Plus Therapeutics Inc (PSTV) 2015 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the Cytori Therapeutics second quarter 2015 earnings results call. (Operator Instructions). 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, business prospects and financial performance, which may affect Cytori's future operating results and financial position.

All such statements are subject to risks and uncertainties, including be risks and uncertainties described under the risk factors section included in Cytori's annual reports on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission from time to time. Cytori advises you to review these risk factors in considering such statements. Cytori assumes no responsibility to update or revise any forward-looking statements to reflect events, trends or circumstances after the date they are made.

It is now my pleasure to turn the floor over to Dr. Marc Hedrick, Cytori's President and Chief Executive Officer. Sir, you may begin.

Thank you, Riley, and good afternoon, everyone. Welcome to our second-quarter 2015 conference call. As Riley said, my name is Marc Hedrick, I am the President and CEO and joining me today is our Chief Financial Officer, Tiago Girao.

I would like to advise you that we had two press releases today. Both are posted on our website and after the call a copy of this transcript can be found there.

On today's call, I would like to update you on our lead clinical programs specifically for scleroderma and osteoarthritis and then go into some detail on the timelines related to both of those. Then Tiago is going to discuss our financials and then we will go to Q&A and then talk about milestones.

So let's jump right in and talk about our scleroderma program and focus first of all on the United States. So the Phase III pivotal trial called STAR is officially underway as of July and that is when we received the green light to move ahead from FDA on some protocol changes and updates to the solution system. And that's roughly on plan to start as we originally announced in 2015. We anticipate that most of the 20 approved sites to be up and running and screening by October of 2015.

The originally announced more conservative if you will, timeline for enrollment of the 80 patients for that trial was anticipated to be approximately a year. But we are hoping that positive experience that we have had with our osteoarthritis trial and some of the strong relationships that we have developed with patient advocacy groups over the past year or so could potentially compress that timeline to less than a year but we will know more over the next quarter or two how enrollments ultimately are rolling out.

So recall on that trial that the primary endpoint is improvement in hand function at six months. But there are a number of other secondary endpoints as well. So assuming that the data is positive then we plan to wait to submit to FDA upon full 12-month dataset which is the current plan as it is as this is an approval trial.

So in terms of the big picture, we anticipate at least today, filing for PMA approval sometime in 2017.

So regarding STAR specifically, as an organization our focus right now is on enrollment and getting the trial fully enrolled but we are anticipating a successful trial outcome and therefore in parallel we are actively formulating a US go to market strategy for this as a rare disease indication.

Now in terms of enrollment and generating a real buzz around this trial in the scleroderma communities, because we want to ensure that patients that need this therapy know about the trial, we are tactically planning on working closely with the scleroderma foundations to help support getting the message out in terms of email blasts and other notifications to patients that might be interested in the trial. That will really start in earnest after Labor Day.

We also intend to leverage our world-class leading US rheumatologists who have access not only to these foundations but also to patient groups to help us get the word out on the trial as well. And then we will view some of the same standard promotional tools and activities that we used successfully in the ACT-OA trial including specific websites, social media and other aspects to help drive enrollment.

So we are optimistic that the combination of these activities could help us on the upside to get this trial enrolled on or ahead of schedule.

I can tell you just from my interactions over the last few months around the trial that it is really heartening to see some of the excitement that we are seeing not only for our technology in the rheumatology space but also for this trial specifically. And I will just give you one brief example.

Last month Steven Kesten, our Chief Medical Officer and myself attended a Scleroderma Foundation Annual Meeting in Nashville, Tennessee. And while we were there for a couple of days we spent time talking to patients, their advocates that work for the Foundation and then doctors, many of whom are on our Scientific Advisory Board that were there. It was really validating to me to come away knowing that what we had learned from our SAB and from our market analysis that this hand complication of scleroderma really is the major source of disability in these patients and a primary clinical need for them. We really don't see much in the pipeline for them so it was great to see that and that was very validating. And I can just say to investors that are interested in the disease or the therapeutic options available for these patients, I would highly recommend the Scleroderma Foundation website and potentially attending this annual meeting. It is full of great resources and information on the disease.

So the longer-term data from the pilot trial in Europe called SCLERADEC-I has recently been accepted and is in press and it should be out shortly. A few months ago we released the topline data and showed that there was a long-term maintenance of the effect of the ECCS-50 therapeutic out to about a year. The French team continues to follow those patients and they are now out to about two years and they continue to be impressed about the longevity of the response with a single treatment.

