Good day, ladies and gentlemen, and welcome to the BioTime's Second Quarter 2018 Earnings Conference Call. [Operator Instructions]. And as a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. David Nakasone. Sir, you may begin.

Thank you, Operator, and good afternoon, everyone. Thank you for joining us today for BioTime's investor conference call and webcast to review the company's results for the second quarter of 2018 as well as recent corporate developments. BioTime issued the second quarter earnings release earlier this afternoon. The earnings release is posted and available on our website at www.biotime.com. There will be a replay of this call, which will be available approximately two hours after the call's conclusion and will remain available for 7 days. The operator will provide the replay information at the end of today's call. With us today at corporate headquarters are Co-Chief Executive Officer, Adi Mohanty; and Chief Financial Officer, Russell Skibsted. Co-Chief Executive Officer, Dr. Michael West, will be joining us from New York. Each executive will make prepared remarks, and then we will take your questions from our covering analysts and institutional holders. Before we get started, we would like to remind you that, during the course of this conference call, the company will make projections and forward-looking statements regarding future events. We encourage you to review the company's filings with the SEC, including without limitation to the company's form 10-K and 10-Q, which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements. These factors may include, without limitation, risks inherent in the development and/or commercialization of potential products; uncertainty in the results of clinical trials or regulatory approvals; need and ability to obtain future capital; and maintenance of intellectual property rights. And with that, I'd like to turn the call over to Adi Mohanty, Co-Chief Executive Officer of BioTime.

Thanks, David. Good afternoon, everyone, and thank you for joining our call today. Let me begin by talking about the transformative agreement we announced earlier today. As part of our continued focus on unlocking value and simplification, we've reached an agreement with Juvenescence to sell 14.4 million shares of AgeX for approximately $43 million. As you may recall, just last year we formed AgeX to consolidate certain early-stage noncore assets and research programs primarily focused on the biology of aging and age-related diseases. Our goal in forming AgeX was to unlock the potential value of these assets for our existing shareholders while not taking resources away from our core clinical programs. It also helps us to further simplify our company, which is one of our key corporate objectives. In the short period of time since last year, we have demonstrated our ability to unlock value for our shareholders. Today's transaction values AgeX at over $100 million and demonstrates our ability to monetize these assets for our shareholders, providing over $43 million in non-dilutive funding to BioTime. This transaction allows our shareholders to benefit from the potential future success of AgeX and Juvenescence. We're excited to partner with a great team like Juvenescence. They're well-funded and a world-class organization with a proven and seasoned team of experts in drug development, strategy, commercialization and finance. Their key management has been on teams that have delivered over $20 billion in total shareholder value. The management team at Juvenescence has in past positions collectively taken multiple products to commercialization, with peak annual sales totaling over $70 billion. Dr. Gregory Bailey is the CEO of Juvenescence and is on the board of multiple public companies. He has co-founded and invested in multiple public and private companies. For example, he was the initial financier and an…

Thank you, Adi. The United States, like numerous other industrialized countries around the world, is experiencing a rapid rise in the prevalence of age-related degenerative disease. Current drug-based therapeutic modalities are limited in their power to coax the body to repair itself. So the sharp rise in the number of older people with age-related diseases like Alzheimer's, Parkinson's, coronary heart disease, Type 2 diabetes, age-related macular degeneration, osteoarthritis and so on is generating enormous pent-up demand for medical solutions. Meeting that demand for select disease types, including ischemic disease and Type 2 diabetes, is a focus of AgeX. Product development within the BioTime group of companies is largely structured on pluripotency-based regenerative medicine. We harness the power of these unique cells to maintain themselves in a youthful state by means of the immortalizing gene telomerase. Since these amazing cells have the power, for the first time in history, to transform into any of the cell types of the human body, it's now possible to manufacture young cells of any kind to potentially repair tissues afflicted with specific types of age-related degenerative disease. We've transferred to AgeX a large estate of intellectual property, including patents and patent applications filed worldwide in the field of cellular immortality, or generative biology. They enable the company to commercialization numerous products in the AgeX fields. Our initial focus is on the development of young vascular cells to rebuild circulation in the context of age-related ischemic disease, a product we call AgeX VASC1. The American Heart Association predicts that cardiovascular disease will account for over $1 trillion of healthcare costs annually by the year 2035 in the U.S. alone, largely driven by the surge of aging baby boomers. Our second lead product in development is AgeX BAT1. This product is intended to reverse age-related changes in…

