Plus Therapeutics Inc (PSTV) 2017 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the Cytori Therapeutics Second Quarter 2017 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 the risks and uncertainties described under the Risk Factors section included in Cytori's annual report 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 the 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, Jericha, and good afternoon, everyone. Welcome to our second quarter 2017 earnings call. My name is Marc Hedrick, President and CEO of Cytori. Joining me on today's call is our Chief Financial Officer, Mr. Tiago Girao. Also, we have with us our VP and General Manager of our Cell Therapy business, Mr. John Harris; and also joining us is our Chief Medical Officer, Dr. Mark Marino, and he will be available for any questions on our STAR trial and next steps in the Q&A period.

On the call today, I'm going to discuss the latest on our HABEO development program and other ongoing cell therapy trials as well as provide an update on our nanomedicine program. John Harris will discuss the commercial-related activities and performance, and Tiago will update on financial performance. Then Q&A will occur, after which I'll update on forthcoming milestones.

So let's start out with an update on scleroderma. I'll minimize the update because we just had a report of the trial, preliminary data readout. But on July 24, 2017, we did report top line STAR data. While we missed the primary and secondary end points in all comers to the trial in the patients with diffuse cutaneous scleroderma, the most severe variant of the disease, HABEO showed a strong trend towards clinically meaningful improvement in Cochin hand function, which was the primary endpoint, and quality of life. Please recall that STAR was designed based solely on a small single-center, open-label trial from Europe.

Despite the miss on the primary, we consider STAR a successful Phase II trial, and specifically what I mean is in this trial we validated the appropriate end points, the proper dosage, the route of administration, the magnitude of the placebo effect and key end points, the viability and safety of the procedure in the U.S. health care setting and very importantly, we found in a prespecified subgroup a clinically meaningful effect that approached statistical significance.

On our previous call, I mentioned the next steps with our HABEO program, and I'd like to go ahead and reiterate those today. Obviously, the first order of business is full examination of the data, which is nearing completion, so that we can better understand the basis for the observed improvements particularly in hand function and quality of life in the diffuse patients that I mentioned before. Then our plan is -- proceed soon thereafter to the agency to chart the next steps. Second, we intend to submit a late-breaking abstract to the American College of Rheumatology to be held here in San Diego in November.

Third, we plan to continue to support the SCLERADEC-II trial in Europe, now nearing full enrollment, as this should provide valuable supported data to STAR and also our regulatory efforts. Fourth, the STAR data should enhance our efforts to provide compliant access to HABEO for patients through our managed access partner in Europe called myTomorrows, and John will provide more detail in his remarks that will be forthcoming.

Fifth, we're in the process of obtaining a post STAR trial meeting with PMDA in Japan to clarify the path forward there based on the STAR data. And lastly, we'll continue to actively explore business development discussions related to HABEO.

Now let me switch over to our thermal and radiation injury program. The clinical trial known as RELIEF is a safety and feasibility trial of a single IV administration of our DCCT-10 cellular therapeutic rich in adipose-derived regenerative cells for the treatment of deep partial thickness and full thickness thermal wounds. We received FDA IDE approval for the RELIEF trial in April 2017. As previously reported, last quarter we executed a contract option with BARDA valued at $13.4 million to fund the RELIEF trial-related expenses and overhead.

To review, the primary objective of the trial is to evaluate preliminary safety and feasibility of this DCCT-10 cellular therapeutic formulation via intravenous delivery in the treatment of deep partial and full thickness thermal wounds. Preclinical studies indicate that intravenous delivery of the cell therapeutic is as effective as topical administration. Also, clinical studies we performed show that IV delivery provides a more seamless integration into the current thermal burn treatment environment and also minimizes OR times.

The trial design is a perspective open-label parallel group, usual care controlled, multicenter, randomized safety and feasibility study targeting thermal burns with a randomization scheme that's 2:1 active to usual care alone. Subjects will have at least one deep partial or full thickness burn wound upgraded in 250 square centimeters that is to be autografted with a split thickness skin graft meshed at either 2:1 or 3:1. Subjects randomized to usual care will not undergo harvesting procedure.

