Thermogenesis Holdings Inc (THMO) 2016 Q4 法說會逐字稿

Good afternoon, and welcome the Cesca Therapeutics FY16 fourth-quarter financial results conference call.

(Operator Instructions)

Please note, this event is being recorded. I would now like to turn the conference over to Mr. Robin Stracey, CEO. Please go ahead.

Thank you, operator, and good afternoon to you all. I have with me here Mike Bruch, our Chief Financial Officer, and Dr. Dalip Sethi, our Director of Clinical Research. We are delighted that you could join us for our Q4 and full-year FY16 earnings and investor update call.

We plan to break the discussion today down into four sections. I'll begin with a summary of key events and accomplishments for FY16, supplemented where appropriate with subsequent events to bring you completely up to date. I'll cover our high-level financial results, our pipeline of autologous cell therapies, our ongoing dialogue with the FDA regarding a pathway to PMA approval for our SurgWerks-CLI system, our financing activities, and the development of our strategic relationship with the BoyaLife Group. Then Mike will walk you through the detail of our fourth-quarter and full FY16 financial results, and give you an update on our overall financial condition, before I return with a few wrap-up comments. We'll finish as usual with Q&A.

So turning first to key events and accomplishments over the last 12 months or so, and beginning with financial results, you will recall that Cesca inherited five revenue-generating product families from the side of the Company that was formally ThermoGenesis, namely the AutoXpress system, or AXP, which is our market-leading automated device and companion sterile disposable set for concentrating stem cells from cord blood.

The MarrowXpress system, or MXP, which is a derivative product of the AXP and its accompanying sterile disposable for the isolation and concentration of stem cells from bone marrow. This is a device that we are adapting for our bone marrow transportation program, and a derivative of it, the VXP will be a component of the SurgWerks processing platform for our future clinical offering.

The BioArchive system, which is our automated device used by cord blood banks, primarily public cord blood banks, for the cryopreservation and storage of cord blood stem cell concentrate, and manual bag sets for use in the processing and cryogenic storage of cord blood.

Until the middle of last year, we were also actively promoting the Res-Q, a point of care system designed for the preparation of cell concentrates, including stem cells from bone marrow aspirates, and platelet-rich plasma from whole blood. However, in June of last year, we elected to withdraw the Res-Q product line from the market as part of the settlement of an ongoing intellectual property dispute that had by then consumed the Company for several years. Mike may comment further on this later. Suffice it to say that the FY16 to FY15 year-over-year impact on revenues of the withdrawal from Res-Q is in the neighborhood of $2.2 million.

In addition, although the service business for our installed base of over 290 BioArchive units remains strong, new BioArchive unit placements were soft in FY16. We shipped 10 fewer units in FY16 than we did in FY15 and these are $200,000 to $250,000 instruments. So the impact from revenue year-over-year for BioArchive alone was almost $2 million. The Res-Q withdrawal and softness in BioArchive unit sales resulted in a year-over-year revenue decline of over $4 million, about $1 million more than we had projected at the start of the year.

On the positive side, demand for AXP has remained strong. For the full year, AXP disposable volume was up 11%. The AXP, our flagship device for cord blood banks, represents almost 60% of our overall cord blood product line revenues, and we continue to add new customers such as the Houston-based Texas Stem Cell, the first hybrid cord blood and tissue bank in Texas, which we announced in February of 2016.

Net revenues for FY16 overall came in at just under $12 million, compared to $16 million for 2015. Expense control for the year was good. Operating expenses were down almost $6 million or 31%, reflecting the impact of our organizational realignment in September of 2015, and significantly reduced legal expenses attributable primarily to settlement of the ongoing Res-Q intellectual property dispute. As a result, in spite of the shortfall in revenues, operating loss narrowed from $14.9 million in FY15 to $10.9 million in FY16 and our adjusted EBITDA improved by just over $3.2 million to an annual loss of $8.96 million.

