Plus Therapeutics Inc (PSTV) 2011 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to today's Cytori Therapeutics second quarter conference. Today's call is being recorded.

Before we begin we want to advise you that over the course of this 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 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.

I will now turn the call over to Chris Calhoun, CEO. Please go ahead.

Great. Thank you, and good afternoon. We're working to optimize the balance of the incredible technology and the opportunity we have with our current resources. We're building the foundation of the business for the long term, with strategic investments into core clinical trials, regulatory processes and reimbursement and target markets.

In parallel we're continuing to grow our customer base with approximately 4,000 patients treated worldwide, far exceeding any peer company. We're focused on improving efficiency and on reducing costs. Our new Executive Vice President of Sales and Marketing, Clyde Shores, has initiated a franchise team structure that will create better alignment within the Company and improve efficiency.

We've been actively restructuring our sales organizations in the US, as well as in Europe with important changes that will have a positive impact on both our costs and our activities. A major theme is focus, which extends to both development and research as well.

There are many near-term value drivers that our team is working to achieve every day. We strongly believe that we're making progress and are well-positioned as a leader in the emerging cell therapy field.

As the details of our quarterly update are provided in the press release and shareholders letter available on our website, we'd like to move directly into the Q&A. I'm joined today with Dr. Marc Hedrick, our President, Mark Saad, our CFO and Clyde Shores, our new Executive VP of Sales and Marketing.

Anthony, we're ready to turn over the questions.

Great. (Operator Instructions). We'll take our first question from Steve Brozak with WBB Securities.

Hey, congratulations, gents. I'm going to go right to the point because I really want to know one item here in the pathway for cardiac, because that's really what a lot of people are going to be looking at and care about. Can you give as much -- and I hate to use the word, but it's appropriate -- granularity on that side? I'll have one follow-up question after that.

Hi, Steve, it's Marc Hedrick. Let me start in the U.S. with our progress with the FDA, which is where we have probably the most recent update.

Recall the indication will be no-option chronic ischemic heart disease. That's going to be a PMA path through the FDA. I would describe the process thus far as very positive with the agency. Pre-IDE is done. We think we're on track for study approval late '11, early 2012. In the background we're talking to potential sides informally and doing resource planning.

So important feedback from that is, I think number one, we're not a BLA. It's an IDE, it's a device, as we've always said, so it's good to have that level of confirmation. The second thing, generally speaking, we seem to be in alignment with the agency on the nature of the trial and see no meaningful barriers there. So that's all good news from our perspective.

If you switch gears and then go to Europe and look at cardiac from the perspective of chronic ischemic heart disease and acute myocardial infarction, where we recently reported long-term, sustained benefit that's statistically significant in both indications, on the AMI side we're in advance, which is our multi-center pivotal European trial for acute heart attack, and we're on track in terms of completing enrollment in 2013.

Then from a chronic ischemic perspective, that PRECISE trial has been done and we're now in a position to seek regulatory approval in Europe. That process is going behind the scenes. I think as we said last call we've had the Notified Body out and we're going back and forth with them, and we're on track to hear back from them in late this year, early next year.

Okay. On the other side, and frankly, given the fact that obviously we've got increased visibility on all different kinds of stem cell issues, what kind of general feedback can you give us from the clinicians that you're working with in terms of understanding and expanding the interest in your systems? Can you give us the general tenor of what you're seeing on the market side?

Because obviously it's a force multiplier, and I want to know what you're seeing so that we can start to get an idea of potentially other applications that you would look at into the future.

Well, it's a great question and it probably wasn't as reflected and highlighted as it should be in the letter, but let me be crystal clear. The feedback from physicians from the perspective of safety and efficacy is uniform. So if you look at the number of cases treated, we're probably up in the neighbor of 4,000 or so. If you look at the sustained benefit from the cardiac side, both studies -- physicians see that, they go to meetings and hear about it.

