Pierre Laurin - President and Chief Executive Officer Gregory Weaver - Chief Financial Officer

Alan Ridgeway - Scotia Bank Neil Maruoka - Canaccord Genuity Doug Miehm - RBC Capital Markets Prakash Gowd - CIBC Endri Leno - National Bank Roger Bensen - Number One Corporation Greg Vance - Private Investor

Good morning. My name is Sylvia and I will be your conference operator today. At this time, I would like to welcome everyone to the ProMetic Life Sciences 2016 Fourth Quarter Results Conference Call. [Operator Instructions] Thank you. Pierre Laurin, President and CEO, you may begin your conference.

Thank you very much, operator and good morning everyone. Thank you for dialing in and participating to this webcast this morning. Very exciting time for ProMetic. I will take you through the slide deck here and the agenda that we proposed for this morning. But first, just a reminder again on Slide 3 is Safe Harbor slide of this presentation, does contain forward-looking statement about ProMetic’s objectives and strategies and businesses that involve risks and uncertainties. But let’s move to Slide 4 of the agenda, I proposed this morning that would start with some comments, high-level field views of the land on the R&D investment and use of cash and need for cash before jumping into a little bit more detail on the small molecule therapeutics, PBI-4050, 4547, updated you all on plasminogen, the key events that we expect for this year before I pass the microphone to Greg, who will go and do a deeper dive on the financials. I will wrap it up and open the floor for Q&A period. So, let me take you to Slide 5 now, because I know it’s been on the mind of a lot of people over the past months and especially when you read the press release and the financials. The R&D resources that we have or the investment that we have made really is as you can see focus on the low risk, high return plasma-derived therapeutics. I mean, that slide speaks for itself. There are few points I really want to make sure you get the message here is a good 77%, in fact, more if you take into account that R&D in Cambridge related to the resin really by and large is to support the plasma-derived therapeutics. So, the bulk of the R&D investment is really focused on the plasma-derived therapeutics, leaving about 16% or $14 million to the small molecule. Pretty sure this is smaller than what everybody thought of. But another important fact is that a lot of what gets booked in R&D right now, almost 50% of that spending on the plasma-derived therapeutics actually relates to manufacturing infrastructure and operation for the plasma. That’s the same infrastructure that can deliver north of $500 million revenue. This is not a poutine shack in Quebec. This is massive infrastructure that we have invested in to deliver capacity, but regrettably, accounting principles have it that right now, this goes on the R&D, alright. So, our message on the slide is that the R&D budget for 2017 is actually expected to be in the same range as ‘16. So for those who thought that this is going out of control, absolutely not and invite you to look at Slide 6. Slide 6 gives you a little bit more granularity, although Greg will spend more time providing you more detail in this financial section. But the investment in R&D is spread here over to four segments, but three of them really are related to the plasma-derived therapeutics. And you can see that, yes, it’s true, ‘16 has seen a jump, but a jump that is in line with preparing the launch for plasminogen, getting IVIG advance, advancing all of the other follow-on plasma-derived therapeutics. Guys, when you look at that bucket, it is driving possibly 6, 7 products over the coming 3, 4 years. So, of course, there is R&D expenditure, but huge revenue to be derived and value to be derived from this initiative comes along with the manufacturing expense and you can see that actually in the small molecule, the R&D is actually even expected to decline a bit relative to 2016. Another important point is that as we launch plasminogen, you will see that the – and this is why the asterisk in green there, a portion of the manufacturing cost will transition to the COGS line in the P&L. It’s not that the cost will be there, but they will no longer appear in R&D. So interestingly, as we progress and become more and more, the use of the manufacturing facility is more and more tailored to supply commercial products that line will decrease relative to its positioning in R&D so you could actually see that this is really an artifact of accounting principle. But, again, Greg will expand more on this on the following slide. But just to my point on the previous slide, Slide 5, 14% of the R&D investment led to amazing value creation with Slide 7 and 8. Just a reminder, I will not repeat all that was accomplished in ‘16, but be proud of the fact that we have now proof-of-concept, confirmed translation of efficacy in patients with positive effects observed on the liver, the pancreas and the kidney of Alström syndrome patients and patients with metabolic syndrome. So I’ve summarized on the slide here the highlights of some of the key level results, expect more out of the Alström syndrome in the coming months. This is a trial that is in rare disease, so it’s a bit more difficult to enroll and get all the data necessary to update you. But so far we have seen some nice results in the FibroScan in the liver and we expect to update you in the coming months as well with additional data, exciting times for PBI-4050 as well on Slide 8, expect more data to be disclosed in April. We have been granted a spot for an oral presentation at the American Thoracic Society, the annual meeting of that society in May and so again more to be disclosed on the remarkable performance of PBI-4050 in IPF patients. Hopefully, the patients will have a product available to them that will help them control their condition. If you move to Slide 9, this gives you a bit more granularity on the small molecule therapeutics program. All in blue here has been completed and only the Alström open label is ongoing. The one in purple has been initiated and the one in the pale purple is by the way are being planned to be initiated in the case of Alström likely expansion all subject to the discussions we will have with the regulators. And then surprise, surprise, 4547 really getting into the clinics and you will see later in terms of timing, but we expect 4547 to eventually be targeted towards NASH, very promising lead drug candidate that will join 4050 in the clinical stage. But again, back on the theme of cost look at Slide 10. This is how much the clinical program is estimated to cost in 2017, $3 million in the first half of ‘17 and $6 million in second half of ‘17, not exactly something we cannot handle and not exactly something that we could call out of control. So I’m very happy that we can generate such value that our drug is performing well in the clinical program that we have now, an increased optionality with PBI-4547 joining and soon 4425 and other follow-ons, but just the importance of that slide is to remind everyone that we are keeping this program well under control and it’s a program that is also intended to be smartly partnered as evidence with Slide 11. Now I could spend an hour on that slide alone. The scope of the meeting today does not allow for too long of a chat, but you will hear more about that partnership very interesting. We said all along we will start partnering in Asia and here how we intend to do it in China. In China, this group Shenzhen Royal Asset Management as – and the principles behind it to have an amazing track record. We have known them for many years. They have created an amazing track record of success, have a position, a pharmaceutical company and Boya is among other things the flagship of their success with a strong plasma fractionator that actually made it to a successful IPO in China worth probably $3 billion, $4 billion market cap right now. And these are all companies that we know very well. What we wanted there is smart funding and a partner that knows well the market to help us in the negotiation and the partnering discussions with other pharmaceutical companies. This is, as I call it, a trading platform. This joint venture is going to focus on China only and that we will enter into agreements with other pharmaceutical companies that will generate further cash, cash to ProMetic ChinaCo cash to develop and commercialize the products in China. So ProMetic ChinaCo is a cash flow positive trading platform for ProMetic. It will also handle and control the API manufacturing in China. That’s very important, as you know. And this is going to be the source of revenue described there in the dark ash line is revenue as we supply pharmaceutical company in China with the API, the bulk active ingredient that they can formulate in various form, pill form and so on. But we get revenue from this with margins obviously and a royalty on the sales of the product in China. So this is just the beginning. That cash influx is just the beginning. We allow that smart investor to take an equity position in that platform and work with them to actually continue our negotiations with multiple companies in China and the structure, the ideal basically is telling you that this is going to be a deal machine and a significant revenue generator. Now I mentioned in my quote during the announcement of that, that deal that China is a major market. It’s number two behind the U.S. But it’s not the market that you do business in like you would do business in the U.S. or even Japan. Japan would be a very different structure. And each region with that reason will have to be addressed from a partnering point of view differently. So we will take in questions if this slide does not answer most of the questions that some may have as a result of the announcement. But I look very much forward to that structure to create value and generate, contribute cash to the deal. Now in passing, the amount provided by Shenzhen actually exceeds what we spend on R&D just from a small deal in China. So just realize how we can leverage our platform to actually start monetizing efficiently our pipeline. So in summary for the small molecule, you are see that acronym on Page 12 repeated from time to time to distinguish the plasma derived versus the small molecule, we use SMT as an acronym. So the key events for SMT the over the next 12 months to 15 months more partnering transaction, multiple publications, further detailing their receptors and mechanism of action, but also more clinical data to be disclosed and actually a lot of the preclinical models to be published. So there is going to be an avalanche of publications and that our scientists and collaborators at Vanderbilt at Montreal Heart Institute, McMaster University, Stanford, they have all worked together to actually start releasing that valuable information that we so far kept very close to our chest because patent mattered more than publishing. Now it’s time to publish as we have secured most of our patent positions and we are in an excellent and intellectual property