Plus Therapeutics Inc (PSTV) 2008 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Cytori Therapeutics Second Quarter Financial Results Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions.

(OPERATOR INSTRUCTIONS)

I would now like to turn the conference over to Mr. Chris Calhoun, Chief Executive Officer. Please go ahead, sir.

Thank you. Good morning, everyone. Our discussion today will include forward-looking statements regarding events and trends which may affect the Company's future operating results and financial position. Some of the risks and uncertainties are described in the Risk Factor section of Cytori Therapeutics 2007 Form 10-K and subsequent SEC filings available through either the SEC or Cytori's website.

In the initial six months of Celution commercialization, we've seen strong interest and growing demand for the Celution system. We have three key updates to report from Q2, each of which will function to support future CRS sales and reimbursement. First, we began enrollment and treatment at several centers in our RESTORE II trial for breast reconstruction that will enroll 70 patients.

Second, enrollment in an independent investigator initiated study in Japan for breast augmentation was completed. Early results are promising and positively impacting sales. Longer term results will be discussed later in 2008.

Third, Cytori was invited by Nagasaki University to participate in a research consortium investigating the clinical use of Celution in HIV therapy induced facial wasting, a new and promising application for our product.

Our recent positive sales news was not limited to CRS alone. Early in Q3 Cytori received orders for its other product offering, our StemSource Cell Bank. In fact, we received two purchase commitments that will likely be delivered and installed in the second half of 2008. The first order was from Biohellenika. Biohellenika is the leader in core blood banking in Greece and banks approximately 600 core blood units per month. The Greek market is particularly attractive for cell banking. Approximately 20% of all patients choose to bank their newborn's umbilical blood stem cells.

More recently, Cytori entered a binding purchase commitment for StemSource Call Bank with Astrea International in Singapore. Each agreement contains options to develop other territories nearby the primary country, as well as exclusivity in the target market. Both orders combined represent purchase commitments in excess of $2.5 million to Cytori, but also contain significant longer term upside to the Company from other support payments and consumable sales.

During the second quarter, we made significant progress in developing new additional banking customers in Europe, Asia and Japan. The long sales cycle makes it difficult to predict which country the next sales will originate, but these first sales clearly validate Cytori's assessment of the value of the StemSource cell banking opportunity.

In the second quarter our product revenue increased to $1.4 million, from $153,000 in the first quarter of 2008. Our product revenue was entirely from cosmetic and reconstructive surgery, or CRS sales. This includes sales of the Celution system, single procedure consumables, enabling surgical instruments, and our proprietary enzyme product. Late in the second quarter Cytori received additional orders for $880,000 in CRS related products, which will be shipped and recognized in the third quarter.

Total operating expenses for the quarter ended June 30, 2008 were $9.1 million, compared to $8.2 million in the same period of 2007. The increase in operating expenses was due in part to increased sales and marketing support, commercialization activities, offset by a decline in general and administrative expenses. Increasing cash flow from sales activity and efforts to reduce expenses, should bring cash burn to $2 million per month by year-end.

Cytori ended the second quarter with cash and cash equivalents and accounts receivable of $6.4 million. We were pleased to announce this morning that we would receive approximately $17 million, less expenses, from the sale of 2.76 million unregistered shares to several investors in a private transaction. Olympus acted as the lead investor of the financing, which is reflective of their continued commitment to our partnership and to the technology.

For the remainder of 2008, we expect revenues will be derived from both the StemSource Cell Bank sales, as well as new CRS orders from surgeons, clinics and hospitals in the EU and Asia-Pacific region for Celution systems and related consumables. In addition, we're beginning to see sizeable CRS consumable reorders. In the intermediate to long term, sales annuity based on consumable reorders is anticipated to be an important contributor to overall revenue.

Based on our current order projections from our sales funnel, Cytori would like to reaffirm its $10 million to $12 million revenue guidance for 2008. Besides our two initial product offerings, we've worked to initiate two new trial sites for our PRECISE study for chronic cardiovascular disease.