You look at the expansion of systems and the number of cases that are being used to treat breast reconstruction, and then you look at -- really we're piecing together multiple investigator-initiated studies and/or cases in chronic wound-healing, the overall effect is in our core focus areas of cardiac and soft tissue repair. The feedback from the physicians is -- not, universally is too strong, but strongly positive in terms of the efficacy and the benefit that it's seeing in patients.

Thank you. We'll move on to the next question, which comes from Les Schultz with Schultz Capital Management.

Hi. In the statement that you put out you talked about the reimbursement. Could you discuss a little bit about the European reimbursement and where you stand on that?

Les, from a reimbursement perspective in Europe we're focused on the G5. Those are the biggest markets and where we've got the most traction. You can really divide the EU reimbursement into UK, France and Germany, which have a DRG-based system, and Spain and Italy, which are more tender-based. I really focus on the UK and to a lesser degree France and Germany, because that's where there's a really transparent process to getting reimbursement.

We're farthest along in the UK, and the process there is three distinct areas. Number one is you get regulatory claims, which we've gotten some bit of time ago, so that's done. Number two, we've got our clinical trial completed and reported, 12-month data, and the paper for that is finalized and being submitted to journal, and we're presenting the data in Europe for the first time at a breast cancer reconstruction meeting this fall. So the data is done and will be reported very soon.

The last part is a series of steps geared towards economic analysis, cost-effectiveness and getting into the clinical guidelines, and we're -- I would say the most recent achievement is discussed in the letter, so we've completed the formal economic analysis and we've got a strong statement about cost effectiveness from the National Innovation Center, which is a group within the UK government.

Next steps are really geared towards getting that DRG, or in UK vernacular, OPCS code, and the soonest we could submit for that is February of next year. We're on track for that. That'll take probably more than a year to two years to get the DRG. So we're farthest along there, but we're on track. I'd say we're about 80% of the way through the process.

The second is France and Germany, and there we've got a base of users. In France it's more geared towards wound healing, because there's a moratorium on putting fat in the breast right now, and in Germany it's really geared more towards breast reconstruction. But those processes are really geared towards getting innovation or bridge payments from the government to fund individual studies, and we're on track with getting both of those done and submitted in the next year.

It's an ongoing process, and those will ultimately lead to specific DRGs based on the nature of the clinical work that's done there. So all good news to report, and we're making a lot of progress. A lot of this is behind the scenes, blocking and tackling, but we really feel like we're moving towards what really will open up the market and provide us pretty broad-based market access in the G5.

Thanks, Marc, that's great. Would you also give us an update on what's going on in Japan as to basically how the business is coming and what's going on behind the scenes as far as any new initiatives that you might be working on there?

Well, let me address the status of the market from the perspective of the most important factor a quarter ago, which was the tsunami. On the surface, everything looks relatively normal.

There's still some power issues that have slowed things down. There's still a macroeconomic effect on the country that aren't as evident but we see in our consumable numbers and so forth. We'd say we're probably 75% back to normal, and improvements continue to happen on a monthly basis and we see that.

Our focus in Japan right now is really gaining full market access, which we achieve through regulatory approval. Even though we have sales, we have systems, we have consumable utilization, our goal is to get regulatory approval for the solution system and PureGraft approval so we can formally launch those products without the limitations of marketing created by not having full approval. So that's our main objective there when you look at the market in general.

As a secondary goal, recently the MHLW, the main regulatory body, has limited new investigator-initiated studies, which has put a little bit of a damper on our consumer utilization and provided a process for doctors to get registration of those sites. The good news is that those sites are coming online most recently in Nagoya, where we have a urology study, Osaka, where we have a Crohn's disease study, and there's several others behind that.

So we see strong signs that the MHLW is opening up the stem cell guidelines and providing approvals for these individual investigator-initiated studies. Why those are important, not in the near term but in the long term, is those provide the basis for getting regulatory approval, reimbursement and full market access in the future.

Okay, thanks, Marc. I'll jump off and get back in line.

We'll take our next question from Jason Napodano with Zacks Investment Research.

