Athersys Inc (ATHX) 2014 Q3 法說會逐字稿

Good afternoon. My name is Dustin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Athersys Third-Quarter Earnings 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)

I'll now hand the call over to our host for today, our Investor Relations representative, Ms. Lisa Wilson.

Ma'am, you may begin.

Thank you.

Good afternoon, everyone. I'm Lisa Wilson 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 we 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 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 the replay 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 November 10, 2014. Since then, Athersys may have made announcements related to the topics discussed. so please reference the Company's most recent SEC filings and press releases. With that, I'll turn the call over to B.J. Lehmann.

B.J.?

Thank you, Lisa.

Good afternoon and welcome, everyone. I'm B.J. Lehmann, President and Chief Operating Officer at Athersys. I'll briefly review our third-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 third quarter of 2014, revenues decreased to $300,000, compared to $600,000 for the same period in 2013, reflecting a $300,000 decrease in our grant revenue. Grant revenue may fluctuate from period to period, due to the timing of grant-related activities and award and expiration grants. While contract revenue will be driven by license, royalty and milestone payments from existing possibly new business collaborations.

Research and development expenses were $5.8 million in the third quarter of 2014, compared to $4.7 million in the prior-year period. The difference reflects increases in preclinical and clinical development costs, personnel costs, research supplies, and stock-based compensation. General and administrative expenses increased to $1.7 million in the third quarter of 2014, compared to $1.5 million in the comparable period in 2013, due primarily to increases in personnel cost, legal and professional fees.

The change in the fair value of our warrant liabilities resulted in non-cash income of $2.5 million in the third quarter of 2014, compared to a non-cash expense of $6,000 in the prior year period, reflecting the impact of new warrant issuances and changes in our share price. As a result, we reported a net loss for the third quarter of 2014 at $4.7 million, or a loss of $0.06 per share, compared to a net loss at $5.6 million, or a loss of $0.10, per share for the same period last year.

During the nine-month period ended September 30, 2014, we used $19.7 million of cash and operating activities compared to $18.3 million in the prior-year period. We ended the third quarter of 2014 with $32.4 million in cash on our balance sheet, and remain well-positioned to achieve important clinical development business milestones.

With that, I'd like to turn the call over to Gil for the corporate update.

Gil?

Thanks, B.J.

Good afternoon, everyone.

Athersys is committed to developing proprietary therapeutics with the potential to address significant areas of unmet medical need. We are particularly focused on serious clinical indications that have substantial commercial potential and for which we believe that MultiStem, our patented allergen stem cell product, could have particular relevance and meaningful advantages over current standard of care.

Our 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 currently focused on executing our strategy to develop MultiStem for therapeutic areas where, based on the growing body of clinical and preclinical data, we believe this novel regenerative medicine therapy has great potential. Our approach of taking multiple shots on goal increases the odds of having one success or more, and also increases the revenue-generating potential of the MultiStem product platform.

Additionally, we benefit by spreading the development costs across a range of programs. Further, we've been able to efficiently advance our pipeline by conducting cost-effective and focused translational research activities through a broad international network of collaborative relationships. This has reduced our need to invest in significant additional infrastructure to support our research and development, allowing us to focus on our clinical stage programs and other activities.

During the third quarter of 2014, we made significant progress with two of our late-stage clinical programs, while also advancing important initiatives on the regulatory, preclinical, and business development fronts. Our top near-term objective is competing our Phase 2 study of MultiStem (technical difficulty). Ischemic stroke is caused by a blockage of blood flow to the brain and accounts for more than 85% of all strokes in the United States, according to American Heart Association estimates.

Due to an aging global population, the incidence 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 first-time stroke each year in the United States, Japan, and European Union combined. Stroke often results in serious neurological injury and represents a leading cause of death globally. And is typically the leading cause of serious disability in most of the developed countries in the world. We estimate the potential market for a new therapy to treat stroke patients to be a $15 billion to $20 billion annual market opportunity, possibly higher.

We believe this indication represents perhaps the greatest area of unmet need in medicine today, and is a priority for healthcare systems around the world. We've made good progress with our trial during the third quarter, as patient enrollment rebounded from the summer slowdown and remains on a favorable trajectory that we are confident will enable us to complete enrollment of the trial in the very near term. Most likely sometime between Thanksgiving and Christmas, depending on the precise timing of the accrual of the last patient.

In this trial, patients are treated with an intravenous administration of MultiStem cell therapy one to two days after the ischemic stroke, followed by a clinical assessment of the subsequent 90 days. Factoring in the time necessary for data lock and analysis by the CRO, we anticipate reporting top-line results around the end of the first quarter 2015.

