Athersys Inc (ATHX) 2009 Q4 法說會逐字稿

Good afternoon. I'll be your operator today. At this time I would like to welcome everyone to the Athersys Q4 year-end financial results conference call. (Operator Instructions) I would now like to turn the call over to Bill Bunting from In-Site Communication. Please go ahead.

Thank you, and good afternoon, everyone. I'm Bill Bunting 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 have not received it, the release is available on Athersys' website at www.Athersys. com, or you may call Libby Abell at 212-759-5665 and it will be sent to you immediately. Gil Van Bokkelen, Chairman and Chief Executive Officer, and BJ 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, or 706-645-9291 from abroad, and entering access code 59293658.

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, the Company specifically disclaims any obligation to do so.

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

Thanks, Bill. Good afternoon, and welcome to the Athersys fourth quarter 2009 earnings call. I'm BJ Lehmann, President and Chief Operating Officer at Athersys. I'll briefly review our financial results for the fourth quarter and full year ended December 31, 2009, and then turn the call over to Gil Van Bokkelen, our Chairman and CEO, for a corporate update.

In the fourth quarter of 2009, we recorded revenues of approximately $869,000 compared to $259,000 for the same period in 2008. Our revenues are comprised of grant proceeds and contract revenues from our collaborations with Bristol-Myers Squibb and Pfizer. The change is due principally to an increase in grant funded projects and contract fees in the fourth quarter of 2009 compared to 2008. Our research and development expenses for the fourth quarter were approximately $4.1 million compared to $3.7 million for the same period last year. The difference relates primarily to increases in cash and stock compensation expenses, which were partially offset by decreases in clinical and preclinical costs, and outsourced study costs during the period. General and administrative expenses increased to $1.7 million in the fourth quarter of 2009, compared to $1.4 million in the fourth quarter of 2008, reflecting, among other things, increases in cash and stock compensation expenses. Our net loss was $5 million in the fourth quarter of 2009, compared to $4.7 million in the fourth quarter of 2008.

For the year ended December 31, 2009, revenues declined $2.2 million from $3.1 million in 2008, largely as a result of a decrease in revenues from our BMS collaboration. While we may continue to prepare and deliver validated drug targets to BMS for use in its drug discovery efforts, we anticipate that BMS's demand in the future for additional targets will be substantially reduced or cease together. We expect some residual revenues associated with milestone achievement for targets previously delivered to BMS. Also included in contract revenues are fees associated with our collaboration with Pfizer, which began in December 2009. Looking forward over the next few years, we expect our contract revenues related to the Pfizer collaboration to include amortization of the $6 million upfront license and technology access fee received from Pfizer, two, research and development funding, three, payments for manufacturing, and four, possible milestone revenue.

Lastly, our revenues include grant proceeds, which remained relatively consistent for 2009 and 2008. However, the grant revenues could fluctuate during any year based on the timing of grant-related activities and the award of new grants. Research and development expenses decreased to $11.9 million in 2009 from $16.5 million in 2008, resulting primarily from decreases in clinical and preclinical development costs, and outsourced study costs, as partially offset by increases in cash and stock compensation expenses and sponsored research costs. General and administrative expenses increased slightly in 2009 to $5.6 million from $5.5 million in 2008. The increase was a result of increases in cash and stock compensation expense that were partially offset by decreases in legal and professional costs.

Interest income decreased to $375,000 in 2009 from $1.1 million in 2008, due to the decline in cash and investment balances during the period. While we received an upfront payment from Pfizer in 2009, the payment had limited impact on interest income given its receipt in late December. Our net loss was $15.4 million in 2009 compared to $18 million in 2008. Our cash, cash equivalents, and available for sale securities were $26.4 million at the end of the year. Based on our current operating plan, and assuming no new financing or significant business transactions, we believe this will be sufficient to support our operations through the end of 2011.

With that, I would like to turn it over to Gil for a corporate update.

Thanks, BJ. 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 several months.

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. In 2009, we made significant progress on both the business development front, as well as in our own clinical and preclinical development efforts. First, in December 2009, we entered into a collaborative agreement with Pfizer to develop and commercialize MultiStem for the treatment of inflammatory bowel disease, or IBD, for the worldwide market. Members of the Pfizer regenerative medicine team are already actively engaged and work with members of the Athersys team, and we are very pleased with the launch of the collaborative activities and the coordinated effort by both teams, and are excited about the future direction of the partnership.

As we have described previously, under the terms of the agreement, we received an upfront cash payment of $6 million from Pfizer, and will receive research funding and additional support during the initial phase of the collaboration. In addition, we are eligible to receive milestone payments of up to $105 million upon the successful achievement of certain development, regulatory, and commercial milestones. Pfizer will have the primary responsibility for the development, regulatory approval, and commercialization of the program, although the team at Athersys will be actively involved along the way, and we will be responsible for coordinating product manufacturing.

In addition, we will receive, we will receive tiered royalties on worldwide sales of any approved MultiStem IBD products. Alternatively, just prior to the initiation of Phase III clinical development, we may elect to codevelop MultiStem IBD products with Pfizer, in which case we would share the development and commercialization expenses and profits or losses on an agreed upon basis from Phase III forward, in addition to certain milestone payments that we may receive. Currently, we are working closely with Pfizer to complete planning and additional preparatory work, prior to submitting an IND and moving the program into clinical development. One of the main reasons we mutually decided to collaborate is that both companies share a common objective and philosophy regarding how to approach the process of development, regulatory approval, and commercialization of new medicines.