position on that front. Again, over the next 12 months, 15 months, expect more data on the IPF, as I explained before and also very exciting data of the effect of 4050 on the fibrosis of pancreas. We are actually granted oral presentation on two prestigious forthcoming healthcare conferences; The American Thoracic Society for IPF in May and The American Diabetes Association in June, so watch that space very closely. We are also expecting to initial our clinical trial Phase-2, 3 now. Guys, we are getting into Phase 2-3 program for PBI-4050 in both chronic kidney disease and IPF. We are planning to open the IND very soon with CKD first followed by IPF. The clinical trial readout also will be watched carefully. Alström syndrome more data and from the two current placebo controlled studies, more data that will be revealed towards the end of this year and 4547 entering the clinical phase likely targeting NASH, as I mentioned. Very exciting for such a small portion of our R&D expenditure to generate so much value and so much potential, and I am very proud of what our group has been able to accomplish on that front. Let’s switch to an equally exciting plasminogen on Slide 13. You may have seen those cover page of the website that we put together for patients and caretaker on the plasminogen congenital deficiency. Let’s review where we are at the regulatory status on Slide 14. We have initiated in December the rolling submission of that plasminogen BLA. We expect the filling of the last module by April 5, that’s a few days from now. We filed proprietary review. We filed for pediatric designation request and we filed for pediatric voucher request. So we will learn from the FDA in the coming weeks over those filing and requests. Look forward to update you, but at the same time for plasminogen as we have delivered on the timeline that we have set for ourselves in line to enable the launch later this year. So let’s look again at the patient we are looking to serve initially and what they are confronted with right now. Congenital plasminogen deficiency, described again on Slide 15, a rare genetic disease has effect on multi-organ systems. So I won’t dwell on this. You have heard me talk about this before. And it is remarkable that a simple infusion actually within one or two infusions take care of those lesions that cause debilitating complication problem for those patients. But as we generated, you can see on Slide 16, as we generated the data that show that you have clinical efficacy, adding efficacy now a days is not enough, you need to show also that your drug is not only efficacious but has – is providing economical benefit to the patient. Now currently, the current care is recurring surgeries, bebilitating complications that require hospitalization, a standardization in ICUs during the acute phase. And this is without counting the fact that these lesions are serious and life-threatening when they involve the lung, for example, as the brain. So clearly, our plasminogen therapy, its effectiveness and its cost relative to the current cost of those patients support a strong health economics dossier that we have been working hard to prepare, but the clinical data did a lot for that file. So the benefit of the patient, the healthcare system, the payer becomes obvious. Now as you look at Slide 17, there is a lot of elements for the plasminogen deficiency market access and reimbursement launch plan. I will not go in detail with those. But I am letting that slide there to let you know that we are on top of it. And that we are working on all aspects that requires or is required for a successful launch and progression and access to the product by the patients. Let’s talk a little bit more in detail though, on what it means on Slide 18. 80% of the patients with plasminogen deficiency will likely be diagnosed first by a pediatric ophthalmologist. And we are going to be working hard on the messaging education to make sure that the ligneous conjunctivitis is now recognized as a plasminogen deficiency. Currently, many of the kids that are diagnosed are going under the scalpel for recurring, recurring, recurring surgeries until the light bulb goes up and finally is referred to ophthalmologist. Our plan will be to make sure that there is a co-management here that takes place with the ophthalmologist and the hematologist invested in managing and monitoring those patients, because what you see in the eyes is just the tip of the iceberg. Both of those patients have multiple organ lesions. So, just drops in the eyes or surgical intervention in the eyes will not deal with the issues. More than 75% of our patients in the trial are on compassionate use had multiple organs. So, the numbers are there to speak for themselves. But just to explain how we will have our MSL sales force deployed in the U.S. as we launch this product. And on Slide 19, it gives you a little bit of a map here where we are going to be focusing predominantly on the Tier 1 hospitals and look after the key centers that are pediatric centers and/or pediatric hematology, ophthalmology and then really gradually make sure that the specialists’ crosstalk as we advance in our commercial program. But we are talking here a small footprint that covers a very influential level of specialists that are concentrated in the key cities. And so we don’t need to deploy a large sales force to cover this. This is very manageable for us. And we are well on our way to execute on that plan. And we will be ready for the launch between Q3 and Q4 of this year. On Slide 20, a reminder that we are also looking beyond congenital deficiency. Looking beyond the congenital deficiency has been part of our plan all along, because we know that not only the congenital deficient patients suffer from acute plasminogen deficiency, but I will point to everyone here that we know that there is over 2,000 patients in the U.S. alone with congenital deficiency and that initial approval by the FDA that we expect to receive this year is targeted at serving that patient population. And we have a clear reg plan to expand the use of plasminogen over time to address critical care in hospitals. We mentioned before that there is some – lot of patients are being treated right now when acute plasminogen deficiency especially in the pediatrics with fresh frozen plasma with mitigated results. Fresh frozen plasma does not bring plasminogen level to the desired target and therefore bringing the vial in pediatric hospitals will help those specialists to deal with other matters on hand than just congenital deficiency. Same thing with severe burns, they have a dramatic drop of plasminogen in their blood when you have the severe burn greater than 20% of your body surface. So, these additional indications basically drive the future value of plasminogen beyond just congenital, although congenital peak value is probably in the range of $200 million and $250 million. All the other indications that we intend to secure over time will bring this to a significant higher level. So in summary, when you look at Slide 21, plasminogen is going to be an exciting year. Complete the filing of the DLA within the coming days as we mentioned and we expect the commercial launch in the second half of 2017. The regulatory filing and other jurisdiction is also well under plan. We are looking at Canada, Mexico, Europe. Obviously, we will have the dossier ready for filing in those jurisdictions later in the year. We are filing for additional Orphan Drug Designation, and I look forward to announce those as we talked in previous slide about the pediatric designation, pediatric voucher. This will look forward to update on the FDA position on our request. Additional clinical readout, of course, there is more data that will be shared with the community as we move forward and we intend to publish those program. And we have initiated the clinical program for the diabetic foot ulcer tympanic repair and we will be updating you on where the readout on the following slide is expected to for this, partnering discussions as well to expand the commercial reach outside North America for plasminogen, but also to accelerate niche and specialty medical applications. We can’t do it all. We will control the API and we intend to enter into partnering transaction that will enable us to achieve more faster and get this plasminogen to more patients in need for wound healing. So Slide 22, when you recap all the key events, we have a very exciting 12 to 15 months ahead of us. Obviously, everybody has their eyes watched on the BLA, as the BLA gets filed and it ekes the likely launch of plasminogen. We have our team ready for this. We have been setting up all the infrastructure to be able to manufacture and now to commercialize focusing on the USA only rolling it out to Canada afterwards and with partnership in other jurisdictions in the world. So that slide summarized nicely that there is going to be a year filled with catalyst events and the systematic delivery on what we have been investing thus far. You have here on the far right, top right NASDAQ window. We are still considering NASDAQ listing in terms of NASDAQ readiness on Slide 23. The slide was prepared just to bring you to speak to the fact that the red dot, the green dots here say that we are ready and the MJDS requirement. This is a Canadian company listing on NASDAQ can go through the MJDS process, needed share price to be a minimum at $3 to $4, so that is yellow, expected to be green eventually with all our delivering of all our milestones and we are obviously extremely busy on the syndicate selection for this process. We are working and being quoted by Tier 1 banks in the U.S. and the syndicate will have to include our colleagues in Canada and the Tier 1 banks in the U.S. So, we are in the very, very good position for this process. Just want to update you on something that is never easy to discuss on Slide 24, the potential share consolidation to achieve an optimal ProMetic share price range for NASDAQ listing. I mean, we can take our time. And if we take our time, the share price may very well reach on its own by organic growth and through catalyst events. The optimal share price range for NASDAQ listing as we have been advised by Tier 1 bankers and with historical data, that, that optimal share price range for an IPO in NASDAQ is between $10 to $20. So I am confident that we can get there. However, the more we could implement a share consolidation solely to bridge the gap between its current share price and the optimal share price range in order to see an opportunity to get listed if there was an ideal NASDAQ listing window. So, the share consolidation is only being considered if it is required to jump up the price to hit the right window and have a successful NASDAQ that falls within the hotspot, the sweet spot rather of the institutions in the U.S. So, this is again as per the advice of the Tier 1 bankers and it justifies why we would do it if we have to do it and by when and it would only be to accelerate that window should it be available to us. On that point, I will pass the microphone to Greg on Slide 25. Greg?