Up to 30 patients will be enrolled. Each subject will contribute up to 3 qualified wound areas for the analysis. Randomization will be stratified to ensure that the numbers of wounds treated with 2:1 and 3:1 grafting are balanced across the treatment groups. In the trial, we plan to include up to 10 burn centers here in the U.S. and also include some key primary end points around safety and feasibility. We also have some key secondary end points, which will include the percent epithelialization of the graft at day 5 through to 4 weeks post grafting assessed by surgeon visual evaluation and blinded independent review of standardized photographs. Number two, we'll also look at the percent take of the graft at day 5 through to 4 weeks post grafting. And then finally, we'll look at the percent of the group with complete wound healing at weeks 2 through week 12 post grafting.

As you know, for those of you that follow us, we have a number of investigator-initiated trials going on at any one time. I want to just focus on a couple. In Japan, our ADRESU trial is a potential approval trial for our cellular therapeutic in male post prostatectomy patients with stress urinary incontinence. That trial is primarily funded by the Japanese government through AMED and continues to roll at all sites.

Here's the time line on this trial. So the plan is to complete enrollment in 2017. We have 4 active sites that are enrolling patients, and the trial is approximately 70% enrolled. So we think we're on track to be fully enrolled by the end of the year. The clinical study report is anticipated in 2018, and the regulatory path anticipated to be in Japan as a Class III medical device. We also have interest in investigator-initiated trials that is growing in the U.S., Japan and the EU, and our plan is, as usual, is to update you as these trials receive the relevant IRB and regulatory approvals.

Now let me give you just a brief update on our nanomedicine business. Recall in February that we closed on the acquisition of a private company in Texas called Azaya Therapeutics. The lead asset that we acquired is called ATI-0918, which is a nanoparticle or liposomal doxorubicin that has been shown already to be bioequivalent to the current reference-listed drug in Europe. The global market for this drug is large, it's continuing to grow and it's been chronically supply constrained over the past number of years. Things are going well with our nanomedicine business in San Antonio, and we remain on track to achieve our 2017 milestones related to ultimately achieving EU approval, including completing the facility valued -- validation at the manufacturing plant and getting our in-house manufacturing ramped up, manufacturing the appropriate registration lots and then fulfilling other key preparatory activities for a planned EMA filing in mid-2018. In the meantime, we're also looking at identifying a commercial partner that can commercialize that for us with us being the manufacturer in the European market, and we're actively engaged in that process today.

Finally, another drug that came to us by virtue of that acquisition is ATI-1123, and that's our Phase II-ready liposomal formulation of docetaxel. We're continuing to work through our clinical plan for this drug, which is nearing completion. It will be complete in Q3, and then we will be ready to proceed to Phase II pending funding, of course.

Now I'd like to turn the call over to John Harris to update on the commercial activities. John?

Thanks, Marc. Our commercial areas of emphasis for the balance of 2017 are commercial cell therapy with 2 discrete areas of focus: our partnership with myTomorrows for an extended Managed Access Program for HABEO in Europe, Middle East and Latin America; and continuing strong double-digit consumable utilization growth in Japan. We also have targeted the nanomedicine partnership for the EU, and we have ongoing business development efforts to secure the right commercial partner in Europe by the time we have submitted the -- for EMA approval with ATI-0918. I will address each of these in more detail later in my remarks, but first, allow me to highlight the results of our second quarter.

2017 Q2 product revenues were about $1 million. Year-on-year revenue gains in Japan of 21% were offset by deferred capital equipment sales and placements from Q2 to Q3, which moderated the overall results for the quarter. Consumable utilization in Japan continues to grow. Q2 year-on-year was up by over 30%. Consumable utilization outside of Japan is off to a very good start in Q3. As was the case in 2016, we see some seasonality. There's less cosmetic surgeries that are done in the summer, but we anticipate a strong finish to the year in terms of device installation and consumable utilization.

As Marc mentioned earlier in the call, with the encouraging clinical results for patients with diffuse cutaneous scleroderma in the STAR trial, Cytori will be scheduling a meeting with the FDA to determine the best pathway forward in the U.S. for HABEO. In parallel, the U.S. commercial readiness plan for HABEO that I outlined in the last earnings call included some milestones in preparatory spend in the first half of the year, such as our attending the Scleroderma Foundation Patient Education Conference and receiving new CPT III codes from the AMA.

