Athersys Inc (ATHX) 2014 Q1 法說會逐字稿

Good afternoon. My name is Traci and I will be your conference operator today. At this time I would like to welcome everyone to the Athersys first-quarter financial results conference call. All lines had been placed on mute to prevent any background noise. (Operator Instructions)

Thank you. Ms. Amy Raskopf, you may begin your conference.

Thank you, Traci and good afternoon, everyone. I am Amy Raskopf of In-Site Communications, Investor Relations for Athersys. Thank you for joining today's call. If you do not have a copy of the press release issued at the close of market, it is available on the Athersys website at athersys.com.

Dr. Gil Van Bokkelen, chairman and chief executive officer, and B.J. Lehmann, president and chief operating officer, will host today's call. The call is expected to last approximately 30 to 45 minutes and may also be accessed at athersys.com. A replay will be available two hours after the call's conclusion and access information for that 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 the 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 may be listening to the replay, this call was held and recorded on May 8, 2014. 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.?

Thank you, Amy. Good afternoon and welcome, everyone. I am B.J. Lehmann, president and chief operating officer at Athersys. I will briefly review our first-quarter 2014 financial results and then turn the call over to Gil for a corporate update followed by a question-and-answer period.

For the first quarter of 2014, revenues increased to $707,000 compared to $326,000 for the same period in 2013. The increase primarily reflects $421,000 increase in our grant revenue. Grant revenue has fluctuated from period to period due to the timing of grant-related activities and with the award and expiration of grants. Research and development expenses were $6.2 million in the first quarter of 2014 compared to $5.6 million in the prior year first quarter. The difference reflects increases in personnel costs, stock-based compensation, patent legal fees and sponsored research, which were partially offset by a decrease in preclinical and clinical costs.

General administrative expenses increased to $1.8 million in the first quarter of 2014 from $1.5 million in the comparable period in 2013, due primarily to increases in personnel costs and stock-based compensation. The change in the fair value of our warrant liabilities resulted in expense of $4.1 million in the first quarter of 2014 compared to expense of $2.6 million in the same 2013 period, reflecting the impact of our January 2014 offering and changes in our share price.

Net loss for the first quarter of 2014 was $11.5 million compared to a net loss of $9.4 million for the first quarter of 2013. The increased net loss reflects the $381,000 increase in revenues, offset by, first, the $924,000 increase in R&D and G&A expenses, which included an increase of $463,000 in non-cash stock-based compensation expense, and, second, the impact of a $1.6 million increase in non-cash expense from a change in fair value of our warrant liabilities.

Excluding the non-cash warrant and stock-based compensation expense, aggregating $4.1 million for the quarter, net loss per share for the three months ended March 31, 2014, equates to $0.09 per share versus the reported net loss per share of $0.15 per share for the quarter, which includes such non-cash expenses.

During the first quarter of 2014, cash used in operating activities was $7.1 million compared to $6.1 million in the first quarter of 2013 and cash provided by financing activities including warrant exercises was $20.5 million in the 2014 first quarter compared to $2 million in the prior-year period.

In January 2014, we completed a registered direct offering with net proceeds of $18.8 million from the issuance of 5 million shares of common stock and warrants to purchase 1.5 million shares at $4.50 per share, which were sold in fixed combinations at $4.10 per unit. This financing puts us in a strong financial position to achieve important clinical development and business milestones.

Taking into account the January financing, we started the year with approximately $50 million in cash and cash equivalents and ended the first quarter with $45 million.

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

Thanks, B.J., and good afternoon, everyone. As most of you are aware, Athersys is committed to developing proprietary therapeutics that have the potential to address significant areas of unmet medical need. Our current work is primarily focused on conditions were we believe that MultiStem, our patented allogeneic stem cell product, has particular relevance and clinical potential.

Our current regenerative medicine programs are focused on developing MultiStem as an off-the-shelf therapy for the treatment of inflammatory and immune disorders, neurological conditions, cardiovascular disease, and other areas where standard of care is limited and significant medical need exists.

We are evaluating our MultiStem product in multiple clinical stage programs as well as a range of preclinical programs. Our clinical programs are based on years of work that we have conducted both internally and in collaboration with leading independent labs evaluating MultiStem in preclinical studies designed to explore its potential relevance in various models of human disease and injury.

Recently, we reported the interim results from a double-blind placebo-controlled Phase II clinical study of MultiStem cell therapy to treat refractory ulcerative colitis or UC which was specifically focused on patients that have failed or developed resistance to other forms of treatment. This exploratory trial was designed to assess whether a single dose of MultiStem could produce a robust therapeutic effect when administered to patients with long-standing active disease and that had previously failed, become resistant, or shown intolerance to other forms of treatment, including corticosteroids, immunosuppressants and anti-TNF therapy.

This group of patients with advanced disease is an important target because it represents the UC patient population with the greatest unmet need. It was also anticipated that a single dose would give the MultiStem therapy the most compelling competitive profile, considering other biologics and small molecules in the field's overall development pipeline. Admittedly, this was a tough challenge. On average patients enrolled in the trial had suffered from UC for 10 years, had pretty advanced disease as a result, and had already shown treatment resistance to multiple therapies.

It is worth noting, for example, that 67% of the patients treated with MultiStem had prior exposure to anti-TNF therapies, treatment which did not yield the desired clinical result. So clearly this was a very challenging patient population. The results of the trial provide additional evidence of the consistent and favorable safety profile of MultiStem, confirming observations from the prior clinical studies that Athersys has conducted.

