Plus Therapeutics Inc (PSTV) 2011 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Cytori Therapeutics first-quarter conference call.

Before we begin, we want to advise you that over the course of the call and question-and-answer session, forward-looking statements will be made regarding events, trends, and business prospects which may affect Cytori's future operating results and financial position. Some of these results and uncertainties risks and uncertainties are described under the risk factors section in Cytori's Securities and Exchange Commission filings, which Cytori advises you to review.

Cytori assumes no responsibility to update or revise any forward-looking statements to reflect events, trends, or circumstances after the date they are made.

At this time, I would like to turn things over to Mr. Chris Calhoun, CEO. Please go ahead, sir.

Thanks, Kelly Ann. Good afternoon and welcome to Cytori Therapeutics first-quarter 2011 investor conference call. As we have released detailed information about the quarter in the quarterly press release and shareholders letter, I will provide only a brief summary of our progress and milestones during the quarter so we can be sensitive to your time and quickly move into the question-and-answer portion of our call.

Overall, we're making tremendous progress. We estimate that more than 3,000 patients have been treated worldwide with our products, and there are now 162 revenue producing systems around the world across 29 countries. With this, we believe that we are clearly leading the way into the emerging field of cell-based therapy.

In addition to our consistently growing population of treated patients and the installed base of systems, we have accomplished many important milestones during the quarter. These include the following -- we have secured an expedited process with on-site review for obtaining chronic myocardial ischemia indications for use in Europe. We initiated the advanced pivotal European heart attack study with the first site now enrolling and treating patients. We reported top-line twelve-month result from the RESTORE 2 trial showing sustained high levels of patient and physician satisfaction.

We have expanded efforts to obtain European health care system coverage for breast reconstruction. We have submitted multiple 510(k) applications to the FDA. We initiated preparations for a pre-IDE meeting with the FDA this year for a US chronic myocardial ischemia clinical study. We have hired an experienced leader as Executive VP of Marketing and Sales, Clyde Shores, to lead our global commercialization efforts. And the board has elected Tommy Thompson, the former Governor and Head of HHS to the Board of Directors. And we have named Lloyd Dean as Chairman.

I would also like to comment on our key milestones for the next 12 months, which include to achieve chronic myocardial ischemia indication for use in Europe; Celution One CE Mark approval; PureGraft approval in Japan; accelerated revenue growth for the full year in 2011; reporting of the 18-month outcome data from the Apollo heart attack trial; publish and present complete RESTORE 2 data, Celution System 510(k) clearance in the US; humanitarian use device designation in the US; finalize the US HDE trial for soft tissue defect repair; design and prepare to begin a US chronic myocardial ischemia study; and growth in targeted emerging markets, including India.

We're building a global organization based on a true platform technology to address numerous ischemic conditions from chronic and acute heart to breast reconstruction to radiation and many others.

Our goal is to have the Celution System in every hospital and clinic around the world addressing these conditions and improving patients' lives. We believe our steps to achieve that goal are clear and with just 160 units installed, we have a tremendous opportunity in front of us.

I would like to open up the call for questions.

(Operator Instructions). Brian Gagnon, Gagon Securities.

Afternoon, gentlemen. Can you hear me okay? Let's talk first about Japan. Obviously this was a difficult quarter for Japan, but those aren't really lost sales; those are just delayed because of the issues over there.

So let's -- maybe you can give a little commentary on that, but then I really want to dive into the Japan regulatory scene and then maybe talk a little bit more about what has happened over there and does that give you any future opportunities? Because I know you've done a lot of work in the past on radiation injury with Nagasaki University, and are there any opportunities that have come out of this for you? And then I have another couple questions.

Okay, Bran, thank you. And I'm going to start before I turn it over to Mark on the sales topic, but I think probably a headline discussion is important because, as you know, we really do a lot of work in Japan. We have an office there with people and we have a number of partnerships there. And we've been incredibly fortunate in this terrible situation that we have been relatively unaffected from a person point of view and a lot of the activities that we deal with over there.

Now, certainly, the effects of the earthquake and the corresponding tsunami and the radiation issues are extensive, and what you hear about and see on CNN probably only touch the surface a little bit about what's really going on, on a day-to-day level.

