Athersys Inc (ATHX) 2015 Q1 法說會逐字稿

Good afternoon. My name is Carol, and I will be your conference operator today. At this time, I would like to welcome everyone to the Athersys first-quarter 2015 earnings call.

(Operator Instructions)

Ms. Laura Campbell with Athersys, you may begin your conference.

Thank you. Good afternoon, everyone. I am Laura Campbell, Vice President of Finance 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, or you may call Matt [Pluznick] at 216-431-9900 to receive it via email.

Dr. Gil Van Bokkelen, Chairman and Chief Executive Officer, and BJ Lehmann, President and Chief Operating Officer will host today's call. The call is expected to last approximately 45 to 60 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 we may make about future expectations, plans, and prospects constitute forward-looking statements for the 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 our Forms 10-Q, 10-K, and other public SEC filings. We anticipate that subsequent events and developments may cause our outlook to change. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim 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 11, 2015. Since then, we may have made announcements related to the topics discussed, so please reference our most recent press releases and SEC filings. With that, I'd like to turn the call over to BJ Lehmann. BJ?

Thank you, Laura. Good afternoon, and welcome, everyone. I am BJ Lehmann, President and Chief Operating Officer of Athersys. I will briefly review our first-quarter 2015 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 2015, revenues were $731,000, compared to $707,000 for the same period of 2014, and are comprised of grant revenues and royalties from our collaboration with RTI Surgical. The $10 million upfront payment from Chugai Pharmaceuticals associated with our recent collaboration to develop and commercialize MultiStem treatment for ischemic stroke in Japan, which we announced in March, is recorded as deferred revenue at March 31, 2015, in accordance with our accounting policy for multiple element arrangements.

Research and development expenses were $5.7 million in the first quarter of 2015, compared to $6.2 million in the prior-year first quarter. The difference reflects decreases in clinical and preclinical development costs, patent legal fees, and sponsored research, partially offset by increases in personnel costs and stock-based compensation.

General and administrative expenses were $1.9 million in the first quarter of 2015, versus $1.8 million in the comparable period in 2014. The change in the fair value of our warrant liabilities resulted in expense of $5.6 million in the first quarter of 2015, compared to expense of $4.1 million in the same 2014 period, reflecting primarily the impact of changes in our share price.

Net loss for the first quarter of 2015 was $12.5 million, compared to a net loss of $11.5 million for the first quarter of 2014. The increase in net loss reflects a $496,000 reduction in loss from operations, as offset by the impact of the $1.5 million increase in expense from the change in fair value of our warrant liabilities. Net loss per share was $0.16 per share in the first quarter of this year, compared to $0.15 per share in the prior-year period.

It is important to note that our reported net loss of $12.5 million for this quarter includes non-cash expenses of $5.6 million, related to the change in fair value of our warrant liabilities, and $800,000 related to stock-based compensation, aggregating $6.4 million of non-cash charges. Further, our reported net loss does not include any impact from the Chugai collaboration since all of the revenue is deferred as of March 31, 2015. Similarly, our reported net loss per share of $0.16 for this quarter includes an $0.08 per share impact from the $6.4 million of non-cash charges and also excludes any revenue from the Chugai collaboration.

As of March 31, 2015, we had $35.5 million in cash and cash equivalents compared to $26.1 million at December 31, 2014. During the first quarter of 2015, cash provided by operating activities was $1.1 million compared to cash used by operating activities of $7.3 million in the first quarter of 2014.

Included in the 2015 first-quarter cash from operating activities was $8 million of the $10 million upfront payment from Chugai associated with the collaboration and license agreement. $2 million of the upfront amount was temporarily withheld by the Japan taxing authorities and will be refunded to us under the US and Japan tax treaty. This amount is recorded as a current receivable on our balance sheet.

Under the terms of the agreement, we have the potential to receive an additional $45 million of development-related, milestone-based payments, including $7 million this year, following Chugai's review of the data from our Phase 2 ischemic stroke study. Additionally, there are approximately $150 million of future sales milestone-based payments based on current exchange rates. We are also eligible for royalties on net sales starting in the low double-digits and increasing incrementally to the high-teens, depending on net sales levels. Finally, we would receive payments for products supplied to Chugai.

Cash provided by financing activities was $8.3 million in the 2015 first quarter, compared to $20.5 million in the prior-year first quarter. While both periods included warrant exercises and proceeds from the use of our equity facility, the 2014 first-quarter also included an equity financing. With that, I'd like to turn the call over to Gil for a corporate update. Gil?

Thanks, BJ, and good afternoon, everyone. Our Company was founded on the concept of developing innovative technologies and novel treatments to address areas of serious unmet medical need. We are committed to helping the patient, first and foremost, as we pursue the development of safer and more effective treatments that have the potential to improve clinical outcomes, enhance patient quality of life, and increase the efficiency and effectiveness of healthcare. In achieving these things, we believe we will be to create substantial value for our shareholders.