It also indicates that a single dose of cells did not achieve the desired therapeutic effect in eight weeks in this group of patients suffering from this chronic inflammatory disease. While there was a statistically significant difference at four weeks in the proportion of responders in MultiStem treated patients compared to placebo as measured by a greater than or equal to 1 point improvement in the Mayo rectal bleeding score, but eight weeks this difference was reduced and no longer significant.

We are obviously disappointed by this miss. As we have said previously, we will be very straightforward and candid when we or our partners conduct trials that are not successful. However, we also believe that it is important to keep things in the proper context. The results of this trial clearly tell us a single administration of MultiStem in this challenging patient population, while safe, was not sufficient to have a substantial therapeutic effect.

We and Pfizer realized from the outset that this was a difficult challenge clinically, which is why it is an area of unmet medical need. So what we have learned for the study is that it is tough to tackle a chronic disease like UC with a single dose and expect a significant durable change reversing a decade or more of damage in a chronic inflammatory bowel disease. However, we believe it is important to recognize what the study did not evaluate, whether a more aggressive dosing regimen might have made a difference in these types of patients.

It would be tempting to think that perhaps a second dose administered after eight weeks to roughly 1/4 of the patients enrolled in the trial might somehow change the outcome or our perspective on the study. First, it is worth noting that the primary endpoints were eight weeks, meaning that formally the study outcome won't change with additional data. Additionally, we and Pfizer do not expect that a second dose at eight weeks would significantly impact the patients' disease, because clearly one post didn't have a discernible effect through eight weeks. So administration of the second dose at that point should not be expected to meaningfully change things over the subsequent eight weeks.

However, once again, it should be recognized that this does not tell us whether a different dosing strategy might produce a meaningful effect over time. We do anticipate that additional data gleaned from biomarker analysis and other information from the 16-week clinical assessment could provide additional insights into the factors at work in the potential relevance for MultiStem in this area. And work by others such as the ongoing Mesoblast study evaluating multiple doses of Prochymal patients with Crohn's disease, may provide additional useful information about the application of cell therapy in patients with inflammatory bowel disease.

As we have said repeatedly in the past, while we do not expect to be successful in each and every study we conduct or opportunity we explore, we have positioned Athersys to advance multiple programs in a parallel and cost-effective manner. In our view, the results from the UC study have no bearing on our other active clinical studies. Treating patients with long-standing, chronic, and refractory inflammatory bowel disease is very different clinically and mechanistically from other indications we are pursuing, particularly acute intervention in areas including treating stroke, myocardial infarction, and other forms of acute coronary syndrome/cardiovascular disease and prevention of graft-versus-host disease.

Based on the substantial evidence and data we have generated here at Athersys and working in collaboration with outside independent labs, we believe that early and aggressive intervention with MultiStem in these areas will make a meaningful difference in improved clinical outcomes. We remain highly confident in our other programs and have made good and steady progress in many areas. Whatever the outcome, however, we are committed to honest reporting of the successes we achieve as well as the disappointments we experience.

Turning to some of these other programs in clinical development, another key program is our ongoing Phase II trial involving intravenous administration of MultiStem cell therapy to patients who have suffered an ischemic stroke one to two days after the event.

Ischemic stroke, which is caused by a blockage in blood flow to the brain, accounts for more than 85% of all strokes, according to American Heart Association estimates. Due to an aging global population, the incidence and prevalence of stroke is projected to increase substantially in the next 20 to 30 years, above the current number of more than 2 million individuals who suffer a stroke each year in the United States, Japan, and European Union combined.

Neurological injury as a result of a stroke represents one of the leading causes of death and is typically the leading cause of serious disability in the United States, Japan, Europe, and other regions of the world. If MultiStem is shown to be a safe and effective therapy that can be administered in a clinically practical time frame -- and we believe within one to two days after a stroke represents both a critically important window for intervention and a clinically practical time frame for the vast majority of patients -- we believe it could change stroke medicine as we know it.

We also believe the potential market for a new therapy to treat stroke represents a $15 billion to $20 billion annual market opportunity, or more. This is an indication that represents perhaps the greatest area of unmet medical need in medicine today and it's a priority for healthcare systems around the world.

Stroke is one of several areas that may benefit from recent international developments on the regulatory front. As we reported previously, in November Japan's Parliament passed the legislation designed to promote the safe and accelerated development of regenerative medicine treatments using a novel conditional approval system. The legislation creates a new, faster pathway for cell therapy product approval, providing the potential for rapid clinical and commercial development and subsequent entry into the Japanese market.

Over the past few months, we have been actively evaluating how we can utilize this new regulatory approach and have engaged prominent, experience consultants and advisors in Japan and have also retained a leading Japanese CRO. We are also active in discussions and diligence activities with several companies in Japan that are highly interested in stroke and other areas. We are committed to defining and implementing an appropriate clinical development path in Japan for stroke as well as our other programs that we believe have relevance there and doing so in a manner that we believe can create substantial value for our shareholders.

Is worth noting that other regulatory agencies have recently taken actions that appear to be following Japan's leadership and approach. Several weeks ago, the European Medicines Agency, or EMA, announced a new program that, like the program announced in Japan, is focused on establishing a novel conditional approval pathway that is intended to speed development of new medicines for areas of great unmet medical need. While this pathway was not designed specifically for regenerative medicine therapies like the framework in Japan, clearly it could have potential relevance in the sector.

