Athersys Inc (ATHX) 2016 Q2 法說會逐字稿

Good afternoon. My name Kelly and I'll be your conference operator today. At this time, I would like to welcome everyone to the Athersys Second Quarter 2016 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)

Thank you. And I will now turn the call over to Athersys. You may begin your conference.

Thank you, and good afternoon, everyone. I'm Laura Campbell, Senior 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 Athersys' website at athersys.com, or you may call Matt Celesnik at 216-431-9900 to receive it via email.

Dr. Gil Van Bokkelen, Chairman and Chief Executive Officer; and B.J. Lehmann, President and Chief Operating Officer, will host today's call. The call is expected to last approximately 30 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 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 August 9 of 2016. 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 would like to turn the call over to B.J. Lehmann. B.J.?

Thank you, Laura. Good afternoon, and welcome, everyone. I'm B.J. Lehman, President and Chief Operating Officer at Athersys. I'll briefly review our second quarter 2016 financial results and then turn the call over to Gil for a corporate update followed by question-and-answer period.

For the second quarter of 2016, revenues were $595,000 compared to $216,000 for the same period in 2015 and are comprised of grant revenues from both clinical and preclinical studies, and royalties from collaborations. Research and development expenses were $5.8 million in the second quarter of 2016, compared to $5.3 million in the prior year second quarter. The increase is primarily due to our work on process development objectives to support large-scale manufacturing. Other variances include an increase in clinical product manufacturing costs and a decrease in costs associated with our stroke B01-02 study that concluded this spring.

The change in the fair value of our warrant liabilities resulted in income of $301,000 during the three months ended June 30, 2016 compared to income of $6 million in the comparable three months period in 2015. Changes in our warrant valuation primarily reflect the impact of changes in our share price and warrant expirations. Net loss for the second quarter of 2016 was $7 million, compared to a net loss of $1 million for the second quarter of 2015. The $6 million net increase is due primarily to the $5.7 million decrease in non-cash income from the change in the fair value of our warrant liabilities, combined with the approximately $400,000 increase in revenues and $600,000 increase in operating expenses.

As of June 30, 2016, we had $24.2 million in cash and cash equivalents, available-for-sale securities and accrued interest, compared to $23 million at December 31, 2015. During the second quarter of 2016, cash used in operating activities was $6.5 million, compared to cash used in operating activities of $5.8 million in the second quarter of 2015. Cash provided by financing activities in the second quarter of 2016 was approximately $400,000, compared to $2.7 million in the prior year second quarter, and included proceeds from our equity facility and warrant exercises.

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

Thanks, B.J., and good afternoon, everyone. As we outlined in our last earnings call in May, during the second quarter and the early part of this summer, we have focused heavily on preparing for upcoming clinical activity related to our program for treating patients that have suffered a debilitating and disabling ischemic stroke. The results from our now completed randomized, double-blind, placebo-controlled study conducted at 33 leading stroke centers across the US and United Kingdom have provided an important evidence for us, clinical investigators and regulators related to dosing and appropriate and effective window for intervention, safety and key measures of efficacy. We believe this provides us with a strong foundation to advance the program to the final phase of development.

Specifically, we have continued preparations for the upcoming clinical trial in Japan that will be conducted and funded by our partner Healios, by planning for and conducting meetings with the PMDA alongside the Healios regulatory and leadership team, with the objective of completing the necessary regulatory requirements to enable Healios to commence the trial. We have also engaged in meetings and interactions with the FDA and others regarding our planned international Phase 3 clinical trial for ischeme stroke, as well as advancing our ongoing clinical trials in treating myocardial infarction patients, and patients suffering from acute respiratory distress syndrome or ARDS, while we continue to explore additional partnering opportunities around multiple programs.

Our stroke program is a priority for us. It represents one of the greatest areas of unmet medical need and an unprecedented commercial opportunity. As we've summarized previously, the incidence of first time strokes in North America, the EU and Japan combined is currently more than 2.2 million cases annually. A number that is anticipated to continue rising in the coming years.