Hi, guys, thanks for taking the questions. When you talk about tool claims in your 510k application in the U.S., can you just kind of explain to me exactly what you're looking to get there in terms of those claims? I assume that's separate from specific indication?

Yes, Jason, that's distinct from the cardiovascular PMA. So the way we think about it is that for high-risk applications -- we'd say injecting cells into the heart is a high-risk application, of course -- it makes perfect sense that PMA is the right regulatory strategy for that, and that's why we're pursuing that and I filled you in on that just a few minutes ago.

For low-risk applications, for soft tissue disease, this is more like a transplantation application. We're absolutely convinced there's a viable 510k pathway for that. The nature of the claims that result from that are what we describe as tool claims, much like what we received in Europe when we first got approval, that you could use the cells back into the same patient, but without the clinical data to support the individual claim about that particular indication.

So as we alluded to on the last call, we've filed multiple 510k's, but don't think about them as a specific, individual 510k; it was a strategic group of 510k's that was geared towards providing those tool claims.

Now, we know while we're there we believe the regulations support 510k and we think the safety profile and the technology supports it and so forth. Those 510k's are really geared to help persuade the FDA that they should provide this low-risk pathway or 510k pathway for the technology.

So that's a dialogue that's going back and forth and we're very well engaged with them. We think we know what the core issues are and as we sort through that we think we'll move that process forward to -- hopefully it goes in our favor and provides market access for the low-risk technology through the 510k pathway, with tool claims.

When do you think you'll first hear back on the -- you said you filed multiple applications, so when do you think you'll hear back on the first ones?

Well, we're hearing back now, and I think we're learning an awful lot very quickly as a part of that dialogue and those correspondences. It's been our practice not to talk about individual discussions back and forth but try to characterize them generally, and then as the administrative action is closed out, then we'll report that and that's our plan here.

Okay. Thank you.

(Operator Instructions). We'll take a follow-up from Les Schultz with Schultz Capital Management.

Is Clyde there, Marc?

Yes, Clyde's here, Les.

Could he give us a little color on what he's done in the marketing area and so forth?

Absolutely. Let's introduce Clyde Shores, who's our new Executive Vice President of Marketing and Sales. Clyde?

Hi, Les.

Hi.

Yes, thank you. So in the past couple of months I've focused on traveling to the different markets and meeting the individuals in the organization, meeting physicians and learning more about our technology and how it's being used in each of those marketplaces.

Internally, as Chris mentioned, we've focused on what we call a franchise process where we'll work with the cross-functional teams to plan and execute our operations to support the commercial rollout of our targeted indications and therapies.

Then as was mentioned, we are focusing on efficiencies in our sales and marketing organization so that we can position ourselves well for the future and continue to establish the important market access initiatives that we've already got under way in Europe and in Japan and in the United States. And at the same time focus on bringing in revenues in a more profitable fashion.

Okay, good. Thank you very much.

We'll take our next question from John Putnam with Capstone Investments.

Thanks very much and good afternoon. I wondered if you could give us an update on your activities in cell banking, where you kind of see that going.

Sure. The cell banking is an important long-term opportunity. We think that supporting the clinical use of cell therapy technology as the water level of the business grows is an innovative new medical treatment platform, banking will be an important part of that. Our role has been not so much to be a banking company but be able to provide access to physicians and hospitals so they can provide banking services either as a standalone or in conjunction with the clinical therapies they're offering using our technology.

So what we're primarily doing is, although we're generating sales in a more opportunistic fashion in banking, we're also developing the commercial models that I think one day will really allow this business to grow. So if you look at geographically where the banks are going, it's really global. So you've got a bank going into Hong Kong, I've got multiple banks in Japan, US now and Europe. We're seeing innovative commercial enterprises and physicians who are bringing the technology in and working with it in their own healthcare system to solve problems that they see as either opportunities or commercial avenues or so forth.