For the second half of the year, our planned spending can be steered with favorable timing and will potentially adjust future milestones after our meeting with the FDA. In the meantime, our near-term commercial focus remains unchanged: launch of HABEO with our new managed access partner, myTomorrows, continued commercial growth of Cytori Cell Therapy in Japan and securing the right commercial partner for ATI-0918 in Europe and in other regions.

We announced in mid-June a new and expanded Managed Access Program partnership with a company called myTomorrows for HABEO. myTomorrows is a globally active, innovative and fully integrated early-access provider with the goal of delivering fully compliant choice to patients while simultaneously creating value for physicians, pharmaceuticals, payers and regulators. myTomorrows' cutting-edge support infrastructure leveraging both pharma and technology puts the patients at the center of a nexus of patient advocates, pharma, regulators, governments, payers and physicians. Their ability to connect these dots through a combination of feet on the Street and their proprietary search engine and knowledge bank is a significant improvement over our previous MAP arrangement. Our partnership with myTomorrows includes expanded geography that adds the Middle East and Latin America in addition to Europe. This will enable HABEO to be available to more patients in a fully compliant fashion.

Previously, clinicians only have the SCLERADEC-I data to evaluate when considering MAP for their patients. The STAR trial data offers more rigorous scientific evidence and further supplements the profile of the procedure. Therefore, with more focus and geographically widespread support from myTomorrows, we anticipate expanded compliant access for patients with diffuse cutaneous scleroderma.

We are encouraged by the year-on-year revenue and consumable utilization growth in Japan. Celution technology is widely accepted in Japan as evidenced by the number of users and multiple clinical trials, including the ADRESU approval trial for stress urinary incontinence that is partially funded by AMED, Japan's version of the NIH. The results of the STAR trial will be complementary to our ongoing efforts in Japan. We are already engaged with scleroderma KOLs in Japan and anticipate approaching the PMDA to determine the approval pathway for diffuse cutaneous scleroderma in Japan. In parallel to our clinical development plans, our current base of business witnessed strong year-on-year quarterly growth for both revenue, up 21%; and consumables, over 30%.

Another important metric we track are the number of approvals our customers have achieved under the Japan's Regenerative Medicine Law. As of the end of June, there are well over 70 Regenerative Medicine Law approvals in Japan for our technology in key indications. For example, our customers have approval for both fresh and cryopreserved ADRCs to treat knee osteoarthritis, periodontal disease and peripheral artery disease to name a few. This serves as a real time and profitable clinical development engine of applications of our technology that are in full compliance with the Japanese Regenerative Medicine Law.

Our objectives with Cytori nanomedicine remains unchanged. Our primary target is the $300 million EU market for liposomal doxorubicin, which is growing at a 5.7% compounded annual growth rate. Third-party estimates of the global market suggest that it will reach $1.4 billion by 2024. Now this will be accomplished through commercial partnerships for ATI-0918. The EU is our primary target for partnership, but we are also evaluating opportunities in the U.S., China and Japan. In parallel to pursuing regional partnerships, we're tracking towards completing in-house manufacturing activities, such as validation builds and stability testing.

Now while -- in conclusion, while we reassess our approach in the U.S. with HABEO, we have clear focus on our priorities for the balance of 2017: first, we will obtain FDA feedback on HABEO next steps; second, the launch of our expanded Management Access Program with our new partner, myTomorrows; third, execution of our commercial strategy in Japan; and fourth, seeking partnership discussions in Europe for ATI-0918 and continued ramp up of our manufacturing infrastructure.

Now let me hand off to Tiago.

Thank you, John, and good afternoon, everyone. Our primary focus continues to be the development of our late-stage clinical pipeline and related commercial preparatory activities with the objective of driving shareholder value. In parallel, we are wisely managing our resources to continually improve our operating performance. Despite the additional new investments in our recently acquired assets from Azaya, operating cash burn was reduced to $5 million in Q2 2017 from $5.7 million in Q2 2016. The reduction in cash burn was mostly related to reductions in operating expenses.