Furthermore, as we've discussed, currently available treatments reach only a small proportion of patients. Globally, nearly 17 million patients experience a first-time stroke annually, imposing a substantial burden to both patient and family quality of life, as well as a staggering drain on patient, family, clinical, healthcare and social resources. We believe that by developing a safe and effective therapy for stroke that is both scalable and also clinically practical, we have a rare opportunity to meaningfully improve clinical outcomes for patients that desperately need help, as well as their families, and also to redefine stroke clinical care, while delivering substantial value to our shareholders.

In order to successfully address this challenge, scalability is key since there are so many first-time stroke patients each year. And with the rapidly expanding elderly population, it is expected that this number will continue to grow in the years and decades ahead, particularly in places like Japan where, according to government projections, approximately 40% of the population will be age 65 or older in just a few years from now.

While Japan's demographics are particularly challenging, similar expansions of the elderly population are occurring in North America, Europe and many other countries around the world, which means that age-related diseases and conditions like stroke are expected to become a bigger and bigger problem. To help address some of the clinical and social challenges posed by the seemingly unavoidable trend, we've worked hard to establish a product format that combines scalability, consistency and clinical practicality in addition to the evidence of safety and effectiveness that we have described previously and one that fulfills several important criteria to ensure ease of use in order to help achieve rapid adoption after regulatory approval. Our product format must also facilitate treatment that may be administered in a clinically practical time frame. This is because current standard of care for treating stroke, tPA and mechanical reperfusion must be administered within several hours after the stroke has occurred. Unfortunately, this narrow time window limits the number of patients, who can receive such care to a small percentage of stroke victims, less than 10% according to recent estimates. However, as the results from our completed Phase 2 study have shown, we and study investigators believe that MultiStem can be effectively administered up to 36 hours following the occurrence of a stroke, which would make it a clinically practical treatment for the vast majority of stroke patients. So the window for treatment is a key advantage of our approach.

In addition to a clinically practical time window for treatment, we have focused extensively on making the product simple and easy to use. In order to achieve this, we've been dedicated to establishing a product format that meets several important criteria. First, the product maybe conveniently stored in a hospital pharmacy or at the clinical site. Second, preparation of the product must be simple and straightforward, without the need for extensive personnel training or highly specialized infrastructure. Third, the time needed to prepare the product should be short. Specifically, the product format should enable rapid processing and delivery to the patient bedside in under an hour. From that point, the product is administered to the patient using a simple IV administration.

We have successfully created a product format that fulfills each of these criteria. And as a result, we believe that we're on our way to establishing a first-in-class and best-in-class treatment for stroke. Stroke remains not only one of the most significant areas of unmet clinical need in medicine today but also represents one of the greatest commercial opportunities in the history of our industry. We firmly believe that as a result of the hard work we've conducted over the past few years, combined with the data from our clinical trial, Athersys is in a strong position from both a development and competitive perspective.

In late spring, we and our colleagues at Healios conducted successful meetings with the PMDA to discuss our plans to conduct a confirmatory clinical trial under the new regenerative medicine regulatory framework in Japan. As we mentioned on our last earnings call, we discussed a number of elements related to the trial during these meetings, including study design, quality measures and a range of other topics. Per PMDA protocol and procedures, in advance of the meetings, we worked side-by-side with the Healios team to prepare and submit relevant materials and background information that laid out our specific plans for the trial and a series of related questions that we and Healios sought the agency's perspective on.

As we noted previously, our meetings with the PMDA were highly productive. During the discussions, we reached conceptual agreement on the primary elements of the trial, including the window for intervention, inclusion and exclusion criteria, the proposed primary endpoint for the trial, key secondary endpoints, and statistical parameters. This has been the case consistently in our prior meetings with the PMDA. Their staff was engaged and very helpful and provided thoughtful advice and perspective.

