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Edited Transcript of CBMG earnings conference call or presentation 6-Nov-19 9:30pm GMT

Q3 2019 Cellular Biomedicine Group Inc Earnings Call

CUPERTINO Nov 22, 2019 (Thomson StreetEvents) -- Edited Transcript of Cellular Biomedicine Group Inc earnings conference call or presentation Wednesday, November 6, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Bizuo Liu

Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director

* Derrick C. Li

Cellular Biomedicine Group, Inc. - Head of Strategy & IR

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Conference Call Participants

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* Amanda Louise Murphy

BTIG, LLC, Research Division - MD & Senior Biotechnology Equity Analyst

* David Bautz

Zacks Small-Cap Research - Senior Biotechnology Analyst

* Madhu Sudhan Kumar

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Varun Kumar

Cantor Fitzgerald & Co., Research Division

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Presentation

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Operator [1]

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Thank you for standing by. This is the conference operator. Welcome to the Cellular Biomedicine Group's Third Quarter 2019 Results Conference Call.

(Operator Instructions) And the conference is being recorded. (Operator Instructions).

I would now like to turn the conference over to Derrick Li, Head of Strategy and Investor Relations. Please go ahead.

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Derrick C. Li, Cellular Biomedicine Group, Inc. - Head of Strategy & IR [2]

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Good afternoon, and thank you to everyone for joining us this afternoon. Speaking today is Chief Executive Officer and Chief Financial Officer of Cellular Biomedicine Group, Tony Liu. After he completes his quarterly update, we will open the call to questions.

Please note that some of the information you will hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding revenue, gross margin, operating expenses, other income and expenses, taxes, capital allocation and future business outlook. Actual results or trends could differ materially from our forecast.

For more information, please refer to the risk factors discussed in CBMG's most recently filed periodic reports on Form 10-K and Form 10-Q. Cellular Biomedicine Group assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. I'd now like to turn the call over to Tony for introductory remarks.

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Bizuo Liu, Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director [3]

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Thank you, Derrick, and thank you to everyone for joining us today. This was an exciting quarter for our company on both the clinical and corporate side. We made a major commitment and started our U.S. expansion for research and clinical development in a new 22,000 square foot facility in Rockville, Maryland in October 2019. We plan to use the Rockville site to, initially, support our clinical development in hematological indications in the United States.

As you recall, we leverage our China operations to develop and hone our CMC process, institutionalize the manufacturing process for swift, high-quality vein-to-vein delivery and build our budding clinical confidence via investigator-initiated trials. While we believed those technology platforms already, we will add U.S. clinical trial sites to our clinical endeavors.

This Rockville site commitment marks a great milestone for us, as we are excited about beginning clinical development in this stage. I am very proud of our team's progress to date.

Our R&D team will be presenting at 2 upcoming medical conferences this quarter. First up is a poster presentation at the Society of Immunotherapy in Cancer, or SITC, Annual Meeting in Maryland at 7 a.m. this Friday. The title of this presentation is: The Next Generation “Off-The-Shelf” Universal CAR For Adoptive Immunotherapy.

Additionally, we will present at The American Society of Hematology Annual Meeting, or known as ASH, in Orlando, Florida. The presentation titled, Developing a Novel Anti-BCMA CAR-T For Relapsed or Refractory Multiple Myeloma, will be presented on December 7 at 7:45 a.m. at the Orange County Convention Center.

Speaking of our lead I/O asset, the anti-BCMA program for multiple myeloma, I want to set your expectations in terms of clinical development progress. We begin patient enrollment in January of this year and added 2 additional clinical sites recently. Although it may appear that we are slower than some of our peers in a crowded space in the market, shown by others working in BCMA to obtain INDs ahead of us, our approach has been to prioritize and institutionalize distinguishable manufacturing process that is repeatable and can help us ensure quality clinical data.