Having recently been there, they're facing things like constant power outages and disruption of trains that they rely on to move around, difficulty in simple things like access to water and food. Even to this day, in a major city like Tokyo, these are disruptions that are still significant and ongoing. So I would say things are kind of getting back to normal, but our -- our team and the people we work with, we have tried to be as supportive and helpful to them as we can, and really I just want to let everybody know that we've been very fortunate in our people and relationships and the people we work with in terms of what's been going on. But that's the high-level point of view.

I will let Mark talk more specifically now about kind of how that's impacted the business side, but that was kind of the human side.

Hey, Brian. With respect to sales, there's no question that the events Chris just discussed affected our sales in this quarter. If you look at Q1 2011, we shipped only one system to Japan we -- fewer than 50 consumables, and it represented the smallest amount of our revenue on a relative basis to Europe and the US, whereas you look a year ago in Q1 2010, it represented approximately 75% of our overall revenue. So there was a big impact.

I think the question is, do you read a trend into that? And based on what we see, the -- in the March timeframe and in April, the number of cases went down, consumables and so forth, but now the rolling blackouts are over.

Tokyo South appears to be nearing kind of a back to normal state. We're seeing increased consumable reorders. So looked like from a perspective of sales it was really more of a delay of a month or two rather than those sales were really gone for good. So I think based on global funnel, the improvements in Japan which are really tangible, we're confident that we are on track to hit our internal yearly growth objectives as well as our internal guidance, which was really towards accelerating growth this year on a year-over-year basis. And I think you had a question about -- kind of a while ago, but about regulatory in Japan?

Yes, regulatory and then radiation injury.

Okay, so let's start with Japan regulatory. As you know, the banking products that we have in Japan that are available and selling today are Class I, and so that's been accomplished as a first step. The next step is our PureGraft products, and we are in process right now with that and we expect approval this year for the PureGraft product line.

And in the Celution products, we have an application that we filed to NHLW about a year ago. And we've had numerous high-level meetings, including some of the top representatives from both the Ministry of Health, Labor and Welfare, MHLW, and the PMDA, which is kind of their version of the FDA's Center for Devices group. And these include reviews of our current application.

The latest of this was a couple weeks ago and I was there at that meeting. And from that meeting, the Ministry determined that we will be regulated as a device for this filing, and that's consistent with other regulatory agencies around the world, including the US and Europe.

They requested some data from us, particularly from RESTORE 2, which we have already provided in English the full transcript which is about 1,000-page report, and we are currently having the primary part of that translated for them to complete the application.

The bottom line is we anticipate that this application is on track for approval pending the full PMDA completion of the review of the -- which includes this RESTORE 2 translated data.

So we expect to pursue claims expansion in the future, then, based on this -- on additional clinical data, similar to what we're doing in Europe. So it's a very consistent strategy around the world, that you get this foundational device approval, then you build on it adding specific indications and claims based on the growing body of clinical work. (multiple speakers)

Before you get into the next part on radiation, what does the opportunity look like for you? I know you've been selling over there on a Class I, but how big is the opportunity if you can move this into a fully approved product?

I think there's a couple parts of that. The top line as everybody knows, Japan is probably -- almost in any case -- defined as the second largest medical market in the world. So I think the opportunity for regenerative medicine in Japan, particularly as an aging population, and as a place that we have found in the world that's the most receptive for cell therapy and regenerative medicine. They just seem to be very, very forward in their use and thinking regarding this new technology set.

So from this application point of view, what's important is I think we expect that this opens up the soft tissue market, and in parallel, improves the ability for centers in Japan to work with the Ministry in translational medicine. So these are things that are happening today by buying approved European devices and bringing them in under their doctors license, which is what they do, and then working with the Ministry for specific indications like -- I mean you have heard us talk about incontinence and radiation wounds and ARS failure and HIV [patient] wasting and a number of other things that are going on there -- liver, kidney. I think what this does is this gets the foundational tool approved that then, when they go to the Ministry, then it's quite simple that they can just focus on these clinical evaluations.

So I think it does two things. It opens up a current market for the soft tissue where we are -- we think that's a big market in Japan, but it also opens up the ability for these translational efforts that then can lead to additional approvals and indications. So for us, it's incredibly exciting as our second largest medical market, and we really feel like we're making great progress there.

Okay. And then on Nagasaki?

