Athersys Inc (ATHX) 2011 Q1 法說會逐字稿

Good afternoon. My name is Jessica and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Athersys first-quarter 2011 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you. Lisa Wilson, you may begin your conference.

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, the release is available on the Athersys website at athersys.com or 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 approximately 45 minutes and maybe accessed through the Company's website at Athersys.com. A replay will be available after the call's completion by dialing 800-642-1687 in the US and Canada, and 706-645-9291 from abroad, and entering access code 58473938.

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.

For the benefit of those who maybe listening to the webcast, this call is held and recorded on May 5, 2011. Since then Athersys may have made announcements related to the topics discussed. So, please reference the Company's most recent press releases and SEC filings.

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

Thanks, Lisa. Good afternoon and welcome to our first-quarter 2011 earnings call. I'm B.J. Lehmann, President and Chief Operating Officer of Athersys.

I will make a few comments about our recent financing, briefly review our financial results for the first quarter ended March 31, 2011, and then turn the call over to Gil Van Bokkelen, our Chairman and CEO for a corporate update.

In February, we completed a registered direct offering generating net proceeds to the Company of $11.9 million. We issued 4,366,667 shares of common stock and five-year warrants to purchase 1,310,000 shares of common stock at an exercise price of $3.55 per share. We believe the terms overall to be favorable to the Company based on comparable transactions during period.

With respect to our operating results in the first quarter of 2011, we recorded revenues of approximately $3 million compared to $1.7 million for the same period in 2010. The increase in revenue reflects primarily the impact of our RTI collaboration, which was announced last summer, increased Pfizer-related payments, and increased grant revenues.

During the first quarter of 2011, we received $1.5 million in milestone payments and license fees from our collaborators, of which, $1 million was received from RTI.

Our research and development expenses for the first quarter increased to $4.6 million compared to $2.8 million for the same period last year, due principally to increases in clinical and preclinical development cost of $1.1 million, personnel cost, sponsored research and patent legal cost, was partially offset by a decrease in stock-based compensation expense.

The $1.1 million period-to-period increase in clinical and preclinical development cost is primarily due to an increase in the cost of our GVHD Phase I trial, and the preparation and support costs associated with our other clinical programs.

General and administrative expenses for the first quarter of 2011 decreased to $1.2 million compared to $1.4 million in the first quarter of 2010. The decrease was due principally to a decrease in stock-based compensation expense. As a result of these changes, our loss from operations was $2.9 million in the first quarter of 2011 and $2.6 million in the first quarter of 2010.

In connection with our February financing, we recorded a $2.1 million warrant liability due to the fact that the warrants could potentially result in cash settlement under certain circumstances. This warrant liability is mark-to-market each reporting period based on fair value of the warrants.

So other expense includes $275,000 related to the increase in the fair value of the warrants from the date of issuance through March 31, 2011. Also included in another expense for the 2011 first quarter is an $810,000 milestone payment to our former lenders, of which, 75% was settled in shares of common stock.

Our net loss was $3.9 million in the first quarter of 2011, which is just noted includes $1.1 million of other expenses related to the warrant valuation and a milestone payment to our former lenders compared to $2.6 million in the first quarter of 2010.

Finally, we began the quarter with $15.2 million, completed the finance in February generating an additional $11.9 million, and as of March 31, 2011, we had $25.3 million in cash, cash equivalents and available for sales securities to fund the continued operations of the Company.

Our cash used in operating activates was $1.8 million for the first quarter of 2011, which includes the impact of the milestone and license fee payments previously noted. With that, I'll turn the call over to Gil.

Thanks, B.J. Good afternoon everyone and thank you for joining our call today. I'd like to begin with a brief review of recent progress in our key development programs and several other areas.

During the first quarter of 2011, we made solid progress in the further development of MultiStem, which continues to be a key focus of our efforts. This patented and proprietary stem cell product is in development for a range of potential indications across a variety of therapeutic applications.

Specifically, our principle focus has been on exploring the potential of MultiStem in three primary areas -- cardiovascular disease, specific neurological conditions, and certain inflammatory and immune disorders. We've established multiple programs in each of these therapeutic areas, several of which are in clinical development. Some of these programs are partnered, while we are currently developing others independently.

Our strategy is to advance key opportunities into and through clinical development, while we continue to evaluate and advance additional applications which we will explore both internally and through our broad network of collaborations.

