Thermogenesis Holdings Inc (THMO) 2014 Q4 法說會逐字稿

Good day and welcome to the Cesca Therapeutics, Inc., fourth-quarter fiscal-year 2014 financial results conference call. (Operator Instructions). Also note, today's conference will be recorded and will be accessible both by phone and Internet. Please refer to the press release about this conference call on the Company's website, CescaTherapeutics.com, for further details.

The Company has asked that I read the following statement. Management will make comments today that contain forward-looking statements. Forward-looking statements are any statements that are made that are not historical facts. These forward-looking statements are based on current expectations of the management team and there can be no assurance that such expectations will come to fruition. Because forward-looking statements involve risk and uncertainty, Cesca's actual results could differ materially from management's current expectations. Please refer to the press release; the Company's forms 10-K, 10-Q; and other periodic SEC filings for information about factors that could cause different outcomes.

The information presented today is time sensitive and is current at this time. If any portion of this call is rebroadcast, retransmitted, or redistributed at a later date, Cesca will not be reviewing nor updating this material.

I would now like to turn the conference over to Mr. Matthew Plavan, Chief Executive Officer of Cesca Therapeutics, Inc. Please go ahead, sir.

Thank you, Operator, and welcome, everyone, to our fiscal 2014 year-end conference call. I'm pleased to be joined by our President, Ken Harris, and our CFO, Dan Bessey.

As I have done in previous updates, I would like to begin by outlining the three key areas of execution that are vital to the commercialization of our cell therapies. They are, first, complete the integration of our companies into one; second, to innovate clinically; and third, to innovate technically.

Reflecting on this past year, I am pleased to report that we've successfully executed on each of these goals. In February, we announced the consummation of our transformative merger with TotipotentRX. This merger marked the beginning of our strategic pivot to become a fully integrated regenerative medicine company.

Cesca Therapeutics combines proven device engineering and advanced stem cell processing with demonstrated stem cell research and development and clinical expertise at the point of care. We now possess a robust pipeline of cell therapies targeting vascular, orthopedic, and oncological indications, each addressing unmet medical needs in large patient populations.

Also, now owning a cord blood bank gives us an inherited experience to better serve our cord blood customers through enhanced service and support, greater advisory services to them, and more effective clinical innovation.

Our clinical innovation during the year is best illustrated by the development of our Surgwerks autologous cell therapy platform. Surgwerks is based on specific fundamentals we believe will maximize our commercial success. First is safety. We use a patient's own stem cells. We do not expand, enrich, or otherwise manipulate these cells. Therefore, we believe our therapies are naturally safe.

Second is therapeutic dose process control. Stem cells must be handled with great care to maximize their curative potential, so we focus on controlling their environment, ensuring they experience optimal temperatures, carrier viscosity, and handling during harvest, processing, and readmission back into the patient. Augmenting precision handling with real-time cell diagnostics, we accommodate for the impact of patient-to-patient variability and ensure the cells administered comprise a therapeutic dose.

Third is scalable delivery. Our therapy is conducted in a single 60- to 90-minute procedure at the patient bedside under the control, direct control, of the physician.

The combination of these three fundamental designs means our therapies are very safe, they are effective, they can be performed at low cost, and they are on a regulatory path that's much shorter than most of the other therapies under development, which Ken is going to spell out more specifically in a moment. This all translates into a regulatory fast track and commercialization with compelling cost/benefits ratios that we expect will achieve broad insurance provider coverage.

We believe the beauty of our approach is that we begin with inconsistent starting material -- in other words, each patient's bone marrow; and we produce a consistent result each time, that is autologous vasculogenesis or the body's own formation of new blood vessels. Whether repairing damaged tissue in the heart, ischemic tissue in the leg, or growing new bone for spinal fusion, or to treat decaying bone in the hip due to avascular necrosis, it is the formation of new blood vessels bringing oxygenated blood with regenerative cells to the areas in need that is the fundamental healing mechanism of all our therapies.

Just within our initial eight indications targeted, we estimate there are over 6 million patients that can be effectively treated and potentially cured via revascularization of the ischemic or damaged tissue. Even with the cost point of our procedure consistent with current surgical and pharmaceutical procedure costs, this represents a multibillion-dollar market opportunity for us.

Perhaps the greatest example of how effective we believe our therapies will vascularize tissue in multiple indications is the result of our Phase 1B clinical trial treating no-option Rutherford 5 patients who suffer from critical limb ischemia.

In January, we announced the safety and early efficacy of our single-center, unblinded, single-arm study in 17 patients with late-stage non-reconstructable CLI. The trial achieved both its primary safety endpoint and secondary efficacy endpoints at an average of 12 months follow-up, having no serious adverse events determined to be related to the therapy. We achieved greater than 82% amputation-free survival rates and statistically significant improvement in pain reduction, six-minute walk distance, open wound healing, and vasculogenesis over the initial 12-month follow-up period in the treated leg.

Then in June, we announced a longer-term follow-up on this feasibility study. 15 of the 17 attempt-to-treat subjects were clinically examined six months after the conclusion of the original study. Each patient reported no new adverse or serious adverse events since the close of the study, and 14 of the 17 subjects had their treated limbs intact without any additional minor or major amputations occurring since the trial conclusion.