Brian, it's Marc Hedrick. I'll bump Chris out of the way and take this.

Not surprisingly, with the events at the Fukushima plant in the Sendai area, the workers that received radiation burns and our existing presence in the Japanese market, we're relatively well-known in kind of narrow-focused circles is some -- is a group that has technology that can heal radiation-related -- chronic radiation-related disease to medical-based radiation. So that position in the market has put us in a bigger position to be potentially a go-to source of potential therapy for these patients that have radiation-related burns acutely, but also potentially as a source for acute radiation sickness, which doesn't affect the skin and the soft tissue so much but really affects more the bowel, the bone marrow, and the central nervous system.

So, we've gotten inquiries, both from Japan as well as the US for, based on that position in the market, for proposals as to how we would see leveraging our technology for these more mass casualty situations. So, there's good data, clinical data, perhaps the best data in the world as far as we know in treating chronic radiation disease. And we think that's a nice commercial market, but also potentially has the opportunity in these very large mass casualty situations, there's strong preclinical data that suggests that the endothelial cell population that we get out of Celution could really be useful in the acute radiation sickness arena, which fits -- both of those fit very nicely with our existing technology.

And then, as you know, we have interests around the world in banking and we're putting banks out there slowly but steadily. But from a preparedness perspective, if you've got a group of individuals that are at high risk normally for radiation-related exposure, then it makes complete sense to bake these stem cells and endothelial cells for potential use in radiation situations that might develop as a result of their position in the company or job or so forth.

So, it's really too early to talk about how we might impact that commercially, although it's -- we've devoted a fair amount of time through meetings and potential solutions that we could bring to bear if these governmental and large corporate institutions want to move forward.

I know this is completely opinion on your part, but do you think that this whole issue over there and their idea of wanting to use these stem cells for help these radiation patients could help accelerate the process with MHLW?

Well, I think we -- we have a technology that clearly showed clinical utility, so I think there's an opportunity -- in fact, Chris alluded to it. In his discussions in the last two or three weeks with MHLW, this issue came up. They're interested, and it gives us a level of visibility and importance that, perhaps we didn't have a month or two ago.

John Putnam, Capstone Investments.

Yes, thanks very much. I thought that was a great rundown of the Japanese situation. I was wondering if you could maybe give us a little bit of color on the stem cell -- stem storage cell bank sale that you've made in Hong Kong; maybe perhaps how large it might be, what it might entail, and how long it might take and how the revenue would be recognized.

It's Marc Hedrick. So the customer is a company called Miaderm. They are the largest distributor of aesthetic-related products in the Hong Kong market and they're growing into mainland China.

This was a strategic account that we've been pursuing for sometime. We've made a decision internally, as you may or may not know, that we didn't want to be in the mainland Chinese market right now. However, we felt like the Hong Kong market was a perfect gateway to get a toe print in that part of the -- in part of mainland Asia, and then provide leverage for going forward in China. So that was part of the strategy.

Miaderm really stood out as being a world-class JD Power best practices Asian aesthetic company. They originally acquired a Celution System and they've been treating patients with that system. Based on their comfort level and success with the clinical therapies, they felt like wow, we could see a real roll in our 15 plus clinics, because they're not only a distributor there, an operator of clinics and they employ physicians who -- they and their aestheticians treat patients. We could really take the banking really to the next step and integrate that into their patient-related practices. So the idea was they would bring a cell and tissue bank into this beautiful Times Square, Hong Kong -- if you know Hong Kong, it's a really -- a very high-end part of the city; upper floors of a very tall building; three stories. They're building it out.

Part of that will be the bank, and they will use that in their group of clinics to store stem regenerative cells and tissue for therapeutic clinics, primarily, and then secondarily, can use that to bank and store tissue for other potential customers in Hong Kong. Hopefully that will be successful, and that will provide a potential entry into that mainland market.

With respect to booking revenue, it really depends on installation. And it's a good problem to have that you've got increasing interest in banking, which means we're trying to organize our internal installation banking group so that we can get these installed as quickly as we can, but I would be shocked if it's not either a Q2 or a Q3 event from a revenue recognition perspective.

Could it be several million dollars?

No, I think -- no, these banks are generally around $1 million plus or minus depending on certain exclusivities and other ancillary products, level of support, and so forth. So this will be right in the $1 million range.