Our most advanced clinical program is MultiStem to treat Inflammatory Bowel Disease, or IBD. IBD includes two chronic diseases that cause inflammation and tissue damage in the gastrointestinal system, ulcerative colitis and Crohn's disease. Together, these conditions affect approximately 2.4 million people in the US, Europe and Japan. And despite currently available therapies, IBD represents a significant area of unmet medical need.

We are particularly pleased with the progress of this program through 2010 and the first quarter of 2011. Last November, just 10 months after the initiation of the partnership with Pfizer, the FDA authorized commencement of the current Phase II clinical program. This rapid advancement to the reflection of the consistent safety profile exhibited by MultiStem in extensive preclinical and initial clinical studies, and marks an important aspect of our development process laying a strong foundation to advanced products quickly and efficiently along the clinical trial path.

In the first quarter of 2011, the first US patient of a planned 126-patient cohort was enrolled and treated in our randomized, double-blind, placebo-controlled, multi-center Phase II study, and since then, additional patients have been enrolled in the trial. Enrollment is ongoing at multiple study sites in the US, and we continue to make progress in preparing for initiating clinical activity in Europe.

In the study, subjects will undergo baseline endoscopic evaluation and then receive multiple doses of either MultiStem or placebo over a several-week period. After eight weeks, there is a second endoscopic evaluation, followed by clinical assessment at 16 weeks, and a patient follow-up for 12 months. We expect to report interim results shortly following completion of the last patient and clinical assessment at 16 weeks, and analysis of the corresponding death.

Pfizer, our global partner for the development of MultiStem for IBD, is acting as the primary sponsor and is covering the costs of this study. We are providing clinical grade MultiStem for this study in conjunction with our manufacturing partner, Lonza.

Moving down our pipeline, we continue to make progress in other studies involving inflammatory and immune disease. Currently, we're conducting a Phase I clinical study at MultiStem for transplantation and oncology treatment support. In this study, patients with leukemia or related conditions receive radiation or chemotherapy and a donor derived hematopoietic stem cell transplant.

Patients receiving such transplants are typically at significant risk for graft-versus-host disease, or GVHD, a condition in which immune cells from the transplanted marrow recognize the transplant recipient as foreign and mount an immunological attack. The effects of such an attack can be debilitating or even fatal.

Additional complications may include tissue damage from the radiation and chemotherapy treatment that are conducted prior to the transplant, lack of transplant engraftment or poor regeneration of certain cell types such as neutrophils.

Our Phase I clinical trial is designed to evaluate the maximum tolerated dose of MultiStem in single dose and repeated dose treatment arms. In the single-dose arm, two days after the initial hematopoietic stem cell transplant, patients receive a single dose of MultiStem at either a low, medium, or high dose level. In the repeated dose arm, patients receive additional doses in weekly intervals for up to one month following the transplant.

The primary endpoint of this study is maximum tolerated dose, evaluating dose forming toxicities over 30 days. Additionally, we are evaluating other safety and clinical parameters over 100 days, including engraftment, GVHD incidence and severity, infection and survival.

We announced previously that we completed the treatment phase of the single dose arm of the study in late December. We are currently completing evaluation of the data from the patients in this arm and expect to announce top line results from this portion of the study shortly.

In the first quarter, we also continued enrolling patients in the second arm of the study, involving administration of multiple doses of MultiStem for up to one month. In addition, the first patient was enrolled in dose for the [European Study Center], and we remain on track to complete enrollment in this arm of the trial in 2011.

While we continue to advance these clinical programs, we're also engaged in preclinical research activities exploring the potential application of MultiStem in other inflammatory and immune conditions, such as diabetes and other transplant applications. We believe there could be broad relevance for MultiStem in disease conditions involving inflammation and immune system disorders.

Moving on to the cardiovascular area, we are working with our partner, Angiotech Pharmaceuticals, on the design of the Phase II clinical trial of MultiStem for the treatment of acute myocardial infarction or AMI, more commonly referred to as a heart attack.

Despite treatment advances, cardiovascular disease remains the leading cause of death and disability throughout the world. This Phase II study will build on interim data from an ongoing Phase I study in this indication, which demonstrated a consistent safety profile and some encouraging signs of improvement in cardiovascular function among patients with significantly compromised heart function at the time of MultiStem treatment.

