Pierre Laurin - President & CEO Greg Weaver - CFO

Alan Ridgeway - Scotia Bank Neil Maruoka - Canaccord Genuity Prakash Gowd - CIBC World Markets Inc. Christopher Lam - Paradigm Capital Sanjay Jha - Panmure Gordon Alan Ridgeway - Scotia Bank Endri Leno - National Bank

Good day, my name is Steve and I will be your conference operator today. At this time, I would like to welcome everyone to the ProMetic Life Sciences 2016 Second Quarter Results Conference Call. [Operator Instructions] Thank you. Mr. Pierre Laurin, President and CEO of ProMetic Life Sciences, please go ahead.

Well, good morning everybody. Thank you operator. Exciting times at ProMetic and we look forward to a good webcast today where we’ve time to update you on our program and taking some of your questions. But first, the same as in same as Safe Harbor slide where we remind everybody that this presentation contain forward-looking statements about ProMetic's objectives, strategies and business that involve risks and uncertainty. But let’s look at the agenda. We propose a slightly different format today where I would go straight into some of the key highlights related to our exciting performance, on our lead drugs 4050, plasminogen, and IVIG. We will go over what to be expected in the second half of 2015 and then Greg will take you through with more detail on the Q2 and the year-to-date for 2016 before we open the floor for questions. But as an introductory statement, I would say that Company and its corporate history has never been in such a strong financial position to execute, and I will let, as I said, Greg expand on this and why don't we jump to the second bullet of the agenda immediately with PBI-4050. We said in the Q2 release, press release, that additional data further confirming efficacy in patients with metabolic syndrome and Type 2 diabetes and I bring you to Slide 4, that again remind everyone of the study design, patients that have [indiscernible], hypertensive, diabetic with glucose level out of control, despite being on mainstay treatments, either metformin and/or metformin and a cocktail of other drugs. They’re enlisted in the trial and they’re treated such as an add-on PBI-4050 to their current treatment. So those patients, again I remind are not controlled like it in the [technical difficulty] and they’re staying on their current drugs, but we're adding on PBI-4412 weeks. Now at the AGM, we said that we were about to complete the enrollment of that trial during the AGM around May -- mid May. We still had four or five patients that were enrolled, but we didn't have the data at week 12. And on Slide 5, that’s the slide that was shown to you all on May 11. And I'm proud to say that on Slide 6, as you can see four patients that have now -- were enrolled in May and that now completed their 12 weeks, as they’ve shown a steady decline of their glycated hemoglobin, still confirming the trend and still confirming extremely solid performance of PBI-4050 in that patient population. And again, further analysis of this is if you’re on Slide 7, look only at the patient that were at 8% or more. We're looking at PBI-4050's performance, quite amazing relative to even commercial products out there. This is a 1% decline of the glycated hemoglobin, highly statistical significant. I was asked very often this is not a placebo-controlled study? That's true. However, if you look at all the controlled trials that were done in diabetic patients of that range over a million patients involved in those studies. The placebo effect in those trial is about 0.13. So we’re just squeezing by 1% over .13, which would still make it highly statistically significant. We are starting our study placebo-controlled in this patient population and I will talk to you more about in few slides to come when we discuss the timeline and next steps. Our Alstrom Syndrome patient trial is going very well. Again, a reminder that Alstrom Syndrome is a very rare condition and it is a metabolic syndrome with an accelerated fibrotic condition affecting key organs including the liver. A particular aspect of Alstrom is that they unlike NASH, they all go on to develop fibrosis and cirrhosis. So it's we're very excited about the prospect of making a difference in those patients, but also if proven efficacious in those patients, this bodes well for the use of 4050 in patients that are [indiscernible] Alstrom patient. And that’s what we're looking for to share with the street very soon. So on Slide 9, it's a reminder of our clinical program on PBI-4050. So Alstrom Syndrome, we will have preliminary readouts in just few months from now. And as you can see on that slide we’re illustrating the fact that in those patients, of course you have fibrosis at several organs and we're monitoring the progress of how the drug does affect fibrosis in all those organs. Idiopathic Pulmonary Fibrosis we have a multicenter open-label ongoing. This one is focused on the long obviously again for preliminary readouts expected in few months at the same time. We may end up being able to set the logistics of everybody and organize an Analysts Day before year-end where this could be also disclosed in a Isle day format or we will just deal with them on special webcast because for each of those two studies, preliminary readouts will be accompanied with what’s next, how do we go from there and what’s the impact, what’s the meaning of the results of those studies. cystic fibrosis related diabetes is ongoing. Readouts is mid next year. Metabolic syndrome type 2 diabetic patients, this would be a placebo-controlled probably enough centers in diabetic patients in Canada to actually effectively enroll for this trial. Trial initiation that layer this year with readout again midyear, next year and the chronic kidney disease Type 2 diabetes, this is now going to be under discussion with the FDA. Again, its first time we met with the FDA, the single endpoint was just chronic kidney disease with the results we’ve obtained now in our metabolic syndrome where we show a very strong effect on reduction of glycated hemoglobin. We are very interested in studying the effect on Type 2 diabetes in the chronic kidney disease patients and the effect on the kidneys. So that would be to two core primary endpoint in the same patient and the treatment of diabetes in those patient is not obvious. For example, in the severe patient, severe or patient with severe