As we've described previously, our goal this summer has been to assist Healios in completing their clinical trial notification or CTN submission, which we sometimes refer to as a J-IND. Healios like Athersys, has a corporate policy of not announcing the submission of regulatory documents. Accordingly, out of respect for that policy and respect for the PMDA, we cannot officially comment further on the status of Healios' regulatory activities. That being said, we are on track with the objectives we laid out and look forward to making announcements with Healios at the appropriate time.

Our interactions with the PMDA have also helped by providing guidance on certain aspects of Healios' study design. In accordance with Japan's regulatory framework for regenerative medicine products, the demonstration of consistent safety and meaningful, although not necessarily statistically significant, evidence of therapeutic benefit are required to achieve conditional approval. Although a smaller study design may be utilized to achieve this objective, Healios is committed to conducting a more meaningful and robust study, a decision that we agree with and fully support.

There are several benefits from conducting a larger study. First, a larger trial increases the robustness and effective powering of the trial; and as a result, improves the likelihood of success by mitigating risk. Second, conducting a more robust study opens up the possibility for full or unconditional approval based upon a more meaningful dataset. Third, such a study will directly complement the international Phase 3 clinical trial we are planning. This is very important since as we have already begun to discuss with regulators, if these studies are consistent with and confirm observations from the prior study, they could provide the basis for registrational package and subsequent approval in the US and other important regions as well.

Our interactions and discussions with regulators in North America and Europe are ongoing. Based on the discussions we have already conducted and feedback we have obtained to-date, we are optimistic that we have a clear and efficient path forward for development, one that could provide the basis for approval in key jurisdictions utilizing the data from these two trials. We intend to provide further information on these and other topics as we reach a definitive understanding with regulators, regarding the clinical path ahead. In the meantime, we continue to make progress in other areas as well, including advancing our ongoing clinical trials in treating patients that have suffered significant damage from acute myocardial infarction and our exploratory study in treating patients suffering from acute respiratory distress syndrome. In both programs, we've been awarded some meaningful grant funding for these studies. And while they've been progressing more slowly than we've hoped, we have made some adjustments, including increasing its engagement with study coordinators at participating sites, making some protocol adjustments, and adding additional clinical sites.

We remain committed to completing both of these studies as quickly and efficiently as possible. In addition to our ongoing regulatory discussions and development efforts, we continue to explore potential partnering opportunities across multiple areas. We remain confident and optimistic that our strong position and commitment to successful execution will help establish Athersys as a true leader in the biopharmaceutical industry.

So in closing, our priorities remain focused on establishing a clear regulatory path for clinical development and potential product registration for the stroke program both in Japan as well as in North America and the European Union, continuing to focus on core activities related to process development and manufacturing objectives to provide the strong foundation for successful commercialization upon approval, utilizing partnerships where appropriate to help us drive development and successfully commercialize products upon approval, and fourth, advancing our other key programs.

And with that, we'd be happy to take a couple of questions.

(Operator Instructions) Jason Kolbert, Maxim.

Hi, Gil. Kind of can't believe it's August already, but I want to ask you to help me out a little bit with some timing questions, with the greatest respect to Healios, I understand you're limited on what you can say. But our assumption is that you had an IND meeting or a J-IND meeting that led to a J-IND submission this summer. And my understanding of the Japanese rules is that, that activates a 30-day clock. So I'm assuming if that were true that you would be hearing back from Japan sometime relatively soon, so the -- when you save on track, I'm kind of assuming in my calculus that, that means we are looking for a trial design to be unveiled, and may be even the first patient enrolled before the end of fall this year. Is that approximate timing in line with the kind of expectations that you're thinking about?

Yes. So I think the timeline that you've talked about there is reasonable, but I just want to make one clarification. So, our goal was to be on a path that actually completes the submission sometime in mid-summer, again, I can't comment, but I can say that things are on track, and I'm happy with where we're at this point in time. You're right, once the submission occurs, then PMDA has a certain amount of time to review that and come back to Healios with specific questions that would then be responded to.

