Athersys Inc (ATHX) 2012 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen. My name is Sheila, and I will be your conference operator today. At this time, I would like to welcome everyone to the Athersys first-quarter 2012 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. Ms. Lisa Wilson, you may begin your conference.

Thank you, and good afternoon, everyone. I am 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 today. If you have not received it, the release is available on the Athersys website at www.athersys.com, or you may call Libby Abelt in my office at 212-759-5665 and it will be sent to you immediately. Gil Van Bokkelen, Chairman and Chief Executive Officer, and Laura Campbell, Vice President of Finance of Athersys, will host today's call. John Harrington, Chief Scientific Officer, and BJ Lehmann, President and Chief Operating Officer, who is dialing in from overseas, will be on the line for the question-and-answer session. The call is expected to last approximately 45 minutes, and may also be accessed through the Company's website at www.athersys.com. A replay will be available [two hours] after the call's completion, and access information is in today's press release.

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 10Q, 10K, and other public SEC filings. Athersys anticipates that subsequent events and developments may cause its outlook to change, and 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 may be listening to the replay, this call was held and recorded on May 14, 2012. Since then, Athersys may have made announcements related to the topics discussed, so, please reference the Company's most recent press release and SEC filings.

With that, I would like to turn the call over to Laura Campbell.

Thanks, Lisa. Good afternoon, and welcome to our first-quarter 2012 earnings call. I am Laura Campbell, Vice President of Finance at Athersys. I will briefly review our financial results for the quarter ended March 31, 2012, and then turn the call over to Gil Van Bokkelen, our Chairman and CEO, for a corporate update.

In the first quarter of 2012, we recorded revenues of $2.7 million compared to $3 million for the same period in 2011. The decrease is primarily due to grant revenue, which fluctuates based on the timing of activities and reimbursements for grant-funded projects. Our research and development expenses for the first quarter increased to $5.6 million compared to $4.6 million for the same period last year, primarily due to an increase in pre-clinical and clinical development costs. This increase related to expenses associated with our MultiStem clinical trials, including contract research organization and clinical manufacturing costs.

We currently have two ongoing phase II clinical trials, one in collaboration with our partner, Pfizer, where MultiStem is administered to treat ulcerative colitis; and a second in which MultiStem is used to treat patients who have suffered an ischemic stroke. During the quarter, we also completed our phase I trial, evaluating MultiStem administration for patients undergoing hematopoietic stem cell transplant, and at risk for GvHD and other side effects.

General and administrative expenses for the first quarter of 2012 increased to $1.3 million compared to $1.2 million in the first quarter of 2011. The increase was due principally to an increase in legal and professional fees associated with our recent filings with the SEC. As a result, our net loss increased to $4.3 million, or $0.17 per share in the first quarter of 2012, compared to $3.9 million, or $0.18 per share in the first quarter of 2011.

Turning to our cash position, we received net proceeds of $8.4 million from equity sales through our March 2012 private placement of common stock and warrants, and from the sale of common stock under our equity purchase agreement with Aspire Capital in the first quarter. At March 31, 2012, we had $15.8 million in cash, cash equivalents, and available-for-sale securities.

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

Thanks, Laura. Good afternoon, everyone, and thank you for joining our call today. As we have described in prior conference calls, our ability to create significant value for our shareholders relies principally on four areas. These include -- advancing our clinical-stage programs by conducting robust and well-designed clinical studies that demonstrate safety and effectiveness of our product candidates; moving our existing partnerships ahead and establishing new ones; progressing our preclinical programs; and maintaining a healthy balance sheet, which is achieved through periodic financing activity, and revenue obtained from partnerships and grants. Ultimately, our ability to create substantial value for our shareholders will be realized by seeing our therapies approved for use in patients by the FDA and other regulatory agencies.