In Europe, the SCLERADEC-II orphan Phase III pivotal trial is moving us ahead. Now it is a follow one trial to this original SCLERADEC-I trial and we have all the full approvals in Europe and sites are screening patients and we are on track for September trial initiation and likely the first patient will be dosed or treated of the planned 40 patients of this trial by October.

And just as a reminder, there are four clinical sites in that trial, all in France. The trial site in Marseille where the original work will be done will be the lead site and then there will be a fifth site in the trial that will handle the therapeutic cryopreservation responsibility. And I think that is a good opportunity to highlight a unique aspect of this trial in that placebo patients as part of a trial protocol, can be crossed over at six months. These are the patients that didn't receive therapeutic after unblinding and they can be crossed over to cryopreserved version of the ECCS-50 if they opt for that.

So that is great for those patients that don't get treated and get randomized placebo but it is also great for us because it gives us valuable data on the preservation of cellular function in cryopreserved cells.

It also helps us drive a model potentially for retreatment of patients using those cryopreserved cells and for us it is really the first full-on clinical validation of the cryopreservation protocols for clinical utilization. So it really does a lot for us and we are looking forward to getting that data above and beyond a specific clinical data for approval in Europe.

So in parallel with this trial, just as we are doing in the US, we are actively involved in launch and reimbursement planning in Europe. We are engaging with the EMEA Authorities and our consultants that are helping us with launch planning as we prepare for an EMEA orphan drug application upon trial completion.

So in terms of the interim activities, there are some options for us and we would like to expand on our early positive experience using pre-launch or named patient programs which we have been testing out over the last few months. Named patient programs are permitted under EU drug legislation but they are governed by individual member states.

We have treated three patients thus far in a single country and although many patient programs are reimbursed for use of new technologies, they do have some downsides in that they are used only for specific named patients and they can have a significant administrative burden associated with them that can take time to fill that out for individual patients. But we really at this point in our technology development where we are in late stage clinical trials but we are not formally approved are really in the sweet spot for moving that forward. And that can be a source of revenue going forward in Europe and we intend to leverage that as much as we can.

And then finally with respect to Europe as I have mentioned previously, our global scleroderma strategy is to take this trial direct in the US but identify a suitable commercialization partner for the EU region.

And as we announced last week, I am pleased to have on board our new Head of Business Development and General Counsel, Jeremy Hayden. We recruited Jeremy from Volcano after the Royal Philips acquisition and he has actually started fully engaged and spearheading these efforts with respect to scleroderma. Also I would say he is working on our discussions around potential partnerships in osteoarthritis and orthopedics as well.

So that is my transition to osteoarthritis and discussing our program there. So during Q2, we announced that our US Phase IIb pilot trial in osteoarthritis was fully enrolled and it was enrolled substantially ahead of our timeline. The reasons for the accelerated enrollment can largely be attributed to a couple of factors. First of all, there was really strong demand both from patients and from doctors for this therapy. Our sense is they really want something beyond the currently available therapies recommended by the American Academy of Orthopedic Surgeons.

On the entry level treatment, there is nonsteroidal, Celebrex, weight loss, physical therapy and so forth and then there really isn't much from there to knee replacement. Something in that gap would really be attractive to patients and doctors based on our research.

Secondly and very importantly, the workflow just flat out was easy for the doctors. In some cases, the doctors were doing two cases a day and one case they could do three cases a day. So that is good validation that the workflow is implementable in orthopedic practices with this technology. So that was good to see.

We are hoping that some of these factors in terms of workflow and strong patient physician demand will spill over into our other trials but that remains to be seen.

What we can say thus far in terms of data for our ACT-OA trial is that the procedure was well-tolerated and that there were essentially no complications in the 94 patients that were treated. And based on the rapid enrollment, we have gone back to the drawing board and accelerated our timeline for a possible Phase III US trial for osteoarthritis. Right now we are anticipating a draft of the Phase III trial plan very soon and we will be communicating on the Phase III design with the FDA this fall.

So my plan is that by the time that the data is ready for analysis in Q1, we will have a pretty good idea on what our final Phase III trial design looks like. So the timing for a Phase III trial could be as early as mid-2016 and the anticipated time to enroll should be about a year but given our experience with the Phase II if we have enough sites and the trial protocol supports that, it could be potentially less.