There is a little bit of a distinction between when the J-IND or the CCN is actually authorized and when the trial itself starts, because there are some start-up activities at specific sites that have to take place upon the authorization of the clinical trial application. So, for example, IRB approval and certain contract-related elements that actually have to be addressed, but the good news there is that you can do a certain amount of preparatory work in advance to enable that process to happen reasonably efficiently, particularly at the sites that are kind of at the leading edge, if you will, of getting up and running.

So, obviously, not all the sites get up and running at the same time, but I think for trial initiation, just thinking about that as being kind of a sometime in the fall or sometime before the end of the year event, it wouldn't be unreasonable, that's not an official comment, I'm just kind of confirming that your timeline is a reasonable estimation.

Okay, thank you, Gil. And let's talk a little bit about you're starting to discuss kind of the size and scope of trial in Japan and what it might mean in terms of the US and EU approval strategy. So I really have two questions here, one is, help me understand kind of what preparations you're making in both the US and the EU with regulators to initiate a stroke trial there. And help me understand if I understood what you were saying properly and that is that US and EU regulators are going to take into consideration [that quality] update, meaning the Japanese trial as well and what I'm assuming as an analyst is that, if we had one US EU trial of 250 to 300 patients and a Japanese trial of -- I'm going to call it 200 patients that you potentially could have a registrational package that would suffice for the US, Europe and Japan, is that kind of the right way to look at it?

Yes, I guess that's the right way to look at it. It's got to be clear on the process. So, we've already had an End of Phase 2 meeting with the FDA. We've gotten very good feedback from them and are already actively engaged in a process that revolves around the discussions that we've had with them and have a very clear sense of what is possible and what we can accomplish. The meetings that -- the interactions that we've had with other regulators are still very much in process as well, so we typically start with FDA, and then we basically involve other regulatory agencies and follow up to that, but we want to make sure that we get everybody aligned and everybody on the same page, but I think the really important point here is the point that you made at the end of your question, which is, is it possible and reasonable for people to believe that based on the results from two studies that are in the range of what you described from a sizing perspective, again, I am not giving official guidance on that. I am just saying I don't think that what you described is inaccurate or unreasonable, that based on the results from those two studies, if the results are consistent with what we've seen previously that that could provide us with a very strong foundation for actually submitting a registration package and getting approval.

And we believe that there is a very good possibility that we can accomplish that. Now, from an investor perspective, that is very important ramifications because I think when people think about stroke problems historically, their general mind-set is that we may have to run very, very large studies and I've heard some people [had guesses] that are substantially larger than the numbers that you proposed, but typically that's if you're seeing something that may have a very small treatment effect or it's based on some of the prior neuroprotectant studies, where they weren't necessarily expecting to see an overwhelming signal or there was a lot of background noise, because they had to give the drugs very early and they couldn't rule out patients that might be spontaneously recovering.

So, the fact of that matter is, that we, I think, have a much clear path and a much better understanding of how we can run an efficient study and we have the data to support that as you and others have seen and I think that that puts us in a very clear and a very strong position, and frankly, it's kind of a unique position, because it means that on the basis of two relatively modified studies, we could be in a position to get approval for an indication like stroke, which as I mentioned and I'm pretty sure everybody on the call understands, represents an absolutely enormous unmet clinical need and also an enormous market opportunity.

Hey, Gil, your comments are extremely consistent with the comments that Silviu Itescu, the CEO of Mesoblast made on his call last night, where Mesoblast unveiled RA data and the key question was, do you need a 1,000 or 2,000 person trial to be approved and he talked about the paradigm of cell therapy and the safety factors being that these are such safe therapies, that it's really a matter of a p-value and showing efficacy. So I think it does represent a new paradigm. That also leads me into another question though, which is on the BD front, we are starting to see robust, very real data signals with p values emerging in the landscape. Cytori's had some really compelling data in scleroderma, Mesoblast continues to show very interesting data like they did last night in RA.