The first and most important objective in the near-term is the advancement of our clinical-stage programs. Currently, we have five clinical-stage programs that utilize MultiStem, our patented and proprietary stem cell product. I'm going to focus today on recent progress in several key areas. Our clinical activities are aimed at evaluating the potential utility of MultiStem to treat diseases and conditions that are underserved or where there is significant unmet medical need. The therapeutic areas we are currently focused on include inflammatory and immune disorders, neurological conditions, and cardiovascular disease.

Targeted indications we are exploring in the inflammatory and immune area include treating inflammatory bowel disease in patients with refractory ulcerative colitis, and preventing graft versus host disease, or GvHD, in patients with leukemia or other conditions that require a hematopoietic stem sell transplant. In addition, through a physician-sponsored trial in Europe, we are exploring the potential to provide support for patients receiving a liver transplant.

In the neurological area, our lead indication is in treating damage from ischemic stroke. And in the cardiovascular space, we have focused initially on treating damage from a heart attack or acute myocardial infarction. These are important, in that success in any of these initial indications could open up a broader set of opportunities for us and our partners in related areas.

As part of our global collaboration for treating inflammatory bowel disease, or IBD, our partner, Pfizer, is conducting a randomized, double-blind, placebo-controlled multi-centered phase II clinical study to evaluate the safety and efficacy of MultiStem for the treatment of ulcerative colitis. This trial is being conducted internationally at clinical sites in the US, Canada, and Europe. We continue to expect that enrollment for this study will be completed around the end of this year, and we anticipate initial results for the trial will be available sometime in early 2013.

Providing clinical support for patients being treated for leukemia and related conditions continues to be a very promising and active area for us. Many patients being treated for these conditions experience radiation therapy, followed by a hematopoietic stem cell transplant to help restore the patient's blood and immune system. Unfortunately, roughly half the patients that receive such transplants will experience GvHD, where transplanted immune cells attack the patient, causing significant pain, disability, and even death.

Current treatments are designed to minimize GvHD in afflicted patients, which we believe is analogous to trying to put out a forest fire after it has already begun raging out of control. Unfortunately, intervention at that point does not work for many patients. However, we believe that there is an alternative by intervening earlier with a therapy that can calm the immune system before the GvHD has developed, essentially putting out the fire at the campfire stage.

During the first quarter, we announced positive results from a phase I clinical trial of MultiStem, administered to patients following an allogeneic hematopoietic stem cell transplant in order to prevent or reduce the incidence and severity of GvHD. The study demonstrated that MultiStem therapy was well tolerated in both the single infusion and repeat infusion arms, and also suggested that the therapy may meaningfully reduce the incidence and severity of GvHD, as well as provide benefits in other clinically important areas.

GvHD is thought to be triggered by the activation of donor-derived immune cells such as activated T-cells which attack the transplant recipient's host cells as foreign tissue. Acute GvHD is associated with damage to the liver, skin, gastrointestinal tract, and other tissues. Moderate to severe GvHD, grade 2, and grade 3 to 4, respectively, occurs in approximately 30% to 50% of matched related hematopoietic stem sell recipients, and 50% to 70% of matched unrelated donor recipients.

In our recently completed study, the majority of patients participating received transplants from unrelated donors, 19 of 36, and nearly all of the patients received peripheral blood stem cell transplants, 34 of 36, both of which are associated with a higher risk of GvHD. All patients experienced successful neutrophil engraftment with a median time of engraftment of 15 days. 86% of patients experienced successful platelet engraftment with a median time of engraftment of 16 days. This compares favorably to historical clinical experience for this patient population, demonstrating a positive impact on blood and immune system recovery.

There was a substantial reduction in acute GvHD incidents relative to historical experience at the highest single dose, 11% grade 2 through 4 GvHD, and 0% grade 3 through 4 GvHD. There was also evidence of a dose-response relationship, with patients receiving the highest single dose of MultiStem having a 33% lower absolute incidence of acute GvHD relative to patients who received a single low or medium dose. And patients receiving once weekly dosing of the medium dose through the first 30 days having reduced GvHD incidents relative to single or weekly dosing over the first two weeks post-transplant.