The study now has a median follow-up of over 26 months.

Based on these compelling results and in consultation with our advisors, we determined that the Surgwerks CLI product should fall under the investigational device exemption instead of a combination product, as was previously thought. On this advice, we submitted our preliminary application for an investigational device exemption, or IDE, with the Food and Drug Administration in March. In its written response to our submission, the FDA determined that the Surgwerks CLI therapy falls under the IDE regulation. This was big news for us as it likely follows or allows Cesca to go from a Phase 1-2 feasibility study straight into a Phase 3 pivotal trial.

Subsequently, in June, we held the pre-submission IDE meeting with the FDA to discuss the Company's CLI proposed pivotal clinical trial design, with the primary intent of avoiding the pitfalls of previously approved trials that have struggled due to design elements that have created unnecessary enrollment barriers. We are quite pleased with the feedback we received from the FDA, and Ken is going to provide additional information on the application we expect to submit to the FDA in the fourth quarter of this calendar year.

Another critical element to developing commercially viable cell therapies is to design these therapies and the clinical trials with reimbursement in mind. We have been active this year in interacting with the Centers for Medicare and Medicaid Services, or CMS, regarding our CLI therapy.

In August, we presented our case study highlighting the potential clinical benefits and cost savings of our Surgwerks CLI cell therapy. Along with other regenerative medicine industry representatives, Ken, our President, participated in presenting organized and led by the Alliance for research -- sorry, for Regenerative Medicine. Key messages included in the presentation were our belief that our therapies have the potential to significantly mitigate the disease symptoms associated with CLI and have the potential to reduce the current cost of CLI to the CMS system by billions of dollars. In our case study to CMS, we highlighted the safety and early efficacy results of our Phase 1-2 CLI clinical trials and proposed design for the pivotal trial.

We enjoyed the opportunity to discuss with CMS representatives our unique therapy approach and our plans for proving efficacy with important clinical endpoints.

I mentioned earlier that we believe we are the first fully integrated regenerative medicine company. One of the reasons we assert this is our relationship with Fortis Healthcare as their exclusive provider of stem cell therapies. In June, we announced the renewal of the master collaboration agreement with Fortis that extends this important relationship.

The agreement affirms Cesca's cellular therapy and cord blood bank at Fortis, renews the cord blood banking collaboration, and launches the stem cell therapy services for hematological diseases across the Fortis network. The scope of services now provide for specific regenerative medicine programs, including cord blood banking services, point-of-care autologous cell therapy product and services, hematopoietic stem cell therapy services, and oncological cell therapy services.

Fortis Healthcare and Cesca Therapeutics will continue to leverage Fortis' hospital network and their respective areas of clinical expertise to launch world-class matched and unmatched bone marrow transplants and create more awareness around the benefits of stem cell therapy across India.

Before I turn it over to Ken for an update on our clinical programs, I want to take a moment to provide our thoughts on some very encouraging clinical news in the regenerative medicine space. First, you may have seen the Mayo Clinic announced the first stem cell clinical trial for pediatric congenital heart disease in the United States. The trial aims to determine how stem cells from autologous umbilical cord blood can help children with hypoplastic left heart syndrome.

We are pleased to see the Mayo Clinic making an investment in pediatric heart disease medicine using autologous umbilical cord blood because we believe initiatives designed to demonstrate the clinical utility of cord blood stem cells are critical to the growth and viability of the cord blood banking sector, and, in this instance, should compel hospitals to consider collecting cord blood as a routine preventative measure against conditions such as pediatric congenital heart disease and blue baby syndrome, just to name a couple.

Also, Cytotherapy recently published topline results of a study performed by the University of Muenster, Germany, authored by Malyar, et al. The purpose of the study was to evaluate the effect of autologous bone marrow mononuclear stem cells on symptoms and perfusion indices in severely symptomatic patients with peripheral artery disease, or PAD. The 16-patient study included a six-month follow-up, resulting in an 88% limb salvage, 75% pain reduction, and 71% complete wound healing or reduction of ulcers.

The study concluded that if their observations could be confirmed by a large-scale clinical trial, bone marrow MNC transplantation could become an alternative therapeutic option for patients with end-stage PAD.

We find the results of the Malyar study to be consistent with the safety and compelling early efficacy results we observed in our own Phase 1-2 feasibility trial treating these non-option CLI patients.

Additional meaningful clinical corroboration of the power of autologous mononuclear cells to create revascularization where desperately needed for end-stage PAD patients excites and further encourages our efforts underway to obtain FDA approval of our Phase 3 pivotal trial in CLI.

With that, I would like to now turn the call over to Ken for an update on our clinical milestones and accomplishments.

Thanks, Matt. I am pleased to provide an update today on the progress we've made on the clinical programs.

During the last three to five months, we've made significant progress in advancing clinical programs and expanding our clinical research team to better leverage autologous therapies in different indications.

Early in the quarter, we announced the formation of our clinical and scientific advisory board. The advisory board will serve to help set our strategic goals for the advancement of research towards the development and commercialization of our autologous cellular therapies and to improve patient care in the field of hematology, oncology, cardiovascular, including neuroischemic injury and orthopedic indications.