So our plan really -- and it's growing, but growing slowly -- is to continue to invest in our current banks, prove out those business models, show that they're viable not only for us but for those commercial partners that acquire the technology, and then as we get to a point where we have a leverageable business model with the bank, then to roll that out more broadly, region by region or on a more global basis. And the infrastructure is there, the models are in development. We're working with the partners. Right now, they represent important high-margin commercial opportunities for us.

More specifically, how large is the potential here for a cell bank?

Well, I think a couple different ways of looking at it. From the perspective of a healthcare delivery system like a centralized hospital with satellite clinics, we think that there should be a bank in that centralized hospital that rolls up from those different feeder, smaller hospitals. That's not just in the US but that's in Europe and that's in Japan, and the most recent bank, sold to the largest hospital group in Japan, is exactly that way. It's the central hospital that rolls up from feeder hospitals in that area.

In addition, we think there's also the opportunity for smaller, maybe more tissue- or individual practice-based banks, so physicians who want to offer banking services to their patients can affordably bring that technology in and turn around and sell those services back to patients from a cash-pay perspective.

So then you're talking about really any physician who wants to sell banking services within their practice could acquire the technology. So there's kind of the big, industrial banking model going to hospitals that require a lot of services and so forth that are associated with it, and then on a much smaller scale the individual physician with a small footprint who provides that to their individual customers. So it really runs the gamut of the entire healthcare system, potentially.

Great, thanks a lot.

We'll take our next question from Caroline Corner with McNicoll, Lewis and Vlak.

Hi, guys. Thanks for all of the updates. Just a quick one from me. Regarding the Athena trial, you said in the shareholders letter that you're expecting the proposed trial to be similar to the PRECISE trial in Europe. Just trying to gauge the expected news flow coming out of that trial. I'm assuming it will likely be 18-month follow-up, and I was wondering will there also be six-month primary outcomes that will be released associated with that trial.

Let me answer that based on where we are in the process. So I think the next steps for us in that trial are to follow on in a positive dialogue with FDA, a pre-IDE meeting and so forth with an IDE filing that gets us approval as quickly as we can. And then based on the final agreements around the IDE we'll be able to provide the level of detail and color that you're asking. I don't have that now.

I think the color I can provide, based on the initial discussions with FDA and the ongoing dialogue, and then leveraging what we know about the technology from our European cardiovascular trials, is we are a device, therefore it's a pilot, pivotal trial format -- we're talking about the pilot trial now -- it's likely to be less expensive on a per-patient basis than our EU trials because we learn what's important and what's not important in terms of following up these patients.

Probably 50 patients or less, including the number of patients needed to power a pivotal trial. It's likely going to be in the $4 million range for something like that, on the high side in terms of case numbers, probably less if we're on the low side.

Then the actual trial design follow-up is yet to be worked out, but it's likely in the US that -- unlike the Europe we'll have at least the 12-month follow-up time point, so I think the FDA is going to want to see that. But that's subject to final negotiation with the FDA.

Okay, very good. Thanks for that detail. Just another quick one -- you mentioned your progress in Europe with regard to getting the reimbursements. If I recall correctly, you had some investigator-sponsored work being done for the repair of radiation burns. Is that kind of thing still ongoing or is that included under what you're calling fistulous wounds?

Yes, when we -- wound healing is a grab-bag of things, and I think it's very important to say we're not interested in being a wound-healing company or a dressing company. I think we're talking about the treatment of wounds that have no good option right now other than in the case of damaged, radiated limbs or wounded limbs, amputation or large surgical flap procedures that could run $20,000 or $30,000 in prolonged hospital stays. So that's what we think we're competing with.

The indications -- there are really microvascular wounds, such as those with diabetic or diabetic wounds that are more end-stage. Radiation is a disease of the microvasculature, so it's an ischemic wound. We have data, mostly from Japan now, at Nagasaki, from the investigator-initiated study that's continuing to be ongoing, enrolling patients there, that it works. That's been reported and published.