From a technology perspective, our major focus is in the area of regenerative medicine, which is regarded by many as an area of tremendous promise. Over more than a decade, a growing body of research has shown that cellular therapies have the potential to advance medicine across a range of areas and in ways that conventional treatment approaches have been unable to achieve. As the field of regenerative medicine has grown and advanced, it has generated unexpected findings about the remarkable capacity of the human body to heal and repair itself, and also about the limits of the human body, especially as we age.

The world is in the midst of an unprecedented transition which is being caused by the dramatic expansion of the elderly segment of the global population. While we have discussed this trend previously, it is worth reminding everyone of just how large a transition is occurring and what the ramifications will be on healthcare systems around the world. It is this powerful trend, which is driving our focus on developing new treatments that have the potential to address specific areas of unmet medical need that are projected to grow dramatically in the years ahead as the elderly population substantially expands in size.

In order to understand the magnitude of the demographic transition and the corresponding healthcare challenge and commercial opportunity, it is worth examining some numbers. Within the next several years, the number of people over age 65 will exceed the number of people under the age of 5 for the first time in recorded history.

According to the Organization for Economic Cooperation and Development and Analysis, the expansion of the global elderly population will have a significant effect on healthcare systems, quality of life, and long-term economic prosperity. Globally, the segment of the population over the age of 65 is projected to double in size between the years 2010 and 2030, and national demographic profiles will be meaningfully altered.

The trends in Japan, the United States, and the European Union are particularly concerning. In Japan, individuals over the age of 65 already represent about 25% of the population and in the next few years will represent more than 30%. Perhaps even more concerning, the segment of the population over the age of 80 in Japan will more than double within roughly two decades from 6% of the population to more than 14%.

In the United States, the group over the age of 65 is projected to grow by more than 80% between the years 2010 and 2030, representing an increase from 40 million individuals to more than 72 million people in only two decades. In Europe, meaning within the EU-27 countries, this segment of the population will increase to more than 125 million people by the year 2030.

This massive and unprecedented increase in the number of elderly is not simply a notable and interesting trend. It has real ramifications for global healthcare systems. Healthcare economic data tells us that as we age, we become much more susceptible to a range of aging-related diseases and conditions that are expensive and resource-intensive to deal with.

Data from the National Center for Healthcare Statistics, here in the United States, shows that elderly cohorts spend 4 to 10 times as much on annual healthcare-related expenses in comparison to young healthy cohorts. This is a direct reflection of the fact that many aging-related diseases and conditions take a significant toll in terms of adversely impacting quality of life, the direct economic costs incurred, and the escalating need for institutional support or home care for individuals that are partially or extensively disabled as a result of deteriorating health.

There is another trend occurring that is also troubling. The growing gap between the demand for healthcare service providers and the supply of qualified providers, both in terms of physicians and skilled nursing staff. Healthcare resources are inherently limited, both in terms of the available financial resources that may be allocated to paying for the care that is needed and the skilled medical staff necessary to provide the appropriate care.

According to the Association of American Medical Colleges, there is already a shortage in the number of primary care and specialty physicians in United States. A shortfall projected to grow to more than 91,000 physicians nationally by the year 2020 and more than 130,000 physicians by the year 2025.

In addition, the Bureau of Labor Statistics for the US government has projected a national shortage of over 1 million nurses in the United States by the year 2022. If nothing else changes, limited healthcare resources and increased demand will eventually result in mounting challenges in patient access to care and escalating costs, creating an undesirable trend toward rationing of available resources.

A shortage of physicians and nurses is also occurring in Japan and the European Union. According to the Ministry of Health, Labor, and Welfare, hospitals in Japan are already 24,000 physicians shy of the estimated clinical need. In the European Union, the European Commission projects that there will be a shortage of 230,000 physicians and 590,000 nurses by the year 2020. It is projected that this will result in an estimated 14% of needed care not being provided simply because there are not enough caregivers to provide it.

So, in both economic and human terms, the expanding aging population is going to have a dramatic impact. In order to address the projected gap in caregivers and the care provided and avoid a scenario of healthcare shortages and de facto rationing, it will require a substantial increase in the capital and human resources allocated to providing care, or alternatively, technological innovations that enable us to improve clinical outcomes in the efficiency of overall care. These problematic trends create substantial opportunities for innovative companies that have the vision, technology, and relentless determination to address them.

By extension, it also creates meaningful opportunities for investors. We believe that there are several key areas where our technologies can address substantial, unmet medical needs. These include the neurological, cardiovascular, and inflammatory and immune areas as well as certain other areas.

Despite the risks and obstacles, we are unafraid to pursue solutions for these challenging clinical areas. Based on years of research conducted with leading investigators across a range of disciplines and a growing body of clinical and preclinical data, we are confident our technologies can and will provide effective and practical treatment solutions. And, as a result, will enable us to create substantial value while we meaningfully improve clinical outcomes and patient quality of life.

Recently, we announced preliminary results from a Phase 2 clinical trial we are conducting to evaluate the safety and efficacy of administering MultiStem to patients that have suffered an ischemic stroke. Stroke is more than just a medical problem, it is a healthcare, infrastructure, and social problem that is having an impact on a global basis that is projected to grow in the years ahead.

