Vericel Corp (VCEL) 2008 Q4 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Aastrom Biosciences fourth quarter fiscal year 2008 investor conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions).

As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Ms. Kris Maly, Senior Director Communications and Administration at Aastrom. Thank you, Ms. Maly. You may begin.

Thank you, Melissa. 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 strategy; initiation, completion, results and anticipated timing; revenue results; potential market opportunities; market development plans; projected cash burn rates; anticipated key milestones; and potential advantages and applications of the tissue repair cell technology 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 SEC. Actual results may differ significantly from the expectations contained in these forward-looking statements.

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

Thanks, Kris. Good morning, everyone. Thank you as always for participating in our call today.

This morning we will highlight Aastrom's progress since the last quarter and review our fourth quarter and year end financial results. We will then open the call up to questions from those in the listening audience.

I'm here today and let me make a few opening remarks initially here. And that is, I believe that at this juncture -- and I've been in the Company for approximately two years, Aastrom is actually in the best operational position it has been in a very, very long time. From the interim data that we have been collecting from our various clinical activities our tissue repair cell-based products are doing their jobs in patients suffering from a wide range of indications, including cardiac, vascular and bone, which currently have limited or no treatment options.

This is all very exciting for the Company and we certainly hope that our shareholders and our other interested parties and stakeholders share the same enthusiasm that we here at Aastrom have. But that does present us with a dilemma or what I paraphrase as a high-class [bubble]. What exactly do I mean by that?

Well, we have several clinical trials approved by the FDA -- a Phase III, a couple of Phase IIs, including our landmark cardiac trial which you'll hear more about it a few minutes. And having all of these clinical programs up and running is all good and well, of course. That's the high-class part of the comment.

However, all of these trials are very expensive to run simultaneously and in parallel and with the current global economy, the capital markets problems that we all are experiencing to some degree or another individually as well as through our funds, being so challenging particularly for the small cap biotech sector, the potential for raising money in the foreseeable future is -- to concurrently support all of these clinical activities at the same time remains uncertain. Therefore that is the problem part of the comment.

Now faced with all of this, during May, which we previously announced, we took action to proactively reprioritize our clinical development programs to primarily focus on cardiovascular applications, including dilated critical cardiomyopathy and critical (inaudible) ischemia. To this end we have discontinued further patient enrollment into our US Phase III ON-CORE clinical trial for osteonecrosis, that we will continue to follow the already treated patients for the full 24-month follow-up period.

We do not anticipate initiating new clinical activity in the bone area or reactivating patient enrollment in the Phase III ON-CORE trial or initiating formal clinical trials in the spinal cord injury or neural area without additional financial resources.

While the decision to reprioritize was driven by economic factors, the clinical programs were prioritized based on anticipated time-to-market, the clinical approvals and their relative clinical and market potential. The impact of these changes within the development in clinical areas resulted in a significant reduction in our staff and in our overall operating expenses which results in a reduced monthly cash burn rate to better preserve our existing cash resources.

During June, with our focus clearly directed to cardiovascular applications, we were very pleased to announce that we received authorization from FDA to initiate our US Phase II dilated cardiomyopathy clinical trial called IMPACT-DCM. The patients we plan to treat with our cardiac repair cells are suffering from dilated cardiomyopathy, a severe chronic heart failure.

Currently, heart transplant is the only long-term solution to these endstage DCM patients. However, the availability of transplants, as most of you know, are limited by the number of donors and are typically only offered to younger patients and require long-term medications with potential, severe adverse side effects.

The hope that we have for these patients is to halt or reverse the cardiac disease progression with our CRCs, to increase life expectancy and improve the quality of their lives. The potential to save lives in this targeted patient population helped guide our decisions to focus on the cardiovascular indications. Not only will we be treating patients who are basically going to die if they do not receive one of the few heart transplants that are available, assuming they qualify, but we will also be able to assess treatment effects in cardiac indications in a much shorter follow-up time than other regenerative applications, for example, in the bone repair area.

