Vericel Corp (VCEL) 2007 Q1 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Aastrom Biosciences first-quarter fiscal year ended 2007 investor conference call. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded. It is now my pleasure to introduce your moderator, Ms. Kris Maly, Director of Investor Relations at Aastrom. Thank you, Ms. Maly. You may now begin.

Thank you, Tina. Good morning and welcome to our conference call. Before we continue, it is important that we review our Safe Harbor statement. This conference call and webcast contain forward-looking statements, including without limitation statements concerning product development objectives and anticipated timing, clinical trial initiation, completion, results and anticipated timing, revenue results, potential market opportunities, market development plans, projected cash burn rates, the anticipated key milestones and potential advantages and applications of Tissue Repair Cell which involve certain risks and uncertainties. These and other significant factors are discussed in greater detail in Aastrom's annual report on Form 10-K and other filings with the Securities and Exchange Commission. Actual results may differ significantly from the expectations contained in these forward-looking statements.

Now it is my pleasure to turn the call over to our CEO George Dunbar. George?

Thanks, Kris. Good morning, everyone, and thank you for calling in for today's call. This morning we would like to highlight the progress that we have made since our last quarterly call and update. I will then turn the call over to other members of the management team for a review of our financial highlights and more details on our clinical programs. Then we'll have a brief Q&A session at the end from the audience.

In mid-September, one of our principal investigators, Dr. Thomas R. Lyon, Chief of Orthopedic Trauma and Clinical Instructor of Orthopedic Surgery at Lutheran Medical Center in Brooklyn, New York, presented additional promising interim results for 23 patients enrolled in our US Phase I/II multicenter clinical trial evaluating our TRC's, Tissue Repair Cells, in the treatment of severe long bone non-union fractures at the 28th Annual Meeting of the ASBMR, the American Society of Bone and Mineral Research. Although these are additional interim results, we are pleased with the results we have been able to share with you thus far. All 36 patients enrolled in this trial will reach the 12-month observation period by the end of June 2007. It is our current expectation that we will be able to compile the data and report the following results during the second half of calendar '07, and we look forward to sharing this information with you at that time. Dr. Burchardt, our Vice President of Medical Affairs, will provide additional details of these results later in the call.

In October Ronnda Bartel PhD joined Aastrom as Vice President of Research and Development. She is responsible for the product development and manufacturing of Aastrom's TRC-based cell products, as well as the Company's discovery and research efforts. Her broad experience and leadership in the biotechnology and pharmaceutical industries, along with experience in the manufacturing and marketing of new cell-based products, strongly support and complement the Company's progress in moving its tissue regeneration products through the commercialization process. Dr. Ronnda Bartel is a seasoned scientist with more than 20 years of research and product development experience in the biotech, pharmaceutical, diagnostic and device sectors, and we are very delighted to have her onboard.

Last Thursday we hosted our 2006 annual meeting of shareholders. I would like to thank all of the shareholders and guests who attended the meeting in person or who listened in on the webcast for their interest and participation. We certainly appreciate your continued support. All of the proposals that were brought to the shareholders for a vote passed in favor. These included the reelection of Alan Rubino and Nelson Sims for a three-year term as Class III Directors, the approval of the amended and restated 2004 equity incentive plan and the ratification of PricewaterhouseCoopers as Aastrom's independent public accountants for the fiscal year ended June 30, 2007.

In addition, I would like to report that at our last board meeting Stephen G. Sudovar was elected to be the new Chairman of Aastrom's board. Steve has been a member of Aastrom's board since July 2005, and since that time the Company has benefited from his outstanding leadership and guidance gained over 30 years as a career in the healthcare industry. Steve has held several senior executive positions at both large and small companies, including EluSys Therapeutics, Roche Laboratories, a division of Hoffman-La Roche, and Pracon Incorporated.

As we look ahead, I would like to note that Aastrom's next scheduled webcast will take place on December 7 when we present at the Bank of Montreal Capital Markets Healthcare Conference in New York. I saw many of you this week at the Rodman & Renshaw Healthcare Conference in New York and look forward to meeting with you again.

I would like to turn the call now over to our CFO Jerry Brennan for a review of our first-quarter financials. Jerry?

