Ocugen, Inc. (OCGN) Q4 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to the Histogenics Corporation 2015 Financial and Operational Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference Mr. Jon Lieber, CFO of Histogenics. You may begin.

Thank you, and good morning, everyone. Joining me on the call today is; Adam Gridley, our President and CEO; Stephen Kennedy, our Chief Technology Officer; and Gloria Matthews, our Chief Medical Officer. A press release announcing Histogenics 2015 financial results was issued this morning. For those of you, who have not yet seen it, you will find it posted on the Investors section of our website at www.histogenics.com. On our call this morning, we will share with you our business update and our financial results, which will be followed by a 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 on current expectations that involve risks, changes in circumstances, assumptions and uncertainties. These risks are described in the risk factors in management discussion and analysis of financial conditions and results of operation section of our Form 10-K for the year ended December 31, 2014 which was filed with the SEC on March 27, 2015 our subsequently filed quarterly reports on Form 10-Q and our Form 10-K for the year ended December 31, 2015 to be filed with the SEC in the first quarter of 2016. Our 10-K and other 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 on the call today is 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. Prior to reviewing our 2015 business and financial results, I would like to remind everyone our few key success factors regarding Histogenics and our lead program NeoCart. NeoCart is currently in Phase 3 clinical development as a potential of first line therapy to treat cartilage injuries or focal chondral defect initially in the knee. Based on the clinical and non-clinical results generated to-date we believe that NeoCart may provide patients with far less variability, a more rapid recovery as well as improved long-term results relative to the alternative products and procedures. We believe these potential benefits are directly related to our ability to make an implant ex-vivo with the physical components or structural characteristics of cartilage and this is due in fact to the evidence of the cartilage reduction as measured by specific biomarkers prior to insertion into the body. Competitive products or surgical procedures seeking to achieve the same cartilage characteristics are often unable to do so until several months or longer after implantation and in many cases do not produce the same degree of natural hyaline cartilage that we believe NeoCart is capable of producing. In addition, based on currently available information, we believe our ongoing Phase 3 clinical trial will be successful given the strength of the results we saw in our Phase 2 clinical trial and the similarity between the two trails. As you may recall, we designed our Phase 3 clinical trial to show superiority against the microfracture surgery the current standard of care. The primary endpoint is based on the dual responder analysis of improvement in pain and function comparing NeoCart to microfracture. The dual responders in our Phase 2 trial registered an improvement of 54 percentage points over microfracture. And our ongoing Phase 3 trial and based upon the protocol and related statistics apply to develop our study size we need to achieve only an approximately 15 percentage point difference to hit our primary superiority endpoints under SPA. We believe that as a function of our negotiations with the FDA the study maybe overpowered and as a result derisk as relates to achieving our primary outcome or endpoint. Finally, our target market is large and growing. Despite the challenges with many of the alternative therapies there are still 500,000 procedures each year in the United States, representing a multi-billion opportunity just in the knee. To give you a sense of our potential economics at an estimated $20,000 price point once launched. Every 2,500 NeoCart implants represents approximately $50 million in revenue. Worldwide, this represents an even larger market opportunity and as we leverage our platform and other areas of the body where cartilage defects are an issue. This easily represents a multi-billion problem that we believe we can treat with our unique cartilage tissue implant. Moving to our 2015 business highlights, I'll now share with you some important information relates with the NeoCart Phase 3 clinical trial. In many ways 2015 was a year of transition for Histogenics as a whole as well as for the NeoCart development program given the recent progress we made to enroll this very important trial. As you may recall, we have been enrolled 103 patients at the time of our third quarter conference call on November 12, 2015. Since then, enrollments have remained strong reaching 114 patients at December 31, 2015 and 123 patients that are just over half the trial as of February 2, 2016. We are pleased with the recent enrollment trends we’re seeing and continue to believe that we will complete enrollment by the end of the second quarter of 2017. As a reminder the underlying enrollment assumptions behind this timeline represent only a 20% to 30% annual increase from the rates we saw in the 2015. I’d now like to give you some specific statistics on the trial and review the changes we made to the inclusion-exclusion criteria in December as well as some or our recent patient recruiting initiatives. So as of today, we have 132 patients enrolled. There are also more than 10 additional patients with confirm scheduled arthroscopies through the month of March. As you may recall arthroscopy is the final confirmatory step to determine the patient’s eligibility prior to enrollment in the trial. Besides actual scheduled arthroscopies are scopes which are highly predictive. Our pipeline of indentified and consented patients, which are those that have agreed to potentially participate in the trial, but have not yet scheduled their scopes bringing us to a total of greater than 150 of the required 245 patients in the trial. Now we’re cautious around these figures since the timing and uncertainty of these patients initially consented in the trial is not consistent or predictable, but we do feel this is important information that further gives us confidence that we have solved the enrollment challenges facing all companies in this area of development and we have indeed during turned the corner on trial enrollment. Importantly the pipeline of initially consensus patients has continue to build with approximately 11 patients consented in January, 27 in February and approximately 10 in the first 10 days in March. We continue to replenish our pipeline with new sites and new patients and we’re currently scheduling patients after June of 2016. Let me now take you through a couple of additional metrics that we measure on an ongoing basis. We currently have 33 sites in the trial compared to 32 as of November 10, 2015. In a number another nine additional sites and active qualification and startup. We continue to close underperforming sites to enable us to add sites that we feel will have a higher propensity to enroll patients. Our current goal is to get to the 40 site maximum in the coming months. Since the beginning of 2015 we terminated five sites and added six sites. To give you an idea of how the changes we made to the mix in sites in the trials impacted enrollment. We currently have 11 sites that have enrolled five or more patients compared to only three sites at this time last year. What this means is we are now far less reliance on the handful of historical sites who have been consistently enrolling and several of our new sites are rapidly coming on board with our streamline initiation and qualification process that is in translating in some cases to enroll patients in less than two months from first contact with these sites. Let’s move on to our