Cytomedix, Inc.
Conference Call
December 14 2005
Operator:
Thank you. I
would like to welcome everyone to this telephone conference.
The purpose of this conference call is to discuss the results
of the company's audit of the clinical trial data that were
announced on December 14th, 2005.
As such, this
conference call will include forward‑looking statements as
defined in the Private Securities Litigation Reform Act of
1995. The words "believe," "will," "continue," "plan,"
"expect," "intend," "anticipate," variations of such words,
and similar expressions also identify forward‑looking
statements but their absence does not mean that the statement
is not forward‑looking.
Other than
statements of historical fact, forward‑looking statements made
in this conference call may include statements about the
company's plan for future review of the clinical trial data,
anticipated results of this review, possible further studies
or trials, progress of and reports of results from other
retrospective studies, case studies and patient registries,
clinical development plans and product development activities,
plans for the FDA submissions and anticipated outcomes or
timetables of the FDA reviews.
All
forward‑looking statements made during this conference call
are made as of this date and Cytomedix undertakes no
obligation to publicly update any forward‑looking statement
whether as a result of new information, future events or
otherwise.
The
forward‑looking statements made during this conference call
are not guarantees of future performance and are subject to
risks and uncertainties that may cause actual results to
differ materially from those in the forward‑looking
statements.
These risks and
uncertainties include the final results of the company's and
FDA's review of the clinical trial results and other clinical
data that may be available to the company, the accuracy of
prior data obtained from retrospective studies, case studies
and patient registries; the fact that such data may or may not
be indicative of clinical trial results, results from further
review of the clinical trial data and clinical trial protocol
as well as the prior data obtained from retrospective studies,
case studies and patient registries, the results from future
studies of patient registries and additional trials if
necessary, the company's ability to collect complete and
accurate data relating to the products, including complete and
audited data from the sites participating in the trial, the
impact of the results of the clinical trial upon the company's
ability to establish successful partnerships and
collaborations with third‑parties, the regulatory approval
process in the United States and other countries and future
capital requirements, the effect of domestic and foreign
legislation affecting the company's products and decisions by
the regulatory authorities regarding the company's products,
including decisions regarding labeling and other matters that
could affect the commercial potential of Cytomedix products,
the speed with which regulatory authorities, authorizations,
excuse me, pricing approvals and product launches may be
achieved, Cytomedix's ability to protect its patents and other
intellectual property, the claims and concerns that may arise
of its products. The company's ability to fund
operations through defined future periods or ability to obtain
outside financing on acceptable terms.
Many of the
risks and uncertainties that could cause actual results to
differ materially from the forward‑looking statements are
described in the periodic reports, proxies and other documents
that Cytomedix files with the Securities and Exchange
Commission. These documents include but are not limited to the
annual report on Form 10‑KSD that was filed on March 31st,
2005, and the quarterly reports on Form 10‑QSB that were filed
in May, August and November of 2005.
These periodic
reports and other documents filed by SEC by Cytomedix may be
viewed and printed at the SEC's website at www.sec.gov. You
may also read and copy all reports and other materials filed
with the SEC at the SEC's public reference room at 450 Fifth
Street Northwest, Washington D.C. 20549.
I'll now turn
this over to Dr. Kshitij Mohan, Chairman and Chief
Executive Officer of Cytomedix.
Thank
you. You may now begin.
Kshitij
Mohan ‑ Cytomedix, Inc. ‑ Chairman, CEO:
Thank you very
much. I'm very pleased to be here to share my thoughts with
you and answer any questions related to the press release we
issued yesterday regarding our prospective randomized blinded
and controlled clinical trial using AutoloGel technology for
treatment of diabetic foot ulcers. This trial has been
approved by the FDA under an investigationnal device exemption
in March of 2004, at which time an external contract research
organization had been hired by the previous management to
monitor the trials.
Some
preliminary results of the trial were available in
September 2005 and were made public. These showed good
healing rates using our product but unexpectedly high rates of
healing in the control group in which an alternative treatment
was used.
The results did
not meet our expectations that were based on other data and
experiences with the AutoloGel technology. Those concerns the
complexity of the clinical protocol in other factors, not
related to the performance of the product may have caused the
inconsistencies between our past experiences with our
technology and the preliminary clinical trial data.