The favorable relapse-free survival rate at 100 days was observed among all patients receiving MultiStem treatment relative to the historical clinical experience. And there were limited infection-related complications over the first 100 days relative to historical clinical experience consistent with a positive effect on engraftment rates. We believe the results of this study are meaningful, and could provide the basis for advancing this program clinically in an accelerated manner because it represents a significant medical condition in an area of great unmet medical need.

Our intellectual property for this program also continues to mature. In early April, we announced the issuance of a new patent covering MultiStem for the suppression of GvHD when administered in conjunction with the hematopoietic stem cell transplant. The patent covers the administration of non-embryonic multi-potent stem cells derived from bone marrow, as well as other tissues sources, and applies to single or repeat dosing over a broad dose range in the context of hematopoietic stem-cell-based treatment. Along with our other intellectual property, this patent will provide broad and long-lasting coverage, and enhance our competitive position.

In the last week of April, we met with the FDA to discuss the results from this clinical trial. In advance of the meeting, we provided the FDA with certain briefing materials, including a summary of study results, and a list of specific questions that we wish to discuss with the agency regarding the next phase of clinical development. The briefing materials also included a synopsis of a potential design for a clinical study to evaluate safety and efficacy of the product for this indication.

The FDA provided answers to several key questions, and also offered their guidance on a number of important issues related to the proposed study design. They also expressed comfort with our proposed end points for the study. The meeting was very collegial, and the agency acknowledged that this represents an area of significant unmet medical need. They also conveyed a willingness to work with us in a collaborative manner to define the specific framework for the next phase of clinical development, which would be designed to evaluate safety and efficacy of the product in a robust and well-controlled manner.

They further indicated that they would like to see a detailed proposal laying out the clinical design, including a statistical plan for the study. The team is now preparing these materials, working in coordination with our clinical advisors and CRO. This process will take several months to complete, but is critical, as it could provide the basis for how the product may be evaluated for registrational purposes if clinical results provide meaningful and robust evidence of effectiveness, as well as further evidence of safety. We expect to receive the detailed minutes from the FDA for the recent meeting within the next several weeks, which should confirm key points from the recent meeting.

All in all, the recent FDA meeting was a very positive step in the process of preparing for the next phase of clinical development in this area. We believe that there is an opportunity to advance this program in a focused and efficient manner to demonstrate safety and efficacy. We also believe that this program could represent the shortest path to approval for MultiStem, but as always, we are committed to maintaining our high development standards, and working with the FDA in a collaborative manner.

Turning to ischemic stroke, our ongoing phase II clinical trial continues to enroll patients at leading stroke centers across the US. This study is focused on treating stroke victims in a clinically practical timeframe, within 1 to 2 days after the stroke has occurred. We believe the stroke market represents a commercial opportunity of more than $15 billion annually. The potential benefits of MultiStem therapy for treating ischemic stroke were illustrated in new preclinical research results presented at the American Heart Association International Stroke Conference earlier this year.

In this study, intravenous administration of MultiStem, one day after a stroke, reduced inflammatory damage in the brain and resulted in a significant improvement in motor skills. This study highlighted the significance of the spleen in the body's immune response by contributing to ongoing inflammation and brain injury after stroke. And as we and our collaborators have seen in previous studies, one of the ways in which MultiStem works is by dampening inflammation that emanates from the spleen.

In the preclinical model of stroke used in the study, animals that received treatment with MultiStem versus placebo showed -- statistically significant increases in the percentage of key regulatory, or key reg cells, which may play an important role in the healing process, and decreases in inflammatory T-cells, which are believed to exacerbate damage in the brain following a stroke; a statistically significant reduction in the pro-inflammatory cytokine levels of IL-1beta and TNFalpha; and a statistically significant increase in levels of the anti-inflammatory cytokine IL-10, also known as human cytokine synthesis inhibitory factor.