Our Company is energized by focusing on cardiovascular applications and we look forward to providing updates as we achieve clinical milestones. So regardless of the fact that fiscal year 2008 was a challenging year for all small cap biotechs, including Aastrom, we are forging ahead and turning these challenges into an opportunity to focus and continue to make progress in moving our clinical programs forward.

Dr. Burchardt, who is with me today will provide additional details on our clinical milestones later in the call. I will now turn this over to Julie Caudill, our Corporate Controller, for a review of our fourth quarter and fiscal year end financial results. Julie?

Thank you, George.

We ended our fourth quarter and fiscal year on June 30, 2008, with approximately $22.5 million in cash, cash equivalents and short-term investments compared to $28.3 million at June 30, 2007. Our average cash utilization during the fiscal year ended June 30, 2008, is approximately $1.7 million per month. Due to the reorganization of our development and clinical program priorities, along with reductions in overhead and staff, we are estimating the average cash utilization will decrease to approximately $1.2 million per month during fiscal year 2009.

Total revenues for the quarter and 12 months ended June 30, 2008, consisting of minimal product sales of manufacturing supplies to academic collaborators in the US and cell-based products to US-based physicians and grant funding were $149,000 and $522,000 respectively compared to $165,000 and $685,000 for the same period in fiscal year 2007.

Research and development expenses for the quarter and 12 months ended June 30, 2008, were $3.4 million and $15.2 million, respectively, compared to $3.5 million and $11.4 million for the same periods in fiscal year 2007. These changes reflect the continued expansion of our research and development activities to support regulatory submissions, ongoing and planned tissue regeneration clinical trials in the US and EU.

We also reported that our selling, general and administrative expenses decreased for the quarter and 12 months ended June 30, 2008 to $1.7 million and $6.4 million, respectively, from $1.9 million and $8.7 million for the same period in fiscal year 2007. These decreases reflect lower salaries and benefits as a result of management and employee changes.

Decreases in relocation and recruitment expenses reduced supplemental compensation, relating to the 2007 management performance bonuses and the eliminations of the management performance bonus plan and the associated costs for 2008.

The research and development expenses in selling, general and administrative expenses include non-cash charges relating to the accounting standard, which requires us to measure the fair value of all employee share-based payment and recognize that value as an operating expense.

Dr. Burchardt, our Vice President of Medical Affairs, will now review our clinical progress since the last conference call. Elmar?

Thank you, Julie. As George mentioned earlier, we have been granted FDA approval to begin our IMPACT-DCM trials (technical difficulties) Phase II clinical trial to treat patients suffering from dilated cardiomyopathy or DCM, a severe form of chronic heart failure.

This is a chronic disease where the patient's heart is chronically overstretched. Pump function becomes reduced to a point that normal circulation of blood cannot be maintained. Patients with DCM usually present with symptoms of congestive heart failure, including severe limitations in their physical activity and shortness of breath. DCM generally occurs in patients who have ischemic heart failure due to chronically incurred blood supply to the heart tissues.

It also occurs in patients with otherwise healthy blood supply to the heart as a disease of the heart muscle and the connective tissues. This is called non-ischemic DCM. Patient prognosis depends on the stage of the disease, but is characterized by numerous health problems and a very high mortality rate. Currently, heart transplant is the only curative option for a fortunate minority of these endstage DCM patients.

We are currently working with five clinical trials to complete clinical trial contracts to finalize the budget, and to assist individuals sites with the investigational review board approvals they must obtain from their institution. Once these required events take place, we will then train the clinical staff at each site, so they will be ready to initiate patient enrollment.

All of the requisite activities are moving forward for the [impacted] DCM trial and we plan to initiate patient enrollment into this clinical trial during September.

Now I would like to take a moment to remind listeners about our ongoing US vascular regeneration clinical trial. Our Phase IIb RESTORE-CLI trial that is enrolling patients suffering from critical limb ischemia or CLI which is the most severe form of Peripheral Artery Disease or PAD.

