Plus Therapeutics Inc (PSTV) 2018 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to Cytori Therapeutics First Quarter 2018 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 risk and uncertainties described under the risk factor 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 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, Alicia. And good afternoon, everyone, and welcome to Cytori's first quarter 2018 earnings call. My name is Marc Hedrick, President and CEO of Cytori. And joining me on today's call is our Chief Financial Officer, Mr. Tiago Girao.

On the call today, I will provide an update on the company's oncology and cell therapy programs. Then Tiago will update on our financial performance. Then we'll have time for Q&A. After which, I'll update on forthcoming milestones.

Let me begin by discussing our nanomedicine (inaudible). First of all, in terms of our lead oncology drug candidate ATI-0918, a pegylated liposomal doxorubicin, from a manufacturing and regulatory perspective, we continue to make progress, building out our manufacturing team and key support functions in our San Antonio manufacturing plant. The total team size in San Antonio is up to 13 people, and we anticipate that growing to 20 employees.

Since our last call, we are now manufacturing characterization lots, loaded with active pharmaceutical ingredients. We've completed our [cell image] contract and that's in place with [Brylan] from Michigan. And in Europe, Cytori has received confirmation from the European Medicines Agency that ATI-0918 is eligible for centralized authorization procedure. And basically, what this does is, it allows the marketing authorization holder to market the medicine and make it available for patients and healthcare professionals in all the EU members states, including the EEA, the European Economic Area countries. In addition, in Q1, Cytori submitted a new [invented] name request to the EMA, which will ultimately serve as the authorized brand name that will place the ATI-0918 on (inaudible) designation.

Now as you may know, liposomal doxorubicin is in a unique niche in the generic space. The drug itself is intended to treat seriously-ill patients with life-threatening diseases. It's a tough drug to make. It's much more like a biosimilar, in terms of its manufacturing and formulation complexity, than it is to a typical generic. Also manufacturing and quality-related issues have affected the market, resulting in global supply shortages over the last decade. Also, in addition, emerging real-world clinical publications are suggesting that clinical performance is not identical between Lipodox, a generic competitor, in other words, that all liposomal doxorubicins are not created clinically-equal.

But I think in that is an opportunity for Cytori. And we think that an important part of our differentiation in the market will be around quality. In particular to this drug, we want to be positioned as a high-quality, made in the USA, provider of the drug, with the best-possible clinical effectiveness.

So digging deeper and looking at the market dynamics and the competitive landscape, I want to give you a little bit more color. We are continuing to monitor the global market landscape and update our models. And if you look at the market estimates and bio surveys, it indicates that there's a current global market opportunity of approximately $400 million to $750 million a year in revenues, with China really driving the growth forecast for that market. In Europe, the current market opportunity estimates are approximately $120 million to $300 million a year. And in Europe, Janssen's Caelyx is currently the long pegylated liposomal doxorubicin product available there. Cytori believes that significant revenue share can be gained by being either the first or second generic approved by the EMA, and that ATI-0918 has the potential to take one of these 2 positions.

Now to be complete I want to point out some public information that investors may be aware of, it's in the EMA meeting archives, regarding the potential EU competitor, TLC, has actually submitted a letter on March 9 of this year, requesting an extension of a clock-stop to respond to EMA's list of questions. This company had previously announced a submitted marketing authorization for the generic pegylated liposomal doxorubicin product candidate in May of 2017. So we will continue to monitor that on the competitive side.

In the U.S. and Canada, liposomal doxorubicin market revenue estimates are roughly similar to that in Europe. In other words, about 1/3 of the market is in the North and South America, about 1/3 is in Asia-Pacific and about 1/3 is in Europe and EMA. If you look specifically again at Europe, that the -- in the U.S., that the market share is -- the revenue leader is the J&J product and the rest of the market is split between Lipodox and generic competitors. We continue to gauge the evolving market dynamics and evaluate strategic options to position ATI-0918 program for U.S. entry, but currently, that's not our priority market.