This ongoing study represents our first clinical trial evaluating the administration of MultiStem to ischemic stroke patients. As we explained on the call two weeks ago, the initial results from the trial show that MultiStem exhibits a consistent safety profile and also suggests that it has the potential to substantially improve clinical outcomes for patients if it is administered within an appropriate timeframe.

As we heard from two distinguished clinical investigators involved in this study, we are learning some important lessons from the ongoing trial. Specifically, we believe the data shows that early administration of MultiStem can provide a meaningful benefit if patients are treated within 36 hours of the stroke. The lesson that earlier treatment is better is not a new concept. It is the same lesson learned from early clinical studies conducted with the current standard of care tPA more than 20 years ago.

While these early studies were initially viewed as failures, since they did not meet their primary endpoint, analysis of the data suggested that if tPA was given early enough, they could provide a meaningful therapeutic benefit with a reasonable risk profile. The lessons learned from those initial studies were then applied in subsequent clinical trials that ultimately led to the approval of tPA.

Today, it is considered the standard of care for many ischemic stroke patients despite the fact that it may only be administered within the first several hours after an ischemic stroke has occurred. And, it is widely recognized that there is an elevated risk of cerebral hemorrhage among patients that receive treatment with tPA.

We believe that the initial results from our ongoing study indicate several important differences between the current standard of care and what MultiStem appears to be capable of. Put simply, these include evidence of a superior safety profile, a much longer and more practical window of therapeutic intervention, and a substantial therapeutic benefit for stroke patients with meaningful deficits when MultiStem is administered within 36 hours or less.

In terms of safety, when evaluating all patients enrolled in the trial, we observed that administration of MultiStem corresponded to a favorable safety profile and was not associated with any infusional toxicities or allergic reactions or abnormal patterns in safety labs or vital signs. Furthermore, administration of MultiStem was associated with significantly lower mortality and life-threatening adverse events as well as fewer pulmonary events and infections.

In terms of the relevant time window for administration, in contrast to the current window of 3 to 4.5 hours for tPA, depending on the relevant regulatory jurisdiction, we observed that the relevant time window for administration of MultiStem appears to extend out to approximately 36 hours. While the 3 to 4.5 hour window afforded by tPA is only sufficient to enable treatment of approximately 10% or less of ischemic stroke victims, we have been advised by stroke specialists in Japan, Europe, and the United States that a treatment window that extends out to the 24- to 36-hour timeframe, suggested by the results from this initial study, is sufficient to reach the vast majority of stroke patients, perhaps 95% or more.

While the initial assessment of the results was disappointing, in that we did not see clear evidence of benefit as reflected in the primary endpoint and component secondary endpoints in the pre-specified efficacy population as we had hoped, we did the highly suggestive indications that administration of MultiStem was, in fact, providing benefits. When considering all patients enrolled in the study, we saw encouraging signs of the impact of MultiStem treatment. In addition to the reduced mortality, fewer life-threatening adverse events, and fewer infections, a higher proportion of patients achieved an excellent clinical outcome. There was a trend of faster recovery and hospitalization times were reduced.

Examination of initial cellular biomarkers also provided mechanistic support for our therapeutic hypothesis. Our pre-specified analysis of circulating immune cells showed that the levels of CD3 positive cells were substantially lower in MultiStem-treated patients. When we evaluated patients that received treatment with MultiStem within 36 hours, excluding a limited number of patients that received both tPA and mechanical reperfusion, we saw even clearer evidence of clinical benefit.

These include a statistically significant difference in patients that achieved an excellent clinical outcome, meaningful improvement in each of the three clinical rating scales -- the NIH stroke scale, modified Rankin scale, and the Barthel index, and a statistically significant improvement using a pre-specified shift analysis of patients utilizing the modified Rankin scale. We also saw a very strong odds ratio utilizing the global stroke assessment, the pre-specified primary endpoint for the trial, which combines the three clinical ratings scales used, and a statistically significant reduction in average hospitalization time per patient of 3.6 days, as well as shorter average duration of time in intensive care hospitalization, as well as improvements in other areas.

In short, we believe this study demonstrates a very attractive risk-benefit profile for MultiStem. And it also illustrates that if it is administered in the appropriate timeframe, it has the potential to deliver substantial benefits to patients that have suffered an ischemic stroke. It is important to remember that while we have generated years of data from preclinical studies with independent researchers in a range of neurological injury and disease models, this study represents our first trial in ischemic stroke.

Like the early trials with tPA, we believe there are important lessons being learned from this trial. The response from leading stroke specialists have been very positive. They understand that while early studies frequently generate unexpected findings, there is widespread acknowledgement and appreciation of the concept that early intervention is likely to be better.

There is also recognition that extending the effective treatment window out to 24 to 36 hours with a therapeutic intervention that is both safe and that can help a meaningful number of patients would be a major accomplishment. One that would potentially make it possible to treat the vast majority of stroke victims, including those which arrive at the hospital too late for tPA or mechanical reperfusion, and many of which are left with substantial and permanent disability in the aftermath of the stroke.

We intend to apply what we learn from this clinical trial in subsequent studies. If the results for patients receiving MultiStem therapy within 36 hours are confirmed in future trials, there is no question in the minds of many international clinical experts that we have spoken with over the past several weeks that it will have a dramatic impact on stroke care as we know it. It will also create substantial value for our shareholders.