Great. And do you see other opportunities in the near term for similar situations?

Yes, absolutely. The -- I think the radiation discussion is interesting from a banking perspective, and from a preparedness sort of perspective, and there's expressed interest in a bank just related to that.

We also have interest in the US. It's effectively -- think of this more like a pilot situation, but physicians who don't want to have a giant sourcing bank; they want to have a bank in their office so they can -- when they are doing cases in their surgery center, they have tissue that they would otherwise throw way they can just put right into their bank and not really bank cells, but bank that tissue which we have also pioneered.

And we have the first such bank here in the US that's really just a fat tissue only, a dumbed-down version of a stem cell bank. So I think that's an opportunity, potential growth area, leveraging the existing investment in banking, but it's really too early to tell if that's going to be a real market opportunity for us or not.

Okay, thanks. I wondered if you might bring us up-to-date on your joint venture with Olympus. Was that affected at all by the situation in Japan, or is that pretty much on track?

That's on track. There was an initial concern, but we heard very early on after the event from Olympus that their manufacturing plants related to our technology are not affected.

It's not going to slow down our timeline with respect to our Celution One launch, and that still is working its way through the regulatory process, and we think we are relatively close to hearing back and hearing approval on the Celution One. So no issues there.

Great. Thanks very much.

Steve Brozak, WBB Securities.

Listen, I -- this is kind of a high-class problem to have, but given the fact that you have got so many different collaborators and you've got so many different projects going, if you were to ever experience like that all of a sudden you [wreak] a moment where someone says here's the story and you were to be put under pressure in terms of requiring both the Celution Systems and the disposals, how would you react to something like that? What are the preparatory plans? Because you get proof of concept that is sterling in one area and you're going to have clinicians crawling for every other area. What are your -- what would be your expectations there?

Well, I think going back to the question before about radiation therapy, that's a different situation than what we are dealing with, with respect to selling a system, training a physician and then driving consumable utilization. That's a potential situation where you can get into stockpiling large numbers of systems around relatively large geographic areas near potential at-risk sites, as well as consumables; because in a preparedness mass casualty situation, you can't rely on normal manufacturing supply chain time frames. So, I think that's what you're getting at. Correct me if I'm wrong.

But that's -- so from a Eureka perspective, yes, I think we've always believed that there would be a potential role for real-time cell therapy in radiation and chemical burns. We have critical data to show that. We have a -- marry that with an example of a good thing nuclear power going wrong, and then now big companies TEPCO and government saying wow, we need to maybe forward place certain technologies that might be useful in another situation, perhaps from a preparedness perspective, but also from a therapeutic perspective.

So the idea would be that you would have that kind of quality control that would allow for you to -- if you were to be put in the breach, you would be able to address that challenge effectively?

Well, I think -- absolutely. If you look at the supply chains and the decisions we've made from a business perspective over time, getting a source of enzyme that's high-grade that's ready to scale, we've done that, check the box; putting a framework in place with Olympus and allowing Olympus that has a global manufacturing and scale ability to put systems and consumables in place quickly; and then having and making decision to put in place a global sales and marketing structure, which we have, really allows us to scale into these opportunities that might come our way.

I look forward to your being able to get that quote, unquote proof and then that follow-on, which it never works steady growth. It always works one of those situations where everybody wants it yesterday, so I look forward to being able to write about that. Congratulations, gentlemen. Thank you.

Richard Webby, [ProMan Management].

Changing gears here, wondering if you could discuss what's happening with the US -- the 510(k) strategy, what your thinking is, how the progress is coming along and how Tommy Thompson may help with this process.

Hi, Richard. It's Chris. Yes, you bring up some good points. Certainly adding Tommy to the board, he brings a tremendous amount of relationships and experience in Washington that I think can be very helpful for us. But, on a stand-alone basis, I think that we -- as we mentioned about six weeks ago on our last call, have really spent a lot of time looking at the regulations, looking at the predicates and looking at the claims that we're trying to achieve here. And they really line up very, very well.

And so the strategy we put in place we are now executing on, so since the last call, we have -- as highlighted in the letter, we have now submitted a number of 510(k)s, so not just one, but there's a whole bunch of those in. There's some more that will go in, in the future.