kidney impairment metformin lined first-line therapy is not indicative. Any drug that would have a different pharmacokinetic with impaired patients would have to change drug regimen or dose. So, we see this as a very unique opportunity for PBI-4050 to address that combination of these and its fairly significant size population worldwide. So other milestones on Slide 10, of course expected additional orphan drug indications for PBI-4050. Additional orphan drug designation and also a reminder that we do have exciting follow-on drug candidates and allows the PBI-4050 that are being scaled up as we speak. Additional testing down to ready them for the clinical stage, which should start the end of this year beginning of next year. So we may had up with more and at least one, possibly two other drug candidates in the clinics following on PBI-4050. Let's move on to plasminogen program. No need to remind you that we had spectacular results with PBI with the plasminogen writer with evidence of clinical improvement and we're very excited with this program. On Slide 12, we had a use pack quarter for plasminogen. We received Fast Track designation by the FDA. We completed the enrollment of the pivotal Phase 2/3 trial to enable the filing of the BLA to start in Q4 this year. So this is all good news. The FDA has agreed to an accelerated regulatory approval pathway which means that we're on track to with an expected launch in 2017 and that bodes very well for the patients that have a congenital deficiency, as well as for shareholders who supported that program, very exciting time. Now on Slide13, a lot to come with plasminogen, many other indications to announce. Of course, the wound care management with the in licensing from Omnio is on track, but we are also talking about new clinical indications of plasminogen to be announced. And we're just waiting to be totally completed our work for adding additional IP and additional orphan drug designation before disclosing those indications, but that will all happen before year-end. And so, therefore on Slide 14, the clinical program will be expanded with new clinical applications, new orphan drug designation and clinical trials to be initiated in Q1 2017. And the wound healing is on track. The specific indications for both Wound Healing 1, and Wound Healing 2 will be disclosed. We are performing those studies in Sweden, so we will be filing before year end these -- the CTA in Sweden. And the clinical trial will start in Q1 as well for those two indications that -- of course and I when I mentioned Analyst Day, you can just see that the analysts they will be packed with a lot of information converging towards midway in H2 this year. Finally IVIG. Again, IVIG exciting product. I mean that the human product we are not going after taking 40% market share of IVIG. A reminder for everyone, we remain a Company focused on orphan drugs, orphan play [ph] but in so doing as you know our platform enables the recovery of some very valuable therapeutics at high yield and that we will take advantage of this. So IVIG the completion of the adult patient enrollment is really setting the tone for us to be able to expect as launch and impact our top and bottom line as of late Q4 18 beginning of 19. And we did mention a lot about the Canadian market in the press release. It's a fact that Canada has a self sufficient issue, being a well entrenched in Canada with manufacturing both in Winnipeg and Quebec. We will leverage that situation and work closely with CBS in the market that could provide Canadian with IVIG, but not to say because I’ve questions about that they were, we’re not looking at the U.S market, we’re looking at both, but the Canadian market and itself is actually -- also a huge and a very interesting market to satisfy as well. So we will do both -- we will launch in both market for sure. The clinical trial we're performing actually is one that enable licensure in Canada, the USA and Europe. So it gives us a passport to exploit the asset in all major territories that we’ve need for IVIG. So just before I advance the baton to Greg, outlook for the second half of this year it looks very, very promising. We will have clinical results on the plasminogen and PBI-4050 to announce. Plasminogen and 4050 will be expanding their reach in Europe with additional sites and additional trials. New indications to announce for PBI-4050 in plasminogen, we will be disclosing the orphan indication for inter-Alpha 1, that will be our second orphan drug coming out of plasma PFSCF [ph], so that’s also in the work and we’ve kept that one close to our chest until we’ve secured the orphan drug designation. And therefore it's going to be a regulatory milestone, rich second half this year. The product pipeline continue to grow. We are advancing all those other plasma proteins towards clinical stage, which have to go through all the hoops of scaling up and Tech transfer from Laval to Winnipeg or [indiscernible] to Winnipeg and so on. And it's all of the way in very well. Advancement of PBI-4050 follow on, as I mentioned, should be a space to watch us well, because 4050 now is a lead drug candidate of a family of other compounds that have performed exceptionally well in preclinical model. So our small molecule will not only be one drug now, but multiple drug opening door to multiple drug partnering. And that is something that will help us create more optionality in our dealing with future partners and on that field. Corporate infrastructure, we're preparing for the launch of plasminogen in the state. Our cGMP manufacturing for commercial launch is constant stage of readiness as we’re preparing for the BLA support, but also preparing for the commercial launch of plasminogen, but as well of IVIG. This is not far ago. This is just three quarters away. So this is exciting times where we will have the first and then follow-up quickly sequentially by the second and then several other products out of our facility. We’ve a continued integration and expansion program for our plasma collection and our processing activities and we look forward to update you very shortly about some initiatives that we’re working on right now. So exciting first half, setting the tone for the second half and the years to come. But on that note, let's pass to -- let's move on to Greg. Greg, you want to go over the financials for this -- the first half of this year and …

