Athersys Inc (ATHX) 2008 Q4 法說會逐字稿

Good afternoon. My name is Alex, and I will be your conference operator today. At this time I would like to welcome everyone to the Q4, full-year 2008 financial results conference call. (Operator Instructions). After the speakers' remarks there will be a question-and-answer session. (Operator Instructions).

Thank you Ms. Lisa Wilson. You may begin your conference call ma'am.

Thank you and good afternoon everyone. I'm Lisa Wilson of In-Site Communications, investor relations for Athersys. Thank you for joining today's call.

You should have a copy of the press release issued at the close of market. If you've not received it, please call Libby Abelt at 212-759-5665, and it will be sent to you immediately.

Gil Van Bokkelen, Chairman and Chief Executive Officer; and B.J. Lehmann, President and Chief Operating Officer of Athersys will host today's call. The call is expected to last about 45 minutes and may be accessed through the Company's website at Athersys.com. A replay will be available after this call's completion by dialing 800-642-1687 in the US and Canada and 706-645-9291 from abroad and entering access code 34803568.

Any remarks that Athersys may make about future expectations, plans, and prospects constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including those discussed in the Company's Form 10-Q, 10-K and other public SEC filings.

Athersys anticipates that subsequent events and developments may cause its outlook to change. While the Company may elect to update these forward-looking statements at some point in the future, Athersys specifically disclaims any obligation to do so.

As a reminder, the Company will be holding an investor day on Wednesday, April 8, at the InterContinental hotel in New York City. The meeting will begin at 8:30 AM and will end at approximately 11:30 AM. Please complete your advanced registration at the Company website -- again at Athersys.com -- or contact me, Lisa Wilson, by e-mail at LWilson@InSiteCoNY.com or by telephone at 212-759-3929 to register.

With that, I would like to turn the call over to B.J. Lehmann. B.J.?

Thanks Lisa. Good afternoon and welcome to the Athersys fourth-quarter 2008 earnings conference call. I'm B.J. Lehmann, President and Chief Operating Officer at Athersys.

I will briefly review our financial results for the fourth quarter ended December 31, 2008, and then I will turn the call over to Gil Van Bokkelen, our Chairman and CEO, for a corporate update.

In the fourth quarter of 2008 we recorded revenues of approximately $260,000 compared to $800,000 for the same period in 2007. Our revenues are comprised of grant proceeds and license fees and milestone revenues primarily from our collaboration with Bristol-Myers Squibb.

The decrease in revenues largely reflects the completion of a multi-year grant in the third quarter of 2008, a grant which provided revenue in the fourth quarter of 2007, and a reduction in license fee revenue from our BMS collaboration related to the payment of a milestone in the fourth quarter of 2007.

Our research and development expenses for the fourth quarter were approximately $3.7 million compared to $4.2 million for the same period last year. The decline is primarily related to decreases in program development, sponsor research, and personnel costs as offset by increases in patent legal fees and other costs.

General and administrative expenses decreased to approximately $1.4 million in the fourth quarter of 2008 compared to $1.8 million in the fourth quarter of 2007. This decrease is primarily due to reduced legal and professional fees and personnel costs.

Interest income decreased to $172,000 in the fourth quarter of 2008 compared to $645,000 in the fourth quarter of 2007 due to the decrease in the Company's average cash and investment balances and declining interest rates.

We had a net loss of $4.7 million in both the fourth quarters of 2008 and 2007.

For the year ended December 31, 2008, revenues decreased to $3.1 million from $3.3 million in 2007 due to a decrease in grant proceeds which was partially offset by increased license fees from our BMS collaboration.

Research and development expenses increased $16.5 million in 2008 from $15.8 million in 2007 resulting primarily from increases in clinical and pre-clinical development costs, patent legal fees, research supply expenses, and personnel costs as partially offset by decreases in stock compensation expense and other expenses.

General and administrative expenses decreased to $5.5 million in 2008 from $8 million in 2007. This decline was due primarily to a decrease in stock compensation expense, legal and professional fees related to SEC filings and transactional work in 2007, as well as other expenses.

Net loss decreased to $18 million in 2008 from $19 million in 2007, reflecting the decrease in general administrative expenses as noted above, was partially offset by the increase in research and development and an overall decrease in net interest and other income.

Cash, cash equivalents, and available for sale securities totaled approximately $31.6 million at the end of the year.