Now in China, we feel that there is significant opportunities for this product. Currently, there are 3 marketed and approved pegylated liposomal doxorubicin products, none of which, to the best of our knowledge, have completed or submitted any bioequivalency study data. For these 3 drugs, estimated combined annual revenues greater than $100 million have been seen and it's growing at about 15% per year. Additionally, this currently includes only 3 of 31 provincial reimbursement drug lists. And also China FDA policies for generic drugs have recently changed, increasing the quality bar there, so we're exploring strategies to gain rapid market access to China for the 0918 product, by leveraging our completed BE trial. We did plan to partner this drug for a commercial interest, so we're actively seeking licensing and commercial partners to market, sell and distribute ATI-0918 to North America, Asia and Europe.

Now regarding our cell therapy pipeline. In terms of HABEO for scleroderma. The SCLERADEC-II European trial has completed enrollment and we are awaiting the 12-week and 24-week trial readout, which we anticipate in the second half of 2018. As it relates to STAR and HABEO for the U.S., we recently received feedback from an FDA pre-submission reading, indicating that a clinical trial focused on more-severely affected diffuse systemic sclerosis patients could be an appropriate next step, given the results of the STAR clinical trial. We recently finalized meeting minutes and are pursuing additional dialogue with the FDA to clarify the parameters and key aspects of a follow-on clinical trial with HABEO.

At this time, we do not have and are not prepared to commit resources required in order to conduct an additional clinical trial for HABEO, and instead we'll rely on partnering or out-licensing opportunities as the basis for continued development.

In terms of our BARDA-supported relief trial for single IV administration of our cell therapy product of deep and -- deep partial and full-thickness thermal wounds, we have now initiated 2 sites and are in the process of planning and initiating other sites to get the first patient enrolled in that trial as soon as possible. And then, finally, in terms of our Japanese urinary incontinence trial, called ADRESU, enrollment's complete. We're working with the PI and Nagoya University to complete all follow-up and report 12- and 24-month (sic) [24-week] follow-up data.

Now regarding our commercial performance. Product revenue was $731,000 versus $591,000 in Q1 of 2018. The BARDA contract revenue in Q1 was $917,000 versus $1,018,000 in Q1 2017. In Japan, specifically, Q1 2018 product revenue was $578,000, which represents an 80% year-over-year growth over Q1 2017.

Looking behind the Japan product revenue growth was a clear trend towards consumable utilization increase in that market. Q1 2018 consumables grew 53% year-over-year versus Q1 2017, and the indications around that growth are principally osteoarthritis, leveraging our previous ACT-OA trial data and breast in esthetic surgery. We anticipate currently that, that trend will continue in that market and we are focusing the lion's share of our commercial activity in Japan to grow consumable utilization.

Now I'll hand off to Tiago for the financials.

Thank you, Marc, and good afternoon, everyone. Our primary focus remains unchanged: the development of our late-stage clinical pipeline and related commercial preparatory activities that we believe can translate into shareholder value. In parallel, we are carefully managing our resources as tightly as possible while continuing to improve our operating performance. Despite the additional investments in our recently-acquired assets from Azaya, operating cash burn reduced to $4.1 million in Q1 2018 as compared to $4.8 million in Q1 2017. The reduction in cash burn was mostly related to reduction in net losses as adjusted for noncash items of approximately $1.3 million. This is offset by working capital give back of approximately $600,000. Adjusted net loss totaled $4.4 million in Q1 or $0.07 per share as compared to $7.5 million or $0.33 per share in Q1 2017.

Note that net losses in Q1 2017 include a noncash charge of $1.7 million recorded associated with eProcess, research and development, part of the Azaya asset acquisition. For research and development expenses, in Q1, our R&D expenses excluding share-based compensation were $2.5 million as compared to $3.2 million in Q1 a year ago. The decrease in R&D spending is attributed to the decrease in headcount from the restructuring activity implemented in September 2017 and the completion of our STAR clinical trial activities. These reductions are offset by our investments into ATI-0918, our nanoparticle doxorubicin, for which manufacturing activities are ongoing in our San Antonio facility. As a percentage of overall spend, our R&D expense for Q1 was 48% of total operating expenses, when excluding share-based compensation. This is in line with our plan and indicative of our focus in late-stage programs.