As I have stated before, we will approach the development of MultiStem for IBD in a systematic and comprehensive manner. What that means is, that our approach will be rigorous and thorough, so as to minimize the potential for unexpected delays or obstacles in the future. Again, our mutual objective is to leverage the prior work we have done in other areas, while working together with Pfizer to develop a deeper understanding of the biological and clinical profile and characteristics of MultiStem for IBD, and de-risk the overall development effort. Our work is well under way, and we expect to make sufficient progress with Pfizer toward our objective of advancing the program into clinical development.

Next, let me review the recent progress and status of our ongoing MultiStem development 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, or AMI, and oncology treatment support, administering MultiStem to leukemia or lymphoma patients who are receiving a traditional bone marrow or stem cell transplant. The objective of this clinical program is to reduce the risk or severity of graft versus host disease, or GVHD, while also potentially addressing other complications commonly associated with radiation conditioning regimens, such as compromised gastrointestinal function. Both of these Phase I safety were initiated based on extensive preclinical work in which MultiStem displayed a strong safety profile and efficacy in relevant animal models.

During the first quarter of 2010, we completed patient enrollment for our Phase I MultiStem AMI study. During the first half of 2010, we will complete both the one-month and four-month patient follow-up visits, and we expect to announce our top line results with our partner, Angiotech, during the middle of the year. The primary end point for the Phase I AMI trial is evaluating safety, although as we have described previously, we will also be monitoring secondary end points that involve assessment of cardiovascular function, such as ejection fraction and other measures.

Looking forward, we plan to utilize the Phase I results, combined with our extensive development efforts to design a robust Phase II program, which will determine dose levels and delivery timing. Following the announcement of our Phase I results, we expect to provide some initial guidance on the perspective timing of a Phase II study. For the Phase I study involving administration of MultiStem to cancer patients at risk for complications from a traditional bone marrow or HSG transplant, we have two treatment arms. The first arm is a dose escalation study that involves administration of the single dose of MultiStem, shortly after the initial hematopoietic stem cell transplant. It involves three separate dose levels. We have now successfully completed dosing of patients in the first two dose levels, and expect to initiate dosing of the third cohort shortly.

The second arm of the study involves administration of multiple doses of MultiStem, given over the first 30 days, following the initial transplant in the second arm. The primary end point for this Phase I trial is safety, such as monitoring for acute infusional toxicity. In addition, we are evaluating multiple secondary end points, such as monitoring for incidence and severity of GVHD, survival and infection. I'm pleased to report that we have recently received authorization from the independent safety committee to commence the multidose study, and we are now dosing patients in this arm of the study.

As we reported in our prior earnings call, initial efforts to enroll patients in this study were slower than expected. However, last fall, we took steps to address this issue, through the addition of clinical sites and through proposing protocol amendments that were subsequently authorized by the FDA and the institutional review boards of the participating clinical sites. Protocol amendments included increasing the age limit for patients eligible to participate in the study, as well as enabling enrollment of patients receiving a bone marrow or hematopoietic stem cell transplant after previously experiencing a first remission as opposed to limiting the study to inclusion of second remission patients. These modifications appear to have had a positive impact on our enrollment rates, as we had hoped. Our goals for the program this year are to complete enrollment for the single dose administration arm, and to make substantial progress in the multidose arm.

In addition to these studies, we've been granted authorization by the FDA to initiate a third clinical study, administering MultiStem to patients for the treatment of ischemic stroke, a leading cause of death and disability. In contrast to single agent therapeutics, our preclinical data suggested MultiStem can provide multiple therapeutic benefits in the context of a stroke or other neurological injury and that the treatment window is potentially substantially greater than conventional therapies.

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 the current standard of care, which involves administration of the thrombolitic TPA within 3 hours of the occurrence of the stroke. As a result of this narrow treatment window, the vast majority of stroke patients do not receive treatment with TPA. Furthermore, we believe this IND is the first for a double-blind placebo controlled study in ischemic stroke patients using a stem cell therapy that may be produced at scale, administered off the shelf, and that offers multiple potential mechanisms of therapeutic benefit in a consistent safety profile.

In 2009, we took a cautious approach to initiating this clinical study, in light of the volatile and uncertain capital markets. However, while we continued our preparations to initiate the study, we have also continued our research efforts designed to deepen our understanding of the ways in which MultiStem can promote healing and repair in the wake of an ischemic stroke or other types of neurological injury. Earlier today, members at Athersys and collaborators of the Company presented research at the eighth annual World Congress On Trauma, Shock, Inflammation and Sepsis that further demonstrates how MultiStem, when administered in various neurological injury models, including ischemic stroke, neonatal hypoxic ischemia, or spinal cord injury can dramatically modulate gene expression and dynamically regulate multiple cell types and biological path ways that play a fundamental role in controlling damage in inflammation following neurological injury. As a result of this and the substantial prior work we and our growing network of collaborators have completed, we believe MultiStem will have broad application in the neurological area.