We ended our first quarter on September 30, 2006 with approximately $39 million in cash, cash equivalents and short-term investments compared to $43 million at June 30, 2006. At September 30, 2006, we continue to have no debt outstanding. Our average cash utilization during the first quarter was approximately $1.3 million per month. We expect the average cash spend to increase to approximately $1.8 million per month during the remainder of fiscal year 2007 as planned. It is expected that this increase will result primarily from expansion and our clinical trial programs, future regulatory submissions, the development of manufacturing facilities and related staffing additions.

As we no longer market our cell manufacturing platform as a stand-alone product and instead use it predominantly to manufacture our proprietary TRC-based cell products for regenerative medicine, we do not anticipate significant product sales revenue until we receive product registration from a regulatory authority. Product sales for the quarter ended September 30, 2006 were $12,000 compared to $15,000 for the same period in fiscal year 2006.

Grant revenues for the quarter ended September 30, 2006 were $92,000 compared to $156,000 for the same period in fiscal year 2006. This decrease resulted from slightly lower grant program activities and the completion of our activity on the collaborative grant with DARPA in June of 2006. As we continue to pursue grant funding, grant revenues may vary in any period based on timing of grant awards, grant-funded activities, level of grant funding and number of grant towards received.

As expected, with the continued expansion of our research and development activities, including additional staffing requirements to support future regulatory submissions, ongoing and planned tissue regeneration clinical trials in the US and the EU and the development of our centralized manufacturing facilities for product manufacturing, research and development expenses for the quarter ended September 30, 2006 increased to $2.3 million compared to $2 million for the same period in fiscal year 2006.

We also reported that our selling, general and administrative expenses increased for the quarter ended September 30, 2006 to $2.4 million compared to $2 million for the same period in fiscal year 2006. This increase reflects additional employee costs that include an accrual related to the former CEO severance agreement and an accrual and severance payment related to the former President and COO's employment agreement. The increases in research and development expenses and selling, general and administrative expenses also include non-cash charges related to an accounting standard which requires us to measure the fair value of all employee share-based payments and recognize that value as an operating expense.

At this time, it gives me great pleasure to introduce Dr. Elmar Burchardt, who will review our clinical progress over the past fiscal quarter. Elmar?

Thank you, Jerry. Today I would like to begin by reminding everyone that Aastrom is focused on developing autologous cell products for their use in regenerative medicine. This is an important differentiator between our TRC-based cell products and those being developed by others. Aastrom's autologous cell products are produced from a small sample of bone marrow cells drawn from the patient and, therefore, are not rejected because they are delivered back to the same patient as a therapy. Our TRC products are being evaluated in clinical trials for bone and vascular regeneration, and we're developing clinical trial protocols in the cardiac and neuroregeneration areas. To date no serious TRC-related adverse events have been reported in our clinical trials.

Now I would like to review our progress in the bone regeneration area. As George stated earlier, additional interim results from 23 patients enrolled in our US Phase I/II multicenter clinical trial evaluating TRCs and the treatment of recalcitrant long bone non-union fractures were reported in September. Of these 36 patients enrolled in the FDA approved trial, interim results were reported on 23 patients, including 12 patients who completed the total observation period of 12 months by August 2006. Of the 12 patients who have completed the one-year follow-up period, 10 showed multiple bone bridging at the fracture site, indicating radiographic evidence of healing. Two subsets of patients totaling 15 have completed clinical trial examination surveys with their doctors. In the first subgroup, six out of seven patients have returned to weight-bearing mobility by six months. In the second subgroup, eight out of eight patients have returned to weight-bearing mobility by 12 months.

Callus formation is the first sign of healing and return of bloodflow. After being treated with Aastrom's TRC-based cell product, callus formation was observed in 78% of the 23 patients by three months and in 96 of these patients by six months.

It is important to note that all 23 patients had atrophic non-union fractures of a long bone, that is of the leg or arm, which failed to heal after at least one prior standard of care treatment and consequently were considered very difficult to treat. 10 of the patients had failed two or three prior treatments. Of the patients reported today, 10 of the patients were smokers who have a particularly pure prognosis for healing.