Currently, we are focused on completing additional analysis and preparing for meetings in the coming weeks with clinical experts and regulators to map out the next steps in the clinical development process. We have already heard from many clinical experts that have expressed their enthusiasm and requested the opportunity to participate in the next trial.

This past weekend, we met with group of leading stroke specialists in Japan. We reviewed the interim trial results with them and sought their input and feedback on a number of important issues. Many of these investigators have stated their desire to participate in the next clinical trial. A few days ago, we also met informally with representatives of the Ministry of Health, Labor, and Welfare in Japan and senior leadership from PMDA, who expressed their encouragement and support.

In short, the enthusiasm for the results from this trial is very high. Clinicians understand that a consistent and favorable safety profile, coupled with encouraging evidence of a meaningful therapeutic benefit and the potential to extend the treatment window to a clinically practical timeframe is a powerful combination. In the weeks and several months ahead, we will continue to prepare for the next phase of clinical development activities and continue our dialogue with our partner in Japan, Chugai, and we will provide updates to our shareholders when it is appropriate to do so.

In the meantime, we also continue to move forward with our other clinical programs. We are actively engaged in site initiation and launch activities related to our Phase 2 clinical trial evaluating the safety and efficacy of MultiStem administration to patients that have suffered serious heart damage as a result of a myocardial infarction and preparing for the initiation of our clinical trial evaluating the administration of MultiStem to patients that have been diagnosed with acute respiratory distress syndrome. Both of these conditions represent serious areas of unmet medical need and are also significant commercial opportunities.

But, these are not the only opportunities we are pursuing. We continue our efforts in other neurological indications, where we continue to garner meaningful grant support, conducting additional research aimed at completing necessary preclinical work, enabling the subsequent advancement of programs into clinical studies.

Based on the progress of the past two years, we recently were notified of the award of $900,000 for the final phase of grant funding, which has been supporting our work in traumatic brain injury, and we recently received a perfect score on an SBIR grant application from NIH reviewers related to our work in acute spinal cord injury. These achievements reflect the high quality of the science here at Athersys, as well as the potential of our technologies, and also reflect the outstanding commitment and capabilities of the team here. We also continue to make progress in ongoing partnering discussions with other companies and are actively evaluating new partnering opportunities in several areas.

With respect to our collaboration with Pfizer in the inflammatory bowel disease area, based on the ulcerative colitis study results announced last year, the fact that further investigation of MultiStem therapy for ulcerative colitis for other forms of inflammatory bowel disease would require multiple studies and meaningful additional investment in a very competitive area. And, that it has several other promising programs for IBD in its internal portfolio, Pfizer has notified us of its intention to no longer invest in the program and has elected to return the license rights to us.

While we are disappointed in Pfizer's decision to discontinue our partnership to develop MultiStem for the treatment of inflammatory bowel disease, we remain optimistic about the potential clinical relevance of the technology in many areas. As we've stated previously, our near-term emphasis will continue to be on evaluating conditions where we believe acute intervention with MultiStem can make a meaningful difference in improving clinical outcomes for patients in areas where there are substantial unmet medical needs and where we believe there are significant clinical and commercial opportunities.

In summary, despite the fact that the broader market has failed to recognize or understand our recent progress, we remain very optimistic about the future. We will continue to execute against our strategic plan to develop our portfolio and work to achieve our goal of establishing Athersys as a leading biopharmaceutical company. With that, we'd be happy to take a few questions.

(Operator Instructions)

Your first question comes from the line of Jason Kolbert from Maxim Group. Your line is now open.

Hi, Gil, thanks for the rundown. I'd like to segment this two parts. One part focusing on stroke and just really understanding since the last call you made, you were still going through the data. What is the next step in terms of talking with regulatory agencies and moving forward with a Phase 2b trial?

And, the other thing is I'd like to pick up a little bit -- you were discussing Chugai. Where is Chugai? I'm sure it is still early days for them, but how will they factor into the next clinical program?

And then, the last thing is, I'm surprised by Pfizer's decision. They have been with you for so many years and such a long time. Was this only really because of the IBD trial? Do they still have an option to come back into other programs? Or, are you now free to really seek out any partner in any direction for MultiStem in any indication? Thanks.

Great. Let me address the first question related to stroke and next steps with respect to regulatory authorities and what we have been doing since the last call. So, one of the important things we've been doing is continuing to engage with and interact with leading stroke specialists around the world and get their feedback on a number of questions related to the next phase of clinical development. Obviously, this relates to things like modifying our inclusion/exclusion criteria, applying lessons that we're learning from the data that we have already analyzed. Clearly, we want to emphasize in the next phase of clinical development a shorter time window, or I guess I should say a time window that extends out to potentially 36 hours for intervention with MultiStem consistent with the data and the impact that we have seen from this current study.

But, there's also a number of fine points that we need to address with them related to potential design elements of the study, and in fact, that was a lot of the discussion that we had with the stroke experts in Japan that we met with just over the weekend. And, again, I think that there is very good understanding and appreciation of this concept that earlier is better, and that's the notion that many people in the stroke field have been living with and acute neurological injury field have been living with for many, many years. So, that's something that I think they are very, very comfortable with.