Now the decision to proceed on that trial is really based on a couple of key things that should be obvious. First of all, we need to have strong Phase II data. And then secondly, we need the availability of those resources and hopefully the partnership support but we will have other ways that we can potentially financially support that trial as well.

I will give you a little bit of a rough estimate on what we are thinking right now in terms of that trial. Looking at the visco-elastic supplement trials that have gone through FDA approval, we are estimating that given reasonable powering scenarios of up to about a 400 patient trial and a budget that is in the neighborhood of about $20 million for that Phase III approval trial here in the US.

So now let me talk a little bit about some of the forthcoming pipeline indications. So in terms of urinary incontinence, the ADRESU trial which is spelled ADRESU trial is a Phase III approval trial of our cellular therapeutic for male urinary incontinence after prosthetic surgery or prosthetic intervention. It is a unique therapeutic approach in that we put our cellular therapeutic into the sphincter itself which is not closing but we also mix some of the cells with some of the patient's own adipose tissue and put that into the sub mucosa or the lining where the scar exists to try to create a bulking function. So it has a two-pronged approach and effect which is very unique. The trial is sponsored by Nagoya University but it is supported both by the Japanese Ministry of Health, Labor and Welfare as well as Cytori.

We now have all of the full IRB and PMDA approvals and the trial is a four-site open label controlled trial. It is controlled in the sense that each patient is acting as their own control over time. It is a multicenter trial treating 45 men again funded fully by the MHLW except for the fact that Cytori is supporting the trial on terms of equipment support and training. And the trial website was supported in our recent press release announcing the final approval and we are ready to go for that trial.

The enrollment initiation date on that trial has slipped a little bit from a forecasted summer 2015 start to likely a September 2015 start and that is largely because of red tape issues within the approval process that were largely out of our control.

So right now we are really optimistic that this could be a first approval in Japan and we are optimistic for a few reasons. First of all just the permissiveness of the environment over there from a regulatory perspective, they have the new Japanese regenerative medicine laws which we discussed previously, we think that helps us. The magnitude of a clinical improvement in these patients and the supporting concordant data in some of the key secondary endpoints that we have seen also give us reason to be hopeful.

Furthermore there has been a lot of substantial pre-negotiation with PMDA leading up to this trial, that is why it has taken a while to get this trial kicked off and up and running. I think that helps us. And then finally, it certainly helps that the MHLW is financially supporting this in a big way at a major national university. So all of that gives us optimism that this could break the ice in Japan.

In terms of enrollment, the timeline and the timeline to approval and reimbursement, this should be a reimbursement trial approval trial. We will be in a better position to forecast an enrollment rate once we get some quarter or two under our belts. We will let you know but I anticipate right now it is going to take over a year to enroll that trial.

As we get up and running though, our plan would be to expand how we work with the institutions involved and leverage some of the things that we know about getting trials enrolled quickly and help speed enrollment of that as much as possible. We will update you as that moves forward.

So now let me move down our pipeline to our thermal and radiation injury program in right now we are in the preclinical phase in terms of our contract work with the US government to develop a medical countermeasure against a nuclear detonation event here in the US.

The current development work consists of three things. Work on the next-generation solution technology we call CTX2. We are also conducting further preclinical work and then we are also conducting some clinical feasibility studies which have now begun as a lead-in to help maximize the chance, our chances of having a successful Phase II clinical trial. All of these are going on simultaneously.

So upon successful completion of the mutually negotiated contractual milestones, it is our intention to file for FDA approval and begin a US feasibility trial for burn therapy.

The goal is to get a treatment as a medical countermeasure for patients that have been irradiated and burned but the trial being conceived is a burn related trial. Our best estimate right now is that trial will be a 2016 event but we will have to keep you posted as we move forward on the contract work and on the timeline. But on the whole I can tell you that the contract activities are going well and certainly the threat environment regarding this therapy remains.

So I think with that I will take a break and turn it over to Tiago to discuss in more detail our financials. Tiago?

Thank you, Marc, and good afternoon everyone. Our cost reduction initiatives implemented throughout 2014 and 2015 continue to deliver significant results. Our Q2 operating cash burn was about $4.8 million which is materially consistent with Q1 and significantly reduced from $9.2 million in Q2 of last year.