In the European Union, our Phase I/II multicenter long bone fracture clinical trial continues to enroll patients at several centers in Barcelona in Spain, although patients are enrolling in our US Phase I/II spine fusion clinical trial. As we have mentioned previously, we're preparing for a clinical study in Spain to evaluate the use of TRCs in spine fusion. The regenerative abilities demonstrated by our TRC has resulted in the expansion of our clinical trial portfolio to include the treatment of osteonecrosis of the femoral head. The potential of TRCs could be typically useful in the treatment of this disease as the bone, bone marrow and vasculature of the femoral head in these patients are all necrotic. Our TRCs received some orphan drug designation from the FDA for this indication which could provide certain benefits upon market approval.

Separate from the orphan drug designation, we're in the process of refining our clinical trial protocol in the US. We are also preparing for similar clinical studies in the European Union.

Let me now move to the vascular regeneration area. We continue to enroll diabetic patients into a controlled Phase I/II clinical trial to treat clinical limb ischemia at a center in Germany. The aim of this study is to evaluate the safety and efficacy of Aastrom's TRCs to regenerate functioning blood vessels in the legs of diabetic patients with critical limb ischemia. It is intended that the patients may experience relief from clinical problems that are related to impaired blood circulation.

We are also in the process of preparing to cement a multicenter perspective controlled, randomized, double-blinded clinical trial protocol in the United States to treat patients suffering from critical limb ischemia with the goal of reducing the incidence of major amputations.

We are also developing plans to evaluate the use of our TRCs in cardiac regeneration. Our plan is to work with cardiac surgeons and cardiologists to treat patients suffering from chronic heart disease. We plan to do this in a pilot clinical cardiac study in the EU and to develop a company-sponsored Phase I/II clinical trial for cardiac tissue regeneration in the United States. This is a very exciting time clinically for Aastrom as we anticipate the initiation of several new trials in 2007. I look forward to the next opportunity to provide an update on our clinical progress.

George?

Thanks. Before we open up for a brief Q&A session, I would like to summarize the clinical milestones that we expect to talk to you about by the end of calendar year 2007.

In the vascular regeneration area, we will initiate a Phase IIb clinical trial in the United States using our TRCs to treat critical limb ischemia. To complete the enrollment in the German clinical limb ischemia clinical trial, in the bone regeneration area, we will initiate a US pivotal trial to evaluate TRCs in the treatment of osteonecrosis. We expect to report final results from the US Phase I/II multicenter severe long bone non-union fracture trial. We expect to complete enrollment in the Phase I/II long bone fracture clinical trial in Spain and complete enrollment of the US Phase I/II spine fusion trial.

In the cardiac area, cardiac regeneration, we will initiate a Phase I/II pilot trial in the cardiac area. And last but not least, in neural regeneration, we will complete a preclinical research program and initiate a Phase I/II clinical trial in the neural area. So you can see that 2007 is going to be a very busy and productive year for us.

Tina, I would like to open it up for questions from our listeners please.

(OPERATOR INSTRUCTIONS). Ren Benjamin, Rodman & Renshaw.

Congratulations on the progress. A couple of fine-tuning questions. You have listed quite a few clinical milestones upcoming in 2007. Clearly in programs that we already have some experience in, as well as new programs that as part of your thesis are going -- you're venturing into new and unknown areas. Could you help us and try to position this a little bit more, not only in terms of timing, as when are these events going to happen like the osteonecrosis trials that are first-half sort of event, second-half sort of event? But also can you help position these trials in terms of priority for the Company. What is more important for you? What is -- which of these conditions are more sort of quicker to market conditions versus more later on the list of priorities for you?

Sure. I would be happy to, and Ren, thanks for asking the question, which was, indeed, a very short one. I think the first part I would say is that the work that the Company has done to date in the bone and orthopedic area is very much a building block process for safety studies in other fields as well. I think one of the things that you and others have heard me talk about is really we are trying to leverage the benefit of what is really a true platform technology play with these TRCs. So all of the safety data that goes into a long bone or a non-union trial, indeed, can be used in the osteonecrosis program and in other programs as well. That will help us in consolidating data that we will submit into the EU, as well as the United States.