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 the Company and our shareholders. We are committed to advancing our stroke clinical program, as well as other programs in the neurological area. We're 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, including autoimmune diseases and other conditions that affect the immune system, and certain neurological conditions, especially those in which inflammation plays a role.

As we have discussed publicly, we recognize that we are not in position to pursue each potential opportunity, relying solely on our current resources or internal operational capabilities. Accordingly, over the past several years, we undertook two parallel efforts to address this. First, we've 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're excited by the progress being made in many of these collaborations and look forward to publications, presentations and announcements by and with our collaborators to highlight the exciting progress.

Second, we began to actively evaluate possible partnering opportunities with companies that understand the potential of stem cell therapy and its long-term potential impact across multiple clinical areas. The collaborative agreement with Pfizer I discussed earlier is a result of these efforts and it complements our previously established partnership in the cardiovascular area with Angiotech. We continue to pursue discussions with others, and we are encouraged by the growing evidence of interest and a 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 seratonin 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 meaningful weight loss over time. The mechanism of action is extensively validated in humans through drugs such as Fenfluramine and Dexfenfluramine, and more recently through clinical experience with a novel 5HT2C agonist, Lorcathrin. Unfortunately Fenfluramine and Dexfenfluramine activated the 5HT2B receptor, which is now known to cause cardiovascular toxicity.

Based on extensive clinical studies Lorcathrin appears to be free of these cardiovascular liabilities, as we and others had predicted. However, limited selectivity at the 5HT2A receptor results in undesirable CNS-related side effects when the drug is administered at higher dose levels, thereby limiting dosing and efficacy. This receptor is known to be the biological target of action for LSD and other hallucinogens. The evidence in this area now clearly demonstrates that while potency for the 5HT2C receptor offers the potential to achieve meaningful weight loss, compound selectivity at both the 5HT2B and 5HT2A is necessary to achieve safety and tolerability, as well as maximize efficacy. I am happy to report that we have successfully achieved a major objective, and have developed a high quality portfolio of potent compounds, which are potent at the 5HT2C receptor, yet exhibit no agonist activity at either the 5HT2B or 5HT2A receptors at any physiologically relevant concentration. We believe this represents a substantial achievement, and that these compounds have the potential to be best in class clinical candidates. We are actively evaluating which compounds we want to move forward in our further development efforts, while we also evaluate potential partnering opportunities.

In addition to our 5HT2C 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 conditions. 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, that act by elevating levels of neurotransmitters in the sleep and cognitive centers of the train 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've 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 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. Our histamine H3 programs leads have demonstrated high potency and selectivity, excellent pharmacokinetic profile, are well tolerated, and efficacious in animal models. In 2010, our goal is to select a clinical candidate for further development, whether developed alone or in the context of a partnership.

In addition to the development and collaboration efforts I've discussed today, I want to briefly highlight some recent intellectual property achievements. In February, we were awarded two broad patents. One in the US, and the other in Europe, for non-embryonic pluripotent stem cells. These patents are especially important to Athersys as they extend the coverage of composition, isolation, differentiation and scalable manufacturing of non-embryonic stem cells that are at the core of our technology and product portfolio. Today, Athersys has a broad IP portfolio, including 14 granted patents and more than 120 global patent applications surrounding our stem cell technology and MultiStem product platform. We intend to further grow this intellectual property estate over time.

In closing, I would like to state that we are encouraged by the results we've achieved, and look forward to the continued progress of our trials and business development efforts. 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 are committed to achieving that goal, and believe that in doing so, we will be able to create substantial value for our shareholders. Finally, our balance sheet is strong, with $26.4 million in cash at year end, and provides us with adequate resources to prudently manage our development programs through 2011.

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

(Operator Instructions). Our first question comes from the line of Adam Cutler from Canaccord Adams. Your line is now open.

Hi. Thanks for taking the question. Wondering if you can help us with a little bit of perspective on what to expect from your clinical studies in AMI and bone marrow transplant as well as stroke in terms of what would be a good outcome from those studies, and what information are you looking for specifically in terms of forming the design of your next studies in each of those indications?

Yes, thanks, Adam. These studies are designed as Phase I safety studies. And the primary end points really focus on establishing patient safety in a consistent profile of safety across a dose range. So really those are going to be the primary readouts, making sure that there's no evidence, for example, of any acute infusional toxicity or other things that could be potentially worrisome or problematic when you're involving an IV stem cell product like MultiStem.

But we are going to be actively monitoring, as I mentioned. So for example in the AMI study, for any signs of improvement in ejection fraction or other measures of cardiovascular function. Now, one thing I think needs to be borne in mind, this is not a large study. And so it involves a limited number of patients. And it's not really powered to statistically demonstrate efficacy. But that being said, I think if we're lucky, we may see some very encouraging signs of improvement in ejection fraction or other relevant measurements in these patients. And I think that we believe that there's going to be enough patients in this study so it will help guide us and our partner, Angiotech, in terms of our decision making with respect to what we could do next in a Phase II study.

With regard to the bone marrow transplant support study, again, it's a relatively small study. It's two, really two independent arms, the single dose administration and the multidose administration, where we're doing dose escalation on both sides, and the primary objective is to establish a consistent safety profile across a dose range, meaning no absence of acute infusional toxicity or other relevant safety issues in either the single dose or multidose arms of the study. And we will be measuring for various efficacy end points in both of those studies as well, or in both arms of that study, I should say.