Then subsequent data probably adding up in total to maybe 100 patients or so worldwide in the microvascular area, showing that this is successful. So the idea then is now translate that investigator-initiated study to real-world, commercial opportunity. That probably happens first in France, as the interest in France now is really geared towards chronic, non-healing wounds because of the moratorium on fat injections into the breast. That would be a study that wouldn't be funded by us but would be funded by the government and run by the investigators, which we would play an important part of but would help not only support the indication on a global basis but provide specific funding and reimbursement in the French market.

Okay. Thank you very much for taking my call.

Our next question comes from Jason Napodano with Jacks Investment Research.

Hey, guys, thanks for taking the follow-up. Let me ask a big picture question. In terms of the business, it looks like costs are going up. I understand you guys are spending a lot of time and effort and money to gain reimbursement and initiate these trials in Europe, the cardiac trials in Europe, and finding a path forward in the US.

But what gets the business to that break-even standpoint and then even profitability? What's the big thing? Is it reimbursement in Europe? Is that a huge step forward? Is it the outcome of the cardiac studies, is it getting approval in the US.? What's the thing here that really makes the business turn the corner?

Hey, Jason, it's Mark Saad. That's a pretty important question, pretty wide-reaching, too. I'll try to come at it as directly as I can, and please hit me with a follow-up if you want to hone in on something.

You opened that up with expenses are going up, so let's first take that on. When I look at the numbers, given how much on the P&L is in the non-cash area, and cash is king for us, so if you really focus more on the cash flow statement and the net cash use and operating activities, you can see that that is higher in the last two quarters in contrast with really the previous four or six, and there's some important reasons for that.

We've really had a full court press in large part on the regulatory side, and there's a whole lot of expenses around that, from legal, consulting, in terms of both getting approvals in the US., expanded approvals in EU, trying to get Canada, Japan, Australia -- key large market potential approvals.

At the same time, in markets where we have approvals, getting reimbursement like the EU, and for that there's a lot of costs around that. So there has been a full court press recently to do exactly what I think you're asking for at the tail end of your question, of what's going to be the thing that does it.

I think there's a variety of things. I think there are several parallel areas that we think are the thing, and within reason we're trying to go after knowing that you can't predict the timing and the who, the what and the when and the how much on each one. We think that there are several in play, any one of which can be that thing.

I'll give you a couple of examples of what those could be. But before getting there, just on the expense side, despite the fact that you've had this full-court press, there's also been some situational expenses in the first half of the year that I would classify as non-recurring that represent a couple of million dollars, and when you get into what's cash, moving forward, where are we going, we've been emphasizing some efficiencies that I believe will get us back to that more historical range, which was more in the $5 million to $7 million level quarterly of net cash use and operating activities.

How quickly we get there, we were able to improve by about $1.6 million from Q1 to Q2. I think you're going to see that improvement continue into Q3 and Q4. So those are going to happen, in my view, number one. A lot of that is because a lot of that investment we've made and that real push I think has been made and we're now at a different phase of that investment.

Then what's going to be the thing that changes that, well, you've got a lot of different approvals that are in play that can open up meaningful markets, whether it be getting approval in Canada, whether it be getting a real medical approval in Japan, which today we're getting 60% plus of our revenues from the extreme fringes of the Japan market.

We're not able to really address the meat of the medical market of Japan, and that could be available to us when we get a breakthrough there, so that's in play. Any one of those things could have a big jump and be the thing.

On the reimbursement side, if you just look at the existing approval we have in Europe for breast reconstruction, the existing data that we have -- so not asking for any more approval, not asking for any more data, but doing the blocking and the tackling that Marc talked about to get to reimbursement, and if you were to just look at UK, you've got enough patients there that if you bring the full package, which includes the coverage, we can be profitable in the UK alone with products that have no -- that are addressing uncertain markets.

So that there are a multitude of avenues that I think are in our grasp that range from something as straightforward, using existing approvals, existing data, to drive a UK market, that will be an important beachhead for the G5. And there's other areas as well that will grow from there.