I think in terms of commercial sense of timing and urgency, I will let Elmar talk a little bit further about some of the timing on the specifics of the trials. But bone takes a long time to grow. That is a fact of life and nature, and therefore, the trials themselves will be longer and slower in nature than, for example, the studies that we're going to be initiating in the vascular area or in the cardiac area. I think commercially the area of heart, the area of vascular will take on a level of urgency both from the patient and doctor perspective, as well as a commercial perspective compared to the orthopedic area, relatively speaking, because in the case of cardiac you're really talking about life or death. In the case of the vascular area, limb ischemia we're talking about potential amputation of fingers, toes. That actually takes on a level of urgency that is different from you as a doctor/patient relationship in the orthopedic area. That is not to minimize by any means the fact that if you have a non-union fracture, you are in pain and suffering, and you want to fix that as urgently as you can and as obviously the data to date that we have on our TRCs in that area is, in fact, very encouraging.

So I think what you will see as we have tried to articulate graphically as well as verbally in the clinical program that we have laid out, is that while the bone area in the osteonecrosis area, which we believe is our most efficient path through the regulatory process in this country, that you will see a lot of activity and announcements of early data hopefully in a good and promising way in the vascular area and in the cardiac area. And we believe that commercially those will be bigger opportunities as well.

But it is a process by which we are really trying to take multiple shots on goal and leverage the platform by investing in a number of small inexpensive yet statistically and clinically rigorous studies to determine whether or not our assumption about improvement in the repair site or the organism we're talking about here, in fact, does gain enough traction that we can informally put a clinical and a formal program around that.

The last point I would like to make in this regard from a commercial sense is that -- why we doing these studies in the European Union and outside of the United States? We're doing it for two reasons. One is that the cost of timing and recruitment of patients in the EU is extremely competitive, and by putting the studies together in a rigorous way that supports the FDA, we will benefit from that aspect alone.

But similarly, the regulations and the use of this type of therapy in the EU is very different and much more relaxed than it is in the United States. You will note from the discussions we have had in the past that we have a number of manufacturing sites that have been approved for a GNP manufacturing. Two now are online in Spain -- sorry, in Germany. One in Barcelona, Spain. We are able to take advantage of the fact that we have this GNP certified manufacturing and licensed facilities so that we can begin not only to do clinical trials, but as we move our program forward and we have confidence that these products work, actually to begin a commercialization process in those countries and those markets.

Let me add a little bit too this. I think we were furthest along at this point with our bone program. As you know, we have a lot of data generated at this point. So we feel it is time now to move into a pivotal trial, which is going to be an authentic process. And the pivotal trial usually implies that you're looking at a hard clinical endpoint. In this case, we're going to look at disease progression in osteonecrosis and progression in the fracture. So this, by the very nature of this endpoint, will require a longer follow-up. So we are typically looking in these kinds of trials at a follow-up period of 12 months, which is actually fairly rapid and the most rapid you can probably do it in the field of bone regeneration.

In the cardiac arena, we are at a different stage. Here we need to establish safety, and when we do these kinds of studies, typically a suitable observation period or follow-up period for these patients is six months. So it is more rapid.

Let me also tell you that as we go along and establish safety in these early patients, we will have a wealth of data coming out of this. There are very well established endpoints in these cardiac patients, which will give you some indication as to what the efficacy of our TRC treatment is. Let me just point out a couple of these. There are very good imaging procedures or very good imaging technologies available at this point, like measurements of rejection fraction or regional (indiscernible) motion, which will give us some very interesting indications as to how well our product works in these patients. So this is a process that can be completed within six months of follow-up time.

So just talking about those two programs very quickly, when do you think the osteonecrosis pivotal trial program could begin? Is that more of a -- since you said there's a lot more data, I assume you are talking with the FDA already. Is that something that could start in the first half of calendar year '07? Is that more of a second-half sort of event? How are you guys thinking about it? And the same with the cardiac.

We're thinking for osteonecrosis definitely on first half of 2007 for the trial to begin. We're thinking of cardiac first quarter of 2007 to begin.