Now, turning to our pipeline of autologous cell therapies, you will recall that in conjunction with Fortis Healthcare, over the last several years, we have conducted pilot or feasibility trials on numerous orthopedic and cardiovascular indications, including osteoarthritis, nonunion fractures, spinal fusion, avascular necrosis, non-healing ulcers, acute myocardial infarction, and critical limb ischemia.

We have also had an active bone marrow transplantation program. Related to these programs, we have two significant system developments underway. Our SurgWerks system includes a broadly capable processing platform of devices and analytics designed for use at the point of care, coupled with indication-specific single-use disposable procedure kits for a variety of vascular and orthopedic conditions. The performance of SurgWerks is enabled by the availability of a next-generation cell processing device, the VXP system, derived, as I mentioned, from our existing MarrowXpress platform.

A key advantage of an optimized and integrated system such as SurgWerks is that it is intended to maintain high cell viability and potency through each and every step of the 90 to 120 minute intra-operative procedure, including bone marrow collection, target cell selection, characterization of the final cell concentrate, and reinjection into the patient. Our CellWerks system is designed for intra-laboratory use under the direction of a GMP cellular laboratory protocol, or a licensed physician. It includes indication-specific equipment, software, consumables, and protocols tailored to the stringent demands of a variety of bone marrow transplantation applications.

These applications are being developed in conjunction with partners through our early technology access program, and are aimed at enhancing treatments for a number of specific oncological and hematological disorders. In September of 2015, we announced our first clinical collaboration with the Center For Immune Cell Therapies at Memorial Sloan Kettering, and October 2015, we announced our second with St. Jude Children's Research Hospital in Memphis, Tennessee. The CellWerks platform and software package is being evaluated for use on minimally manipulated, as well as targeted specific cell depleted units of mobilized peripheral stem cells and bone marrow aspirate.

Last month, we announced the data from our Indian study involving 17 patients treated with bone marrow concentrate for nonunion fractures had been published in the Herald Scholarly Open Access Journal of Stem Cells Research Development and Therapy. In the study, the bone narrow aspirate was processed at the point of care using Cesca's proprietary technology. Of the 17 patients treated, 14 displayed clear signs of bone regeneration and fracture healing. We believe that cell therapy using bone marrow concentrate represents a very promising new method for treating atrophic nonunion fractures, in patients with a history of failed primary surgical intervention.

In addition, in May, we announced publication of data from our pilot study utilizing the Company's innovative technology for the treatment of acute myocardial infarction. That report, titled Autologous Bone Marrow Concentrate Enriched In Progenitor Cells and Adjuvant In the Treatment of Acute Myocardial Infarction was published in the International Journal of The Cardiovascular Academy.

The results of the study were remarkable, in that the single patient involved was able to return to normal life just two weeks after the procedure. 24 months after the intervention, the patient's left ventricular ejection fraction, or LVEF, had improved from an initial assessment of 35% to 60.3%. LVEF is a key indicator of cardiac function, and a reduced LVEF level is considered a risk factor for cardiovascular mobility and mortality. In the publication, the authors noted that the degree of improvement seen was atypical for a patient having suffered in ST elevated myocardial infarction, or STEMI, with an ejection fraction below 40% post reperfusion.

Turning to CLI, and our ongoing dialogue with the FDA, aimed at establishing a practical pathway to a PMA approval for our SurgWerks-CLI system. At the end of May, we submitted an investigational device exemption, or IDE supplement, to the US Food and Drug Administration, for our already-approved Phase III pivotal trial for the treatment of patients with critical limb ischemia, or CLI, using the Company's SurgWerks-CLI system.

We had by then concluded that amputation free survival, or AFS, simply would not be a practical primary endpoint for a successful pivotal trial, a conclusion based largely on analysis of the experience of other companies in the space, including Aastrom, AnGes, Juventas, Terumo Harvest, and Zimmer Biomet. In the supplement, we proposed transcutaneous oxygen pressure, or TCPO2, as a surrogate endpoint. TCPO2 is a noninvasive clinically accepted method for measuring the amount of oxygen diffused from capillaries through the skin and reflects both the oxygen supply and the metabolic demand in a specific region.