As we approach the completion of the trial and the announcement of the results, we thought it would be appropriate to provide some additional clarity regarding how the results from the trial will be assessed. If MultiStem is shown to be a safe and effective therapy for stroke, as we are optimistic it will be, and can also be administered in a clinically practical timeframe, we believe we could change stroke medicine as we know it.

Based on discussions with leading neurologists from the US, Europe, and Japan, the one- to two-day post stroke timeframe we are currently evaluating represents both the relevant window for intervention and the clinically practical timeframe for the vast majority of patients. Consistent with this thinking, late last year we engaged independent advisers to conduct an analysis that included perspectives from key opinion leaders, key clinical sites, and international reimbursement experts. The results of this analysis suggest that if we were able to demonstrate safety, clinical effectiveness, and practicality, such as the ability to administer MultiStem in a simple and straightforward manner in a clinically practical timeframe, we are likely to see strong demand.

Furthermore, the analysis suggested we are also likely to see strong support from a reimbursement perspective, provided we address certain issues that are important to the clinicians and reimbursement agencies. Importantly, the analysis resulted in the identification of appropriate measures and parameters that should be used to demonstrate safety and effectiveness for this clinical study, which are incorporated into the analysis of the trial results.

Accordingly, we worked with our advisors to refine and finalize our statistical and analytical approach for this trial, commonly referred to as the Statistical Analysis Plan. Patients will be assessed for key safety parameters, including mortality within the initial 90-day clinical assessment period, as well as the occurrence of serious adverse events and other clinically relevant safety measures. In addition, a primary objective for this study is to evaluate patients for meaningful recovery using the well-accepted and standardized clinical rating scales, including the NIH Stroke Scale; modified Rankin Scale; and Barthel Index. Each of which evaluate and reflect important parameters related to clinical outcome and patient quality of life.

Like the original NINDS study evaluating TPA, we are evaluating these parameters on a global basis to provide a more robust picture of MultiStem's impact on recovery. This is also consistent with the feedback we received from clinicians, payers, and other stakeholders that have suggested that a comprehensive evaluation of this patient population, including multiple measures of post-stroke deficit in function, and determining improvement across the stroke severity spectrum, is important to understanding the true potential for this investigational therapy.

The global assessment approach we are utilizing provides the sensitivity to detect a treatment-related effect in the subject population, including among patients with more severe strokes, which we believe will be very relevant from a reimbursement perspective. We will also assess the dichotomous modified Rankin Scale outcome, NIH Stroke Scale, and Barthel Index outcomes as independent secondary endpoints, along with other secondary and exploratory endpoints that will be evaluated. We will also assess the impact of MultiStem administration in specific subgroups, such as patient that have suffered more severe strokes, based on the NIHSS enrollment criteria.

These patients represent an important subgroup since they typically experience meaningfully lower rates of improvement in recovery. And experience an even greater clinical and quality-of-life impact, adding to the already high cost in both human, economic, and social terms. Based on the extensive preclinical work we and our collaboratives have conducted that has consistently shown safety, robust efficacy, and has also elucidated and reinforced the key mechanisms of action through the effects in the brain, spleen, and elsewhere. We are optimistic about the study's outcome and, clearly, the demonstration of statistical significance on our key endpoints would be a big success.

The study is designed to give us a comprehensive evaluation of this patient population, and also help guide us in subsequent clinical development. We might find that MultiStem therapy works better for certain patients than for others, or that it has better effects on certain clinical outcomes. Information that we would build into future studies. Evidence of meaningful clinical impact would represent success, even if we do not necessarily achieve statistical significance on all key endpoints.

Whatever the outcome, as we've always done in the past, we will honestly and accurately communicate the results and objectively assess their impact. Needless to say, we eagerly await the results from this trial.

Our next clinical priority is our program in acute myocardial infarction or AMI. 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 a significant injury to the heart muscle, which can severely affect the patient's overall health and quality of life or cause significant damage that can ultimately lead to heart failure. Despite the positive impact of statins and other medications, AMI and related forms of heart disease remain a leading cause of death and disability for many countries.

According to Data Monitor and other sources, an estimated 1.7 million myocardial infarctions occur each year in the US, European Union countries, and Japan combined. Effectively treating patients that have suffered damage from AMI remains an area of great unmet medical need. And it also represents a significant commercial opportunity.

Our study will build on promising Phase 1 clinical results and supporting non-clinical data, which demonstrates the consistency and the consistent safety of the product and the delivery approach. And also provide meaningful evidence of therapeutic effectiveness and a thorough understanding of key mechanisms of action. As a reminder, this study is supported by NIH grant funding.