So, help me understand when you look at financing the effort of the company over the next two years, how active is the BD landscape now? Are you seeing active dialog with big pharma? Are you seeing kind of any shift in the response rate that -- you've been at this a long time in terms of the interest level of where you're at now, really on the border of two pivotal trials in what could be a blockbuster, what is a blockbuster indication?

Well, I will say that there's clear interest in the programs we have and also in opportunities like stroke. I mean stroke is kind of a double-edged sword, in the sense that as you know and I know a lot of other people recognize and appreciate, there've been a lot of programs in stroke that have not succeeded over the past 20 years since tPA was approved. But those programs typically revolve around this notion of having to give a neuroprotectant or thrombolytic very, very early after the stroke has occurred, and they suffer from a number of (inaudible) limitations and problems.

I personally think that the regulatory path and the path to development and the finish line also has a big impact on partnering discussions and what we may be able to accomplish there, because if we can demonstrate in a very tangible way, the fact that we have a very efficient path to getting to where we want to go to, then I think my view is that has a very positive impact on some of the things that we want to accomplish.

We're being very methodical and very systematic about partnering outreach who are engaged in discussions with what we're willing to consider and I think that getting regulatory clarity in the way that I described will only benefit the things that we're thinking about doing and I think could be in a position to do.

Jason I think we have to also consider value here as well. We're talking about two pivotal studies to get us to approval at a relatively modest investment in the big scheme of things and we have to trade that value to have partnership come in early, it's a consideration for us. You may find that waiting to do that partnership creates substantially more value for the company and shareholders.

We have options, we have choices and we have a healthy balance sheet. We're going to do what we need to do to get to where we want to go to, and I think we have the ability to accomplish what we want.

Thanks guys. We look forward to increasing clarity as you start to narrow in on the timelines for Japan. Thanks.

Steve Brozak, WBB.

Just one quick question, talking about stroke. You obviously have learned the critical part that the 36 hour window is golden, but having treated all these patients, what are you still getting feedback from and what kind of takeaway do you have with the patients that you did treat. And going forward, what was the critical thing outside of that 36-hour golden window that you now have started to look at, that you could tell us and I'll hop back in the queue after that. Thank you.

Yes, well, actually, it's interesting because there's been a number of questions that have emerged over time and some of these have been addressed at presentations that some of the clinical investigators have been involved in, and we're actually in the process of writing up and eventually publishing the data from the study as well. So, I think -- but some of the key questions have been, hey, how does the therapy work on top of orientations that had not received standard of care like a reperfusion therapy, like tPA, for example, and the results from the trial and some of this we've actually presented at the Investor Day event that we held earlier in the year, based on the data that we had at that time, we didn't have the final one-year results, but I can tell people that basically we see clear benefits irrespective of whether or not people got reperfusion therapy or whether they did.

So I think that's very comforting for a lot of people, because they see they could layer onto the current treatments and remember that a lot of patients that actually get treated with tPA or mechanical reperfusion don't have a meaningful benefit, and there are certain risks associated with that. Another key question that's come up is, how does the therapy do in patients that are older because the vast majority of patients are older patients. And as we talked about repeatedly, a lot of these patients were aged 65 or older. Strokes can happen across a broader age spectrum than that, but the very encouraging thing that we see is that, among patients that are aged 65 and older, we actually see more robust benefit.

And we think we understand the reason for that, and the reason being that, younger healthier individuals when they have a stroke, have the capacity to bounce back a little bit and maybe recover in ways that are more difficult for people that are a bit more elderly to achieve, but again the comforting thing is the vast majority of patients are older patients, so that kind of plays [or strengthen the sense] that we see this very robust effect, this treatment effect when we're treating patients that are older.