In terms of the next steps with regulatory authorities, what we hope to do in terms of our interactions with these experts is refine as many things as possible to develop a perspective and then come to the regulatory agencies in Japan, here in the United States, and also in Europe with a proposed plan. And, this will probably happen in informal discussions first with regulatory leaders and then be followed up by more formal discussions once we've actually iterated and gone through a number of issues related to how we would propose to design the study. And, we have a variety of different design options that we can pursue, and we also have options in terms of how we approach things geographically.

I'm not going to walk through all the scenarios today, but you can imagine that we might do something in Japan. We might do something internationally. We might do something in the European Union and in the United States as distinct from what we do in Japan, or we may roll it all up into one study or a couple different efforts. That depends on a number of different factors which we're going to have to sort out over time which leads me to my next point about Chugai.

So, we also met with the team from Chugai last week when we were in Japan. Again, those conversations were very constructive. Chugai is still doing a lot of analysis with their team, as are we. We are both defining specific points of consideration and questions and things that we want to dig into a little bit more deeply, and I think that, that process is going to take a little while as we are sorting through all the data.

It really is a large amount of data that we're going through, and we're trying to do it as systematically as possible while we address points that are important both to Chugai as well as the clinical experts that we are interacting with and things that we are anticipating will be questions that the regulatory authorities may have as well. I think that over the next several months we're going to get greater clarity on what that path looks like, and our goal is to really have it pretty well mapped out by the end of summer.

In terms of Pfizer, yes, we were disappointed. I think that this illustrates one of the pitfalls of working with a large Company that has multiple programs in any one particular area. We are not just competing with the current standard of care, we're competing with the other programs that, that Company may be supporting, and it's no secret in the pharmaceutical community where among people that have done partnerships with these types of companies that when you've got an outside program and inside programs, there is always going to be a certain amount of tension that revolves around those various efforts, if you will.

Pfizer doesn't have any ability to opt back in. When we regain the rights to this, it belongs to us and we can do whatever we want. And, it gives us the complete freedom and latitude to engage in partnerships in the inflammatory and immune disease area, or specifically in the IBD area if we wanted to do that or any of the other areas that we would like to focus on.

Again, as I mentioned in my comments, we really have a heavy emphasis right now in focusing on acute intervention first because we think that's where we are the most likely -- it is not just likeliest, but it's also kind of in a time -- with respect to the time of the studies and the cost of studies, that's where we think we're going to get the biggest bang for the buck in terms of being able to deploy our resources against studies in an efficient way. So, that we can get to clear indications of providing benefit, or not, as the case may be.

Got it, Gil. Think you very much for the rundown. We look forward to additional data sets as you have a chance to talk with regulators and understanding what the design and global nature of the follow-up stroke trial might look like. Thanks.

Thanks, Jason.

Next question comes from the line of Tracy Marshbanks from First Analysis. Your line is open.

Thanks for taking the questions and good afternoon. Couple questions, maybe not on stroke, just to flesh out some of the history here. As the Pfizer program and study winds down, were there any additional learnings, understanding, biology that was uncovered that you can now use on a go-forward basis to your benefit? We just never wrapped it up. And, if you would, could you just put a wrap on it as far as what you got out of it? Besides money.

Yes, I mean I think we got some encouraging hints and signs of activity when we administer MultiStem. As we've talked about on prior calls, there were some indications that when we provided a single dose of MultiStem to patients that were suffering from this long-standing chronic disease indication that we were seeing indications of activity out to four weeks or so, which is one of the points that we use to evaluate the patient. But, by the time we got out of the eight-week assessment, we weren't seeing anything -- we weren't seeing anything meaningful.

And so, I think that, that ultimately led us to the perspective that in order to really assess this in the way that I think would be required, we would really need to do a study where we are looking at multiple-dose administration and perhaps even several different dosing regimens to try and gauge what's the right approach to be able to achieve a more robust therapeutic effect and something that is more durable as well. In terms of the biomarker analysis, again, we saw some things that were suggestive. Some other things that didn't really appear to reinforce any substantial activity at least based on those biomarkers. Some of the biomarkers analysis was actually never completed or fully analyzed, and so I think that remains something that we would like to pick up at some point.

As part of actually re-acquiring the rights to the program, we will actually get custody of the samples and the information so that we can continue to evaluate some of the things as we have the resources and the bandwidth to be able to do that. But, for now, I think that the results that we saw from this study have obviously made this a lower priority for us and, obviously, for Pfizer which ultimate led to their decision to return the rights back to us. But, we do have the latitude to apply whatever we are learning from other programs or from future research programs or from the subsequent biomarker analysis that we wanted to, to be able to decide what to do down the road.

Yes, I think, Tracy, one other thing to note is we had a couple of other parallel activities underway as part of the Pfizer collaboration. There was a very robust, non-clinical research program and really focused on mechanism. I think we learned a lot from that. We've actually published with some of the folks at Pfizer, and that's given us some clues I think with respect to mechanism that's applicable in a variety of different indications.