Thanks, Mike. I will now review the financial highlights for the quarter, then touch upon the planned AgeX distribution. BioTime's consolidated cash, cash equivalents and marketable securities totaled approximately $29 million as of June 30, which compared to approximately $31 million as of the end of Q1. In addition, we own publicly traded common stock in Asterias and OncoCyte, which represent an aggregate market value of approximately $70 million based on yesterday's closing price. As announced earlier this morning, we will receive an additional $43 million from the Juvenescence transaction. This will provide us with $21.5 million in additional cash and an additional $21.5 million in securities. As we've done over the past couple of years, we've included at the end of our earnings release a non-GAAP table that details operating expenses by entity adjusting for noncash expenses. We believe this will help investors better understand BioTime's and AgeX's financials. But please keep in mind, when reviewing this table, that the table is not a cash flow by entity, because grants and other revenues are not included in the totals. During the quarter, BioTime's consolidated non-GAAP operating expenses were $9.3 million, which is comprised of about $7 million for BioTime and about $2 million for AgeX. Grant revenue of about $2 million for BioTime was recognized during the quarter. BioTime's actual cash burn during the quarter was about $5.4 million. This brings our cash burn for the first half of the year to a bit over $12 million, which is in line with our prior guidance. Based on our current plans, we continue to believe that BioTime's quarterly operating cash burn over the course of 2018 to be a little over $6 million per quarter. Provided we maintain our planned level of expenditures and receipts, we expect to have sufficient…

Thanks, Russell. So our sharpened focus on the corporate imperatives of clinical progress, simplification, and unlocking value for our shareholders is paying dividends. The Juvenescence transaction and the upcoming distribution of AgeX shares are transformative transactions that provide significant, non-dilutive funding to BioTime, set up AgeX for further success, and unlock over $100 million of value that was previously not valued as part of BioTime. OpRegen development is accelerating, with encouraging data to date and expected near-term data that could be transformative for the program, the company, and for patients suffering from dry AMD. Renevia is on the verge of approval, launching the company towards a commercial product and opening the path towards much larger indications in aesthetics. BioTime is now very well-funded to deliver on important upcoming milestones: the distribution of AgeX shares to BioTime shareholders; EU approval of Renevia; data from OpRegen at AAO; data from OpRegen cohort 4 by year-end or beginning of next year. So for BioTime, we've had a great first half of the year, and the second half will build and accelerate on this progress. With that, operator, we're ready for questions.

[Operator Instructions]. Our first question comes from the line of Kevin DeGeeter of Ladenburg Thalmann.

This is James on for Kevin. Could you please talk about Juvenescence access to external drug development expertise and how that could potentially accelerate AgeX product development?

Yes, I think as we mentioned, so Greg Bailey, who is the CEO of Juvenescence, was part of founding Medivation, taking that -- early steps to form the company and take the products to the clinic, and as part of that has significant connections. Along with that, on the board is a person called Declan, who used to be the head of R&D of Merck. I can list the number of people there that have had significant success, Annalisa Jenkins. These are names that everybody in the industry would recognize as people who have delivered products through early-stage development all the way to commercialization. They are people with strong track records, but also, significantly, they have significant access to funding. So they're extremely well-funded. They've raised already about $70 million. They have access to lots of funds. And we think that combination of a well-funded, extremely -- well, shall I say, accomplished set of people, that creates a great partnership within AgeX for the products and technologies. As you know, we have some very powerful technologies. That combination of those technologies and those people we believe will accelerate development and create significant value.

And just to clarify, so potential distribution date for AgeX, it could be as soon as September?

Sure. I think I'll stick with what Russell said in his prepared remarks, which is we believe definitely that we can get all of this done within two months. Our target will be sooner than that, but that's the outside date. So on the outside it's by end of September, but we could get that done sooner, and we'll do that as soon as we can.

Our next question comes from the line of Reni Benjamin of Raymond James.

Congratulations on this, I think, pretty transformative deal and unlocking of value. A couple of questions, maybe just starting off with the OpRegen program. Adi, you mentioned that we're going to see data from a full 12 patients from the first 3 cohorts at ARVO. Can you just provide a little bit of context or color as to what will be kind of the longest follow-ups that we might see? Is there anything in the data that should materially change? Or should we be pretty happy that, if we see nothing that's changed, should we take that as a positive sign? And might we see some data from cohort 4?