We have selected and are actively working with a CRO, established a proposed design for the trial, and have also conducted an end-of-Phase I meeting with the FDA. We look forward to initiating the Phase II trial later this year, while we continue preclinical work in other areas of cardiovascular disease with our collaborators.

In the neurological area, we also continue to make steady progress. As we have described previously, we recently decided to modify and expand our initial clinical trial design in order to conduct a more extensive evaluation of safety and efficacy of administration of MultiStem in patients that have suffered an ischemic stroke.

This condition represents a leading cause of death and disability in many parts of the world, affecting approximate 2 million people annually in the US, Europe and Japan. According to the World Health Organization, more than 15 million individuals suffer a stroke each year globally, resulting in 5.5 million deaths and 5 million individuals that are permanently disabled.

Similar to the preparations for our planned trial in AMI, we will be conducting a double-blind placebo-controlled study in multiple clinical centers here in the United States. We have selected and engaged a CRO for the study, established our prospective study design, and lined up multiple clinical centers for the trial, which we expect to initiate in the next several months.

The next step in the process is to receive input from institutional review boards at the participating clinical centers, finalize the study protocol, and then initiate enrollment for the study soon after the appropriate IRB approvals have been obtained.

Recent work has broadened and deepened our understanding of the multiple ways in which MultiStem can have a profound effect on promoting tissue repair and healing in a range of neurological indications. Positive data from recent preclinical studies conducted through academic collaborations that we have established over the past few years, was presented during the first quarter, supporting our prior results and progress in several areas. These and other study show that MultiStem can have profound effects in various preclinical models of neurological injury and damage, including stroke, traumatic brain injury and spinal cord injury.

In addition to our collaborations with leading independent research labs, we continue to investigate the potential for MultiStem in other neurological conditions, such as multiple sclerosis and Parkinson's disease. We believe that MultiStem could have broad relevance in the neurological area, especially in those areas where inflammation plays a central role.

We look forward to continuing to assess the potential utility of MultiStem in these and other indications in the cardiovascular, neurological, in inflammatory and immune disease areas, as well as other potential applications.

To touch briefly on our obesity and metabolic disease program, there is clear evidence that a potent 5HT2c receptor agonist may enable meaningful weight loss. In addition, clinical data suggests that 5HT2c agonist can also provide benefits in regard to lowering HbA1c levels, impacting glucose levels; two important parameters that are relevant to patients with type 2 diabetes.

As we have seen from programs in the obesity area at other companies, safety is of paramount importance. Agents that have apparent, adverse, cardiovascular effects, or that have a history of other safety and tolerability issues will undergo intense scrutiny from the FDA and other regulatory agencies. However, the need to develop safe and effective treatments for obesity, in many respects, is now greater than ever, given the growing number of people affected and the role it plays in terms of increased risk of cardiovascular disease, diabetes, stroke, and a range of other conditions.

We believe that the key to creating safe and highly effective 5HT2c agonist is the development of compounds that are both potent and highly selective. We are focused on development of compounds which do not have activity as other receptors that are known to be associated with toxicity or undesirable side effects.

Specifically, data shows that the selectivity at both the 5HT2b and 5HT2a receptors is necessary to achieve safety and tolerability, as well as maximize efficacy. We believe that we are the first company to successfully develop compounds which are potent agonists of the 5HT2c receptor, which is key to achieving significant weight loss but that exhibit no physiologically relevant agonist activity that either the 5HT2b or 5-HT2a receptors which is key to achieving safety and tolerability.

Importantly, we've been able to demonstrate an understanding of how to achieve this profile across multiple, distinct, compound backgrounds, and then successfully develop a portfolio of compounds that meet our fundamental criteria.

This represents a substantial achievement and we are confident that these compounds have the potential to be best-in-class clinical candidates while we are actively evaluating which compounds to advance into further development -- sorry, we are actively evaluating which compounds advancing to further development, while also considering potential partnering opportunities in this and other areas.

Finally, as B.J. mentioned earlier, during the first quarter, we completed a registered direct stock offering that netted $11.9 million for Athersys. This financing strengthened our cash position and enables us to maintain a healthy balance sheet while we continue to advance key programs, progress current partner programs, and explore new potential alliances and opportunities.