So we believe that if we achieve clinical success in stroke and other areas, we will be well-positioned to achieve our development goals and subsequent commercial success. During the first quarter, we accelerated enrollment in our ongoing Phase II stroke trial, initiating enrollment in the United Kingdom and expanding United States activities. As we have stated previously, completion of enrollment is currently anticipated to occur around the end of the summer and initial results are targeted for later in the year.

Stroke is not the only clinical program where the new regulatory framework in Japan may be relevant. As we mentioned in last quarter's call, we plan to advance our acute myocardial infarction program into Phase II clinical development with support from a grant we were awarded last year from the National Heart Lung and Blood Institute, which is part of the National Institutes of Health.

Myocardial infarction, or heart attack, is caused by the blockage of one or more arteries that supply blood to the heart. This can result in significant injury to the heart muscle, which can severely affect the patient's overall health and quality of life or cause significant damage that could ultimately lead to heart failure. While statins and other medications have clearly improved the landscape for patients at risk of heart disease, it remains the leading cause of death for many countries and a leading cause of disability.

According to Data Monitor and other sources, there are an estimated 1.7 million myocardial infarctions that occur each year in the US, European Union countries, and Japan combined. Effectively treating patients that have suffered damage from a myocardial infarction remains an area of great unmet medical need and it also represents a significant commercial opportunity. We are excited to advance a third program into Phase II development and by the potential opportunity to capitalize on emerging changes to regulatory paradigms in the US, Europe, and Japan in our effort to both benefit patients and create shareholder value.

Another clinical program in the development stage involves transplantation support. Clinical data suggest that the administration of MultiStem cell therapy may substantially reduce the incidence and severity of graft-versus-host disease, referred to as GVHD, particularly to patients suffering from leukemia or other blood-borne cancers. Many of these patients after receiving radiation or chemotherapy to destroy cancerous cells also receive a hematopoietic stem cell or peripheral blood stem cell transplant, which carry significant risk of GVHD and other complications.

In the past several months, we advanced planning and preparations for Phase II/III GVHD prophylaxis study, highlighted by our recent request for an FDA meeting to review the revised clinical trial design. We are also engaged in parallel discussions and preparations with the EMA and we look forward to finalizing the design of the trial such that it will meet our objectives and rigorous standards.

Once that is done, we look forward to the initiation of the trial as we achieve certain business development and financial objectives that will provide the necessary support. It is worth noting that our GVHD program is been assigned Orphan Drug Designation from both the EMA and the FDA, which among other benefits assures us of seven years of market exclusivity upon approval.

As B.J. mentioned, we started the year with essentially $50 million of cash as a result of two successful registered direct offerings that were initiated by institutional investors who recognized that if we are successful in any of the areas we are currently pursuing, we are extraordinarily undervalued. This is underscored by the recent regulatory initiatives that could accelerate our development path.

Our solid financial position enables us to execute on a number of development programs with our current resources. It also enables us to further progress our clinical development programs, advance our process development activities, and expand our later stage development capabilities, as well as pursue our business development discussions relating to certain regenerative medicine programs as well as to our novel 5-HT2C receptor agonists program to treat obesity and neurological conditions such as schizophrenia.

With our broad development portfolio and the important business and clinical catalyst are coming up this year, we believe we are on a path to delivering substantial long-term value for our stockholders through the execution of well-designed, high-quality clinical programs and the advancement of existing collaborations and new partnerships. It is worth noting that we believe that the market response to the disappointing clinical result is an overreaction and in our view our current share price fails to reflect the value of our programs or the fact that UC study represents only a portion of the value of our entire portfolio.

In particular, if we were to be successful in the area like stroke, which represent a much larger potential market opportunity with much less competition and is also a program that we retain full ownership of, we think the value creation potential could be far greater than other areas such as UC. It also fails to reflect the potential impact of the improving regulatory landscape and how that might help accelerate our ability to develop and commercialize MultiStem in multiple areas of unmet medical need.

In closing, we remain committed to advancing our portfolio of opportunities and achieving our long-term goals, and we appreciate the continued support of our shareholders. With that, we would be happy to take any questions.

(Operator Instructions) Jason Kolbert, Maxim.

Thank you so much. There's a bunch of things I would like to talk about, but I would like to pick up on your last statement, which is that it's an overreaction to the stock. So just remind us a little bit on the ulcerative colitis program and Pfizer, that that was a milestone and royalty-only program to Athersys. So essentially if we were to take the program out, that only reflects a small portion of Athersys's overvalue -- sorry, of Athersys's -- the total value of the Company. So help me understand but just remind us what are the metrics that that program represented in its totality?

Yes, so I will comment. I'm sure B.J. will have some thoughts to add to this. So you are correct. The partnership was structured as a milestone. We received an upfront license fee of $6 million. We also received several years of research funding and support. In total, I think it was in the neighborhood of about $20 million of capital they came into the Company over that initial timeframe.

As we have reported previously, the total milestone potential was just north of $100 million, about $105 million in various milestones that could be earned over time, which includes clinical development milestones, approval milestones, and some post-approval milestones as well. And then at that point, once the product reaches approval, then we could receive either a tiered royalty structure or if we elected to pick up some of the costs in Phase III clinical development, then we would get a bigger piece of the backend that relates -- that would be achieved through a profit-sharing arrangement.

But here is kind of one of the rules of thumb that I think is useful for people to kind of recognize. In these types of partnerships, just a ballpark estimate is that the pharmaceutical company partner is usually going to capture about 90% of the value in a successful scenario. I'm not saying that's the actual number; I'm just saying that that is kind of the general ballpark number that I think most people would kind of use or something in the neighborhood.