So let me try to walk through that and clarify a little bit. As you know, we have three cohorts, with cohort 1 being a certain dose and a cohort 2 and 3, so there was from 500 cells per microliter to 2,000 cells per microliter. So we have cohort 1, 2 and 3. And last time we mentioned, because we had gotten so good with all the different centers coming online, and we had patients, we had an opportunity to get a few extra patients, and we did. So we got 3 extra patients enrolled, so that's how we get to the total of 12 patients. We really haven't shared a whole lot of data from those additional three patients that got treated over the last quarter, so that 12 now going to AAO in October is more meaningful than the 8 or so patients that we had shared at ARVO. So we'll have a larger number, significantly larger compared to 8. We'll have 12. And what we think is important is that continued watching or seeing the structural changes that we saw, right? Reduction of drusen we think could be pretty meaningful, and a lot of KOLs agree. The improvement of the ellipsoid zone, the RPE layer, maintaining a lot of those changes for a longer period of time is also pretty meaningful, because we saw some of them at month 4, month 5, and that was pretty good that we can already see some improvement at the month 3, 4, 5, but does that sustain for 8 or 9 months, or 12 months. Now, in either case, there is a product, right? But the idea is would this be a really long-lasting effect, or would there be a shorter effect? Those are things that we can see with some of this data that is longer-term. Some of the earlier patients, they're heading out to almost 2 years, 2-plus years. But I think more important for me is to see that the patients that are now at even 9 months that we had shown 4 months of data, are we able to see similar or continuing improvement. That's important in the first 3 cohorts. The fourth cohort, which we just started treating recently, now, we think if we have 3 or 4 months' worth of data -- I'm sorry, 3 or 4-month time point data, given that the 3 or 4-month time point data and the previous cohort was pretty meaningful, it'd be interesting to see. Whatever we have, I can't promise, and it's hard for me to now make those commitments. But we think we'll have some. Whatever we have we'll share at AAO, but, more meaningfully, the larger cohort of -- I'm sorry, larger number of patients from cohort 4, the data will be more complete end of the year, beginning of next year.

And just thinking about things a little bit longer-term and how things might unfold in 2019 and beyond, at what point do you kind of go with what you have and go to the regulatory agencies and discuss a potential commercial pathway forward? Do you already have that path pretty much planned out and ready to be conducted? And what are your thoughts regarding RMAT designations for the syndication?

So this is one of those tougher questions. Of course, we have a long-term plan, but that long-term plan -- at the very minimum, you can take the basic plan, which is when we finish IIa, we have a meeting, we do a IIb, and then you do a Phase 3 [indiscernible] more traditional plan. At the least, we think with the data we have, with safety, with starting to see some early functional -- I'm sorry, structural changes, that that path should be available at the minimum. Now, if the data from the Phase IIa becomes -- as you know, the size of the clinical signal matters -- is better than what people might get in a typical IIa, because we're seeing signs that we might get something better. But we won't know until we see the actual data. In fact, the data is better, then of course we're ready to take advantage of that and go sit with the agency and say, look, we have now 20-some patients worth of data that is really meaningful change, and based on that, is there a path to a registrationals trial right away, being that there is nothing else that works in this space? There is that opportunity. It's a little early to talk about all of those still, Ren. I think this is why we think that the data coming out within the next few months could be quite significant, because that data we think at minimum at least confirms here's the conservative pathway, and if it's really good, then it gives us that confirmation of being able to approach an accelerated pathway. We think RMAT, as you know, we're learning a lot about the RMAT designation, OPC1 having the RMAT designation within our family of companies. We know a lot about it. We're involved. And so if there's an opportunity to take advantage of that, we will. We're learning more because we are approaching the agency through that process. It's a newer process. You know that the agency wants to work with cell therapy companies, but they're learning, we're learning. So we can learn from another product within our family, and we'll apply that to OpRegen as available. As of today, I think it's still a little early for me to give you more details.