Yes. Thank you, Pierre. Yes, let's do the numbers. So beginning at Slide 17, this part of today is webcast based on financial information for the quarters and the six-month ended June 30 '16, and '15, as well as the audited financial statements for December 31 of 2015. All statements were prepared under IFRS as you know and the financial filings for the Company can be found on sedar. All sums in today's presentation are in thousands of Canadian dollars except for the per share amounts or where otherwise indicated. And on Slide 18, a summary of important points. So we strengthened the balance sheet with the bought deal equity financing of CAD60 million in May that’s the gross number, which led to an increase in total assets to CAD260 million at the end of June. Net total cash of CAD64 million at the end of June and importantly extending the Company's cash runway to mid 2017. Revenues for the quarter were CAD3.3 million and CAD8.5 million at the six months ended June 30. Revenues increased CAD3.7 million year-to-date due to a year-over-year growth in the mix of the bioseparation product sales out of PBL. The Q2 net loss of CAD24.6 million for the quarter and year-to-date $42.6 million, which includes also the non-cash debt extinguishment expense of CAD2.6 million. I will get into a little more detail briefly about that later related to the concurrent debt around the bought deal in May with our lender structured Alpha Thomvest. And in R&D, the spend in the first half was CAD35.8 million focused on advancing our multiple clinical programs as we just commented on further evidenced by the two press releases this week announcing achieving the plasminogen and the IVIG patient enrollment milestones and then as compares to CAD20.4 million in R&D spend in the first half of last year. So then moving to Slide 19 and briefly on the revenue snapshot here at a glance comparing 2016 on the left to 2015. And the affinity resin product sales of pharmaceutical customers were up CAD3.1 million or 80% over the first half of last year. And as you know these revenues are quarter-to-quarter lumpy and understanding our business also keep in mind especially resin production is the enabling technology for our own plasma therapeutics business. And then on Slide 20, let's talk about the EBITDA by segment where we represent results in the two business segments. And this presentation is adjusting out and excluding the non-cash stock-based compensation, depreciation and amortization expenses. So first the protein technologies, the bioseparations and plasma products segment, which includes again the activities related to both and including clinical and preclinical activities. So the adjusted EBITDA for the first six months was a loss of CAD26 million compared to CAD14 million in the first half of 2015, and a decrease in the adjusted EBITDA due to an increase in R&D relating to headcount, CRO, Contract Research Organization work and manufacturing activities to support the ongoing clinical trials for the segment, including again plasminogen Phase 2, Phase 3 and congenital deficiency and the pivotal IVIG trial and primary immunodeficiency. Then the small molecule therapeutics segment with a focus on preclinical and clinical development in PBI-4050 with adjusted EBITDA of such a loss of CAD7.3 million compared to a loss of CAD4 million in the first half of 2015. So we’ve been advancing PBI-4050 through this robust clinical program with ongoing trials and IPF metabolic syndrome Type 2 diabetes, Alstrom, and other setup costs for other activities and other trials to come. The corporate activities line item here is then the supplement and total of the two segments where we include various administrative and public entity reporting activity and the cost reported here in a reduced year-over-year basically reflecting an increase in the cost transferred to the two operating segments. So in summary, looking at the underlying business segments here the results and costs were in line with the strategic direction previously laid out with normal and managed cost growth in the areas of our business that support value creation activities. Moving to the next Slide 21, on the P&L results, which is formatted with Q2 on the left and the year-to-date on the right year-over-year with variances and I will comment on each line briefly. Revenues and cost of goods sold were I mentioned earlier, the increase in revenues due to product sales while the revenues and gross margins are fluctuating quarter-to-quarter naturally based on the mix of customer product deliveries. R&D year-to-date in Q2 increased by CAD15.4 million and CAD8.7 million as of June 30. Again, just directly related to clinical and preclinical activities here. The G&A costs year-to-date in Q2 increased as our headcount of the admin team just critical to supporting the level of activities across the Company increased. And also importantly, as Pierre mentioned, the activities around marketing and selling and the team there on the plans for the plasminogen launch next year. The loss on extinguishment of liabilities line of CAD2.6 million. This was recorded in Q2 per the issuance of 1.9 million shares to our lender structured Alpha at the $3.10 per share bought deal valuation pricing. So, in here and the lender exercise the right under the loan agreement to cancel a portion of the outstanding loan principal of CAD5.8 million. In accounting we apply the IFRS rules and over this amount of CAD2.6 million loss on extinguishment of debt is recorded, along with debt reduction booked of CAD3.2 million. And this is on the comparison here, you see the prior year loss of CAD9.6 million reported on other prior transactions. The financing costs here are related to the loan in February 2016 from structured Alpha that was $30 million loan, which increased the non-cash accreted interest reported. So this is primarily a non-cash pipeline item here. In context here, while the instrument was extinguished in Q2 of last year, this line item the fair value adjustment of warrant liability for those at one familiar was related to the quarter-to-quarter accounting and prior year of a derivative instrument and the valuation of the -- variation of the valuation they’re in. So at the end of the slide here, the year-to-date adjusted EBITDA reflects a loss of CAD36.5 million versus CAD22 million for 2015, and overall the Company returned a net loss of CAD24.6 million or CAD0.04 a share in Q2 and CAD13.5 million or CAD0.02 a share in the same quarter last year and on the six-month loss for 2016, CAD42.6 million or CAD0.06 of share and the prior year CAD34 million or CAD0.06 a share. Couple of slides remaining here. First on the balance sheet. Slide 22, cash stood at CAD64.3 million compared to CAD29 million at the end of 2015. You see both accounts receivable and accounts payable are essentially flat as compared to year-end 2015. Capital assets have increased due to the acquisition of production equipment -- important production equipment to support the infrastructure build out for the plasma drive therapeutics and Winnipeg and also to a lesser extent in our Isle of Man facility in the U.K. The intangible assets of CAD148 million, there is no change here. That’s the transaction done at 2014 related to the NantPro valuation. As previously mentioned, the long-term debt here on the balance sheet CAD40.3 million increased due to the debt financing transaction in Q1, partially offset by the participation of Thomvest Structured Alpha and the private placement in Q2, which reduced the carrying amount of the debt by CAD3 million. So these results have brought total equity to CAD176 million, up from a CAD145 million at year-end and total assets to CAD260 million as compared to CAD215 million at December. And then on Slide 23, the cash position highlights six-months of cash flow as compared to same period last year. So we opened 2016 with CAD29 million and of this CAD41.7 million was used in operations, further CAD9.6 million was used in investing activities related to the capital assets I just mentioned. CAD86.8 million of net inflows from the two financing -- the two key financing activities of the CAD30 million loan and the CAD60 million bought deal. And these movements when combined with the opening balance resulted in the closing cash position of CAD64 million. And for me and investors, particularly, message here is that with our current cash expected exercise of warrants to come at our [indiscernible] year-end and without including any business development deals here. We have adequate cash runway into midyear next year and to execute on the opportunities here before us that were laid out today. And that wraps up the slide walk through portion of the financial section and thank you very much. I will hand it back to Pierre.