This quarter, our efforts in this area were focused on advancing preparations for our Phase 2 clinical trial in AMI. This is a double blind, randomized and controlled clinical study to evaluate the safety and effectiveness of MultiStem administration to subjects who have suffered a heart attack. The planned enrollment target is 90 patients. The primary objective of this study is to compare the difference in the incidence and severity of adverse events between patients treated with MultiStem versus control group at the 30-day follow-up.

Our secondary objective is the assessment of the effects of MultiStem therapy, using established parameters of cardiac function, comparing the changes assessed by MRI-based analysis of heart function between patients treated with MultiStem versus the control group at four months and one year. We expect the first couple of study sites will be ready to go by the end of this year, with IRB approvals and contracts in place, with multiple additional study centers up and running in Q1 2015. We expect to begin dosing patients for the trial sometime in Q1.

We also continue to make progress in preparation for clinical activity in other important areas. Without getting into the details today, over the past several years, we have done some exciting work in the pulmonary area that we believe represents a serious area of unmet medical need and an exciting clinical and commercial opportunity. In collaboration with key opinion leaders and clinical experts, we are working to complete the necessary preparatory work to enable us to advance this program into clinical development.

I'd like to quickly touch on our program in preventing graft-versus-host disease or GvHD. We continue to receive feedback from the FDA and the EMA regarding our proposed Phase 2/3 GvHD prophylaxis study. This feedback will enable us to finalize the design of the trial, such that it will meet our objectives and rigorous standards. However, as we've described previously, we would look to further advance this program in conjunction with a partner or once adequate resources to fund this trial are in place.

Recall that our GvHD prophylaxis program has been assigned orphan drug designation from both EMA and the FDA which, among other benefits, would assure us a seven-year period of market exclusivity upon approval.

These programs that I discussed represent just a portion of the exciting work ongoing at Athersys. We have a broad set of preclinical programs to further evaluate potential applications of MultiStem. And upon obtaining the appropriate resources, we hope to advance additional promising opportunities into the clinic over time.

Turning to our regulatory initiatives, an important part of our development strategy is to engage with regulators in the US, European Union, and Japan that may lead to opportunities for accelerated development and commercialization, as well as enhanced opportunities for significant partnerships. In particular, as we've discussed on prior calls, we are excited about the evolving regulatory landscape in Japan that is specifically designed to provide support for the accelerated development of regenerative medicine therapies. This visionary new regulatory framework stems from a growing recognition in Japan that unprecedented demographic trends threaten the national health care system there.

There is also a recognition that innovative areas like regenerative medicine may provide highly-effective solutions for the clinical, social, and economic challenges ahead. Regulatory reforms are needed to facilitate and support the necessary innovation. Last November, important legislation was voted into law by the Japanese Diet, or national legislature, with overwhelming support, formally authorizing the new regulatory framework. For the past year, the dedicated team has been crafting and refining the detailed regulations for the new framework.

The explicit intention of the law is to hasten clinical development and application of cell and regenerative medicine therapies, such as MultiStem. The new regulatory framework enables promising new cell therapies to obtain accelerated conditional approval in Japan. Provided the sponsor can provide evidence of safety, coupled with evidence of a probable therapeutic benefit. We expect implementation of the new legislation may come as early as later this month and certainly by the end of this year, paving the way for an important new era in Japan.

To ensure we are well-positioned to capitalize on this emerging opportunity, we have been working over the past year to build and strengthen our relationships with the PMDA, potential business partners, clinical experts, and other collaborators in Japan. In keeping with our goal to commercialize MultiStem in Japan for multiple therapeutic areas, execution of our strategy in Japan will remain a key priority for the foreseeable future.

A few weeks ago, we reached an important milestone in the regulatory process in Japan. Following a series of informal discussions, formal submissions of materials, and informal discussions with PMDA, we obtained confirmation from PMDA that our manufactured MultiStem product is suitable for clinical development in Japan. This represents a critical step in the regulatory process and an important regulatory achievement. And we are now focused on the next set of activities that will ultimately pave the way for conducting clinical trials in Japan in stroke and other areas.

We also remain actively engaged in discussions with potential partners that are interested in the development and commercialization of MultiStem in Japan across several important therapeutic areas, discussing potential opportunities and approaches. We believe that partnering in Japan represents an important part of our strategy. And we will make announcements, as appropriate, regarding our progress in these activities.

To conclude, we continue to make headway in several important areas, and do so in a focused and cost-effective manner.

And with that, Operator, we'd like to please open the call to questions.

(Operator Instructions)

Ted Tenthoff, Piper Jaffray.

Thank you very much. Can you hear me okay?

Yes. Hi, Ted. How you are you doing?

Real quickly just with respect to the things you were mentoring about stroke. Do these actually represent changes in the primary end point or is this more of a kind re-prioritization? Maybe you can just kind of clarify that a little bit more for us.