recent protocol amendment, in December of 2015 we announced that the FDA had accepted the proposed amendment to the NeoCart Phase 3 clinical trial protocol, where we thought to expand the eligible patient population. As a reminder the amendment which we filed in November 2015 under the special protocol assessment for the trial enables us to enroll patients with trochlear lesions. It increases the upper age limit of patients eligible to participate in the trial from 55 years to 59 years, reduces the time between the prior procedures. Such as ligament reconstruction or the repair of the meniscal tears and a patient’s participation in the trial from six months prior to arthroscopy. To three months prior to arthroscopy and allows patients with asymptomatic lesions in the non-study locations that are larger than study lesion to participate in the trial. Now prior to submitting the protocol amendment we had extensive discussions with our investigators and regulatory experts to ensure continuity and equivalence during the ongoing trial. For example, we believe that NeoCart would in fact do well on a broad variety of patients. However the current standard of care microfracture is known to perform poorly in higher BMI, older patients and we wanted to ensure that the comparator have the best opportunity perform well in this trial to avoid any potential bias during an FDA regulatory review. We feel comfortable that the recent amendment will not impact the strength of the study and we continue to believe that this trial and the result from it will become the standard by which all future cartilage repair therapies and measured and compared too. Because the protocol was approved by many of the IRBs in January and February of this year. We believe that these changes are just beginning to impact our enrollment trends and we have seen several patients in the last month enroll with trochlear lesions. I want to remind everyone that we did not include the impact of clearance of the amendment on enrollment when we updated our guidance back in November and established the new timeline for the trial. On our last call we shared with you our goals continuing to work with sites on localized recruiting initiatives and some of those recent initiatives include our first podcast ad we just started playing on running on home, Running on home is a podcast and blog dedicated to athletics and fitness that averages over 12,000 downloads per episodes. We’ve also put into place additional radio spots on ESPN and now is with NPR as well and those have led to several qualified patients. For example, we recently ran a four week radio campaign on WDBO ESPN 580 in the Orlando Florida area, which has already yielded one enrolled trial patient and two patients currently in the screening process. We’ve also implemented number of targeted television spots in conjunction with one of our sites we recently completed a segment that will be featured on Discovery Health for the lifestyle channels breakthroughs and regenerative medicine focused on the knee series. This is a 45 minute segment, which will featured Derrick Jones. The section had its sports medicine in cartilage restoration at the Ochsner Sports Medicine Institute in Orlando and one of our investigators and it will also include the patients who has received a NeoCart implant. In the segment the patient discusses his participation in the trial and lets the viewer know that he is feeling good and has resumed his normal activities. In addition to the changes we’ve made in our advertising since early in 2015, we’ve also eliminated the national call center that we previously used to screen patients responding to recruiting campaigns and have now contacted with a coordinator that works to ensure the suitability of patients before they reach the investigative sites for final qualifications. The combination of our Histogenics Employee Clinical Research Associates and coordinators reflects the commercially minded approach that makes it more likely for physicians and surgeons to participate and screen patients because we’ve minimized the burden on their surgical practice. Feedback from physicians in early 2015 when we begin to implement many of the changes to the trial was that they simply could not afford to take the time to screen the high volume of less qualified patients that were previously being funneled to them. So in summary we believe the steps we’re taking that reduced the screening burden on many of the sites that are yielding a high quality pipeline of patients that have a better chance of enrolling in the trial and have been through a thorough screening process prior to engaging with the sites. Given the success of these efforts we intend to continue to roll out additional physician and patient direct at local recruiting campaigns. We also share successful recruiting strategies and best practices amongst our different clinical sites. What we’re seeing is that many of the sites who were not significantly amendable to advertising are now interested after seeing the results achieved by their colleagues and investigators for whom we've conducted successful recruiting campaigns. We’re also increasing our focus on generating and publishing additional data for NeoCart, last week and there was a poster presentation at the Orthopedic Research Society Annual Meeting based on work done as part of the sponsor research agreement with Larry Bonassar at Cornell University. Under the agreement we provided Dr. Bonassar’s laboratory with cartilage tissue implant based on the NeoCart manufacturing process as they characterized and tested in their models. The data indicated that the tissue engineered implant such as NeoCart exhibit mechanical properties similar to that of native cartilage, even prior to the implantation. We believe this means that tissue engineered implants are both able to withstand the compressive forces they will projected to in the joint while providing lubricative [ph] properties necessary for proper function and knee extension. We believe these results are due to the combination of cell, scaffold and engineering that are unique to NeoCart and are another example of potential for NeoCart to change the market by offering patients a better alternative for knee cartilage repair. The results also compared favorable to competitive products that lack mechanical competence at the implantation and do not develop extra-cellular matrix [indiscernible] that NeoCart has at implantations even after a year in the body. These data provide additional evidence that our ex-vivo engineering allows for a better and quicker integration of our implant and appears to correlate with the anecdotal evidence that we hear from physicians regarding the potential earlier return to function and the durability of the implants. In the coming months we expect to also publish the full five year data and MRI imaging data from our Phase 2 trial, our lead investigator Dr. Denise Crawford presented a high level of summary of the initial unaudited five year data in May 2015 at the International Cartilage Repair Society or ICRS Annual Meeting. At that meeting Dr. Crawford received an award for his pioneering work both on the technical advantages of NeoCart as well as our dual threshold responder design that is unique compared to competitive therapies and clinical trials in the industry. The data from the Phase 2 trial are now fully audited are going through final editorial peer review for publication and further support our belief regarding the potential benefits of NeoCart even with the small sample size. According to the literature up to 30% of microfracture patients have another procedure done within two years due to the unsatisfactory results. We believe that the microfracture patients in our Phase 2 study exhibited similar profile with another factors such as dropout rates in the Phase 2 trial makes a long-term comparison to NeoCart microfracture challenging however we do believe that our Phase 3 trial