So I think that, looking for various parameters, again, it's not, it's not powered to really give us a statistically significant pattern of efficacy, but, again, I think if we see encouraging signs in terms of improvement of outcome and some of the parameters that we would be looking at, I think I would take that as a very positive sign. I think one of the mistakes we've seen people make in the past, they are not willing to take a diligent, rigorous, systematic approach to their early clinical study design and that is something, those are mistakes that frankly we're not going to be making and we know that Pfizer feels the same way, that they are committed to the same philosophy. In future clinical work we would be engaging in with them, we're very confident they will be taking the same approach.

The ischemic stroke study is actually a little bit larger than the AMI study and the GVHD study, so that would involve just under 50 patients. And again, it's a dose escalation study, but in contrast to the two current studies that are ongoing, that's actually a double blind placebo controlled study. And again, it's not really going to be large enough or powered to demonstrate statistically significant indications of efficacy, but we will certainly be monitoring for any evidence of efficacy in that study. And again, I think that will help shape our thinking.

One of the things that we've done over the past few months, as we've been continuing our preparations to launch these stroke study is we've continued to do additional work in the stroke and neurological area, such as some of the work that was described at the conference earlier today. And we've actually made some very exciting observations about some things, and we're going to take the opportunity about some of the things that we've learned to submit additional information to the FDA and request certain protocol amendments so that we can actually incorporate that into a modified study design. And we think that will give us greater flexibility to look at some things as we launch that study and move it forward.

Okay. So if I can ask a follow-up, it sounds like in particular, in the AMI and bone marrow transplant studies, the main focus is on safety. So as long as the product looks safe, I assume that would warrant further studies. But is there a threshold in terms of looking at some of the efficacy parameters, even given that there isn't a control in those studies and that they are certainly not powered to look at efficacy in terms of any statistical significance? Is there a threshold in terms of seeing any kind of efficacy signal of some kind that would lead to sort of a go/no go decision in terms of future studies?

Well, I think, again, based on all the preclinical work we've done, we feel pretty optimistic about the outcome for both these studies and our ability to move it forward. And I think the primary objective, again, is seeing a consistent pattern of safety across the dose range that we're exploring. But again, we are going to be looking very closely for signs of efficacy, and I think that that information could factor into how we would design a subsequent study. But I can tell you, we've done a lot of preclinical work where we've dosed animals at very, very high levels, and we've seen very consistent pattern of safety across many studies that we've conducted. So we're pretty optimistic that we're going to see a very good safety profile from these studies. Obviously we can't guarantee that, but we expect that. And I think that we feel at this point we're going to be in very good position to move forward into the Phase II trials.

Okay. Can you just remind us about what's being done in terms of monitoring for safety as these studies are, are enrolled and ongoing? I presume that if there were some safety problems, you would know about it, we would hear about it, and -- along the way. Is that fair to say?

Yes, that is fair to say. If there was -- I mean obviously, in these studies, we monitor very carefully. In fact, in these studies, there's an independent safety review board that evaluates the data after every dose level, and basically looks at that data and then they have to review it before we actually move on to the next cohort.

Right. So no news is good news from a safety perspective at least in those studies so far?

Correct.

Okay, great. Well, thanks for answering the questions.

Yes.

Your next question comes from the line of [Stephen Gunne from Life Tech Capital]. Your line is open.

Hi, guys. Thanks for taking my questions. Got some housekeeping questions. First, on the AMI trial, Gill, can you tell us if all six patients were enrolled at the highest dose concentration? In other words, did you fully enroll with no maximum tolerated dose issues?

Yes, they were. Right. There were three dose cohorts as well, just to be clear.

Right. Do you recall what the dose concentration was at the highest?

We do. We haven't disclosed that information yet.

I have to ask. Moving on to leukemia, or the bone marrow, if I recall, you moved the age limit from 60 up to 65, while your AMI trial was about 80 years old. So is it fair to say that we don't see an age-related safety signal?

Yes, I mean we've never seen anything that would suggest that there's any kind of age-related safety issue. I think the age range was originally selected based on the advice and the input of some of our key clinical advisors. But once we began screening patients for enrollment, it became clear that we were missing out on a cohort of patients that were between that 60 to 65 age range for the bone marrow transplant trial.

All right. On these single-dose -- of a single-dose arm, you've completed the first two cohorts. You're into the third high dose concentration cohort. You're not going to tell me what that is. But is the high dose concentration cohort the same as your high dose in the AMI trial?

Well, the AMI trial, we're actually delivering that locally. And so we're actually using much smaller doses in the AMI study because we're delivering the product directly into the heart, into the region of ischemic damage. Whereas in the bone marrow transplant trial, we're delivering the product IV.

Right. So that's systemic.

Yes, we're using larger doses. But it does actually raise a related question, Steve, which is, in terms of this data, we believe that this data is actually going to be relevant to other things that we will be doing over time.

So this -- so the bone marrow Phase I is really going to be our first look at safety of systemic delivery, is that correct?

That's correct.

Okay. Want to jump real quick to ischemic stroke. On these -- I need a little clarity here. The phrasing is administration within 48 to 60 hours. Does that preclude earlier, like 24 hours after ischemic stroke, or -- what is the actual window?