Yes, Ted. Maybe I'll take a first cut at this and Gil can add. I think one of the important things that Gil mentioned was the information we've developed over the past year really focused on reimbursement and what's going to be necessary for making the case for strong pricing in Europe and other geographies.

And one of the key themes that we've heard is that we need to understand the impact of the MultiStem therapy across multiple measures of stroke recovery such as the NIHSS scale, Barthel index, and the modified Rankin Score and we also need to be able to evaluate the improvement across the severity spectrum. So, as you recall, one of the key enrollment criteria is the stroke severity of 8 to 20, and we need to be able to evaluate across that whole spectrum improvement.

And so what we've done is, as you said secondly, is to prioritize the need for developing that information set in finalizing our statistical analysis plan, and we've done that by bringing the global test or the global recovery evaluation forward as an important tool for providing that information. The components include the modified Rankin Score, so we have the good recovery, so modified Rankin of 0 to 2, so we'll look at proportion of patients that achieve that.

Another component would be NIHSS improvement. We're looking specifically at 75% improvement for these patients which is something that's going to be important with respect to seeing improvement at the upper end of the severity range. And we're going to look at Barthel Index as well, looking at a threshold score of 95 at 90 days.

We're also looking at those as individual components in our secondary end points, so we're getting a very comprehensive look at this patient population and the impact of MultiStem on this patient population. So I think we're accomplishing what we need to accomplish to set the stage for subsequent development, but also importantly for making the case from a reimbursement perspective.

So, let me make sure I understand this. So the primary is now the global recovery evaluation comprised of those three factors and then those three factors are also individual secondaries?

That's correct.

Yes that's right.

Great. And we should have the full data at the end of the second quarter. How is enrollment and how many patients are you anticipating in total? And then I'll hop back in line.

Yes, actually we're anticipating around the end of the first quarter. And so in terms of the total number of patients there's 136 patients in total in the study. There was two cohorts, a low-dose cohort which included eight patients, so six that received MultiStem [too] that got placebo, and then a second high dose cohort, six that got MultiStem too that got placebo, and then the final cohort which is 120 patients. The data from the second cohort can actually be combined with the third cohort, so we will aggregate that data and assess it as one package, so 128 patients actually in that analysis.

Around 128. Excellent. Alright. Thanks so much.

Thanks, Ted.

Tracy Marshbanks with First Analysis.

Good afternoon and thanks for taking the question. On the finding of suitability for manufacturer in Japan, what were the key elements that they evaluated and you guys sort of scored very well on that led to that?

Well, it was kind of a long list of issues that they wanted to get detailed information on and in fact it took us several months to gather all that information and prepare it in a form and obviously translate it into Japanese and then reverse translate it so that we were confident that the translation accurately depicted and reflected all the information that was in there.

There was also a lot of secondary documents. Basically a lot of our suppliers that provide us with materials that go into the manufacturing process, they wanted to make sure that those materials were adequately characterized and evaluated and free of any kind of adventitious agents and frankly that was a lot of the work was making sure that we had the appropriate documentation, in the proper format, translated in most of the instances. Some of the information was provided in English but the vast majority of it was ultimately provided in Japanese.

So, it was a pretty comprehensive evaluation, and the reason why we regard it as a pretty significant milestone, there's been kind of a long history of companies, and particularly in the biologics area, that have tried to develop manufactured biological products, and if they didn't meet the very rigorous criteria in standards established by the PMDA and if they didn't manufacture the product in Japan, then they weren't able to move forward and in our case we're working with our partner contract manufacturing organization, Lonza, that is doing the manufacturing and of course they are global player, but we had not used manufacturing facilities in Japan in order to produce products for the ongoing clinical trial that we're running right now.

And so a key question we had was would those types of facilities have to be established or would we be able to use the manufacturing facilities that are already up and operational that have been thoroughly validated that meet the very high standards in Europe, for example, which the Japanese standards are patterned off the standards in Europe. And so again just to kind of state it plainly, there was lots of things that might've been problematic, and we managed to work through the entire process and provide them with all the information they wanted, we answered all the questions that they had, and we appreciated their guidance and their input. And so I think that that -- it's a pretty substantial milestone and it has ramifications for more than just the stroke area.

I assume that puts you in good stead as you go, like you said, different areas or even different geographies you've been through a pretty tough test and so now you're sort of prepared and ready.

Yes. I mean we've already been -- just to put it in context, we've already been through this process in Europe and in the United States, and our methodology for people that know our regulatory philosophy and approach is we're always very, very careful and systematic with the regulators and the regulatory agencies that we interact with, and I think that that has generated a lot of faith in our approach and the quality of the work that we do which is paying clear dividends now and we believe will continue to pay clear dividends as we move ahead.