The Rotterdam site has been initiated and is beginning to enroll patients, and the second site in Denmark is expected to begin enrolling in the fall. We intend to complete enrollment as soon as possible in all 36 patients by end of 2008, early 2009. Our APOLLO also continues to evaluate and enroll patients.

Finally, based on promising preclinical data, we received a financial commitment from the prestigious Fraunhofer Society in Germany of $425,000 over two years in support of a clinical development project using Cytori's Celution system to advance adipose-derived stem and regenerative cells into clinical trials for ischemic stroke.

The second quarter had many developments in Cytori's intellectual property portfolio. The key patent was issued to Cytori in June from the U.S. Patent and Trademark Office, which we believe provides broad market protection for commercialization of the Celution system in this country. The newly issued patent specifically protects Cytori's device technology that processes adipose tissue to obtain a diverse and mixed population of cells.

Cytori also received the U.S. Notice of Allowance in July for a patent application that covers methods of creating a cell enhanced graft using a closed system to process adipose tissue-derived stem and regenerative cells. This patent is expected to specifically protect Cytori's Celution system based device and methods essential to our CRS product now on the market.

We expect to continue adding to our IP position through receipt of similar patents related to other features of our device, as well as specific applications such as stem cell banking, cardiovascular disease, orthopedics and other indications.

On a separate note, on June 8th the District Court of California made public its ruling regarding inventorship of U.S. Patent 6777231, which covers isolated adipose stem cells. To be clear, the court's decision does not impact our primary ongoing business activities, the Celution system, or the product development pipeline. The '231 patent covers only adipose-derived adult stem cells in an environment substantially free of other cellular materials found in adipose tissue.

On the other hand, the Celution output is designed to produce a diverse population of many different cell types that, in fact, are very substantially rich in many cells. In other words, the Celution output doesn't practice the '231. Nevertheless, we have and will continue to support the University of California in the inventorship dispute, as the '231 patent may have future product value in this emerging area of medicine, particularly in drug development activities, and because the key inventive work was clearly performed at UC.

Subsequent to the federal court decision, we have, with UC, appealed the district court ruling. We believe the incremental investment in the appeal is warranted given the facts of the case, and there's a strong possibility of success at the appellate level.

In conclusion, we want to fully share with our shareholders the excitement surrounding our products that we are seeing in the field both from doctors and patients. Despite challenging economic times in many places, we believe there's always an opportunity to succeed in the medical markets when one focuses on making it easy for doctors to better help their patients.

Operator, we'd now like to open up the call for questions.

(OPERATOR INSTRUCTIONS)

And our first question comes from the line of Steve Brozak from WBB Securities. Please go ahead.

Well, congratulations, gents, on the movement as far as the -- as far as the returns are concerned. But I would like -- a question on color, and then a follow-up. The question on color is, you've got a device now that is basically out there for the research community to evaluate. What other types of indications are you starting to get interest from?

I'm not saying that you have to commit to those types of indications, but give me a cross-section of what types of people and the level of their interest are you starting to see? And I've got a follow-up after that.

Hey, Steve. It's Marc Hedrick. Thanks for the question. I look at the expansion of the use of the Celution from a couple of different perspectives. And the first part, as you know, a loft of the usage right now of the system is from plastic and reconstructive surgeons or breast surgeons. And so many of them have diverse practices. Some typically do more reconstructive, some do more breast cosmetic surgery and others do more general cosmetic surgery, not just the breast but face and other places.

So what we're seeing is, the doctors will initially bring the system in for one application, for example breast reconstruction, based on the particular nature of the practice. But then once they get comfortable using the tools, they'll begin expanding it to different indications.

We have a very important key opinion leading doctor who happens to be on the Allergan Scientific Advisory Board who's using the technology initially for taking breast implants who -- which have had different problems that make them cosmetically unacceptable. And there's really no good treatment short of just taking the implant out and redoing it. But now, for example, you can take the material from the Celution system all autologously and then effectively paper over or lace in that material over and around the breast implant to make it look more normal.