That could be a sustainable company, and then there's things that create the big opportunities. Now, is that a Japan approval, a Canada approval, a partnership of which there are a multitude in process. So there's a whole number of things that are in that grasp that we think we're positioned to get, and the investments that we made have picked up, and we think for good reason, and on the back half of this year I think you're going to see those numbers come down so that the resources we have today, before any future offering, we think can get us to some definable events.

Thanks, Mark, that's helpful.

No problem.

Our next question comes from Ren Benjamin with Rodman.

Hi, good afternoon, guys, and thanks for taking the questions. I apologize if this has already been answered, I jumped on the call a little bit late. But could you just give us a sense as to what's happening with your various strategic collaborations that you currently have in place?

Hey, Ren, it's Chris Calhoun. I hope you're doing well.

Hey, good.

I'll keep this pretty high-level, because I don't think we're at a point to really get down into any specifics as of right now. But just for magnitude of effort, we have 10 different individual groups that we're working with. Some are multinational, some are government, some are more focused companies. Within those 10 different ongoing negotiations there are six specific therapeutic areas that we're talking to people about.

So I think it reflects on the platform nature of the technology, and the building amount of -- not only practicality of the technology but the data that we have, that it's working in all these different indications, and we've got this growing body of evidence out there.

So I think that there's an increasing amount of interest and visibility and certainly our goal to get something done as soon as possible, and we've got a number of things that we think are moving toward that goal and they kind of range from very large indications.

Probably one of the more visible things that we can talk about is the equity deal that we did with Astellas toward the end of last year, and they had put a marker on the table in an interest in the liver indication and that's moving forward. So there are specific indications like that in a number of different areas and a number of companies that we're making a lot of progress with. Really, our goal is to get at least one of these over the finish line by the end of the year, and we're working hard to do that.

Is there any other way to measure the progress, Chris, by data presentations that may be coming up in the second half of this year that might help us gauge how things are moving, or should we just be expecting, at least from several of these options, that one will take the option to move forward?

I think generally it's kind of under the hood stuff, so you probably don't have a lot of visibility into it, but I would say that some of the data that has become available, and particularly some of the long-term cardiac data. Being that the data was so positive and comprehensive that that helps to support these partnership. If the data wasn't very good, I think it's harder to get a deal done.

But because you're seeing really dramatic, long-term, sustained improvement and very consistent results when you look from the pre-clinical to even within the clinical data itself and all the markers and the endpoints that we looked at, those help support the kinds of partnerships that we're looking to achieve. So I think from that level, you can kind of get a sense of what's going on.

Okay. Just one final question, and you probably addressed it in your prepared remarks. The US regulatory path -- and I think in your shareholders letter you mention that there are three parallel paths -- can we go into a little bit of detail as to which is the most preferred path? Based on your discussions, which path does the regulatory body seem to be leaning towards? How should we be viewing this, and how fast do you think you can get there?

Hi, Ren, it's Marc Hedrick. I went through this in a fair amount of detail right at the beginning of the call, but let me take a step back, because you're really asking about the three paths and which is preferable and so forth.

It really depends. As discussed, we had a productive discussion with the FDA about chronic ischemic heart disease. We're all in agreement that we're regulated as a device, not a biologic or a drug. We're in agreement about the PMA path and a pilot pivotal approach to that, not three phases. We think that there's no meaningful barriers, and therefore we're really aligned in terms of where that goes forward. We're on the time frame of kind of late '11, early 2012, to get approval for what we think would be the pilot part of that study.

So that's the preferable route for cardiac. We're all in agreement, and that's going well. Where we think also that, besides the high-risk applications like cardiac, for lower-risk things like soft tissue repair and for physicians using the technology in the practice of medicine, there should be a corresponding low-risk pathway. We think, as we look at the overall regulatory landscape, the best pathway forward, and we're convinced it's the right pathway, is the 510k pathway.

Now, the FDA has not agreed with that in terms of our first filing, and so as you know we kind of stepped back, recalibrated that with our consultants, with our attorneys, with our regulatory group internally, and we believe that that's a viable pathway. So we think that's the preferred pathway for some of these lower-risk indications and we've alluded to those in our letter as tools claims. So not for a specific indication, necessarily, but for more general use of the technology.