The FDA subsequently approved the changes in our pivotal trial design, as proposed in the IDE supplement. As a result, there are now no regulatory impediments to the Company enrolling patients and beginning the trial. Furthermore, we had earlier received positive feedback from the Centers for Medicare and Medicaid Services, or CMS, for Medicare coverage for the study protocol.

The only hang up now is that in the FDA's feedback to our IDE supplement, they also indicated that in spite of their approval of the study, they would additionally require the Company to further validate TCPO2 as a surrogate for clinical outcome for the proposed indication, prior to granting marketing or PMA approval. As a result, we are now engaged in an active ongoing dialogue with the agency, exploring alternative pathways to ultimately securing the necessary PMA. We remain fully committed to the program, but I anticipate there may yet be several rounds of dialogue with the FDA as we further refine our plan, a process that could extend several months.

In the meantime, we announced in August, 40-month follow-up results for a number of the patients that participated in the Company's earlier feasibility study, using SurgWerks for the treatment of late-stage no-option CLI patients. These were the same patients from which the feasibility data initially provided to the FDA was derived.

The study initially was conducted in 2013, but the investigators involved were able to reconnect with a number of the enrollees for a follow-up 40 months later. In that 40 month follow-up, nine of the 12 patients that were amputation free at the end of the initial study were clinically assessed. The remaining three could not be contacted. The investigators reported a significant overall reduction in rest pain, and appreciable improvements in quality of life.

All nine patients still had their limbs, and exhibited no sign of disease progression. Though two of the nine had in the interim undergone additional SurgWerks treatments to relieve mild to moderate rest pain. There were no adverse or serious adverse events reported, and there were no safety concerns attributed to the treatment procedure.

In addition, in May of 2016, we reported the results from six additional late-stage critical limb ischemia patients treated with the SurgWerks-CLI system on a compassionate use basis. All six had failed all prior standard revascularization therapies, and were considered no option. In the six-month follow-up post treatment of these patients, the investigators reported that pain scores had fallen from an average of 7.6 before treatment to 0.67, with four of the six patients reporting no pain. Foot ulcers and open wounds appearing on five of the six original patients had healed and five of the six had avoided major limb amputation.

These follow-up results not only reinforce our belief that autologous bone marrow derived stem cell therapy using our SurgWerks-CLI system is effective, they also suggest that it is durable. We continue to believe strongly in the science, and remain committed to conducting a successful Phase III pivotal trial for CLI, and ultimately bringing this treatment to market. Meanwhile, pending the outcome of the dialogue with the FDA, our field-based team of clinical research associates remains fully engaged with investigators at our identified clinical trial sites to keep them informed of developments.

Turning now to our financing activities and the development of our strategic relationship with the BoyaLife Group, in February of 2016, in exchange for aggregate proceeds of $15 million, we sold and issued to affiliates of the BoyaLife Group 735,294 shares of common stock, at a per-share purchase price of $3.40 and senior secured convertible debentures for $12.5 million. This transaction was highly significant for a number of reasons. Not only did it represent a strong vote of confidence in Cesca's future and provide additional working capital to fund its strategic initiatives, it also enabled the Company to repay existing senior secured convertible debentures, and retire associated Series B warrants from an earlier financing that had a toxic special exercise feature embedded within them.

Last month, we announced that we had elected to convert the senior secured three-year convertible debenture of $12.5 million principal held by BoyaLife plus interest, to just over 6 million shares of common stock. The effect of this conversion has been to raise BoyaLife's equity stake in the Company to 70% of shares outstanding, as a result of which they are now entitled to three of the seven seats on our Board. Significantly, it also means that we now have a much stronger balance sheet with no debt, no security interest or liens placed against our assets, and no obligations regarding participation rights in or consent rights over potential future equity or debt financing.