And so, from an increasing -- from bringing the material -- the system in for one application, breast reconstruction, then expanding it into rescuing implants that are unacceptable, and then now going into doing cases where you completely retake -- replace the breast implant with the fat tissue is really illustrative of how doctors are expanding the use of the tool once they get it into the clinic. So, that's on one hand.

On the other hand, once you get the system in the hospital, we're seeing that curious doctors in different specialties are coming in and bringing their unmet medical needs back to Cytori and asking how can we take the output of the system and begin using that for areas outside the originally intended sale of the system.

For example, doctors are using the system for fistulas in the gastrointestinal tract, and also in chronic wounds such as diabetic ulcers. So, we're seeing clinical usage beyond just the plastic surgery field into new areas. And we anticipate this only continuing to grow as we get more and more systems in the field.

Thanks. That leads me actually to the follow-up question. Given the plethora of different physicians and the initial leaders that are going out there and saying, I've always thought about this, what are you looking at in terms of peer review type publications?

I would imagine that you're probably focusing on a lot of the trends that are thought leaders, so that over the next 12 to 24 months you start to see the results carried out in independent reviews. I would imagine that that would be something that would add the validation that these people are working on. Is that something that you've started to see any discussions with so far?

Absolutely, Steve. If you look at the breast augmentation study that was done in Japan, that would be -- it's an investigator initiated and driven study. That's going to be -- result in a publication. But even prior to the publication, based on that surgeon's hands, it's really driving sales in his practice. That data has been presented now in several venues around the world even prior to publication, and it's driving sales of systems to other doctors. So the word-of-mouth component to the sale of this technology can't be underestimated.

In the end, though, to really broaden the reach of the product, you've got to get these studies published in peer review journals. And so, to the degree that Cytori can work with those physicians behind the scenes to get those out in the scientific literature, we're trying to do that. However, the lead time is such that, I think, in the short term we get more bang for the buck in the market by getting those presented and in front of doctors as quickly as we can in a variety of creative venues.

So the last question on that would be -- so that would be a template that you would look to use for other indications coming in that you would basically explain what you're doing, and then let the peer system basically evaluate and validate the fact that it did work and then go out there, and then you get the broader distribution going forward on that front?

Absolutely. It's entirely a template for moving forward into other indications.

Great. Thanks for the questions. I'll jump back into queue.

Thank you, Steve.

Our next question comes from the line of Erica Selin from Stanford Group. Please go ahead.

Good morning. Thanks for taking my question. Looking at the gross margins and the revenues that have been pushed into the following quarter, we've increased from about -- from $801,000 last quarter to $880,000, yet your gross margins are going up. It looks like you're increasing your supply, but the demand's outstripping that. Is there anything that you're doing in order to increase the supply, and any color you could give us on that?

Hi, Erica. It's Chris.

Hi.

From a manufacturing point of view, our capacity actually increased quite a bit during Q2, and we should continue to see increases in manufacturing in Q3 and then beyond. This is not a current bottleneck to support either the CRS sales, our banking sales and/or clinical trials. The timing of those $880,000 in orders just came right at the end of the quarter and it wasn't availability of systems versus just the timing of the orders coming in.

Okay, that's good to know. And so you expect that in the coming quarters, assuming that people don't place their orders right at the end, you should be able to supply it during the current quarter?

That's exactly right. You know, we knew it would be a little lumpy this first year and we're kind of seeing that, and hopefully we'll see the smoothing out sometime in the future. But right now, production is just -- capacity is not an issue for us.

That's good to hear. It does look like the capacity increases have increased the gross margins. Do you think they'll stabilize around this level for now, or do you think we'll expect to see some more increases?

Hi, Erica. It's Mark Saad. It's going to be tough to figure that one out. We have, as Chris said, for lack of a better scientific term, a lumpiness to the order flow. We have a combination of system sales that may have, frankly, different revenues to Cytori depending on whether or not they come direct from a customer, whether or not they come from a distributor, and then you have the consumable sales as well.