But for our stroke program, which we own 100% of, and frankly for all the other programs that we maintain full ownership of, we own 100% of that value. We made the conscious decision to actually take that program through Phase II clinical development on our own precisely because we think it will actually translate to much greater value creation. Of course we made that decision before the framework in Japan became a reality or before some of these other opportunities had actually surfaced in the past few months.

So there is the ownership potential, but then there's also the absolute market potential. So just to talk a little bit about that and I know B.J. will have some thoughts here, the stroke market, as we have talked about before and as I mentioned today, every year in the core markets that we care most about there are over 2 million people that suffer an ischemic stroke.

If you think about -- I think it would be perhaps unrealistic to think that MultiStem was going to be applicable to everybody who has a stroke, so let's just cut that market in half or the patient population in half and call it roughly 1 million patients a year. Well, 1 million patients a year, depending on what your pricing assumptions are, translates to a market opportunity that is just absolutely astronomical. You could easily be talking about a $20 billion or $25 billion or $30 billion a year market opportunity. That's every year.

Now if you compare and contrast the to the IBD market, you are talking about numbers that are still substantial but a lot smaller than what you would be looking at with something in the stroke area. In inflammatory bowel disease, whether it's for Crohn's or for ulcerative colitis, yes, you are talking about several million patients across those markets that suffer from these conditions but the incidence rate, the annual incidence rate, is a lot lower than what you are talking about something like stroke and you're also talking about focusing on the patients that are the sickest portion of the disease spectrum.

So maybe you're talking about in total a target population of several hundred thousand patients. That's not every year; that's several hundred thousand patients in total. You might be treating those patients for a long period of time, but I think any way you do the analysis, you're talking about an absolute market opportunity even if you are assuming 100% ownership that is substantially smaller than the opportunity that I think we're looking at a stroke.

Then if you further kind of calculate that a company like Pfizer would be getting the lion's share of the value from that type of the partnership, again it further reduces what the upside value creation potential would be for us and for our shareholders. So, B.J., I knew that you might want to add some things on --.

I think you are right there, Gil. I mean, it's important to think about the actual patient populations you are going after. I think our stroke program is really focused on a potentially broader percentage or proportion of the ischemic strokes that happen in any given year. I think the theme that Gil walked through applies generally for many of our other programs as well.

There are some big market areas we are going after, cardiovascular disease. There are certainly reasonable therapies out there for heart attack and the like, but there is substantial unmet need. We are bringing to bear I think something that would be much more competitive than you would have in the IBD market. It's important to note that IBD, while there is a substantial unmet need, there are actually some pretty reasonably good therapeutic options for patients at least for a long period of time to address and mediate the disease condition.

I think in cardiovascular disease there is a substantially greater opportunity particularly with diseases that develop into chronic congestive heart failure and the like. I think in GVHD, while we are going after a smaller patient population, we're going after absolutely a very severe patient population with substantial need, significant costs. So I think a theme that applies to many of the other indication areas we are going after is one of substantial unmet need, substantial market opportunity, and perhaps a better competitive profile for the therapy that we do develop, given what is out there today.

Yes, so just on stroke in particular, a couple of points. On stroke in particular, because there really is no effective therapy that reaches anything more than just a small percentage of the patients -- I mean tPA only reaches about 5% to 10% of the patients there and then there's also a small number of patients that will undergo thrombectomy -- but you're talking about a very, very small percentage of patients that experience a stroke.

For the rest of them, really they don't have any good options available to them. So this represents a quintessential area of truly unmet medical need. So anything that is shown to be safe and effective that can be administered in a clinically practical timeframe, we believe is going to get rapid uptake in the market. And that is what we hope to show with our -- with MultiStem in the clinical trial that we are running now and then subsequent studies that we would run after that.

So, Gil, let me interrupt you for a second because that's fantastic and I just wanted to bring out that point that the economics are vastly different than a wholly-owned program like stroke versus a partnered program like ulcerative colitis.

But you guys both mentioned something that I think is really important and that is I'd like to dial in a little bit and better understand the intervention with one dose on an acute disease like acute myocardial infarction or an acute stroke versus using one dose to shift a chronic disease and, as you guys have described it, one that has been in place for maybe a decade and that is even biologically refractory. So can you help us understand mechanistically why we think an intervention with one dose, one time in an acute disease like stroke could be vastly different than a one-time intervention in a chronic disease like ulcerative colitis?

Yes, that's a great question, and the answer to that is that in the case of stroke or in the case of -- it also applies actually to other programs that we've got going on, for example the GVHD prophylaxis study. What you're really doing is you are intervening early on in the disease paradigm, if you will, preventing the more serious things that can happen that create much more substantial damage. So the hyperinflammatory cascade that occurs after a stroke or other things that might happen.

In the case of GVHD prophylaxis, the objective there is literally to neutralize the potentially alloreactive immune cells before they really get off the launchpad and begin to inflict a lot of damage, which in some cases it takes time for them to get going. So in both of these instances, we believe that by intervening early in these types of acute indications, not only can we have a profound effect at actually stopping things before they begin to get out of control and create a lot of damage, but we can also to the scales in favor of the healing and repair process much, much sooner.