Now on our sales and marketing activity. Those decreased this quarter to approximately $650,000 as compared to approximately $900,000 in Q1 2017. The decrease in expenses in Q1 relates to lower salaries and benefits as well as lower professional services related to HABEO pre-commercial activity mostly done in the U.S.

G&A expense, excluding share-based compensation, and approximately $600,000 related to a onetime lease termination charge this past February, was $1.6 million this quarter as compared to $2 million in Q1 2017. The continued tightening of our G&A expenses was related principally to reductions in salaries and benefits, resulting from the 2017 restructuring as well as discretionary spend.

Now with respect to the revenues. Q1 total revenues were $1.6 million and materially consistent with Q1 a year ago. Product revenues increased by 23% in 2018 versus 2017 and was largely related to our focus on consumable growth in Japan, as outlined by Marc earlier. As per our guidance, we once again achieved double-digit consumable growth for the quarter in Japan. And we continue to expect such trends to continue. Our government contract revenues relates to our activity supported by BARDA. Such activities decreased by approximately $100,000 as we transition from the development activities to a kickoff in lease activities as part of the newly-awarded option of the BARDA contract. As a reminder, the FDA-approved the IDE for the RELIEF trial in 2017 and we negotiated BARDA Option 2 of the contract last year, where we were granted approximately $13.4 million to complete such trial. We have contracted with our CRO and have, so far, initiated a couple sites of the RELIEF trial.

Turning to the balance sheet. As of March 31, we have $5.9 million of cash and $13 million of debt principal. We plan to balance on-going 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 markets. Now back to you, Marc.

Thanks, Tiago. So let me -- before going to Q&A, let me just update you on the forthcoming milestones that can be found in written form in our press release. Number one -- our number one priority is to complete the 0918 manufacturing and regulatory activity required to file a completed application for EMA approval for that drug. Number two, we plan to enroll the first patient in our RELIEF trial, funded by BARDA. Number three, to report the 12-week and 24-week EU SCLERADEC-II data for scleroderma associated hand dysfunctions. Number four, we intend to report the 12-week and 24-week Japan ADRESU trial data, which addresses urinary incontinence in men after prosthetic manipulation, and then, five, we continue to look and to find a partner for our 0918 product in Europe, U.S. and Asia.

So after that, I'll turn it over to the operator for any questions. Alicia?

(Operator Instructions) Our first question comes from the line of Jason Kolbert with H.C. Wainwright.

I just want to focus in on a couple of areas. You talked a little bit about Lipodoc versus Caelyx. And what I understand you to be saying is that Sun Pharma's Lipodocs is not the precise equivalent as J&J's Caelyx. And if I think of it like biosimilars, the reference standard matters. And what I understand you're saying is that this could have implications for who is the first generic in Europe and it certainly has implications for what a partner wants to develop in the U.S. What is the basis for the comments? Can you expand a little bit on scientifically, how do we know that they are different? What studies have been done?

Jason. So there is a difference between Lipodocs, which is a generic competitor to the branded drug, Doxil, in the U.S. They entered the market in an unusual FDA action and in an extreme global shortage situation. And in their own documentation, they say that they are not bioequivalent to J&J. And now it's going to get proven. Their publications now that have been emerging in the literature over the last couple of years that suggest that Caelyx and Doxil, historically, J&J's branded drugs, has better clinical performance than Lipodocs. The recent paper of 2016 from MD Anderson supports that, as well as some other publications. So to your point about what does that mean. So to your point about biosimilars, these are tough drugs to make. As far as we know, we're the only drug that has shown clinical bioequivalency to the J&J products, Caelyx and Doxil. And we think that, that provides a potential quality advantage for our product, plus we're manufactured in the USA and we think we have a robust and very high-quality manufacturing facility that's fully dedicated to these products, and we intend to position the product based on getting a high-quality generic alternative to Doxil and Caelyx.