At four days after the stroke, animals treated with MultiStem had reduced levels of the serum cytokine IL-6 compared with placebo. But most importantly, animals that were treated with a single dose of MultiStem showed dramatically less tissue loss in the brain at 28 days post-stroke compared to control animals that received treatment with vehicle. These outcomes support prior research at UT Health, in which researchers found that animals treated with MultiStem showed normal spleen size and increased levels of anti-inflammatory cytokines in the blood, whereas animals treated with placebo showed a reduction in spleen size and an increase in inflammatory cytokines in the blood. We are pleased that the body of data supporting use of MultiStem to treat stroke continues to grow, and look forward to outcomes of the ongoing phase II study, which, as we have described previously, is currently anticipated in late 2013.

We've also continued to make progress in other neurological areas, as evidenced by a recent grant from the NIH that provides up to $1.9 million in funding to support further work in treating damage from traumatic brain injury, or TBI. As is the case with stroke, inflammatory damage from the spleen has also been implicated as a key factor in TBI, as well as other forms of traumatic injury. We have also made good progress in exploring the potential for MultiStem to treat chronic neurological conditions, as evidenced by a recent publication demonstrating potential benefit in Hurler's Disease, which is a rare neurological condition. We also announced a new patent covering the use of MultiStem for Hurler's and other orphan neurological indications, and have continued to make progress in our preclinical programs related to treating damage from spinal cord injury, which is supported by a grant from The Third Frontier, and in treating chronic progressive multiple sclerosis, which is being supported by Fast Forward and the National Multiple Sclerosis Society.

In January, we received a US patent that covers the use of MultiStem for the treatment of cardiovascular indications, including myocardial infarction, congestive heart failure, myocardial ischemia, and other conditions. This patent also provides protection for multiple techniques for delivering the stem cells to treat cardiovascular disease, which represents an important opportunity area for us. We believe that this enhances the value of our cardiovascular portfolio for potential partners.

Another area where some exciting progress has been made is in our 5HT2c agonist program for obesity and other indications. Although we have not focused much attention on this program in recent earnings calls, internally we have continued to develop and advance this program. According to a recent report by the Centers for Disease Control and the National Center for Health Statistics, obesity and diabetes have reached epidemic proportions in the US, with 35.7% of adults and almost 17% of young people in the US now defined as clinically obese. This is not just a lifestyle issue, it is a major challenge for our health care system. Obesity contributes directly to the rate of diabetes, which continues to escalate, and also increased risk of cardiovascular disease, stroke, and a range of other conditions. According to the CDC, in 2008, medical costs associated with obesity were estimated at $147 billion.

There has been considerable skepticism about whether it is possible to develop a pharmaceutical treatment for obesity, given the recent experience of several companies, and the apparent complexity of the regulatory path. However, there are two notable events that have taken place over the past few weeks that would suggest that not only is it possible, approvals of new treatments for obesity may well be occurring in the near future.

The first event occurred in February when VITAS presented before an FDA advisory committee panel for an updated review of Qnexa, a combination drug consisting of phentermine and topiramate, that has shown effectiveness in helping clinically obese patients lose weight. The FDA advisory committee reviewed and discussed a number of safety issues related to Qnexa, and subsequently voted 20 to 2 in favor of approving the drug. A decision by the FDA regarding approval of Qnexa is now anticipated in late July.

More recently, Arena Pharmaceuticals presented before an FDA advisory committee for an updated review of Lorcaserin, which is a selective 5HT2c agonist that has also shown some effectiveness in helping clinically obese patients lose weight. The FDA advisory committee reviewed and discussed a number of safety issues related to Lorcaserin, and subsequently voted 18 to 4 in favor of approving the drug with one abstention. A decision by the FDA regarding approval of Lorcaserin is anticipated in late June, although Arena has also indicated that it may need to map out additional post-approval studies with the FDA, which could impact this timeline. Arena has a partnership with Eastside Pharmaceuticals to commercialize Lorcaserin in the United States, and immediately following the FDA advisory committee vote, the companies announced that they were expanding this partnership to include additional territories in North and South America.