Yes. A little bit of business-related question. It sounds like you're attacking more aggressively some new areas of indication. Obviously you've got sort of a geographic expansion and you also have sort of an expansion in the, I don't know, the capabilities or the areas within your process that you're dealing with. What's your evaluation of the organization's readiness and maybe capabilities that you might need to add over the one- to two-year timeframe as you're going through this rapid sort of evolution?

Well, that's a great question actually. There's a lot of things that we intend to do, but we're staging things in a very careful and systematic way, but kind of the question behind your question is are we going to be ready for success? I don't want to put words in your mouth, but that's kind of how I interpret it. Is that a fair way to assess it?

That's fair. When the dog chases the car what happens when you catch it?

Right. So, we have, for example, an entire actually two teams of people that are focused on process development and manufacturing-related issues, another team of people that are focused on other things that are important to ensuring that when the time comes we're going to be ready for success.

And so without going into all the details and all the component kind of activities that are part of that, I can tell you that there are a lot of people here in the organization that are working extremely hard to make sure that when that moment comes that we will have a very clear prioritized list of things that we're going to be doing and some things that we're already doing it have been doing for months to make sure that we are ready to take advantage of the window of opportunity.

Okay. So when I think about sort of the organizational infrastructure and staffing you feel you're there at least for the planning phase of an expansion if you need to?

Yes. Well, I think that's exactly right. Clearly, let's just kind of day dream for a moment and just say, okay, what happens if we're successful in stroke? Are we thinking about adding capabilities and other types of things so that we can take advantage of the portfolio of opportunities that we have in front of us?

Clearly we would have a mindset to do that, but I think, as we've always done, we would do in a very careful systematic and methodical way so we don't get ahead of ourselves, but I think that there's lots of opportunities and we have, I know I speak for the entire leadership team here when I say that we have enormous faith in all of the people that are part of this organization that are working very hard to help ensure our success and then once we have gotten past some significant milestones that are out in front of us, be able to make sure that were well-positioned to do the things that come after that.

Thanks a lot for taking the questions.

Thanks, Tracy.

Jason Kolbert with Maxim.

Thanks, Gail. Hi. Yes, I have just a very few questions given the excellent questions you've already been asked, but I wanted to talk a little bit about what's the difference between approval in Japan using the new law and reimbursement given the government nature of health insurance in Japan? And would reimbursement require a different clinical trial strategy than approval based on your consultant and your assessment of the landscape in Japan?

Yes. Thanks, Jason. That's actually a really good question. As you know, we're working with one of the foremost experts on the reimbursement landscape in Japan and he's somebody that we have a lot of faith and confidence in, and he has really helped guide our thinking over the past few months about how to approach this from an analytical and a strategic perspective. And he's been really incredibly helpful and informative in terms of the number of things that we're currently evaluating, analyzing, and getting ready for.

We -- obviously, we're all keen to see what the new regulations will look like when they come out a few weeks from now, but our understanding is that this new regulatory framework will be linked to a pathway for reimbursement in Japan and we want to make sure that we're ready for that, which is why we started not just with respect to Japan but in other geographies beginning to accumulate data and analyze factors that we think are going to be very important for establishing a strong case for reimbursement should we achieve what we believe are going to achieve which is the demonstration of meaningful clinical success.

The accelerated regulatory approval in Japan is interesting because reimbursement dynamics in other geographies around the world tend to be a little bit more fragmented. For example, Europe is very fragmented in comparison to Japan. In Japan it's actually very streamlined and centralized. And in contrast to what can take a year or sometimes even longer outside of Japan, and Japan it's a process that typically happens within a several month timeframe once you've delivered the information that you need to deliver and have submitted your dossier for formal consideration there.

So, I think we're going to be ready for that. I think that obviously obtaining reimbursement upon a demonstration of clinical success in Japan, and just to remind everybody the current clinical trial that we're running and the discussions that we've been having with PMDA are designed to put us in a position to be able to run a subsequent study in Japan that builds up the knowledge that we gain from the current study that we're running in the US and UK.

We can incorporate that knowledge into the subsequent what I refer to as the confirmatory study that then allows us, we believe, to present that aggregate data set and be able to make a what I think could be a very strong case for approval under the new framework in Japan or -- and then subsequently reimbursement. There are other possibilities. It's possible, depending on what the data set looks like, that we might be able to pursue a pathway that leads to full approval in Japan.

And we're open-minded and we've gotten some very encouraging feedback from some of the key decision makers in Japan that I think has been very supportive and helpful, but ultimately it's going to come down to the data and the other pieces of material information that we need to aggregate and present to them for their consideration so that we can take advantage of this visionary new framework and opportunity.