Well, thanks on that note. Maybe operator, we should open the floor for questions. Thank you, Greg.

[Operator Instructions] And your first question comes from Alan Ridgeway with Scotia Bank. Please go ahead.

Hi. Good morning, guys. Thanks a lot for taking the questions this morning. And I have to apologize if you did address some of the answers to these questions. I did jump on a few minutes late, so I might have just missed it. But Pierre, can you talk about on the 4050 side you guys are going to be reporting some initial data in Alström and in IPF in Q4. Can you talk about what the end points you’re going to -- you think you will be reporting on. So we have an idea of what we should be expecting when that data comes out?

Alan, you’ve no idea what we are going to report. I mean, the Alström patient and that was a deal by the way. I mean, when you look at those patients, when you look at those patients, they are "suffering from all organs", right. I think that the outcome of this trial we hope will be to actually pick one that could help us sit down with regulators and come to an agreement as to what would be the most sensible things to do next. Fibrosis is a condition that it's chronic. I mean it's something that you need to reverse and may take time to show evidence in terms of clinical improvement, but there is a lot of excellent biomarkers and monitoring method here that could help in the case of the Alström patient. A reminder here that our trial involve what you call in statistical sense at trend shift analysis. We have the ability to look back as far as back as three years in the historical medical record of those patients and look at how we impact over the course of the first six months of exposure on the drug relative to how they progress in their disease for the past three years. So its -- we’re very excited about that patient population first because it's nothing for them and secondly if we show evidence of efficacy in those patients, what it means. It’s a very prestigious indication that would provide a strong proof-of-concept. So yes.

So Pierre, can I just jump in and just ask then, so if I think about what I guess my question is more on what you’re measuring. So would we be expecting to see as you said biomarker data like blood levels or maybe glucose or some other factors that would indicate the issues that they're facing in their lungs or livers or pancreas or are we going to see more functional data like improvement in lung function or maybe some human biopsy data.

Right. Well, they all progress with fibrosis, but they don’t all progress equally. And some will have more rapid deployment liver functions away ahead of how the long decline. So it's almost the same situation here. We are with the plasminogen. We will draw the comparison, because they actually compare pretty well. When you enroll a plasminogen patient, first of all, it may not have lesion active at that point of enrollment, right. Second time also second point writer the patient may have lesions in the eyes, the other one have lesions in the gut or in the long or lesions on the event, so how do you measure all this and compile statistically pooling patients together. So they got to have to be case-by-case analysis for these type of patients because they don't progress equally and they don't have necessarily the same affected organ progressing at the same rate. We are measuring, for example, liver functions with enzymes and fibroscan. We are measuring along with CT scan and other type of measurement. We are measuring heart condition with MRI and also other type of imaging plus, at batteries of biomarkers, of course the pancreas and the adipocyte is huge for out some patients and there are some special techniques to measure how the patients metabolize its glucose, its insulin, its far more expensive than just a glycated hemoglobin level. But that’s something you can do in the mainstream population in the public syndrome that’s what’s done for those patients. We have skin biopsy, I mean, this is by patient the most expensive study were running, because there are so many things we're looking into. So quite frankly when I made my opening joke is that when I had my little casino like images of all the organs, this Alström patient brings all the images, if you recall. Everything ranging from pancreas up to the skin, fairy tissue and we're monitoring them all.

So did you guys update on how many patients have been enrolled and how many do you think you need to see before you would have enough to provide some of this data considering the potential heterogeneity of what will be reported for each patient?

Well, you know we're going too much detailed here. When we approached the regulator initially, we all concluded that there was no reliable animal model that they could actually sent their teeth on to come to conclusion as to whether we had a disease changing drug. However, we're talking about if you see movement that is consistent in three to five patients. For that type of condition, that would be enough to impress the regulators. These type of conditions would require maybe 30, 40 patients to get life insured. And this is not too different than what intercept has done with their niche indication for the primary obstruction delivery duck where they get a very small indication that at least proving the point and the FDA agreeing that ALP is a reasonable surrogate marker to measure the efficacy of their drug. They're nowhere near going to get approval on overall NASH, because that’s far more complex and far bigger, but they at least got that one in. And Alström could very well be an indication like that for us.

Okay. On the IPF side, the data in Q4 and also I didn't see it listed on the randomized trial Lester. You guys changing your plans with IPF at all going forward?

Well, with IPF, a reminder to everyone that this trial was not design to show efficacy, we were treating patients for three months, there were a lot of information that we want to get out of this. Drug use alone, 4050 used in combination with pirfenidone, 4050 use in combination with [indiscernible], is the drug well tolerated, what is the pharmacokinetic in those patients, how do they feel overall, I mean, there is a lot of data that will share with the street and in Q4. We have had an agreement with the FDA in terms of an add on therapy, but that's a bit of a exceptional situation given that in the U.S pirfenidone and/or [indiscernible] our standard of care. Legally speaking, standard of care. There is a little bit more optionality in Canada and Europe. And that opens up a new way of looking at things possibly when we see how our drug is performing so far in the IPF. So we will update everyone of the readout results, and how we're proceeding from there. We are going to proceed from there, but how is still in the hands of our capable clinicians and advisers because with data then that you didn’t have a year-ago, you make an interesting adjustment to your plan. So -- but it's still there and still are very interested in the prospect of 4050 making a difference to those patients.

Okay, great. Thanks. I will jump back in the queue. Thanks guys.

Thank you.

Your next question comes from Neil Maruoka with Canaccord Genuity. Please go ahead.

Hi. Good morning, guys. First question is just a follow on to Alpha question regarding Alström. Happy to see that you’re looking at a different organ systems, but given the broad fibrosis that you're seeing there, based on the data that you can get from the study what's the read-through to the rest of your pivotal program and could this data change some of the indications that you might be focusing on in future pivotal trials for 4050?

Well, it’s a good question and that's what research is for, right. I mean, clinical research is research and clinical research is validating hypothesis, right. So we went from one of the 24 preclinical model done at Vanderbilt where we observe to our pleasant surprise that the glucose in those animal was declining and we realized just like we’ve seen in other model, but not that to that extend that we were reducing fibrosis in the pancreas and we were reducing and improving liver condition. We decided to do the metabolic syndrome patients and that was the model where we prove translation of clinical efficacy. And what is Alström? Well Alström, is a metabolic syndrome where fibrotic conditions at warp speed. And what is cystic fibrosis related diabetes? Well there are diabetic because they are fibrosis of the pancreas and what is the CKD and Type 2 diabetes, well they’re diabetic patients that have a worsening of their kidney function, but they also have their pancreas affected and in all those with the exception of IPF, Neil, it's always the same mechanism of action. So they’re all consistent and in fact, the common denominator on the file on that slide that we showed Slide 9, the common denominator on Alström, cystic fibrosis related diabetes, metabolic type 2 diabetes, and chronic kidney type 2 diabetes is the coexistence of a diabetic condition in fibrosis making it worse for the patient. And the drug seems to perform exceptionally well in those situation. We have exceptional results as well in preclinical and pure play [ph] fibrosis like pulmonary fibrosis, even scleroderma. So, all those programs are possible, there’s some others that we will be announcing right now. In September we’ll have additional data generated by reputable institutions to confirm, and that will all be put in the basket to say okay; when we look at the lung, is IPF the only lung condition that we could treat? Is there any other more meaningful impact we could have in patients with lung conditions? If you look at scleroderma patients, when they have lung involved, their life expectancy is less than one year for 60% of the patients. So there is so much opportunity here. We have to be careful, focus, choose some time the path of least regulatory resistance, get in and expand afterward. And let’s not forget we have the follow-on the 4050 as well to also start figuring how we position them. My dream Neil, would have to -- will be to have almost like a drug persistent or a drug per indication and that would make partnering that much more lucrative and easy to manage.