In closing, we remain committed to developing a portfolio of therapeutic programs where we believe our technologies have the potential to deliver best-in-class therapies that can advance clinical care in meaningful ways and by providing safer and more effective treatments in currently available approaches.

Both through internally developed programs, and strategic partnerships with other organizations, including commercial partners and leading research and clinical centers, we are making steady progress. Through these activities, we intend to advance our portfolio of opportunities, develop therapies to address significant unmet medical needs and create substantial value for our shareholders. With that, we'd be happy to take a few questions.

(Operator Instructions). Steve Brozak, WBB Securities.

Hey, congratulations gentlemen on all the different indications you're going after, but I'll come straight to the point. The graft-versus-host is the one that I think people are looking at the most, because it's such a debilitating indication, and frankly if you get positive results there, you'll have done more than most anyone else has done.

Could you give us some granularity as to what you would expect in terms of positive results? And could you also highlight the difference in terms of how you can provide uniform results, whereas in the past some people have made claims that they've had results, but now they weren't either reproducible or they couldn't provide more better results in the placebo effect?

Thanks Steve. So in terms of what to expect, I think it's helpful to look at the literature and the history of the clinical experience in terms of what is typically seen in the clinical environment among patients that are undergoing these types of treatments. And I think there's some interesting literature out there which suggests that the incidence of graft-versus-host disease depending on the profile of patient and the material from which the donor is ultimately derive, in general, it can range from about 40% to 60%, or in some cases, be a little bit more or a little bit less than that, but that's basically the ballpark.

In some of the key parameters that I think people look at relates to whether or not you're obtaining hematopoietic stem cells from a matched related donor, where the GVHD incidence tends to be at little bit on the lower side or a matched unrelated donor in which case the incidence tends to be on the higher side.

Another key parameter relates to whether or not you're using bone marrow-derived hematopoietic stem cells, again, is associated with slightly lower rates of graft-versus-host disease versus whether or not they are peripheral blood stem cells which is actually more common these days, which interestingly enough is actually associated with elevated rates of graft-versus-host disease.

So, I think that in terms of what to expect, there is some fairly clear literature out there which I think is good guidance with respect to historical rates of graft-versus-host disease, again, depending on the nature of the patient population and the way in which they've been treated. And when we announced our results, we're going to point to that information as a way to compare our results from the clinical study versus what's been seen historically but try and get people a clear picture of what's been done.

Now obviously, in this study -- it's a small study. The single ascending dose portion of the study only involves 18 patients and the multi-ascending dose study only involves 18 patients. It's not a double-blind and placebo-controlled study. So, again, I want people to just bear that in mind.

But, in terms of what we anticipate and what we're hoping for, we think that there might be a good possibility that we could actually see very encouraging signs of an impact in terms of administration of MultiStem, in terms of reducing graft-versus-host disease, both in terms of reducing the severity and then also reducing the frequency of graft-versus-host disease.

And I think if we do see that from this clinical data, we obviously will be very encouraged by that and I think people outside should be very encouraged by it as well. I think the greater the apparent benefit based on the data, I think the better people should feel about the results that we have, so again comparing it to historical norms.

Yes. I mean one of the things we know, Steve, is that GVHD like other disease conditions is T-cell-mediated, there's a big T-cell component and, and we've published and our collaborators have published, with MultiStem and a variety of disease models and in vitro models where we're in essence modulating T-cell activity or the condition that results from aberrant T-cell activity or immune response driven by T-cells. And so our expectation is, given what we've seen preclinically in vitro, we would hope to see some impact in the GVHD side given that it's a T-cell-mediated disease.

Well, that actually brings in the follow-up part of that. So, basically, to prove or to see results here, given the fact that you're looking at that immune response or that immune over response, it would mean that you're agnostic as to what the indication would be as long as that immune response is there and you can treat it; that would be the follow-up I guess.

Yes. And I think that's right. Basically, if we're seeing a profound effect here, and I think the possibilities are pretty significant. I mean graft-versus-host disease clearly is not the biggest clinical indication we're going after, but given that -- depending on the nature of the transplant, you can see 50% to 60% of the patients that are undergoing a transplant experiencing GVHD.

Then I think it's a pretty meaningful opportunity, particularly to those patients and their family, and I think the clinical need within that patient population is pretty significant. I think it'll be interesting to see what the data looks like. We're going to have it here pretty quick, and we're looking forward to actually announcing what the data are.