Yes, that's a great question. So it does in fact for this study preclude earlier administration. But let me just point out a couple of things there. We and our clinical advisors intentionally selected that window, because it's well known -- so again, it's going to be a safety study. We're going to be looking primarily at safety end points, but we will be doing a range of different functional assessments to look for evidence of improvement in these stroke patients.

Now, one of the things that's known in many stroke patients, they will exhibit a spontaneous recovery or improvement in that first 24 to 48-hour timeframe. And that can create a lot of noise in terms of putting you at a real disadvantage in terms of trying to determine whether or not you're having a meaningful impact in patients that wouldn't otherwise have improved. So the reason why we selected that timeframe for this initial study is because we wanted to maximize our chances, if you will, or increase the odds, that we would be going into patients that wouldn't spontaneously recover in a significant way early on. So basically, we would essentially be ruling out patients that showed a dramatic spontaneous recovery very early on after the stroke.

So would it be fair to say in this trial, we have a higher chance of seeing an efficacy signal than we would in a typical Phase I?

I think that's right. Again, it's not really powered to demonstrate efficacy, but I think we certainly would have a better chance than if we had done it at, say, an earlier timeframe where you might have many patients or some significant number of patients that would have spontaneously recovered on their own because obviously that impacts your numbers in the placebo group.

Can you share with us what the follow-up periods will be for these patients?

The followup goes out to one year.

Yes, up to one year.

Yes.

And we have a variety of different points in between that we're going to be taking a look at both safety and gather some efficacy data.

Yes.

We'll provide more on that later.

Can you share with us the oldest age for enrollment?

I don't have that--

I don't have that number off the top of my head, but that might be in the -- I'm not sure, Steve.

Yes, it's not there yet.

Okay.

Otherwise--

Yes, so let me just point out a couple of other things. So in our preclinical studies, and we've actually run these different types of studies in multiple independent labs, and we see substantial improvement even when we administer MultiStem days after a stroke has occurred. We've gone out as far as a week. We've never gone beyond that. We've also seen that when we go in earlier, we see better, better outcomes in terms of the health of the tissue and protection of the damage to normal cells. We think that ultimately clinically, you would want to go in as early as possible. But we're confident based on the preclinical work that we've done that that 48 to 60-hour window is a pretty appropriate window.

Okay. Fair enough.

Yes.

Final, final topic, moving on to your 5HT2Cs. You provided us with a lot of color on arenas off target on the accept type at the high doses. I guess if you can give us a little color because we have two obesity drugs, both PDUFA dates in October. How do you see this fitting in with what could potentially be three players in the field? And are you looking at it more like a monotherapy oral, or are you looking to do a combination with, let's say an antidepressant, antiappetite suppressant, or both? I mean what are your visions here for this program?

Well, the short answer is, I think that it could have utility at either as the monotherapy or as a combination therapy. In fact, the nice thing about this mechanism of action, it's pretty well established at this point that it can be used in conjunction with other agents to enhance the overall effect. So I think that, that used either as a monotherapy, depending on the needs and objectives of the -- we ultimately believe that combination therapies are going to be the right way to maximize weight loss in patients that need it a significant amount of help in terms of losing weight. And so we think that that's really going to be the focus of many of the therapies that are administered in the future. But I think there's certainly going to be room for effective monotherapies, as well as effective combination therapies.

And in fact, one of the things we know about obesity, so I don't have a crystal ball, I can't tell you who is going to get approval or who is not going to get approval in terms of things in front of the FDA right now, but I can say that as I look at the three programs that are out there right now in late stage development, I think that they have all got pros and cons. Some drugs show better efficacy. But there might be safety and tolerability questions about certain things or frankly I think one of the things that's been demonstrated through multiple different studies over time is that different patients respond differently, or have different sensitivities to different types of agents. So I don't really see the obesity space, and we've been pretty open about this historically, as being fully addressed by a single therapy and that's it.

In fact, I think there's going to be multiple therapies that are highly successful and I think it's going to depend on the needs, the objectives, the tolerability and sensitivities of the patients that are taking the various agents. I mean, if you look at any of the data from the Phase III studies that have been completed today, you see some patients that are very good responders, whether it toe be to Lorcathrin or the other agents that are out there. And then other patients don't respond as well. Some patients might be a little bit more sensitivity to activity to a particular receptor or side effects that caused by activity or a particular receptor. Other patients may be less susceptible to that.

Again, I'm not going to prejudge how the FDA is going to come out on this stuff over time, but I think there's going to be room for multiple therapies out there. I will say that of the things that are out there in late-stage development that are being reviewed by the FDA, we certainly don't consider any of them to be perfect. We think there's significant room for improvement. And if you can develop a better, safer, more tolerated and more conveniently administered therapy, we think there's going to be a lot of demand for it.

How far are you going to develop this on your own? By the time you get to late stage, Arena had 7000 patients in two Phase III trials. Are you going to probably have a partner? How far are you going to try to take it yourself before you absolutely require a partner?

Well, that's a good question, and I can't really answer it, but I can tell you that there are people that are very, very interested in this area and in this program.

All right, thanks for taking my questions. I'll jump back in the queue. Thank you.

Thanks.