So it means to me that 0918 becomes a very, very attractive candidate for a partner who has reach in Europe, who understands the U.S. market and you did a pretty thorough job of outlining what could be a significant opportunity in China. So I got that right, yes?

Yes, I think, for now, our target -- key target markets are number one, Europe, and number two, China. I think that market, if you look at the [way to define that] data, which we've just recently evaluated, we think that, that's where the growth is likely to come and that the CFDA is in the process of revamping their generics regulations, more online with the U.S. And we think that creates some opportunities for this product. If you're beginning to go into a new market, we have the potential process and manufacturing capabilities that should provide a nice leg up for potential entrance into that market.

Okay. I got it. And Tiago, I understood what you were talking about when you were talking about prioritizing HABEO. So what you're saying is that the FDA has given you guidance. You kind of understand what the road forward is, but at the same time, you have SCLERADEC-II coming and you also have linkage for HABEO in Japan. And while I understand, it's a slightly different product for stress urinary incontinence, that trial too is going to report. So can you -- can we talk a little bit about what the pathway forward might be for HABEO, both in stress urinary incontinence surgically induced. And in scleroderma, in Japan, because that could be, it sounds like, not a very significant expense. But it could be, maybe, the first time we see HABEO approved in the Japanese market, kind of, beating out the U.S. and Europe. Is that possible?

I'll take that. And from a timeline perspective, the most expeditious and fast way to enter a market with a cell therapy product is with the ADRESU trial and stress urinary incontinence in men. And that trail, as I mentioned, is now fully enrolled and we're following up those patients for data. That's potentially an approval trial in cell therapy in an unmet medical need. Based on that trial and the data from the trail, then there are couple of options that opens up in Japan. That opens up potentially a [bridging] trial that could lead into female urinary incontinence, of which, we have a small good (inaudible) that shows that it's potentially promising there, which is a much bigger market. And then, also a relatively direct path to doing a follow on, on the U.S. trial, specifically for scleroderma in Japan and those are things that we are considering.

And to answer your question on the financial commitment, we alluded to the Japan market, you're absolutely right. The size of the trial in Japan with the -- be potentially significantly smaller than the size of a trial here in the U.S. and the cost could be a couple of million dollars. So you're absolutely right of thinking of that way.

Okay, guys. I think, I understand. I'll come back and talk to you later a little about more about BARDA, but between BARDA, between existing revenues, between Japan, between HABEO options in the U.S. and Europe. And then, when we look at 0918 and its potential options, first in Europe, the U.S., and now I'm starting to think about China, it's just from a sum-of-the-parts valuation point of view, I can argue, a significantly higher value for each one of those parts, much less the combination.

Your next question comes from the line of Jason McCarthy with Maxim.

So I just want to piggyback some of the 0918 questions. And Marc, maybe you can talk a little bit about what the market size actually is for liposomal dox because my understanding is that, there is actually a shortage. It's very difficult to make. You have one of the manufacturing facilities that actually can make a liposomal dox. It's almost like making a biosimilar, but the expectation is that liposomal doxorubicin, that market is going to expand with the entrance of generics. There are high barriers to entry. We think that you would be one of the first. Can you talk about how that space is looking to grow on an annual basis from where it is today?

Jason, yes, thank you. And I point back to a couple of my comments in the text of the script and that is that the current market opportunities, if you look at -- if you integrate all of the market research that we've been able to evaluate, including the most recent IMF data, is that the market globally is somewhere in the neighborhood of $500 million to $750 million a year. It's flat in some markets but it's growing in others. And I think, the lion's share of the growth is in -- will be in China going forward for obvious reasons. But also because there are generics laws that are being retooled and that creates some opportunities for having a high-quality manufacturing approach in that market that can leverage the timeline there. We can also potentially leverage our European BE trial data, and as you alluded to, we've shown bioequivalence to the Caelyx product clinically. And we can leverage that data potentially to help facilitate a market entry into China. So that's a complicated market. I don't want to make it sound like it's a no-brainer but there are reverse inquiries from a potential market leader to (inaudible) in their portfolio into what is probably the most rapidly growing market for this product. And we think, we could be the preferred provider of that.