Based our current plans we anticipate using $11 million to $13 million of our cash, net of inflows -- such inflows being grants, licensee fees, and the like -- to fund our activities in 2009, which includes clinical trial costs to advance ongoing MultiStem programs and reflects a reduction in 2008 and forecast 2009 costs as a result of our suspension of the ATHX-105 clinical development program, which Gil will further describe below, as well as other initiatives taken to reduce costs.

So with that, I would like to turn it over to Gil for the corporate update.

Thanks B.J. Good afternoon everyone and thank you for joining our call today.

I would like to begin with an update on our key development programs and briefly summarize the progress that we've made over the last year.

Let me start with our lead programs involving MultiStem, a patented and proprietary stem cell product that we are developing as a treatment for multiple disease indications.

MultiStem is currently being a evaluated in two ongoing clinical trials and was recently granted an IND authorization to begin a third Phase I trial in December for ischemic stroke.

MultiStem is an innovative biologic product that is manufactured from human stem cells obtained from adult bone marrow or other non-embryonic tissue sources. The product consists of a special class of human stem cells that have the ability to express a range of therapeutically relevant molecules as well as form multiple cell types.

MultiStem has the potential to deliver a therapeutic benefit in several ways, such as the reduction of inflammation, protection of damaged or injured tissue, and the formation of new blood vessels in ischemic injury. It achieves these benefits primarily through production of multiple factors that act to regulate the immune system, protect damaged or injured cells, and promote tissue repair and healing in other ways.

In contrast to traditional cell therapy, which aims to achieve whole cell direct replacement of damaged tissue, MultiStem exhibits a more drug-like profile in which cells exert a benefit in multiple ways and then are cleared from the body over time. We believe these and other capabilities will allow them to be relevant in a number of therapeutic areas.

During several years of pre-clinical work we've conducted with outside independent collaborators and contract research organizations, MultiStem has demonstrated the potential to address the fundamental limitations exhibited by traditional bone marrow or hematopoietic stem cell transplants. These limitations include the historical requirement for tissue matching between donor and patient, the typical need for one donor for each patient -- a reflection of the inability to expand cells in a controlled and reproducible manner -- frequent use of immune suppressive drugs to avoid rejection or immune system complications, and a range of other potential safety issues.

Unlike other cell types, after cells are isolated from a qualified donor, MultiStem may be expanded on a large scale for future clinical use and stored in frozen form until needed. Cells obtained from a single donor may be used to produce banks yielding hundreds of thousands to millions of doses of MultiStem, an amount far greater than other stem cell types can achieve.

Just as importantly, based on evidence to date, MultiStem may be administered without tissue matching or immune suppression -- in effect creating the stem cell equivalent of type O blood.

This combination of characteristics creates a highly distinctive profile combining true scalability with off-the-shelf utility and multiple therapeutic mechanisms of benefit with a drug like profile.

In a growing list of pre-clinical disease and injury models, MultiStem has demonstrated a consistent safety profile and efficacy, providing multiple opportunities for Athersys and potential partners to pursue.

With that as a background, let me review the recent progress and status of MultiStem development programs -- of certain programs.

In 2008 we advanced two MultiStem programs into clinical development, initiating Phase I safety studies in cardiovascular disease for treating patients that have suffered an acute myocardial infarction, and in oncology treatment administering MultiStem to leukemia or lymphoma patients who were receiving a traditional bone marrow or hematopoietic stem cell transplant -- to reduce the risk or severity of graft-versus-host disease.

Both of these Phase I studies were initiated based on extensive pre-clinical work in which MultiStem displayed a strong safety profile and efficacy in relevant animal models.

In the fourth quarter we announced successful initiation of patient enrollment in both Phase I studies. Since then we've added additional clinical sites participating in each study and continued with patient enrollment. As of now we are approximately one-third of the way through patient enrollment for the AMI study, which currently includes seven participating clinical centers. We intend to add additional sites to the study in the near future and to complete enrollment for the study by the end of the year.

In the Phase I study involving administration of MultiStem to cancer patients at risk for complications from a traditional bone marrow or hematopoietic stem cell transplant, we now have three participating clinical centers and expect to add additional centers in the future.

While initial patient enrollment has been somewhat slower than hoped for, we have additional patients scheduled for inclusion in the study and believe that the addition of these new centers will help us increase the rate of enrollment as we move forward.