The advisory board will review evidence-based practices, identify training needs of network providers, identify reimbursement processes, and monitor clinical guidelines that include cultural factors important in achieving optimization outcomes. The newly formed advisory board will consist of leading scientists, researchers, and clinicians drawn from the regenerative medicine field who've led landmark clinical research in hematology, oncology, cardiovascular, and orthopedic development.

We have been pleased to have appointed Dr. Solomon Hamburg of Cedars-Sinai Medical Center and the University of California in Los Angeles as the Chairman for the hematology-oncology subcommittee of the board. Professor Hamburg is both a scientist and a practicing hematology-oncology physician, holding both a PhD and MD degree. He also leads the Tower oncology research department, focused on innovative anticancer therapies, including cell-based cures.

Additional appointments on the hematology-oncology, cardiology, and orthopedic committees will be made in the coming fiscal year.

In addition to the establishment of the clinical advisory board, we have also expanded our professional clinical team. We've retained the services of Dr. Gary Cohan, who will lead our team as the chief medical advisor. Dr. Cohan was previously the Chief Medical Officer of TotipotentRX and, as such, has in-depth understanding of our clinical approach for developing stem cell therapies.

Dr. Cohan will co-lead our clinical applications group, which include expanded clinical science PhDs focused on optimizing the mechanism of action for autologous therapies and degreed nurses who will oversee our unique clinical trial field operations, or our CRO.

We are now staffed with a medical and scientific team that will enable us to advance our clinical trial initiatives in the US and in India in critical limb ischemia, cardiovascular disease, ischemic stroke, and bone marrow transplants. As we approach the launch of our pivotal CLI trial, we will be increasing our staff of registered nurses to manage the trial sites, quality assurance of the clinical data, and the overall care provided to our CLI patients at our treatment sites.

Before I get into specific updates on each of our clinical programs, I would like to provide an overview of our regulatory structure and pathway towards the PMA approval for our therapies. As we have recently discussed, we now know that our Surgwerks approach to cell therapies falls under the investigational device, or IDE, regulations in the US, which is under the jurisdiction of the Centers for Biologics Evaluation and Research, or CBER, of the US FDA.

The rationale for this decision by FDA is that our treatments involve autologous cells which are minimally manipulated, never leave the operating room and the surgeon's control, and additionally, the products which Cesca provides are devices optimized for better cell aspiration, cell processing, and cell delivery, thus placing us on the IDE pathway.

The IDE pathway typically only involves a feasibility study, which is our early first-in-human trial specific to safety for the treatment indication, and then a final pivotal study statistically designed to evaluate both safety and efficacy, leading to a premarket application, or PMA, for final marketing authorization. Since the cells we are injecting are autologous or from the patient, minimally manipulated, and never leave the operating room, the majority of the regulatory focus will be on the safety of the devices which process the autologous cells and then on the overall efficacy outcome of the disease treated.

All in all, being an IDE significantly reduces our time to market compared to an IND or BLA study, which requires three independent phases.

As we have highlighted in earlier calls, our CLI program is our most advanced therapy in terms of its lifecycle and regulatory pathway. In March of this year, we submitted a pre-IDE information package for the CLIRST pivotal clinical trial to the FDA for their review. As Matt highlighted, then in June we held the pre-IDE meeting with the FDA to discuss their feedback on the pre-submission package, including our trial design.

We were very pleased with the discussion of the meeting with the FDA, as there were several significant takeaways for us. Part of the significant dialogue was around the trial design and we jointly discussed Cesca's concern over placebo controls in this patient population. We concluded from the discussion that the FDA will be receptive to a randomized control trial with an active control design, with the active control design not requiring a placebo.

This is important to us because we believe it will improve enrollment rates to reach an 80% tolerance statistically significant clinical study. In our opinion, recently terminated studies treating CLI patients did not fail because of the absence of clinical efficacy, but rather the inability to obtain sufficient patient enrollment.

Please keep in mind that our population will consist of patients with Rutherford category 5 no-option peripheral arterial disease. These patients are facing near-term amputations, are in great pain, and have open ulcers, typically with gangrene.

Asking these patients to potentially submit to a randomized blinded placebo procedure is a disincentive to participate in the program. Beyond this practical challenge, we believe administering a placebo procedure to a patient who will ultimately lose their afflicted limb raises certain ethical issues from a medical perspective, raising the potential for a challenge by institutional ethics committees.

For these reasons, we believe using the latest in the standard of care for our control arm provides us with the confidence of a sound comparison arm in our overall study design that would be able to enroll the required number of patients. However, to minimize the bias in the unblinded study, we will be employing a blinded independent assessment committee, similar to standard practice in oncology studies today.

Lastly on the study design, the FDA recommended that we include biological assays in our IDE application to support our theory of the method of action in our clinical therapy and correlate them backwards to the prior human feasibility study. As a result of this feedback, we've spent the last several months conducting bioactivity studies supporting that our Surgwerks CLI kit and VXP system can produce cells capable of initiating revascularization.