Also, we had parallel activity related to process development, and that is also going to benefit us with other programs as we move forward. So, we do drive benefits, and as Gil mentioned, we get all the data back. We get tissue samples back. We get to [marry] all of that [up] and understand that a little bit better, and we get to apply the learnings from this program to any our indications. (technical difficulty) So, we think it provides real value going forward.

Okay. Thanks a lot. Another -- you're going into a much heavier clinical phase. Let's assume stroke moves forward and maybe stroke moves forward clinically in multiple countries and geographies -- AMI, ARDS. That's a heavy clinical burden, but I'm thinking about on the backside of supply and logistics and manufacturing and compliance, could you just update us? I know we've talked in detail at times, but where you stand on, if you will, being able to deliver given that heavy clinical program and deliver the off-the-shelf in multiple geographies?

Well, that's kind of three questions rolled up into one. I'll take a first stab at it and then I will let BJ add color. So, one, I think it would be-- it's premature to project right now just exactly what that next phase of clinical development -- or, as you put it, the significance of that burden. What that's actually going to be because I think we have a number of interesting design options and choices about what we might elect to do next. One of the things that was actually encouraging from this study is that with a fairly modest number of patients, we saw what certainly appeared to be highly suggestive of a meaningful clinical impact.

Which I think gives us optimism that we don't necessarily have to design an enormous study in the next phase of clinical development to be able to achieve whatever our goals might be. But again, I think it's a bit premature at this point to project out what exactly that next phase of clinical development might be. It's also interesting that the jurisdictional requirements might be different depending on where we decide to emphasize things in that next phase of clinical development. They might be a little bit different in Japan or in certain other jurisdictions that we might be looking at where accelerated approval opportunities might be a possibility.

With respect to the process development that BJ had referred to a moment ago as it links to our ability to achieve the ability to supply meaningful amount of product, whether it be for clinical studies or ultimately for commercialization. Frankly, I think that has been one of the more great, hidden successes, if you will, of what we have accomplished here at the Company over the past several years. We've put a lot of effort and energy into optimizing and refining the manufacturing approaches and the process development side of things so that we can achieve things on a better, more cost-effective scale, if you will. That ultimately, I think, will provide substantial benefits to us as well as to our partners.

In terms of the [thought] administration aspect of it, that is something that I am very confident in. We still have a little bit of additional work to do in terms of doing stability studies in various [bio]formats, but the reality of it is, is that we already are using a thought-administered formulation of the product in our myocardial infarction study. Ultimately, we think that is going to be a key competitive advantage in the -- not only in terms of actually running clinical studies but also in the commercialization realm. Because I think that what we have heard from clinicians over and over again is they really prefer simplicity and a product profile that is associated with ease of use, ease of administration.

And, frankly, the thought administration profile that we've been committed towards and are actually now utilizing in clinical trials is something that we are very proud of because I think that is something that is exactly what clinicians are actually looking for ultimately. And, it's going to represent something that is adopted because it's easy to use, and it doesn't require highly specialized facilities or highly specialized personnel to handle the product or deal with the product. It's something that can be done, as David Hess was saying on the call we had a couple of weeks ago, it can be done in virtually any hospital you can think of. And, I think that's a key advantage and is something that we are really committed to delivering.

Thanks much.

Thanks, Tracy.

Your next question comes from the line of Ted Tenthoff from Piper Jaffray. Your line is open.

Great. Thank you very much, and I apologize if I ask some repeat questions. I've been juggling between calls. But, the fact that stroke as the primary driver in the obviously freshest data set, where are we now and what are the next steps. I'm sure you're going to be repeating yourselves, so I apologize for that. But, just to reinforce, what are the next steps for stroke, and what you would be anticipating?

Yes, the near-term focus is really on interacting with the clinical experts in Japan, the US, and in Europe as we've been doing over the past couple of weeks in particular. Really beginning with the stroke conference in Glasgow were David made his presentation and then continuing that discussion with a variety of different experts since then. And then, more recently, Ted, I'm not sure you were on the call when I was talking about it, but more recently with the leading stroke experts in Japan that we met with over the weekend. And, getting input from them and perspective on them on a number of different issues that relate both what we are seeing from the current study, but also about how to utilize that information and apply it towards the next phase of clinical development that we will be running.

I think we have already gathered a lot of relevant information, but we're going to be continuing that process in the coming weeks while we're also moving forward with having informal meetings with regulatory agencies in Japan, here in the United States, in Europe to discuss with them our thoughts on the next phase of clinical development. So, that will happen informally first in a series of meetings in various jurisdictions, and then that will be followed up with more formal interactions with agencies as we really layout in a more definite way -- in a more refined way what we want to do in the next phase of clinical development.

Obviously, in parallel with that, we will be continuing to interact with the team at Chugai and continuing to engage in other activities that relate to other people we might work with in the next phase of clinical development. (technical difficulty)

Okay. Good. All right, helpful. I look forward to more color on the path forward there.

Thanks, Ted.