And then layer on the banking, which we think may have the opportunity to improve margins further. Put those all together and then the unpredictability of which revenues come in first, I think it makes it really tough. And that's one of the things we're trying to work on and help the analysts in the buy-side -- to get a good grounding of that. I would look at the quarter for what it is on a gross margin basis.

We believe based on the revenue mix we see going forward that we can continue if not hopefully beat that with revenue mix going forward. We think there's a possibility for a high margin product here both in the banking, both in the -- certainly the consumables and even a reasonable margin on the systems, which I think is -- I think telling in the fact that we have a first in class and only in class product that we can sell.

So putting those all together, we think there is the opportunity to improve margins. It's just a little bit hard to figure out how quickly that occurs and obviously with the lumpiness, going back to that scientific term, it's a little bit challenging. But we're going to do everything we can to guide that the best we can.

Okay. That is helpful to [how it's working] to the expectations. I was also hoping that you could give us a little bit of information on the timing between the sale of the StemSource Celution and the install. I know that there's a good deal of time, but would we expect maybe two months lead time, less than that, more than that, just so we can judge as these sales come in?

Yes, hi, Erica. It's Chris again. So there were essentially two agreements so far in Q3. One is for this bank in Greece. We're in the process of installing that right now and we think that'll be installed during this quarter.

The Singapore agreement is really a signed, binding letter of intent it's conditional on the regulatory filings in Singapore. Those have been in process since May. We've had a response to the agency regarding their questions there in late June. And it's hard to predict exactly when the approval's going to come through, but we expect that'll be either this quarter or next quarter. And then as soon as that's in, we'll sign the final agreement and begin to install. So it's -- we think it's likely that second bank will get installed this year.

Okay. And the clock will essentially start on that once the regulatory approval comes in.

That's right.

Okay. And also if I can just ask one more question on G&A expectations. It looks like you're managing those well. Should we expect another higher quarter in the fourth quarter like we did in '07, or do we expect -- should we expect those to come down as well?

Hi, Erica. It's Mark again. G&A we're going to work like crazy to keep that going in the downward trend direction. I do not foresee a pickup on the back half of the year based on everything we see right now. We are -- I think there's a reasonable chance that we can continue to work that down as well.

That's great. Thank you so much. And, I'll hop back in the queue.

And our next question comes from the line of Laurence Bleicher with Noble Financial Group. Please go ahead.

Hello, everyone. Congratulations on the results thus far. I wanted to ask with the revenue guidance reiterated and with StemSource sales happening at the pace they're happening, you identified a component of the revenue guidance last quarter as being 75 to 80 freestanding Celution systems.

Are you willing to update whether the components of the guidance are still 75 to 80 freestanding Celution systems and then your implied StemSource expectations? Or, has there been any shift towards higher number of Celution systems or consumables based on what you're seeing thus far?

Laurence, good morning, it's Chris. I'm going to try and provide some more color. And, I think we can provide a little bit more clarity on kind of what the revenue split is looking like based on kind of this halfway point through the year. It's looking like half our revenue's going to come from the CRS and the other half will come from banks based on our funnel and the progress to date. So I think as a guideline, that's our best estimate of how it's coming together right now.

In terms of number of units, there are 44 units in the field aright now. We're seeing continued positive demand, and we think that the guidance of 70 to 80 is still on track. We don't want to change that at this point. There were 25 sold and -- both to distributors and direct accounts in Q1 and Q2 that have been delivered.

There were an additional five units that were ordered in Q2 that were shipped in Q3. So the demand is increasing, the unit numbers are increasing. Some of the units out there are at study centers obviously, but importantly, we're seeing increasing reorders for consumables. We think there are approximately 250 patients that have been treated so far this year and that seems to be increasing.

Excellent. Thank you. Do the reorders tend to come from the -- are they particularly concentrated at a minority of the centers where you placed the devices thus far? Or, are they fairly spread evenly among centers that have had the devices for comparable amounts of time?