In addition to the recommendations made by the FDA staff, we have also made significant progress on other elements of our IDE application, including final testing and validation of the various devices that are used in the Surgwerks CLI kit, including our VXP cell processing device, our specialized and unique infusion needle, and our point-of-care cell diagnostic device.

We have also just appointed Christy Hansen new head of field clinical trials, who joins us having served as the clinical research manager for the Jobst Vascular Institute. Christy has managed four prior pivotal peripheral vascular studies and will be a significant asset in guiding our clinical enrollment programs in the US.

As you can observe, we have accomplished a lot in the important steps required for our IDE application that we believe will facilitate a smooth and efficient approval process with the FDA. Based on FDA regulations, they have 30 days to respond to an application for an IDE clinical trial, but have historically taken as long as 180 days to approve a complex trial like this. So we are taking all the prudent steps we believe are necessary to minimize the FDA's review and approval process.

Based on our current expectations, we expect to file our IDE application in the fourth quarter -- fourth calendar quarter of 2014 and will be ready to launch our CLI trial in the first calendar quarter of 2015, subject to the timing of the FDA's final approval.

Moving on to our acute myocardial infarction therapy, as is the case with the CLI trial, we have been performing the additional preclinical work necessary to submit a Phase 2 feasibility application to the Indian authorities to conduct a clinical trial treating patients who have suffered an ST-elevated acute myocardial infarction. These STEMI patients will be treated with our AMIRST autologous cell therapy, using the Surgwerks AMI kit and VXP system.

Our latest preclinical work on our AMI program is focused on validating the updated, highly specialized intracoronary cell delivery catheter, which is being co-developed by Cook Medical for Cesca and also uses elements of Cesca's patent-pending process. This heart catheter is one of the very important components in distinguishing our Surgwerks AMI kit. We have completed a very exciting animal study demonstrating that the Surgwerks AMI kit with the optimized Cook intracoronary catheter safely delivers autologous cells, and in the study they home beautifully to the ischemic region of the heart.

As Matt mentioned earlier, based on the results of our pilot human study treating a STEMI patient with a proprietary AMIRST therapy, as well as the preliminary efficacious results of our revascularization in the CLI feasibility study, we are looking forward to making progress on our AMI clinical protocols and the design of the clinical trial.

We have currently targeted the first calendar quarter of 2015 to submit our application to the Indian authorities for the Phase 2 study. We look forward to updating you on our progress over the next few quarters.

Our final but equally exciting area in clinical development progress this quarter was in the hematopoietic stem cell transplant sector. Through our collaboration with Fortis, we began evaluating curative method improvements for optimizing engraftment rates, as well as improving donor availability through unmatched transplants in pediatric patients suffering from genetic abnormalities, such as beta thalassemia, sickle cell disease, and severe combined immunodeficiency, or SCID disease.

Each of these diseases are genetic abnormalities and typically fail. However, allogeneic bone marrow stem cell transplants can be curative if donor units are provided with a high level of HLA matching or, as is evolving in the market now, the use of family donation or family unmatched units using red blood cell and T-cell depletion processes.

The opportunity we see jointly with the patient population in India and globally is the use of the haplod-identical transplant, which makes curative bone marrow transplants available to the previously unmatchable patients.

In traditional bone marrow transplant, the better the match, the better the outcome. The cell type match has historically been critical for two reasons -- faster engraftment time and thus minimizing the risk of infectious disease mortality; and second, the reduction of graft versus host disease in a less than perfectly matched unit. Unless the donor and the patient are a perfect match in both red blood cell type, called ABO match, and white blood cell type, called HLA matching, additional laboratory and pharmaceutical adjunct steps are normally required.

Each of these manipulations and therapies comes with their own risks. One specific risk in red blood cell mismatch is the necessity for depletion of the unwanted red blood cells in plasma. In normal routine labs and chemical processing practice today, as one depletes the red blood cells in the plasma, they also inadvertently deplete significant numbers of the desired stem cells. The lower the stem cell count becomes, the longer the patient takes to re-establish a newly engrafted blood and immune system, resulting in increased risk of illness and potential death.

Our AutoXpress and MarrowXpress systems can effectively address the inadvertent stem cell loss and more efficiently prepare a transplant unit. Specifically, our stem cell yields are between 30% to 40% higher than current laboratory methods, leading to an anticipated better engraftment rate. Typical engraftment rates for US centers for matched units are around 93%, but in mismatched units can be as low as 70%, according to two separate studies by Mattson et al and [Confer] et al.

We are currently evaluating the performance of our product in a 10-patient major ABO mismatched pediatric open-label study with the intent of submitting a 510(k) in the US.

The other hematological focus for us, which is India-centric, is the optimization in our Fortis GMP laboratory for preparing haplod-identical transplants in the treatment of pediatric disorder patients unable to find suitable HLA matches. This capability is the one which will truly enable bone marrow transplant in the Indian market, which has little to no proactive donor matching programs.

We are currently just under the midpoint of a 10-patient haplod-identical related donor pediatric open-label study, with depletion of the T-cell receptor alpha beta cells, otherwise known as TCR depletion, to minimize GVHD in the less than perfectly matched transplant.