as designed will enable this comparison. The Body of Scientific Data generated to-date feedback from our investigators and what we hear at events like the recent annual meeting at the American Academy of Orthopedic Surgeons, makes us even more excited about the future potential prospects for NeoCart. So in summary we believe the strategy we put in place in 2015 are working, a combination of new investigators, local recruiting, our practice management mindset and our new clinical leadership team have revolted in significant recent progress in recruiting the NeoCart Phase 3 trial. In addition we are assembling a robust and comprehensive set of additional technical data to support the potential commercialization of NeoCart. As a result of our recent momentum and continued recruiting efforts we remain confident in our guidance that we will be able to complete enrollment by the end of the second quarter of 2017. To this end we are providing guidance for 2016 that we expect total enrollment to reach between 180 and 200 patients by the end of this calendar year. With a one year superiority endpoint available on mid-2018 we are preparing for a rapid BLA permission to the FDA and based on industry wide expectations we’d expect to see an FDA approval in the middle of 2019. In addition to the recent progress we made in enrolling the NeoCart Phase 3 clinical trial we achieved a number of manufacturing objectives in 2015. We worked with the FDA on our path forward for the transition of raw materials for NeoCart from third party suppliers to material manufacturer of Histogenics and in December 2014 we received affirmative feedback from the FDA on the path forward to this transition. As part of the future transition, we completed the qualification runs for collagen, a key raw material needed for the manufacture of NeoCart, the NeoCart scaffold and adhesive and intend to use this material in the clinic and prior to any commercialization pending approval by the agency. We believe that this will strengthen our eventual BLA filing by providing additional data regarding the comparability of these critical raw materials. We continue to progress our technical engineering lens for the other materials such as scaffold and peg adhesives as well as initial technical work on multi-unit bioreactors that will be important for our eventual commercialization. We believe our modular submission strategy of scaling based on demand upon launch will protect our future gross margins and furthermore we also believe it will provide for a robust CMC package as part of the FDA’s review of our manufacturing process upon BLA approval if granted. While our primary focus is on Phase 3 clinical trial enrollment, we believe our technology can also be deployed in many other indications and will benefit from a one-step procedure after the first approval of NeoCart. As such we are building a pipeline and are continuing to work with Intrexon Corporation to develop next generation allogeneic products to treat cartilage repair. As noted on our last call, we have made significant progress on the multi-step process development plan to use Intrexon, iPSC technology to potentially isolate and reprogram chondrocytes for use as a master cell line in future applications of NeoCart. In the third quarter of 2015, the parties selected an iPSC cell line and then in the fourth quarter of 2015 Histogenics begin manufacturing second generation NeoCart at lab scale using the iPSC chondrocytes supplied by Intrexon and did that in our current manufacturing process. We believe the initial results from these studies are promising and the iPSC NeoCart’s produced at Histogenics has exhibited critical biomarkers of cartilage production. We’re excited about the results of the proof-of-concept work done to-date and will seek to publish the data later this year. It’s important to keep in mind that we began working with Intrexon in the fourth quarter of 2013 and kicked off this project in early 2015. So, in a little over a year, we have progressed all the way to a potential candidate that maybe suitable for formal preclinical development. Our partner Intrexon has provided impressive scientific and technical support and characteristically within Intrexon in a rapid and robust fashion. Partnership thus far has exceeded our expectations and are extremely pleased with the robust data packages assembled by their scientific and project teams. Further that point, the partners are developing data packages and initial regulatory strategies and once the final data are available we will work with Intrexon and the respective regulatory agencies to determine the best regulatory path forward either in the United States or abroad. Keep in mind that the newly commissioned regenerative medicine pathways in Japan maybe more conducive to stem cell therapy evaluation and maybe option working with our Japanese partner to engage with the PMDA in Japan if that presents a more rapid or efficient path to commercialization. While the one-step products will likely significantly expand the market, we also believe that such product has the potential of the transform manufacturing in a way that may result in increased gross margins due to automation and in other continuous manufacturing efficiencies in the future. We continue to believe that we are in advanced development stage with our current cGMP capabilities and look to build upon this competitive advantage in the future. We look forward to updating you on our progress with this program in the coming quarters including the publication of data generated to-date, potential development plan and regulatory pathways. I also mentioned earlier that 2015 was a year of transition for Histogenics, part of that transition included building in a leadership team to support the long-term success of the company. We believe the addition of David Gill to our Board of Directors as our Audit Committee Chair, the promotion of Steve Kennedy to Chief Technology Officer and the hiring of Jon Lieber, Gloria Matthews and Amnon Eylath as the Chief Financial Officer, Chief Medical Officer and Vice President of Quality Operations respectively is an important sign in the company’s progression. I believe that these individuals have already made a significant impacts on our operations and we’re excited to work with such a talented team that has such a deep experience in designing and running clinical trials, developing technology, scaling manufacturing and fund raising. Lastly, on the investor front we’re continuing our investor outreach efforts through our participation in industry and investor conferences. Since our last call, we presented at the Biotech Showcase in January, the BIO CEO and Investor Conference in February and the Canaccord Genuity Muscular Musculoskeletal and Cowen and Company Healthcare Conferences in March. We intend to continue to work to raise our public profile by participating in additional investor and scientific conferences and expect our regular quarterly enrollment updates and business activities such as the five year data from our NeoCart Phase 2 trial and our pipeline with Intrexon will drive additional investor interest. Our primary focus and priority remains on moving NeoCart to our ongoing Phase 3 clinical trial while continuing to execute the underlying manufacturing of those and scale up initiatives to support our future potential approval and launch. We believe that there are several inflection points and milestones for stakeholders, the first being in the enrollment of the trial. We feel confident that once we achieved this first milestone we will be able to move quickly to preparing for positive data outcomes and our BLA filings. If our Phase 3 trial is successful, we believe that our study protocol and product will become the new standard of care in the marketplace and the comparator for future therapies and FDA regulated trials in the space. At this point, I’ll turn the call over to Jon Lieber to discuss our financials. Jon?