No, I would agree with you that they're concentrated at a few key centers. And, I think what we're seeing is we have some clinics that have installed these systems that began using it that are now expanding that use and they're increasing its use within their practice, and they're beginning to use it pretty heavily.

I think there's a number of other systems that are out there that are either at the distributor level or in the process of being installed that we anticipate reorders going forward from those. But from the guys who have received systems already, we're seeing a pretty heavy use and that's increasing.

Great. One more question on the placement announced this morning. The size of the placement, not raising perhaps as much cash as some of us had anticipated, can you discuss perhaps reasons for the size of the deal, expectations for what we might see in the future?

Laurence, Mark Saad again. We raised $17 million gross, which was the most we could raise under the circumstances without, I'd say, materially changing terms in a way that we didn't want to do it or going away from a group of investors we were comfortable going to.

And if you follow our past, in the last four years, with this raise, we've brought in $114 million. It's been -- we started four years ago with a very early stage technology. I think even as recently as one year ago people would classify us as very early stage. And now, we've reached commercialization.

But of that $114 million, $76 million has come from strategics, and $38 has come from financial parties. So if you look at that, we've tried very hard at Cytori to focus our sources of cash to match with what we think is strategically beneficial for the Company.

And we think we've done as good a job as can be done to have done that, getting leadership investments both in terms of equity and other types of investments from the likes of Olympus and Green Hospital and we believe other companies as well.

Like always, we work in parallel and we've never had the luxury of a big balance sheet. We always have to make our progress and then in parallel do the best we can, always with the eye towards focusing on the strategic opportunities, to the extent that it's beneficial for the Company and shareholders, but then at the same time needing to run parallel an equity or potentially a market alternative, if needed.

We've been fortunate in the past, in that most of the time we have not needed to look to the market and we've been able to lean more exclusively on the strategics. And, hopefully, forward we can lean more and more on our own revenue performance.

As we look at this circumstance, we were working in parallel and it turned out that the best opportunity for us at the time was to go with the financial market deal. We were also very fortunate to have Olympus, our partner, renew their enthusiasm, renew their support for Cytori with a $6 million lead order. And around that, we were able to build a small but good book of investment to add to that and give us some runway.

You're right, we didn't add as much as we probably, ultimately will need. But, we believe other sources that still align with our focus of doing everything possible to get strategic dollars first, to the extent that it's good for the Company, and try to minimize what we raised from the financial markets when we believe as a Company we have not realized a valuation that is consistent with our longer term goals.

And as we get closer to those, those things can always come into the normal curve. But for us, we've done everything possible to focus on strategic and believe this deal was the best deal we could do today, and we feel very good about what was done and the quality of the investors we brought in.

Certainly. You mentioned these sort of ongoing strategic deals that you're working towards. Is it reasonable to to think that to some extent you were buying yourself a window of time here as revenues continue to ramp up, as strategic deals, discussions continue to advance and that you weren't in a position of having to satisfy all your long term cash needs in a placement at this time?

That's exactly how we would look at it.

Great. Thank you very much. That's all my questions.

And our next question comes from the line Ren Benjamin with Rodman & Renshaw. Please go ahead.

Hi. Good morning. Thanks for taking the questions. I guess my questions are more from the clinical side. You mentioned a couple of brief updates regarding PRECISE, APOLLO and the Japanese study. Can you give us an idea as to when, at least in the case of, let's say, the Japanese study we can see updated results?

And then maybe a little bit more color as to what's happening with APOLLO. You mentioned that enrollment continues, but can you give us more of a status update there and when we might complete enrollment? And I think, Chris, you mentioned that the PRECISE study is going to complete enrollment by early 2009, but if you can just give us some additional color there, too.

Hey, Ren, it's Marc Hedrick. Thanks for the question. I'll try to answer it as best I can. I think the expectation from data from Japan I would characterize this way, that 20 patients or so were treated in the RESTORE I study. That data's been reported. That study was successful.

We built on top of that with the RESTORE II study, which is we're treating patients. We have four sites that are basically up and running. And because we're going country by country, we just have to work with individual governments and ethical committees to get those studies approved. And every country and geography is a little bit different.

