dialogues with FDA that we have a strategic advantage in actually moving our technology across the goals. But in terms of competitive environment I’m aware of a vaccine strategy that’s moving into human to demonstrate safety, but I’m not sure how that proceeds forward to demonstrate efficacy.

Okay. Great, that’s very helpful. Thank you.

You’re welcome.

Our next question comes from James Tang of Aegis Capital Corporation. Please go ahead.

Thank you. Hey, Jim, it’s James. Congratulations on the great news, very exciting stuff.

Thank you.

Of course, I was hoping you can talk a little bit about the cost of actually producing Hemopurifier and what that will mean when you scale up production.

That’s a good question. I’m almost embarrassed to tell you how expensive it’s been to make these things for clinical studies. The actual cost related to the cartridge, the components, pretty inexpensive, especially as compared with anticipated price of therapy. But our real gating factor long-term has been the affinity agent that we mobilized that allows us to capture viral pathogens but a unique signature that viral pathogens co-op from their own host cells during replication. This is what provides us broad spectrum capability. And this compound, it’s called Galanthus nivalis agglutinin, historically for clinical purposes and research purposes we purchased it from vendors who purify it from its natural source. And that compound from its natural source, when it’s not scaled up is very expensive. Jim, what is it like?

It’s $8,000 to $10,000 a gram.

$10,000 a gram?

Yes, so - and a gram can make 40 to 50 cartridges.

Wow.

So that’s been a real gating factor moving forward. It’s the cost component. And so we worked for a number of years to scale up GNA and finally had success in being able to grow it up in tobacco and have perfected that methodology. We’re able to get purified GNA that has activity that is equal to or exceeds the activity of what we previously get from naturally sourced GNA. So having that in place dramatically changes our cost structure. But at this point in time, while we can say dramatically reduces our cost structure, I don’t think we disclosed publically where we think our cost structure would be and at this point in time we really don’t have an incentive to do so until we really mapped out the true scalable cost of GNA. But all I can is that cost has been reduced dramatically by having access to this compound in a scalable basis.

Thank you.

You’re welcome.

This concludes the question-and-answer session. I would like to turn the conference back over to Brad Edwards for any closing remarks.

Thank you, operator, and thanks everyone for joining us today for the conference call. We look forward to speaking with you on our second quarter call. Have a great day.

Thanks, everyone.

Thank you.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.