First quarter of 2007. Okay. And, of course, you guys in your earlier remarks talked about some other programs as well. For example, the vascular critical limb ischemia trial. When would that start, and then, of course, the neural trial. I believe George mentioned that not only would you have an IND filed, but also start clinical trials in 2007. I assume that is more to the end of 2007, but can you give us some clarity on those two trials as well?

You're absolutely right. The (indiscernible) trial in PAD patients, which is I think going to be the biggest clinical trial effort of any commercial company undertaken with one felt in this area, will also begin in the first half of 2007. The neural regeneration trial is going to be in spinal card injury, and it is expected to begin at the end of 2007.

Okay. A couple of more questions. One having to do with the potential for partnerships? I mean clearly you know as much potential as there is in this technology, you cannot have your cake and eat it too I guess would be the best phrase here. A lot of different indications, some of them big market indications, some of them much smaller. What is the potential for a partnership here, and how aggressively are you seeking a partnership?

Let me answer the question this way. I think the economics of how we reach the customer will vary from indication to indication based upon the competitive nature of that industry, whether products and services are grouped and clustered together as part of the offering and just what the basis of competition and the cost of doing business in that channel is. Clearly orthopedics, just to start with that one as an example, is an area that just screams out for having a commercial partner. We have not to date had a very organized or focus activity in talking to corporate partners of any kind, and that is not a criticism. That is just a statement of where the Company is.

I think the resonance that we are beginning to get right now is now that we have a clinical program and effectively a roadmap, we can now sit down and articulate what we actually want a partner to help us with and participate in. If we talk to an orthopedic company, for example, whether large or small I think they need to decide and we can help shape the discussions of whether they want to be a player in these new biologicals that will help augment the kind of work that they are currently doing today.

Our needs are very modest. We can support the cost of the clinical programs that we have outlined within the budgets that we have projected and that Jerry Brennan has talked to you about in terms of our cash spending over the next couple of years. Obviously, as we get into pivotals and if you will more traditional and bigger Phase III kinds of programs, the cost goes up.

So a partner can come in early and help influence and shape and, indeed, even sponsor some of the studies, but we're going to do those studies ourselves and then can also participate potentially on a milestone driven basis the opportunity to commercialize the technology either with us or exclusively down the road. And I think, as you look at each of the indications we are talking about, there are some companies as potential partners who work in one area exclusively, and then there's others that have multiple therapeutic interests, and those discussions we will proceed with as well.

I think realistically starting from sort of a standing start, it takes awhile to find an internal champion within these organizations. And so you can anticipate that we will work towards a partnering strategy if it makes economic sense for us to do so, but certainly those discussions are now underway.

Presentations of data, you mentioned the final results will be coming out for the bone regeneration trial middle some time to -- I think the second half of '07 is what you had said. But are there any other presentations of data, whether it is pre-clinical, clinical in 2007 or that you hope to present at meetings -- scientific meetings?

Well, you know, I hope we are going to have some clinical data coming out of our new clinical trial initiatives because the cardiac trial is going to be an open label trial. So it may well be that we have data to report at an early time point in these trials.

I think the other thing that we are doing is we're trying to certainly since I have been here increase our profile and our visibility at both commercial as well as scientific meetings. So we are actively being invited to, as well as seeking invitations to these meetings, where we will talk about what we're doing and our progress and use that opportunity that if we have data to present, given the timing the meeting and where we are in our studies, we will certainly do so.

And final question, not to leave Jerry out or make Jerry feel left out, the burn, Jerry, that you mentioned for the Company of $2 million a month, is that for all of fiscal year '07, or does that go higher towards the end when you have all the clinical trials in full swing?

Thanks for giving me a question. As I said, our burn rate in the first quarter was about $1.3 million a month, and we anticipated moving up to an average of about $1.8 million a month. So I don't think that it will get significantly higher than $1.8 million a month in the latter part of the year. I think that would be the actual burn rate in a month, not the average for the year.

Thank you guys very much, and congratulations on the progress.

Jose Haresco, Merriman Curhan Ford.