Now that is very different than, say, and I will you stroke as an example -- you can imagine that if you try and treat a patient that suffered a stroke, say, 10 years ago and they have long-standing damage, that's a very different proposition from trying to treat somebody that just suffered a stroke within the last 24 hours. You can intervene early on before that scar tissue has started to accumulate and before a lot of that inflammatory damage has really laid waste to a lot of tissue in the brain that might otherwise be saved. So it's an entirely different biological mechanism, if you will, or paradigm that is fundamentally different than what you might want to be doing for a patient that suffered a stroke years prior to that.

In fact, this is exactly how we describe the GVHD prophylaxis study. In fact, the analogy that we always use is the forest fire analogy. If you are trying to treat a patient that has got full-blown graft-versus-host disease, where you have got immune cells that are kind of raging out of control, that is a very challenging thing to do. People have been trying to go after that for quite some time. In our minds, that's kind of like trying to put the forest fire out when it is raging out of control. So what we are doing is we are trying to put it out at the campfire stage. We are neutralizing those cells very early in the process, before they have really have begun to inflict a lot of damage and when things can be contained and neutralized.

Now, I don't want to make it sound like we don't believe that MultiStem is going to have relevance in chronic indications. We absolutely do. We just think that there's a lot of questions that we need to sort out and additional information that we need to generate to figure out how best to do that. But we are still convinced today, based on a lot of work that we have done, that it's going to have relevance in a broad range of different disease areas.

I think it's really important for people to understand that Phase II clinical trials are the riskiest stage of development. Roughly 2/3 of the things that actually are advanced into Phase II trials, the study doesn't pan out the way you want it to. But it doesn't mean that the therapy doesn't work necessarily. In many instances it's because you don't know enough about the endpoints or you haven't optimize the dosing strategy or a whole bunch of other things that you need to sort out over time.

So this was a painful experience. It was a bitter disappointment not only for everybody here at the Company. I know it was very disappointing for the team at Pfizer and also disappointing for our shareholders. Believe me, I feel for each of everybody on the call --.

I'll tell you, Gil, as an analyst who follows, when I see a trial take as long and I see as high a swing as you were taking for people who have had the disease for 10 years, who've been refractory, it would have been a grand slam had it worked. But in the area of clinical science, I don't look at this as a failure. I look at it as a success because it's very clear to me if I were going to be running the next trial how I would run it, how I would structure it.

I also want to ask you a question. What's your confidence level that if you could go run another Phase II proof-of-concept trial now based on what you know that you could hit the endpoint? I know you are speculating, but I'm just trying to understand how informative this clinical science was to you and to Pfizer.

I'll give you my personal view. I'm certainly not going to speak for Pfizer and won't speak for anybody else. But I believe today that if we ran a study where we were administering multiple dose of MultiStem over time in patients that have inflammatory bowel disease that we would see a meaningful effect.

And what I have been saying publicly over the past few months is, look, we are running this study eyes wide open, just looking for some evidence that a single dose provides meaningful evidence of activity. We didn't see that. We have to be honest about it. It's brutally difficult, but the reality of it is that we saw some hints maybe of some things, but the reality of it is that we didn't see what we were hoping for.

But to answer your question, I think if we ran a study where we were designing it to do a more systematic exploration, looking at different parameters related to dosing and duration of dosing and timing of administration and things like that, that would ultimately get to a point where we could actually achieving a meaningful therapeutic effect.

Yes, Jason, I think it's worth noting we haven't completed all the analysis of the data yet and I think there will be additional information that is generated from this study that is going to be very informative I think with respect to this particular question, biomarker analysis, for instance. We may get some clues from the second dosing at week eight. We don't think that is going to change the outcome necessarily, but it might give us some insight with respect to repeat dosing.

Frankly, I think the work that Mesoblast is doing with Prochymal is going to be very informative. They are doing a repeat dose study and it's a similar patient population and similar indication. That will be informative. So I think we could speak with more confidence when we have that additional information.

Thanks, guys. I really appreciate the rundown and keep up the good clinical work. We look forward to following the enrollment of the stroke trial and ultimately that data, as well as the other trials like GVHD, the solid organ transplant. There's some really exciting things in here. Thank you so much.

Tracy Marshbanks, First Analysis.

Good afternoon, guys. A couple of questions and a little bit building on the prior discussion. Could you just sort of remind us maybe the two or three things based on all your research and study on MultiStem that it is the best at addressing? Maybe just line that up against a couple of your programs and sort of from mechanism of action why it's ideal and your thoughts on how it addresses some of the other beyond IBD diseases.

Right, the one of the things that we have seen very consistently across many different collaborative research programs and the work we have done here internally is that when we administer the cells, whether we administer them locally or we administer them systemically, they have an amazing biological capacity to actually recognize when there are signals of tissue damage and inflammation and injury.

In fact, we have seen using studies where we label cells and then track and see where they go over time, that the cells have a propensity to actually home to sites of tissue damage and injury and sites of inflammation. Furthermore, we have used some techniques where we can really analyze at the molecular level exactly what the cells are doing over time in a range of different disease and injury settings.

So we know because we developed techniques over time that allow us to do this that when we administer the cells, they are not just doing one specific thing. They are actually doing a whole range of things, whether it's up-regulating regulatory T-cells or other cells that are responsible like empty macrophages for driving the healing process, or down-regulating activated T-cells or other activated cells in the immune system, they clearly have the capacity and are doing these things across a broad range of different models. We see consistency looking across a lot of the neurological injury disease models we've looked at, for example. We've seen it over and over and over again.