Excellent. Thanks, Pierre and good morning everybody. Let’s start with Slide 25. Please refer to the filings the company made to SEDAR of our ProMetic annual financial statements and MD&A last evening. And okay, well for the two review of the numbers just walk with me here as we go to Slide 26. What I am conveying here is to simply add together the proceeds received or to be received this year from recently announced transactions where we ended 2016 with $39 million in cash. We added to that $21 million in warrant proceeds in February plus $25 million from the loan with Thomvest that we signed last week in press release and yesterday the additional $23 million we announced from the ChinaCo joint venture that Pierre just described to you earlier this morning. And in summary, arriving then in pro forma $108 million in cash runway for 2017 and the important point made here is that we are focused on raising capital in a most effective and cost efficient way and then deploying that capital to the projects that will be creating the highest returns and the highest value. So that’s the point. Slide 27 on cash flow presentation here and the summary comparing 2015 on the right, 2016 on the left. I will focus my commentary to the 2016 cash flow results, opening cash and liquid investments, $29 million. And then we used $97 million in operations for the full year 2016, which was deployed to R&D and SG&A. I got much more to say on the R&D in the following slide or two, so stay tuned, but at the summary level here for the moment, the cash financing activities, $87 million in 2016. Let me break that down. That includes the equity bought deal in May of 2016 along with the Thomvest, Structured Alpha loan proceeds from March 2016. And then we broke it out here for presentation ease, the cash required in the business combination from Telesta of $36 million. So looking back across 2016, these inflows did not include any significant business development receipts at all. Whereas as mentioned a minute ago, we began 2017 with the right kind of deal as we just did with ChinaCo. And that takes after months of negotiations and in parallel with harvesting the strong molecule clinical and preclinical data. So the financing execution designed to minimize dilution where possible assure sufficient runway as we drive valuations entire through focus product development efforts and leading to the commercial launch this year, along with clinical manufacturing and the appropriate R&D investments. CapEx here in 2016 was targeted mostly at the Isle of Man facility, a manufacturing facility also in Laval and Winnipeg and the plasma processing equipment and also the Telesta acquisition, the accounting breaks down a booking of roughly just under $11 million in the business acquisition accounting in Q4 for CapEx in there. I will make a comment here regarding 2017. And this really dovetails with an earlier comment from Pierre, but regarding the estimated 2017 cash requirements, we would expect the full year 2017 to see use of cash at or slightly above where we performed in 2016. But given the variability of certain key revenue drivers such as the timing of the commercial launch of plasminogen, many of the ongoing business development negotiations and the consummation of those deals moves things, but this is the overall expectation for 2017. Let me transition to Slide 28, the comparison of key income statement accounts. Fourth quarter on the left, full year on the right. I will focus my commentary to the full year account announced. Revenues of $16.4 million in 2016 compared to $24 million in 2015. So we have different revenues reflective of the variability and we are focused on this. And it was caused by two customers who deferred purchases for their own inventory management. But fundamentally, understanding the solid customer base, there is no churn in the customer mix overall, but the customer order size and timing varies sometimes depending upon quarter-to-quarter and year-to-year needs that the customer has. So we are expecting modest growth in 2017 and then indications are more significant growth in 2018. The underlying customer base again remains healthy. Reorders are expected to continue and I have another slide on this in a moment. R&D expenses, along with a footnote in R&D expenses there, really reiterating again that the R&D includes a plasma protein manufacturing and plasma therapeutics of $33 million and $35 million. The overall R&D of $81 million compared to $50 million in 2015. So again, detail on the slide to follow, 77% then of the R&D spend was either on plasma protein manufacturing in Laval and the at Winnipeg CMO or characterize these plasma therapeutics which totaled $35 million, again investing and establishing the necessary manufacturing infrastructure to enable commercialization leading with plasminogen followed by IVIG as you know. And marketing expenses, $23 million compared to $16.6 million in 2015. The increase in admin, again this was really driven by the growth in the number of employees and the support infrastructure necessary to administer business such as ours along appropriately, along with prelaunch prep work for the forthcoming launch of plasminogen pre-commercialization cost of fees related to that. And it’s not insignificant for those that have it’s a big deal and targeted expenses to support that effort. The loss on extinguishment of debt, $4.2 million that’s non-cash accounting related to the Thomvest, Structured Alpha transactions where they exercise their participation rights in the equity transactions in 2016. The net loss of $110.7 million compared to a net loss of $56.8 million in the prior year. The loss per share math is $0.17 based upon weighted average shares outstanding of 598 million shares and that’s again the average for last year. And as of today, we are at 669 million for your note. And the full year adjusted EBITDA reflects the loss of $98 million versus $45 million in 2015. With that, we will go back and take the conversation on Slide 29 to a drill down into R&D expenses. As mentioned earlier, so R&D of $88.1 million is the sum of the four column areas here. From left to right, the manufacturing of GMP plasma proteins, $32 million or 37% of the overall R&D spend. The year-over-year increase driven by investments in production expenses in Laval and in Winnipeg necessary for preparations to deliver the plasma therapeutics at the quantities forecasted and they are tied to meet our commercial scale requirements as well as clinical trial materials for the ongoing clinical work necessary. Also to generate the required data to file the regulatory BLA that Pierre mentioned earlier. The setup of the GMP infrastructure again tied to driving top line pharmaceutical product revenues beginning later this year. On the next column segment is the R&D plasma derived therapeutics of 40% of R&D or $35 million. That’s primarily the PBT business, the PPPS business along with the costs of R&D management and we have also oversee clinical operations, etcetera. And many, again here many BLA-related plasminogen activities are there as well. Moving to the right affinity resin R&D, this is $6 million or 7% of the R&D representing our UK resin related R&D activities. And then on the right, the small molecule R&D, the 16% of $14 million and with multiple Phase 2s that Pierre covered, PBI-4050, very active over the course of last year. Again, tied to creating financial value through clinical data leading to partnering agreements, which has led to the announcement of ChinaCo venture yesterday. And a last point before I leave this year-over-year slide was it’s not specifically captured here, but we booked $9 million as of year end, the plasminogen inventory materials into the balance sheet in advance of plasminogen regulatory approval launch. And with that, I will transition to Slide 30, and Slide 30 is the summary as Pierre presented the same slide earlier. But I wanted to revisit it here and emphasize the two points that we made specific budget for the 2017 R&D investments, some dated, some very tightly controlled subject to events and carefully managed, i.e., new hiring or project spending targeted as you would expected to be. So the business is at a turning point of pivoting from R&D and manufacturing focus to the commercial stage pharmaceutical sales point and the financial impact of that is big and challenging. And this really gives a sense of what 2017 should look like in comparison to 2016. ,: And the balance sheet accounts is Slide #31 and in this case, the cash of $39 million, which I thoroughly reviewed earlier, but you see we had net-net increased year-over-year $10 million in cash. Accounts receivable, flat year-over-year representing primarily trade receivables at PBL for the most part. Inventory of $13 million, which includes $9 million of plasminogen inventory ahead of regulatory approval. The CapEx increase is roughly 50% from the Telesta business acquisition and the valuation of the purchase price allocation therein and the balance then of manufacturing, processing equipment and other investments in Laval, Winnipeg and UK. Intangible assets, this is primarily the valuation of the IVIG transaction from 2014 that carries forward year-to-year with the increase due to the recently announced year end recognition of a non-cash $7 million related to the Hematech 50% plasminogen rights to worldwide profits in that deal. APN accruals, which represents increase in inventory and other expenses incurred in the year end Q4, long-term debt of $48 million at year end, which increased year-over-year. This is due to combination of things, non-cash accounting for the interest accretion of the various Thomvest loans, along with the debt picked up in the Thomvest acquisition. And these results bring total equity to $159 million and total assets to $265 million at year end. Let’s say in the next slide in summary, I am going to transition that back to Pierre. Thank you very much.