Good morning, guys. Congratulations on laying out a very aggressive agenda for all of '07. I guess the first question is to Elmar. Given your expertise and your background in cardiac therapy, could you give us a little bit more of what you're thinking in terms of what the endpoints could look like for cardiac cellular therapy trials? There have been some out there that have not done so well, a different type of (indiscernible) the MAGIC trial out of Medtronics for example. Could you just help us understand what those endpoints would look like and what would be appropriate?

Yes, let me just point out again, we are and I will be fairly broad here -- let me just point out that we're looking at chronic heart failure patients here. So these patients are patients that are at high risk. You can measure their clinical state by clinically established measures like New York Heart Association, New York failure stage. It is known in these patients that they have impaired ventricular function. In other words, the heart is not able to pump away all the blood that arrives in the heart, so it is essentially pump failure.

Having said this, there are a number of things you can measure in these patients. You can measure the pump function. You can measure the clinical stage these patients are in, and you can also measure how these patients are doing as they go along. In other words, what their survival is or what their complication rate is.

Typically what you do with these patients you want to establish safety fairly quickly in small clinical trials also to get the program moving quickly. And typically on these first patients, there is an emphasis on imaging modality, so-called surrogate parameters to establish that the heart pump function is improving. As you go along and you go into studies which will get you product registration, you add other parameters that can be observed also in a number of patients, like clinical status of the patients and complication rates and so on.

I think, Jose, let me conclude by saying that while we are in active discussions with the appropriate regulatory authorities and so we are being a little circuitous in our answer, until we gain alignment with them, I don't want to presume or propose where this will go. But we're in active discussions when we gain alignment with them on exactly what we want to do, and when we are real clear internally on what that is, you will be hearing about it.

Okay. So going back to what Elmar was saying, it sounds like at the beginning you might be looking at things like as [LVF] as a surrogate marker. As you move to later clinical stages, you could be looking at moving patients from Class III or Class II or quality of life type of improvements.

You're right. Let's see we are definitely going to use a very extensive panel of imaging procedures and functional procedures, so this is very reasonable to assume this. Let me also say these patients are very sick patients that we're trying to target. So it should be easy to establish a differential between how control patients are doing and how our TRC treated patients are doing.

Are these types of patients mostly Class III [PHF] patients probably? Fairly serious?

That is a reasonable assumption, I guess.

Given that you are like you said, you're maintaining an open dialogue with the agencies, do you get the sense that the agency has to figure this all out, or that this is even among -- inside the agency that they are still trying to figure out what the right parameters are for cellular therapies in cardiac tissue regeneration?

Our experience to date, and this certainly predates me joining the Company, is that our entry point is a very well grounded one for two reasons. And I don't mean to make a commercial here, but I think it is relevant. One is we're using autologous cells. That is noncontroversial. Those cells are safe, and everybody knows they are safe, including the people that we're talking with at the agency. That does not mean we get to skip over the steps of demonstrating safety. We will have to do that.

Secondly, because we have already sorted out the manufacturing parameters for these cells in a GNP environment, again, that will give everyone a higher degree of comfort that we are going into these programs with a lot of knowns rather than unknowns, and they are very cooperative and willing to work with us. The fact is that this area has yet to be sorted out. We hope to be first. That sometimes can be a little scary if you think about it, but I do believe that in this case taking advantage of being first, whether ignoring the commercial aspect of it, is we will work with the agency on the best way forward and hopefully set a standard that others have to follow.

Kind of tying into this question, something you mentioned earlier was that at least in Europe that they are maybe a little bit more relaxed. Could you comment on that a little bit more specifically, and is it a stretch to think that it is easier to get these types of products approved there ahead of the US?

Well, I understand your question, and I am going to let Elmar answer it in a little bit more detail. We are not being -- we're not making a judgment critical or otherwise one way or the other about what is required for approval in this country or in any other country. We are just recognizing what the playing field is today. And, in fact, the EU takes a different approach country by country, but I think within the EU generally we are fortunate because of Elmar's direct personal experience of working in the cardiac area within the EU and Germany in particular, he brings a lot of insight that we will be able to maneuver through rather than you should have learned by doing.

