Good day, ladies and gentlemen and welcome to the Histogenics Second Quarter 2015 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct question-and-answer session and instruction will follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Jon Lieber, Chief Financial Officer of Histogenics. Please go ahead, sir.

Thank you, and good morning, everyone. Joining me on the call is Adam Gridley, our President and CEO and Stephen Kennedy, our Chief Technology Officer. A press release announcing Histogenics second quarter 2015 financial results was issued this morning. For those of you, who have not yet seen it. You will find it posted in the investor section of our website at www.histogenics.com. On our call this morning, we will share with you some exciting business updates, which will be followed by question-and-answer session. Before we begin our prepared remarks, I would like to remind you that various statements we make during this call, about the company's future results of operations and financial position. Business strategy and plans and objectives for our future operations are considered forward-looking statements within the meaning of the federal securities laws. Our forward-looking statements are based upon current expectations that involve risks changes and circumstances, assumptions and uncertainties. These risks are described in the risk factors and management discussion and analysis of financial conditions and results of operation sections of our Form 10-K for the year ended December 31, 2014 which was filed with the SEC on March 27, 2015 and are subsequently filed quarterly reports on Form 10-Q or 10-K. Another reports are available on the SEC's Edgar System and on our website. We encourage all investors to read these reports and our other SEC filings. All the information, we provide in this conference calls provided only as of today and we undertake no obligation to update any forward-looking statements we may make on this call on account of new information, future events or otherwise. Finally, please be advised that today's call is being recorded and webcast. I will now turn the call over to Adam.

Thank you, Jon. Agenda for today's call will include a brief overview of our business and highlights from the second quarter. Jon will then take you through a summary of our financial results and then we'll open up the call for questions. As a reminder for anyone that is new to Histogenics. We're regenerative medicine company, focused on the advancement of NeoCart. Our novel Phase III candidate being evaluated as a first-line therapy to treat knee cartilage injuries or focal chondral defects. We believe that our regenerative medicine platforms, which encompasses a unique combination of biomaterials, cellular expertise and our bioengineering capabilities may create better therapeutic outcomes for our patients than the current standard of care. Our ability to make an implant ex-vivo with [indiscernible] cartilage production, as measured by specific biomarkers prior to insertion into the body is compelling. The competitive products are surgical procedures see to achieve the same cartilage characteristics [indiscernible] do not occur until several months after implantation. We continue to believe that this unique mechanism of actions may provide for far less variability. Importantly, a more rapid recovery as well as improved long-term results. Our primary focus and priority as an organization is to move NeoCart to our ongoing Phase III trial while continuing to execute the underlying manufacturing scale-up and reimbursement initiatives to support our future potential approval and launch. As we believe, NeoCart [indiscernible] significant unmet medical need, our target market is active and healthy adults, who are seeking better alternatives to the current standard of care, both in terms of near-term recovery dynamics and long-term durability. And this represents a significant opportunity with positive demographics despite the well published challenges with many of the alternative therapies including standard of care. There are still 500,000 procedures each years in the US representing a…

Thank you, Adam. And good morning, everyone. For the second quarter of 2015, the company reported net loss attributable to common stockholders at $7.6 million or $0.58 per share compared to a net loss attributable to common stock holders of $11.8 million or $19.85 per share in the second quarter of 2014. As a reference point, we currently have approximately 13.2 million shares outstanding. Total operating expenses for the second quarter were $7.6 million compared to $6.0 million in the second quarter of 2014. The increase in 2015 operating expenses were primarily due to increased external research and development cost, related primarily to the advancement of the NeoCart Phase III trial and our collaboration with Intrexon. Increased internal research and development cost primarily resulting from an increase in headcount to support the Phase III trial and our manufacturing and tech transfer activities and higher rent as a result of our Lexington manufacturing facility. Also we had increased general and administrative expenses resulting from higher D&O insurance premiums and director fees both are result of our December 2014 IPO and higher non-cash compensation and other expenses, which were offset by a reduction of professional service fees including audit and legal fees. At June 30, 2015 we had cash, cash equivalents of marketable securities of $45.2 million compared to $58.1 million at December 31, 2014. Based on current operating plan and the expected timing of product development programs. Histogenics believes its current cash position will fund its operations into 2017. I'll now turn the call back over to Adam for concluding remarks before we go to Q&A.