We, therefore,
undertook an independent and comprehensive audit by a former
FDA manager with over 20 years of experience in auditing
clinical trial centers and results. And based on this
independent audit and our own in‑depth review of the data we
arrived at the results that we published yesterday in our
press release.
The audit
process that we went through consisted of a review of the
clinical data submitted by the participating centers on each
patient enrolled in the study and the patient's medical
records to confirm that the patient indeed met the inclusion
criteria in the study protocol, and that the treatment that
was provided was consistent with the protocol. During the
audit process, the independent auditor was kept blinded
regarding whether a patient was treated with AutoloGel or with
the controlled treatment.
The audit was
conducted in compliance with the well‑known guidelines for
good clinical practices issued by the International Committee
on Harmonization, which are the gold standards for the conduct
of clinical trials and are endorsed by the U.S. FDA.
The independent
auditor conducted audits of the participating centers and
their records to check the source documents such as patient
charts and to reconcile any discrepancies and errors where
material errors were verified and documented, based on
objective measures and criteria, the patient data was excluded
from the analysis.
In each case,
the documentation and rationale for excluding each patient was
noted and is maintained to support the decision. It should be
emphasized that the decision to exclude data patients or
centers was made either on objective measures, such as a wound
size that may have been larger or smaller than the sizes
allowed by the protocol, or on material violations of the
protocol that could not be reconciled.
After the
conclusion of the audit, it was documented that 32 of the 72
patients who were enrolled in the trial met one or more of a
set of objective criteria that required them to be excluded
from the trial, such as: Their initial wound sizes were
larger or smaller than those allowed in the study. Their
recorded treatment violated the protocol, or they dropped out
of the study for reasons not related to the product or the
treatment.
The results on
the remaining 40 patients were then analyzed. Of these 40
patients, we discovered that 35 of them, that is, 88% of them,
had initial wound sizes of less than or equal to seven square
centimeters in area and two cubic centimeters in volume.
In these 35
patients with the most common wound sizes in the study, the
rate for total healing defined as full wound closure, this
rate using AutoloGel was 81.3%, while the rate in the
controlled group was 42.1%, and this difference of about 39%
is clearly statistically significant with the p‑value of
0.036.
In general,
p‑values of less than or equal to 0.05 denote statistical
significance.
For all
patients who were in compliance with the protocol, that is all
the 40 patients, the healing rates were: 68.4% for
AutoloGel and 42.9% for the control group, and this difference
of 26% was almost statistically significant with a p‑value of
0.125.
It should also
be noted that the control group was not treated with a placebo
or a sham, but rather with an alternative wound treatment, a
saline gel cleared by the FDA. Public healing rates for
control groups in the past wound studies had been in the 20 to
30% range, and we had assumed originally that that would be
the case in the study as well.
The important
point here is the high rates of healing at 81% for the most
common wound sizes in the study and of 68.4% for all wound
sizes, and these rates are higher than any other product or
wound healing that we know of.
We believe that
the high rate of healing with AutoloGel compared to other
marketed product gives our product a significant competitive
advantage.
Equally
important is that there were no unanticipated serious adverse
events related to the product and the clinical trial and in
independent data safety monitoring board or a DSMB that had
provided oversight on patient safety in the clinical trial has
not raised any pending safety concerns.
We're now in
the process of completing the analysis of some of the other
secondary safety and effectiveness parameters of the clinical
trial, and that may be needed by FDA in their review.
We plan to make
a submission in the first quarter of next year to FDA based on
our clinical trial results as well as some other recently
completed, fairly compelling data from a wound registry which
is proprietary to another organization. Our regulatory
strategy for such a submission is based on our product having
been categorized as a medical device, rather than as a drug or
a biologic.
So even though
the Center for Biologics Evaluation and Research, CBER for
short, is the regulating FDA component, the applicable laws
and regulations are those that are applicable for medical
devices.
Under these
regulations, one of the most common pathways for products like
ours has been the 5‑10‑K process in which one shows
substantial equivalence of the safety and effectiveness of a
product or currently marketed product by a predicate.
Now, this
process typically takes three to six months, though it can
take longer in the individual cases.