There's a number of other questions that people have asked over time, I'm not going to address all of them in the course of this question, but that gives you a couple of points that I think help people understand or should help people understand some of the things that have come up, and we've done a lot of data analysis from the clinical investigators that were involved in the study, had done additional analysis on top of that, and I think it all leads everybody to the same conclusion which is, this is a consistently safe therapy that has a very clinically practical timeframe for administration that is offering us genuine hope and actually very exciting hope to get patients back on the road to recovery and not just back on the road to recovery, but when you look at the numbers, we saw -- in accordance with the design of the study as we originally designed the trial, we saw more than five times the number of patients that achieved an excellent outcome, which is we described previously represent complete or essentially complete recovery in every clinical parameter that these type of patients would evaluate on. So, we're very excited by that. I think that's a pretty compelling message.

Great. Well, obviously, that's more than anyone else can show at this point, so I am looking forward to what happens next. Thank you.

Max Jacobs, Edison Group.

So I just want to know may be some additional clarity on the FDA process. Are you -- do you think you'll be going for an SPA?

Yes, so let's just say that we recognize that as a distinct possibility, and for the benefit of those people that are not familiar with the SPA and what it represents. An SPA is Special Protocol Assessment, and essentially what it means is that the agency has agreed in writing with the parameters of the study, and what represents success.

Now, I will point out for people, we haven't given any formal guidance yet on whether or not we intend to pursue an SPA, it wouldn't be terribly unreasonable for people to think that we might pursue that, and the ramifications of it are actually very important, because it sets a clear benchmark.

The other thing that I would just like to point out is, we've already done this in one of our other programs. We applied for and we're granted an SPA in one of our other clinical programs, prevention of Graft versus Host Disease in patients that are at high risk for that condition. So, we know how to do this. We have a very strong relationship with the regulatory agencies, the FDA and others and I think that's based on a foundation of mutual respect [across the] fact that we are recognized as being a company that is committed to doing things the right way, and if I think we were able to achieve an SPA, that would be a very, very important benchmark and an exciting step forward for us and our clinical path.

Great, and I mean, I don't want to get too deep into hypotheticals here. But hypothetically, if you were to pursue an SPA, what do you think that would do to the timing of initiation of the trial?

I'm not sure that the SPA itself would actually have an impact on the timing or the initiation of the study. I think it's the step that you would go through with the agency to make sure that everybody's on the same page and that it's clearly defined in writing essentially what we're doing, how we're doing it and what the benchmark for success would be, but I don't think it really has a meaningful impact actually on the timing of the study. I mean, obviously, you have to go through the process of submitting the SPA and actually having the agency review it, so I guess in that respect, it takes a little bit of time on the front end, but in terms of the actual execution of the study from that point, it doesn't really have a meaningful impact.

Now the aspects that would probably need the SPA would be, or that would require the SPA would be the number of trials, possibly the size of the trial and also the endpoint?

Yes, it would define essentially everything in the trial. And again I think people should recognize that we believe we're in a very good position to be able to combine the results from a clinical trial from Japan, which Healios is paying for with the international clinical trial that we would propose to run. And conceivably, you could define all of that in the context of an SPA and submit it to the agency for review and consideration.

And do you have -- since when you first released the data back in April of last year, there were a lot of statistics that kind of [we're divulged]. Do you have a preferred endpoint do you think in the Phase 3 like excellent outcome or --?

It actually is one of the things that we discussed with the FDA and PMDA. The FDA actually gave us some very clear guidance on that point in terms of what they would consider to be reasonable choices in terms of the primary outcome, primary endpoint and key secondary. We're not going to comment on that formally just yet, but we do have a clear perspective on it.

Yes, I think it's fair to say that the endpoints that we are discussing are ones that we think are favorable for us as well, given the data that we've generated in that Phase 2 study.

Yes. So let's just say there was a lot of commonality in thinking in terms of what regulators see as being well established, very appropriate endpoints is being primary benchmarks. And I think the results from our study are very consistent with that and I think very consistent with what the feedback we've got.