Thanks, Adam. For the year ended 2015, the company reported a net loss attributable to common stockholders of $32 million or $2.42 per share compared to a net loss attributable to common stockholders of $10.5 million or $6.85 per share for the year ended 2014. In 2014, the company’s net loss of $22.8 million included a $10 million gain related to fair value adjustments to certain liabilities that were either settled or terminated upon the closing of Histogenics’ initial public offering in the fourth quarter of 2014. As a reference point, we currently have approximately $13.3 million shares outstanding. Total operating expenses for the year ended December 31, 2015 were $31.8 million compared to $32.7 million for the year ended December 31, 2014. The decrease in 2015 operating expenses was primarily attributable to a onetime expense of $10 million related to the acquisition of license rights in connection with Histogenics’ exclusive channel collaboration with Intrexon in the third quarter of 2014. This amount was partially offset by a number of items including increased external research and development cost from the NeoCart Phase 3 trial and related development and manufacturing activities as well as higher ongoing cost related to development work to support the Intrexon collaborations. It’s also offset by a higher internal research and development cost primarily a result of from an increase in headcount not only to support the Phase 3 trial, but also our manufacturing and tech transfer activities as well as our increased rent due to our Lexington raw material manufacturing facility which came online in the fourth quarter of 2014. And lastly we had increased general, administrative expense resulting from higher D&O insurance premiums, director fees and personnel costs all a result of our December 2014 IPO as well as higher non-cash compensation and recruiting expenses. At December 31, 2015, Histogenics had cash, cash equivalents and marketable securities of $30.9 million compared to $58.5 million at December 31, 2014. Based on our current operating plans and the expected timing of product development programs Histogenics believe its current cash position will fund its operations through the first quarter of 2017. We are aggressively managing our business and liquidity needs with the goals of getting to our expected trial moment by the end of the second quarter of 2017 with minimal additional capital. I’ll now turn the call back to Adam for concluding remarks before we go to the Q&A.