As Matt has mentioned in his earlier comments, we estimate this to be a sizable market opportunity for India alone, in collaboration with Fortis. The global market for the devices alone in both the [AVI], ABO, and TCR depletion could exceed several million dollars per year. However, the BMT services, inclusive of the TCR depletion we provide to Fortis, could potentially pass into 6,000 treatments per year in India alone, which equates to a $100 million to $200 million addressable market.

Thus far, we are proud to announce that we have completed over 50 stem cell therapy BMT processes for Fortis Memorial Institute and anticipate this to grow each month hereafter.

In closing, I would like to say that at Cesca we believe that stem cell therapies will revolutionize healthcare in the US, Europe, and throughout the world. We also believe that autologous therapy is the most probable approach for near-term commercialization. Believing that our approach to stem cell therapies is unique and highly effective, providing measurable cost benefit for insurance providers, and easy for physician adoption, we are confident the Cesca Surgwerks and CellWerks platforms will play a leading role to successfully transform the emerging field.

I would now like to turn the call over to Dan for a review of the quarter's financial performance.

Thank you, Ken, and good afternoon, everyone.

In the way of a brief overview of our financial operations, we have a base set of product lines that derive their revenues primarily from the sale of our automated and manual cell processing and storage systems to cord blood banks and hospitals throughout the world. These cell processing product lines generated approximately $5.9 million in gross profit during the year, which we used to partially fund our clinical trial programs and overhead.

In addition to the gross profit generated by our cord blood product lines funding cord blood device innovation, they also support the technical engineering, manufacturing, and quality systems and functions necessary to pursue our cell-based clinical trials programs in vascular, orthopedic, and oncological indications.

As noted earlier by both Matt and Ken, our primary focus is to develop autologous stem cell therapies using our proprietary Surgwerks kits to address unmet medical needs in large patient populations.

During the last six months, we have been active in the capital markets, successfully raising net proceeds of $16 million through private and public placements of equity securities. In January of this year, we raised net proceeds of $5.9 million by issuing 3.3 million shares of common stock at $2 per share. And in June of this year, we raised approximately $10.1 million in net proceeds by issuing 7.5 million shares of common stock at $1.50 per share. The use of these proceeds will be for the development and advancement of the Company's cell therapy clinical pipeline with a focus over the forthcoming year to commence clinical trials treating critical limb ischemia and acute myocardial infarction.

Moving on to our investor relation activities, as we committed to in last quarter's earnings call, we remain active in our investor relations pursuits, having participated in a number of investor conferences during the last quarter. In addition to our formal communication process, we have also used our recently launched social media platforms, including Twitter, Facebook, Google Plus, StockTwits, and Stocker, to assist us in keeping our investors informed of key Company accomplishments, as well as our observations of trends and news in the regenerative medicine space.

As we have noted in previous calls, we're committed to expanding the research coverage of Cesca, so we're very pleased to have Dr. Ren Benjamin of H.C. Wainwright & Co. initiate coverage on Cesca during the fourth quarter. Ren has his doctorate in biochemistry and molecular genetics and has presented at various international conferences and published in peer-reviewed journals. Ren's recently issued report, entitled An Investor's Guide to Understanding Regenerative Medicine, is an excellent piece covering our industry and its various investment opportunities.

So with that, let's take a closer look at our financial results for the fourth quarter and full year. Net revenues for the quarter ended June 30, 2014, were $3.8 million, compared to $4.1 million for the same period in 2013. The decrease in revenues of $310,000 was due to lower sales of our AXP consumables in the Asian cord blood market and lower sales of our manual consumables. These decreases were partially offset by an increase in sales of our AXP consumables in the United States.

Operating expenses for the quarter ended June 30, 2014, were $4.4 million, compared to $3.5 million for the same period in 2013. The increase in operating expenses of $981,000 was primarily attributable to the development of our cell therapy clinical program, including costs associated with preparing our IDE application with the FDA for our pivotal clinical trial treating no-option patients with late-stage critical limb ischemia.

Also contributing to the increase in operating expenses were legal costs associated with defending our Res-Q patents. These costs were partially offset by the absence of legal and advisory fees associated with consummating the merger with TotipotentRX in February 2014.

Adjusted EBITDA loss was $2.7 million for the quarter ended June 30, 2014, compared to $1.9 million for the same period in the prior year. The increase in adjusted EBITDA loss of $736,000 was due to lower sales of AXP and manual consumables, increased legal fees associated with defending our Res-Q patents, and the development and advancement of our clinical therapy clinical program.

Net loss for the quarter ended June 30, 2014, was $2.9 million, compared to $2.4 million for the same prior-year period. The net loss increased by $472,000 due to lower sales in our cord blood product lines and an increasing cost associated with advancing our cell therapy clinical program in anticipation of launching clinical trials in the forthcoming year treating critical limb ischemia and acute myocardial infarction.

Moving now to full-year financial results, net revenues for the year ended June 30, 2014, were $16 million, compared to $18 million for the same period in the prior year. The decrease in operating revenues of $2 million was due to a decline in AXP disposable sales associated with the wind-down of product inventory at a major US-based distributor upon the Company's termination of the distribution agreement. The Company now sells its AXP cell profits and consumables directly to its US-based customers.