But we think that that RESTORE II study, which is 70 patients, should enroll very quickly. It's not a controlled study. It's an open label study geared towards reimbursement, although with a look at really nailing down and quantifying efficacy through MRIs and things like that. So, I would say that's the key piece of plastic and reconstructive surgery data that we're looking towards, but that's really geared towards reimbursement.

At the same time, we're working with different countries who have existing reimbursement codes to try to get reimbursement separately. But this study would really establish, we think, a very fair price level for our consumables.

Now to kind of jump back to Japan, but to go to a different indication, Dr. Kamakura in Tokyo has been one of our biggest consumable users, has seven clinics throughout Japan, came to us with an idea for an investigator initiated study for breast augmentation. As you know, our core focus was on breast reconstruction. We supported that study, supported the consumables.

Now he's treated over 60 patients for the breast augmentation indication. He's now got data out to six months, with great retention and beautiful results that are very persuasive for the long term success of the Celution output for breast augmentation as a substitute for breast implants.

And he's expanding his usage, and we believe he's going to expand that to all seven clinics pretty soon. That's where we are on the breast clinical side. There's still other indications that doctors are using and I expect those will follow the same path through investigator initiated studies and first presentations and then publications, as we discussed with Steve Brozak in his question.

With respect to the cardiac studies, APOLLO has enrolled six patients, but we're not projecting when that enrollment's going to be done. Right now, we just don't have enough patients in the study to be able to project that. We're suffering a little bit from the summer doldrums in Europe.

PRECISE is well into the second cohort. The key to continued enrollment there is overcoming site fatigue which we see in Madrid, where we've exhausted the accumulated patient pool that we went into the study with. And we saw that coming many months ago and began initiating two new sites, one of which is up and running in Rotterdam. They've accumulated a number of patients and it's just a matter of getting those patients treated. Again, the summer holiday season in Europe is not helping us.

And then, we've got a third site in Copenhagen that should be ready to go early fall. We're making a lot of progress there. It's with a new country, but we're making progress. Optimistic that both those two additional sites will be up and running in the fall. And as Chris said, we're trying to drive to get all those patients enrolled by the end of the year, but hopefully, by the first quarter next year and then data out in 2009.

Okay, so I guess just in trying to map this out, because I would assume that there would be nice sales increases following data presentation, data from the cardiovascular trials would be expected in 2009 and then what about -- ?

From PRECISE only.

Oh, I'm sorry, PRECISE only. And then, what about RESTORE II and maybe some updated results from the investigational -- investigator sponsored trial in Japan?

We're waiting for the six-month data on the first -- of all the six-month data from the first patients in the investigator initiated study. That data's continuing -- as it accumulates to be presented in a variety of smaller venues, but it's really up to the investigator as to when that data gets published and presented formally at a peer reviewed meeting, if you will.

I would expect that in 2009. But the exact meeting and venue hasn't been discussed. It'll likely be one of the two big plastic surgery meetings. He's already -- I know that he's already getting calls from the leadership of those meetings to present that data.

With respect to the RESTORE II data, I think that that's probably also a 2009 presentation. But the meeting has not been confirmed and we're not 100% sure exactly when that's going to be presented.

Okay, great. And what's happening with VENUS?

VENUS is really no movement there. We're still working with the ethical committee. We just happen to be in a position with a hospital that's having difficulty proving that study. And we're continuing to work with the site, but we really had nothing new to report there.

Great. Thanks, guys.

Thanks.

(OPERATOR INSTRUCITONS)

And our next question comes from the line of Jason Napodano from Zacks. Please go ahead.

Hey, guys, good morning. I'm wondering if you could talk a little bit about the size of the hospital market in Korea, Taiwan and Thailand, and how that compares to Japan.

The opportunity for stem cell banking?

Yes.

So Japan by far is the leading target for the stem cell banking opportunity. Interestingly, in Japan there's about 9,000 hospitals and of those 9,000 we're really targeting about 300 or 400 of them. These are the largest hospitals. Most of them either big public or private hospitals.