Thanks, Jon. The last quarter and month have been particularly rewarding for us. As we believe we have turned the corner on rolling out the optimal strategies to enroll our NeoCart trial. The recent momentum is helpable with our investigators, coordinators and our internal staff. We have transitioned from the initial startup phase on this trial and in our manufacturing activities to an organization that is preparing for the submission of the successful BLA for the approval of NeoCart. We believe we are clearly in the lead role for companies running post actively define randomized clinical trials in line with the 2011 FDA guidance documentation for cartilage repair therapies. We’re building data on the bench preclinical and clinical properties of NeoCart to further support our anticipated commercialization efforts and we’re also moving rapidly to complete our raw material technical activities to also support an anticipate the commercial launch. Given this potential for our technology to be applied in other applications are at large scale we’re expanding our work with our scientific advisory board and academic institutions such as Cornell, [indiscernible] and others. The work with Intrexon has been extremely rewarding and we believe this may further expand the opportunity for our technology platform. We have a long tail with protection not only via the BLA pathway as a comparative proxy, but also post from IPO space and knowhow. This can and should be the leading technology solutions for cartilage repair in the coming years and for many years thereafter. A few final data points that investors and our stakeholders should consider. We enrolled the same number of patients in the fourth quarter of 2015 that we enrolled in all of calendar year 2014. Yes, we enrolled 25 patients in the fourth quarter of 2015, which was equivalent to the numbers that we enrolled in 2014 after restarting the trial. And we’re on track to do so again just in the first quarter of 2016. We believe we are well on our way to our enrollment goal for 2016 and to complete this trial in 2017. Importantly we believe that NeoCart is a unique product that may offer patients more rapid recovery combined with the lasting long-term benefit that other products on the market and development simply cannot offer. We are the only one making cartilage tissue implant ex-Vivo and we’re confident that we will continue to see momentum in the Phase 3 clinical trial enrollment and believe this trial will be successful given the strength of the results we saw in our Phase 2 and the similarity between the two trials. As we begin to think about potential approval and commercialization, we’re laying the groundwork for a rapid BLA submission after we generate the one year of data in mid-2018. The market opportunity in the U.S. is significant 500,000 applicable procedures each year yield the billion dollar plus opportunity just in the need. And remember it only takes a small market penetration upon launch to generate significant revenue. Worldwide the opportunity is even larger and as we leverage our platform into other areas of the body where cartilage defects are a problem we will be participating in a multi-billion dollar market. Finally, we’re continuing to manage our operating and capital expenses with a goal of getting to completion to enrollment with minimal additional capital. In summary, the efforts of our dedicated employees, our investigator, the Board and advisors is paying significant dividends. And we now turn to an entirely different opportunity that even six months ago preparing for an eventual commercialization of NeoCart if approved. We have an amazing new team internally and the culture of execution and expertise that is unparalleled in this industry. With that thank you for joining today’s call, we’ll now open up the line for any questions. Operator, please open up the line.