Thank you, Jon. So in summary, we're pleased with the progress that we made during the second quarter and we believe our team members, investigators and Board of Directors are fully aligned around executing on our Phase III trial for NeoCart. We continue to hear from patients and physicians about the enormous unmet needs for better knee cartilage therapies supported by robust technical advancements and evidenced by well design prospective randomized clinical trials. We believe that we've got both advance technology with an implant making new cartilage prior to implantation and a robust clinical program. In addition, we believe that we have a potentially significant improvement in durability and recovery in our ongoing development programs versus the current standard of care. We do recognize the last several quarters certainly were challenging with several unfortunate but necessary management changes and the depreciation of our share price and we've now reset with the new team, a new focusing clinical development and a robust strategy around the activation of our product portfolio. US investors should expect to see more visible presence from our team, a rapid expansion of our partnering efforts and OpEx [ph] focus on execution. We believe that our regenerative medicine platform has the potential to help this burgeoning industry. And do appreciate support of our board and our investors as we seem to create additional shareholder value. Thank you for joining today's call. We'll now open up the line for any questions. Operator, please open up the line.

[Operator Instructions] and our first question comes from Josh Jennings of Cowen & Co. Your line is now open.

Hi, good morning and thanks. Congratulations on the progress on multiple fronts. One, initiatives have evolved positively, you're still on track to finish enrollment in 2016, Adam. I was just - to understand you're not getting enrollment numbers. And I guess from a higher level talk about the conviction in that timeline. Based on, is it where the enrollment numbers are, is it more still based on the optimization of the enrollment initiatives or combination of both?

Thanks, Josh for the question and I would say, it's definitely a combination of both. The optimization efforts over the last several quarters as we've been diving in and listening to our investigators and surgeons, continue to reflect great optimism around the course of therapy and the trial itself. Now obviously, we needed to translate that into action and I think the activities over the last quarter in particular are starting to pay dividend. Both at a local recruiting effort example and then, also as we brought on a couple of new investigators. You probably recall and have seen this with other clinical trials that, bulk of many of these trials are often handled by just a few investigators and that has been our pathway in the past. We're now trying to expand and diversify and have brought on a couple of great sort of private practice, ability to move very quickly type investigators that also have a large patient population and pool. So we're seeing a demonstrable change in the way that, surgeons and investigators are approaching the trial. And importantly, the work we've done over the last quarter. Particularly around streamlining our consent and other processes, have started to pay dividend. Investigators are now reflecting that they're spending much more time getting those perfect patients into the trial, rather than screening a number of patients that may have knee pain. So I think it's a combination of multiple efforts. We still have strong conviction on that timeline and are looking forward to reporting future progress in the next couple of quarters.

Excellent and just from, the terminated number of sites you commented on your prepared remarks. Do you think, you're through that process in this sites, that are really now are other sites that are fully engaging and may be just some color, on why those sites were terminated and what the challenges are to enrollment?

Sure. Another good question and thank you, Josh. So yes, we believe that we got a very nice mix now. We're in the final process as working through contracts and several other activities as well as side on boarding for our final site. So we're going to be at sort of 40 only here very shortly. The couple of sites that we did terminate. Frankly were sites that have been around since 2010. As you recall, as we were trying to raise funds many years ago. We had stopped enrollment and so, a number of these investigators just hadn't reengaged. They have been around for a while, they were very supportive. But we looked at their activity and had a tough conversation with them, which was focused around moving their efforts forward very quickly and putting together remediation plan or frankly letting them off the hook and some of these cases, some folks had said, look it's a different time. We are very engaged and years ago, we've got different investigators, now it's not the time. And then in other cases, we had several folks that we weren't sure, we were going to make it, then we put them on at probationary period for the last couple of months. Even better news than having to terminate the site is actually, one who reengages. And so we had several sites that reengage substantially and one from having no activity to starting to consent in enrolled patients. So we think, that the mix that we have right now is a very nice mix of great key opinion leaders, which is going to be important for future commercial adoption, as well as the high potential enrollers with a big patient pool. We've got a select sites on the East and West Coast for example, that just have a large number of patients, the right demographics. It's those active patients that are seeking better therapies and are very well educated and a couple of those sites are seeing tremendous activity. So as we were identifying the ideal sites, it was really that combination of large patient pool, the ability to be open to our practice management efforts where we're able to support them on referrals, be open to local recruiting and we think that mix is into a very nice spot now and we'll start to see that momentum build as we diversify from some of the original investigators, who were doing the bulk of our enrollment.

Great and then just in terms of your positioning relative to competitors on these enrollment timings and commercialization. Do you still feel that NeoCart will be the first commercial product in US?

So we believe that we have still the leading program with the highest technical hurdles, there has been some updated news from one of our competitors named Vericel, which I'm sure many of our investors are familiar with. They recently in the quarter, publicly stated that they intent to file a BLA with their MACI product. We don't have further visibility on what that regulatory pathway looks like, if the BLA is accepted, whether new clinical data is required. So that's the one trial that or one product that we continue to watch. There is an opportunity that they may have a quicker entrance. But as we think about the product portfolio and then the dual-threshold responder analysis, as we put together in our clinical trial. We think that, our clinical data is going to be as and above anything that's out there and importantly, the way that our product works is just dramatically different from any of the therapies. So we're still very confident that we've got a strong leadership position, highest total endpoints, but we'll continue to watch our competitors as they make progress.