Well, Greg, I mean, thank you and I love to cover, but obviously for me and for our shareholders, I think the reassuring messages here is use of cash required in ‘16, $116 million. We already have a pro forma cash runway of $108 million, expect this year to be slightly higher than last year, but not that far apart. And therefore, we have a cash runway flow that is quite comparable compared to where we were at the same time last year. And we are only in Q1, right. So there is a lack of deals in the corporate and we are extremely confident to deliver one way or another. It’s important that the company remains sufficiently capitalized such that people are not always guessing are we are going to raise money or we do this, we do that. So, this is going to be part of our strategy going forward. Just be reassured that we are well on top of it and the expenditure and the investment is done wisely. It’s done where it matters and it’s focused predominantly on establishing a solid business that will grow substantially from where we are starting with the launch of plasminogen. So, on that note, in summary before we open the floor to questions, plasminogen its clinical efficacy goes beyond our expectation. We expect market entry in ‘17, mid to late ‘17, market potential is significant. I mean congenital deficient patients north of 2000 in the U.S. and many more that suffer from acute plasminogen deficiency that will gradually look to support these indications systematically in addition to the wound healing. So, we expect to partner as well some of those indications and/or regions that can do it all. So partnering activities around plasminogen as we mentioned, partnering activities around 4050 in small molecule, efficacy confirmed multiple shots at the goal and we have a lot of interesting exciting things with our platform. And finally, we have built an infrastructure that is capable of delivering $500 million of revenue, never forget that. This is not a poutine shack as I said earlier. This is a state-of-the-art, massive infrastructure that is necessary to secure approvals and then enable revenue going forward with low regulatory risk products. So, our commercial capabilities are being implemented for the plasminogen launch, but it’s to be followed by multiple other products as well. So, the same infrastructure serves for many products. This is what I like amongst other things about ProMetic is that it’s going to be a big transition from R&D expenditure to a money machine with our facilities. On that note, we will open the floor to questions.

[Operator Instructions] Your first question comes from the line of Alan Ridgeway of Scotia Bank. Please go ahead.

Good morning, guys. Thanks a lot for taking the questions. Pierre, I think I will start with the plasminogen launch. Just to sort of get a handle on this for our perspective of the 2,000 patients that you guys talk about based on the congenital or ligneous conjunctivitis in the surgery data that you have, how many of those are actually known right now to actually have plasminogen deficiency?

All of that. These are patients that are – they are known because their ligneous conjunctivitis surgeries was recorded and picked up by the IMS service. So, we know the physicians. We know the patients and that we have various triangulations with our patient registry that we start building as well as access to data from labs, labs in various clinics and so on that will report plasminogen deficiency and surgeries. So, with that triangulation, we are able to have a very, very targeted approach to focus initially on those specialists that handle those patients very efficiently. It’s a matter of connecting those patients, making them aware of the availability of the product, aligning them up with a payer, this is a typical concierge approach that we have to do, but we are not going blind in this. We have very good idea of where those patients are and who is treating them, but it’s not an estimate, this is factual number of patients that have gone under surgery for ligneous conjunctivitis.

And have they all – would they have all had their plasminogen levels tested?

Yes. And well, actually, it’s a good question. I would say, yes, I was going to say, yes, in the sense that there are clinics that will do that systematically, but it’s a very good question now and I take this back to the point where I was talking to the folks that are handling the marketing. You are probably – then, this is my best educated guess, 60% of those patients are still wondering between surgeries not knowing exactly what they have. There is a possibility of that. But lab results are not necessarily available from us while they are available from the private clinic. So, they don’t necessarily – I cannot say definitively that all patients that received surgery are also confirmed with a lab test. But there is no other way of getting ligneous conjunctivitis other than having a plasminogen deficiency. So, that’s how you triangulate it.

Right, right. So if we think about numbers, when you are talking about the pediatric ophthalmologists who are seeing these kids usually first with the ligneous conjunctivitis, but how many of those docs are there out there, like are we talking hundreds, are we talking less than that? Can you kind of triangulate us in on sort of what the coverage needs to be from a sales force perspective?

Yes. Well, as I pointed out on Slide 19, right, you are talking roughly 500 to 700 specialists to cover. So that can be easily handled with the numbers that we have on that Slide 19. And this Slide 19, it offers numbers that is progressive. Initially, you will want to hit those specialists that treat already 20, 25 of those patients, right. And you would gradually expand to others, because these became your KOLs, your opinion leaders that will actually serve as teaching professors and other teaching hospitals. I mean, this is a typical ramp up of those kind of specialty services for those rare cases. Patients are with ligneous conjunctivitis in average are diagnosed at 9 to 10 months of age, alright. So – but the ophthalmologist’s reflex will not necessarily be that this is a plasma-derived or originated condition. They will try all kinds of things before, obviously, connecting the dots and realizing that this is a congenital disease. So we have been already working for the past year creating and closing that gap. So that’s where we’re talking about at co-management where the hematologist comes in. The main reason for this is that 80% of those patients with ligneous conjunctivitis have lesions other where – elsewhere in their body, right? They have other competitions. But the frontline diagnosis will be ophthalmologists.

Okay. And have you guys had -- are you guys down the path as far as reimbursement and pricing discussions? And are you comfortable with some of the pricing levels that you’ve talked about in the past?

Yes, yes. We will actually disclose more as we go but very comfortable. As you know, our pricing strategy is not out of control here. It’s quite reasonable compared to many other orphan products out there.

Okay. Maybe one more and then I will jump back in the queue. Just on the IVIG, I noticed on the key events slide over the next 12 to 15 months, it looks like IVIG data is now expected in early 2018. Has there been something changed there? Why we end 2018? I thought that trial would have been 12-month data by midyear this year? And I’ll jump back in the queue.

This is clinical data readout. It’s not necessarily related to regulatory filing. And the readout, actually, I could have had three bucket at different time. There’s the readout for the adults that will be earlier. Then there is a readout we may end up bundling the adults in the pediatric. Bear with us with this. I mean, there’ll be more coloring on the IVIG. There’s no change of planning in terms of commercial launch for IVIG. But this is more like a typical readout of the data. As you know, we’ve enrolled more patients that is required for the filing with the NDA, and the readout for the entire study may be different than what you need to file for the BLA.

So launch late ‘18 is still the outlook for the company?

Yes.

Okay thanks. I will jump back in the queue. Thanks guys.

Thank you.

Your next question comes from the line of Neil Maruoka of Canaccord Genuity. Please go ahead.

Hi good morning guys. Thanks for taking the question. Maybe just a point of clarification on your China JV. The $10 million payment in the second half of 2017, is that also at the option of your partner to secure, I guess, the initial – their initial equity stake?

Yes.

Okay. And maybe just switching to plasminogen. What’s the timing of the priority review, when you hear back whether you can get a priority review? And also for the rare pediatric disease indication, when do you expect to hear there? The second part of that question is, as you know, you need to show that 50% of patients with plasminogen deficiency are under the age of 18. Can you give us a little more color on that data that supports your view there?

Yes. Well, good question, Neil. For the priority review and the position of the FDA is made known to the company when the last module is filed, which is few days from now. So we’ll have more color for this. Our regulatory affair is standby. And this is not an automatism. This is something we hope to get. In any case, under an orphan drug Fast Track, you get reviewed fast. But it’s perhaps more like confirming that what you expect to be will be. In terms of the pediatric designation request, we have filed a submission taking into account the new regulation. They made it tougher. The requirement for pediatric designation is not only in relation to a cutoff between pediatric patient and adult, but it’s also a cutoff with regard to when the serious and life-threatening manifestation occurs in those patients. Does it occur when they are at pediatric age? Or does it predominantly occur when they’re adult? In the case of plasminogen deficiency, we’ve surveyed the entire literature, assemble a lot of data for the KOL. Combined with IMS data, we can triangulate that indeed 5 times out of 6 the life and serious life-threatening condition of – associated with plasminogen deficiency occurs at pediatric age. So we believe we have a very strong file. But at the end of the day, this is a decision that is outside our control. We filed with the data confident that we will get it, but we’ll see. Now typically, the designation may be granted any time during the process of the BLA review. As you know, the voucher is unused that you get once the BLA is granted. There are few other conditions to get the voucher. And we also meet all of them typically. So the trick here is to get the designation. If we get the designation, then we’re even more confident we will get the voucher because we meet all the additional criteria for the voucher.

Okay, great. Thanks for the color. Just the value of your platform, your plasma therapeutics platform is in layering the products and the economic – economies of scale that you can get. But what have been the hurdles to getting additional plasma products into the clinic? Can you provide an update on some of those earlier stage products?