In addition to the current studies, in December 2008 we were granted authorization by the FDA to initiate a third clinical study administering MultiStem to patients for the treatment of ischemic stroke. According to recent American Heart Association estimates, over 700,000 patients suffered an ischemic stroke in the United States in 2008. It remains one of the most significant unmet medical needs that burdens our healthcare system.

According to the American Heart Association, the estimated direct and indirect costs of treatment for stroke for 2008 were more than $65 billion. The average long-term costs of care for stroke victims was estimated at more than $140,000 per patient -- in 1999 dollars -- representing a staggering aggregate economic burden on the healthcare system in the United States.

Current drug therapy for treating an ischemic stroke is limited to administration of the clot dissolving drug tPA. In accordance with current clinical guidelines, tPA must be administered to stroke patients within three hours after the occurrence of the ischemic stroke in order to remove the clot while minimizing potential risks such as bleeding into the brain.

However, many strokes occur at night or at a place or a time where immediate diagnosis or medical treatment is simply not available. As a result, only a very small percentage of ischemic stroke patients are treated with tPA.

In pre-clinical studies conducted with our collaborators, a single dose of MultiStem administered intravenously has demonstrated the potential to safely deliver a substantial and durable therapeutic benefit even when administered several days after an ischemic stroke has occurred. Based on results from multiple studies, we believe that this benefit is achieved through several mechanisms including reduction of inflammation and immune system modulation in the ischemic area, and the protection and rescue of damaged or injured cells, including neuronal tissue.

The Phase I safety study authorized by the FDA is a double blind, placebo controlled study that allows for administration of MultiStem to patients 48 to 60 hours after an ischemic stroke has occurred. This treatment window would represent a meaningful increase over currently available treatment options. Furthermore, authorization of this IND represents the first clinical study in ischemic stroke patients using an off-the-shelf stem cell therapy, one that can be produced at scale.

If MultiStem is demonstrated to be both safe and effective in appropriately designed, well-controlled studies, we believe that it would have a substantial effect on the standard of care for ischemic stroke and could improve the quality of life for many patients in need while also creating substantial value for our stakeholders.

We look forward to initiating the study upon the receipt of grant funding or acquisition of capital obtained through partnering, or other activities enables us to do so.

We are committed to exploring the potential utility of MultiStem for treating a range of other conditions including autoimmune diseases, other conditions that involve the immune system, and certain neurological conditions -- especially those in which inflammation plays a role. We intend to describe some of these opportunities at our upcoming investor and analyst day, which as Lisa mentioned will be held on April 8 in New York.

We are excited about the progress we've made with MultiStem and look forward to the further advancement of our trials. We believe that MultiStem has the potential to offer advancement in treatment to patients suffering from a range of diseases.

However, given the potential breadth, we recognize that we're not in a position to pursue each potential opportunity relying solely on our current resources or internal operational capabilities. Accordingly we are doing two things.

First, we are engaged in a network of collaborations with outstanding investigators across various disciplines and disease areas in work that is being conducted at leading institutions both here in the United States and in Europe. We are excited by the progress being made in many of these collaborations and look forward to publications and presentations by and with our collaborators to highlight the progress being made.

Second, we are actively evaluating possible partnering opportunities with companies that understand the potential of stem cell therapy and its long-term potential impact across multiple clinical areas. While it would be premature to comment on specific opportunities at this point, we are very encouraged by the growing evidence and interest in and commitment to the area among companies that possess complementary capabilities, significant resources, and a dedication to developing therapies with best-in-class potential.

In addition to our MultiStem programs, we are developing pharmaceuticals for the treatment of obesity and certain neurological conditions affecting attention, cognition, and wakefulness. In the obesity area, we are developing compounds that selectively stimulate the 5HT2c serotonin receptor in the brain, which is known to play an important role in regulating appetite. These compounds, known as 5HT2c agonists, are designed to reduce appetite and food intake in order to achieve substantial weight loss over time.

As we have previously disclosed, last year we completed several clinical trials in the United Kingdom involving ATHX-105, a potent and selective 5HT2c receptor agonist that was being developed for the treatment of obesity.

In the summer of 2008 we applied to the FDA to initiate a double blind, placebo controlled Phase II clinical trial involving ATHX-105. In September of 2008 we were notified by the FDA that our proposed Phase II clinical study was being placed on partial clinical hold pending the agency's receipt of additional information and discussion with the FDA regarding several issues, some of which related to proposed trial design, and one of which related to a pre-clinical toxicology finding observed in rodents that was inconsistent with earlier test results and not reproducible despite multiple attempts in several independent labs.