Although final FDA decisions regarding the approval of Qnexa and Lorcaserin have not yet been rendered, it now seems likely that one or both drugs will be approved in the relatively near term. We believe that these are significant events, and have relevance to our obesity program for several reasons. First, we have committed ourselves to developing compounds that have the potential to be a best-in-class treatment for obesity. In order to determine whether this is feasible, we have conducted studies that compare some of our potent and selective 5HT2c agonists with both Lorcaserin and Qnexa. We have now posted the results from some of these comparative studies on our website.

As these data show, we have developed compounds that exhibit superior selectivity than other 5HT2c agonists have been able to achieve, which is critical for safety, and also delivers substantial weight loss in preclinical rodent models of diet-induced obesity. Furthermore, when we administer some of our compounds in combination with other agents such as the Phentermine, we are able to achieve dramatically better weight loss than shown by other agents in a head-to-head comparison. We have also demonstrated complementarity with multiple mechanisms of action, and we believe this illustrates that there are multiple ways for us to achieve a best-in-class profile, which to us means better efficacy and superior safety.

Second, these results are relevant because obesity represents not only a major area of clinical need, but also a staggering commercial opportunity. We believe that we are well positioned to partner our 5HT2c agonist program with an organization that is committed to establishing itself as a long-term leader in the area of treating obesity and related conditions. We also believe we are well positioned to establish partnerships in regenerative medicine, and are actively exploring opportunities on several fronts, engaged in discussions and diligence activities with multiple companies. While we continue to evaluate these opportunities, we will also continue to advance our programs through a range of other activities, including accessing the capital markets when we believe it is reasonable and appropriate to do so. Maintaining a healthy balance sheet allows us to advance our core programs, and also maintain a solid negotiating position with potential partners, and therefore, represents a key part of our strategy.

In summary, we continue to execute our business model, advancing multiple clinical programs evaluating MultiStem for diverse indications, and pursuing attractive partnering opportunities. We are very excited about the road ahead, and look forward to keeping you updated on our progress.

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

(Operator Instructions) Your first question comes from the line of Ted Tentoff from Piper Jaffray. Your line is now open.

Great, thank you. Can you hear me okay?

Yes, we can, hi, Ted.

Hey, Gil, how are you? Thanks for the update, a lot of things moving here. My first question really has to do with the meeting with the FDA. It sounded like that was a very encouraging discussion. Granted, again, with the FDA, you always want to make sure that everything is in line. But how quickly do you think this would be something that you could move into a pivotal study, and how large do you think that might have to be?

I think it is still a little too early to speculate on just how quickly we could initiate that next study. I think we really believe in dotting the Is and crossing the Ts. And I think the feedback that we got from the meeting, again, was very, very positive. There was good input on a number of the questions that we asked the agency, there was a couple of questions which they actually deferred on until they actually saw the detailed clinical trial plans and the statistical analysis that goes with that. We are hard at work actually preparing that materials so we can submit it to the agency for their review and then actually really nail things down from there. Our goal, obviously, is to get this clinical trial defined -- designed and defined and set up and initiated as quickly as we possibly can. And I think the exciting thing is that we believe that if do this right, we can actually achieve this on an accelerated basis.

In terms of the overall size of the study, just kind of back of the envelope. We think that this could be a study that could involve something in the neighborhood of 300 to 350 patients, but again, that is not written in stone. There is a number things that we really want to make sure we have clarity on and defined with the FDA. So, we want to take it one step at a time before we get people mentally committed to what that trial's going to look like.

That's really helpful. And based on the positive panel vote last week, would this be -- would these pre-clinical obesity assets be something that you would choose to partner, and have you begun discussions along lines at all?