I think one of the things that is exciting to us -- and that is in stark contrast to what people see with single modality therapies, whether it's a pharmaceutical or biologics. You can have biologics and pharmaceuticals that are incredibly powerful drugs and are capable of actually managing very powerful pathways that touch on different things that are driving disease or exacerbating injury or disease, but the remarkable thing about MultiStem and the cells that we work with is they are dynamic living entities that have the capacity to home to trouble spots, if you will, or other relevant organs and tissue systems in the body and exert their effects in multiple different ways. That is unlike traditional drugs and we have seen that and actually published quite a few papers actually that illustrate that and, as I mentioned, have developed a deep understanding across a range of areas around it.

When it comes to what are the points of real distinctiveness relative to other things that are out there, well, again I think stroke in some ways really provides a compelling example of that. People have been trying for years to develop a therapy for stroke and it has been failure after failure after failure. Neuroprotectant, next-generation thrombolytics that can potentially extend out the window beyond what is currently possible with tPA, and a bunch of other things. The reason why it's an area of tremendous unmet medical need is because nothing has really worked or extended the clinical opportunity to intervene in these types of patients.

So we know it's a really challenging area. But we have data from the studies that we have run with outside independent labs that shows that if we administer MultiStem even within a few days after a stroke has occurred, that we see profound dramatic recovery. And we understand the mechanisms that actually enable that.

So we have put our money where our mouth is. We bet on this program ourselves after years of hard work because we believe it can make a difference in patients that have suffered a stroke and that we can do that in a clinically practical time frame. And we assembled some of the leading experts in the field of stroke medicine that are part of our team. That doesn't guarantee our success in this clinical trial or any other area, but the point is that we've worked incredibly hard and very diligently over the past few years to really develop a game plan and refine our thinking about seeing how we can address an area of tremendous unmet medical need.

That's how we approach each and every one of our programs. We have always said we will not be successful in every area. We will learn unexpected things when we are engaging in clinical development, things that don't translate to the results that we saw in the best available preclinical models. That is to be expected because that's been going on in the industry for a long, long time. But if we are successful in only a few of these areas or even one area like stroke, it's going to create extraordinary value and it's going to improve medicine and quality of life for a lot of patients that have no other options.

Great. A little bit more to the mundane -- with about $45 million on the balance sheet, that sounds like a fairly substantial amount of capital but some of the spending in the trials can consume some of that fairly rapidly. What is your outlook? Is that two years of capital?

Then maybe just highlight the cards that will be turned over in that period of time if the timing is about right. So sort of like what are we going to know before we get to another capital-raising event? Are we leaving out business development that may ease the burden in some of the programs and maybe a quick update on that side?

Yes, when we completed the financing of the beginning of the year, our perspective was we wanted to put the Company in a position to have two years of capital. I think we feel pretty comfortable with that. Importantly, we have capital to get through a number of important events and milestones. The leading one of course is the stroke data.

I think our expectation, our target, is to have topline data around the end of the year and that is based on completing enrollment around the end of the summer. So that will be very important, a big value inflection point for the Company. We will be launching an AMI Phase II study supported by NIH grant funding, which essentially lays off some of that clinical development costs you are talking about which can be so expensive. That will be launched in the second half of the year. I think that will be important. Obviously, that won't be generating clinical data inside that two-year period.

I think business development actually has the potential to be a catalyst. As Gil mentioned, we have a number of discussions in Japan that I think could prove to be fruitful. We have additional discussions outside of that as well and they involve different indications than you might expect. I think that could be a meaningful driver also.

I think we will get clarity on our GVHD study. Remember the idea there is to have a study that could be potentially a registrational study, so a Phase II/III type study. We made a lot of progress in advancing the design of that study. We are engaged with the FDA kind of through this period right now. I think we will have a perspective on that. What we've told folks in the past still remains; we are not going to launch that study until we feel like we've got the financial wherewithal to carry that through.

It would be a rather large study, several years in length, potentially upwards of $20 million or so in terms of investment. So while I think it would be an important milestone to have clarity around what that looks like and could be important in some of our discussions on the business side, again we don't launch that until we have partnership funding or we are in a different financial position to get that done.

I think in short we feel like we are in a good financial position. Obviously we going to continue to mind the store pretty closely here at the Company. We will be focused on the real value-creating aspects of the spend. Clinical development is going to be key there, getting that stroke study done as soon as possible obviously very important. Then we will be making selective investment as well really oriented to what's going to be important as next steps. So to scale up on the manufacturing side to allow us to be positioned for commercialization, which we need to have in place for Phase III studies, some additional capability development, the launch of AMI, and so forth.

All right. Thanks.

Steve Brozak, WBB Securities.

Thank you, gentlemen. Thank you, by the way, for the candor on the call. It's one of those things where it is genuinely appreciated.

Two questions. The first one, on the Pfizer study, can you give us any color as to what your ideas would be? Because obviously it's not that these were just sick patients. These were very, very sick patients but they also had been administered, exposed to anti-TNF products, severely -- how should I put this? -- immune-depressing, immune-altering products. What are your thoughts on that as far as what it may have done? What kind of color -- what do you think you have learned from that?

Then I have a follow-up question based on what are you going to take away from that, given that other side on the stroke trial?

Yes, so the short answer to the first question in terms of what we have learned with regard to patients that have been exposed to TNF-alpha, we actually have a tremendous amount of data that we still have to work through with Pfizer and we really haven't developed a perspective on it yet. But we have been building kind of a list of questions that we want answers to as we interrogate the data and there is actually a team at Pfizer that we are working with that we will systematically go through that over time.