Very exciting. Thank you. Can we switch gears to cardiology a little bit and just talk about -- clearly you're getting closer to launching this Phase 2 proof of concept study. Can you just take a minute for me and connect the dots with me to the earlier Phase 1 study and help me understand what's different in terms of delivery, dosing. What did you learn in the Phase 1 trial that you've now modified in order to find the sweet spot for the current design in the heart attack space?

Yes. So the Phase 1 study that we ran, just to refresh everybody's memory, was a 25-patient study that consisted of four different groups. There was a control group, a registry group, and then three different dose groups, a low dose, a medium dose, and a high dose. And in the medium dose and the high dose groups, and this is published information that has been presented at some of the leading cardiology conferences as well by the principal investigator for the study, Dr. Mark Penn.

The data showed a very strong picture, although the study was not designed to evaluate -- the study was really designed to evaluate safety first and foremost, but we also looked at various efficacy parameters that are well-established, recognized efficacy parameters for these types of patients. And prior to conducting the study we specified, based on the input of Dr. Penn who at the time was at the Cleveland Clinic and other cardiologists like Dr. Warren Sherman who is at Columbia, we specified that we really focus on trying to look at patients that had severely impacted or reduced cardiovascular function, heart function as reflected, for example, by reduced ejection fraction in a 30 to 45 range.

And in those patients that the published data reflects, we actually saw a very robust improvement. In the medium dose group we saw it was close to 14% absolute improvement in ejection fraction among those patients that had severely compromised cardiovascular function, and we saw comparable effects, although the end turned out to be a little bit smaller in the high-dose group that really kind of mirrored and reflected that data. So, we took all that information. We actually presented it in a grant application to the NIH, the NHLBI, and we were awarded approximately a $3 million grant to run this 90-patient Phase 2 study.

In an ideal world frankly we'd like to run a larger study, but we think that this study is large enough for us to be able to assess a therapeutically relevant dose, one administration of MultiStem in patients. Now the patient group in this study is going to be slightly different than the patient group in the first trial we ran. The first trial was focused on STEMI or ST elevated myocardial infarction patients. The patients that we are running in this trial are [NSTEMI] patients, so non-ST elevated myocardial infarction patients. This actually is the more common myocardial infarction patient population these days.

The ST elevated MI's have been dropping in frequency. I know you know, Jason, and so NSTEMI is kind of more the urgent need, if you will, and so the study was designed to evaluate MultiStem using the dosing information that we had generated from the first patient trial, and we're excited about moving ahead. We think that the information we generated from the first trial is going to be very helpful and informative in this current study, and we're excited to get going.

Got it. Thank you. Thanks for the comprehensive answer. We're all looking forward to the stroke data.

Thanks, Jason.

[Steve Brozak] with WBB Securities.

Good afternoon, gentlemen. It seems like a lot of questions have been asked, but I do want something that -- you've been giving a lot of transparency on data and evaluating data. Can you go back on one item here and tell us about the data or I should say the dosing data differential that you had between what you're doing now on the stroke trial and in terms of Pfizer and what the major difference is there because that's something I really want to get a better grasp of and my hands around it? And one follow up to that.

Yes. So, in the Pfizer study so, again, that focus was on patients that had been suffering from longstanding severe inflammatory bowel disease, so treatment of refractory ulcerative colitis, so approximately just to refresh everybody's memory there was -- almost 70% of the patients that got treated with MultiStem in that trial, I think it was just under 70%, about two-thirds of the patients, had already failed the TNF alpha blocker therapies as well as multiple other forms of treatment. So it was a pretty severe patient population that was suffering from long-standing chronic disease. On average, patients had been suffering from IBD for 10 years. We had some patients that suffered from IBD for as long as 30 years that were in the trial.

So it was a pretty severe and pretty substantially sick longstanding group of patients. In that trial we administered a dose of 750 million cells one-time IV into these patients to assess the primary outcome in this study which was effect at eight weeks in these chronic patients.

In the case of the stroke trial we're actually giving a higher dose. We're dosing at 1.2 billion cells to these patients and we're treating an acute indication. And the analogy that I use to explain to people to kind of illustrate the concept of them is imagine if you had some that suffered a stroke 10 years ago versus somebody that suffered a stroke yesterday, which would be easier to treat or which do most people think would be easier to treat. And I think most people intuitively grasp that treating somebody and helping somebody that just suffered a stroke in the last day or two is probably going to be a lot easier than somebody that suffered a stroke a few years ago after all the resultant tissue loss, destruction and scarring and everything else has already accrued over an extended period of time.