BoyaLife has been and continues to be a valuable strategic partner, that is committed to both our historical cord blood banking business, and to our proprietary cell therapy programs. In BoyaLife, we have a robust, highly diversified, well-funded, and strategically oriented investment partner, with a large footprint in China, and strategic interest in expanding in the United States. They clearly see great value creation potential in our clinical programs, and have already invested heavily in our future success.

Meanwhile, we continue to refine and realign our organization, in support of our most important strategic initiatives. In September 2015, we implemented restructuring that significantly streamlined and simplified our management structure, generating over $3.3 million in annualized cost savings. And in March 2016, we secured our NASDAQ listing by effecting a reverse stock split to regain compliance with the $1 minimum bid price requirement for continued listing on the NASDAQ capital market.

Lastly, in August of this year, we raised an additional $2.5 million from institutional investors, in a registered direct offering of 600,000 shares of common stock, at a purchase price per share of $4.10. There were no warrants issued in the offering, and the proceeds further strengthen our balance sheet, pending the outcome of our ongoing dialogue with the FDA and the start of our CLI trial.

With that, I'd like to turn the call over to Mike for more detailed commentary on our quarterly and full-year financials. Mike?

Thank you, Robin, and good afternoon, everyone. As Robin mentioned, this has been a year of refocusing resources and positioning the Company to take full advantage of its clinical programs. Many of these efforts have had financial impacts as well.

As Robin has already mentioned, we've reduced personnel costs and implemented other cost savings during the year, and these efforts are expected to reduce our costs by over $3 million annually, and allow us to align our resources to high value creating clinical programs. We are now poised to realize the increased financial benefit from our legacy cord blood business, while at the same time leverage our technology and personnel to move our clinical programs significantly forward.

We've also strengthened our financial position over the year. Our cash balance has increased from $3.4 million to $5.8 million, while at the same time, our current liabilities have decreased from $7.9 million to $5.5 million. This has resulted in improved working capital from $5.3 million to $7.3 million.

Additionally, in August 2016, we raised an additional $2.5 million through a registered direct private placement of common stock and converted our long-term $12.5 million convertible debenture with BoyaLife into common stock, which has approved our financial flexibility by removing all security interests, participation rights in, and consent rights over potential future equity and debt financings. These focused efforts throughout the year, as well as the capital raises and conversions of debentures, has resulted in a Company that is financially stronger and more flexible than it was a year ago, and better positioned both strategically and financially to move its clinical programs forward.

Now turning to our financial results. For the fourth quarter of FY16, net revenues were $3 million, compared to $3.7 million for the same period last year. The decline in net revenues was primarily the result of a BioArchive device sales of $340,000, and a reduction in Res-Q sales of $630,000, due to our decision to withdraw Res-Q from the market. These decreases were partially offset by increases in AXP sales of $385,000.

Gross profit was $941,000 for the fourth quarter of FY16, compared to $879,000 for the same quarter in the prior year. The Company increased its gross profit percentage from 24% to 32%, despite a decrease in revenue, as a result of lower personnel expenses and other cost savings initiatives, partially offset by a change in the mix of the products sold.

Operating expenses for the quarter ended June 30, 2016 were $3.2 million, compared to $3.3 million in the same quarter of last year. The decrease in operating expenses was primarily attributable to the cost savings associated with lower personnel costs of approximately $700,000, and reduced spending for clinical programs of approximately $275,000, as last year the Company was preparing to initiate its clinical trial for treatment of CLI.

Net loss for the quarter ended June 30, 2016 was $3.7 million, compared to $2.4 million for the same quarter in the prior year. The increase in net loss was due to non-cash financing and interest costs associated with the February 2016 $12.5 million convertible debenture. For the full year of FY16, net revenues were $11.9 million, compared to $16 million for 2015, a decrease of $4.1 million. The decline was primarily attributable to softness in the BioArchive unit sales, since we shipped 10 fewer devices during the year ended 2016 than we did in the year ended June 2015, resulting in almost a $2 million decline, and diminished Res-Q sales of approximately $2.2 million, as a result of our decision to withdraw the product from the US market.