Also contributing to the decrease in revenues were lower AXP cell processing consumables sales in our Asian market, due to a delay in the construction of a new cord blood processing facility at one of our large Asian customers who is implementing our automated AXP cell processing platform. Also, other revenues decreased as a result of the sale of our thermal line and CryoSeal product lines during fiscal 2013.

Operating expenses for the year ended June 30, 2014, were $14.9 million, compared to $9.4 million for the same period in the prior year. The increase in operating expenses of $5.5 million was due to the development and advancement of our clinical therapies program, including labor costs associated with increasing clinical and scientific personnel, legal and advisory fees to support the preparation of our IDE application with the FDA for our forthcoming pivotal trial treating CLI, and engineering costs associated with the development of our MXP and VXP cell processing devices to be used in our forthcoming CLI and AMI clinical trials.

Operating expenses also increased due to professional and legal fees associated with consummating the merger with TotipotentRX and legal costs incurred to defend our Res-Q patent.

Lastly, in fiscal 2013 we recorded a gain of $2.2 million on the sale of our non-core thermal line and CryoSeal product lines, which also contributed to the year-over-year change in operating expenses.

Adjusted EBITDA loss was $7.4 million for the year ended June 30, 2014, compared to $4 million for the same period in 2013. The increase in the adjusted EBITDA loss of $3.4 million was due primarily to lower sales in our cord blood product line, costs associated with advancing our cell therapy clinical program in anticipation of launching clinical trials in the forthcoming year treating CLI and AMI, and an increase in legal and advisory fees associated with completing the merger with TotipotentRX.

Net loss for the year ended June 30, 2014, was $8.6 million, compared to a net loss of $3.1 million for the same prior-year period.

We ended the fourth quarter with $14.8 million in cash, compared to $6.9 million at the end of fiscal 2013.

In closing, I would like to briefly comment on future financing plans and expected cash burn. At last quarter's earnings call, we said that looking forward we intend to invest $15 million to $20 million in our clinical programs over the next 18 to 24 months. Having raised $10 million of that goal in our recent financing in June, we will look for beneficial conditions in the financial and capital markets and, through possible strategic sources, to acquire the additional $10 million in the coming 12 months, assuming favorable market trends.

Regarding cash burn, our cost structure and cash outflows will largely be influenced by the development and advancement of our clinical programs. We expect future clinical operating expenditures will increase over historic levels as we commence our CLI pivotal clinical trial and our AMI feasibility clinical trial in the forthcoming year. As we approach the commencement of these trials, we will provide further updates on our expectation of our cost structure and cash expenditure levels.

I will now turn the call back to Matt for his closing remarks.

Thanks, Dan. A few final comments before turning the call over for questions.

We believe fiscal 2014 was a year of major positive change for us as we repositioned the Company towards much larger market opportunities and better equipped ourselves to seize those opportunities to create value for our shareholders. We've developed a portable, fully integrated autologous therapy platform with [inhuman] safety data and early efficacy across eight indications. We have secured funding to advance three of the largest of these opportunities, CLI, AMI, and bone marrow transplant that we've talked about on this call.

Now our remaining protocols to treat another six indications with our Surgwerks process include stroke, osteoarthritis, avascular necrosis, nonunion fractures, and spinal fusion. These are all very valuable assets to us that we will deploy as we determine the optimal path for each. And the optimal path could be through outlicensing, direct funding, or through partnerships.

As I commented in my opening statement, we remain very excited about the clinical power of our Surgwerks platform and see tremendous upside in our current valuation when we look at our clinical assets and their potential benefit to the regenerative medicine space. We are confident in our upcoming milestone achievements through the combination of our active participation in investor and clinical market forums that will serve us to substantially enhance the awareness of Cesca and the true value it presents and represents to patients in the healthcare system.

Now with regard to our upcoming clinical milestones, let me summarize those in the near term. In the October-to-December quarter, we expect to, one, submit our CLI pivotal trial to the FDA for formal FDA approval; and, two, to release the data for the 10-patient trial ABO mismatch study. And in the January-to-March quarter, we expect to be prepared to begin enrollment for our CLI pivotal phase trial, which is, of course, contingent on the FDA approval of our IDE. Second, we intend to submit our request for approval of our AMI feasibility study in India, as Ken mentioned, and then, lastly, to submit our bone marrow transplant 510(k) application to the FDA for approval in that quarter.

So now with that, I would like to turn the call over to the operator to open it up for questions.

(Operator Instructions). Dr. Ren Benjamin of H.C. Wainwright.

Congratulations on a transformative year. A couple of questions for you. Maybe just starting off with the Phase 3 trial or pivotal study in CLI, can you talk a little bit about any sort of interim analyses that might be built in, approximately how long you think that it may take, and what exactly is the latest and greatest standard of care and what impact that may -- what sort of results might that latest and greatest have on amputation-free survival?

And the other question in regards to this trial is, is there a difference between the latest and greatest standard of care between US and India? Or will there be -- will the trial be essentially streamlined and everyone will be using the same standard of care?

That's a good question, Ren. Thank you. There's a couple of them there. In terms of the interim review, there will be a review by the Safety Review Board, and I think Ken is well positioned to answer that, as he has been in the thick of this for us.