So let me add to this just a little bit. I think so far in Europe more than 500 patients have been treated with cardiac stem-cell therapies. So at this point it is a good entry point for any early clinical studies. In other words, we well will seek to do clinical studies where it is easiest to do them and where the environment is best to develop the product, and whatever this takes, whether it is to do the trials here in the United States or in Europe, we will do it, and we will take advantage of our geographic, if you will, expertise. Because we know what the regulatory environment is like in the European Union, and we also seem to have some understanding of what the regulatory environment is like here in the US, and we will try to take advantage to get the program going as soon, as fast and as effective as possible.

Can you just give us one example of how things are a little bit more efficient over there? Is it just the way they evaluate, or is it their criteria for getting it approved? Is there anything you can specifically point to as an example as to why things are a little bit more well-defined if nothing else?

Well, I think at this point there is a lot more experience quite frankly in Europe with actual patients that have been treated. This was due to historical differences in the approval process and how easy it was to get first patients treated. So, at this point, I think in Europe again there were over 500 patients that have been treated so far.

So in Germany there is actually a reimbursement in place for cardiac stem-cell therapy, both as an intracoronary application, as well as by direct intramyocardial injection. And let me also say, it is fairly accepted that bone marrow has an acceptable safety profile giving the bone marrow, given the clinical experience that exists over in Europe.

Let me also say that really what we have, our product is a bone marrow product. Keep this in mind, it is essentially autologous bone marrow product that just contains very high numbers of precursor and stem-cells. So the regulatory authorities and centers over there have a certain degree of confidence in the safety of our product for the application in the heart, especially in the context of (inaudible) graphing procedures or for any other cardiac applications at this point.

So it is fairly easy for us. It is fairly easy to us to start these trials. Please also note that production for us is not a problem at this point with a CMP -- CGMP facility in Stuttgart that can supply the product to our trial centers in Europe at this point. So that is all established. So we have the infrastructure in place, and we have the experience in place essentially to do these kinds of studies and to get the program going.

Last question and then I will hop off. You mentioned the narrow indication in the spinal card injury. Why that particular indication versus a neurodegenerative disease, for example? Is there any particular data that we can look at in the bone marrow space that would lead us to believe that this is a better indication than one that people are chasing?

Yes, again, we are familiar with the European arena. Let me put it this way, and I personally have some previous experience in the field. And at this point, it appears that to get the first -- to get first clinical data out of clinical trials, it is easiest to target spinal cord injury.

We also think too that the regulatory process, assuming that the early preclinical data is encouraging, by the application of our TRCs at the repair site physically in the spinal cord will be a less challenging regulatory path than actually trying to deal with neural injection, for example.

Stephen Dunn, Wall Street.

That is with Dawson James. It comes as no surprise all of my questions have been answered. Thank you.

(OPERATOR INSTRUCTIONS). There are no further questions at this time. Do you have any closing comments?

Sure I do. Thank everyone for listening to the questions from Jose, from Ren have been very good, very thoughtful questions, and hopefully our answers and response to their questions has helped explain as it did to Steve exactly where we are going. And I think you will be pleased with the progress that we are making and intended to make on a going forward basis.

Those of you who have heard us speak at meetings and at our shareholder meeting more recently, let me just summarize by saying that the change that you will see on a going forward basis I think what we just talked about will speak for itself. But we are leveraging this platform technology of TRC's for multiple commercial opportunities in not only the bone area but also the vascular, the cardiac and the neural area. There is going to be a renewed emphasis on product development.

Also, we are planning to expand our intellectual property in the field to make sure that by the time we do get products to market, that we are as competitive then as we are today. And we intend to implement the fastest path to and through the FDA and the regulatory processes in the EU given the timing and differences that are there.

And finally, as we have talked about as well, initiate corporate partnership discussions that really makes sense for us, not only in recognizing the commercialization path and ultimately how we are going to make money, but also to help share and underwrite some of the cost and influence some of the costs of the clinical trials that we're working on as well once we get their FDA and international approvals.

So that concludes the remarks from the Company. I would like to thank again all of you for tuning in and participating. Tina, back to you.

Thank you, sir. This concludes today's teleconference. Thank you all for your participation. You may disconnect your lines at this time and have a wonderful day.