Right now they are focused on accumulating and organizing all the data from the 16-week clinical evaluations so that they get that all squared away. And then we can begin to ask the next wave of questions that we have. So there's lots of things that we are very keen to look at and kind of developed additional information on an additional perspective on, but we're just not there yet.

Okay. And that obviously leads to the next question because now we are talking about an equally debilitated population but in a different way. On the stroke side, you know that one of the key things that you always understood and that you know for sure now is the safety is not a concern in any way, shape, or form.

So on the stroke side now it gives you a lot of flexibility in terms of different approaches, either higher titration, either different focuses. What are your thoughts there in terms of how you are going to approach it? Because obviously any kind of improvement in stroke is immense and it just takes even a small subset population responding in a certain way to give you something no one has ever seen before. What can you tell us about that?

Well, so actually that is a good point. In terms of the dosing strategy that we employed with stroke, what we did was we first ran a couple of small cohorts early on that trial where we did a low dose of 400 million cells and then a higher dose of 1.2 billion cells. Then the Independent Data Safety Monitoring Committee to that data and made the recommendation that we conduct the remaining part of the study at the highest dose level, 1.2 billion cells administered IV.

The dose that was used in the Pfizer study, we went as high as 750 million cells IV. So the dose is lower than what we used -- what we are using, actually, in the stroke trial. Whether or not that is a factor here I don't know. It is something, again, the right way to explore that is to actually do a more rigorous evaluation and kind of dose-ranging and looking at a whole range of different factors over time. That's not how the study was designed.

Hindsight is always 20/20, obviously, but it do think those are relevant questions to ask and I do think, again, it underscores the difference between trying to do something acutely. We believe for a variety of reasons that intervening in the stroke patients with the dose that we are using would put us in a really solid position to generate a meaningful clinical effect. And we still feel that way.

So we are excited to complete the study. We've actually seen -- I think a lot of people participating in the study are actually very excited about it. We have seen a very good increase in enrollment over the past few months. That doesn't prove anything, but frankly we think that there is excitement around the program and certainly we are excited about the program for good reason.

That will put me into the last question. You obviously have now been exposed to a whole host of different clinicians, different types of clinicians. I will jump back into the queue if you don't mind answering this.

What has been the overall feedback? Because obviously a lot of times clinicians look at data and they start to say, you know, if you did this, or if you did that--. Has there been anything, even if it is just anecdotal now, where clinicians are coming back to you and saying, hey, listen I've got an idea here. What kind of feedback if you gotten? Again, thank you for the candor and for the update on this call. I will jump back into the queue after you answer that. Thank you.

Well, before you leave, Steve, we talking about the stroke program in particular, or are you talking about other programs?

Both. Because obviously everything has been very topical as far as everything you've done, everything you are doing right now. You are on the -- (multiple speakers).

Okay, but just in terms of clinical feedback overall, we have historically seen a tremendous amount of engagement in each one of the clinical areas that we are focused on. But in the case of the UC trial, really Pfizer was responsible for managing those clinical and investigator relationships. So really feedback that was generated was really kind of coming through Pfizer, because we weren't directly interacting with those folks.

We obviously have our own team of advisers that we interacted with, but not as tight in the study, if you will. We had more direct interaction with people in the stroke clinical trial and again I think people are very excited about the program and what it could mean. On the other programs, on the cardiovascular front, on the GVHD front, yes, there has been kind of a constant flow of ideas and suggestions and people thinking about, hey, maybe we can go after this patient population and this would be a good next step, or this is how we ought to think about approaching this particular type of indication, and this is where a major area of unmet medical need exists.

One of the great things about this technology is that the clinical experts and the scientific experts I think really understand what the potential of the technology could be. That's why they want to work with us and be part of the clinical programs and why they are keen to put ideas on the table and say, hey, here's how we can go after myocardial infarction patients, or here is how we can go after some of these other indication areas.

Frankly, we have seen and been exposed to lots of good ideas in the various clinical areas. For us, what we have always tried to do is shrink it down to something that is clinically straightforward or straightforward as possible and something that we believe is going to have real-world utility. I'll give you just a quick for-instance. I knew you probably dropped back in the queue, but when we started doing work in the stroke area years ago, the first approach we took was to actually to administer cells locally directly into the brain and for us that was about asking some basic scientific questions about what happens if we administer a small dose of cells directly into the brain. Do we see evidence of any therapeutic effect?

It was very clear. We saw a very strong evidence of therapeutic effect and we also got a good idea of what the relevant dose range was using that type of model. But we also knew from talking to clinical experts that that's not a very practical way to think about treating patients that have just suffered a stroke, by sticking a needle into their brain and administering cells directly into a pretty hostile environment.

So then we asked the next set of questions. What happens if we do -- if we administer the cells systemically and we do dose-ranging there? That is what ultimately provided us with a very strong foundation of evidence that says that we didn't have to administer locally or that if we delivered systemically that we could see very consistent, very profound effects they are.

Now it may be that those two things are actually complementary to one another. We don't really know that yet. But I think the point is that we've gotten lots of good ideas from experts and key opinion leaders over the past decade. We try to systematically explore these things, but always with an eye toward looking at things that are clinically practical, that we think could be implemented in a straightforward way to benefit patients, and using clinical simplicity as the order of the day, if you will.

Again, thank you for the candid forum.

Christian Glennie, Edison Investment Research.