And then while we continue with the multi-ascending dose piece of the study which I think is the -- is also going to be very informative, and then from that, we'll take a hard look at what the next step in the clinical development process might be. But in the oncology area, I think there might be some pretty interesting options in terms of how to proceed along the development path from whatever this data shows us.

But you're right, it's one of those areas that a couple of people have taken a crack at it, and really it remains a pretty significant unmet medical need.

Great. Well, I wish you guys luck and I hope to be able to write about it. Thank you, Gentlemen.

Yes.

Thank you.

Greg Chodaczek, First Analysis.

Hi guys. Just a couple of quick questions. We'll start with the graft-host disease. The MAD study, I think I heard you correctly, you're going to talk about completing enrollment in 2011, did I get that correct?

Yes, that's correct.

Yes.

So, does that mean results come in some time second quarter 2012 of that study?

I think it could actually happen before that. It really depends on how quickly enrollment proceeds from here. We've done a couple of things. In fact, the enrollment ate has actually picked up over the past several months. So, I think we're in a pretty good position here.

Okay.

So, I think that completing enrollment this year is a very achievement goal and we would expect to have data from that, not too long after that actually.

And primary endpoints and secondary endpoints are exactly the same as the SAD study?

That is correct.

Right. Safety, primary and then some [clinical] --

Right.

Versus secondary endpoints.

That's right.

Okay, perfect. And with regards to IBD, for the Phase II study with Pfizer, are you using a certain CRO for that?

(Multiple speakers). We're actually working with a couple of outside contract service providers, but Pfizer is really leading the charge on the clinical and regulatory.

Okay. And when do you think that's going to be -- the enrollments are going to be completed on that?

Well, our goal -- as we've said publicly previously, our goal is to actually complete enrollment in the latter half of 2012. And then of course, we follow those patients out from the time the last dose is administered, we would follow those patients out for about 16 weeks. And then actually begin compiling the data from that point in our top line interim results. (multiple speakers) --

Absolutely. So, Q2-ish 2013 to be conservative?

Yes, to be conservative, I think that's probably a reasonable timeline.

Right. And then you'll do another safety profile a year later on those after the last ones is enrolled -- last patients?

Yes, that's right. I mean, I think the really interesting and informative data is probably is going to come after that 16-week clinical assessment.

Right. And that's the first time where you're going to see any data is after that last patient makes it through the 16-weeks?

That's right.

Okay. And how many centers does Pfizer expect to use?

They haven't disclosed that, and I don't think we're allowed to disclose it, but I can say it's a meaningful number of centers in the US and in Europe.

Okay. But it's US and Europe, and if I look at -- I'm assuming there's about 1.5 million sufferers of ulcerative colitis, now disease wise, how is that broken up between US and Europe, and I know Japan is a little bit? And can I assume that centers will be based on that ratio?

Well, the centers -- I'm not really sure you can really drive any hard and fast conclusions around that. And in terms of proportion of -- in terms of incidents in the US versus Europe, to be honest with you, I don't have those numbers right in front of me, and I am happy to answer that offline. I know the information is up there publicly and in fact we've presented it, I think, or talked about it previously, but I just don't know where it is off the top of my head.

In terms of -- I mean I think the way to think about it is different clinical centers will see varying levels or volume of patients just depending on the nature and the reputation of the clinical centers. I mean, there are certainly some leading clinical centers out there that are known to have high competency in the treatment of inflammatory bowel disease.

And I think those are the type of centers you want to focus on. One because the clinical investigators there highly regarding their experts in their field, but also because they tend to see a lot of patients. But in terms of how you can break that down a little more precisely, I'd be hesitant to do that.

Okay, fair enough. All right. Thanks guys. I'll jump back in the queue.

Okay. Thanks, Greg.

(Operator Instructions). Keay Nakae, Chardan.

Thank you. Couple of questions. First, with respect to the AMI study, so it sounds like you have something at least a proposed design. Where does that stand with respect to the FDA?

So, we just had our end-of-Phase I meeting with the FDA literally this week and so we're incorporating some of that feedback into some of the things that we're thinking about on the design front, and then we'll be looking to follow-up with them shortly.