Net loss totaled $6 million in Q2 2017 or $0.19 a share as compared to $6.4 million or $0.43 a share in Q2 2016. For the year-to-date period, net losses, when adjusted for a noncash charge of $1.7 million associated with an IP R&D asset part of the Azaya acquisition, was $11.9 million or $0.44 a share as compared to $11.7 million during the same period in 2016.

For research and development expenses, in Q2, our R&D expenses, excluding share-based compensation, were $3 million versus $5.1 million in expense for the same period in 2016. The decrease in R&D spending is due to the completion of enrollment in our Phase III STAR clinical trial as well as completion of option 1 period under the BARDA agreement, offset by our initial investment into ATI-0918, the nanoparticle doxorubicin. As a percentage of overall spend, our R&D expense for Q2 was 48% of total operating expenses when excluding share-based compensation. This is in line with our plans and indicative of our focus in late-stage clinical programs.

Furthermore, as outlined during our Q1 call, our year-to-date figures include a noncash charge of $1.7 million related to in-process research and development intangibles acquired as part of the Azaya acquisition. Where following the accounting literature, we accounted for such item as an operating expense and such intangibles would otherwise have been capitalized in our balance sheet if we had determined the transaction was to be accounted for as a business combination. And to be clear, this is a onetime noncash R&D charge.

Now on to sales and marketing. Our sales and marketing activities and related expenses increased in Q2 to $1.2 million as compared to $800,000 in Q2 2016. This increase is mostly related to completed HABEO pre-commercial activities mostly in the U.S. as outlined by John earlier on this call. G&A expenses, excluding share-based compensation, was $2 million this quarter as compared to $2.2 million in Q2 2016. The continued tightening of G&A expenses was related principally to reductions in salaries, benefits and discretionary spend.

Now with respect to revenues. Q2 total revenues were $1.5 million as compared to $2.8 million in Q2 2016. Product revenues were approximately $1 million in Q2 2017 compared to $1.1 million in Q2 2016. Despite the global product revenue decrease of $100,000, Japan grew by over 20% and more important, continues to show substantial growth in consumable utilization, up over 30% from Q2 2016 in support of our focus to grow our technology penetration into that marketplace. Overall, we continue to expect product revenues to reflect at least a double-digit growth of consumables in Japan, where we have regulatory approval.

Government contract revenues related to our activities supported by BARDA and resulted in $0.5 million in Q2 2017 compared to $1.7 million in Q2 2016. The decrease is attributed to the completion of RELIEF IDE activities as we anticipate a transition into the clinical phase of this contract. As mentioned earlier by Marc, the FDA approved the IDE for RELIEF in April of 2017, and we negotiated a BARDA option, option #2, of the contract in this past May, where we were awarded approximately $13.4 million. We are gearing towards contract negotiations with the CRO and other vendors to begin enrollment of the RELIEF trial and hope to provide more update to you later in Q3.

Turning to the balance sheet. As of June 30, we had $9 million of cash and $14.2 million of debt. We plan to balance our ongoing capital requirements through several targeted activities that include revenue growth, business development opportunities, operational efficiency measures and working capital management in addition to accessing the capital market in the second half of 2017. Our 2017 financial guidance has recently been updated, and we expect it to now be a range between $20 million and $23 million for the full fiscal year 2017, which is an improvement from our initial guidance of $26 million to $29 million for the full year. A sizable portion of the reduction in operating burn guidance comes from pre-commercial HABEO activities that can be deferred pending feedback from the FDA post-STAR trial meeting we expect to have later this quarter.

And with that, I'll turn over the call back to Dr. Hedrick.

Thank you, Tiago. Jericha, I'll turn it back over to you for any questions that we may have.

(Operator Instructions) Our first question is coming from the line of Jason Kolbert with Maxim Group.