All patients in this trial are critically ill with a high risk of amputation. These patients are extremely limited in their ambulatory capacity. They experience constant and chronic ischemia-induced pain, ulcers, tissue loss, or gangrene to the limbs which leads to approximately 160,000 amputations per year.

We currently have 21 clinical trials -- trial sites initiated for patient enrollment. Our next milestone for this clinical trial is to complete enrollment of the first 30 patients. We will unblind and then analyze the interim data from these first 30 patients approximately 12 months after the 30th patient has been treated.

We anticipate reporting on these results from this interim analysis by the end of calendar year 2009.

If you are interested in learning more, we invite you to visit the clinical trial Website at www.RESTORECLI.com. This Website was developed to provide more information on CLI and how Aastrom's vascular repair cells are being clinically evaluated in the treatment of patients suffering from those indications.

Our US Phase III ON-CORE trial is evaluating the use of our bone repair cells, BRCs, to treat patients suffering from osteonecrosis growth of the femoral head. As George mentioned earlier, we have discontinued further patient enrollment into this trial until we have secured additional financial resources. Patients who have already been treated in the ON-CORE clinical trial will continue to be followed by their physicians for the full 24-month follow-up period.

I am excited about the progress Aastrom is making in moving its IMPACT-DCM clinical trial forward in preparation of patient enrollment, and about reaching our milestone of treating a 30th patient in our RESTORE-CLI trial.

I look forward to the next opportunity I have to provide you with an update on our clinical program progress.

I will now turned the call back over to George.

Thanks, Elmar.

Before we conclude today, I wanted to bring to your attention the 8-K that we filed with the SEC on Wednesday, announcing the resignation of Susan Wyant from our Board of Directors. Susan has served Aastrom with distinction since 2002 and her extensive experience in the pharmaceutical industry has been extremely valuable to Aastrom over these years.

I wanted to take this opportunity to personally thank Susan for her years of service and dedication to the Company. She will continue to serve on the Board until our annual shareholder meeting later this fall.

Many of you are concerned also about our current stock price and when I talk to those of you in one-on-one conversations, we always talk about, what is Aastrom doing about it and what about the concern for delisting relative to NASDAQ.

I can assure you that the Board of Directors, along with our legal and financial advisers, we are all working together to consider every option that we have available to us to ensure that this doesn't happen. We are all painfully aware, of course, about the downturn in the market generally and the economic obstacles that are facing small cap biotech. And we have to look at this in the context of what we're doing operationally and we believe that we are making extremely good progress, operationally and in the clinic.

This press release that was published earlier today highlights the forward-looking statements and the milestones that we've set out for ourselves and I'd like to summarize a couple of those before we conclude and take any questions.

We are also trying to give you, our shareholders, better guidance of timing and expectations over when some of these events are likely to land.

First and foremost, of course, is the initiation of our patient treatments in our IMPACT-DCM clinical trial that we actually expect to start treating patients as early as next month, but certainly during Q4 of this year. Completing patient enrollment in his trial which of course is very important is at the end of calendar year 2009.

I would say here that this is an open label study. So we will be able to observe and talk about the patients as we go along in this study. And we will be communicating with you on a more routine basis than we might otherwise do if the trial were blinded as in the CLI limb ischemia trial.

The next milestone of course, is obtaining the necessary approvals to initiate a cardiac clinical activity in the EU and, finally, completing the enrollment of our first 30 patients in our restore CLI trial as we have mentioned. This is very important because we will be able to analyze the interim data 12 months after that first -- after that 30th patient is treated. And we are on track to do that again during Q4 of this year.

We hope that this will conclude and summarize the comments that we made, not only going forward but for the year, and hope that you are excited about following Aastrom's progress as we move forward into our new fiscal year 2009.

Melissa, we are happy to take a few questions from the listening audience at this time.

(Operator Instructions.) [Scott Smith], a private investor.

I've got a number of questions for you today. First question I would like to ask is, are you planning on bringing up another reverse split vote (inaudible) to change Aastrom's NASDAQ compliance? And if so when? Because, from my understanding, your second extension is up in the December time frame.