Now our regular
pathway, whether this is the process that FDA will accept and
timetables for it will become clearer only after further
discussions with the agency.
Now that we
have our clinical trial results, we will complete our
pharmacoeconomic study, which is a study of both costs and
benefits of a technology or a product to ascertain whether it
is cost‑effective.
Such studies
are useful in making a case for reimbursement by pairs, such
as Medicare and insurance companies.
Once we
complete this study, we will then initiate discussions with
the center for Medicare and Medicaid services regarding
coverage for Medicare reimbursement and also make appropriate
submissions. We will proceed with these efforts simultaneously
with the FDA process, though an eventual coverage decision is
likely to come after FDA clearance.
Now, even
though in this telephone conference we have been focusing on
clinical trial results and regulatory clearances for marketing
and reimbursement, it is important to remind everyone that we
are continuing to implement the other aspects of our
strategies as well, namely, extracting economic value from our
intellectual properties and building up our phase and
marketing capabilities. Even in these last three months while
we've been busy auditing our clinical trial results, we have
finalized two significant licensing arrangements. One with
Cobe Cardiovascular, a subsidiary of Sorren Group of Italy and
another with Safe Blood Technologies. We've also signed a
distribution agreement with National Wound Therapies of
Dallas, Texas to use our products in over 1750 long term
skilled nursing facilities covering about 200,000 beds.
We will
continue to pursue other similar opportunities, even while we
push forward with our regulatory and reimbursement efforts.
So in summary,
we believe that with these latest clinical trial results we
have delivered fully on the most critical of our operational
strategies and on others important to the company's
profitability.
And we have
done it within the time frames that we had envisioned over a
year ago, and with less financial resources applied to this
effort than we had expected.
Within the last
18 months, we have met several milestones. Despite the
operational challenges in implementing a complex clinical
trial protocol that was already in place, we have completed it
with favorable results and believe that we are on the right
course to achieve our regulatory goals.
We have
prevailed through winning or settling all patent infringement
suits and we have signed six significant licensing agreements.
Thereby, in effect, putting to bed the patent infringement
issue.
We have
established a new governance structure for the company, an
outstanding board of directors, and an experienced management
team that has proven its ability to overcome challenges.
We have managed
our cash well. In the second quarter of 2004 we believed we
had enough cash for a year. In our last 10‑Q, as of September
30th, 2005, we also believed that we had enough cash to last
us for a year. We were also pleased to note that our revenues
in the third quarter of 2005 grew by about 86% over the
comparable period of the prior year, which was a direct result
of our licensing deals.
And there has
been no additional financing since March 2004.
The company
remains debt free, and finally we have accomplished all this
with a staff of 12 people. We believe, therefore, that we can
face our future challenges with confidence. Thank you. And I
will be happy to take questions at this time.
Operator:
Thank you.
(Caller instructions) our first question comes from Raymond
Meyers with Emerging Growth Equity.
<Q>: Yes, thank you
for taking the question and congratulations. Looks like good
results.
<A>: Thank you.
<Q>: Thank you. First
question is about HCFA Rule 314. I understand it's a fairly
new HCFA rule that creates penalties for nursing homes that do
not address chronic nonhealing wounds and that the regulatory
agencies have increased their pressure upon nursing homes to
address these wounds. It would seem like that would really
play into Cytomedix's hands. What more can you tell us about
that?
<A>: Yes, that rule I
think will certainly help us and probably also explains the
heightened interest that we have observed in that community
regarding finding the right technologies which are both
effective and cost‑effective within the reimbursement
structure for nursing homes. So we are very pleased with this
development.
<Q>: Good. We'll take
whatever support we can get.
Also, this
registry you mentioned you had some favorable data I think
from another organization's registry, which certainly piques
our interest. Can you tell us more about that?
<A>: I'm yearning to
tell you more about this, but we do have to respect the other
organization's proprietary rights to it. They have allowed us
to use it in submissions, et cetera, but we are limited in
what we can discuss about that data, except to say that it is
supportive and fairly compelling data.