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

Hey, good afternoon, gentlemen. Most of the questions have been asked and answered. But, there is one way of looking at this that I'm kind of curious about because obviously you do have this relationship with Chugai. You did have the relationship with Pfizer, and you've had relationships with multiple companies. And, obviously, they all understand that your technology is significantly impressive, significantly important.

What would you look for in, let's say, the next partnership that you would approach? And, how would you try and put it together so that -- I'm not going to say you're more in control, but that you have the ability to go out there and give your quote-unquote first-hand knowledge of MultiStem, what needs to be done, and everything else along the lines. Obviously, you've got a remarkable relationship with FDA, but now I want to know more about with corporate partners going into the future? And, one follow-up after that, please?

That's a great question. And, I think we've learned a lot in our experiences with partnering with a range of different entities over the past decade or even a little bit longer than that. A partnership is more than just about the money. It's obviously -- the economics of it and the potential for creating substantial value is a critically important part of the partnership. But, I think a lot of it has to do with consistency of the vision and the depth of the commitment between the organizations. I will tell you that with Pfizer, as I mentioned, there is the complexity that we weren't just competing with the outcomes of the [owned] study we were running, we were competing with internal Pfizer initiatives that had their own internal champions, and groups that were lobbying for resources from the business unit and other things.

So, that creates a certain level of tension whereas if you are working with a company that they look at you -- or look at us as their gateway to success in a particular therapeutic area, I would say that, that is a slightly different commitment. And, frankly, something that we favor because we want to be viewed as the appropriate gateway into a highly attractive and highly valuable therapeutic area with our technologies. And we look for those types of areas where we believe we can be first-in-class and best-in-class, and we want other companies thinking about us in the same regard.

I think that we have had relationships in the past some of which have worked out really well and others maybe not so much. But, I think the common theme is there has got to be a good consistency of vision between the teams and the organization, and there has to be a very, very strong level of commitment and advocacy within the company that is partnering with us to achieve success. That's absolutely critical.

If you have a partner that might be distracted by multiple different initiatives in a particular area, or maybe even ambivalent about some things, and they are not really sure that this is an area they want to get into. That creates a bigger hill to climb, and all things considered, I think we want to work with people that are really, really committed and enthusiastic and energized by what they think we can accomplish. And, that's really who we are focused on in terms of our discussions at the moment with other companies that have that depth of commitment and can demonstrate it in a variety of different ways.

The size of the company, frankly, is less important than the consistency of the vision between the two organizations and the depth of that commitment is deployed in, or is illustrated in a variety of different ways. Does that help?

Yes, that's exactly the type of answer I was looking at. Last question, and I'll hop back into the queue. Obviously, you have gone in front of the regulatory agency more than some large pharmas do in the same period of time. Obviously, you have had results that were not what you were looking for, but they did provide you with additional information. How would you describe, let's say for instance, the next round of interactions you have with FDA based on what you know today in terms of the trials that you submitted, the data that you got back? And what would you say the takeaway would be from that in dealing with the FDA going into the future? And, I will hop back in the queue. Thank you.

Yes, I don't really see it as so much an FDA question as the regulatory authorities that we are dealing with EMA in Europe, as well as FDA, as well as PMDA and even more jurisdictional entities --.

I'm sorry, I'm just talking about the regulators, in general. Obviously, FDA is synonymous for all the different agencies.

I don't think we really have a defined perspective yet, and so I'm not really sure I can answer the question as specifically as you want. I do think that regulatory agencies, in general, are not going to tell us how to interpret our own data. I think what they will do is they will give us points to consider as we are thinking about the next phase of clinical development, no pun intended. They will ask questions that are meant to be thought-provoking. They will usually if you are headed into something that has registrational potential, they are going to ask questions about the statistical approach that you intend to take to be able to analyze the data.

Our discussions in the past with regulatory authorities, whether it be the FDA or others that we have engaged with, have tended to be very productive. We may not always agree with them in terms of how they think about certain types of things, but I can tell you that those discussions have been very constructive and very productive. And, in general, I think it reflects, not only our philosophy, but their desire to work with companies that come in with the right attitude and that are committed to the right things -- first and foremost, patient safety. That they are really willing to work with them in a constructive way.

So we've engaged in lots of informal discussions with regulatory leaders as well as formal discussions with regulatory leaders. I think that our hope is that we are going to be able to continue to do that, and that we will see good consistency in terms of the response from regulators in each of the major jurisdictions that we care about. When I talk about the United States, I also include Canada in that.

We're really talk North America, but it's interesting that in a few different jurisdictions they have created the opportunity for accelerated approval options or opportunities in ways that we find quite exciting because it shortens the development path. And, the emphasis in each one of those areas is always on, first, if you can show us good consistent safety, which I think we've been able to achieve across multiple different clinical programs. And then, it becomes what is the benchmark by which you are going to be judged in terms of showing clinical impact if you want to use one of these accelerated approval approaches?

And, we've spent a lot of time examining options in different areas, and we're continuing to evaluate different options. I think that there are some very interesting possibilities, or even exciting possibilities, that we see out in front of us. But, we still have a lot of work to do, and I think we want to make sure that we are not taking any shortcuts or doing anything that -- we want to make sure that we are developing a full sense of what the technology is capable of and taking the approaches that regulatory authorities think are prudent and are supportive of as we go to this next phase of clinical development. And, that's what we're going to do.