And just a quick kind of housekeeping question. With the capital that's on the balance sheet now, if you're not planning to move HABEO forward right now in the U.S., can we expect some of the burn rate to pull back a little bit further from where it is this quarter to focus on 0918?

Absolutely, Jason. And we believe that the Q1 burn of $4.1 million will reduce much further than where it is now to, maybe, around $3 million a quarter, as we focus the efforts mostly on ATI-0918 and Japan is bringing some more cash from the consumable growth that we have experienced. So I agree with that position.

(Operator Instructions) At this time, your next question comes from the line of Andrew D'Silva with B. Riley FBR.

Could you maybe touch base on the ADRESU trial? So for all intents and purposes, this is the exact same trial as the pilot study, and since there is no placebo, which has been a roadblock for STAR and then progress in OA, just in general. Would you -- or in your opinion, do you expect there to be less risk with results at it relates to potential surprise outcomes relative to the pilot. And if that's the case, what potential issues could there be? I'm just looking for differences as far as enrollment criteria or difference in patient demographics, things of that nature would be very helpful when we assess that opportunity.

Andy, just to confirm, you mean the SUI trial ADRESU in Japan, right?

Yes.

Okay. Yes, I thought that's what you meant. Sorry, I thought maybe you said ADRESU. So it's a good point. We agree with that. To elaborate (inaudible) U.S. trials that we performed, as the requirement of the FDA versus MHLW, [indiscernible] which (inaudible) both of those indiscernible in Japan is that apparently for ethical reasons in Japan, they feel like a scan procedure control group is not -- doesn't fit their ethical standards in that particular market. Therefore, they allow us to conduct a pivotal trial in these patients with the patients on baseline as the comparator. So you're measuring improvement over baseline. Whereas in the U.S., we have to measure against placebo. So one thing that you probably will recall is in our STAR trial, in our ACT-OA trial, there was an extremely strong placebo effect. So if you kind of extrapolate that out without that strong placebo effect in comparing against baseline, that might be -- that might increase the probability of beating the primary endpoint and being potentially approvable in that market and that might be an advantage in that market. So we agree with that point. As to what are the risks, the number one we still have to hit our primary endpoint and that's something that we will know when we get the data. So that's still the major concern, the major roadblock, although we think that given the pilot data, the strength of the response, it is an open-label trial, we have talked to some of the physicians. We think there's a good chance potentially of hitting the primary endpoint, but at the end of the day we'll have to look at the data. We have seen no safety signals, as one would expect and we have -- we had no issues getting that trial enrolled, and we expect the follow-up will be on the complete side elevated to those patients so that we will -- we won't lose patients to a follow-up. There are 4 centers in that trial and we will be able to balance out any individual site-related issues as part of that.

Okay. Just -- so basically, I was just kind of curious from the 11-patient pilot study that took place, obviously, the patient population is 45 for this, so it's much larger, but what are the other differences as far as the patient population that could be variables that we should be thinking about? Are there any significant differences that you're aware of within the pilot trial, the 11 patient trial, patient population and the pivotal trial that was just completed?

No, there is -- they are basically the same population of patients. I guess, one difference, we did actually been following those patients in the pilot trial now out to, I think, 4 years now. And what's interesting is they seem to maintain their benefits, so unlike injectables, where there tends to be a peak effect that may be around 6 months and then you start to see the effect wane, with this procedure, it seems like that the effect continues to improve over time and remain stable out to 4 years, which is very different in terms of that the [files] you get the treatment, then with temporary bulking agents and injectables. So I think, there is potentially a different space for this unique therapy, but the nature of the patient is fundamentally the same group of patients.