I'm here with Dr. McCarthy, and we have a bunch of questions in a bunch of areas. I guess I'd like to go back and talk a little bit about

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the data was first released. What additional nuances can you provide to help us understand what the totality of the data says? And where I'm really going with this is until you have the meeting with regulators -- I've been hoping that there's still a window based on the data and based on changing legislative pathways that in the best-case scenario, regulators could actually accept the data. So help me understand what additional nuances you've seen from the STAR trial and kind of what your sense is for the strategy going in with regulators. And I have a couple of follow-up questions.

Jason, thank you. And I'll turn that question over on the data specifically to Dr. Marino, our Chief Medical Officer, who is here with me. Mark?

Yes, thanks, Marc. We've been looking into the data further, and as we dig into it, we're looking at the difference between the diffused group and the limited group. So the diffused group are those patients who have a more extensive disease and a disease process that's more prone to fibrosis versus the limited group, which has -- does have finger involvement but less general fibrosis and less severe skin changes and much lower propensity to develop fibrosis throughout the body. When we look at these 2 groups, we're seeing a clear response in the diffuse group that is treated with HABEO as compared to the placebo. And what that response is looking like, it's looking like the placebo group of the subjects in the diffused group don't respond as well. And this is probably a manifestation of the fact that this is more of a fixed disease in that they have more severe vascular -- vasculopathy as well as much more significant fibrosis. Now...

Mark, I just want to interact with you because I want to make sure I understand what you said, which is that the more severe patients, the diffused group, which is the group that I would expect to see the greatest benefit, do not react as well. So can we just go back to that? Because that's not intuitive.

Sure. Well, what we're finding is that the placebo response is much less in the diffused group than it is in the limited group.

Good. That I would expect.

Right. And that is what is producing the difference between the 2. And this is, as I mentioned, we think it's much more of a fixed disease and much less prone to a placebo response.

So if we were to look at the data and analyze the data, I mean, the placebo response was not -- was that out of sight of your expectations in terms of the total trial? And in terms of the limited group versus diffused group, you're saying the placebo group was actually different, meaning you have less of a placebo response in these more sick patients.

Yes, that is correct. Now from our previous -- well, from the previous SCLERADEC-I study, there was no placebo in it, so we did not have a priori estimate of what the placebo response would be.

It's Jason McCarthy. I was just wondering, is there -- how much subjectivity is in -- versus objectivity in the placebo response? And I'm trying to tease out, is there a placebo effect? Or is there just such a big difference in fibrosis between diffused and limited groups where the placebo effect is just different?

Well, what I can tell you is that, the Cochin Hand Function Score is a patient-reported outcome. So you ask patient 18 different questions about how well their hands are functioning, so this is obviously fairly subjective. But when we look at some of the other factors in these groups, we could see -- now this is all preliminary data exploration that we're finding and obviously we'll have final reports and discuss that with the FDA, but what you can see in this group is that there are less of a formation of new ulcers, there is an increase in their actual physical ability to extend their hand and there are improvements in the quality of life measures that are indirectly and -- actually not directly related to their hand function. So we're finding these in the SHAQ scores as well as EQ-5D scores. So we think that evidence combined is suggestive of the reason why we find the diffused group is responding better than the limited group.

And so Dr. Marino, if you had your druthers and regulators agree, would you run essentially a -- I hate to use the word bridging study, but almost an adjunctive study to kind of go after and repower the diffused group as a clinical pathway towards approval? Is that one strategy that you guys are considering now?

Yes, that's certainly a strategy. And before concluding anything on the strategy, I would really emphasize that we need to get down and get this data in front of the FDA and have a full discussion as to the best pathway forward.

So what's the difference percentage-wise in the scleroderma population between diffused and limited?

In our study, it was around 60% diffused, 40% limited, and that mirrors what we would anticipate as folks that would be eligible for this type of therapy.

Right. So statistically, if it's 60-40, if you had -- if the study had enrolled twice as many or x number of patients more, would it have hit statistical significance?

Well, those are hypothetical questions...

The data clearly would have been better if you have had a higher percentage of diffused patients. I think it's safe to say that, no?

I think that's a strong possibility, but once again, a hypothetical question.