<Q>: Then that kind of
brings up, I don't know if it's a bit of a conundrum that we
all have about the data. Is on the one hand the FDA would like
to have these controlled clinical trials to determine whether
these treatments are effective, but in the wound care
business, we understand that in real life wound care is not
done in a controlled manner. Often especially in geriatric
cases the patients are not receiving the absolute best medical
care that might be available if you had unlimited funds. And,
therefore, the control of your clinical study is far better
care than what the patients are receiving in real life. And
therefore a patient registry or some form of example that
would explain how these patients are doing in real life care
should be an important decision factor in the approval of
AutoloGel. Is that something that you believe the FDA will put
much weight in their decision?
<A>: Yes. This is a
point that we'll be definitely emphasizing to FDA. And you
know for medical devices, double blinded well controlled
clinical trials are not always the only tool available. I mean
you can't do a blinded trial on hips or whatever or artificial
[indiscernible] or whatsoever. So as the nature of the devices
the surroundings in which they're given, et cetera, just
resorting to only data from well controlled trials is not the
only part of valid scientific evidence which is defined in the
law that governs medical devices in a much more broad setting
than it is very frankly in the area of drugs or biologics.
<Q>: What of this
assertion that it's actually true that your treatment is shown
to be at least as effective as any other approved treatment in
their own clinical trials. Now granted they weren't compared
head to head. But how much does that factor do you believe
into the FDA's ultimate decision?
<A>: I think it should
factor in and again those are exactly the points that we will
be making as emphatically as we can to the FDA, because the
FDA approval process, let's at least take 1 process, the five
10‑K process. That's a comparative process with other similar
devices, similar in technology, similar in the indications for
which they're used. And you have to show substantial
equivalents with what is currently marketed.
So some of
these technologies that are out there we can compare our
results to and as I said we have not found any that we have
information on in which we see these kinds of results as high
a set of results as we have here.
<Q>: What about the
pharmacokinetic study that you mentioned during your remarks.
Explain where that stands and when you expect to complete it.
<A>: We have hired a
company that does pharmacoeconomic studies here in Washington
as a living. They've got some experts who have taught in
places like imminent universities et cetera on health
economics. These studies look at two things, one, of course,
all the costs, hard costs of the device, the cost of the
treatment and even some consequential costs to society as a
whole. They also look at what the benefit is and try to create
an equation for cost benefit as being the rationale for any
payor to reimburse for this. So the idea is if you can help
patients and you can do it in a cost‑effective way, because,
after all, the government has only a certain amount of money
to spend on healthcare, then you deserve to be reimbursed by
Medicare or CMS, the Centers For Medicare and Medicaid
Services. Similar thinking goes through any payor whether it
be a private insurer or someone else.
<Q>: When do you
expect that to be complete?
<A>: We have already
been working on that for several months. So the economics part
of the study is almost done, but of course you have to now
weigh that against what the clinical benefit of our product is
and that was not as clearly apparent until we had this
clinical trial results out. So now that we have that, we have
both the enumerator and the denominator in the equation, with
the costs and the clinical benefits, and so I would take that
it would be done in a fairly reasonable amount of time,
sometime within the first quarter.
<Q>: Good. Final
question. Thinking pragmatically, you've learned a lot from
this study that you've done, and maybe you've learned how to,
if you had too it again, I understand it was not a
particularly long study, particularly if you did have to
repeat part of it. You have the centers already identified.
You know which ones performed the procedure properly and which
ones did not, the procedure that, the centers that did it
properly presumably had very good results with it, so I don't
imagine recruitment at those centers would be difficult. And I
would imagine their performance would be similarly strong as
it was in the first time around.
So repeating
the study would not be that did you feel or time‑consuming for
Cytomedixes. Is that a fall back position that you've
considered.
<A>: It is. That of
course becomes an extreme situation, repeating the whole study
is a very extreme situation, even less than that if one needed
a few more patients, et cetera, that could be done sooner.
However, we are counting on, and we really believe and we'll
be arguing our case with the FDA, that what we currently have
in the study as well as the other data, if you look at the
standard that FDA uses in the area of medical devices for
other similar products, what we have we believe should be
adequate.
<Q>: We hope so too.
Congratulations again and good luck.
<A>: Thank you very
much.
Operator:
Our next
question is from Gordon Mayors with Smith Barney.
<Q>: How are you
doing?