Thank you. [Operator Instructions] And our first question comes from the line of Josh Jennings with Cowen & Company. Your line is now open.

Hi thank you and good morning. Congratulations on all the progress.

Thanks, Josh.

Yeah, absolutely. I just wanted to ask about the expansion of the criteria for enrollment and including trochlear lesions. I think the call went in and out for a second when you started to describe that, but can you give us an idea of how expensive that is maybe what percentage of cartilage defects [indiscernible].

Sure happy to do so. Let me do this, I’ll turn it over to Glory Matthews our Chief Medical Officer and she can talk about that, I believe the question was the impact of trochlear lesions in the recent protocol amendment. Gloria?

Sure, hi Josh. So after the amendment was approved in right before the Christmas Holidays. We had to get IRB approval from each of the site where about half of our sites we have that were which is the central IRB. So the approval is fairly quick it takes about two weeks. For the other half we tend to do a local IRB approval and all of those that have now been approved. The point being that it wasn’t an immediate after December that we have approvals. So it’s been a little over a month that we had all the sites approved and we still have three trochlear lesions. We would expect about a 15% to 20% increase from the addition of trochlear lesions in that so far each be playing out in the one month that we’ve looked.

Great. And if we think about the remaining seven sites I know you guys made nice progress and of prone and added sites. But how do we think about the timeline for those last seven to get onboard?

That’s a great question. So we have there is various stages, we have three that are preparing for the site initiations now that were ahead of the others in the pipeline. The other ones are currently going through the contacting and IRB process. So it really is dependent upon their local sites. But we would imagine in the next several months we would have all of them onboard. And then we’ll continue to add sites and subtract. The nice thing is that some of our sites that have been inactive before we’ve actually worked with and we now have a number of them enrolling. Maybe went from zero up to two or three in the past few months. So that’s very satisfying to us so we’ve actually had to add less than we thought. There is a still a few that we can close and we’ll be doing so.

I wanted to ask for the Phase 2 five year data publication, sounds like that may hit in the next couple of months, is that going to be presented at a conference and what was the last updated published data or presented data was that four and how meaningful is this five year hurdle in terms of durability of data?

So the last published data were the two year data it was published in JBJS a number of years ago by Dr. Dennis Crawford who was our lead investigator. He had presented some preliminary results fact about a year ago that shows the continued progression and great results of NeoCart what we’ve done since then has gone through a full audit as we prepare for our BLA that data is now going through final editorial review with a leading publication and we expect that that to be published in the next couple of months or a quarter or two. Whether it is published at a scientific meeting, we are not sure depending timings, but as soon as it is available we intend to put out a press release, summarize that and also make that publication available for our investors and investigators. So we are excited to present that data. Just going through the final editorial review literally as we speak.

And just to think about the five year kind of landmark within the Orthopedic Clinical Committees, Sports Medicine Committees. Is this five year data? How impactful it is in terms of this five year durability?

So Josh you broke up a little bit I think the question was how does the clinical community view the five year data. Gloria, maybe you can address that given your work most recently at AOS and ORS where a number of folks were presenting data.

Yeah. So it’s probably a lot more interesting prepared in terms of help economic returns than it is for surgeons, surgeons that want the quick -- they want to have they prefer quicker returns over long durability because in a way our medical business set up they may not ever see those patients again due to either moving or getting in different insurance company et cetera. So for surgeon it’s interesting to have that but a one or two year data would be most impactful to surgeons versus payers.

And what’s nice about that Josh is we believe that we will have both initially from some of the Phase 2 data albeit with a very small sample size. But importantly we are going to be tracking our own ongoing Phase 3 clinical trial. So we think there will probably be two very nice benefits coming out of that, first the quicker return that Gloria referenced that’s why we are the only ones with a one superiority endpoint right now. And then secondly as we’ve seen in the Phase 2 the NeoCart implant appear to be very durable and perform well over time as well. So we are looking to make sure that we can address both the physician needs, the payer needs and of course most importantly the patients with a quicker return to function.

Great. And just one of my last questions was just on the reimbursement landscape. Have there been any changes and just your thoughts on the sustainability of the current level of reimbursement for future NeoCart procedure? Thanks a lot.