Right. So we will do the data safety monitoring at different points throughout the study.

And for interim data analysis as far as efficacy, we have looked at a nine-month interim look. And that will stay very focused on the primary endpoint, as well as safety endpoints. And if we drill down into the secondary assessments, we start changing the potential power of the study by opening it up and biasing it. So we are keeping the interim analysis as minimal as we can to keep it on track.

I think the second part of your question was around what is standard of care. And so standard of care primarily today is good medical management of hyperlipidemia, hypertension, anticlotting factors, and general cardiovascular health. So each of the patients will be prescribed a list which is available of standard drugs that are available globally. And they will be on a standard dose to their body weight, age, etc. And then everyone will receive proper wound care support throughout the study, which will include debridement, if necessary; proper wound advisement; and then review at a wound care clinic at each of the study endpoints of one month, three months, six months, and 12 months.

And Ren, were you specifically asking whether we would have a report midway through the pivotal with regard to interim results?

Yes, I was -- about an efficacy interim analysis.

No, we will only have leading indicators of amputation-free survival.

However, as I did mention in the script, we will be using a blinded independent review committee, and maybe let me highlight that briefly. The reason for this, and this is an FDA request, is because we requested to remove the requirement for placebo control, which unblinds the trial, although it significantly changes enrollment. And the FDA was very supportive of that.

We both sat down and tried to figure out a way of minimizing bias. In order to do that, we've appointed a blinded independent committee and they will assess all of the data, and they will determine both the timing of amputation -- well, they will determine if amputation is to be counted and the timing that the amputation occurred. And although the surgeons will continue to do the practice of medicine, they actually will not be determining whether the patient is amputated or not for means of the regulatory science. They will for the patients themselves.

And what is the delta we should be looking for, Ken, between the treated arm and then the standard of care?

Okay, so we have -- I'll tell you, it will be somewhere between two-to-one or three-to-one ratios. And we had dialogue with the FDA around both of those.

We are pushing for three-to-one, again because we can have a powered study and it drives better enrollment. And the FDA's feedback to that is they would be receptive to a properly argued three-to-one ratio. And that's what we'll do. But that doesn't mean that's what they'll agree to.

And Ren, just to clarify, were you asking us to project what we thought the difference between the control arm and our treated arm are?

Yes, as far as amputation-free survival.

Oh, I see. Okay. Typically, a Rutherford 5 patient with the current best practice of medicine is amputated within six months.

And you see a significant portion, about 30%, coming in the first 60 days and then about another 40% coming within six months, and then the remaining trail throughout the further endpoints.

And part of those statistics are impacted, one, by the physicians' drive to amputate; and, two, by the patients' agreement to amputate.

The advantage we will have by the blinded independent review committee is even if the patient doesn't want to be amputated or if the surgeon is not ready to amputate, if our committee determines that the patient should be amputated, the amputation will count at that point. This would be a committee of two people, adjudicated by a third, should they disagree. And it's really becoming much more of a standard in no-option patients to use these independent decision boards.

Excellent. Just in regards to the release of the ABO mismatch study, can you give us some color as to what we should be expecting, what might be considered a good result, and how we should interpret the results?

Okay. We will be looking for, A, adverse events to -- obviously, as you give an unmatched red blood cell component, you will have adverse events. So that will be our primary endpoint. And our secondary endpoint will be both rates and timing to engraftment.

Got it. Okay. And then, just one last question regarding the CMS discussions. Could you give us any color as to those discussions and any thoughts you may have regarding pricing or ways to price and get reimbursed, both here in the US, as well as worldwide?

Yes. Again, I think I'd like to defer to Ken on this. He's been interacting directly with the CMS folks.

Yes, so we are approaching CMS for two different questions. The first one is to actually get reimbursement of the clinical trial itself.

And because we have enrolled to be an IDE, there are statutes that allow many of the hospital costs, the in-hospital patient costs of the patient in the clinical trial, to be reimbursed by CMS. So we had dialogue around that.

As you know, last year in the Affordable Care Act, CMS became actually a healthcare agency over -- compared to a payer position they had had before. So they actually have input into clinical trials.

So our second goal in initiating dialogue with them was for a review of our clinical trial design to ensure that, if we are successful and if FDA would grant us marketing clearance, would we receive reimbursement under CMS. And their rules are quite different now under the Affordable Care Act. They are really focused on superiority and not paying for multiple types of therapies. Although they may be FDA approved, Medicare really wants to get to the level where they will prioritize the therapies they want CMS patients or recipients to have.

And so we have a better understanding of their view of what we need to do in the trial and we have designed the trial to meet both their needs and FDA. So ultimately, we would come back, I think, and at a minimum be in the market for an equivalence to amputation charges. The average amputation reimbursement fee today is about $13,000.

Excellent. Thank you, guys, very much and good luck going forward.

Jason Kolbert of Maxim.

Hey, guys. Very thorough call, and with the questions with Ren, you have explored most of the things I would ask. But I wanted to get into a little bit on some of the trial assumptions.