Well, Neil, it’s a good question. And it speaks for 90% of the motivation behind Telesta acquisition. We clearly look at the optionality that the Belleville facility of Telesta provide for us in adding downstream processing suite. The issue is always the dilemma of pushing many products under development to increase your pipeline. But if you use the GMP facility as the same facility to make GMP products for commercial and BLA filing and commercial launch, if you use the same facility to manufacture R&D batches and optimization and scale up, we’re really playing with fire. So we took a conscious decision to say, you know what, let’s pull the rug back a bit on the new products and the pipeline in terms of scaling them up, not to disrupt the approval and launch of the first 2 products, being plasminogen and IVIG. But all those are like moving forward nicely. Alpha1-antitrypsin, fibrinogen, albumin, Inter-Alpha 1 will all see their way in the pipeline. But it’s a matter of managing the risk of doing anything too easily, that compromise your GMP compliance and your BLA compliance when you launch the product. Now Belleville, I believe when we have the full analysis and master plan on how to use in an optimal way this facility would provide additional downstream processing capacity that then alleviate this problem. The second reality is this kind of bad news, good news. Because as we pull the rug on other products, the other motivation here is we realize that we went from a plasminogen focused on congenital deficiency to a plasminogen that can target 10 different other indications, each with a log of magnitude more patients than the congenital deficiency. So all of a sudden, it is far more lucrative for the shareholders to have plasminogen come out of the gate strong with congenital deficiency and quickly expand its clinical use in other indications whilst we continue the sequential approval of other products, plasminogen turns out to be far bigger product than we ever imagined and will drive for a foreseeable future the manufacturing strategy and the product development strategy for the follow-ons. So what we intend to have in due course, like in ‘19, we would expect to have plasminogen approved in multiple indications, driving the show by far, supported with contribution from IVIG, Alpha1-antitrypsin and gradually other orphan indications kicking in such as Inter-Alpha 1. So the sequence is still very much in the card, Neil. But I would say more to do with the fact that plasminogen is becoming such a big potential product with multiple indication that really don’t want to miss the boat of this one and focus on expanding revenue faster than expected with that product and quickly supplemented by IVIG and alpha1-antitrypsin. That’s the game plan.

Okay. So, can we expect to see additional plasma products in the clinic in 2017? And I made my last question on plasminogen, can you provide just a bit more color on your wound healing study? And with that, I will step back into queue.

Right. Well, with the latter, I mean, obviously, the plasminogen for wound healing required different formulation. So we have been working hard on this last year and been filing our CTA and in discussions with our regulatory colleagues in Sweden to enable the clinical trial. And these clinical programs have been initiated, the clinical trial will require as you know a lot of paperwork signing the size of the ethics committee and so on. So, I expect to be in patients around Q3 this year and start having the result as we indicated in slide where am I? This is Slide 22 started having readouts late in the year early ‘18 for tympanic repair and DFU. There will be also other trials, small trials, for the IV used in acute patients such as severe burns and so on. These again will be PK data and early even then from efficacy in those acute care patients. That’s again we expect readouts early in ‘18. With regard to, if there is going to be any other IND, yes, we expect alpha1-antitrypsin to be in a position for an IND filing in ‘17. And there is possibility as well to actually consider other filing of IND for specialty IgG products, but exciting pipeline, as you can see. But again, my point is we will not do anything that will compromise the success and the launch of plasminogen in IVIG and the GMP plans.

Okay, great. Thanks.

Thank you, Neil.

Your next question comes from the line of Doug Miehm of RBC Capital Markets. Please go ahead.

Thank you very much. Can you hear me?

Yes, we can.

Okay, great. So maybe, Pierre, first question with respect to – can you maybe describe how the tone of negotiations for 4050, some of the other small molecules has changed over the last, let’s say, 3 to 6 months based on some of the data that you have generated and what you expect the outcomes might be?

Well, this is very, very, very good question. The tone has changed to the better with the IPF data, perhaps because the IPF data has useful benchmark there. I mean the IPF patients are extremely hard to treat. We, albeit, smaller trial, albeit not placebo-controlled, there is a predictable decline of lung function that simply was not observed when the drug 4050 was given alone or added to one of the IPF drug that is out there. And interestingly, when you see that one of the combination that seems to have a drug-drug interaction that work then the patient decline in the same way as it has been on placebo. So clearly, you have an interesting signal in the trial that can somewhat benchmark what the drug does in human relative to fibrosis indication against previously approved drugs. So, this is probably the Phase 2 trial that has moved the needle the most and it’s quite recent the data really of the 40 patients became available in January, February and that is increasing the temperature significantly in the discussion.

Okay, great. Second question really has to do with the pacing of R&D and I said that you indicated and you did a very good job laying out the cost of manufacturing versus plasma versus small molecule, etcetera, in the resin. A question I have though is that the R&D was really back-end loaded and I’d say quite high in Q4. So I guess, what I am trying to understand is based on what you have told us, I would expect the pacing to falloff a bit here in terms of their R&D spend to be consistent with what you are describing for 2017. As part of that, I am curious about the cash burn in Q4 was around $34 million. Would you expect that number to be fairly consistent through each of the next four quarters prior to the launch or how should we think about that?

Well, it’s good question. I think that you will have the CEO answer and the CFO answer, but clearly, there is some from a reporting and accounting point of view, first and then the cash, second. There are some interesting tricks that mislead in terms of how a valuable asset, in my opinion, such as inventory of plasma gets reported on the P&L and expense and then will become a KA in inventory CapEx when you are commercial, but there are things that are treated as full expense whilst they become capitalizable when you are commercial. So, it’s interesting that as you ramp up and prepare for commercial launch until you are approved, it is still an R&D expense, so that kind of bulk up your R&D significantly. And on the true R&D of the plasma therapeutics, you can imagine that we are committed and heavily invested in documenting all the BLA for not just plasminogen, but IVIG as well. And preparing the IND for alpha1-antitrypsin and preparing the IND for other products. So, that is a fairly significant investment driving 4, 5 products, right. So, these are the two angles. But in terms of cash, where we are talking of cash use of about $118 million to $120 million in ‘17 and we already have $108 million of runway and we are only in Q1 and we expect fully the business to contribute and business development deal to cut this up. So you want to add anything to that, Greg?

Yes, good question, good observation in Q4 and the run-rate as compared to where we are going in 2017. Yes, I think the color on the overall run-rate in 2017 is, as indicated by Pierre, the variability quarter-to-quarter. Q4 had sort of typical year end accounting some cash, some non-cash there along with – as we have the other thing comes to minds as we added employees throughout the course of the year, you have got a the full quarter of impact of the employees that were headed. So, I think that might be helpful. But in terms of modeling 2017, it’s not too far off from where we are in 2016.

Okay. Then, yes, sure, let me ask this question then, because if I look back at the 2016 presentation as it relates to what was expected to be spent on the plasma programs and the small molecule therapies when I add that up it was around, I don’t know, $15 million or $16 million and yet we ended up spending about $50 million. I just want to make sure that we are not going to be off in terms of what the potential spend might be, because I know that you have a lot of opportunity and you are trying to invest it properly and carefully. I just want to make sure that you are highly confident with that cash number you expect to spend this year relative to what may have happened last year. That’s all.

No and it’s a very valid point, Doug. And in fact, we judiciously characterized this as investment in infrastructure. Infrastructure means obviously you are standing still in the plant and the validation thereof and a lot of work that goes into qualifying a facility that you don’t have to repeat afterwards. There is a lot of work that goes into validating and preparing a BLA that you don’t have to repeat anymore, but the team you put in place is the same team that, then create value by being able to process other products efficiently. So if you look at that Slide 6 that I had in my – in the slide deck, you clearly have a bump up that is not replicating in ‘17. So there was this bump up. And this bump up was supported by the board with a view that we needed to invest and put everything possible in place to capture the opportunity of plasminogen. So plasminogen opportunity has been realized as we progress with this. And I can tell you that the awakening, let’s put it that way, has translated into having this willingness to put the infrastructure in place to support that launch. Now everything gets dragged up because if you can make more plasminogen then you’ll make more IVIG, all the numbers go up. But that really was what drove the -- this investment. So I think that at that point, we are now, as we state, we’ve brought ourselves to a point where you don’t need huge additional CapEx to simply service that $400 million, $500 million revenue, that top line that we’re talking about. So that’s a bit of a burden to carry ahead of a launch, but it’s a burden that you can’t have otherwise you won’t launch those products. And that’s the cost of getting in that club, that select club of few companies that can manufacture plasma-derived products. So we are incurring that price of entry, which is in itself a barrier to entry for anyone trying to follow suit. So – but point well taken and I hope that our answers are addressing your point as well and concern.

No, no, they do. And again, I just want to underscore the work you put in the presentation and how you split it out I think it’s very helpful for the investment community. Thanks again.

Alright, thank you for that.

Your next question comes from the line of Prakash Gowd of CIBC. Please go ahead.

Thank you and hi, everyone. I have a few questions on plasminogen, specifically on manufacturing and inventory. Maybe I’ll start with just a clarification point. I thought Greg might have said something that I just wanted to make sure I heard it correctly. Did you say that there was $9 million of plasminogen in inventory that was carried into Q1?

That’s right. That’s right.

Is that a finished goods inventory?

That’s a combination of things. But to drill down into it, its raw material and processes that are captured in that number, so $9 million.