Okay. That's good to hear. Based on that, are you starting to look at the -- in any partnerships in Japan yet? And what would be the process, perhaps, to obtain reimbursement in the region? And is there any opportunity also to cross over to female urinary incontinence?

Yes. So as you know Regenerative Medicine is a hot issue in Japan, has been for a while. We're well positioned in that market having a full complement of [COUMADIN] approved products that are growing in sales in that market. So with this trial, being involved in it has created some additional partnering interest and we are having those discussions, both now with our team here in the U.S. and then through our team in Japan. So in terms of reimbursement and next steps, so in Japan, unlike the U.S. you actually get approval and reimbursement essentially at the same time and they're part of the same essential application. So our PI and ourselves have had discussions with PMDA and we will be, once we have the data, we will be ready to -- if it's positive, we will be ready to file for approval and reimbursement nearly simultaneously. We looked at the potential pricing model for alternatives to this therapy for male urinary incontinence. We feel like we have a pretty good handle on what the ultimate pricing will be. And then to your last question, in terms of female urinary incontinence, as I alluded to in my formal remarks that there are -- we have actually done some pilot patients with female urinary incontinence, which as you know, it's probably at least a 10x or more market size opportunity globally. It's a very common complication after delivering children, and we think that with this potential regulatory pathway, a bridging study that we're beginning to contemplate, could allow us to expand the claims and the market opportunities substantially. And that's something that we are beginning to plan out.

Okay. Thank you for the color. Couple more questions. I'm assuming you've been keeping a pretty close eye on the development of the breakthrough device program. Any thoughts on how that could change your decision-making process for HABEO? Domestically in scleroderma or any other indications that you find interesting through that pathway?

So in our discussions with the FDA, they [seem] very encouraging for us as a Class III medical device to repeat the pivotal trial in diffused scleroderma. Because we've already completed a pilot trial and a Phase III trial, there are no safety issues, and as you know, we were fast tracked really from European pilot trial. This, in our view, and in our discussions with the FDA, there is no benefit to what -- to our regulatory approach, with or without breakthrough status. So for us, it's really not something that really helps us in any way.

Okay. And just last question is related to esthetic in breast market, and sales currently taking place in Japan. How -- what will be the best way for us to think of this as we model it out? Should we just assume that it primarily, it's going to be a consumable uptick year-over-year? Or should we -- or better yet, is it smart for us just not to anticipate any meaningful equipment sales. And if that's the case, what function is causing that? Is it working capital requirements either on your side or the customer side? Or is it related to the position and market size and the percent of the market you've already penetrated and sold equipment into?

Really good question. So we have a pretty good handle on what's going on in the market. Over the last 4 years, with a couple of exceptions, we've seen quarter-over-quarter pretty steady consumable growth over that period of time. With respect to the capital equipment sales, because the (inaudible) so small, and it is seasonal, and there are long capital buying cycles, you see it -- it's all over the map. It's sort of the [indiscernible] and it's difficult to predict. Still -- about a year ago, so we really began switching strategies and focusing not on capital equipment sales but on consumable sales. And really in the last 2 or 3 quarters, we're really starting to see the benefits of focusing on our customers and laying a foundation for having them be successful in their practices with this technology. And our leading customers -- our #1 customer is the leading esthetic practice group in all of Japan. And they continue to put this out into increasingly more of their clinics, and when they put it in there, they really get behind it from a marketing perspective. They do it right. And we've been actually working with their marketing team and our marketing team to develop ways to make sure they tailor this offering to that niche of patients that can -- are most likely to benefit and be willing to be a customer for this technology. So whereas in the past we were reliant on a relatively small number of capital equipment sales. Now we have a relatively larger number of consumable sales and that is really driving the revenue number. Right now, we're going to continue to focus on that. Now with respect to capital equipment, we're around 80 devices placed in that market right now. That's going to continue to grow but we will -- we think that the best way to drive capital equipment is to drive consumable utilization because that will drive the new customers for the capital equipment. And because we're focusing on non-academic customers, where in the past we used to -- the private customers can make relatively quick buying decisions. And we're offering lease-to-own plans and other low entry level plans to allow them to get started and be successful with the consumables without being CapEx burdened. And that seems to be paying off.