But I think from our perspective at a high level, the meeting went well. I think the dialog between the agency and the team I think is -- it's a very good dialog and we feel very comfortable in terms of the basic parameters of our proposed studies done. And I think, frankly, there's few things that we need to do and some questions we need to answer, but basically above and beyond that we feel like we're in pretty good shape.

Okay. So -- and is this something we could think about you initiating in the second half of this year?

Yes, absolutely. For both; for stroke and AMI, we actually are intending to initiate both those studies in the second half of the year, and I'd like to see at least one of those studies enrolling patients by the end of the third quarter, and the other one pretty quickly right behind that.

Okay. And with respect to Pfizer and IBD, what we see in data that Pfizer collected prior to the initiation of the Phase II?

Well, some of that data we've actually talked about and presented publicly previously, but I don't really have any expectations about what additional data we may talk about.

I mean we've shown, for example, that the administration of MultiStem in various models of gastrointestinal damage has an impact on producing lesions throughout the GI tract. We've actually presented a fair amount of data that focuses on mechanisms of action in terms of how MultiStem regulates T-cell response or other activated immune cells. Specific pathways of these cells regulate in terms of regulating expression of whether it's key factors like TNF-alpha or expression of vascular endothelial markers, adhesion markers that regulate trafficking of activated immune cells from the vasculature in two sides; the tissue damage inflammation and injury.

So I think we tried to develop a pretty deep understanding of, not just whether the cells are working in these types of preclinical models but how they're working. And we're actually seeing remarkable consistency across multiple different models, whether it's in the neurological area or in other models that we've looked at in terms of how these cells exert their effects and how they express factors that protect, damage, or injure tissue, for example, in the regions of ischemic damage and injury or trauma, as well as reduce the inflammatory cascade that is occurring either in chronic inflammatory stage or in the wake of a particular type of injury for example.

Okay. What are the amount of two doses that are being used on this study, the high dose and the low dose?

I'm not sure we've disclosed that, have we?

No, I don't think we have.

Yes. You're talking about for the IBD study, right? (multiple speakers) --

Correct.

If Pfizer disclosed --

Yes. We haven't. I think that's up to Pfizer about whether or not they want to actually disclose that at some point.

Okay. All right.

But they will disclose at some point. It's really a question of just when it's going to be.

Okay. All right. Thanks a lot.

Okay. Thanks, Keay.

Marc Pentopoulos. Symmetry Capital.

Hey, Gil.

Hey, Mark.

I'm just wondering if you could talk a little about the stroke trial. I mean, since it seems like you guys are positioning this as a Phase II, and maybe you've had some kind of feedback from the FDA, what are you guys thinking of in terms of patient size? Are you going to blind this study? Or are you just going to run it as a single arm study? And what type of endpoints you're going to look for? And how long you're going to follow these patients?

Yes. So it will be run as a double-blind, placebo-controlled study. It will be a dose escalation study. So we're looking at several different dose levels. And some of the primary endpoints we'll be looking at might include functional improvement after several month timeframe. So, for example, after three-month timeframe.

And there is some pretty well-defined scores and methodologies that are used out there clinically to evaluate whether or not patients are improving over time, that there's been some recent studies that I think -- one in particular that I'm thinking about that actually, there's some methodology applied in that study that I think is probably relevant to the way we think about it.

So, I think the key point is, the original study that we were running was going to involve 48 patients and we've actually increased the size of the study by roughly threefold to actually allow us to power it and structure it in a way such that we think that we can quantitatively assess whether or not we're having a statistically significant effect on patients that we're treating.

We held off on pulling the trigger on the Phase I study for a variety of different reasons. I mean, the financial markets were a bit chaotic and we wanted to make sure we were managing our resources very carefully, but the reality of it is that we think -- and in the meantime, we've generated safety data on a couple of different fronts and we've made progress in other areas. So we felt like the appropriate thing to do would be to increase the size of the study and use this as an opportunity to really evaluate whether or not in a clinically relevant population we're seeing the same types of results that we've seen from multiple preclinical studies that we've run.

And I know stroke is a tough area and a lot of people have really fallen down when they've tried to do things in the area of stroke, but we are seeing such good consistency across not just preclinical models of stroke, but other neurological models of damage and injury that we've looked at such as some of the ones that I mentioned earlier. I think we're really in a good position to make a difference here.