Okay. How much finished goods inventory do you expect to have at launch for plasminogen? And you can talk about it in terms of numbers of vials or doses or whatever makes sense.

Well, I think that I wish we had our VP of manufacturing on this one, Prakash. But we can, if you believe that this is a data point of interest, we certainly can come back with this one. Suffice to say that, obviously, as we manufacture the conformance batch in advance of the pre-approval inspection of the FDA and with the results we have, we will be stockpiling plasminogen for the launch. This is not, however, the same launch than IVIG. IVIG, you know that you can manufacture out the wazoo 24/7 and stockpile just like a generic and sell the equivalent of a quarter or 2 quarters of sales the next day as it leaves the gate because you have an existing market that takes it all up through GPOs or a distributor. This one will – plasminogen will have a ramp up. We are doing everything possible to line up and put all those patients in need, those who are in clinical trials, those that we know, those that we have been in contact with, line them up ahead of time such as there is a quicker uptake as we get approval. But it will not be kind of a steep revenue jump, a square bar on a graphic, I would call it like you would see with IVIG. So – but it’s a good question. I think that the inventory has always been – the manufacturing has to be there to enable more products than the marketing forecast, right? So I can tell you if you want some guidance of some sort that we have way more product manufactured to date that would service way more sales than everyone has in their forecast right now. So it gives you a perspective.

Okay. Just out of curiosity for plasminogen, what is the exact manufacturing lead time for a commercial batch from start to finish if you had to do it?

Well, right now we rely on CMO for fill/finish, right, so – but it’s a couple of weeks. Then – and there is different release. What makes a difference is that you have your main release for the API, and then you have a release for the finished product. But the manufacturing per se is not – is about a couple of weeks. I mean, of that time, you have holding time and quarantine time and so on. The plasma going in our facility from one end to another for the bulk active is 24-hour process. It’s very efficient. But then you bundle 10, 15 batches of bulk API for a fill/finish, okay? So this is not how it’s done when you do clinical trials. When you do clinical trials, you’re looking at smaller numbers, and that also is creating a higher cost for your clinical trials. When you’re commercial, we’ll be able to bundle efficiently a number of bulk active to make the best use of a fill/finish suite. So it is a difficult answer because you need to break your process in 2, from plasma to bulk active, about a day. And then from bulk active to the vial, the finished vital, well, you have to pull 10, 15 batches for a batch of fill/finish so. And that usually, fill/finish, will be a day as well and then a few days of lyophilization. So overall, I would say, excluding the ins and outs and quarantines and so on and traveling between sites, you’re looking at a couple of weeks, I would say.

Okay. I will follow up with you on the other manufacturing question, but just a couple other little ones. Has the FDA already scheduled their pre-commercial inspection?

That’s usually done and triggered with the last module. So in the coming days we’ll know, yes. But we expect it to be in May, roughly.

Okay. And when was the last time they inspected the facility?

Well, the – we had mockup inspections for the Laval facility, and this will be the first of the inspections for the purpose of that process. That facility was FDA approved for vaccine manufacturing, but now we made some substantial improvement to it for our process. The one in Winnipeg is already licensed by the FDA and EMA.

And then just lastly on can you update us on your perspective on plasma supply and that you to have secured contracts that give plasma supply in the future?

Yes, we have a lot. And if you have empty freezers, we can also make use of the space in your empty freezers. We have our own collection center, as you know, in Winnipeg that is going to be ramped up to about 30,000 liters. That’s a small plasma collection center that we will clone over time. We have contracts with established plasma collection centers in the U.S. that is already – that are already providing us plasma. I would say that right now, we are extremely well positioned for the FDA, EMA-certified plasma collection. And so it will be a combination of both take-or-pay long-term supply agreement with established independent collectors and our own collection system.

Okay, great. Thank you very much.

Thank you, Prakash.

Your next question comes from the line of Endri Leno of National Bank. Please go ahead.

Hi and thank you for taking my questions. The first one I have, it’s regarding Slide 10 where you have the list of the clinical trials for the small molecules that you intend to do in 2017 or initiate some of them that you haven’t. So I was wondering if it’s a fair assumption that the majority of them and their costs will be into 2018. And if you can give an estimate of what do you expect this cost to be?

Well, absolutely right. And thank you for your questions. The – you file an IND and let’s say that we take chronic kidney disease, for example, and we file an IND in April. And we may get lucky and get approval and granted green light without any comments, but that’s rather unusual. There is usually back and forth and it may take 60 to 90 days before getting green light. So you are looking at Q3 with a green light to proceed and then negotiate with the sites, getting the ethics review committee. You start dosing patients sometime in Q4. And you are right, I mean, most of the cost would be then incurred in 2018. The way we are looking to execute on the clinical trial for chronic kidney disease, actually, will be rather unique and speak for the amazing networking and experience of John Moran, our Chief Medical Officer and Ray Hakim a board member that is both nephrologists and well-positioned in the field to bring about a rather unique network of centers that would keep the cost of that clinical trials quite low, I would call it, $2 million to $3 million in ‘18. The IPF trial would be multi-center trial in the U.S. and Canada. Same logic in terms of timing of filing and same logic that’s why in the following slide, on Slide 10, that’s why there was such a low impact in terms of an – and in fact it’s Q4 for the most part as we would expect to start enrolling patients around that time, but by and large in ‘17. The trial for IPF in ‘18 could yield higher than CKD due to the fact that you have this is a rare disease compared to chronic kidney disease. A typical site for chronic kidney disease may have already 3,000, 4,000 patients within the same site from which we can pull easily 50 or 100 for a clinical trial. In the case of IPF, you have to open many centers, many sites to be able to get to your desired target number. Having said that, if you pay attention to the nomenclature we are calling it Phase 2/3, that means that you start with a number to show a trend that is more akin to a typical Phase 2 trial. Once the trend is confirmed, then you expand into a Phase 3 by enrolling more patients. So in ‘18, I don’t expect those costs again to be prohibitive. And we already saw a trend with only 15 patients at 12 weeks. So, we don’t expect to need a lot of patients to show a trend as the FDA is required in our process, in our protocol at 6 months. So, I believe that it will be a relatively small number to confirm the trend placebo-controlled and then expand into Phase 3, which then again will crossover to ‘18, ‘19, so not again a huge ramp-up in clinical trial cost for the SMT as we go towards ‘18.

Okay. Thank you very much for clarification. The other question I had is you have hired about 400 people you said in your headcount. Is that the right size that you are looking at or are you looking to expand further?

Well, on the manufacturing side, we have invested a lot hired and trained a lot of people to accommodate the launch and the validation and all that work. I think we are pretty much at a good level at this point in time for a while where we are going to hire 10 to 12 people as mentioned is related to the marketing and sales in the U.S. as we rollout the launch of plasminogen. So – but other than that, we are – we really brought ourselves to a level that is going to be quite consistent for a while.

Okay, great. Thank you very much. And last question I had is relating to Generium in Russia, is there any updates on that one or is it status quo as of right now?

Well, there is – we will be providing an update for where we are with Hematech, where we are with CMVG in China, where we are with Russia, each jurisdiction, each parties have their own optionality. We have renegotiated our agreement with Hematech as you know and we intend to continue discussing the CMO opportunity there for additional capacity. Same thing for Russia and the market is difficult in Russia. We will expand – we will hope to update the Street of that front. And in China, I think as we progressed ourselves with our program and filed more of those INDs, that enables China to get going again. So, we look forward to update you all on what’s happening in those three jurisdictions.

Great, thanks. And do you have a timeline for the update or?

Well, I go in AGM in May.

Great, okay.

Yes, thank you. Look forward to see you there.

Yes, thanks.

Your next question comes from the line of Alan Ridgeway of Scotia Bank. Please go ahead.

Thanks for taking the follow-up questions guys. Just I know it’s not a huge part of the business anymore at least as far as from a valuation perspective, but I just want to give a little bit more color on the resin business if we can. So, it’s down 40% basically year-over-year. What percentage of that was foreign exchange related and what sort of run-rate should we think about? I mean, I appreciate that this is a lumpy business. So, should we be averaging ‘15 and ‘16? Should we be expecting that the two orders that got delayed will come in ‘17 so we should go back to the ‘15 level? How should we think about this? And then also is there any update I know that Endri just asked about China and Russia but as far as when PPPS resin sales may start with some of your partners?