Great and last question from me. You may have, so I just want to apologize, if you're going to repeat yourself. But just any updating on the menu for actual scale-up progress and where you are relative to internal expectation six months to nine months, 12 months ago? Thanks for taking all the questions.

Sure. And so as it relates to that question. We continue to make good progress on our qualification validation activities, as a reminder. We have another facility that we put into place in 2014. That start to scale and develop our own critical raw material capabilities. Our target is move those into an FDA submission and move those into our manufacturing process towards the end of the year. Those programs still continue and they're on track to potentially be able to supply, some of the critical materials in the trial as well as for any comical scale-up activities.

Thank you. And our next question comes from Chad Messer of Needham & Company. Your line is now open.

Great, thanks for taking my question and thanks for the update on the progress. I was particularly encouraged, that you are back so quick with an update on your Intrexon collaboration and very much look forward to good to seeing, what you have to publish there later in the year. You mentioned that the next sort of milestone will be basically taking their IPSC technology producing something in your manufacturing facility and assessing if it works, if I understand correctly. I was wondering if you could maybe give us from a high level, how exactly you're going to decide whether it's working obviously, you have to do that without the showing clinical benefit? What will give you a comfort that you're indeed producing something that's worth going forward with both in terms of efficacy and immunogenicity? Thanks.

Thanks, Chad. And I appreciate you joining the call and for the question. And so, I'll address the first part of it and then I look to Steve Kennedy our Chief Technology officer for additional clarity there. One of the benefits of our manufacturing process of current NeoCart, is that our release specifications include several biomarkers of cartilage. And so our existing manufacturing process allows us to demonstrate, that we're making cartilage tissue very similar to the articular hyaline cartilage that you would have in a patient's body. I mean, that's very unique about our product and we think actually leads to all of the very good results that we thought in the clinical trial. So for purposes of evaluating and comparing let's say, a NeoCart second generation which maybe with the Intrexon cell line will actually be conducting some of the same specifications, some of the same release criteria and other studies to demonstrate that comparability. So for us, it actually becomes a pretty easy way to evaluate whether you can make NeoCart tissue with the patient cells as we do every day, when we're supplying our clinical trial or in the future when we use the Intrexon cells. Steve, you want to comment any further?

Yes, I think, well things to add to that are, are that first of all, this would be. The technical evaluation will be conducted in our, we have a pilot plan, where we conduct the exact manufacturing process. So we do have the advantage of being of knowing that, we can run trials and pilot plans that will exactly mimic the manufacturing process. So when we bring the Intrexon cell lines and we can do this evaluation that Adam just described. The only thing I would add to the comments regarding our knowledge of biomarkers is that, we hit through our collaboration with Cornell in biomechanical testing. We have really very good data on the biomechanics of NeoCart and of our actual NeoCart material, are going to be published later in the year. And now that we have that, that biomechanical data in place, we're going to be able to compare the Intrexon derived NeoCart with the NeoCart that we're producing in this biomechanical model. Remember the last piece on the immunogenicity, everything that we've learned about immunogenicity I think is really retracing the steps of the industry has been through and so we understand the immunogenicity in our counter site and we don't see that there is going to be any difference between material that we generate from the Intrexon process and allogeneic implants that are done today in the clinic either through kind of accepted surgical procedure. So we don't expect we're going to have a huge hurdle there and that obviously remains to be seen exactly, but we feel confident that we're generating the data to address that issue.

Great, thanks and maybe just one more. Presuming you have a positive outcome to this tech evaluation in Intrexon aided product is everything you want it to be. What is sort of the timelines from that point to potentially getting this into the clinic?

So that's what we're actually working right now, Chad. We literally just had our meeting only about two weeks ago, not even two weeks ago and we've been doing two things. So one, are putting together those project plans which include our clinical and regulatory assumptions. At sort of the top level, our goal is to look at potentially a supplementary clinical study versus a whole new DeNovo clinical program. Effectively what you have is the same robust proprietary NeoCart manufacturing process, just a different source of cells. So the teams are actually working through pretty robust project plans as we speak and that would include and probably the next quarter, further update on not only the clinical and regulatory pathway, but what some of those timelines maybe. I would say on the technical side, we've made rapid progress probably a little bit more quickly than we had anticipated. And so we want to be very thoughtful, how we think about a clinical and regulatory strategy. So I was expecting roughly the next quarter will have that and we'll also be communicating with our investors as well.

All right, I appreciate that and it does sound like you're making very good progress there and just welcome to Jon and Gloria and congratulations to Steve. Thanks for taking my questions.

Thanks much, Chad.