Having seen our early clinical feedback, I remain cautiously optimistic that we can be one of the key companies in this indication. Our intention is still to show some early clinical feedback later this year and to continue to update everyone on our clinical progress. Besides our leading I/O asset for anti-BCMA for multiple myeloma, we continue to make great progress in our other clinical programs, which includes CD19, CD20 biCAR, TIL and KOA.

We ended the September quarter with $29 million cash on our balance sheet as compared to $39 million at the end of June 30, 2019. Net cash used in operating activities for the first 3 quarters of 2019 was $28.1 million compared to $19.4 million of the same period in 2018.

As you can see, our team has been dedicated executing on our vision of being a vertically integrated cell therapy-focused company. We continue to develop our clinical pipeline conservatively. And as 2019 comes to a close, we see our company expanding to the U.S. These clinical programs in U.S. and in China along with our U.S. facility expansion will require significant funding in the upcoming next 12 months, both in terms of business operations and capital expansions.

Therefore, we will need to raise additional capitals for the foreseeable future. We plan to use approximately $82 million over the next 12 months to continue to develop our clinical program and to expand our capacity and infrastructure.

Overall, Cellular Biomedicine Group has continued to progress on both the clinical and operations side of our business. We stay focused on our vision to build a global platform capable of researching, developing our own robust pipeline as a cell therapy company while continuing to build out our globally leading manufacturing capabilities, building our own efficiency, scale and an innovative approach.

With that, I'll turn you back to Derrick, opening our discussion for any questions you may have for us.

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Derrick C. Li, Cellular Biomedicine Group, Inc. - Head of Strategy & IR [4]

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Thank you, Tony, for the introductory remarks. So at this time, we would like to open up some questions. So operator, in the queue order, we go with the first person on your list.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first caller is from Madhu Kumar of R.W. Baird.

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Madhu Sudhan Kumar, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [2]

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So first one, I mean I'll try and hopefully, you'll say something. What is kind of a reasonable estimate for the number of patients you might expect in the BCMA update at ASH? Obviously, the abstract discloses 3, but will it be a reasonable number to expect for that presentation in December? And then I have a follow up after that.

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Bizuo Liu, Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director [3]

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This is Tony. Thanks for the question. I think the -- we have -- when we submit the ASH presentation, that was a few months back -- a couple of months back, and we continue to monitor and follow with patients. So I think we are looking at single number of the patients. We are -- we have continued to dose escalation. We, so far, feel very good about it, and I think that last 2 months, we added 2 more sites.

So you'll see us continue to pick up speed in terms of number of patients to be enrolled. Although, some may not be fully ready to evaluate yet, but I think that you would expect us total in terms of the evaluable patients plus the dosed patients close to about 10 patients. The actual numbers, the outcome or results on clinical -- from safety, efficacy, will have to be shared with you when the -- during the ASH presentation.

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Derrick C. Li, Cellular Biomedicine Group, Inc. - Head of Strategy & IR [4]

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And additionally, I'll add to that, Tony. This is Derrick Li. So our approach on how we want to make sure that we speak to investors and analysts and basically stakeholders who are watching our story is to be very conservative with the kind of data that we are showcasing. I think that there has been some pushback and some reluctance of investors who accept data originating from China and our goal really is to have and showcase our data in a way that there are going to be reduced questions regarding that. And so our approach is going to be to show the most conservative way in order to do that. So that's the way that we want to do it going forward.

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Madhu Sudhan Kumar, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [5]

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So beyond that, you have the CD20 program in post-CD19 DLBCL. When might we expect initial clinical results from the anti-CD20 CAR-T program?

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Bizuo Liu, Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director [6]

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Great question. We have dosed patients and so far, we feel good about it. And again, CD20 is, at this point, in our clinical study is through IIT, has been positioned as treating patients, CD19 relapsed patients. So we, at this point would dose patients. I think that they, hopefully, in weeks ahead or -- that we should be able to see the early from the safety perspective, great. But we want to see, hopefully, would stand ahead, we'll see some early indication from the efficacy perspective.