<A>: Yes, sir.
<Q>: I was curious if
you could more clearly lay out the time frames over the next
six to 12 months of things we should be looking for from the
company, FDA, submissions, CMS submissions, things of that
nature.
<A>: Yes, I think as
we go to FDA, when we do make a submission to FDA, I think we
will let you all know. Our philosophy is to put out more
information rather than less for our shareholders. So we will
let you know when we do that. If there's something interesting
really material that comes out of our discussions, we will
make those things available. The submissions we expect would
be to the FDA would be within the first quarter. When in the
first quarter depends on discussions that are still ongoing
with the FDA experts and others to figure out when the right
timing would be and how much, for example, prediscussions one
should have with the FDA before one puts the submission in.
So it's not
being held up because we can't put the application together.
So the
timetables are submissions, first quarter and then depending
what those submissions are, sometime in the second half of the
year getting some results out of approvals from the FDA and
simultaneously with that going in with CMS and trying to work
that system as well.
<Q>: How long do you
anticipate that process to take?
<A>: That's a very
interesting question. I wish I could have a clearer simpler
answer for that. In the FDA there's statutory time frames for
them to get things done. They take a little longer, et cetera
but you have a frame of reference. We don't have that kind of
frame of reference with the CMS. So we can't make a definitive
kind of a conclusion, but as we discuss with CMS, the
timetables and those kinds of facts will emerge during our
discussions.
<Q>: Will the fact
that this company Blue Sky Medical got the same reimbursement
code as Connect Concepts help you along quicker?
<A>: I think as the
CMS realizes that this area of wound care is a large clinical
need and is not as fully met with as great a clinical or
cost‑effectiveness as it can be, good public policy would
dictate that they allow other technologies like ours to enter
the marketplace sooner and provide that advantage to Medicare
patients.
<Q>: Well, thank you
and keep up the great work.
<A>: Thank you so
much.
Operator:
Our next
question is from Mitch Lester with Lester Brothers Capital.
<Q>: Congratulations
on the test results again, doctor.
<A>: Thank you.
<Q>: I want to take a
step backwards just to understand something. When the original
trial was set up, was the precise wound size dictated to all
clinicians, what size of wound size the group had to
demonstrate?
<A>: Yes, it was.
<Q>: So when the
initial results came back that were less favorable, when you
went through the data, you realized then that perhaps
something was amiss based on your own internal results, ergo
you then hire the third‑party FDA auditor to go back and make
sure that the trials were run properly?
<A>: Yes.
<Q>: When you went
back and you did that, you found out that people that had
larger wound size than was the trial were let in. When they
were then removed you then got the favorable result?
<A>: That is correct.
<Q>: Was that the only
thing that they were looking at? Meaning is there a
possibility that other elements of the trial, if those things
weren't adhered to, that other parts of the trial were not
adhered to?
<A>: Yeah, we didn't
look at only that aspect. We looked at ‑‑ our auditors
and our staff, because after the trial was unblinded, we had
access to some of that information and even got some of the
records faxed and so on. So we looked at all aspects of the
trial where a protocol might have been violated in a material
fashion.
And there were
other things also. So it was not only the size of the wounds.
Moreover, there were some patients who dropped out of the
trial for a variety of reasons.
You know, some
died or other causes not related to the product or had other
social conditions in terms of moving out of an area and things
like that.
So we looked at
all those records that we could to determine whether the
patients had followed and completed the trial according to the
protocol.
<Q>: Thank you for
that clarity. As a follow‑up to that, the wound size that you
dictated that the trial should have, was the reason that that
size was picked is that that that's the most common size of
the diabetic wound universe?
<A>: The wound sizes
originally were picked in consultation with FDA and the
rational was if the wound is too small, then maybe it might
heal without intervention anyway. So the very small wounds
were excluded.
If the wound
was so large that there was no chance that it could be healed
by any less severe methodology like ours, then those kinds of
wounds were eliminated. So that was as a result of discussions
before and during the trial with FDA.
<Q>: Lastly, actually
I have two questions. Once the reordered a trial then yielded
a universe of 40 patients. Being that you have FDA experience
and people on your board of directors have FDA, former FDA
experience, is a universe with 40 patients large enough to get
an approval from the FDA in the area of medical technology
products?