There are a couple other different things in the works as well. Some more near-term, some a little bit further out. So on the nearer-term side, we're looking at this humanitarian device exemption opportunity, and that's in process, and we will let you know updates as that moves through the channel.

In addition, a little bit longer term, we're working on bringing our cardiac program into the US, and so that entails really pre-meetings with FDA about planning the IDE and what's to be included in that and the scale and the scope and so forth. And we are in the planning stages of that right now, but hope to have some meetings with FDA either this quarter or early next order to keep that moving along with an eye to kind of getting that trial up and running sometime in 2012 based on progress with the FDA and our balance sheet allowing us to do it.

And so I think that what you are seeing is increasing confidence based on a lot of additional knowledge, some new relationships, and a significant portfolio of shots on goal if you will. And we're executing all these things in parallel.

So I think, you know, you hopefully -- we really start to see some traction there and you've now see us move up in our milestones, 510(k) clearances to this year. So I think we're feeling good about it. There's no guarantee obviously in these things, but based on our understanding of the regulations and where we are and what we're trying to do and the people we are talking to, we think it's absolutely achievable.

And just one quick follow-up, with your plans for the chronic ischemia, should we expect that to look like the precise trial in terms of general overall design, general endpoints? I know you're still in discussion, but what should we be looking for in general?

Yes, I think that's exactly right. I mean, I think as a little bit bigger trial, this won't be a pivotal trial. This will kind of be an intermediate trial that leads to a pivotal trial which would be the defining approval trial. But in that trial, we would look for more towards efficacy and powering for the pivotal trial. As you know from our PRECISE, we obviously saw that in PRECISE. So we're very clear, statistically significant functional measures that came out of that, which are approval in the US. So the idea is to increase the numbers a little bit and then use that as a metric to go into a broader approval trial in the US.

But yes, I think the design of PRECISE turned out to be very good; the dose was good. The timing of evaluation and the metrics we looked at were appropriate and clinically relevant. We would add in some economic components to this, but I think that beyond the economic piece, I think the trials will look very, very similar.

Brian Gagnon.

Hi, guys; a couple more questions. Can you talk about India? You made some comments in your prepared remarks about growing in India and we have been reading a bunch of stuff in the papers about what's going on there. What type of cases are you doing and what's the opportunity? And then I had more questions.

Great, thanks, Brian. Yes, that was kind of subtly slipped in there.

So I can tell you India has kind of received some press early during the quarter really based on some of the activities that have been going on there. So we've been talking about the work we're doing in India over the past six or nine months, and we really saw some huge traction during the quarter. So there were a number of evaluation cases done at five different sites in four of the leading institutions, so these include the two largest hospital chains, both Apollo and Fortis that you've heard us talk about on this call. Medanta, which is one of the top private hospitals and also Phoenix; it's another private hospital. So we're working with a variety of groups there, really the top groups in India.

And we're doing evaluation cases at each of these. And then based on a near-term follow-up of likely six months-ish, those will move to hopefully revenues and customers. And the kind of cases we're doing there, it's kind of been a whole portfolio of things so it hasn't really focused on a single thing. Marc has talked about the radiation wounds. We've actually treated radiation wounds in India.

We have treated a gunshot reconstruction, a patient that as a child had a car accident and went through the windscreen and had some facial trauma that now 20 years later is having corrected now that this technology is available for that.

Other things like facial rejuvenation, facial fillers, breast augmentation -- really the kind of things we're doing around the world, we're doing in India.

The most important one though I think that in talking about our US regulatory strategy that I mentioned, we have talked about this HDE opportunity for a rare congenital exemption, and that's really around this Romberg's condition, which is a wasting condition of half the tissues of the face, and we've actually treated Rombergs patients in India. Others have been treated around the world successfully, so we think it's a -- this is a very, very appropriate space and reasonable target. And it's why we have kind of picked it as one of our US pillars.

So, just in summary, India really represents one of the fastest-growing medical markets. There's a huge population there and very sophisticated technology and service providers and hospital groups. So we are cautiously optimistic, but we've got a lot of traction going there. And I think we're going to really see measurable revenue in India this year.

How many cases have been done there so far?

I don't know exact number, but I think it's around a dozen.

Right. Actually I met with [Yoshimura] this morning, just as an aside note. He's done I guess almost 600 cases. And he mirrored your comments about March and April that things were picking back up, which is nice to hear.