Gross profit was $2.7 million, or 23% of revenue for 2016, compared to $4.7 million or 30% of revenue for 2015. Our gross profit declined primarily due to changes in the mix of products sold and increases in inventory reserves. The Company expect gross profit percentages to return to normal levels in FY17.

Operating expenses for 2016 were $13.6 million, compared to $19.6 million for 2015, a decrease of $6 million. The decrease was primarily attributable to reductions in legal expenses of approximately $2.9 million, as a result of the settlement of certain patent litigation cases in 2015, lower personnel and other cost-saving initiatives of approximately $1.5 million, and deferral of spending associated with our CLI and other clinical programs of approximately $650,000.

Net loss from operations for 2016 was $10.9 million, compared to $14.9 million for 2015, a decrease of $4 million. The reduction in net loss from operations was due to a significant decrease in operating expenses, partially offset by a decrease in gross profit as already described. Net loss for 2016 was $18.6 million, compared to $14.9 million for 2015, an increase of $3.7 million. The increase was primarily the result of the charges associated with the two debenture transactions during the year, partially offset by the improvement in net loss from operations, as already described.

In addition to the results reported in accordance with US GAAP, Cesca uses a non-GAAP measurement, adjusted EBITDA, to evaluate operating performance and to facilitate comparison with historical results and trends. This financial measure is not a measure of financial performance under US GAAP, and should not be considered in isolation or as a substitute for any -- or for loss as a measurement of performance. The calculation of this non-US GAAP measurement may not be comparable to similarly-titled measurements used by other companies.

Adjusted EBITDA loss was $9 million for 2016, compared to $12.1 million for 2015. The reduction in adjusted EBITDA loss was due primarily to the reductions in net loss from operations, as previously described. At June 2016, the Company had cash and cash equivalents of $5.8 million, and working capital of $7.3 million. This compares to cash and cash equivalents of $3.3 million and working capital of $5.3 million at June 30, 2015.

In August 2016, the Company sold 600,000 shares of common stock for net proceeds of $2.2 million. Based upon our cash balances, the August 2016 financing, as well as expected outflows of projections for revenue, we believe we have sufficient cash for our operations and working capital requirements for at least the next 12 months. And now, I'll turn the call back over to Robin for his closing remarks.

Thanks, Mike. So let me finish with just a quick refresher on our overall strategy. Our aim, as I think all of or most of you know, is to be a market-leading fully integrated autologous cell therapy company, with unique and highly differentiated offerings. In order to achieve this, we expect to sustain and build on our leadership position in automated devices, for the separation and concentration of stem cell preparations from cord blood and bone marrow; target what we perceive to be insufficiently met medical needs, where regenerative cell therapies can have a significant impact; further develop our unique point of care approach. Our therapies typically require a single visit to the operating room for a treatment lasting only 90 to 120 minutes. Deliver a fully integrated offering, with all the hardware, software and disposable components necessary for the aspiration and processing all of autologous bone marrow, to prepare a therapeutic dose of stem cells for reinjection into the patient at the point of care; focus our approach on autologous minimally manipulated bone marrow-derived stem cells; leverage our India-based clinical research organization embedded within the Fortis Healthcare network of hospitals in Asia, as a highly cost-effective approach to conducting feasibility studies and early-stage clinical trials; and take advantage of the breadth of our clinical program.

We have multiple shots on goal. As previously discussed, we currently have numerous cardiovascular and orthopedic protocols in development, in addition to our BMT program. Our immediate next step is to conclude the discussion with the FDA regarding the path forward for our CLI program, so that we can finally begin to enroll patients in our first Phase III pivotal clinical trial.

With that, I'd like to open the call up for questions. Operator?