And just one final kind of a modeling question. So in terms of the stroke trial, generally what is the cost per patient for a Phase 3?

There is a lot of things that actually go into that, I wouldn't really want to put a number out there just yet in terms of what I think -- a general rule of thumb that people have used would be something on the order of about 100k per patient, but frankly, it really depends on the nature of the study that you're running. That number I think sometimes reflects studies that have much longer study durations and are more complicated to run, frankly than what we might be looking at doing in the stroke trial. So, I think that number would probably be on the high side.

Tracy Marshbanks, First Analysis.

Couple of questions, turning a little bit to thinking about your programs and sort of portfolio and focus of resources, for example, in your ARDS and AMI trial, you talked about it taking longer and while they are grant supported longer usually means more expensive, you said you're going to finish them, but I'd be interested in, are they impacting you on a cash basis?

And I guess maybe even more importantly, if you have positive results in those trials, you still may have a true tiger by the tail in what you have going on in stroke, might you have to make decisions and choices in the not-too-distant future if all the various timelines you've been talking about hold?

Well, let me just say, I don't anticipate having to make the type of choices that I think you're implying any time soon. I think we're in reasonable shape and frankly we have lots of options and I'm excited about what I think we're going to be able to accomplish, not only in path ahead on the stroke programs, but also in these other clinical programs that I mentioned.

One of the side effects I guess of having a forward enrolment is that you tend to spend a little bit less in the near term in terms of what (inaudible) might be on the studies. But at the end of the day, it all kind of evens out. I mean you're going to be spending money on the studies, on the clinical sites and on the other things. I mean, it's not -- I wouldn't really kind of point too much in that direction, which is based on what's ongoing. I think our objective remains the same, which is get these studies enrolled, get them executed, do it as efficiently as possible and then look at the results. The AMI study is a more traditional Phase 2 trial. The ARDS study is a more exploratory study. So, it's smaller. It's built primarily to assess safety, but also do an exploratory evaluation of what some of the clinically relevant benchmarks and parameters might be, because that would actually inform us we believe in proceeding from there based on work that not only we are doing but others are doing in the field, so that we can actually proceed in an efficient and an effective way.

Think of it as kind of some people refer to it as [path life type of study, or a proof of concept life] type of study, it's not really powered necessarily for statistical efficiency or statistical definitives, but it is basically designed to give us a good look at what's going on these patients when we administer MultiStem in patients that are suffering from severe respiratory distress, and again, I would point people to the fact that we have some publications out there, but I think show pretty clearly that when MultiStem is administered in this type of a situation that we see some pretty exciting benefits and that's one of the reasons why the clinical investigators and others that have been involved in the program have been so excited about.

Okay, great. And my last question, more on the operational side. You referred to operational preparedness, you hit on a couple of things, product format that you've got in place, additional spending on process development and the need for scalability. Could you just delve a little bit deeper on, are there still any I'd call them operational issues, should you want to move in a large scale trial that need to be proven out or are you sort of ready to go at least from the company side of things as far as supply and progressing with the trial?

Tracy, I'll take a cut at that. I think from a clinical perspective, we're in good shape. I think we're in good shape to supply the clinical trials that are planned in stroke. And additionally, anything else we might elect to do. Ultimately, we're thinking very aggressively [now on the] commercial scale as well. If we are in fact able to do two studies and put together a registration application, and that would lead to approval, we would be essentially at a commercial stage, and we have to manufacture commercially for stroke, which is a large indication, as you guys know.

So that's really occupying a lot of our effort and time right now. It's really to put the building blocks in place to allow that to happen assuming success with the stroke study.

Thank you. And that's the last question that we have time for today. I will now turn the call back over to Gil Van Bokkelen for closing remarks.

Well, once again thanks everybody for listening in today. We're certainly happy to have the questions, and we'd like to thank everyone for their time and attention. And we look forward to updating you again soon.

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