Yes, we actually have had discussions with people that are very interested in our obesity program. And I think that -- one of the things that I think has held things back little bit historically is the real uncertainty around whether or not it was really and truly possible to get a program passed the FDA. And I think that -- the recent indicators are that there has been a lot of additional work done to analyze safety and evaluate the risk/benefit ratio. And I think the -- certainly the arrows seem to be pointed in the right direction in terms of being able to get one or potentially both of these therapies approved and onto the market. I think the reason why that is important from a partnering perspective is because it gives people a little bit more comfort that it's possible to go down this path, do all the things that are necessary in order to demonstrate safety and efficacy in a reasonable way.

There has been speculation over the past several years that the size of the study or the length of time that might be required in order to demonstrate safety and efficacy may just make it impractical for developing an obesity drug. I think the current signs really indicate that that is not the case. We know that there are a number of companies out there that are really, really interested in the obesity area, and we feel like we are in a very strong position. We've continued to advance this program very quietly in the background, not focusing a lot of attention on it, and that has been the prudent thing to do. But it is something that we are tremendously excited about because we do believe that with the data that is illustrated on our website and of course, an enormous amount of additional information behind that, that we have a very compelling case for having a best-in-class program.

That's helpful. Very exciting, and I look forward to hearing more about the progress on those lines

Thanks.

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

Thank you, gentlemen, for taking the questions. Actually, I would like to follow up on your last statement, and then I've got a follow up after that in terms of MultiStem. Let me understand this and make sure that it is crystal clear. What you're looking at is a situation where you believe that the Aviva and Arena potential approvals will be accretive for your progress and for your franchise as a fast follower? Is that pretty much accurate? And how would you say -- obviously, we have had a chance to very quickly glean over the material that you published to your website, but how would you say your program would be accretive in terms of, let's say just going over safety and efficacy?

Those are great questions. I'm actually going to let John address some of those points, Stephen, then I'll add some color to it, actually.

Right, as Gil mentioned, we view this program as having best-in-class potential, and that really centers around the selectivity profiles of the compound, the compounds that we're developing. And again, we're not talking about a single compound or single compound series, we're talking about a lot of breadth here across multiple chemical classes where we've been able to achieve this selectivity profile. Particularly at two receptors, the 5HT2A and 5HT2B receptors which have been associated with the safety concern around neuropathy, obviously related to 5HT2B action. But importantly, 2A has not been -- has not received the same attention on the safety side, and it is clear to us that it is important to have a wide safety [fluctivity] window at 2A. And just to put that in context, if you look at the efficacy profile of lorcaserin in the early clinical studies, phase IIa, phase IIb studies, lorcaserin, which had very modest selectivity at 5HT2A was able to achieve a dose proportionate increase in efficacy all the way up to the maximum tolerated dose without any evidence of the efficacy reaching its maximum. And so what that says is if one could go to a higher maximum tolerated dose by having a better selectivity profile, it is quite possible and maybe likely that one would be able to achieve better efficacy as well.

So we-- as we look at our program, we see an opportunity to improve not only the efficacy profile of lorcaserin, but also improve upon the safety around both adverse events, psychiatric events, which were observed at some frequency with lorcaserin, but also reduce any risks that might be associated with neuropathy. We see this -- these assets as being valuable to the Company, and as Gil mentioned, we will be -- we will continue in our discussions with potential partners around monetizing this asset.

Yes, and just to add a little bit color there, the first thing is that we applaud both Aviva and Arena for their tenacity and their diligence in advancing their respective programs. We are unabashedly rooting for them both to be successful. We think it would be great for the field, we think it will help many, many patients that need help and will provide clinicians with important options in terms of being able to treat patients that have obesity or diabetes and really need help.

In some ways, we are benefiting from their experiences at all the work that they have put in. Obviously, we are a little ways behind them in terms of advancing our program, which is still at the preclinical stage. But I think we are taking a longer-term view here, which is, what is possible down the road? As John was saying, we believe that we've -- we have put in an enormous amount of time, effort and energy to characterize the similarities and the differences in terms of the types of compounds that we have been developing versus the other things that are out there. I just want people to understand that we are rooting for both those companies and really applaud them for what they have been able to do.