Okay. So Marc, one of the things that -- Marc Hedrick, one of the things that you were talking about a little bit on this call and I was paying close attention, is both the efforts in Japan, the efforts with BARDA. But I think what I as an analyst and I think what most investors are looking at is they're trying to understand the pathway forward on scleroderma. And what I hear you saying is it's still early, you're still accumulating data. But Marc Hedrick, please help me understand, is your intention to absolutely come up with the pathway and move this forward in scleroderma and particularly as we focus on the manifestations in the hands?

Yes, Jason, so yes, despite the miss in the combined groups, and Mark kind of clearly mentioned that the diffused group, looks like where there's potential -- there's safety and potential efficacy in that subgroup. There are some important factors to consider in this disease. It's clearly unmet. There's nothing approved in the U.S. It's a rare disease. We're a device, not a drug in the U.S. And as Mark -- Mark didn't mention this, but we mentioned this in the other call, we were very close to statistical significance in the primary and secondary end point in the diffused group in an underpowered population, as Mark said. So we were absolutely -- once we get the final data, we're going to go right to the FDA and chart the next steps. And there are several ways this could go, and it's premature to talk about that. But in the U.S., our plan is to get in front of the FDA as quickly as possible. We've also had discussions with PMDA. The clinical trial process through regenerative medicine is very different there, as you know, and our plan is to work with our 4 KOLs in Japan and also get in front of PMDA. And then finally, as it kind of come full circle, as John said, we actually have a managed access partner in Europe. We think there's an opportunity for compliant access. We think this data strengthens the argument that this might be useful in this group of patients. And we're interested in pushing that forward as well. So we're planning on moving forward with this therapy, but it really starts here at home with the FDA.

And so let me transition a little bit to nanoparticle doxorubicin. I mean, the Azaya acquisition was very strategic and of course, Cytori is in kind of a critical juncture right now in terms of having enough capital to move the company forward in terms of strategy. And I'm one that I always believe that there is a lot of value in ATI-0918. So help me understand -- I understand you're looking for an EMA submission next year. What other activities and what other elements should we be focusing on? How do we unlock the value that exists in nanoparticle doxorubicin because it seems almost buried under the regenerative medicine side of Cytori? So I guess, if you could lay out for me the catalysts and some of the business development, just give me a sense for the temperature of business development. Are you seeing a lot of inquiries? I mean, you're now at a kind of a sweet spot where you should be able to start unlocking some of that value.

So I think you're right on. So I think this asset is extremely promising. We brought it in at a very favorable valuation. It does sort of get lost in the cell therapy. Part of that's because there's been a lot of energy behind getting to the HABEO readout, which is now behind us. But in the background, we've been busy working to hit the key milestones in this -- with this 0918 product, and we're on track. So the key milestone really is getting a manufacturing facility, which we don't talk about, but we bought a $3.5 million brand-new manufacturing facility for liposomal cytotoxic therapeutics based in San Antonio. So that plant is online. We just built out our analytical chemistry lab. We're in the process of preparing to manufacture the key stability lots when it goes stability testing. And that will be starting later this year with the plan on once we have those lots manufactured and after 6 months of stability testing, we'd be filing with EMA middle of next year. So key milestones: number one, get the drug manufactured; number two, middle of next year, file for approval. In the meantime, we're trying to identify a partner. It's a little bit early in the partnering process, but we've had good interests. A partner see what we see, and that is a market that has been underserved because of chronic supply issues, anticipated 5% to 8% year-over-year growth in that market and this drug is not going away and is anticipated to be well over $1 billion drug in 2024. So it's a difficult drug to make. The company we acquired has experience running 2 successful trials. We've gotten largely that key team back together, and we're on track. So we'll be talking more about the 0918 drug as things move forward. And let me just -- sorry, the other thing about the other drug. The ATI-1123 drug is very promising. There's a number of preclinical studies that have been performed that suggest that it may have advantages over docetaxel alone, Taxotere. There's been a completed Phase I that shows promising results that are early but potentially in its improved safety profile. And we think this drug may have an ability to address some key unmet needs in the oncology space, and I think I'll defer kind of announcing what our plan is there until we kind of finished our evaluation in Q3. But we will have a plan related to this and of course, it will be funding dependent, but we're excited about that drug as well.