Your next question comes from the line of [Lauren Miquelay] from Morningstar. Your line is open.

Hi, everyone. I just have a couple of questions. First, can you provide any ballpark range of when you expect or hoping for clinical trials in ischemic stroke to begin, like late 2010, early 2011, along those lines? And then second, echoing an earlier question, what is the general position regarding advancing small molecules in trials? I know you mentioned you were considering advancing one compound and trial this year with or without a partner. But for the other molecules, will you wait to begin -- until a partner is found? If so, what kind of interest have you seen for these molecules overall? Thanks.

Sure. For the first question, we haven't given any guidance on the ischemic stroke program and I don't think we're going to do that today. As I said, we've learned very interesting things over the past few months that we actually want to put in front of the FDA to request some protocol modifications, discuss that with them, get their feedback, and then we'll go from there.

With regard to the small molecule programs, I don't think that we've given guidance that -- in fact, I'm pretty positive that we haven't given guidance that we were moving a small molecule program into clinical development this year. I think our objective is to select a clinical candidate for, for the H3 program, for example, and continue to move forward aggressively on the 5HT2C program where we've got a very exciting portfolio of compounds, but before we can give specific guidance on when we might be selecting a candidate out of that program, we've got a little bit of additional work to do there. I can tell you that we are very, very excited about the profile that we've developed with the portfolio of compounds, and frankly, we've had people openly ask whether or not it was even possible to develop compounds that were potent at the 5HT2C receptor without having activity at 2A and/or 2B. And we've heard many people doubt that that was even biologically possible and we've demonstrated that it is possible, and we've done it.

So we see that as a pretty important step forward. Because if you think about the long-term ramifications of having patients on these types of agents, one open question is, what would the long-term ramifications of taking some of these compounds be, if there's, if there's low levels of activity at a receptor like 5HT2B? The ideal would be to have compounds that are totally dead at that receptor, so you don't really have to worry about the cardiovascular issues that people have seen previously. And so I think the fact that we've advanced as far as we have in developing the portfolio of compounds that are clean at 2B and 2A gives us tremendous amount of confidence that we're going to have a very good profile for this program, and I think others would agree with that.

Okay, thanks for that clarification. Just real quick, finally, going back to the 48 to 60-hour window in the future stroke trial, with MultiStem showing activity up to one week after stroke, as you said, do you hope to extend that window in the future, or do you expect the 48 to 60 hours to kind of be the standard in later trials?

I think we -- I don't necessarily think that that's going to be the standard, per se. I think ultimately clinically the way we would expect it would be used is you would administer the patients as soon as they come in for treatment, because we demonstrated through some of our preclinical work that earlier appears to be better than later.

I think one of the interesting things is we're not really sure how far out the window goes in terms of when we can administer MultiStem. Let's put it this way. The current standard of care, patients have about a 3-hour window to get TPA. And 95% of the patients, give or take, that have an ischemic stroke, do not get to the doctor in time to get treated with TPA. And so most of those patients, there's very little that clinicians can do for them, other than wait and see if they exhibit -- if it's a serious stroke, wait and see whether or not they exhibit signs of spontaneous recovery. And if so, perhaps you can put them into physical therapy, or do things over time to help provide some rehab.

If we could extend the window out to even 24 hours, we think that would be a huge accomplishment, especially if you can deliver something that enables significant improvement in outcomes for patients with a very strong safety profile. So the 48 to 60-hour timeframe that we selected for this first study, we may use again for studies in the future as a way to reduce the potential noise in terms of spontaneous recovery for patients that have suffered from a stroke.

But I am confident that we'll be looking over time at administration at earlier time points as well in patients. And I think that clinically our objective is to create a meaningful window for clinicians and patients that has practical utility in the real world. So not something that is so short that it excludes the vast majority of patients from getting treatment. And that's the big problem now.

Thanks.

Yes. Just one follow-up thought on that, stroke has been one of those areas where there's been a lot of disappointments over the past 15, 20 years, and people have asked us how are you guys different? And one of the things that we've seen in many of those agents, whether it's a thrombolitic, or a single-agent small molecule that's designed to provide some neuroprotective activity, those agents typically act through a single mechanism of action.

One of the things we know about MultiStem that's been reinforced through multiple studies we've run with outside expert independent labs is these cells are capable of doing multiple things in parallel that we think has a profound impact in terms of improving outcome in these types of ischemic injury, whether it's stroke or other types of neurological injuries or other types of ischemic injury that we've looked at. So we think that that ability to express multiple different factors or dynamically interact with multiple different cell types, to hone to sites of tissue damage, injury and relevant organ systems in the body in order to promote healing and advanced repair is really fundamentally different than what anybody else has been able to do in the area of stroke previously, so we do believe that, that that creates potential advantages on multiple different levels for us.

Your next question comes from the line of Jason Kolbert from National Securities. Your line is open.

Hi, Gil. Congratulations on certainly a lot going on. I wanted to ask you a question about the competitive landscape first. Astrid Biosciences recently reported some interesting data on critical limb ischemia. But what they are doing is a very different approach. I wonder if you could talk a little bit about the differences between autologous approach, or your allogeneic approach and kind of the difference in potencies and whether critical limb ischemia is an area that you would find attractive.