I personally don't think that you're ever going to see a single-agent small molecule have the kind of impact in a stroke population that people have been hoping for. I think that a therapy like MultiStem, with its ability to do multiple things in parallel and respond to the tissue damage, and the inflammation and the other things that are going on in the wake of a stroke, in multiple different ways, is frankly a much better approach.

And I think that's, at least in my personal view, there's a much higher likelihood that you'll actually see the kind of therapeutic benefits from that type of dynamic multimodal, if you will, therapeutic intervention than you would if you were just delivering a single neuroprotective agent or a single small molecule that's really only going to be capable of doing one thing.

The interesting thing about stroke is, people arguably look at it as being risky for sure, but I think that the unmet medical need here is just absolutely enormous. And I think that if we were successful at developing a therapy in stroke -- I mean, you're talking about a patient population where 95% of the patients that suffer a stroke don't get treatment with tPA because they can't get to the doctor in time. They basically get palliative care. And the cost of that palliative care is absolutely mind-boggling.

The American Heart Association has published statistics on this in the past. I mean, as a nation, we're spending about $73 billion a year just on stroke care. And it's interesting that the American Heart Association published a paper in February this year where they actually looked out over the course of the next 20 years of what's happening in healthcare or what they expect to happen in healthcare.

And because of the aging population and the increased susceptibility to things like heart disease and stroke, they actually project that we'll go from spending roughly $270 billion annually today to over $820 billion a year in clinical care for cardiovascular disease between now and 2030. So, it's an enormous clinical challenge, it's an enormous social problem, and it's also an enormous opportunity for the first company that can actually develop a safe and effective therapy that can really make a difference in the life of patients that have suffered a stroke. So, I think we're on the right path. It's up to us to demonstrate it clinically. And I think the right way to do that is to run the type of study that we're envisioning here.

Now, I'm just trying to think about -- I just want to try to find out how you guys are thinking about designing those studies so that you can get the maximum amount of information in order, if it is successful, for you to go on to a pivotal study with it.

So, I guess my question is, how are you blinding the study? And what's the window of therapy? And then how are you going to randomize the patients? Is it just 50-50 placebo and treatment, and then what time points you're going to be monitoring the patients to produce a clinical outcome?

Yes. So there is few questions in there. So, in terms of how do you blind it? The most important thing is you want to make sure that the patients nor the people that are actually evaluating the patients know how the patients that have been treated, and so that part is key.

I think in terms of the randomization, yes, we are looking at a one-to-one randomization. That's the basic structure. And in terms of the timeframe that we'll be using to evaluate patients, we'd be looking to follow them out primarily out for several-month timeframe. By that point, you really know whether or not the patient has been meaningfully affected, and whether or not they're getting better.

And just remind me again I know you've told me this before --

(Multiple speakers) sorry?

No, I'm just saying just remind me again. I know you've told me this before but what is the treatment window? tPAs like 3 or 6 hours or something like that, what treatment window are you guys going to use?

Well, the original clinical study design allowed us to actually administer MultiStem 48 to 60 hours actually after the stroke has occurred. We're going to modify that slightly. We haven't disclosed the exact time window. But, basically, it will be -- with tPA, it is about 3 hours. We think we can actually go well beyond that to be able to administer MultiStem and achieving meaningful therapeutic benefit. I think if you could demonstrate that you could actually -- 3 patients even a day to couple of days after the stroke is occurred, that would be a huge step forward if it's associated with a meaningful clinical improvement.

Yes, I agree.

Okay?

Okay, thanks.

Thank you.

(Operator Instructions). Greg Chodaczek, First Analysis.

Yes. Just a couple of housekeeping questions. Looking at my model and determining -- looking at the cash level, can I assume your model is now set up where you'd really don't need to go after any partnering opportunities until more data is made public for (multiple speakers)?

More than half [that we've dated through] shortly in the context of it.

Yes, that's what I'm saying, but with some of these other products that are not partnered, the longer you hold off and the more positive data that comes out, I know there's data coming out rather quickly here but can you hold off long term to get a bigger bag for your box, so to speak?

Well, I guess, let me answer the question in a slightly different way. I know it's not exactly the question that you've asked. But, one, we feel like we're in a stable financial situation right now.

Right.

That's one of the benefit and that's what we believe is the financing in the early part of the year. So, we don't feel like there's an urgent requirement that we do [anything].