And partly that's kind of the delay is getting through the whole process in these big institutions where we really need approval from all the different departments, the committees, ultimately the board and then even some of the public hospitals' public figures as well. It's just taking a long time. But that's by far, we think, the largest market opportunity.

Korea is probably second and that will have a similar model where, I think, that having multiple bank installations makes sense, and is possible based on the structure within Korea, but by far smaller than the opportunity in Japan. And then Taiwan and Thailand are probably likely single digit bank sales, maybe a couple, just based on the territories. And I would probably rank them Taiwan as third and then Thailand fourth.

So, I would assume that Green Hospital has key relationships in those countries and that's why the agreement was expanded to include them?

That's right. And they're expanding their business as well into those countries for hospital management, building hospital facilities and other medical equipment sales and service.

So as they're expanding into those territories and building relationships, we thought it made sense to continue this relationship and bring it into those countries as well. And despite the fact that we haven't posted our first sale yet, I think the expansion of this territory should echo our enthusiasm and confidence that Green is the right partner, that we are making progress, and that these banks are coming.

The two deals that you closed -- or the letters of agreement for Biohellenika in Greece and Astrea in Singapore, how exactly were those deals -- how did those move forward? Were those internal sales force or third party?

Hey, it's Marc Hedrick. I can discuss specifically the Greek bank. So there's a combination of ways that we get banks. Either we get a phone call from someone who's interested in expanding their services or, for example, in Japan we really go out and market the service.

Greece was an example where the leader in core blood banking, in a country that in particular is very aggressive in umbilical cord banking, generally speaking, significant percentage of babies born there, parents make the decision to bank the cord blood. They came to us looking to expand their banking services into other areas and felt like adipose was the next best thing to bank.

They came to us and we worked with them. We took what we had learned in developing the banking sales process in Japan and developed a product, added exclusivity to the Greek market, as well as service maintenance and marketing help to Biohellenika. So -- and so the idea is we would work in conjunction with Biohellenika to help develop the market.

We've developed a lot of internal expertise, standard operating procedures, protocol software, and marketing materials, and then Biohellenika would take that material, translate it and reformulate it for the Greek market and then take that out there and try to drive consumable sales and bank units.

And we, again, participate as we sell one consumable for every patient they bank. And there's certain minimums in that contract that they have to hit over the five years exclusivity within that market. In addition, there are related markets in the Balkan states that they're interested in developing and they have the opportunity to develop those as well as [clone] the initial bank that will be in Thessaloniki into Athens and other areas. So they effectively have an exclusive partnership with us to develop that Greek market.

Very good. One final question, guys. I'm wondering, if I remember back to the first quarter, the breakdown of Celution 800 sales was pretty even between Europe and Asia. I'm wondering if that was still the case here in the second quarter -- or back in the second quarter.

Yes, I believe that's still consistent. We're continuing to see demand from all the territories and we haven't had really the ability to get into all of the different countries where we have approval so far, but we're finding interest there and we're going to continue to expand this in the upcoming quarters into countries where we haven't yet posted any sales. So, I think that the opportunity's great and that we're just kind of scratching the surface here based on our limited resources, and we intend to expand that.

Hey, thanks for taking the questions, guys, and congratulations on the quarter.

Thank you.

And there are no further questions. Please continue with any closing remarks.

In closing, I'd like to reiterate our excitement about the positive reception we see in the market for the Celution system. We believe the European and Asia-Pacific cosmetic and reconstructive market on its own can make for a successful company.

Expanding this opportunity to other countries and regions will continue to contribute to further growth over the next 12 to 18 months and well beyond. The prospects in our product development pipeline have never been stronger. Thank you for your time today and your questions.

Ladies and gentlemen, this concludes the Cytori Therapeutics Second Quarter Financial Results Conference Call. If you would like to listen to a replay of today's conference, please dial 1-800-405-2236 and access code 11116771, followed by the pound sign. ACT would like to thank you for your participation. You may now disconnect.