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Madhu Sudhan Kumar, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [7]

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Okay. And then thinking about the cell programs. So your direction was non-small cell lung cancer. How are you envisioning the non-small cell lung cancer TIL program? Do you think about it more from kind of the Iovance approach of you take the tumor, make TILs that immediately treat or say the Moffitt investigator-initiated trial approach, which has been bank TILs, treat with PD-1 inhibitor when you have progression on PD-1, then administer the previously banked TILs, like which approach are you thinking about for your TIL trial?

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Bizuo Liu, Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director [8]

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We -- in a big picture, great question. We look at the TIL program essentially 2 approaches. One is what considered would be a traditional TIL treat -- TIL method. However, we will be doing with the -- from the process perspective more or less try to shorten the time and -- but the -- just what we call traditional TIL. And then that would be an indication in lung cancer, yes.

And then the second method at this point, we are -- through our collaboration with NIH, we are, by expanding TILs through, what you call biomarker-based expansion. And we are in the process of developing a consistent, the scalable methodology. Hopefully once that's done, we're going to start to have another cohort using new treatment method.

So from the overall approach, that's -- you have the both traditional as well as new from selection-based, the -- approach. And CBMG has been very strong historically and consistently. And our approach has been, we want to make sure solve the manufacturing issues ahead of the any kind of clinical programs. In this case, we like the -- we saw the early indications from the treatment with TIL, great results. We want to continue follow that. That's what we've got Tier 1, at least working well from potential outcome.

But in the long-term perspective, we want to focus a lot of energy in terms around from the consistent, scalable-approach perspective to develop our own proprietary, the methodology from the coverage perspective based on the biomarker-based selection. So that's the second, the more in the future once we are ready to go.

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Madhu Sudhan Kumar, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [9]

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Okay. And I'll squeeze one more. And do you guys have any update on the Kymriah BLA submission in China?

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Bizuo Liu, Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director [10]

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We -- on that one, again, thanks for the question. We continue to work with Novartis on that. We're making progress as planned. So far, it's on track. So this, both sides, both Novartis and CBMG, we are pleased with the progress and we continue to move forward with that. And I will defer the specific time frame to -- for you to follow up with Novartis, but CBMG has been extremely pleased with the collaboration with Novartis. They have filed IND in China, as we expected. So so far, so good.

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Operator [11]

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The next question is from Amanda Murphy with BTIG.

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Amanda Louise Murphy, BTIG, LLC, Research Division - MD & Senior Biotechnology Equity Analyst [12]

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So I guess just a couple of follow-ups, some of these questions on ASH to start off. A couple of things. So are you or maybe you can even give us a sense now in terms of manufacturing time line, what you're seeing in IIT trial, sort of being the waiting time? And then just secondly, it seems like your adverse events profile is pretty favorable. So just curious there, if you could speak specifically what -- why that is or what you might disclose more on that front at ASH?

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Derrick C. Li, Cellular Biomedicine Group, Inc. - Head of Strategy & IR [13]

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Amanda, I don't know if we can provide that. I would prefer not to speak too much about the additional data that we'd disclose at ASH. So just to kind of jump ahead of Tony on that just because we don't want to violate any [protocols], et cetera.

But on the manufacturing side, we were -- we kind of stated it. And I believe that our Chief Scientific Officer stated it at your conference. We believe that there we do have some pretty substantial vein-to-vein manufacturing advantages compared to our peers on this. And so -- but we believe that the combined effort and what we end up disclosing at ASH, at the conference, should be pretty compelling. So...

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Bizuo Liu, Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director [14]

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Great. Thanks, Derrick.

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Amanda Louise Murphy, BTIG, LLC, Research Division - MD & Senior Biotechnology Equity Analyst [15]

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I guess just on the BCMA program. So obviously, you've got the IIT trial running. What's the next step there as it relates to the NMPA? Are you planning on filing there? Or can you just update us? I forgot what you've said previously, but can you give us the time line from a kind of FDA perspective?