Marc, Jason McCarthy. Once you do submit to EMA next year, how long is the review process in Europe? And what do you think the timing for potential commercialization is?

So if we're able to get the drug manufactured, show 6 months of stability testing, which will be roughly around midyear next year if we remain on track, again, then we would file -- and then we would file a supplement regarding our additional 6 months -- we'd have 12 months of safety testing. We would file that when it's available. Presumably, the EMA would have a chance to evaluate our filing prior to presenting that second 6 months of stability testing. So conceivably, we could have approval towards the end of next year or early 2019. And then in the meantime, as I mentioned, we'll have a commercial partner in place to commercialize that in Europe and related markets that recognize European approval.

Marc, I remember the day when Genentech announced data on Avastin and it failed and analysts were downgrading the stock, and we all know what happened there. So I want you to know, I really have my fingers crossed on not just for Cytori, but for patients, too, because I do believe there's a real signal here. And I give you a lot of credit for just standing up and facing the music so that you continue to operate the company and drive towards these goals.

(Operator Instructions) Your next question comes from the line of Andrew D'Silva with B. Riley.

Just a couple short ones here, most of them were already answered. As far as the -- I don't have the data in front of me from your pivotal trial. But as far as the primary end point goes, was that supposed to be for at 6 months or 12 months? And were you approaching statistical significance at 12 months or 6 months or both?

Mark Marino here. So we utilized the Hochberg statistical procedure where we could look at either the 24- or the 48-week data on the primary analysis for the combined group of limited and diffuse versus placebo. It did not reach statistical significance. If you looked at the diffused group, and this was prespecified but several layers down on the pre-specification, p-value for the 24-week period was 0.11 and for the 48-week period, it was 0.07.

Okay. All right. So if everything was consistent and it was just the diffused group study, maybe double the group and you might have hit it at that 24 possibly. Okay. And then as far as partnerships or any sort of strategic things that are going on ebb, any entities that you've chatted with in the past come forward now that you've at least had some data that's positive for a defined subgroup within your HABEO trial? Or has there been anything involved in – over there at all?

Yes, I think there's -- it's a difficult question to answer concretely, but yes, I think this is an unmet medical need. There's nothing approved. This is a very rigorously designed trial, which in a prespecified subpopulation, Andy, shows right at statistical significance for the primary end point and in fact, key secondary end point quality of life showed statistically significant benefit. So there is interest, certainly, interest in our part on moving it forward and getting in front of the FDA. I think that will help partners once they know kind of what our plan is with the FDA. So we're here and we're engaging in those dialogs and we think that there's interest.

Okay. Great. And then as far as financing goes, is there any caveats or restrictions with the Lincoln Park, I guess, not an ATM, but it kind of resembles an ATM? Are you able to access this at any price? Or are there times where you're not able to?

Andy, this is Tiago here. Thanks for the question. Yes, so the ATM doesn't have any specific price limitations. But we -- because our market cap is below $75 million, we operate under baby shelf rules. And those baby shelf rules apply that only 1/3 -- we can only raise 1/3 of our market cap under an S-3, which is where the ATM is at. And right now we have exhausted that 1/3 and every month, there's a little bit that gets trickled in into based on what we have done in the past. So we will continue to monitor and provide updates to that. I wanted to emphasize, we finished the quarter with $9 million in cash. We have raised some funds since the end of the quarter. We do have a long-standing relationship with our vendors. We have significantly reduced our burn as indicated, and we have significantly reduced our burn forecast for the second half of the year. We are running very lean and very enthusiastic about the prospects of the business. That said, we will likely need to raise more capital in the second half of the year.

Okay. And last question. We're thinking about the BARDA contract and associated revenues with that, and this is just a modeling question obviously, I guess the bottom line impact is de minimis over the long term with this. But was the downtick in that line item Q2 related to the negotiation that was taking place? And then should we expect a significant uptick in Q3 and then obviously more so in Q4 and onward into '18?