We continue to work on expense reductions, working capital management and operating efficiencies with focus on G&A and sales and marketing reductions. But as we completed enrollment in our ACT-OA trial well ahead of schedule and enrollment has begun on our Phase III STAR trial, we expect somewhat higher operating burn in the second half of 2015 when compared to the first half. That said, we are decreasing our operating cash burn guidance by about $1 million to approximately $24 million for the full fiscal year 2015.

With respect to operating expenses, research and development expenses excluding share-based compensation were $5.9 million in Q2 compared to $3.8 million in Q1 and $4.5 million in Q2 of 2014. The decrease in spend related to the prior quarter and prior year is primarily related to clinical trial related expenses, mostly attributed to the rapid ACT-OA clinical trial enrollment. Further, our Q2 R&D spend was approximately 67% of total operating cash expenses as compared to 56% in Q1 and 43% in Q2 2014. This big increase is very aligned with our plan to focus our investment into clinical activities.

With our effort to turn ourselves into profitability, we continue to manage down sales and marketing expenses, which excluding share-based compensation were down to approximately $600,000 in Q2 compared to $800,000 in Q1 and $1.8 million in Q2 of last year. We continue to expect positive margin contribution from our sales and marketing team in the near term.

G&A excluding share-based compensation was $2.3 million which is consistent with Q1 and significantly reduced from $4.2 million in Q2 of 2014. We have experienced G&A expense decreases across the board with the main drivers being headcount reduction and decreases and professional services showing that our renegotiation of service contract efforts are paying off in a meaningful way.

With respect to our revenues, in Q2, we recognized $3.5 million in product and contract revenues compared to $2.3 million in the preceding quarter and $1.3 million in Q2 of 2014. Product revenues were $1.6 million during this quarter compared to $935,000 in Q2 of last year.

As discussed in our last call, Cytori and Lorem Vascular received Chinese FDA clearance for the Celution System in April and Lorem placed its opening order which we partially fulfilled during Q2 with the balance of fulfillment expected to occur in the remainder of the year.

I am confident that Lorem Vascular has been diligently involved in their implementation commercial plan. At this time, they are in active discussions with key hospitals in China around building a user base in a number of indications leveraging published data which with an emphasis in osteoarthritis, heart failure and ostetic markets. The company is targeting first cases this fall and plans to capture patient registry for their portfolio of therapy options allowing capture of objective clinical data to support expanded claims and market access adoption. They are an important partner of Cytori and we are excited about their progress. We are reaffirming our product revenue guidance of $5 million to $8 million for 2015.

Contract revenues are driven by activities with BARDA who continues to fund ongoing research and development activities required to enable a pilot trial in thermal burn. Contract revenues were $1.8 million during Q2 compared to $1.4 million in Q1 and $356,000 in Q2 of last year. We are reaffirming contract revenue guidance of $6 million to $8 million for the year.

With respect to our balance sheet, at June 30, we had approximately $23.8 million of cash and outstanding debt principle of approximately $17.7 million. The reduced operating cash burn, restructured debt and Olympus liabilities and the proceeds from our Q2 financing activities significantly strengthened our balance sheet and based on current projections provided liquidity for over 12 months of operations without further capital infusion. Operationally, we are laser focused on the execution of our key clinical objectives with continued emphasis on Phase III scleroderma and Phase IIb osteoarthritis US trials.

With that I will turn back to Marc for our forthcoming milestones.

Thanks a lot, appreciate that. I would like to finish up this afternoon by focusing on as Tiago said, some key forthcoming milestones over the remainder of the year. First of all, in terms of publications and data releases, there are number of things in the Q over the next couple of quarters I want to just remind you of. I have mentioned some of them be for but just hit those again.

As I mentioned, the long-term follow-up data from the SCLERADEC-II is in press and we intend to announce that upon release but as mentioned previously, the data looks good.

The Athena interim six-month data has been submitted to the American Heart Association meeting and we are waiting for feedback on the acceptance of that abstract and in theory that would be presented there. The Athena 12-month data we just obtained and that is under evaluation and we will keep you posted as to how we are going to put that data out there and then we have some other burn publications that are pending as well. So a number of things coming forth on the publication and data release side.

In terms of milestones related to trials as we announce this morning, we begun enrollment of the US STAR and there's a lot of data around the trial itself in that press release. We have also planned on forthcoming announcements on the EU SCLERADEC-II approval trial in Europe and the Japan ADRESU trial relatively soon and we will announce both of those.