Yes, thanks, Jason. That's a great question. So we've actually done extensive work in peripheral vascular disease, working with independent experts. And in fact, we've already published some of that work. And top of that, we've done additional studies, where we've done comparisons using MultiStem and comparing it to other cell types, whether be MSCs or others, looking at, for example angiogenic profile, or immunomodulatory profile, and we see clear differences between what MultiStem is capable of doing in multiple different dimensions. Now, it's very interesting, the whole autologous versus allogeneic question.

Frankly, we believe that having a standardized, well validated, consistently manufactured product offers up advantages over the autologous approaches that people are using. But clearly there are going to be people out there that may prefer an autologous kind of therapy or an autologous kind of approach. But again, we think that the ability to, to consistently manufacture a standardized, well validated, extensively tested product where we really have rigorously evaluated across multiple different dimensions, is going to be the right way to go, particularly something that can be administered off the shelf without the need for any kind of tissue matching or immune suppression.

Well, I'm also thinking in terms of potency and it just seems that the MultiStem approach might offer a potency advantage. I wonder if you could just speculate on that for a minute.

Yes, well, we haven't done a head-to-head comparison against Astrid's products, so I can't really compare to what they are doing. I will say we're very encouraged by the results they presented recently in terms of seeing the effect they do in critical limb ischemia and frankly, we think it's very consistent with the work that we've conducted, working with outside experts, and showing that MultiStem can have a dramatic impact. And I think that that gives us a lot of confidence and a lot of encouragement that we're on the right path and certainly we are rooting for the other companies in the regenerative medicine space to be successful and to answer their programs. So as hard as it may, may be to believe we're--

Proof of concept in one company certainly could be successful for everyone.

Exactly, and I think demonstrating biological proof of mechanism I think is, or benefit across multiple different areas is great. I think we learn from each other's efforts and each other's studies and ultimately our products or our efforts are going to stand or fall on the strength of our platform and the safety and the therapeutic benefit we deliver. One of the things we've seen some people publish on in terms of autologously derived cells is that you can, and people, researchers in the field have seen inconsistencies in terms of when those cells are harvested and how they may behave when you put them back into various models, whereas cells isolated from young, healthy donor sources might be, and have exhibited greater consistency in some studies that people have done.

But there's still a lot of unanswered questions out there. I think we believe the right approach is to have a highly standardized product that can be manufactured on a truly industrial scale, which is a big advantage that we have, and have the ability to express multiple different factors again, we've done head to head studies comparing to other cell types like MSCs where we show our cells have angiogenic activity and express angiogenic factors that MSCs and other cell types don't. We think that gives us some advantages along with some of the other features that we see in the cell type.

Just one other thought, Jason. I think Gill mentioned the preclinical work. There is a suggestion of potency as far as the cell, but one of the things we've gotten a much better picture of as well is the mechanisms of action that are driven by our cell in many of these models, including PVD. It's not just angiogenic activity that provides benefit in some of these models. There are other mechanisms that work, some of which we published on, some relate to inflammation and modulation of immune system. And these are going to be very important in certain of these indications. And I think together with the, what we see as advantages on angiogenic benefit, they are going to derive additional benefit that I think translates into better potency, therapeutic potency than some of these other products that are hemopoietic stem cells or stem cells in orientation.

That's great. That's kind of where I was going. Thank you. I wanted to just switch directions a little bit and talk about a delivery question I had. I understand the localized delivery at AMI -- sorry, and the systemic delivery at BMT. But can you talk a little bit about in stroke about changes that occur to the blood brain barrier and how that might control the therapeutic window?

Well, we know in stroke that the vasculature in the region of damage appears to be pretty leaky over a period of days and frankly we've seen our cells have an interesting effect. We know that our cells are -- one of the hypotheses we had early on, if we administer the cells IV, that they might actually home to sites of tissue damage and injury and they might be able to do that in a way where we could see a clear dose response and a therapeutic benefit, even if we're administering IV. The earlier studies we did, we were actually delivering cells directly into the brain intracranially, but then we did comparative analysis over time where we looked at IC delivery versus IV delivery, and we saw there was a clear therapeutic benefit when we were delivering IV, we did in fact see this not only in stroke studies, but in other relevant studies where we see cells getting into the region of damage and injury, and when they get there, they're actually doing multiple different things. We monitor their gene expression profile, not only of the cells, but also of the target tissue they impact in various ischemic injury and other types of situations.

The interesting thing about stroke, you've got this window where the vasculature is a bit permeable, if you will and we know cells can actually modulate traffic of inflammatory cells across the vasculature and not only do they dynamically regulate cells, but they can dynamically interact with cells of the vasculature, and that they themselves can, are very good at recognizing signals and getting into sites of tissue damage and injury. We've learned some very important things, I think, and we've done, again, comparative studies with MultiStem relative to other cell types and we see clear differences between how our cells regulate these various biological processes and other cell types which don't appear to be capable of doing some of the things MultiStem is able to do.

That's very helpful, Gill. Thank you. I just wanted to migrate a little bit now beyond AMI, BMT, and stroke, and think about what might we see by the end of the year? Could we expect something in inflammatory bowel disease?