Yes, Andy, so we -- as you remember, I think we got FDA clearance on the IDE back in April. We got the contract signed at the end of May. So definitely, there were some time that was spent during Q2 that we could not get the efforts. And as I indicated in my remarks initially, we have worked -- we have been working with the CRO, get that contract in place, get the sites initiated and all those activities are going to start to happen now in Q3 as well as through the end of the year. Our goal continues to be to enroll the first patient on the trial before year-end. That's our goal, and that should definitely continue to show some efforts on generating revenues and contributions to the bottom line from the BARDA contract. I do expect the second half of 2017 revenues from BARDA to be higher than the first half of '17.

And your next question comes from the line of [Joseph Pepe], a he’s a private investor.

Can you guys hear me?

Yes. Who is this? Sorry.

My name is [Joseph Pepe]. I'm not affiliated with a firm. I'm a private retired investor. Can you just clarify -- can Tiago or someone clarify for me? I'm not really very familiar with the Lincoln Park arrangement. You've mentioned that you're going to need to raise some additional financing as we approach the latter part of this year. Can you just recap for me how the Lincoln Park thing works and how much financing you think you're going to need later this year?

Sure, Joseph. I appreciate the question. So the Lincoln Park Capital, just to recap for you, at the end of the year, we entered into a $20 million equity line with Lincoln Park. We have used a portion of that equity line over the past couple of months, and we have -- not just a couple months, sorry, since Q2, we have used a portion of those equity lines. There's still a significant amount of funds available. There are restrictions as it relates to that equity line, and one of which is the restrictions around the number of shares that we can issue and the other relates to share prices. And at these current levels, that facility is not available to us. From a needs or the capital needs of the company on a go-forward, it's going to depend, and I'm not prepared to answer that question in a very solid way. And the major reason for that, just to be clear, it's all leaning towards what are we going to hear from the FDA, what is going to be the answer for the FDA and what are we going to do with respect to scleroderma. We are very optimistic about the results of the trial. Of course, disappointed that we didn't hit the primary and the secondary end point but...

Yes, but you're not expecting to hear back from the FDA on the scleroderma in the next 6 months, are you?

Oh, yes. Yes.

Okay. Okay. And you mentioned that there's obviously some constraints around the Lincoln Park Capital equity line, which you, and probably so, you need to basically have a reverse split would release that constraint, I would imagine?

I'm not prepared to indicate. We have not received any notices from NASDAQ, so it's not something that I'm prepared to answer...

I understand. I understand. But you're going to get or receive a notice from the NASDAQ, just like they send everybody else a notice. So you're going to have to reverse split the stock at some point in time. Once you do that, I don't know when it's going to be, but once you do that, will you then be able to access the equity line from Lincoln Park Capital?

Yes. If we do a reverse split, we would then be able to access the equity line with Lincoln Park Capital. But I want to remind you and just indicate to you that usually, when the company does receive a notice, there is a 6-month period that the NASDAQ provides for you to [occur] and that process is going to take long. So I'm not -- I'm just not prepared to commit to anything at this point with you.

And there are no further questions at this time. Are there any closing remarks?

Jericha, thank you. No, I'd just like to finish up. Once again, thank you for the questions. And I'd just like to lay out our forward-looking milestones for the remainder of 2017 and just really a summary of what we’ve discussed during the call.

First of all, first and most important, meet with the FDA and determine the next steps for our HABEO product in the U.S. As John mentioned, we're in the process of rolling out the formal Managed Access Program with our new partner, myTomorrows. We intend to have the first patient in, enrolled for the BARDA-funded RELIEF trial the second half of the year. We're in the process of completing the facility validation, manufacturing and related activities for our nanoparticle doxorubicin product and preparing for an EMA filing and seeking potential partners simultaneously. We also plan to complete and we'll announce our market and clinical valuation plan for the ATI-1123 liposomal docetaxel product. And then also, as mentioned, we plan to complete enrollment in the Japanese ADRESU SUI, stress urinary incontinence pivotal trial and the EU SCLERADEC-II trial.

So I'd like to conclude by just saying on behalf of the board and the management, thank you for participating in this call. The company is very appreciative of the patients that have trusted us for these various clinical trials, our advisers and thanks most of all to our hard-working and dedicated employees. Please have a good evening. Thank you.

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