Also data from the US Phase IIb ACT osteoarthritis trial which was enrolled ahead of schedule, means we will move forward the release of that data to likely a Q1 release in 2016.

By mid-2016 as I mentioned, we should be ready for a Phase III OA trial pending the data and the funding and we will announce that once we decide to move forward with that and then a burn trial as a Phase II could be a 2016 event based on a number of factors that I mentioned previously.

Also I think we are at a point where we can begin very cautiously but begin to discuss the timing of approval filings for the FDA in EMEA related to scleroderma. So completion of the enrollment in our two scleroderma approval trials by approximately midyear and it looks like the European study may be because 40 patients might be a little bit ahead of the US but we should be ready to file both to EMEA and to FDA thereafter, so middle of next year.

So we are conservatively estimating a one-year review cycle in the US and approximately a 1.5 to 2-year review cycle in Europe for those approvals. But as I mentioned, we intend to move forward as rapidly as we can with the named patient program in the interim.

So let's move on to Q&A, Riley, if we could and then after Q&A, turn it back to me and then I'll close out.

(Operator Instructions). Jason Kolbert, Maxim.

A pretty comprehensive update. I'm sure we could spend a lot of time talking about all these programs but can you just take a moment with me and start kind of at the end which is what is the timeline on BARDA? What are the next events? And help me understand when you talk about a trial in 2016, what do you mean and how does that translate into a procurement contract so that Cytori will benefit?

And I have a follow-up question where I want to just make sure I understand the business model around scleroderma and how you are going to differentiate servicing and reimbursement particularly if you're going to be potentially treating patients in Europe ahead of the US? Thanks.

So let me -- feel free to jump back in if you want me to clarify but in terms of BARDA, so recall we have this $100 million contract framework and so forth. We completed an early preclinical proof of concept work and now we are doing some clean-up preclinical work, some clinical feasibility work which means we are doing dry runs of the procedure in the burn room, burn operating room for a number of patients but not giving them back to cell just to prove the feasibility out and so forth.

And then we are also developing CTX-2 which will be faster, less expensive and will be more efficient and robust in terms of getting to cell dosage. So all those things are going on in the background.

So once we have that data, it is feasible, we have a timeline for CTX-2, the preclinical data we are doing proves out, then we are in parallel writing the IDE and then we would take that data and then we would submit that to the FDA. So there are a lot of moving parts there which makes it a little bit difficult to calibrate exactly when that will be submitted, when FDA would approve it and then we would start enrolling.

But to be clear that would be a Phase II trial, not a pivotal trial. And then the question then becomes after that Phase II trial is complete, what are the next steps and so there are a couple of different scenarios that we are discussing with the government, one of which would be to go from that trial if successful to a Phase III trial. And that is built into our contract framework with BARDA and that would potentially be a path forward and then get full on approval for burn.

Another way to proceed would be to get the Phase II data which roughly corresponds with the timeframe that we could have approval in the US for scleroderma and then with a US FDA approval under the PMA framework for the device and coupled with the Phase II data, that might be sufficient from BARDA's perspective to drive an acquisition contract and use of the technology off label in the instance of a national emergency. So the idea, BARDA's idea behind this is that they would pre-deploy this technology around the country and then have special work instructions to use in the case of a natural disaster.

So there might be some strategy there about just going to the Phase II, getting clinical trial approval and something else and then going to acquisitions and so forth. And that could be mutually beneficial for us.

So I think right now it is a little premature to say how that will happen but we do have a number of options, a paid for Phase III and then a potential government acquisition contract based on Phase II data.

That is perfect. Actually that clears things up for me quite a bit. Just do me a favor and just opine with me a little bit on how you are thinking the business model is going to develop along the lines for scleroderma and just confirm for me right now that you see scleroderma as kind of the leading driver of the company and the leading focus, is that correct?

It is, it is, Jason. On so many levels, it is a great indication for us. And so let me tell you why I'm saying that. So from a mechanism of action perspective, the things that are going off trajectory in scleroderma patients, the cellular therapeutic that we produce with our system seems to be perfectly tailored by accident for scleroderma patients in terms of the ischemia, the fibrosis and the chronic inflammation. So it looks like a great match on a mechanistic perspective.