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Bizuo Liu, Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director [16]

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Yes. Sure. Great question. And I, first of all, echo what Derrick said earlier about the overall BCMA program. Our approach truly has been focused on quality of clinical enrollment, and we put enormous effort on the quality patients enrollment. Every single one comes in reviewed thoroughly to make sure the criteria is met and every patient that has dosed works closely with hospitals.

So that's -- and then on top of the manufacturing, what we are very proud of, that with great swift process and digital-based and that's, by far, from the -- in our view, we have one of the best process in place. Then with that asset foundation, the IND filing is underway. I think that once we have the great -- all the IIT indications and then we follow R&D, we will show that from the both IIT perspective as well as IND and eventual commercialization, that CBMG will show to the regulators that we have consistent process in place from manufacturing perspective versus peers some of which maybe decide to start with research and solve the manufacturing later. That's not the case in CBMG.

So we want to make sure we put all the -- line up all the tasks, if you will, and from the -- from IIT to IND and to commercialization, we have a consistent process in place where we can show from each stage that we don't change the manufacturing protocol. So that's the approach in IND, and we would very much in the process working with the [CDS] and NMPA to make sure that's filed and -- as soon as possible.

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Amanda Louise Murphy, BTIG, LLC, Research Division - MD & Senior Biotechnology Equity Analyst [17]

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Got it. Okay. And then I guess a sort of broader question as it relates to your thoughts on partnership. You've, obviously, talked about bringing your TILs to the U.S. with the NCI or at least looks like (inaudible) the NCI but there's been some recent investment. You're looking at Amgen and BeiGene, for example. Could you just, I guess, curious how you're thinking about that part of the business, whether it'd be just BCMA or, I guess, more broadly? You've obviously got a pretty deep pipeline now in terms of candidates. So how are you thinking about U.S. partnerships, whether it be manufacturing or bringing the drugs to the U.S. commercially?

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Bizuo Liu, Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director [18]

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Sure. Sure. That's a good question. I think the -- overall, CBMG has been consistently that -- stick to the approach that we want to be not only a strong drug developer in cell therapy, which as you can see, we have brought pipeline from the liquid tumor to solid tumor. You have the partnership with Novartis to bring Kymriah to China. We have BCMA. We have -- earlier, we talked about the presentation, Universal CAR.

We also have the CD19, CD20 biCAR from the investigator-initiated study perspective. We have CD20 treating relapsed patient for CD19. And we have TCR and TIL program. And that, along with the strong manufacturing capabilities and reputation, and just a reminder, that we also have 2 Phase II assets for KOA program, which by far CBMG in China has the half of the INDs, if you will, out of 4 approved in China from the stem cell regenerative perspective and what we have both are Phase II.

So overall, we have a broad pipeline. And on the other hand, with that, yes, we're very excited for the partnership with the others in this sector, biotech sector, that certainly puts CBMG in an unique position from both from the assets development perspective and as well as from the leveraging our strong manufacturing capabilities. So we see potential both inbound, outbound partnership with partners who try to come to China, work with us, leveraging our manufacturing capabilities and our strong development capabilities. Meanwhile, if we see -- have early lead programs, great efficacy and safety profile and then that certainly is a potential opportunity for others who work with us in the United States or other regions. And so we remain open for continued -- as we see opportunity fits, and we'll go from there.

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Amanda Louise Murphy, BTIG, LLC, Research Division - MD & Senior Biotechnology Equity Analyst [19]

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And I guess just one more and feel free to not answer this, however you like. But I'm just curious how the competitive landscape is shaping up in China in terms of players that have GMP manufacturing capabilities for cell therapy at this point. Obviously, you have quite a lot of capacity. I'm just curious how -- that there -- how many players there are? How competitive it is, especially given the -- again, going back to the breadth of your pipeline, as you think about each asset going forward and then potentially partnering there or not?