Also will Aastrom have enough capital to get through the cardiac and chronic limb ischemia trials through the whole process? And if the answer is no, why fix the capital structure of Aastrom only to turn around and break it again with more private placement financings?

You've asked a lot of questions. Let me try to address those in some order and give you the best guidance that I can.

I think as our listening audience and shareholders know, we put through an attempted reverse split process back in spring of this year. The primary reason for doing that, as I had said on a number of occasions during conference calls and otherwise, was to reduce the uncertainty and the cloud of potential delisting that is of primary concern, not only to us in the Company, but also potential new investors.

At that time, of course, no one knew exactly how long the downturn in the market would continue or to what extent it would, in fact, indeed bottom out. And there are signs that the bottom may have in fact been reached by now, but at the end of the day no one really knows.

The vote that we achieved at that time was overwhelmingly in favor of the split, 3-to-1. Of those that voted, voted to support the reverse split. However, we did not achieve the requisite number of outstanding shares that voted and, therefore, because of that fact, we withdrew the proposal.

So the message that we got from that was that a number of people that we talked to is that maybe doing this as early as we did might influence whether people would vote for or against it or even turn out to vote if we did it closer to the time. The time line that we're working under today is that we have received the extension from NASDAQ, the first 100-day extension in June. And the second 180-day extension is in place now and will come up during middle of December.

We expect then to sit down with NASDAQ and discuss where we are and what our circumstances are at that time. So -- .

Can you get a third NASDAQ extension? Is that a possibility here?

We will talk to NASDAQ about all possibilities. There's no hard and fast rules as I understand it. And the discussions that we have with NASDAQ are really -- the hearing we have will be with people who not only represent the exchange, but also consultants and business people that they bring in to understand and review each company's individual circumstances and evaluate it on its own merits.

So there's really no hard and fast guidelines or prediction of what is likely to happen. Obviously we will watch and see how this goes as we enter the period of the next -- the last quarter and as we enter the December time period.

So I can't put my hand on my heart and say to you today that we are planning to implement a reverse split before that event. But it is always a possibility that we have to have, keeping all of our options on the table.

The second part of your question was about our cash position, relative to the cardiac clinical trial and what that means. Let me step back for a second and talk about what we've done.

I think the short answer to your question is that if things went exactly the way that we hope they do, relative to not only site recruitment but patient recruitment, we could indeed get those patients in under the wire. But we also have to deal with our cash positions from a going concern perspective, relative to our outside auditors, where we have to demonstrate that the Company has 12 months' worth of cash in the bank -- not planning to raise it, but in the bank -- to satisfy the next financial year's plan that the Company has set out for it.

So part of the strategy that we adopted and the hard decisions that we took a few months ago to reduce our burn rate and the corresponding reprioritization of the clinical programs was pretty painful to do because we had to let go a number of very, very good people. And we had to deliberately put on hold the clinical programs that remains very, very promising.

But we can't in this economic market, and with the uncertainties around raising money, we had to do what we had to do. And as a result of that I think we came out of this, at least from a financial perspective, a lot stronger with a lot more options relative to how we do. Now there's not a day goes by that Elmar doesn't have me on him about site and patient recruitment because that clearly is the most important thing that we have to do and it is the number one priority for us today.

Obviously the limb ischemia trial is equally important but because that's a double blinded study and we have the opportunity to unblind that after the first 30 patients have been treated, and then assess where we are and sit down with the FDA and decide what is the best way forward from there, that also is an important milestone. So I think we are looking at clinical milestones, both in cardiac recruitment and in the data on the limb ischemia during the fourth quarter of 2009. (multiple speakers)

I sort of want to interrupt you on this. Towards this end, would it be possible for the existing patients in osteonecrosis for Aastrom to seek FDA approval and get that indication out in the market on the patients to date rather than having the full patient recruitment for that trial?

I mean it would make sense to get something out on the market so you can start bringing revenues into the Company to then start ramping up all of your trials concurrently rather than having to cut back on them?