Secondly, it is a tough disease, it is a rare population but it is not that rare and the thing that really bothers these patients most is their hands. There are a lot of things in development for the pulmonary disease which kills them but their major source of disability is their hands and there are very few clinical trials related to developing something for the hand and that was confirmed recently at the meeting.

So there is a nice unmet opportunity there that if you contemplate premium pricing assumptions that are consistent with other drugs that are on the market such as Bosentan, which is endothelin I antagonist. It is just coming off patent by the way but it is used to prevent new ulcer formation in scleroderma patients, that is $93,000 a year. So there are good analogues both in the scleroderma hand world and also in the rheumatoid world for premiumly priced therapeutics for this group of patients.

So that kind of leads me now to commercial model and this is what is really cool for us and why this is such a great indication for us. I think the fact that we have European drug approval and it opens up not only a fast track because it is orphaned but it opens up the possibility of maybe coming out of the device space commercial model and going to more a drug-based model and here is how it might work. So we might not sell the device or the consumable but we might have a clinical account specialist that would go right into the hospital where we have pre-deployed our device and consumables at really a very reasonable working capital investment quite frankly. And then they would take the tissue, they would give it to our technician and we would give them back the drug at the end of the procedure and then any extra drug that is left over, therapeutic that is left over, we could cryopreserve and then hold that for the patient to be bought and then if they need subsequent treatment.

So in Europe and the US for scleroderma, we see a model that maybe allows us to own a means of production and then effectively sell a service as well as a drug to the patient at the bedside. And that is -- given the number of patients in the US, the 40 or so major scleroderma sites in the US, we think that model makes a lot of sense.

And then finally just sort of as an appendix to that answer, it helps us with some of these other indications that we are looking at. For example we announced that our licensee Kerastem/Bimini has received approval from the FDA for an alopecia trial. The preliminary data looks good but it would help us to differentiate a market like scleroderma where we think we can get premium pricing whereas alopecia might have different pricing dynamics to our partner. So we think it really opens up a new avenue for us in terms of product differentiation and pricing differentiation.

Thank you, Marc. I appreciate the overview.

(Operator Instructions). Steve Brozak, WBB Securities.

Good afternoon, gents. Looking at what you just said, Marc, as far as scleroderma being the lead, I would like to follow that with a couple of questions specifically about what you are seeing and monitoring the results. Have you and can you tell us if you have seen any kind of differences as far as between six months and a year on blood flow to the hand and any other kind of follow up or visibility or granularity you can give us on that? And a couple more on specifically on scleroderma.

Thanks for the question. I could tell you on the whole that the 12-month data not only confirms the response that we have seen at six months but it helps. So think about it like this, it looks like the value that was rendered to this patient at six months exists at 12 months. In some cases there is maybe a little bit of return to baseline, in other cases there is continued improvement. And it depends on what end point you look at. And I think the thing for me that it does and I think we will be able to talk about this more as it rolls out, but it begins to really clarify the mechanism of action picture here. We know from preclinical work that we have done and some other groups that we work with and some groups that are completely independent from us, how these kinds of therapies plausibly would work in a variety of preclinical settings.

Now we have an enormous amount of robust clinical data over about a year for how it seems to be working in terms of clinical outputs. I can see some nice overlaps between what we have seen pre-clinically historically and what we are seeing now clinically. So I think it is going to really help clear up the mechanism of action picture.

Actually that leads to the follow-up. Given the fact that you can see this and given the fact that it is a fairly small community, what are the KOLs giving you feedback in terms of what are they seeing, what are they saying? Because obviously this is one where as you put it, it is an unmet need. What are you seeing as far as their expectations being met or the next what they are looking for as far as how quickly they can get to the next step?

So from the patient perspective in the preliminary trial against the primarily trial but we have videos, quotes, specific feedback from all those patients, videos of how they are using their hands and so forth. So the patients are excited. The physicians in France that continue to follow these patients now out to about two years looks like there is continued benefit from these patients out to that level. That is anecdotal. I don't have you any data to give you on that but that actually makes us feel good. And the effect on the physicians there is that they believe in the technology and believe that it works.

Here in the US where we really just have the six-month data to talk about in the top line, 12 month data I think there is a lot of interest and the fact that you look at our Scientific Advisory Board and you have got some leading rheumatologists that are populating that and the fact this is an unmet need shows that there is a lot of interest. I think it is going to be a process over the next six months and I can tell you we are going to be very visible and aggressive in terms of getting the word out about this therapy both to patients and to physicians over the coming few quarters so that they know this is an emerging therapy for this group of patients.