Well, that's something we're obviously in the process of scoping out with Pfizer. I can tell you that our standard approach for -- and I can't really give you a specific guidance on that today, because that is something that we would be announcing jointly with Pfizer at the appropriate time. I can tell you that our standard approach is to make sure that we interact early in the process with the FDA, give them relevant information and thoughts on study design, and then use that information to make sure that we've constructed an appropriately, rigorously designed study that takes their input into consideration. And certainly I think that approach would be the relevant approach here that we would be utilizing with Pfizer.

I can tell you the launch has gotten off to a phenomenal start. We've made rapid progress in multiple different dimensions. We feel very good about where we're at. And we also feel good about being able to utilize the extensive prior data and information that we've generated not only from the extensive preclinical work we've done in various areas, but also from what we've been learning in the clinical work as well.

Terrific, guys. Thanks. Congratulations on a lot of activity.

Yes, thanks a lot.

Your next question comes from the line of Steve Brozak from WBB Securities. Your line is open.

Hey, gentlemen, congratulations on all this news. I think about every question has been asked that I can think of except for one. I want to go back on the stroke side, because there's a couple of interesting components here. Given the fact that you're seeing a global mechanism take place and you're seeing results that are well beyond the normal range, what would happen if you were to administer into a high risk population prophylactically, what would your expectations be on something like that, or administer in a prophylactic setting, in a hospital setting, where you were looking at complications or procedures where complications were pretty endemic? What would your thoughts be on something like that? I've got a follow-up question after that.

Sure. Well, that's actually a really good question, and we have seen that the cells can have affect in some of the studies that we've done related to vasculature function, for example, where the cells do some things that we think have therapeutic relevance in a variety of different areas. Without knowing the specific at-risk population you're talking about, I can't really answer the question in a detailed way, but I do think that in certain types of high risk populations in the cardiovascular area or peripheral vascular disease situation in particular, that we may have a significant benefit there. But it's up to us to kind of demonstrate that I think by doing the right types of studies.

No, that's exactly -- on the cardiac side, when you're talking about in some cases with these high risk cardiac patients where you're looking at situations where for all intents and purposes you can go through the right type of procedure but you might have a situation where for whatever reason that patient is that fragile, you might have a situation where you would use this prophylactically to assist in whatever procedure or process you were going to do.

Yes, it's a really good question. And frankly, I think what a lot of people hope for in regenerative medicine, you might actually be able to intervene earlier in the process when patients are very susceptible or at risk or already in the early stages of a degenerative condition, so that you could turn the tide, so that the patient doesn't have that massive event, if you will, or congestive heart failure or whatever, so you can actually steer the outcome in a better direction.

And there's some suggestive work being done that's been done recently that, for example, in progressive orthopedic indications, whether it's hip degeneration or related types of things, that in fact cells can have a profound effect there. These studies are small, not really powered in kind of a large scale, robust way, but I think they are very suggestive. I think from a biological perspective, it makes a lot of sense. One of the nice things about the approach we're taking with MultiStem, using this kind of master, master file approach, if you will, is that we feel like we're going to be able to leverage the safety data that we're generating in the early clinical work we're doing to enable us to advance programs in other areas more efficiently. And it opens up some pretty exciting possibilities about how we could use the product or administer the product in high risk patient populations that might have very little in the way of options or effective options to improve their outcome.

Okay. That leads me to the follow-up question. Considering the fact that you've already drawn the attention of large pharma, now you're talking about that proverbial one pill fits all, where they might have multiple indications, multiple interests. You've already shown your ability to differentiate one program with one partner. I would assume that the bottom line is, given all the different programs and the dearth of products that are available for large pharma that this would be now a topic of discussion across the board with each individual company saying we're interested in this approach, we're interested in this approach and here are the dollars to go that route. Those are all options that are now on the table.

Well, I can say that the interest among the companies if you go back 18 months ago and you looked at the major pharma companies, hardly any of them were talking about their interest in regenerative medicine and now a significant number of them are. We know that, let me just first be clear. Our partnership with Pfizer is something we value greatly and we know their interest extends to other areas, as do ours. The initial thing that we're focused on with them is in IBD. But I think it's fair to say that their interest, in fact I know Ruth McKernan and others have stated this, that their interest extends well beyond, and if you just look at their current programs, it speaks to that. I do believe there is a lot of exciting potential here and one of the nice things we have about the approach and the technology is the breadth of potential applications across multiple dimensions.

One of the things we think is also really exciting is the potential interface between small molecules and cells. And we know already, and I think there's evidence accumulating across multiple paths or lines, that the biology of the cells can be modulated using small molecules, or specific biological mediators. I think that opens up some pretty exciting next generation opportunities in terms of how you can modulate in various ways the biological profile of cells. And that might have relevance in specific disease areas. So kind of the low hanging fruit, if you will, first generation opportunity we're focused on is the undifferentiated, unmodified, don't really do anything to it MultiStem, but that's certainly not where the opportunity ends. And I think one of the things that we're excited about is that we have experience in both domains and we're one of the fewer regenerative medicine companies that does.

Got it. I appreciate it. Let me jump back in the queue. Thank you.

Thank you.

(Operator Instructions) There are no further questions at this time. I'll turn the call back over to the presenters.

Great. Well, if there's no further questions, I would like to thank everybody for your time. We're certainly excited about keeping everyone updated on our progress and we look forward to the next call.

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