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Bizuo Liu, Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director [20]

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That's good question, Amanda. I think the China known for many clinical studies, mainly in the phase of IIT and then apply for IND. So they are mainly in this sector. For one, I always have the view of this equating that allow us to continue to work with each other from their perspective to conquer a cancer, if you will.

But on the hand, too, we also hold the view that the companies who has not only great clinical programs but also has the strong manufacturing capabilities, continue quality [manuf] system will eventually be able to take the clinical studies to the commercialization stage because at certain point, it's going to be about the quality management. It's about the efficacy, safety. And then from that perspective, CBMG has been, not only look at today, but also we keep eye on all the 2 or 3 years from now on when our assets, say, which for whatever it is, they're ready to commercialize, we would be in a great position to take that to the next step.

And certainly, our partnership, Novartis, in which we have tremendous respect and we have learned a great deal by working with Novartis, that will help us to get us from the -- from first research a couple of years back, and now to working actively in getting our site ready to be able to take on the manufacturing for commercialization.

So from all that perspective, that in our view, for CBMG in a very competitive position from the market perspective. So from that end, we feel very good about our positioning within this competitive landscape.

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Operator [21]

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The next question is from Varun Kumar with Cantor Fitzgerald.

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Varun Kumar, Cantor Fitzgerald & Co., Research Division [22]

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First on the BCMA program. I see, again, you escalating the dose. In the ASH abstract, the 3 patients are still at the lowest dose. I think it's 1 million cells. Just wondering, what is the current rationale of further escalating the dose, given you're already seeing activity at the lowest dose?

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Bizuo Liu, Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director [23]

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Great question. And I think, again, from the most recent clinical data, we will -- please wait for the ASH presentation. I think that, overall, so far, CBMG has been try to following the guidelines in China from the low-dose to mid-dose, which is [3 million/kg]. And then go from there from the protocol perspective. And so far, we are very -- from the early to additional sites, we're very pleased with the continued progress in that, and we are cautiously optimistic about the program and looking forward to present at the ASH on December 7.

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Varun Kumar, Cantor Fitzgerald & Co., Research Division [24]

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Great. And maybe on the patient with their prior treatment line, I see again, it's a heavily pretreated patient, around 7 prior line of treatment. Now it's very different than the local competitor you have, Nanjing, who are treating in earlier line. I was just curious, once you start expanding the trial, let's say, next year, will you then enroll -- are you envisioning to enroll earlier line patients? Or the current focus or at least near-term, you plan to have this heavily pretreated multiple myeloma patient?

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Bizuo Liu, Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director [25]

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It's a great question, again. I think China, in general, from multiple myeloma perspective in terms of the drugs available to treat, a little bit different from U.S. in that enrolling, consistently, to 6th or 7th line of patients, it's a challenge. And I think that that's why, in our approach, we have taken the position of quality than -- and treating patients comparable to U.S., as the key priority.

And as time passes, as more patients enroll and U.S. sites start to enroll some patients, so long we are very clear about what the patients have been treated before in high-quality hospitals with the well-known physicians, who believe that these patients should be clearly involved. And then, we would try to enroll. But overall, we have ensured every single patient comes in. We work extremely closely to ensure that we only enroll patients with clear medical history, the background in terms of lines of treatments, and that has been the mantra and that has been exhibited from the data -- early data and we'll continue to do so, and I look forward to present during ASH.

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Varun Kumar, Cantor Fitzgerald & Co., Research Division [26]

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And on patient enrollment, I was thinking about the follow-up time you may have for the ASH. Now as you mentioned the enrollment starting in January and going to what Derrick was saying, setting expectations for investors, I was just curious, should we expect some durability color at ASH, mostly in terms of how much follow-up we may have at ASH a bit from maybe around 8 or 10 patients you mentioned.