At the suggestion of the FDA, we conducted two additional studies to provide further data about ATHX-105's potential toxicological profile -- one repeating a prior study under different conditions, and another study that we had not previously conducted and that is not typically included in a pre-clinical evaluation.

While the first study confirmed our prior negative findings -- meaning the absence of a relevant toxicological effect -- the second study produced data that suggests a rat-specific toxicological effect. We met with the FDA to discuss the issues and reached resolution regarding all of the study design issues related to the partial clinical hold.

However, based on the results of the additional test and subsequent discussions with the FDA, we believe that the apparent rodent-specific effect could require additional non-clinical studies and greatly complicate long-term toxicology testing and thereby increase substantially the development time, risks, and costs associated with subsequent development of ATHX-105.

Furthermore, these increased risks could make it substantially more difficult or impractical for us to establish an attractive, third-party collaboration for the further development and commercialization of ATHX-105.

Consequently, we have decided to suspend further development of ATHX-105 and withdraw our IND application and are currently focusing on the advancement of next-generation compounds that exhibit improved characteristics. While the potential significance of this toxicological effect to humans remains unclear, it appears to be a compound-specific effect that is not representative of the class of next-generation compounds that we are continuing to develop while we explore potential partnerships for the program.

In addition to our 5HT2c agonist program, we are also independently developing novel, orally active pharmaceutical products for the treatment of certain central nervous system disorders, including disorders affecting cognition, attention, or wakefulness. This includes a range of indications such as narcolepsy -- excessive daytime sleepiness -- or chronic fatigue associated with certain other disease indications. It also includes potential indications such as attention deficit hyperactivity disorder and cognitive disorders such as schizophrenia or certain diseases affecting memory.

These programs are focused on the development of potent, selective histamine H3 receptor antagonists or inverse agonist compounds. It acts by elevating levels of neurotransmitters in the sleep and cognitive centers of the brain and stimulating neurological tone. This results in an enhanced state of wakefulness and cognition without causing hyperactivity, excessive rebound sleepiness, or addiction.

At Athersys we have developed a portfolio of highly potent, selective histamine H3 antagonists and inverse agonists with properties that we believe create the potential for establishing best-in-class therapeutics. Specifically, we've been committed to developing compounds that exhibit outstanding potency and selectivity, half-lives suitable for once per day dosing, and a strong safety profile that is free of toxicological properties that could be problematic for competing programs established at other companies.

We are happy to report that we have successfully achieved that goal and have established a portfolio of compounds that we believe have an outstanding competitive profile. As with our other programs, we're currently evaluating potential partnering opportunities around his program and look forward to describing our recent progress more fully at the upcoming investor day event in April.

In closing, I would like to state that we are encouraged by the results we have achieved and look forward to the continued progress of our trials. We believe that each program we are pursuing offers the opportunity to develop best-in-class therapeutic products with the potential to establish safer and more effective therapies to treat patients suffering from a broad range of diseases.

We're committed to achieving that goal and believe that in doing so we will be able to create substantial value for our shareholders.

With that, we'd be happy to take a few questions.

(Operator Instructions). Bill Tanner.

Thanks for taking the question. Gil, just a couple of questions along timelines, if you could, in terms of the 2c agonist, what would you look at then in terms -- excuse me -- antagonist -- what would you look at -- a timeline in terms of nominating a clinical candidate?

And then just on a MultiStem partnership -- I know these things are kind of like nailing JELL-O to a tree, hard to nail down; but just what kind of a timeline do you think might be reasonable to contemplate some kind of a partnership being done for that program?

Thanks Bill. Well, with regard to the timeline in terms of development of ATHX-105, I think it's a little premature at this point in time to give an exact timeline. I think we've made very good headway in terms of establishing a portfolio of very high-quality compounds that we are excited about. But we're not ready just yet to actually lay out what a potential development path might look like.

And frankly, it might be impacted by potential partnering activity in terms of interacting with other companies. So I think at this point in time we're going to refrain from setting any specific guidance in terms of timelines there. But we are very excited about what we've got going on in the program.

With respect to partnering around the MultiStem program, again I think we're very much encouraged by the level of interest and the broader level of activity among a range of different companies that relates to understanding the opportunities in the stem cell and regenerative medicine space.