Great. Thanks for the color. Just shifting gears a bit to your financial results, the revenue came in a little bit lighter than what we had expected given some of the larger partnerships that you have in place and what we saw you do in the second half of last year. Are you expecting some more -- some larger orders in the second half of the year from those partners? And then also related to the top line, are you -- I know there’s a deep emphasis on the resin business, but are you still working to drive new contracts and new businesses through your resin segment?

The answer is, absolutely. And I would compare the revenue of products to our share price. It will go up, and it won't be a straight line. I mean, if you look at the historical performance in general, our product sales grew and will continue to grow, and it won't necessarily always be well distributed throughout the year. There’s this lumpiness, it's not even a quarterly lumpiness, it could be as large as a year lumpiness. There are companies that are having a habit of buying large amount at once and stock piling and then jumping 18 months before they reorder other large amounts, and all those big POs create anomalies and on the curve. But if you step back and you look at the graphic, it's a steady growth with those up and downs. So we expect product sales this year to be in the same range as last year, and if we missed by a $1 million or $2 million or exceed by a $1 million or $2 million it’s just because it won't reflect -- it will be reflected in the following quarters. It's just on the growth side, and we are not deemphasizing the business per se. As you know, we are looking at that platform as far more greater contribution to the value of our drug pipeline. But it's not to say that we’re giving up on that business at all. So, it's -- but some people get confused at our market cap which is greatly driven by the discounted cash flow of our therapeutics is disconnected with our revenue of the resin sales. But the revenue of resin sales in general continues to grow and we’re getting good traction on that front. But that ProMetic is a more integrated story now. I hope that helps.

Yes, absolutely. Thanks.

And your next question comes from Prakash Gowd with CIBC. Please go ahead.

Thanks. Good morning, everybody. I have two requests. One is, if you could provide an update on where your partnership stand, and some information on possible timelines there. Speaking about the Wuhan Institute, Hematech and Generium. And on Generium specifically, I understand there’s some political issues in Russia and that the government has clearly passed some fair competition practices and awarded a single Russian company to be a sole supplier of blood plasma products to the Russian government for the next couple of years. How do you feel that will impact Generium and its plans to build the facility there to service the regional market? The second request is, if you can provide an update on your thoughts with respect to securing additional plasma supply. Are you thinking about expanding the Winnipeg collection centre or opening new centers, and what other initiatives are you pursuing to secure supply from public sources? Thanks very much.

Well, thank you, Prakash; very good questions. I’ll start with Generium and your comment about the Russian situation. The project with our colleagues in Russia does not involve Russian plasma. It was all along understood to be using U.S. FDA and/or EMA sourced plasma. And therefore -- and by the way it's probably even worse than the Canadian situation in the sense that the local plasma nowhere near can address the domestic market. So you need to bring plasma in. Plasma for us can only be EMA, FDA certified plasma. So that's -- so, it's good that you bring it up, because I want to clear, the air on this one has no impact whatsoever on our situation.

Pierre, can I just clarify. From what I understand, the Russian company is becoming a sole supplier of blood plasma products, not much so much the securing of the plasma. Does that change things?

Can you repeat that?

From what I understood, the Russian company has been awarded a contract by the Russian government to become the sole supplier of blood plasma products. So I’m not sure where they’re actually getting the plasma, but whatever products they produce from it will be exclusive to the Russian market. That was my understanding, perhaps no more…

Well I mean -- and again, I don’t think so it has to do more with the plasma, not the plasma products.

Okay. All right. Thanks.

Yes. And a reminder as well that, our colleagues just like us will be able to make products that nobody else can make. And so, I mean, again we’ve been enabling other parties for domestic markets, and they will add all their realities. Believe me; I don’t know any country that doesn’t have political issues. So some are less tragic than others, but we for the most part are focused on driving our value in North America. And we are like working with our colleagues in other markets, but they’re I don’t think as material as one of the same concerns of our ability to drive revenue and drive growth. I mean, there is this possibility that they can add to our capacity as a CMO and we will be updated very shortly on all those situations. There it's quite important for us and when we’re looking, and I mentioned the Analyst Day, I think the Analyst Day that we plan to organize will have a significant portion on the clinical update, where we’re going, new data of course that will be timed with the outcome of the data on Alström and IPF and so on. But there will be a sizable portion of that presentation that day, also covering all aspect of operations. So starting with our partners, and do they provide capacity for us, by when. But let it be known that we together with Winnipeg and Montréal right now, we are well positioned to drive revenue up significantly to 2019, 2020. All those initiatives are okay, well [indiscernible] contribute to your expanded growth past 2020 to 2021, and we’ll update the street on that in few months from now. And that also will -- I’ll come to your question about plasma collection. At AGM we were quite specific about this and I’ll repeat it again, we intent to clone Winnipeg and add collection centers that we would own. And we continue entering into take or pay agreement with existing independent plasma collection center. Coming 2020, we’ll probably FNF plasma that we collect ourselves versus plasma that we have under contract, that provides good flexibility with our program. And that was why the acquisition in Winnipeg was so valuable to us, because it provided us with a established plasma collection centre or with already it's U.S. FDA, EMA and Health Canada license. With that then you can expand your capacity by opening centers using the same SOP same license and it makes it much easier and within control for us to achieve. But I look forward to perhaps more detail answer. Prakash, if you don’t mind in couple of months from now hopefully when nobody is elsewhere then in the room where we want to organize the Analyst Day we’re looking at the optimal timing probably late September, October when we’ll be ready to go live with a lot of the developments. And few other things would be too material. Ahead of time there will be webcast, but we do think there would be time to have hurdle and everybody in the room and here’s the plan for the forthcoming four, five years. We’re setting the stage for a pretty big play here, so it's exciting times.