So it's not maybe the perfect metaphor in terms of comparing what we did in IBD with Pfizer versus what we're doing with stroke, but we're really weighted more heavily these days towards acute indications where we think that early intervention based on a lot of the data that we generated over the last few years, can have a profound impact on improving the outcome. And so kind of getting ahead of the curve as opposed to waiting for patients that are much sicker. We still believe we're going to have an impact in chronic indications. In fact, there's a few chronic indications that we're extremely excited about based on data that we generated, but we think the difference is that in chronic indications you're going to have to give multiple doses over time as opposed to giving a single dose which is what we think is going to be appropriate for various acute indications that we've been pursuing and are actively pursuing now.

And we also think that getting the dose ranging right is very important. We think in this case of stroke we're giving a pretty high dose of MultiStem in these patients. And, again, the history of the work that we've done to explore the safety of MultiStem IV tells us that that's a prudent thing to do, which is why the regulators have said that we can do it and we've undergone multiple safety assessments from our clinical work that also reinforces the notion that we see a consistent and a very safe product here.

Actually, you just led into my second question. When you're looking at that acute setting and you see that inflammatory cascade kicking in big-time, it seems like your product is almost tailor-made for that kind of approach and to look at not so much reducing the inflammation but moderating, modulating the information and working with it. Can you end for me by going over where MultiStem really achieves that critical kind of significance and what your thoughts are there? And I'll hop back in the queue.

Yes. We've -- actually we and our collaborators produced a lot of data that shows that if we administer MultiStem intravenously that a lot of the cells go to the spleen, and it's now well-recognized and I think this first started to come to light several years ago based on some work done in a couple of independent labs that we're doing work along the same lines that we and some of our collaborators were doing which shows that the spleen is a critically important immune organ.

And what we know is that when we administer MultiStem in situations, for example like a stroke or like a traumatic brain injury or other situations where you see activation of this immune response that emanates from the spleen, that that hyper inflammatory cascade really is responsible for driving a lot of the damage in the brain as well as is relevant in other indications.

In fact, I was just looking at a publication other day that somebody here at the Company had sent to me that illustrated that there's evidence that emerging that it's relevant to cardiovascular disease as well. So, the splenic effects and down regulating and kind of mitigating or neutralizing that hyper inflammatory cascade, which is clearly a major driver in the damage that accrues, is a key effect. But what we've also shown is that we also stimulate reparative effects in the brain that actually help accelerate the repair of the compromised blood-brain barrier both in stroke models as well as in traumatic brain injury models as well as upregulating neurotrophic, neurogenic, neuroprotective factors in the brain.

And we know that in contrast to kind of a single agent pharmaceutical that's really designed to do one very specific thing, MultiStem is capable of driving therapeutic effects through multiple different pathways and doing it in some very powerful ways. And a lot of that mechanistic data that we and our collaborators have accumulated over the last several years, those of some of the big reasons why we are very confident and optimistic that this trial could be successful.

Great. Again, thanks.

Thanks, Steve.

Christian Glennie with Edison.

Hello, good evening, gentlemen. Just a bit more follow up on the end points to be clear in the stroke trial. First of all, obviously the expectations are 1 to 1 randomization, effectively about 64 patients on [MultiStem] versus placebo in the final analysis. And then on the primary efficacy end point effectively are you talking about composite improvement in the three NIHSS, MRS, and Barthel? In other words, you are looking for percentage movements within those?

Let me answer the first question. I think the numbers with respect to the patients, we are doing 1 to 1 randomization for the third cohorts that would be 60 patients in each group, a treatment group and a placebo group, and then with respect to the cohort two which would be added to the analysis, there were six patients that were treated and two that were placebos. So you would have potentially 66 patients' data for evaluation and 62. Obviously there will be some patients that we don't have all the data for through the 90 days, but that would be kind of the foundation.

With respect to the composite -- or with respect to global test, it's not a composite per se. This is actually, and this is important to note, this is an approach that was used in the original TPA study. And for them and for the data monitoring board that was responsible for driving the statistical analysis plan and basic end point approach, I think the viewpoint was you needed to look at multiple measures of stroke function recovery. In that particular case they used four. We have three here available to us. They had in common with us the Barthel, MRS and the NIH Stroke Scale, but they also had the Glasco outcome scale as well to be used.

Essentially what this is, statistically speaking kind of a summary level is a multidimensional determination of patient recovery. So each of the individual components we're looking at favorable outcomes for the three different scales, but then statistically we're doing a simultaneous what they call global test analysis of those results. So, it's not a composite in the sense that each -- we have to hit for each patient all of the outcomes. What it's doing is evaluating the three different outcomes simultaneously as a multidimensional kind of determination of patient recovery. But again, importantly, it was used in the TPA study, it's been used in several other stroke studies since that time.