Sure. And to address that, no there hasn’t been any subsequent changes to our knowledge. We continue to work with a number of consultants to prepare for a potential reimbursement and engaging with payers. There is already a very attractive reimbursement with one of the competitive products that we believe will utilize that code. We of course wanted to make sure that we got ahead of this and about a year ago have put into place an amendment with additional health outcomes data. And so we believe that that will further augment the existing Phase 3 database that we are currently collecting. So we are confident that upon launch that we’ll have a great compendium of data, showing the potential benefit long-term. But also with the shorter return and recovery process we hope that there will be less pain meds, less rehabilitation and we’ll have the data to prove that out to payers.

Great. Thanks again and congrats on the progress.

Thanks, Josh.

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

Great. Thanks for taking my question and let me add my congratulations on the progress. I think I’d agree with your statement earlier Adam that it does indeed look like you’ve really turned the corner on enrollment and that’s fantastic testament to all your efforts. We learned earlier this month that a competitive product may see BLA was accepted by the FDA they’ve got a PDUFA date early January. I do appreciate there is a very large market out there that is extremely under served and in no way would view this is a one product quickly take all kind of market. But be that as it may that is definitely something that you must have under consideration as you think about your commercial strategy more than one product effects pricing strategy and marketing strategy. I was just wondering how and I’m quite surprised actually given the history of it this is developed this way, but how it now looks like a likely competitor on the market a couple of years before you potentially is effecting your thinking about the eventual launch of NeoCart?

Sure, great question Chad and thanks for the feedback. I’d actually volunteer that I think this is good news for us and the entire industry I think what this signals is that the FDA is a bit more accommodating as they’re reviewing these therapies as you know the first product came out almost 20 years ago. It took another 15 years for guidance documentation to be published. And so we welcome other entrance moving to the FDA process. So I think the recent acceptance of the BLA with no advisory panel is good news for everyone that is going through the regulatory process. When we think about commercialization however we’re also highly confident that in any sort of head-to-head or as we move to the market that we have a number of advantages compared to maybe that I think will be attractive for patients and physicians. And that includes the earlier trend to work it’s a quicker procedure and we also have a number of additional data points that would show we have mechanical competence prior to it even being implanted that in some cases takes 12 months for other products to develop. So whether it be the clinical data, the endpoints, the technical data showing our cartilage tissue implant we’re highly confident that we’ll be extremely competitive in this market. We also volunteer that anyone who comes to market before us will hopefully create awareness for this debilitating problem and may open up opportunities for us to potentially more rapidly commercialize the product. So across the board from a regulatory perspective or from a product performance perspective we think this is good for us and good for the industry and actually welcome and best of luck working through that process.

Great, thanks for that feedback. And I do agree that increased awareness is probably good for everyone. But let me ask you this, these are procedures both yours and MACI that you take a little bit of time and dedication for the surgeon to get to know, do you envision, do you see a certain stickiness for either of your products once the surgeon or a practices that’s kind of pick the product or do you think you may have the option of choosing one of these with any given surgeon?

So I have a strong opinion, but also turn it up to Gloria here in just a second, I have a strong opinion that whether it be the clinical data, the ease of use, the quicker procedure and potentially quicker return to work I think in all cases physicians may choose NeoCart. Gloria I’d ask you to jump in and comment one, given your familiarity with the product and secondly what we’re hearing from physicians and as they think about what is an optimal therapy, how are we addressing some of those challenges in the way that other products may not?

Sure, so I think first of all I’d say that it’s actually a very beautiful progression albeit sort of choppy between from Carticel as a second generation into MACI which is considered a third generation specific carrier of cell common scaffold to a tissue engineered product, which I would say is the fourth generation. So it’s actually from a market perspective it’s pretty appealing to have that the surgeons say if may be a successful, surgeons say great we have the next generation and then as the next generation comes along they’re ready to take that on. Having been in the procedures both procedures, the NeoCart procedure is extremely easy for surgeons to do and if you got this question 15 years ago you might have said well people don’t really want to do these two set procedures and that has really or the [indiscernible] piece and that has really changed in the surgical culture as the only options that they have tend to [indiscernible] the microfracture tend to be TCEP [ph] procedures. So things like allograph that are common and you put in things who have a long bone loss are two set because you have to order the tissue et cetera. So things are more and more becoming -- this is more and more becoming the standard of practice whereas it wasn’t back in the day when Carticel was first introduced.

Great, thanks for that feedback and again congratulations on the progress.

Thanks, Chad.

[Operator Instructions] And our next question comes from the line of Kyle Rose with Canaccord. Your line is now open.

Great. Thanks for taking the question and I want to echo the congrats on the momentum and progress you guys have made.

Thanks, Kyle.