Thank you. [Operator Instructions] and our next question comes from Bill Plovanic of Canaccord Genuity. Your line is now open.

Great, thanks. Good morning, can you hear me, okay?

We can, hi, Bill, how are you?

Good. So couple of questions, just more follow-up to the other ones previously asked. You know with Intrexon moving a little quicker than expected. Can you remind us the milestone payments, what are those milestones and what are those payments? Do you hit them over the near term?

Sure, so the way that the exclusive channel collaboration works, is that we're reimbursing them for roughly 50% of the expenses over the next couple of years, before we get to the first key milestone, which is the acceptance of the sort of FDA's ability take this into a clinical trial. At that point, then there are several milestones totaling up to around $10 million over the course of the development program and that would be over several years. And then, there are back and sales milestones, also totalling around $10 million based on several $100 million worth of sales. So the way the agreement is really sort of set up is that, it's back end loaded. We want to make sure that we're preserving our cash, but also advancing the near term efforts. And if both parties are successfully in the clinical developments then there is big upside for both. On the very, very back end. There is a single digit royalty that also would be applied on sales. Our belief though is that, the integration of this into let's say NeoCart second generation will not only simplify and streamline our manufacturing process, but bring down our cost of goods sold demonstrably offsetting any royalty payments. So the agreement is set up for both parties to succeed and if we do, we're happy to pay out those milestones as we make progress.

Okay and then, you mentioned I guess I don't know, if the terms is correct, but probationary sites or what have you that the enrollment increased for those sites. What changed at those sites that motivated them to increase enrollment?

So I think part of it was just having candid conversations, very similar to any commercial sales cycle, around what were their challenges, what were the things that we can do to further support them or had things just change for them from the environmental or from a practice standpoint that wasn't going to allow them to commit. So it was similar to any discussion that you have with an employee internally or a partner. And we laid out common interest and in some cases, things have change and it didn't make sense to continue. In other cases, part of that I think was just listening better and in a couple of instances, there were couple of real challenges for those sites internally. We're able to work through those collectively to find sort of a common solution and they engaged quite a bit. The other thing that we done with our internal staff, I think as a reminder most people know that we have clinical research associates that are staffed internally, that call on each of the sites very similar to a sales representative or a medical science liaison. And those folks have now been spending much more time about helping them to remove barriers, how do they continue to build their practice and instead of just sort of checking in and saying, have you enrolled everyone. We're partnering with each of them and for the sites that sort of reengaged, a lot of it was just listening and providing them the appropriate attention that I don't think, it was provided before. A lot of good blocking and tackling and in some cases, we were able to turn things around in a very nice fashion. In other cases they've been at being, a sort of good split for both parties.

And then, you had mentioned you have new private practice site. Is there a cost differential for these sites in and do you think an enrollment differential versus kind of some of the other sites that you have?

Sure, I think there is and I'll give you maybe two examples and they're probably extreme examples. But it sort of describes the different type of folks that we have in the group. So on the sites that are, let's say traditional private practices that may not have the full blown infrastructure that one of our let's say larger, more academic or sort of hospital oriented sites may have and so, for those private practices typically, the negotiated cost per patient as well as other support is lower, than some of these fully integrated sort of hospital environments. The difference there though, is that many of these private practice teams may not have the appropriate infrastructure to help screen, to help actually go through patient charts and to be calling the appropriate patient. So what we've done is, in those cases where the private practices have a lower cost differential. We may actually sponsor a research coordinator to help run the study. So in many of these cases, these private practices have a huge volume of patients. They want to do clinical research, but may not have the infrastructure. So we'll make select investments to help them do that. And when we compare, let's say, those newer private practice sites that are coming onboard with some of the historical larger hospital centers, the cost ends up being about the same, when we continue to support those private practices. So net-net, it ends up being sort of a good solution for all parties. And if they don't have the infrastructure, we obviously don't pay for it upfront, but it allows us to fund it on the back end.

Great, that's all I had. Thank you.

Thanks, Bill. Thank you. And I'm showing no further questions at this time. I would like to turn the conference back over to Mr. Gridley for closing remarks.

Thank you, Candice. And thanks to our investors for listening in today. We believe that we've got special opportunity to improve outcomes in a meaningful way for our patients and surgeons with our NeoCart product and importantly our regenerative medicine platform. The efforts by our employees, consultants and board and the commitment provided by our investors and partners such as Intrexon have been especially gratifying. And we thank each of them for their respective contributions. Every time we hear from an investigator or a patient on unique benefits of NeoCart, it affirms our unwavering commitment to bring this special technology to all of our patients. We'll look forward to updating each of you on our future conference call and our progress. Have a good day.

Ladies and gentlemen, thank you for participating in today's conference. This does conduce the program and you may all disconnect. Have a great day, everyone.