<A>:
A very good question. And you can look at it both ways.
You know, any universe or any n or size of the cohort, as you
call it, needs to be such that it can detect the effect that
you are trying to test.
We were
fortunate that our effect, the beneficial effect was so
dramatic that even with an N of 40, we were able to show for
most patients or most wound sizes in a statistically
significant fashion, clearly statistically significant
fashion. So therefore by definition the size of 40 as an end
was adequate.
I'd also like
to point out, though, that it's not only this trial data but
as I mentioned we've got other.
<Q>: The registry.
<A>: Registry data, et
cetera, and all that constitutes the thrust of our argument to
FDA for approval.
<Q>: One other thing.
I know you've only just retained this firm in Washington to do
the pharmaeconomic study for cost‑efficiency, but currently if
I'm a nursing home operator and I have these type of wounds
that the study was doing, what is my cost as an operator with
the conventional treatments that are available right now
approximately on a per annum basis?
<A>: I don't have
those numbers. All I can say is that this very large group of
nursing homes, this consortium, National Wound Therapies, with
which we had a licensing done recently, felt that the
reimbursement scheme for nursing homes and the economics are
such that our product makes a lot of sense for them.
<Q>: Okay.
<A>: By the way, the
pharmacoeconomic study was thought of several months ago,
actually the middle of last year because we hired that firm
early and they have gotten a lot of the work done. We were
only waiting for the clinical trial results.
<Q>: One of your other
questioners mentioned this new HCFA Rule 314. You
discussed it a little bit. Can you elaborate on
that. Is that a new rule that's mandating that nursing
home and assisted living operators where they have patients
that have these type of wounds must address it or suffer
penalty and fines? Is that what the nature of that rule
is?
<A>: You know, I have
to confess that I don't have the nuances of that rule at my
fingertips right now. We have heard about it and we've seen it
but we haven't analyzed it at this point.
<Q>: Okay. Thank you
again and congratulations.
<A>: Thank you.
Operator:
Our next
question is from Sade Karovach with DSCC.
<Q>: Hi. I guess
‑‑ I'm an investor and I had a question. What is, and if you
have the numbers, what is the current market size for the
nonhealing chronic wounds product and how much do you expect
that AutoloGel can capture?
<A>: You know, chronic
wounds in the United States, number of the order of 5 million
cases a year. Just in diabetic foot ulcers, you know, the
numbers again I do have those numbers, I don't have them right
in front of me over here, but the number for the market run in
the billions very frankly. So even if we were wrong by a
factor of four or five or eight, it is still a huge market and
very attractive and even if we got a small piece of it for a
company like ours, it would be a very attractive opportunity.
Note also that we have the seminal patents in this area which
we have licensed to companies all the way from J&J and
Medtronic to what I call, for example, Sorren Group, et
cetera, so we get a piece of the pie no matter who is selling
that area.
<Q>: Very good. Thank
you.
Operator:
Once again, if
you would like to ask a question, please press star 1 on your
telephone keypad. Our next question is from Bill Cross private
investor.
<Q>: Thank you for
taking my call, Dr. Mohan, and congratulations on the
great clinical trial results.
<A>: Thank you very
much.
<Q>: My question is
dealing with timing. I understand we have a difference,
statistical difference in wound closure. But my question is in
the amount of time it takes for the wound closure, is there a
significant difference between the saline as versus AutoloGel
in time to heal a wound.
<A>: Excellent
question. And as I said there's some secondary end
points that we're completing the analysis on right now in
order to make a submission to FDA. And we'll have more
definite information on that shortly.
<Q>: Very fine. I look
forward to reviewing the results.
<A>: Thank you.
Operator:
Doctor, I'm
showing no further questions in queue at this time.
Kshitij
Mohan ‑ Cytomedix, Inc. ‑ Chairman, CEO:
Very good. Well
I would like to thank everyone for not only attending this, I
would particularly like to thank all of you who have shown
great patients and understanding for us as individuals and as
a company during the somewhat turbulent times that we went
through in the last few months. Thank you very much.
Operator:
This concludes today's conference. Thank
you for your participation. You may disconnect your lines at
this
time.