Jason Kolbert, Maxim.

I appreciate the comprehensive review. Can you share with me, on several fronts, how BoyaLife is interpreting the business at Cesca? And what I really want to understand is three different areas: one is just the hardware business and the sales of equipment, and I believe that as we see just explosive growth in regenerative medicine and in CAR-T, and in a host of other areas there's a potential for that business to grow. And I want to understand what does BoyaLife see, both for the US, and does BoyaLife have interest for the China market?

Two, I want to understand a little bit about what you see, in terms of the potential to really go after bone marrow transplantation, because one of the things that we believe is that we are going to see a lot of growth in the utility of BMT as both it becomes safer and more therapeutics like Prochymal being developed in Japan and now in the US, are coming to market, and enable those numbers to rise.

And then three, help me, and I know this is the most difficult area, I want to understand what you think your regulatory options are, if the FDA would soften their position on TcPO2 as a primary endpoint? And if they won't, where does that leave you in terms of the CLI trial? We agree with you. We understand why finally after your effort and some of ours, why TcPO2 makes sense, but it seems like the FDA isn't mentally there ready to accept anything other than AFS, or adjudicated AFS as a primary endpoint.

So sorry, three questions, three very different areas. But it would be very helpful for me to understand the relationship with BoyaLife, and what you're thinking as managers of the Company.

All right Jason, thank you. This is Robin, I'm going to have a stab at part of this and maybe Dalip or Mike chime in with any additional commentary. So first of all, with regard to BoyaLife and their interest in the hardware, the equipment, the US market, the Chinese market, and so on and so forth, you may remember that we've had a relationship with BoyaLife actually since 2011.

They were the first adopters of the AXP technology for their cord blood banking business in China back in 2011. They're not our largest Chinese customer today, but they were the first to adopt AXP, and they had the BoyaLife stem cell bank. It's a significant part of their overall portfolio of businesses. There are obvious synergies between what we do and what they do.

I think their primary interest is probably in the Chinese market, specifically for the cord blood banking business, but obviously, the same basic technology leverageable. The AXP/MXP technology is leverageable into SurgWerks with the VXP system, and they clearly see potential for our clinical programs using SurgWerks. And it's definitely not beyond the realm of possibility, that we could partner with them on specific clinical studies, for these clinical programs in China. A lot, I think, depends on how things evolve with the FDA, which is one of your other questions.

With regard to the potential to go after bone marrow transplantation, we've been talking about this for a couple of years, there are a couple of components to our bone marrow transplantation program. There's a service business in India, which leverages our relationship with Fortis, that's primarily focused on haploidentical transportation approaches, it's a service business that we provide for Fortis.

I would say if we step back from that, it's not taking off as quickly as we anticipated it would. It is still progressing. We are still enthusiastic about it, but the uptake is slower than we had anticipated.

And beyond that, there's the pure device play, which is the play for which we have the collaborations with Memorial Sloan Kettering and St. Jude's and so on and so forth. In our ultimate vision, and Dalip can perhaps comment further on this, is to get to the point where people can specify the specific cell configuration or cocktail that they are adjusted in, depending on the particular application they are pursuing. And Dalip, I will maybe hand over to you, if want to add something to that in a minute.

The last one you mentioned, Jason, is indeed extremely tricky. As I mentioned, we are in the middle of an ongoing dialogue with the FDA. We've had several interactions with them already, since we got their feedback to our IDE supplement.

I think they clearly understand the issues with amputation-free survival. They know what's going on with other players in the industry, and the challenges. I think they do appreciate that the bar is extremely high, and there are inherent issues with the measurement. At the same time, they're not quite ready to embrace TcPO2, based upon what we have provided to them.

And so we are -- I think we have develop seven different scenarios for discussion with them, one of which seemed to be the one that they preferred. It may not necessarily be the one that we prefer, but there is one that they preferred, and we're scoping out, I'd say the top two, maybe top three of those seven, as we speak, and expect to engage in further conversations with them, to arrive at what we hope will end up being a practical compromise that doesn't require us to essentially do an amputation-free study on top of a TcPO2 study.