I can't say that we remain busy on the business development front looking at multiple different types of potential opportunities, and we're going to pursue those selectively and really enter into partnerships or opportunities that we think are consistent with our longer term objectives and that will allow us to hang on to a lot of the long-term value [from] the various program that we're interested in pursuing.

We do intended to implement additional partnerships over time. We may extend current relationships or put new relationships into place. And partnering has always been a key part of our strategy, whether it's partnering with commercial partners or partnering with the broad range of research and clinical institution that we work with.

In fact if you look at the pipeline that we've established here, and obviously, we didn't talk about all of the indications today, we're getting tremendous amount of leverage out of this broad network of collaboration that we've established over the past few years because we're working with investigators that in the vast, vast majority of cases are bringing substantial resources that pay for the preclinical work that we've been doing because they want to access to our technology and they want to be on the front line of evaluating what could be a breakthrough therapy in treating a disease that they care very deeply about.

So that has allowed us to deploy very little financial resources in a lot of these programs, leverage our internal capabilities and resources and expertise in way that they're highly efficient, and really manage these programs in a meaningful way.

I don't really want to make too much -- prognosticate too far out or give too much guidance about what we might do next in terms of the partnering front or other activities we may engage in, but I think we're in a good position right now and I think we feel good about the fact that we're going to have some additional data here, not just from the GVHD study but, of course, we'll have our one-year data from the AMI study as well. So, I think we're going to have a couple of piece of information here soon that I think will be very useful.

Yes. I'm just waiting for the Genzyme-mipomersen deal to come through here for your guys, which was (multiple speakers) --

Yes, well if you know, it's interesting. I mean there's -- we do believe the transformational partnership opportunities are very achievable and it's really just a question of the timing and the scope, who the partner is and what terms that look like. But I think the fact that we continue to see some good data emerging in several different areas, I think the fact that the Mesoblast/Cephalon deal with its structure and the terms of that deal are certainly reassuring to people that are looking for serious signs of intent on the part of either larger biotech companies or the major pharma companies.

I think it's also very interesting that there's been a number of major pharma companies over the past couple of years that have come out of the closet, if you will, and talked about the fact that they are very, very interested and committed to what's going in regenerative medicine because they say there's transformational area of opportunity that could touch a lot of different high-impact, high-need disease days.

So I think again, it's all about -- and the open question that lot of people are still waiting to see more information on is good evidence of clinical effectiveness. I think the safety profile across the number of different programs has been pretty firmly established. It's really about showing good clinical effectiveness. And as that starts to happen or continues to happen, I guess I should say, I think it's going to have a bigger and bigger effect over time, and that's going to create good opportunities for us.

Right. And that's why as I build this out, I'm looking at -- when data comes in, when do you need cash, not that you need it now, I'm just -- the longer you -- you know better than I do, the longer you wait the better off you are, especially one of the -- if one of the stuff works. But getting back to partnering, does Pfizer and/or Angiotech have the first right of refusal on any other potential indications?

Pfizer does not; Angiotech has got rights in cardiovascular but not beyond that.

Okay. All right. Great. Thanks guys.

Thank you.

Keay Nakae, Chardan.

Yes. Just a follow-up on expected OpEx in the back half of the year, how should we think about those levels?

Well I mean -- I think the key driver is going to be related to our clinical development activity. I think we've been tracking along roughly around $1 million a month from an operating expense or operating cash usage perspective.

I think as we talked in the past, we expect that to ramp up over the course of the year a bit really to support the AMI study with Angiotech and our stroke study. We haven't provided any specific guidance to that, but we expect some increase starting mostly in the second half of the year on the OpEx side.

All right. So you don't even have any firmer parameters about what the R&D spend might look like?

No. I mean to a certain degree, Keay, it's because we've been trying to nail down the final specifics related to the clinical trial design. I think we've made really good headway there. And I think in most respects, we feel like we've got it nailed down, but we haven't really incorporated that into any guidance we might give.

Okay, thanks.

Thank you.

There are no further questions at this time. I'll turn the call back over to Mr. Van Bokkelen.

Okay. Well, if there's no additional questions we'd like to thank all of you for participating in the call today and for your interest in the Company and your ongoing support of what we're doing. As always, we look forward to keeping you updated and we certainly look forward to providing you with an update here in the near term on the clinical data from the GVHD study and the AMI study. Hope to see you on that. So thanks so much and happy Cinco de Mayo.

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