I wanted to dig into the site data you guys gave a little bit more. You talked about 11 sites of 5 or more patients up from 3 year-over-year. Can you just talk about what’s different about this high performing sites than some of the other sites? Are they newer? Are these the reengaged sites you are talking about? I mean when I think about all of the changes you’ve made both from a patient marketing, but then also in engagement with the physicians and these clinical trials what’s really driving this momentum? And when you think about the remaining 22ish sites that are there out of the 33 how many of those are on the cost of getting to the 5 or more, how many are building momentum? Just trying to really understand some of the enrollment metrics there.

Sure. Thanks for that Kyle. So you were correct that we currently have 11 and they are a bit of mix. So by looking here the mix that we have and two of them are legacy sites that have always been very good enrollers. The remainder are generally newer sites that have started to take off quickly. There is a lot of excitement and momentum as part of that we have four different things that we used to drive enrollment. One is as you pointed out and very important one is to bring on of additional sites and driving momentum there, another very important one is the changing the culture internally of our clinical operations team such as they are engaging at a level of passion and enthusiasm and ownership that perhaps wasn’t there in the past or at least in the recent past and that’s been paying big dividends we see a very direct correlation with their engagement with the sites are in the uptick in enrollment like I have lots of examples of that, [indiscernible] moment. Another important thing is Adam talked about was the recruitment efforts that we are doing and we are really bringing a broader awareness to many of our markets that this trial is going on and I think the amendment helped to drive a little bit as well though we need to see how much that will impact it and we are only about a month out from getting full approval on that with the IRB. But the difference in the sites is really that they are much more engaged than previously the newer sites have been quite engaged they are doing a lot of peer-to-peer activities such that they sort of feed on themselves and the orthopedic surgeon community is a fairly competitive group and when they see and hear that their friends and colleagues are outperforming them, they tend to step up and look [indiscernible].

Great, I appreciate the additional color there. And then another question on the enrollment metrics we’ve seen it sounds like somewhere around 11 patients in December in the six weeks of December and November there and there are 9 in the four weeks of January to get us to half way point and then we’ve got another 9 from that point forward. So when I think about the seasonality of some of these procedures the cadence of where you’ve brought some of the sites with the productivity curve and just now starting to realize the momentum from the amendment in the trial criteria. How do we think about what this cadence of patient enrollment should be moving forward? I mean is the 9 a low point, is there the ability and I think you said the 15% to 20% potential from the trochlear aspect. Could we see that bump up to the 10 or 11 or 12 point as we move through the year? I mean, how should we think about enrollment and then also you are getting to that April-May time frame in ‘17 to finish enrollment?

So I think you characterized it nicely Kyle. I think there is still a little bit of chopping as, but I think what’s very different from wherever we were let’s say take at the end of the third quarter for September 2015 where we were at 94 patients. So we did about five patients in October and then we bumped up to about 10 in November, we did five in December and then we bumped up and have seen continued growth in January of about eight, another eight in February and then as we signaled we’re seeing another 10 in the next couple of weeks. So I think what we’ve seen was we are at a rate of anywhere from three to five maybe you would have a good month of eight or nine patients last year with a little bit of droopiness and now we are starting to see that step up further. And so I think what we are starting to see is a greater consistency. Although there is still some on boarding for a couple of investigators. So in some cases there is a little bit of bump with some additional data and additional momentum and we think that will continue to build. So as we look across the way and as we start thinking about reporting our results over the next couple of quarters we are seeing a greater consistency and may have a couple of months where we are well north of 10. Now, there may be couple of months where that drops a little bit. But there is a demonstrable step up in the rate of enrollment that we had even just four or five months ago.

Great. Thank you very much and again congrats on the momentum.

Thanks, Kyle.

[Operator Instructions] And I’m showing no further questions at this time. I would now like to turn the call back over to Mr. Adam Gridley for any closing remark.

Thank you, operator and to our investors for listening in today. We appreciate of the patience and the support from our stakeholders and truly believe that we’ve turn the corner on enrolling the NeoCart Phase 3 trials. We think that we now have everything in place and are focusing on execution of the trial as well as our other business objectives while minimizing our cash burn. As we committed to you on the third quarter call, we’ll continue to provide updates on our milestones, enrollments and otherwise so that you’ve clear visibility of the progress we are making on a quarterly basis. We believe Histogenics is an attractive investment opportunity with potential upsides around our pipeline, through partnerships and other new indications or progress with Intrexon and we look forward to sharing updates with you in the future. Have a great day. Thank you.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day.