Well, that leads me into the last question. Given the fact that you have started to see these clinical results and this evidence and that you do have a good grasp on our understanding of the mechanism of action and Cytori has always basically been a Company that believes in working with collaborations and having external clinicians. What other areas do you think you're going to see interest and have already seen interest in collaboration and in furthering the technology? And I will hop off the queue and jump back in.

You know, we continue to get -- inundated is probably too strong a word -- but we do get a number of reverse inquiries regarding partnering with institutions for cell therapy trials not only orphan indications or more niche indications but major indications in the urologic field, renal, erectile dysfunction, ostetic, breast, Crohn's disease, wound healing, hepatic disease. And we think that there are potentially roles for the therapy in those. And I think one thing that is driving it in part is the emerging consensus from a regulatory perspective that just doing this in your backyard will not meet increasingly unified regulatory approach to cell therapy. The bar has been set high, we set it and anybody else that wants to treat patients is really going to have to meet that bar and I think that puts us in a nice position to be able to help and support many of these trials.

But the flip side is we are capital constrained and over the last year or two, we have become incredibly focused on getting the market and we have got two trials, one in Europe and one in the US that could get us approval and reimbursement relatively quickly. We have a new up-and-coming indication in Japan that could do the same for us there. And then I think we can [considerably] build off of that in a strategic way to broaden our potential portfolio of indications, not to say we aren't doing some measured targeted collaborations with some of these but we are doing that very carefully while we continue to focus on the things that will drive shareholder value.

Great. Thank you for taking the questions and I will look forward to the progress. Thank you again, gents.

Dan Trang, Stonegate Capital Partners.

Thanks for taking my question. Most of my questions have already been answered but one question that lingers in my mind is how confident do you feel about your growth in China with Lorem Vascular?

You know, I think right now we are still really in the early days of testing that and then we are 8000 miles away from what is going on on a day-to-day basis. We have very frequent calls with them. I think we are very confident that they are fully 100% committed to succeeding in that market. They are making the kinds of investments and moves that one would hope to see from a committed partner so that is all good. It is a big country. They are focusing in on some key hospitals and in some ways it is a pre-commercial approach right now is to see key thought leading hospitals, hospitals that people know about China would immediately recognize, get the technology in there so there is not an economic burden to get it in. In other words, place it, get them active with consumables and treating patients and based on that then leverage that out into next year, hospitals and build a pricing framework that may be largely built around self-pay which is very possible over there given how their reimbursement system is organized to begin to drive utilization.

But they are well capitalized obviously. They are making the right hiring moves, they are spending the time and we are working with them so I think given the limitations we have about not being on the ground with them I think we are optimistic that they are doing the right things. But it will take a while. They have got some contractual commitments they have to make and we will hold them to those.

But at the end of the day, we think the technology works and it is going to work just as well here in the US in our clinical trials that it is going to work there. And I think at the end of the day that is going to move the market.

All right, thank you.

There are no further questions at this time. Dr. Hedrick, do you have any additional or closing remarks?

I do, Riley. Thank you guys for the questions, appreciate it. And I would just like to conclude by thanking our team and employees here at Cytori. It has been a tough few quarters for them and I hope that to you our shareholders that their hard work and their focus is evident to you. And I would just like to publicly acknowledge them for their efforts and from my perspective kind of looking at what they have done in a very short period of time has transformed the Company from what it was or what it has been to a Company that is now a late stage therapeutic company that has a number of active approval trials lined up in three regions around the world and these are trials that are cost-effective, in other words more simple to capitalize that have achievable endpoints, they address unmet needs and needs including those that have substantial market opportunities.

In addition, our team has completed a Phase IIb trial in rapid fashion that represents yet another potentially forthcoming late stage clinical trial opportunity for us and at the same time working behind the scenes with US government and our contractual framework increases support from government from a little under $5 million to a little over $22 million.

So I can't tell you how happy I am with the progress that we have made. It has been a lot of hard work and execution in terms of our team but I will keep you updated as transparently as possible. And once again to our shareholders, thank you for your interest and support. Hang in there and have a good evening.

Thank you. This does conclude today's conference call. Please disconnect your lines at this time and have a wonderful day.