It's really designed to bring to bear the power that you get from looking at the different components or measures for stroke recovery. Each of them are tailored to a particular kind of outcome. The NIHSS Stroke Scale is focused on neurologic deficit, the modified Rankin Score is focused on global disability, the Barthel Index is really focused on activities of daily living, and so focusing on any individual one basically eliminates certain aspects of evaluation stroke recovery.

So, that's what the intention is. We're following in the footsteps of the important TPA studies in the mid-90s. And we think this is going to give us the best possible evaluation of the potential of the MultiStem therapy and set us up well for subsequent development and ultimately reimbursement discussions.

Okay, thanks. That makes sense. And then obviously, but then you still have the secondaries where you look individually and is that still according to the proportion that will be in the low score for each of those low-high depending on which is preferable?

Yes. Right. We're looking at, with respect to Barthel, NIHS Stroke Scale, and the MRS, we are using a dichotomous approach in the independent secondary end points. We're also looking at other secondary end points as well in terms of things like mean change in some of these different measures. We're looking at a [variety] of other tests as well.

The point here is to get a comprehensive evaluation across these different measures for the patients that we have in the study which are moderate to moderate-severe patients, so we want to get a look across the spectrum. So, that's going to be the tools and the data we're going to have available to us in analyzing outcome and recovery and success of the study.

Okay. And then just a housekeeping thing. Is this presumably something that still could be updated on the clinical trials record or --?

Yes, we'll update that. In the registry it ordinarily lags a little bit, the activity but, yes, we'll update that in the near term and you'll get a little bit more clarity on what we just talked about. Yes.

Yes. Great. Just turning to the update on Japan. Is it possible to put into context -- obviously you're getting sign off on the manufacturing process versus other stem cell companies that obviously multiple companies are obviously looking to develop their products within Japan. And one of the first obviously I mean there are certainly one other that I can think of already has this, but any context there?

Well, we -- sorry, are you talking about the mesoblast JCR activity?

Yes.

Yes. So that partnership is actually kind of a carryover, if you will, from the prior partnership between Osiris and JCR that was established a few years ago. In fact, I think it was probably close to a decade ago.

Yes, about 10 years, 2003 I think.

And so they completed a trial -- JCR completed a trial evaluating clinical impact in treatment of patients that had serious graft-versus-host disease. And then the program, at least our kind of understanding of it of it is it kind of went into a holding pattern, but they took that clinical data and they recently submitted it as to be considered as part of the -- as a potential program for consideration under the new regulatory framework and I think that that was very interesting. I mean obviously we're hopeful for them that they will achieve some success there. Obviously we haven't had a chance to scrutinize the data, but I think that that's a good indicator.

I think that we and Mesoblast and maybe one or two other companies, I think we, honestly we were among the first to really kind of embrace the opportunity and take action based on what's going on in Japan. And a number of us here at the Company have been making fairly regular trips over there for regulatory activities, partnering discussions, interactions with key clinical experts and others that are very excited about what we're doing and what it might mean.

So, again, to be honest with you I went in with a bit of a skeptical mindset and just because of things that I heard from others that have been doing this for a long time, not -- when I say others I mean in the business if you will for a long time. We found the PMDA to be nothing but accommodating and very supportive, and the leadership at MHLW has been the same.

So, it's clear that we want this new framework to be successful, it's clear that they view us as an important early case study, if you will, in the utilization of this new regulatory framework. And they've been consistently quite supportive in the whole process and I think that bodes well. Ultimately, our data is what allows us to claim victory, but I think that the interaction and the progress we've been making over the past few months is very exciting to all of us here.

Okay. And then one final one if I may. Just potential guidance or indication at least maybe in terms of R&D spend for Q4 and into 2015? Obviously you have the stroke study finishing off, although continuing early part of next year but then to be replaced by the AMI study to some extent in terms of clinical activity. Any guidance at this stage in terms of R&D run rates?

We're not providing specific guidance. I think our thinking is that our overall kind of burn will kind of continue at the rate it's been over the past couple of quarters. As we transition from stroke into AMI and even pursue some of the other clinical activity that Gil was referring to in the pulmonary space, but we may be able to provide some more guidance early next year on how things are going to play out. But I think at least for this quarter it should be pretty similar, and I expect going into next year it would probably be similar as well.

Okay. And sorry, just finally on the AMI. Obviously you still have the grant money to flow into offset those costs?

Yes. That would be an offset to those costs.

Okay. Great. Thank you.

There seem to be no further questions. Do you have any closing remarks?

Well, I'd like to thank everyone. And if there are no further questions I would just once again like to thank you for your time and attention and your continued support of the Company, and we look forward to keeping you updated as we advance and move things ahead. Thanks, everybody.

Ladies and gentlemen, thank you for joining the Athersys third-quarter earnings conference call. This concludes today's call. You may now disconnect.