Okay. And a quick question for Tiago. Your term loan that you have right now, when is the balloon payment or the principal payment due?

So as far as the current amortization schedule, we have the first payment scheduled on the loan in September of 2018 and that amortizes into the summer of 2019. We have begun discussions with them to assess opportunities to push that out further, but I can't comment any further on that at this point.

Your next question comes from the line of I-Eh Jen with Laidlaw & Company.

First of all, I have to start with housekeeping question that for this quarter. The G&A expense seems to be higher than the last few quarters. Should we consider that would be the one, maybe, annualize for the full year? Or should we anticipate that to go down to $1.6 million, $1.7 million range for remainder of the year?

This is Tiago. I mentioned on my remarks, inside the G&A cost that you see in the press release is a $600,000 onetime charge related to a lease termination fee that we paid in Q1 of 2018. So if you exclude that $600,000 from the $2.1 million that you see, you get to $1.5 million, which is roughly what we're going to expect to have on a go-forward basis. We continue to put pressure on that $1.5 million and hopefully, we're able to decrease a little bit further. But I'm not prepared to comment on that at this time.

Okay. Great. That's very helpful. In terms of 0918, I know, you guys have already started manufacturing process. My question is, it is going to have a stability test? When we should anticipate the cost accounting in terms of stability? Because that would be 6 months as well as 12 months’ timeframe. Should that be something in the second quarter of this year?

This is Marc. I would guide you towards the second half of the year in manufacturing those stability lots. As I mentioned in my remarks that we're manufacturing the characterization and validation lots right now. We have some in vitro comparability testing against Caelyx that we need to do. And I also mentioned that we're very pleased with our current stocks [indiscernible] [vendor], and that was on our critical timeline and indiscernible right vendor in with the right COGS per unit. So that we could meet our targeted pricing scenarios. And we're very pleased with [Brylan] in Michigan. So I think, in the second half of the year, we're having those lots manufactured. There is some variability in that depending on how much comparability data we have to generate. But once that comparability data is done then we will put those lots on stability, and I should mention, we plan to file currently after 6 months. And as I mentioned in my remarks, we plan to file using a centralized approach based on our feedback from EMA.

So theoretically, that would put the filing roughly maybe in the first half or maybe even first quarter of next year and the time during that then wait for the 12-month data to be matured? Would that be a possible timeline or you think it is too conservative?

No, I think that's a reasonable assumption at this point. And we'll refine that as we get closer, but that's a good guess right now.

Okay. Great. That's very helpful. In terms of BARDA trial, the RELIEF trial, is there a time? What's the best sort of projection we may have for the recruitment of the first patient?

Yes, so that's potentially could happen now. We're initiating multiple sites, some have already been initiated, others are on the schedule. I think the maximum number of sites is 12. So one of the challenges and I'm sure you know, I-Eh, that with burns there, they are seasonal, they are sporadic and it is difficult to predict when they are going to come in. so we -- In our timeline with BARDA, we've allowed a pretty lengthy enrollment period. But the quickest way to get patients enrolled is get as many sites initiated as possible. And that's what we're really focused on. Those patients will come, but they are going to be difficult to predict.

So it is possible, let's say before the mid-year, you might have the first patient, but it all depends on the eligibility about specific patient to be enrolled? Is that right?

It does. So we're going to rather than focus on -- to focus on things we can control, which is getting sites initiated and up and running and it literally can be relatively soon before -- when you see the first patient enrolled. It will be something that we'll lay out. Once that first patient's enrolled, we'll lay out a more complete timeline for the trial.