And just switching gears real quick to Renevia, you mentioned that the interactions with the agency are pretty routine. Typically, when we see people submitting for [indiscernible] approval, there's essentially a question-and-answer period, right, where essentially the clock stops, the 120-day questions and things like that. Can you tell us, is that the same case with the CE Mark and kind of where you are in that pathway? And then related to -- you mentioned expanding into new indications. You have some ISTs here in the U.S. But how do you expand into new indications in Europe? And I guess the follow-up to that question is what are the commercial activities that you're thinking about instituting as you get ready for a potential approval by the end of the year?

That's a lot of questions in one, Ren, so let me try to go through that. So it is a little different, as you know. You mentioned those things. Compared to the U.S., with the FDA, there's a -- you get this comment period, and then a Q&A period. There's a 60-day clock, 90-day clock. That is not the same for Europeans in general, but definitely for the CE Mark pathway, that is not the same. So we don't have that defined timeline, which is why previously we have said we're basing it on what has happened. So for the 40 or so approvals over the last 2 or 3 years through the CE Mark pathway, it's been that sort of 4 to 8-month timeframe it's taken, which is how we came up with we think the fall, we could get approval. But there's not a defined timeline. However, there are similar review steps. So they look at all our submissions. First they tell us if it's complete, then they tell us if they have questions, then they tell us what the label discussions look like. So we've gone through the first couple of gates, complete, and then some questions, pretty typical routine questions. It was nothing other than it took us a little bit to clarify things. So we feel pretty good about the interactions so far. We're now waiting for that next step, which would be that label conversation, and as you know, a lot for us. We have several plans in the drawer that we're ready to pull out, but a lot depends on how that label conversation goes. So we haven't finished that. That's what we think the next couple of months will be, because that's almost like the last step before they send you, like,…

Congrats on the progress.

Our next question comes from the line of Patrick Lin of Primarius Capital.

Congrats on all the progress as well. I echo the other callers. Particularly excited about the AgeX, as well as some of the other progress. But the first question is, in terms of the distribution and the record date, I just want to make sure I heard correctly. All the people who bought stock before the record date of July 31, if they sold it since then, they do not get the AgeX spin-out when the distribution happens. Is that correct?

Patrick, this is Russell. Correct. Because the BioTime stock is -- the New York Stock Exchange is attaching the due bill, it means that the right to receive the distribution will go with the BioTime stock until the distribution date.

So if you sold it, you lost that right.

Yes, if you sold it, you lost it. On the other hand, if you buy it, you get it.

That sounds fair to me. And then, the second thing is you mentioned about the quarterly burn, roughly about $6 million a quarter. And based on what I heard about the current cash on hand, if you add in the marketable securities as well as the new cash that came in, that's well over $100 million. So would it be close to four years then of roughly at the current burn? I'm not saying that it's not [indiscernible]?

If it were all in cash.

But at the current -- no, I understand, but if you add up the cash and cash equivalents and investments, I just want to make sure I got the math right, that that's over $100 million, right?

Yes, Patrick, you're right. It is well over $100 million, and yes, that would be four years all-inclusive. But cash alone is a pretty big number now. That's why I say we're well-funded to do what we need to do.

And then the last thing is just to give us a little preview, I know you have some of these presentations coming up. But are there any investment conferences that you guys are scheduled for, and any other presentations coming up, just so we can kind of mark them on our calendar? That's it. Thank you.

Sure, Patrick. We have a number of presentations that we'll be doing in September and October, including the Rodman conference, the B. Riley conference, and Ladenberg Thalmann. And I think there are a couple other ones coming up toward the end of the year. So we will definitely keep you apprised as those conference dates approach.

Terrific progress, and look forward to future updates.

Our next question is from the line of Bruce Jackson of Benchmark.

Just a couple of more on the OpRegen trial. What is the cell concentration for cohort 4?

Yes, Bruce, so we have kept that the same as cohort 3 because we like that concentration. We've seen that now for 2 cohorts. That concentration works well. And that jives also with our preclinical data from the animal model, which also suggested that that would be likely the right dose. So 2,000 cells per microliter, that is our dose. That's what we're doing, and that's what we have in cohort 4.

And then I wanted to make sure I heard the numbers for cohort 4 correctly. So there are two arms in this cohort, correct? And then is it 9 and 3 or 6 and 3 in the 2 arms?