So Dalip, do you want? Go ahead Jason.

Thank you, I know that's very comprehensive, and it actually gives me a little bit of information, because it tells me that there is ongoing dialogue back and forth between you and the FDA on what is the practicality of doing a study. Let me just ask one question, and that is, there was recently some other data that came out from at VIVA Zimmer Biomet in CLI, and I wondered if you had a chance to look at that data. It's a similar approach, and what you thought of it.

We're going to toss a coin here to see (multiple speakers). Go ahead, Dalip. Dalip was actually there at the conference in Las Vegas, so go ahead, Dalip.

Thanks, Robin. I attended that presentation from Dr. Murphy at VIVA, looked at the data. They did not have their primary endpoint of AFS, as expected, as we were expecting. So basically, what we proposed to start for the TcPO2 surrogate, that proved correct. So there is 10% is what they got, so we see the signal there, and we think that data is really helpful for in negotiation with FDA, to actually go back to them and say, see what we were saying is within industry standards now.

That makes sense. It's almost like a surrogate, that if you insist on AFS, they may not get there, even though in reality, you're probably helping those patients, even though they didn't meet their P value on AFS; right?

Yes. Signal is there, but there's like to get the statistical significant result, this is not an easy task in this (inaudible).

To me, Jason, it boils down to two sides of the same coin. The FDA could take the position, this stuff doesn't work, right? Our argument is, it clearly does work.

There's clearly an effect; however, the yardstick we're being asked to meet in order to demonstrate statistical significance is so high, nobody can meet it. And as a result of that, patients who may have no other option are being denied potentially a treatment here. So it's an ongoing dialogue, I think we are making progress, but it is certainly not a done deal with the agency yet.

And is BoyaLife, just help me understand how BoyaLife looks at the therapeutic side of the Company, because they must clearly understand that they have a lot at stake here. If you're therapeutically successful, it transforms their investment. So help me understand how involved they are on not just the ongoing existing operational value and technology value of the Company, but on the therapeutic side, as well?

I wouldn't say they have been directly involved. Obviously Dr. Xiaochun Xu, who is their Chairman and CEO, is on our Board of Directors, so he's fully informed, as things progress in our dialogue with the FDA, and as we reformulate our plans for CLI or our other clinical programs. So he's very much in the loop, and he contributes a great deal to the intelligence of our dialogue around it.

I think that there is clearly interest on their part in some of these clinical protocols, the potential for some of them in China, and I imagine that the way that they will view those opportunities will, to a large degree, depend on how things evolve with the FDA here. But they definitely see a significant upside in the clinical programs, not to mention the cord blood banking business, that we already have established.

I would also add, Jason, that their interests, as you know, are very diverse. And there may well be opportunities for us to do things with them beyond our historical focus in cord blood or even in the development of these cell therapies. They have a fairly active drug discovery program, for example, focused on cardiovascular and metabolic diseases, which could conceivably be very complimentary to what we are doing.

Now this is a long way out, it's very early, but there are those kinds of possibilities that are out there, and they clearly see us as a very strategic investment, as opposed to purely a short-term financial play. None of their equity is liquid. I mean they are locked up in the Company, and perfectly happy to be so, because they see the long-term potential here.

Thanks Robin, I really appreciate it, and my apologies for a lot of questions. Appreciate it.

You are welcome.

(Operator Instructions)

This concludes our question-and-answer session. I would like to turn the conference over to Robin Stracey for any closing remarks.

Well, in closing, let me just thank everybody for joining the call. I wish I could say that we had clarity in terms of the path forward with the FDA for CLI. I beg for your patience as we work our way through with this government agency, and I look forward to keeping you all updated and abreast of our progress. So with that, let me just wish you all a very good evening, and I look forward to speaking with you next time. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.