Good afternoon, guys. Just on the upcoming event in terms of the way you plan out the next stages of your portfolio development I guess for MultiStem, is there a sense at this stage that some of the other programs that you have looked into a preclinical setting particularly around maybe the traumatic brain injury or MS or maybe other cardiovascular studies, that you might look to advance some of those programs at this stage, given the UC trial outcome? Or in reality is it more likely that you will wait for the stroke data, for example, before reassessing those kind of programs?

We are constantly going after grant money opportunities or other forms of support, whether it is through partnering discussions or other things, where people have the recognition and appreciation for how the technology may have relevance in an area that they care about.

That includes not only the neurological but cardiovascular and inflammatory and immune and other areas. So I wouldn't say that there is really anything off the table at this point. We are systematically exploring a range of these other areas, including the ones you mentioned in the neurological space. If we can get -- by being able to garner significant financial support for some of these programs, it allows you to do more with your existing resource base.

But we also have an order in mind in terms of how we want to attack things in various different areas. There's no perfect science to that, if you will. You have to be very thoughtful about your strategy and the package you want to employ over time and we always try to be. So we try to -- really what we have done is we've picked lead indications across several broadly defined therapeutic areas in cardio, neuro, inflammatory and immune, transplantation and the like.

We think that those lead indications for that guide our thinking about the next wave of opportunities that we would advance into clinical development. But around that, we have been continuing to do extensive preclinical work and publish papers, make presentations, and garner additional grant money to support things that we are doing in each one of those areas. Does that answer the question?

Sure, yes, great. And then if you could just remind us of the AMI study in terms a bit of the size and scope of that trial.

So basically that is designed as a well-controlled blinded Phase II study and we are still refining some of the specific particulars around that, so I'm not going to get too much into the detail there. But basically it's designed to look at different doses as well as the control group so that we can actually build off the data that we generated from the prior clinical study that we ran.

It's focused on a slightly different patient population than we used in the first clinical trial, but again that is based on information and experience that has been generated over time. So if you recall, in the initial clinical trial that we ran with the Cleveland Clinic and some other leading clinical sites like Henry Ford and Columbia-Presbyterian in New York, we saw some pretty meaningful evidence -- in fact, some of it was statistically significant, understanding it wasn't a double-blind placebo-controlled study -- but we saw some improvement that was statistically significant in patients that showed pretty profound improvement actually in heart function after treatment with MultiStem.

In fact, the effects of that following a single dose were sustained. We followed those patients out for a year and in particular we were looking at them at four months and one year. What we saw was pretty meaningful robust improvement in heart function in these patients. That's exactly what we were hoping to see. It was designed as a safety study. It wasn't designed to be powered to look at efficacy. But even despite that, we saw pretty statistically impressive performance improvements in patients that were in the study.

Yes, I think as we approach launch there, perhaps even in the next quarterly earnings call, we will provide a little bit more clarity and set some expectations around the program.

Okay, great. And then finally, if I may, an update a bit more on Japan during. You mentioned I think you signed up a CRO, all to start to get the ball rolling on that side. How about other things like discussions with regulators and development partners, I guess?

Yes, so we are busy on both fronts. We have had numerous discussions with folks at PMDA and we are engaged in the process right now. PMDA recommended to us that we actually engage a CRO in Japan, which we did, and so we have been busy working with that team over there and have meetings upcoming and other things that are ongoing as we look to refine our planning around what we intend to do clinically over there.

The initial focus is the conversation that's revolving around stroke. But as I mentioned in my comments earlier, we are very much focused on the next wave of clinical activity, which will revolve around what we doing in the AMI study and then other things that we could be doing behind that as well. I honestly believe that almost any of areas that we are thinking about doing clinical development in with MultiStem that Japan is going to be relevant for us.

The thing that is I think exciting to see is that two years ago when we were talking to companies over there or, frankly, trying to engage in meaningful discussions with companies over there, very few of them had any level of interest, if you will, in the field of regenerative medicine because it was an area they just hadn't been exposed to, they really didn't understand it, they weren't familiar with it. Well, that has changed pretty dramatically over the past few months.

Now I would say that it's the majority of companies in Japan that are actually exploring opportunities in the regenerative medicine area. Frankly, it's not too dissimilar from what has happened over the past several years here in the US. The Alliance for Regenerative Medicine just recently published its annual report, where there was a survey conducted of the top 20 or so big biotech and major pharma companies and every single one of them without exception has an effort in regenerative medicine now. Three years ago, if companies had a program in regenerative medicine, very few of them were talking about it publicly.

So I think it reflects a growing appreciation and recognition of the fact that regenerative medicine has tremendous potential and can reach into some of the areas that these companies have not really been able to get into at least in the way that they would like using more traditional approaches. But it does not mean that we are going to be successful in each and every area. When I say we I mean the field. It does not mean we are going to be successful in each and every opportunity or each and every disease indication we go after. That will not be the case. We have said that for a long time.

Sure, that's great. Thank you.

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

So, just to conclude and wrap up, we will provide additional updates as appropriate related to our clinical and partnering progress in the weeks and months ahead. In the meantime, we would like to thank everybody for their continued support.

I know this has been a very difficult time for our shareholders. It's been a difficult time for us here at the Company. But I can assure everyone that is listening in today that we are just as committed as we have ever been with respect to developing our programs and our technology. We are going to continue to keep at it and in the meantime we would like to thank you for your support.

Thank you for joining, ladies and gentlemen. This concludes today's conference call. You may now disconnect.