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Bizuo Liu, Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director [27]

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In terms of specific number of patients and results, I really have to defer to the presentation coming up at ASH. But in -- because this dose escalation -- escalating studies, and we follow closely. So we do have to stage one after another then before two. And then wait for the committee to review and move onto the next dose. So it has to, as you know, take time step-by-step. So -- but we've now -- and that new size added for higher dose, and I think that should pick up the speed a bit, although from the -- to a greater perspective than the low dose meant to be from safety and signal. And then we start to see more from the efficacy in the higher doses. So therefore and from the duration response perspective, and -- I think it's still too early to tell, but I'm sure we will continue to keep you guys all posted as the data becomes available.

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Varun Kumar, Cantor Fitzgerald & Co., Research Division [28]

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And maybe my last question on the AFP hepatocellular carcinoma program. If you can just basically provide what's the current status in terms of the clinical, the enrollment. And are we on track to have some initial proof of concept data next year?

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Bizuo Liu, Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director [29]

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We are the -- in the process of -- as you know, the -- our program, FDA program targets the subtype, which amongst the Chinese liver cancer patients, is only about 15% of those. So we have only one site and in the process of -- you have to do large tests to get to that, but I'm confident soon, we'll have the first patient. We also in the process adding two more sites from the IIT perspective. And therefore from the -- reporting back to you and -- as far as patients' enrollment, I'm sure, starting next year, we'll see some.

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Operator [30]

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The next question is from David Bautz with Zacks Small-Cap Research.

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David Bautz, Zacks Small-Cap Research - Senior Biotechnology Analyst [31]

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So looking at the Q, I noticed that R&D expenses were up pretty considerably this quarter. I'm just curious if that's kind of a one-off jump? Or is that going to be the new normal for our future quarters?

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Bizuo Liu, Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director [32]

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Great question and observation. I think the -- as a biotech, as we start to pick up speed in terms of the broad programs and the clinical development, I think that, in a way, they're from -- as CEO, you want to see rapid development in terms of clinical programs. But on the end, as you know that, that also means a cost increase. So in a way, I look at this as only indication of CBMG in accelerating our speed from the clinical program, development programs. And I think that, I hate to say it, but it is a fact that the more you spend in that space, you started more see date come in and more programs come in. So you should expect more continued increases in spending, but also you'll see more clinical results and clinical updates and program updates. So I think that go hand-in-hand together.

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Derrick C. Li, Cellular Biomedicine Group, Inc. - Head of Strategy & IR [33]

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I'll add to that, David, as well. I think that a big piece of our strategy that we've been very consistent about is about understanding and utilizing the IIT clinical process in China to dose and get early signs of efficacy and safety within our programs, and we've done so in BCMA and several of our other programs.

And so we -- our belief and the one of the reasons why that we opened up the facility in Rockville and we're laying the groundwork there is to leverage the positive signal of efficacy and the proof-of-concept work that we're doing, and then translating back to some more serious work additionally and proving that in the Western world. And so I think that's just the -- it's very -- in our sign, we're very -- we're cautiously optimistic about within our programs and what we've seen so far. So...

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Bizuo Liu, Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director [34]

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It's a great comment. I will add one more thing. So once you -- because you have done IIT in China and you've decided to take to U.S., from that perspective, that give you greater confidence when you come to point of doing the R&D in U.S. because you've done some early IIT already. You've seen some indications from the efficacy and safety perspective. Therefore, you spend even more upfront and -- which in China has high efficacy from the efficiency perspective. But then later on, you avoid the long, lengthy program only to discuss the program that may be as expected. But that's not to say, you guarantee any kind of success. However, it does help you to mitigate potential risks and provide better chances, if you will.

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David Bautz, Zacks Small-Cap Research - Senior Biotechnology Analyst [35]

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Okay. Earlier in the call, you had given a value for what you thought your cash needs were for the upcoming year, and I'm sorry I missed what that value was. So could you repeat that, please?

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Bizuo Liu, Cellular Biomedicine Group, Inc. - CEO, CFO & Executive Director [36]

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It was $82 million, which includes the normal operating expenses and CapEx and et cetera. So it also covers the programs for the U.S. and China and as well as infrastructure expansion.

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Operator [37]

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This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.