Great. Thanks, Pierre.

Thank you, Prakash.

Your next question comes from Christopher Lam with Paradigm. Please go ahead.

Good morning. Thanks for taking my call. Perhaps just switching over to plasminogen, I was wondering if you could share some details on your roadmap for commercialization given that it's around the corner. Do you think you’re going to be going alone or with the distribution partners? So perhaps you can update us on your thoughts and if your approach has changed?

Thank you, Chris. We said all along North America is going to be our domestic market. Boots on the ground, we are beginning the hiring of our commercial arm. To launch products ourselves this is a product that will be handled through teaching hospitals and handful of KOLs across Canada and U.S. and we can easily manage that process ourselves. We will certainly need distribution/reimbursement management for Europe, as you know it's a complicated market. You get approval in Europe, you still have to deal with 22 different countries, different pricing, different reimbursements. On that front we are in discussions with parties that can assist us on that front. So you can look at, a hybrid system where but definitely boots on the ground, and the launch will be first in the U.S. hopefully, quickly followed by Canada, but Europe and Turkey primary targets for us, and we’ll require some as you mentioned some form of collaboration, distribution assistance. This is not a product where you need a Pfizer like massive sales force to market, and it's perfectly a pay alert for a product -- for a company like us.

So if you can just comment on some of the market development activities. I know that you’ve launched a Web site last year. I just want to ensure that you’ve identified the customers and that they’re going to be there mid, I guess, mid next year when you want to launch?

Yes, well it's a good point you’re making. And the more evidence of clinical efficacy and the more noise, the more reach in the community of patients affected. This is a condition that is diagnosed and/or treated by very different type of specialist. Sometimes its urologists, sometimes it's the ophthalmologist, and it's clinically manifest itself through different organs, different tissue. So at the end of the day that we’ve been very diligent in getting a better understand of who’s treating those patients? Who are they? Where are they? We’re beginning to know those patients by name, and know their name of their pets that's the nature of the orphan disease where it's as I mentioned before much more of a conservative approach and it's therapy for life, but therapy for life in the year of multiple surgeries that does not prevent the condition to recur. So as the evidence of clinical efficacy have emerged with our dramatic patients in Germany, we haven’t press released all of them. I mean at one point we have to stop, but we have consistent evidence of clinical efficacy, immediate response after one or two infusion. And more importantly evidence that you avoid surgery and stay out of surgery or away from the need from surgery, and that's what health economics is all about. How much is this product worth for a patient to a payer, to an insurance company, so and all of this has been in the work, but data then populate the rational and we’ve been very -- working hard on that. So building patient registry, lining up all the KOLs, the patient, and also the payers has been the prelaunch activities that justify a slight increase in our admin and marketing expense. Preparing for that launch, we’ve been working on that a good year, it's now and it's going to be a two year work ahead of launch.

Great. So do you have, maybe just a ballpark in terms of the headcount you think you’re going to need?

Well, it's sales and marketing for that type of products range and it's a range of 08 to 10 folks specialized [indiscernible] and handling accounts and everything. You got to understand that, as we launch plasminogen we’ll be preparing for the launch of IVIG and we’ll be preparing for the launch of other products. Because that's not too far after plasminogen is launched, IVIG hit -- the tyres hit the road, and we started having now two products in hospital and then a third product in hospital. So it's going to be -- a sequential launch of products. IVIG does not require the same type of marketing. It's a little bit more administrative handling and logistics with GPOs and key accounts. But they’re all going to work synergistically, because ultimately it's going to be an hospital product.

Right. Okay. So maybe just last question on plasminogen still. So assuming positive results from the trial later this, I guess, later this year. Will you be sharing that and making that available to your partners around the world so that they can start I guess, regulatory filings in their respective areas. I guess, what I’m getting at down the road is, can we expect some sort of royalty or whatnot from them in the future?

Well, we will hold on to much more value than just royalties for those markets. I think that, we ended up being the manufacturer. So you’re looking more at a distribution fee for them handling the product. So the vast majority -- vast proportion of the value of the product still remain with ProMetic. What are the sales in Europe or the sales in any territory. Because you end up -- we’re not licensing with the view that they would manufacture it there. We would be manufacturing the products worldwide. So we’re keeping a lion share of the value of the products wherever outside North America it would be sold.

Great. Okay. And then maybe just last question on financials. R&D for this quarter is roughly [indiscernible] million, do you see this as a run rate that going to be sustained to the next couple of quarters and through ’17 obviously with more trials, it's going to go up a little bit. Just wondered if you could share any thoughts on how we can think about the increases?

Yes, it's kind of steady a bit -- the name of the game right now. Because one thing you have to remember is that, when IVIG trial is done then another one starts. So that there is some cost right now that will stop and then replaced by another product that's on the plasma side. So there’s a bit of a cycle, recycling of cost that makes it steady despite the fact that more products are entering into the market. The interesting question that we will face mid next year will be, partner or do we do a pivotal Phase 3 ourselves. And it's a bit too early to say. But there is certain medical conditions that pivotal Phase 3 may require small number of patients, and that we would definitely handle as we would be expected by shareholders to do. So I think we’re still a distant away from those massive clinical trial costs that drive everybody nervous. It's still within control, and we are looking at those smarter indications to get into the market and expand thereafter with additional complementary Phase 3, Phase 4 studies. And at that point as you can imagine the value has gone through the roof compared to where we stand and the optionality of doing it ourselves versus partnering is again brand new topic for discussion. Two or three years ago, shareholders would have expected us to partner for 4050 to fund the company. Now we’re expected to drive value with those assets. And it's exactly what those assets will provide to our shareholders, increasing value as we advance.