One of the areas that we've seen hiccup with CLI in the past is what event rate to assume in the control arm. And while the clinical trial, the Phase 1 data that you guys are quoting is spectacular, I want to better understand what types of numbers in terms of powering and what the assumptions are that you are making in terms of the AFS rate in the control group and the active group.

And if you could just address again -- I know Ren already asked it and I know you tried to address it, but help us understand how long it will take to enroll and when we could expect to see data, if you wouldn't mind just clarifying that one more time. Thank you.

Yes. Go ahead, Ken.

Okay, so starting with the parameters of the study design, so our assumptions are that the control arm should have amputation rate of about 60%.

And because there are not good data or statistics around that trailing 30% to 40% of the patients I mentioned in Ren's question, we just didn't know. So we assumed that there would be no amputation in those trailing people, so that about 30% to 40% would keep their limbs.

So, a 60% amputation rate. We assumed a 15% mortality and dropout rate. And from an anticipated response rate in the treated arm, we used 72%. And we used that because we had a 72% minor and major amputation rate, although our major amputation rate was 82%. We used 72% just to be conservative.

Plugging all those in together, at an 80% powered study we will be enrolling 218 -- between 180 and 218 patients.

So can we just talk about that a little bit? So if you are talking about a 17% rate -- sorry, a 70 -- I'm not so sure I understood. You are assuming a 60% AFS rate in control, right?

A 60% amputation rate.

Right, okay, a 60% amputation rate. What amputation rate are you assuming in the active arm?

We are assuming an amputation-free survival rate of 28%.

I got it. Okay.

Amputation (multiple speakers) -- sorry, amputation rate of 28%.

Right, an amputation rate of 28% versus 60%, or two-to-one; it's 60% control and I'm going to just round it to 30% in the active arm.

But it just -- that strikes me as -- help me understand. Is that what has driven the powering calculations? Because if, let's say, it turns out that the active arm were 45% versus 60%, that would change your powering assumptions. And I'm just -- I'm a little concerned because I've seen many companies, based on small numbers, go in with a high assumption in terms of the active arm and it just didn't pan out. So it strikes me that a 28% amputation rate in the active arm is an aggressive assumption, no?

Well, I don't think it's that aggressive because, again, we saw 82% in our study. We saw the 88% in the Muenster study that Matt talked about in the script. And in properly designed trials, with the exception of the couple that have been here in the US where they have been at about a 45% rate, it seemed to us to be reasonably accurate to use those responses.

And we did back off of it another 10%. We changed our dropout rate. We basically doubled that, so we assumed that patients would die or drop out for other reasons. And we didn't use any of the trailing data in the control arm for the other 40% because it's not that robust. So we felt like we had pretty reasonable safety buffers in place to go in with those parameters.

Okay, guys. We will be watching, and maybe off-line we can talk about this in a little bit more detail because I really do believe that the crux of investor focus is going to be on understanding the assumptions that you are making around active and control and your ability to execute the CLI trial in terms of getting patients enrolled.

And can you just address getting patients enrolled and how you select Rutherford 5? Because we know, for example, what an incredibly hard time Astrum had doing this in the US. And maybe you could share with us what insights have you learned from other trials in the US and how will you make sure that you are going to be different?

Okay. So let me talk specifically about Astrum because you've asked this question a couple of times and I would like to sort of deal with it.

First of all, Astrum had problems enrolling patients for multiple reasons. But one of the biggest reasons was the parameters on their exclusion criteria around diabetes endpoints and cardiovascular health basically ruled out 95% of all patients. So, the patients weren't even eligible for the trial.

Then the second element hit, which was a placebo-controlled trial where they had to go in for multiple procedures. And it was very hard to sell. I mentioned in the script that we've hired Christy Hansen. Christy was the clinical coordinator for [afishnis], among others.

And we really tried to work together with experts in the field that have done other peripheral vascular studies and with the FDA. The FDA spent a long time with us on driving us to loosen up our inclusion and exclusion criteria so that a broader swath of the population would meet the criteria. So I think with both FDA strategic feedback, which is real time to what they've seen in the other trials, and then the experts' opinions is we've done that as much as we can to minimize failure to enroll.

And I think regarding Rutherford 5, the reason for Rutherford 5 is because they progress to amputation at a much more predictable rate than Rutherford 4s. And Rutherford 6 patients are going to die. So you are going to lose them to mortality rates in the trial. And our study was only on Rutherford 5 in the feasibility, as was our Italian study that we did, which was another 13 patients. And we saw very similar, predictable outcomes in that group.

Thanks for taking the time to address the question head on. I know that if I'm thinking it, maybe others are, too, so I think it's always good to be really clear. I appreciate it. Thanks for the update, guys.

(Operator Instructions). And at this time, we will conclude the question-and-answer session. I would like to hand the conference back over to Matthew Plavan for his closing remarks.

Thanks, Operator, and thank you, everyone, again for joining us.

I just want to reiterate that we are excited and highly motivated about the future of Cesca. We believe our therapies will meaningfully change patient lives for the better and the future of healthcare delivery. And even more gratifying will be the reward generated for you, our shareholders. So we look forward to updating you in the very near term, given that our Q1 call will be in the not-too-distant future. Have a great evening. Thank you.

Ladies and gentlemen, the conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.