Like I said, I'm looking forward to the next phase of clinical development, as is everyone else. Good luck. Thank you gentlemen.

Thanks, Steve.

The last question that we have time for today is from Christian [Glennie] from Edison. Your line is open.

Hi, good afternoon. Just to follow up on some quick ones on the last point in terms of potential timings [resolved] end of Phase 2 meetings with FDA?

Thanks, Christian. We are already thinking about a timetable for when we are following up with some of the regulatory authorities, and we're actually reaching out to them to schedule meetings. To a certain degree, it depends on what their docket looks like and their windows availability so what we typically tend to do is suggest windows for potential meetings with them as well as a preliminary set of points of discussion. And, first you submit your meeting requests and give them a general indication of what the nature of the meeting is going to be about, and then you can submit more specific points for consideration as you get closer to the meeting date.

Obviously, we want to conduct these meetings in the near-term, and then I think conducting the informal meetings will give us better perspective on a variety of different issues. And, then from there, we can refine that knowledge and that information, apply it towards options or plans for the next phase of clinical development, and we can sit down and actually discuss those in more detail with the regulatory authorities here in the United States as well as internationally.

I guess I would characterize it as we to make some meaningful progress over the course of the summer, and it is probably going to happen in a few different iterations. And, it is going to be meetings with each of the regulatory authorities across the major geographies that we care about. But, I can't give you specific dates just yet because honestly, we -- I just got back from Japan last night. So, I'm still kind of suffering from a little bit of jet lag, and I know the team is focused on in the coming several weeks figuring out timetables for some of the meetings that we want to conduct in the near-term. And then, we will go from there and update people as appropriate.

Christian, I think it is worth noting, obviously, the next study in stroke is a very important study for the Company. And so, we're going to make sure we do the right study. And so, we're going to spend the appropriate time on the design upfront and in discussions with regulators to get that right study in place. It's going to take a little bit of time. I think we'll update as we go along with respect to timing. Obviously, the broad parameters of what we are going to go do are pretty well known right now.

I think the information that we learn from the study guides us very nicely to the next study, but there are obviously a lot of choices we have to make both with respect to where we're going to do the studies and a variety of operational choices we're going to have. So, we're going to work through that, make sure we do it right, interact with the regulators as we go, and we will update with the financial market as we go as well to set some expectations about timing of that next study.

Sure. Thank you. And then, presuming an element or a feature of next steps would clearly be Chugai's decision on its next steps. Is that fair to say?

Yes, that's clearly going to have an impact on what we decide to do in Japan. And, that by extension, may actually have an impact on what we decide to do. One option would be to run a Japan-centric study. Another option would be to run an international study which Japan -- sites in Japan are part of. You can imagine if we decided to run a Japan-centric study, you could design that in a number of different ways. Or, even the international study which could be consistent with either utilizing the accelerated approval pathway in Japan or going for a more traditional form of approval. Which alleviates the need to invest in some of the downstream follow-up studies or other things that might be required under the conditional approval pathway.

We just don't know yet exactly where we're going to be in all of that because we're still analyzing data. We're going to be doing some modeling. Obviously, having ongoing conversations with Chugai and having ongoing conversations with PMDA and clinical experts to figure out where we are on that. But, it's obviously a huge priority for us right now and something that we want to get greater clarity on in the coming weeks and the next several months. I think you could say that while our plans will be affected by Chugai and its desire to continue on with us. We hope it does. We think it's a good partner. They're not going to be dependent on that, right, so we have a couple of different approaches and strategies that take into account the things that they might be interested in pursuing in Japan and otherwise.

Right.

Great. Thank you very much. I know we are slightly running out of time. But, quickly, on R&D run rate for the rest of the year, and then also just some brief highlights of the AMI study? And, just to confirm that what's on clinical trials is what we should be working with?

With respect to run rate, we haven't given any precise guidance. I think if you take a look at the numbers we report and take a look our 10-Q, you'll see that from an operating perspective, we're spending -- compared to the first quarter of last year, we spent a little less. I think, in general, we're going to spend roughly in the same kind of range of what we spent last year at least through the end of this year. But, I don't want to be more specific than that. Obviously, as we leg into the stroke study that will have some impact on expenses, but we will provide some more guidance about that as that time approaches.

With respect to AMI, we've launched the activity there. There is a lot of work still to be done. We only have the first sites through the process. We're going to have several other sites that we add here in the near-term. Again, I think that is something we provide some guidance an update on perhaps in the next quarterly call, so we are moving forward there. With respect to what's on clinicaltrials.org, to be quite honest, I haven't taken a look at that recently but I think that is updated and current. But, I can't say that definitively because I haven't personally taken a look at that.

Okay. Thank you very much.

Okay. Thanks, Christian.

I will now turn the call back over for closing remarks.

Thanks, Carol, I appreciate it. Well, since there are no further questions, I would like to thank everybody once again for their time and attention as well as their continued support of the Company. We look forward to providing additional update the coming weeks and months, but for now, good night, everyone.

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