Great. Thanks, guys.

Thanks.

[Operator Instructions] Your next question comes from Sanjay Jha with Panmure Gordon. Your line is now open.

Good afternoon, gentlemen, from London.

Good afternoon.

I just wanted to go back to the question I think Prakash asked earlier on your partners. And I’m not sure, but did you discuss Hematech in your answer. Because I was -- the reason I’m asking this is because, the way we’ve kind of always done our modeling, we have kind of had a little capacity number for Laval and then we had a capacity number for Hematech. Is that something we should still be thinking about in terms of future revenue, because I got the impression that you’re now saying kind of you’re more focused on North America. So could you sort of ...

Let’s put it that way. The CMO whether it would be CMO with Hematech or a CMO possibly from Russia or any CMO, they have to time their facility when it makes sense for them and for us. A Greenfield is a three year affair. You do not want to build it too early so you end up with a plant ahead of having a critical massive product that can make that plant profitable, and you don’t want to be too late. So there’s a question of timing. If you recall our IVIG IND has been installed for 10 months last year, and we are now caught up with five months by executing swiftly and executing fast. But that is just an example of a way that between partners we need to modulate timing on $150 million CapEx decision. Don’t forget that those contracts, these guys fund the plant, great. They fund the operations, but we commit to buy products from them. So when the plant is ready we better make sure that we have the need for those products, and we have the regulatory approval for those products. So it needs to be modulated right now. So we are looking at the optimal window for those facilities to kick in around 2020’ish, meaning that Winnipeg and Laval ramp up will enable us to achieve significant revenue. And it means also that by mid '17 or before that anyway you will have to have heard that, one of those or anything else have kicked in to be in placed in time for 2020 to keep on the ramp up. So we still have a window here to finance our best optimal way forward, and very much involved of course within Hematech and Generium on that front. And we’ve said that, if the opportunity presents itself we may consider doing ourselves. I mean, we’ll remain opportunistic with this, but we’re driving the capacity on the basis of how much capacity we believe we need for plasminogen. And it will become apparent when we disclose the new indication for plasminogen that indeed more capacity by 2020 will be very much desired. So all this would be tied together, Sanjay. And I look forward for that kind of October meeting hopefully that's where I think it may make sense where a lot of things converge, and we start updating the street with a lot of the both clinical but also operational reality that keeps the continuum as you suggest past this 2019, 2020.

Okay. Thank you. I think I’ve got one more question. Can I just -- I think, Greg earlier mentioned that the balance sheet gets you to runaway till the middle of 2017, is that correct?

That's right, Sanjay.

Yes. So I was -- based on your half year -- first half number it looks like the cash outflow was about $50 million. Would that be fair?

Okay. I think that I’ll put in the context to help the explanation here. So, we ended Q2 with $64 million in representing that that in addition we have expected an highly likely exercise of cash warrants to bring additional funding into the company north of $20 million at or around yearend. And the combination of the two is sufficient to run the company into mid 2017. Now in addition to that, we’re working on multiple fronts, on multiple business development opportunities, it's more for [indiscernible] but those are not baked into the numbers I’m sharing.

Yes, Greg’s answer, and as he just did, was with cash on hand and the warrant which is well in the money that's sufficiency for the next 12 months. And we are obviously busy with deals. We can’t forecast when those deals will come in. But in the next 12 -- during that runway let’s put it that way, I mean, we’re very confident that more cash will come in through transactions. So we’re in a very good position here.

Okay. Thanks gentlemen.

Thank you.

And your next question comes from Alan Ridgeway with Scotia Bank. Please go ahead.

Hi, guys. Thanks for taking the follow-up. Pierre, I just wanted to circle back on the plasminogen, on the wound healing side. Could you just update us on where you guys are in the reformulation, and what your thoughts are for that program going forward? What do you guys think is going to be required for approval there? And if you don’t start the first trials until Q1, when ultimately could this formulation be at the stage where it would be in a registration level trial and potentially at the approvable stage? Thanks.

Well, I mean, start Q1 means that we filed our CTA, CTA has been granted and we’re rolling. I mean, it's -- there’s so many ways to talk about. I mean, we’ve already lined up our meetings with the Swedish authority, the formulation is in good hands, we’re accumulating stability for that formulation. You cannot file your IND until you have so many months of stability on those things, meanwhile you’re meeting with the regulators to address your initial clinical trial, and we’ll probably need to gather the views of different authorities the Swede, the EMA and the FDA to have a greater understanding of what it will take to get it approved. It is a bit of an uncharted water in a positive way Alan, because a lot of the things that have been tried in those patients have been a combination of gunk [ph] to bandage, to all kinds of things. Here we’re dealing with a human plasma protein that will already have been approved for use intravenously at gram quantities in human. And we’re going into those patients with sub-milligram quantities around the little wound. So from a safety point of view the regulators will be facing a reality that the drug is extremely safe, its human derived. And. And as I explained before the rationale for why those patients have wounds include the fact that when they’re diabetic that their plasminogen activity is lowered by 50%. So around the wound you have a sub-therapeutic concentration of plasminogen. So, we’re kind of doing a supplemental therapy but very isolated around the wound. And how will the regulator deal with number of patients we need to treat. There’s always two components in a clinical program. There is the efficacy obviously, but there is a safety. And the safety side, we’re very safe there. We’re in good position, because we’re talking administering three to four log less of drugs into a patient compared to what we are expecting to already be approved for. And we already have the proof of concept as efficacy with the non-GMP products will need to repeat it with the GMP product. But to me the endgame is not just efficacy, it's the safety. So hopefully the feedback we’ll get from the regulators, we’ll -- we’ll be able to share with the street. This is also an indication that we’ll likely partner, Alan. We’re able to show the proof of concept ourselves and so on, but we’ll be entering partnering discussions because some companies are better positioned to take that specific indication to a commercial stage and commercialize we’ll probably handle plasminogen when it's plasminogen deficiency handled in hospital and for the congenital and the orphan drug [indiscernible] that will be announced shortly, where partnering maybe in play here for wound healing. So operator, is there any other question? Operator?