Okay, that is an overarching answer, and I really appreciate that in the positive. Obviously, getting back to MultiStem, there is one question, because the talked about -- you very briefly hinted about the submission and everything else as far as your next steps. I would like you to give me a quick answer in terms of, there is obviously some PDUFA changes on the offing. How would you feel a product like MultiStem, given it's different applications, might benefit from different changes? And what do you think -- and I'm not going to ask you to speak for the agency, but what do you think some of the strengths that you have got are going forward? And with that, I will jump back into the queue.

Yes, thanks. Well, it is interesting. As part of one of the other hats that I wear, which is as part of the biotechnology industry organization, we have been actively involved in monitoring what is going on in terms of the PDUFA renegotiations, which are expected to be implemented some time this summer. One of the very interesting aspects of some of the legislative language that has been introduced in the PDUFA is a broadening of the framework for accelerated approval for therapies that are designed to treat serious or a significant unmet medical needs. I think if you look our overall development portfolio, many of the indications that we are focused on are -- represent very serious, truly unmet significant medical needs. And I think that what that opens up the possibility for is that we might be able to utilize this broadened accelerated approval pathway in multiple different ways over time.

The other thing that I think is very relevant is that as we have been building a broader and broader foundation of safety data from the clinical trials that we have been engaged in with MultiStem, and as we continue to expand that from the trials that are now ongoing, we believe that that's actually going to make it easier to advance other programs in other indications that are not yet at the clinical stage. This is really part of a broad-based strategy that we are implementing that we think will allow us, with a little bit of success from these early indications, it will really open the door for some exciting opportunities where we can get new therapies that are really needed by patients that are -- really need help develop in a very rapid and efficient manner. But we are going to do it prudently, and we're going to do it in a very collaborative manner with the FDA. We are not going to cut corners, and we're going to make sure that we are really committed to doing it properly.

Again, gentlemen, congratulations on all the progress on many different fronts, and I look forward to the conference call and all the data in between. Thank you, gentlemen.

Thank you, Steve

(Operator Instructions) Your next question comes from the line of Jason Kolbert from Maxim, your line is now open.

I just wanted to ask you to talk a little bit more about GvHD. We have seen so many failures in the space, whether it is Osiris, and I was listening to the Osiris call and Prochymal is not dead in GvHD. But can you help me understand the manufacturing differences that exist, at least to your knowledge of your process versus others?

Sure, absolutely. Good to have you on the call, Jason. There is really kind of two key areas of difference, I would say, related to the product profile that I want to touch on, and John, you may want to add some color to this as well. One has to do with the issue that you asked, Jason, which relates to manufacturing scalability. We know that MSCs are a relatively expandable cell type based on the extensive work that of Osiris and others in the field have done over the past many years. And when I say relatively expandable, what I mean is is that people have seen that you can isolate cells from healthy donor individuals and then you can expand cells up to produce hundreds or potentially several thousand doses from a healthy consenting qualified donor. However, in our case, we've demonstrated that our cell type is much more expandable than MFCs or other cell types that people we have worked with. In fact, we have demonstrated that we can take cells from young, healthy consenting donors and produce the equivalent of millions of potential doses, which we believe gives us a significant manufacturing advantage and also an advantage in terms of product consistency.

But the other thing that I think is very relevant is that we have also developed a very deep understanding of how the cells work from a biological mechanism of action standpoint. By that, what I mean is that we know that MultiStem regulates immune system function on several different levels. It down regulates activated immune cells, and in the case of GvHD or other autoimmune conditions are the things that are causing the damage to begin with. It down regulates the trafficking of activated immune cells into the target organ systems and tissues, and we know that the cells actually respond dynamically to signals that are actually driving the pathology in multiple different ways. I think that it is important to recognize that there are fundamental differences between MultiStem and other cell types like MSCs, and that is one of the keys in terms of really achieving better efficacy in terms of treating these types of patients.