Well, thanks for asking that, so I know that can get confusing. So there is really just one arm where we're going to treat 12 patients. What we've been saying is what we want to do, and that's what we're trying to set up, is get the first 9 patients treated, and then take a brief -- I'm talking about like days, not a long pause -- but take a brief pause, see if we have learned things from those first nine patients that we might want to use to enhance the last three patients. So take advantage of having 12 patients, which is a pretty decent size number of patients. And so it's not separate arms. It's not -- I can see how when I'm talking, it could sound confusing, but no - one arm, 12 patients. We'll get to 9 patients, take a short breather for a couple of days, look at what we've learned from 9, and then finish the last 3 either exactly the same as the first 9 or with a small enhancement that would help us either with a procedure-related or site-related, or other small tweaks.

And then with the extra patients that were in the first 3 cohorts to get it from 9 to 12, which cohorts were they in? Were they all in one cohort, or were they in various cohorts?

Yes, good question. So it was -- we call that the cohort 3 extension arm. So they were the same as the cohort 3, which is the primary -- what I would say exciting data at ARVO came from the cohort 3 patients. So the additional 3 patients were cohort 3 extension patients.

And then finally, with the data that you're going to be showing for the first 3 cohorts, roughly what is the follow-up period just on average? I know it's going to be variable depending upon the individual patients, but what's the average follow-up period going to be?

Your comment there about being variable is very accurate. It'll be really hard for me to give you an average number. There's -- patients will be all the way from a few months to a couple of years. So I would rather not give you an average number and say, yes, we'll have patients who have been treated fairly recently to patients with really long-term follow-up.

And then a quick question for Russell. With the AgeX spin, what's the cap structure of the new company going to look like? So Juvenescence is going to have their 14 million-plus shares, and then the BioTime holders are getting 1 for every 10, right? So what's the final share count going to total up to, do you think? And what's the BioTime stake in the new spin going to be?

It might be easier to just go simple with as of today. There's about 37 million shares.

Right. There's, yes, about -- BioTime owns a little over 80% of AgeX currently, which for us represents about a little over -- almost 29 million shares. And Juvenescence is purchasing 1.4 million-plus shares of?

14, 14-point ?

We will be distributing one share of AgeX for every 10 shares of BioTime. There was 126 million BioTime shares, so we'll be distributing about 12 million-plus shares of AgeX to the BioTime shareholders.

So I think it's best right now to stay with those numbers and say, look, as of the record date, we have that many outstanding shares, 126 million or so. 1 to 10 we'll give out AgeX shares, Juvenescence bought it. As soon as we finish that, we'll give you the final remaining number for BioTime, because we'll end up with remaining shares of AgeX as well as new shares of Juvenescence.

And then last question on the AgeX pipeline. I know that Mike didn't want to give out too much information on the plans, but can you give us just maybe a little bit more on, like, the rank order of the three different programs and when we might have something begin to happen on the clinical trial front?

Right. So I see the vascular product, VASC1, and the metabolic product, BAT1, which are brown adipocytes, as roughly equivalent in their stages of development. And so we'll be developing them in parallel, and that's quite a complex task. We've developed now several products from pluripotent stem cells through preclinical development, and then to clinical trials, obviously, and have a strong sense of the tasks required, the number of animals and animal studies. But the precise timeline will depend on ongoing discussions with FDA and [indiscernible] specific indications. Obviously different indications require different types of animal models, so once we've had more definition on that front. And then, with this transaction with Juvenescence, obviously they will become a very significant partner as well as shareholder. And so there's ongoing discussions, which as you might anticipate, have preceded today's announcement about our joint collaborative efforts that they can bring to the table to help in some cases accelerate that development plan. So we thought it best not in this earning call to lay out a defined milestone time line path, but we'll be doing that as soon as possible.

Congratulations on all the progress.

And at this time, there are no further questions. I'd like to turn the conference back over to Adi for closing remarks.

Thank you. Thank you all for joining us. It is such a great, exciting time for BioTime, and we look forward to coming and sharing more of that progress over the next few months. Thank you.

Ladies and gentlemen, this conference will be available for replay after 7:30 p.m. today through August 9, 2018 at 11:59 p.m. You may access the replay system at any time by dialing toll-free 855-859-8367, or internationally at 404-537-3406 and entering the access code 1389978. Again, the phone numbers are toll-free 855-859-8367, and international 404-537-3406 and access code 1389978. This does conclude our conference for today. Thank you for your participation. You may now disconnect.