Also, can you talk a little bit about the new EVP of Marketing that you just tired? Where did he come from? What are you going to have him do?

Hi, Brian. It's Marc Hedrick. So, we really have some talented on the ground regional sales folks in Europe, here in the US, in Japan. And we have someone here that's responsible for the emerging markets in India and so forth.

But the big missing component to our commercialization team has been in the marketing area. We have a young, relatively small lean marketing group, but we recognize the need that really to do scale into the opportunity that we know this can be, we need solid, experienced, steady leadership on the marketing side that can also overlap into sales as well, that has experience carrying a bag and leading sales individuals in therapeutics. So, you don't find that person in Starbucks.

We've been looking for about nine months for the right person. We have recruiters come through, 1,000 applications and so forth. We kind of narrowed it down to a few individuals and at the end we picked a gentleman named Clyde Shores, who is the current Global VP of Marketing at Baxter.

However, while running $2 billion in sales right now in his marketing group at Baxter, if you look back at his career, he's actually very entrepreneurial. He has succeeded in high-growth environments. He's launched transformational products. He was at Amgen for nine years and was one of their first, if not their first expatriate employees who's got European experience having lived there. But he -- culturally he's a beautiful fit for the company, and he's been in high-growth, high revenue growth, challenging, dynamic, global environments, and he brings that expertise into Cytori and he starts in the next couple of weeks.

So we think waiting was the right thing to do. It would have been great to have this filled nine months ago, but we really felt like we wanted to really measure twice, cut once on this. And we could not be more happy to have this position filled and filled with the absolute right guy for the nature of this opportunity.

Good. I look forward to meeting him. On your chronic ischemia comments in Europe, what are you doing to prepare for approval there?

So Brian, you know it's a multifaceted exercise, and so there's activities going on. I've been spending quite a bit of time over in Europe, as have Marc, within our team over there really looking at the market, identifying which countries to really focus on and I think focus will be the key word. This won't be kind of a shotgun approach. We're going to pick the right countries to launch this in and really get successful in those countries before we expand it. So we're evaluating specific markets.

We're evaluating the -- all the way down to the center level which markets we want to target. We're looking at reimbursement in these markets. And as Marc I think alluded to earlier, reimbursement can take some time up to a couple years to get really bona fide coding and real reimbursement, but there are reimbursements along the way.

There are health technology assessment scores. And each country has different interim new technology funding channels that you can get access to, so we're preparing a lot of that stuff; understanding the one in Germany compared to how you do in France or the UK or Italy. And so are working on that.

We're working on aligning the centers that are going to be the core centers for the ADVANCE trial with opportunities for chronic ischemia marketing within these countries. So, some of the key centers for the ADVANCE trial will also become hopefully customers and active users in the chronic ischemia category as luminary centers and luminary leaders.

Cell delivery is a big part of this; which kind of catheter do we use and how do we deliver cells cost effectively and safely and therapeutically effectively, and we are evaluating a variety of catheter choices right now, and how that might play into all of this.

So, as I said, there's really a lot of different things, channel and how we're going to structure sales force training. There are three parts to our training program, and Marc is going to talk a little bit later probably about some of the training activities we are doing now. But when you think about cardiac, there are three parts of training. We need to train on how you deliver cells safely into the heart in this case; how you safely do liposuction to these anti-coagulated patients or patients on blood thinners; and how you safely operate the device and -- for the case of cardiac and how we train for that.

So there's a number of different activities that we are very, very actively working on so that when this is ready to go, we have the claims. We will still have somewhat limited data and we still won't have reimbursement, but we're looking at how we accelerate to [bolusing] our data and quickly getting to some source of funding for the interim while we're really driving towards -- the inflection point comes here when you get the reimbursement. And so accelerating that time to getting those reimbursement codes is the key, and so we're putting all the pieces in place.

Good. Look forward to it. Thanks.

James Anderson, Lantern Hill Capital.

Just to follow up because my main question was about European marketing for CHF. Do you have to recruit a completely new sales force to address that versus the soft tissue? And will that be a decision made farther down the road when you're close to approval or even post approval? And, or maybe reimbursement. Could you just sort of follow on a little there?

Yes; and I think you're kind of touching on an important topic, and what's -- there's a lot of implications to that, and I think a big part of that is how the budget looks. But, in the short term, I think that you can work with some of the team that we have.