Again, we're not going to give any specific guidance there about what a potential transaction might look like or the precise timetable, but I can tell you that it's something that we regard as being very strategically important for the organization, and it's something that we're very intensely focused on as a Management team and as a Company. And again, we are very encouraged by the level of interest from various organizations.

And as it relates -- certainly it kind of follow on's for 105. I mean, it sounds like the rat finding was somewhat spurious. Is it fair to say that that would be one of the first things with any follow-on compound you would check? Or you really do think this is something that is -- appears -- it was kind of idiosyncratic and not likely to see again?

I think actually I'm going to ask John Harrington, who is our Chief Scientific Officer, who is here with me as well; and he will offer up some comments on that. But I will give you kind of the short answer to it, which is this is obviously something that we would work to ensure is not going to be part of any compound that we advance into subsequent development, and so it's basically something that we would put a priority -- in terms of characterizing. But we do believe it is something that was compound-specific.

And with that, let me turn it over to John and let him offer up some more observations on it.

All right. Thanks Gil. Several points worth making here. First, as Gil mentioned, we do believe that this toxicological finding was compound-specific. We've done testing within the same series as ATHX-105 and have found that compounds within this series don't appear to have this same toxicological effect.

It does appear to be a metabolite, and more specifically a rat metabolite. That metabolite we believe is not produced in humans.

We have done a fairly extensive workup of other compounds within the same series as ATHX-105. We continue to evaluate compounds within that series, and obviously we'll take a very close look at any compound that might come out of this series.

It's also worth pointing out that in our backup program we are actually working on multiple chemical series over three different, chemically distinct chemical series in which we have developed highly potent, highly selective 5HT2c agonists, and so it is quite possible that any backup compound that we select may come from another series. And obviously we are evaluating compounds across all dimensions. We will be looking at this specific toxicological finding as we move through that process.

Matt Osborne.

Gil, just a quick question on MultiStem -- or perhaps B.J., this is for you. Can you comment on enrollment now that the Prochymal trial is fully enrolled. Do you expect enrollment for your Phase I to pick up or increase?

Matt, B.J. here. I'm happy to address it, and Gil may add a few comments.

I do expect that we may see some positive effect in our oncology study as a result of less activity from Osiris in the clinic. It's hard to know what that impact is actually going to be. It appears that the number of sites has been an issue. Having as many sites on as possible is key to I think driving enrollment in this area. So I think it will allow us to add sites perhaps a bit more quickly and move things along at a faster pace.

We are also taking a look at a couple of other strategies. We're not going to go into detail right now. We'll be happy to talk about them a bit more at our analyst day -- other strategies that would help accelerate enrollment in that study. And we have a pretty restrictive inclusion/exclusion criteria that we'll take a look at.

And I think there are some other opportunities as well that could allow us to move things a little bit more quickly with the objective of course to demonstrate safety with our product and start to get a read as soon as we possibly can on the biological activity of the product in that particular indication. So more on that to come.

Great. And just to follow up, as you discussed about the commercial opportunity for MultiStem, are any of the potential partnerships or deals that you're discussing now -- perhaps in the early stages of discussing -- dependent upon that Prochymal data in the third quarter, or are they really just independent of those results right now?

I would say they are largely independent. Certainly folks are looking closely at the results that Osiris will announce at that point in time, but they are more focused on the basic capabilities and characteristics of our product both from a safety and efficacy perspective, looking both at pre-clinical data.

Our manufacturing platform has been a key part of the discussions. We think it's very distinctive. It seems to be resonating with folks that we're talking with.

So they seem to be much more focused on the capabilities and the potential of the product platform as it can be applied in a variety of different indications.

But most of these folks that we're talking with are very well educated, they clearly have a perspective and information about what Osiris is doing with Prochymal, and certainly they are following their progress very closely.

Tim [Findley].

Really you just answered my question. So I don't have any more. Thank you.

(Operator Instructions). We have no further questions. Do you have any closing remarks Mr. Gil?

Well, I'd like to thank everybody that's been listening in today for participating in the call, and we certainly hope that you will attend the upcoming investor day and analyst day event in New York on April 8. That will be I think a very productive event and allow us to go into more detail regarding some of the very exciting programs or dimensions of some of the things that we're doing here at the Company.

So again, thank you for your time. And we look forward to speaking to you at the upcoming event. Thanks very much.

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