Sure. The primary reason, and it may be counterintuitive, but the primary reason that the osteonecrosis trial or indeed any bone trial was put in the lowest position, relative to priorities, was not anything to do with our excitement about the clinical outcomes. That's the frustrating part. Because everything that we have done to date indicates and suggests that it has to work.

However what the FDA has required is that there be 24-month follow-up on those patients in that trial before they can get approved. Furthermore bone grows very slowly. And this is one of the things that a lot of people miss -- is that in cardiac repair, for example, we can watch and see changes and improvements or lack of improvements almost in real time. With the sophisticated imaging techniques that are available today, including echo, MRI, pet and CT scanning we've really have the tools where we can assess patient changes very, very soon after treatment in a way that we can't do in the bone area.

Meaningful data from bone growth -- I mean we get some early indication in six months, but it really takes a year to really define whether this is working or not. And then you couple that with what the FDA has asked for which is, with two years of follow-up, reasonable or not, that's what they've said to us. And those are the things that have influenced the decision that we had to make to reprioritize and put the other programs ahead of that. (multiple speakers)

Right, but if say these patients that have already been recruited and treated and let's say their 24-month follow-up period were to beat the time frame, let's say, of cardiac or limb ischemia, getting through not only Phase II, but getting through Phase III, would Aastrom be able to pursue FDA approval and then go for marketing?

The short answer is no. Because they, the FDA doesn't parse or slice and dice patient groups within a clinical trial. The power of a clinical -- or the beauty of a clinical trial from an FDA perspective is the power of the statistical significance of measuring and following a set number of patients, and then looking at them statistically across a number of diagnostic and therapeutic checks to determine what the efficacy outpoint is.

There's really never been much question in our mind and, in fact nor the agency's mind about safety. But it is the efficacy and the end points and the labels, and they just simply don't make exceptions even though it's a great idea.

Elmar may have some additional comments to amplify what I just said.

Yes, just dive into some more details. What you need for these retrials is so-called [prospective] hypothesis. So you need to have a hypothesis whether it's a -- your treatment group is doing better than your control group. And to do this you need a certain statistical power. So you need to reach the statistical significance.

And the number of patients in this case has been calculated so that it would be sufficient to show a difference between the two groups. This is unlikely that with a patient set as small as the one we have at this point, you would be able to show this significance. So you need probably to complete the entire patient set to make these kinds of conclusions.

Okay. That answers my question for that. Now can you answer a question sort of going back to the share price? And this goes back to promoting the Company.

Can you tell me why are you guys not promoting the Company more regarding share price or your compassionate use [pacings] that you tell us about last April? Why is Aastrom so quiet about this? Why not tell the world "Hey, we are doing this," and try to attract new investors and new monies into the Company?

Considering that you have made cardiac the focus of Aastrom, wouldn't it makes sense to do this? It seems like Aastrom has been extremely quiet throughout this period. And it really needs to be said that Aastrom needs to go the other direction. You need to get out there and promote this.

You are telling us that everything is working and we believe you. But if you don't get the message out to the world, you are not going to attract new investors.

I think all I can say to put this in context is that we do not withhold any data that we have that we believe is relevant and meaningful. I don't think there's a lot of -- I haven't said that, there is a lot of noise and hype and story of the week in the news media about stem cells or cell therapy generally and that I have found personally and certainly our outside public relations advisers in New York say that any company that is operated in a space with this sort of environment has to be very, very careful because people just tune out and don't listen.

What really carries the day, and what is important, is meaningful clinical data with statistically relevant numbers behind it. Now that is something new for Aastrom. I have to tell you, Aastrom in the past, in my opinion, and others may disagree would me, were clearly trying to generate a lot of information to stay in front of things.

It is not obvious to me that in doing so that that helped except possibly on a temporary basis. We are trying to build a strong foundation of meaningful value with very solid clinical data that will stand up not only to regulatory, but peer review for publications by journals and in academic publications.

That is really the only way that this is going to gain traction. And in particular, the type of investors that we are interested in attracting who will be long-term patient institutional investors, unlike yourself, and we very much appreciate your time and patience here, but as one of my board members said Aastrom is really a two-year old company in a 19-year-old body.