We have some guys who are very sophisticated in selling devices. We have previous cardiac guys working for us like John Ferris in the UK, so we've got some talent that could really cross over.

A question of de-focusing and losing traction in one as we kind of shift over would be an obvious question. I think ultimately though, what you are alluding to, I think, is that you really have separate channel teams that are really focused on the Cath Lab or on the operating room or on the clinic, and I absolutely see that's the way this goes to be successful. I think when you look at any of the big companies that have multi-product product lines that they have specific channels into those product lines.

And, so yes, I think absolutely the ideal way to do this is to have a focused, channel-specific team that really drives the cardiac market as an independent opportunity. But it may not happen day one.

Okay, thank you.

Caroline Corner, McNicoll, Lewis & Vlak.

Thanks for the update. Just going back to the cardiac trial and your communications there with the FDA, I realize they are pretty early on, but are you pretty confident that this is going to be a 510(k) path versus a PMA path? And also, is there any chance this would go to a panel or anything like that?

So let me reframe for the cardiac trial that we are going to pursue or we are actively working on right now, the pre-meeting with FDA, we're not going to try and submit this as a 510(k) heavyweight. We're actually going to go directly for a IDE trial that then leads to a pivotal IDE trial which will ultimately go I think to a panel. So, yes, this is not a -- I don't think cardiac in this case is a 510(k)-able event. (multiple speakers)

Okay.

The overall strategy, though, and this is -- you could really look at this as a global strategy, and maybe kind of going back into what we did in Europe and how that's rolled out and now what we're doing in Japan and how that's kind of rolling out right now.

Originally, we received a CE Mark on the device as a tool in Europe. So we had this very broad tool claim. It effectively said you can roll this thing and you can take fat from a patient, run the tissue through this tool and then get the patient's own cells back out that are quote, unquote minimally manipulated that you could put right back into the patient, either infuse back in so meaning into their bloodstream or you could put back into tissue. So it was a very, very broad claim but it wasn't therapeutic. It was a total claim, a la, bone mill processor or a plate leverage plasma processor. There's lots of predicates for tool claims.

And then, we've done some clinical work; for example RESTORE 2 that has been led to a claims expansion. So we go back to these regulatory agency in the case of Europe it's our notified body, and said okay, here's some additional clinical data. We would now like to add therapeutic claims to the device claims for this indication and here's the data that supports that.

And so they added last summer these claims around breast reconstruction, breast augmentation, soft tissue applications, certain kinds of wounds this fistula where we had data, and that's a trend that we will follow.

So now in Europe, we're going back to the European notified body with our data from our PRECISE trial and saying okay, here is really good clinical data that showed significant functional improvement and mortality benefit. We would now like to add claims for cardiac ischemia as the next step in expanding our claims.

So in the US, we're talking about a similar pathway. The 510(k)s that we're submitting now or that are in and that are coming really relate to device and device-oriented claims. So these are more general tool-oriented type of things. And I'm not going to get into specifics on exactly what they are, but that category kind of gives you the idea of what we're going to get.

And that's (technical difficulty) for any hospital in the US will be comfortable to bring it in, but we can't specifically market it for let's say some cardiac application or even let's say breast reconstruction. The tool will be approved, and then what we need to do is go back to FDA and work specifically to expand those claims for specific, more narrow, targeted indications, which really we need to get in the market anyway, so claims don't really give you market access.

You need not only the claims, but you need the data that's going to give you the driver into the market and ultimately reimbursement that's going to be the driver for utility and usage.

So that's how we are doing it and it's also how we're doing it in Japan. So this application I talked about earlier is effectively the tool claim. We're also presenting the RESTORE 2 data, so it's likely we could get some RESTORE claims around that or breast claims around that. And then we will go back and we will work to add cardiac and wound and radiation and other things based on data and market targeting and so forth.

Okay, thanks. That makes since. Yes, it does. Thanks for taking my call.

You're welcome

We appear to have no further questions. Mr. Calhoun, I'll turn things back to you for closing remarks.

Okay. Thank you very much. And we would like to really thank you all for your time today and your continued support of Cytori as we lead the market in bringing regenerative medicine products to patients around the world. Thank you very much.

That concludes today's conference. Thank you all for joining us.