Okay. In terms of the business, it is somewhat frustrating, because you get a purchase order of $11 million. And if you happen to ship everything on one quarter or a two quarter of the same year, it looks great that year and then they don’t reorder until 18 months later. So, you keep a whole year of that revenues, but you know that their sales going up. The long-range contract suggests that they will buy more. But the frequency or the timing of those big orders is fluctuating. Right now, for the purpose of the planning on our manufacturing, we are looking at a substantial revenue in ‘18, right, which we are staying away from providing guidance, but just kind of quite the guidance I can tell you that we already know that in ‘18 their resin revenue will be much, much higher and in ‘17, in the range of more or less in the range of where we were in ‘16. So, can we bring forward some? And this is some of the things I’m asking our folks to work with the clients. Can we bring forward some of those shipments that we don’t have to all of a sudden ship triple what we have in this year in ‘18? This is where we are working with those companies with that, but we are at the mercy of their requirement, their management of their own inventory. And we also have to say that when we say this business will grow, it will grow, but in a lumpy way. If you isolate the analysis of just PBL making the resin, it’s looking at another huge client which is PPPS. And that huge client will consume more of the resin than actually the outside client. So, we have to look at this is not just a business, but it’s a critical component of how we can actually drive value, so servicing the clients is reflected, because this is third-party sales. But the actual activity of that group consolidated is going to double, triple over the next 2 years. So, expect this to continue to grow. I still expect this to be lumpy, but it will get lost in the mix of revenue overall. I mean so – but in itself there will be – there was lumpiness because there are huge purchase orders every time, $10 million of this, $5 million of that. And I wish it would be different, but I know that it will get mixed overall with our sales of therapeutics and we come more predictable in terms of overall consolidated revenue line.

This is Greg. You asked about there was revenue filtrations related to FX, I don’t think so. I think it was really fundamentally the order flow.

Yes, more so. Yes.

Okay. Resin is not priced in the pound?

We depend – I mean some clients we may ship in pounds. Most clients would be trading in U.S. dollars. So, there will be an effect, but we are not hiding behind a currency effect here to explain the difference.

Yes, okay. Any idea on when you guys think you might start to see some orders out of Russia and China or should we wait to the AGM for that update as well?

I really appreciate if we could wait till the AGM because we’ll have a comprehensive picture. Right now, we are in discussion with all of them to firm up long-range planning, decisions on do we need this, do we need that, but I’m pleased to say that in China, it’s finally moving as we – as you recall. They could not file just 1 IND at a time, so as we have progressed with many of our products, we are in better shape now to support them in turn, so exciting things coming for China.

Right, okay. Thanks. I can wait. Last thing for me then, just on the – just coming back to the R&D and sort of consolidating the question from Doug and also the question from Prakash. Just on thinking about the protein R&D spend and the small molecule spend, last year you guys guided to a certain clinical trial spend and then I’m assuming that’s only a portion of this. As we look forward, you’re guiding on small molecules to about $9 million in spend. Should we be expecting a similar overall level of R&D? Does that get absorbed in here at around $15 million? Or will the whole system be higher?

No, again.

Yes, the clinical piece is included in that $15 million. So it’s not a – there is no bait and switch here. It’s really a straightforward approach. The breakdown of the clinical detail was an effort to reflect what the CRO cost, external cost is as related to each of those trials. So that’s straightforward. And then adding that into the small molecule staffing and management internally and that arrives at something close to where we performed in 2016. Good question.

Yes, I don’t think I asked it as well as well as I probably could have but, I guess, if we go back to the ‘16 or the Q4 ‘15 slides, the 4050 clinical estimate was about $6 million and you ended up coming in at about $14 million. And for next year, I guess, the 4050 is – well, with 4557 is in the 9 range and you sort of have the chart around the same. So – but I guess you’ve also probably brought some CRO cost in-house with some of your hires as well. So maybe that’s the wash?

Well, yes, I mean we do have a core group now that can absorb some clinical trial expansion and – but by and large what happens also is that the structure that you have in place to run a clinical trial like metabolic syndrome is completed. So it’s the same group that pursues the placebo-controlled. So there are some trials that as they’re completing, you don’t – you lose that constant, they are replaced by another constant, so there is continuity there. And though that may appear to make this cost expand dramatically are not going to hit ‘17 that much. That’s why I took the trouble of highlighting Slide 10. So, if I can – it’s really helpful and it’s also almost embarrassing actually to see how much value we could generate with such a small investment in clinical trial, quite frankly. This is not a slide that I would actually dare to show to U.S. funds where I’m walking around. They would look at me and say why aren’t you spending $50 million on that product? So we are pacing ourselves here. Hopefully, shareholders would appreciate but at the same time it’s about generating value. And we think that with the stuff that we’ve done so far we’ve achieved this, exemplified with the ChinaCo deal. This is the first of many to come and we are on track.

And I just want to confirm one thing because I think I got a little bit confused, Pierre, when you were talking about R&D costs that are capitalizable after the approval and then with this – the talk on inventory. Just to clarify, the $88 million R&D spend in 2016, $9 million of inventory is outside of that?

That’s right.

Right, okay just I just wanted to clarify. That’s great. Thanks, guys. I appreciate the time.

Thank you. Good question, Alan.

Your next question comes from the line of Roger Bensen from Number One Corporation. Your line is open.

Good morning, Roger.

The Vertex stock recently jumped up about $20 billion – that’s a billion with a b – in market value on some favorable clinical trials on their potential drug to treat cystic fibrosis. Now I know the fibrosis that you’re targeting with 4050, the 4 items there, is a vastly larger market than cystic fibrosis and just numerically much, much bigger market. Yet cystic fibrosis has a lot of popular attention, and it’s a terrible disease and we certainly need help there. Do you have any plans to try to extend 4050 into cystic fibrosis as well as the other forms of fibrosis you’re already working on?

Well, thank you for your question. I mean, cystic fibrotic patients have fibrosis in the pancreas, the liver and the lung. People usually relate to cystic fibrosis for the lung and, of course, lung is an organ that takes it on the chin. Patient used to die at age of 5 with this condition. They now live up to 50 years in average in Canada, actually slightly better average in Canada than life expectancy in the U.S. We have targeted cystic fibrosis not as a disease-modifying agent like Vertex or other companies looking at introducing gene therapy. We are looking at the large number of those patients that have by age of 8 or 9 started to develop diabetes and because the mechanism of actions related to developing diabetes is fibrosis of the pancreas. So we are looking at cystic fibrosis as a niche patient group that would benefit from the action of our drug in reducing the damage caused by their condition on their organs such that they could live without the need of insulin and without developing the complication of diabetes. When they don’t manage their diabetes well, they worsen their lung conditions. It becomes a vicious circle. So indeed, that placebo-controlled study that we’re running right now in Canada is one to determine is this, like Alström, a proof-of-concept that the drug is a true fibrotic drug or does it become an indication for a earlier approval compared to the massive market one like chronic kidney disease. Chronic kidney disease, 26 million patients in the U.S., but you have to look at the one we are targeting initially are the severe chronic kidney disease patients that decline fast, get on the dialysis machine, cost a lot of money, for the system and a debilitating condition for them. So we really try to focus, Roger. At the point we are on proving our point, securing a pathway for a rapid, efficient, optimal regulatory approval for 4050. Keep in mind that we’re not a one trick pony show here. As we bring 4547 and the other compound, 4425 in the clinic, we may end up having some bait and switch. We may end up having, okay, let’s focus 4050 in the lung let’s bring the other one in the liver. Let’s bring the other one for the kidney. And right now, 4050 was our decade-long champion, scored well on pretty much all organs and – but it wouldn’t make sense to pursue all indication with one single agent. So we will – you can expect that the reason why we’re being the other one forward now is as we prove that 4050 is safe and efficacious in humans, well, we know that the likelihood of the other compounds that follow on will do as much if not better in certain organs then and also tremendously improve our positioning on partnership possibilities, because trying to carve out a compound between indication is not obvious. So if you can park one in a partnership and keep the other one for another partnership, you just realize that between ChinaCo we’re creating a deal machine and we have a deal machine as well for the small molecule. And now we’re introducing the concept that even plasminogen will be partnered. So yes, we’re busy on the business development front to confirm the value of what we’ve invested in for our therapeutics.

Fantastic. Fasten your seatbelts.

Absolutely. Thank you for your call, Roger.

Your next question comes from the line of Greg Vance, a Private Investor. One moment please. Your line is open.

Yes, good morning guys. Thanks. Just going to follow-up don’t meant to beat this horse, I apologize but that means first of all congrats on the presentation quality of the detail of the R&D obviously that’s a big focus with all of the focus on the balance sheet, you guys are talking about a $120 million cash use if I heard correctly, so on average about $30 million a quarter. And maybe this goes back to Greg question wise. I presume that you are expensing a bunch of stock that could be capitalized and you do that to build your capital your tax loss carry forward. Greg, can you characterize or do you know offhand what the dollar amount of your spend that could have been capitalized as opposed to being expensed, like what’s gone into capital, like capital structure into your plant and equipment, etcetera that you have otherwise expensed that could have been capitalized or inventory for that matter? Do you know what that number is either as a percentage or in dollars?