So that's moving forward. Think about those 510k's as a group. They're strategic, and they're creating a lot of opportunity for dialogue and negotiation with the FDA with the goal that at the end of the day we have a risk-adjusted pathway for the system that doesn't necessarily mean you always come back with a PMA.

Okay. I'm thinking about the 510k process and the fact that it's a group of applications that have been submitted. How should I be thinking about the timing of -- when you might hear something back?

Well, I think we are hearing things back and we are responding, and there's an active dialogue on all of those files. But I think the way to think about them is as a group, not 510k to 510k, but as a comprehensive strategy to get to a point where we and the FDA are in alignment about a kind of low-risk pathway.

So timing on that is -- it doesn't really allow itself to say well, there's a typical 90-day turnaround and then we hear, and so forth. That's going to be something that's going to play itself out likely over the remainder of the year.

However, any time in that interim we could hear some good news or we could get to a file or a group of files that are administratively closed out, where we would say that we were unable to get to agreement and we're stuck. So I think that we're talking about one, two, three quarters, not one, two, three years.

Okay. All right, that was great. Thank you very much, and good luck going forward.

Thanks.

We'll take our next question from David Musket with ProMed.

Hey, guys. Can you give us a little bit more color on the regulatory path, etcetera, on the no option in the EU, the Notified Body feedback, how you think that's going to progress, what kind of restrictions do you think that's going to come with, etcetera?

David, the headline in that is it's going to go according to plan. As I alluded to earlier, they've been out, kicked the tires internally in terms of the filings in the clinical data, and they're going back with their team and there's a correspondence going back and forth. They're asking for data and we're providing it and so forth as they try to get comfortable with the application.

The things that are to the benefit of this particular application in terms of its ultimate approval are that this is a group of patients that really don't have an option. We're not kidding when we say a no-option group of patients. They're heading towards a transplant list.

So there's definitely a humanitarian motivation on the part of BSI, but there are some things we have to overcome, being the first cardiac-approved therapy for this. So we're really drilling down more towards some of the -- I won't say last issues, but we're kind of down to the core issues and working through those, and we anticipate doing that for the remainder of the summer and early into the fall with the hope that by the end of the year or the first half of next year we can get some real clarity and final word back on that.

Thus far, interactions with our Notified Body on this and other things has all been positive. We don't read any particular roadblocks today, but we know that with this particular Notified Body it can take some time to get them comfortable on the cell therapy side, and we're working through that. But so far, so good.

Does the pending approval of Celution One have any bearing on this discussion?

It really doesn't. We're actually very close on the Celution One approval. We hoped it'd be in the second quarter; it looks like it's going to leak into the third quarter. But we see no roadblocks there. That system is really important from the perspective of having it available for the advanced acute heart attack study.

We actually do have it available; even despite we don't have the formal CE mark. We have worked through the competent authorities in the individual countries that we're doing the advance trials. We're able to bring the technology in on a research basis pre-CE mark.

So the lack of not having a CE mark is not really holding anything up from a clinical trial perspective. And ultimately, that's the big boy hospital system, really geared towards the cardiac market or major utilization in the cath lab or the OR and so forth. So it's not really holding us from a clinical or a commercial perspective.

Ladies and gentlemen, this does conclude our question-and-answer session. I'd like to turn the conference back over to Chris Calhoun for any additional or closing remarks.

Great, thank you. I want to thank you all for your time today, and just in closing I wanted to reiterate that our key initiatives for the remainder of the year will be to continue pushing the cardiac pipeline forward, driving our regulatory approvals and reimbursement around the world, reducing our cash burn, establishing a strategic partnership and increasing our operational efficiency.

Pursuing these initiatives positions us to achieve several significant value drivers during the next six to 12 months, which we look forward to reporting. We want to thank you again for your continued support and commitment to Cytori as we lead the market in bringing cell therapy to physicians and patients around the world.

Once again, this does conclude today's conference call. We thank you all for your participation.