I ultimately believe that Osiris will be successful in terms of developing their product to treat patients that are suffering from graft versus host disease. They may need to do some additional work to actually get there, but I think that one of the things that we are doing in our clinical development program that I think is serving to our advantage is developing a deeper understanding of the dose ranging or the dosing that is necessary in order to achieve the desired type of clinical outcome. I think when you do some of the things that we've seen some other folks out there do and you don't really develop that depth of understanding, then you may find what some other folks have seen, which is they're consistently underdosing patients that are not able to achieve the therapeutic benefit, frankly because they -- maybe they -- they just did not develop a good foundation, basically, of what they needed to establish before they moved into patients.

I think that is actually a really key point, and that is the dose differences that have been evaluated in the cell therapy space. And I'm sure you saw the news last week that Pluristem released of the rescue. One question, though. How does the treatment paradigm change when you move upstream towards prophylaxis? If you're a bone marrow transplant physician, they're not really used to prophylactically treating these patients, are they?

Well, I'm going to let John answer that, and I think it will introduce a very interesting paradigm shift, we believe in frankly, a much more effective way to deal with GvHD.

Hi, Jason, this is John Harrington here. Yes, at some level the physicians are quite experienced treating prophylactically. There's -- these patients are clearly at risk of developing acute GvHD and therefore, receive immunosuppressive agents following the transplant. Those agents include methotrexate, they include [trocolomith], cyclosporine and other immunosuppressive agents.

Even with that current standard of care, the incidence of acute GvHD is still in the neighborhood of about 50%, looking specifically at grade 2 to grade 4 GvHD. So, there is a prophylactic regimen that is used, but it is not as effective as it needs to be, and I think the FDA recognizes the unmet need that still exists in this space. In terms of the approach that we are taking to developing a prophylactic regimen, our view, based on animal data, based on early clinical data, is that it is important to hit these patients hard with a very high dose shortly after the transplant and then possibly follow-up with subsequent doses prior to the onset of acute GvHD. I think the data both preclinically and clinically support that approach and as part of future studies will be clearly looking at a dose ranging component to any study that we run.

I think, again, a key difference between what Osiris and others have tried to do in some sense is that they are waiting for the problem to get really big and then try and control it. What we are doing is we are heading it off before it really begins to take off, and we think that that might actually be a much more practical and frankly, a much more effective way to deal with it. From a competitive positioning standpoint, it would also put us earlier in the decision-making process, if you will. Clinicians could be applying us on the front line if we do demonstrate robust safety and efficacy, that they can actually implement it on the front line and it could become standard of care.

Right, and so the idea here is that, say, if you're not going to endanger the graft, so why not go for it? Is that the thought process? Is there (inaudible) graft?

No, that is exactly right. In fact, not only we're not endangering the graft, but we believe that we are actually enhancing engraftment, and the data that we generated to date certainly is consistent with that. I think that that could also be key.

If you look at the results which are on our website, it was a small study, so we are not trying to make too much of it. It only involves about 36 patients, but we did see consistently across the board positive signs and indications that we are actually not only helping in terms of reducing the incidence and severity of GvHD, but also promoting engraftment. For example, we saw rapid, not just neutrophil engraftment, but also platelet engraftment. And of course, for many of these patients, the historical clinical experience has been that you see a lot of patients that actually don't experience good platelet reconstitution and they have to come back for repeat platelet transfusions over time. We saw a very high rate among patients that received treatment of MultiStem in terms of platelet reconstitution and it happens very quickly, within about 2.5 weeks.

Great, thank you, I appreciate it.

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

Once again, we would like to thank everybody for listening to today's call, and we look forward to keeping you updated as we continue to advance our programs and make important progress on multiple different areas. Thanks very much.

This concludes today's conference, you may now disconnect.