Thanks for the question. I think if I follow you, you are asking if there is anything that we’ve expensed that could have been capitalized. And I don’t know that I followed, I mean typically at what we have done is follow the accounting rules to the extent that it’s plant and equipment, processing equipment, plant related, it’s capitalized. But to the extent that it’s R&D related processing or CRO cost, manufacturing cost, staff costs, they are appropriately expensed.

Yes, but – I mean, to Greg’s point, I think that for – I think we made the comment and reflected before that huge ticket item, for example, the cost of plasma. So plasma inventory or certain component that typically would find its way on inventory or would find its way on COGS when you use it as a commercial product through IFRS guidelines right now, they are expensed. They are R&D expensed as if they were regions or whatever you can, so until such time as it’s anchored and that’s a very difficult flux. That’s why we have in our slide a little – which slide was it? In early slide, Slide 6, Greg, I am sorry, that little asterisk. I mean, this is – we see, I mean, clearly it’s been a frustrating process that because we don’t have the similar reviewed quarters in the year before, we could not do that kind of quarter-to-quarter or year-to-year and explain where that flow. We can only illustrate that there will be a movement of things that will end up either being capitalized or move on to COGS as we get commercial as opposed to be totally expensed, right.

Okay. I understand that. So, is it safe to say that of your predicted $120 million cash use in whatever portion the R&D is of that, that those relative ratios are going to stay the same for 2017 in terms of how much of that is attributable to inventory, etcetera, going into the manufacturing process?

I would say we just don’t know for sure because of the variability of timing and also the calculations that go into it, but...

You will have – it will be like, again, the tests will have to be following the test, but if anything, if you jump a year in ‘18, yes, a huge difference, but in ‘17, it’s going to be a question of how much does the quarter, Q4, amongst other things create this big variance. You may all of a sudden, say, oh my God, huge decline of R&D in Q4, what happened? Well, there is a lot of movement on transitioning some costs or capitalizing some costs.

If the rules tell us to capitalize inventory, we will capitalize inventory. It’s not a lot of gray area in the accounting rules. But from a cash flow standpoint, I think the cash – the intent here to backup the intent of the cash guidance is to try to be transparent with the Street as to what we incurred here given the variances of 2015 and 2016 to give you a sense of comfort in what 2017 is going to look like and with some credibility. And so I think that’s the point. Again, it sounds like you’re familiar with the accounting rules and what goes into the inventory capitalization and we will follow them appropriately.

Great. I mean, obviously, the credibility comes with hitting the numbers?

Well, absolutely, yes.

Can I switch gears, Pierre? Can you speak to the relevance of the acceptance to present at the Thoracic Society? It sounded like that was a fairly big deal. And in relation to that, can you guys speak to the broad strokes, your strategies with respect to 4050 and IPF in North America and what the timelines are?

Yes. Well, I mean obviously, everybody fight to get a spot on the limelight at those international conferences. There is always a lot of competition especially for the podium for oral presentation. So in addition to the oral presentation, we have a lot of poster sessions which is well attended and so on,, but the oral presentations signal the maturity of the product and the interest amongst the reviewer that the data is meaningful. I mean, that’s one signal to say. Now, obviously, the reviewer is aware of the full data that we will disclose in April and it’s obviously a sign that there is – 4050 is migrating to the bigger leagues. So, IPF is definitely an indication of interest to us as we always discuss. And we have some time to see how best to carve the indication and/or the product that we direct the product predominantly on IPF or CKD. Can we push both from a price reimbursement point of view? The good news is that 4050 price reimbursement wise would be compatible with IPF and chronic kidney disease late-stage. Both patients are in a trouble. Their kidney is going down requiring dialysis, which costs $100,000 to $110,000 a year. And IPF, as you know, is a terrible condition that declines very quickly. So right now, our strategy is we are in discussions with many players interested to take the poll for Europe or take the poll for Europe and the U.S. and they handle one indication on that. We are entertaining various discussions right now under confidentiality agreement. So, I cannot disclose more than this. But suffice to say, we are being quoted. So, it’s a good position to be in finally.

Okay, thanks. I have one last thing if I could. It’s just slightly multifaceted. But with respect to the wound healing and the progress in with Omnio in Sweden and the application – the trial application for – with the regulatory authority, have you guys given – is there merit to – given the apparent good working relationship that you have with the FDA and their acceptance of the technology and specifically plasminogen, is there a merit to a parallel application given the size of the wound healing indication, specifically? And as it relates and related to that, I am curious whether or not you spoke about the plasminogen, the process being different or a nuance of the difference in the makeup of the plasminogen for wound healing versus deficiencies specifically. Is there still the significant manufacturing efficiencies like with respect to producing them at the same time? Is that – I presume there is, so if you could address that? I would appreciate it.

Okay. So plasminogen as a bulk-active ingredient is the same for all indications of plasminogen. The formulation is different. You need a higher concentration when you want to inject locally in site such that you don’t have a huge volume that cause pressure in the tissue. IV, you don’t mind as much because it goes in the vein and it’s diluted with a diluent, but for – imagine a little Botox-like needle, small volume to be injected around a wound or around a hole in a tympan, you are requiring far less plasminogen than treatment to replenish the entire systemic concentration of a congenital patient. So the bottom line here is that you need less drug to treat a patient for ulcer, a wound or tympanic repair even less, right. And you are talking lots of magnitude lower. So different formulation, different pricing, because obviously a congenital patient will require the treatment for life versus acute requirement of few weeks of treatment for a wound. It’s completely priced differently, but such so is also the formulation and the concentration. The process is the same. The formulation is different. The concentration is different. The presentation of the product is different. To your question about the FDA, we will talk in due course with the FDA and the EMA. I would like to reemphasize the fact that the 2 centers where we are going to do that in Sweden are amongst the top 2 in the world anyway to begin with. So you would want those centers involved. The DFU treatment standard of care has been rewritten 16x times over with 300 chapters by the same person who will perform the clinical trial for us, Jan Apelqvist. The entity that we are retaining to perform the tympanic repair is among the two best in the world for that type of surgery and implementation. World-leading location, it so happened there in Sweden, and we don’t mind if they are producing good hockey players as well, but they also have amazing, amazing medical treatment, so happened for our two indications. Having those two names with our program creates huge credibility in the data that will be generated. I remain extremely confident, but this is not our decision. We will have to go with the regulator, but remain extremely confident that if we prove that injecting grams of plasma-derived protein in human is safe that when you get into milligrams and micrograms around a wound will not trigger the need for extensive clinical trials, right? So this is where we have a chance to actually achieve market entry faster. But first things first, let’s get those studies done by some of the top in the world. And therefore, the data generated is not going to be questioned and second-guessed. And that’s in part why we are doing it there. And we will have our discussions with the FDA, different agency, different group than the one right now who is reviewing plasminogen. And you can imagine that the attitude of the regulatory agency will be much different and positive once you present yourself with: one, data generated by some of the best in the world; two, already a product approved for sale. So, it becomes – these become Phase 4 studies. These become expansions of your original indication. So we will play that smartly, Greg. But be under no illusion that the folks that we are working with in Sweden are amongst the top leading authorities in the world for those particular indications.

Alright. That’s excellent. And do you feel like you guys are any closer with the marketing research you have done to being able to give us even broad strokes of your, like a conservative expectation for plasminogen sales for 2018?

Well, I mean, yes. I mean, as you know, we have been burned in the past with all kinds of guidance that we missed because clients change their forecast and change this and change that. We are going to be quite religious about how we want to go about guidance for the plasma-derived products and any therapeutics. Right now, what plays in terms of the impact on ‘17 is going to be definitely, are we getting approval in August or is it September or is it October? When is it exactly that we start shipping? And then more importantly, what’s the ramp up in ‘18, right? So we will come up with those guidance in due course. But I expect that it will be a lot of information disclosed at the AGM to give more color on this. I think it’s the right timing and we will have better visibility on all fronts.

Great. I will see you there. Thank you very much, guys.

Thank you. Thank you.

There are no further questions at this time. Presenters, I turn the call back over to you.

Well, thank you very much. It’s been a long call, but I really appreciate your interest in ProMetic and we have an exciting year behind us and an even more exciting ahead of us. And I am glad this call is over so we can go back to work. Thank you very much.

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