Okay. Great. Maybe just 2 very quick questions. One, on the -- some competitor’s idea that is on the market, on your market. On the competitor side, you mentioned [POC] (inaudible) [liposome] is a request for expansion of their filing in Europe. Is there more color in terms of whether that will be something, in other words, would that be suggesting their application still be eligible, viable at the moment? How should we read that?

Thanks for bringing that up. So normally we wouldn't comment on competitors. We brought that up specifically because it is the most advanced potential competitor in Europe and that data is public. So we're monitoring that. It sounds like -- we're not sure now whether that will be ultimately approved or not. They have asked for additional time for more questions. That's all the transparency we really have into that at this point. So we will continue to watch it, monitor it. But we still think we're in very good position as it relates to the European market. That's why it's our number 1 target market right now. And if there are updates, we will make those available on subsequent calls, and those will be made public. They are a public company and EMA makes those decisions public.

Sure. And my last question here is that you mentioned the second targeted market for the time being for 0918 is China. And would you give us a little bit more color in terms of -- you mentioned that competing product there, but in terms of timing, would you more prefer to have some of the study done in the United States -- I mean, here or in the process of filing for European approval, then to seek the partner? Or you could see partner, and maybe, consummate a deal regardless what is the progress in Europe?

No, if I understand your question right, I-Eh, with respect to partnering, we have a number of discussions that are ongoing with a variety of partners in those markets. And our strategy there has been, once we acquired this asset, we got our arms around it, is to begin to talk to partners. We learned a lot and we learned what are the appropriate price points and the expectations for partners, and we can build those into our [sterile] indiscernible] contracting, our comparability data. I think we learned just as much from that process as they learn and that's been a very good exercise for us. We are under no compulsion at this point other than if there is upfront cash that would be great. But we are under no compulsion to get a partner today and our view is that the farther we move the ball down the field, the more valuable this potential asset becomes. So we're trying to find the right balance between finding the right partner and getting the timing and economics right. With respect to -- principally discussing a European partner. With respect to a Chinese partner, we, again, would definitely want a commercial partner. I think, we're thinking more about a technology transfer agreement over time where we can take our technology and what we have learned in the manufacturing of this product and drop that into a partner's manufacturing facility as build a de novo plant for this product and commercialize it in China, where we expect the growth to be. There's a revamp in those regulations and we think the timing is great. And we think that in the interest -- Tiago was just in China recently and has substantial interest from potential partners and we're continuing to have those discussions and hopefully we'll find somebody that we think can be very successful in that market.

Let me just add on one more, as you have mentioned that you could have transfer to manufacturers to China, my question is that you guys have been talking about the production mostly done -- exclusively done in the United States in the San Antonio, so you feel more comfortable about the quality as well as other aspects. Is that -- could be an issue or concern for you if the manufacturer could be transferred overseas? Or do you think that will be sort of exceptional cases, what are your thoughts?

I think that would be definitely something that would be front of mind as we evaluate partners. We want to make sure that if we build a facility and process and product that's of the highest quality, in the U.S., if that could be neared to equaled in that market or we would not do it. We do have the potential from our facility in Texas to supply what we think are any reasonable global supply situations. But we've had a mix of partners that have been interested, some in sourcing it directly from the U.S. And we think our cost structure could support that, believe it or not, or potentially, transferring the technology. So it has to fit within our quality requirements to be able to do that. We're not really worried about so much overlap and market conflict. We think that can be managed. I think it's really more about finding the right group that's dedicated to quality. And based on what we know about changes ongoing at the CFDA, we think that would be CFDA's bias as well.

At this time, I'm going to turn the floor back over to Dr. Hedrick.

Thank you, Alicia. So I just want to make - just end by thanking those of you that have taken time to listen to the call, and those analysts that have participated in the call. The company is very appreciative of your time and to our advisors and to the patients and physicians that have trusted us with their -- with our product. And also are appreciative to our hard-working and dedicated employees who get up every day and come to work and try to make this happen. So thank you once again, 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.