Your next question comes from Prakash Gowd with CIBC. Your line is now open.

Thank you. Just a quick question on 4050, can you share any light on any additional conversations or interactions you’ve had recently with the FDA specifically regarding requirements for additional toxicity and safety data? I would expect that to be fairly important as you enter into some more detailed discussions around partnering.

Well, I mean with the FDA we have fairly active discussions with the cardio renal the division as we’re preparing for this trial. This is going to be the crossover. But then there’s also discussions with the filing of orphan drug designation request, so it's multiple aspect. I think that, on the tox program I mean we’re already in the clinic and we’ve filed all the data already both in the U.K with MHRA and both Health Canada which are quite stringent agencies. And there’s no, I don’t see any issues there that will be different with the FDA than they’ve been with the U.K and/or the Canadian authorities. But they are structured differently, and if you want to top programs in the lung, you talk to the lung division. If you want to talk programs for the heart or the kidney, you talk to the heart and kidney division, or if you want a co-primary endpoint that involves diabetes and the kidney, now you have to bring in the endocrinology department. So far more complex organization to deal with, but we’re in dialogues with all of them. So again the timing of that mid September, October is where we are going to have a lot of clarity over next steps, following clinical results, discussions with health authorities both on the plasminogen front and the PBI-4050.

So just to clarify, Pierre. I recall that, I think you got nine month tox data in two species at the moment. But for chronic medications would you require a longer study?

No. I mean there is already more being done in terms of -- there is a longer study being done for; my god, what is it called? Anyway longer study done in rabbits and other rodent, but the nine month tox in dog, and six month tox in rodents are the main long-term toxicity that’s required for chronic therapy. Of course at one point what happened, Prakash, is that, there is the beginning of stronger reliance on adverse events observed in humans, and the toxicity is always important in an animal. But as you gain momentum in the Phase 2 programs, there is a greater weight given to the clinical results. So far 4050 has no drug related serious adverse event. And this is in situation where 4050 is added to cocktails of drugs. So this is something to remember, the patients that we have enrolled so far on our drug are not playing basketball three hours a day and in good shape. They’re sick. They are already taking multiple drugs and our drug is not adding anything to their side effect profile. So we’re in good share on that front. And depending on the indication also that you’re going for, if we were going to go straight mainstream diabetes that would be a different answer that I’m just giving you versus a diabetes in cystic fibrosis patient or diabetes in chronic renal patient. So again, these are the reasons why we need to sit down with the regulators and modulate expectations and deliverables pursuant to an indication that you’re addressing.

Okay. So, and then would you still be planning to release a publication detailing the mechanism of action somewhere around yearend?

Yes, we’re working on that with the institutions that we’ve done a lot of work with Vanderbilt, The Montreal Heart Institute and in fact we’re talking about multiple publications here. And so far it's been more view of patent in -- publish or perish or patent or perish, we didn’t want to perish or be patented a lot of our data first. Now we’re pretty much done with this. So we're ready to publish, but its good also that we will publish and co-author with reputable institution. So it's data not just in our hands, but data generated in reputable institution. So if you recall vendor build it four or five models, they repeated some of ours, but they’ve some of theirs. Montréal Heart Institute have done several models. There is other institutions involved, validating our preclinical and also helping in the key decisions for the next step on the clinical.

Great. Thank you.

Thank you, Prakash.

And your next question comes from Eride [ph]. Your line is now open. Please go ahead.

Hello.

Hello.

Hi. I’m sorry. Good morning, guys. This is Endri with National Bank.

Yes.

I have two questions. The first one is regarding the capital expenditures. I was wondering if you can share what your expectations are for the rest of 2016 and perhaps into 2017 as you prepare to launch plasminogen and IVIG. And the second question is regarding the news that Pharming acquired the commercialization rights for Ruconest for the recombinant esterase inhibitor for US$120 million. I think it was -- I was wondering if you could provide some general commentary on your thoughts on the pricing and whether you would consider something similar for the plasma proteins that are a bit further in the pipeline such as the esterase inhibitor and perhaps AAT [ph]? Thank you.

All right. I'll let Greg answer the first question on CapEx, but regarding Ruconest as you may know, Ruconest market share in that space is very small. Its below 10% anyway. Our product would be more designed around CSL and Shires and -- so you cannot compare apple-to-apple with Ruconest. So we’ve not necessarily looked at that as having any impact whatsoever. And again this is for us a non-core plate. C1 is one product that we can make efficiently and we will sell what we can manufacture. It's not necessarily a -- like nowhere near the plasminogen potential. So we want to make sure we do focus on that though they will drive the biggest revenue and value for our shareholders. But again to your comment and question Ruconest is not really affecting our views at all on the market. Now to the CapEx question, Greg.

Yes, Endri. This is Greg [indiscernible] CapEx. You’ve noticed in my previous comments the investment in the first half of this year at around CAD9 million. Second half of this year shouldn't be that high. It may reach that number perhaps a bit less. We haven't done the guidance and put the pencil to paper on the full-year 2017 yet, so it would be a bit premature, but we will be working on that in the months to come. So I think if you write to the CapEx investments in Winnipeg, it's been important and it's the lion share of what we've been investing in this year as we build out the important infrastructure around the Winnipeg facility and in addition working in the Isle of Man also doing some refurbishing and a bit of expansion there. Again yet to be determine what 2017 is going to look like in any detail. So I’m not yet ready to add color around that, but I appreciate the question. Thank you.

Thank you. That’s all the questions I had.

Thank you very much.

There are no further questions at this time. I now turn the call back over to the presenters.

Well again, thank you very much. We expect to be with you in for the webcast as we view other news than other plans in the coming weeks, and hopefully have a critical mass and converging news to support a logistically feasible Analyst Day in the fall. And look to -- look forward to meet some of you there and exciting times as I said and thanks for your participation to this call today.

This concludes today’s conference call. You may now disconnect.