So a lot of the things that have taken place in the past simply don't apply anymore as far as the operations going toward are concerned. But clearly you, as a long-term patient investor, we appreciate your willingness to support what we're doing. And in the end we believe that that will pay dividends and benefit.

So thanks, Scott, for that input. Melissa, if we could go to another caller who might have any questions please. Thank you.

[Robert Smith] with [The Center for Performance Investment].

Can you tell me if you've attempted to partner it in the bone area and if so what have been the roadblocks? Has it been price and if not why not?

Sure. We have communicated in the past that each of our clinical programs will probably require some type of partnering. whether it is geographic partnering or whether it is development partnering. And because we have backed off on the orthopedic programs, that is clearly the area that is of the most interest to potential people.

We are actively and systematically reviewing with a number of possible parties who would be interested, of our orthopedic portfolio. They are taking it under advisement and right now it's early days.

So I don't want to comment one way or the other to try to set an expectation, but I think it is our goal to do that. On the other hand if we are success -- if the market turns around and we are successful with another fund-raising that allows us to pick up and expand and move in parallel with multiple programs, you might see a change there as well.

The one area that we have not progressed in, which again is a frustration, is in the spinal cord area where we believe our technology has tremendous application. But until we see a better or stronger financial market, we are just real reluctant to spend any money in that area.

So -- and I think the companies and partners potentially that we're talking to, each in their own way, are experiencing their own issues and downturns. So everybody is being real careful, slow and cautious right now. But it is an active program and we will talk to you and update you more as things develop.

It seems that Big Pharma is quite interested in pipeline [sale] and making such arrangements. So when you say it is a difficult time, it might just as well be viewed as a very optimistic time.

I'm not going to disagree with that and make a general statement about Large Pharma. But in the discussions that we have had with some pharma companies, clearly they see their sweet spot is in traditional small molecule and pharmaceutical development. And I believe that the work that some are actively considering getting into, if they're not already, are programs that will use stem cells to augment their drug discovery process, first and foremost.

I think the decision to actually treat patients with stem cells as we're doing is a different branch on the tree that they are all looking at and considering. But I think what you'll see first and I think that's been indicated by what you have seen announced with Glaxo SmithKline and Harvard and one or two others that have formed academic collaborations. Because first and foremost they want to use stem cells to help augment their own drug discovery work, which is the strength they have.

Thanks so much. Good luck.

[Alice Watson]. A private investor.

I wanted to ask in the cardiac program, you say you are going to initiate patient enrollments in September of 2008.

That's correct.

When is the earliest interim data that can be presented?

Let me let Elmar address that. I think the challenge that we have is that because we are very excited about the fact that, a, it's open label so therefore we can see and share amongst our constituents how we are doing, but [an in] of one is not a meaningful number.

Then you say, "Well what about two or three or five?" I think we have to see how this goes.

And the reason I say that is in part and Elmar can collaborate on this, but we are dealing with very, very sick and fragile patients and we expect that some of these patients may in fact die. Not from the procedure, not from the stem cell therapy, but these are people who are on a transplant list and are very fragile and at the end of their life.

The experience that we have had with treating patients to date has indicated to us that the sicker these patients are, the better they respond to the treatment. And this is the patient group that we are trying to go after.

So we don't want to, as you can well imagine, come forward and say, "Look, we treated our first patient in United States at such and such a hospital," and then follow it out for a couple months and find out that for reasons, which are completely unrelated unless we follow them for a couple of months, that there were problems.

So the opportunity is that we have the availability of this data and to communicate it. We just have to figure out the best way to do it in a meaningful way.

That is a long-winded way of saying I'm not sure I know the answer to your question, but Elmar, if you can help out also.

Sure. Please recall as George said before this is an open-label study. So the situation is slightly different from the situation we are having in the CLI trial. We are going to have almost real-time access to the data as they come out.

And we -- the second part of my answer is about the sectors that are influencing when you are reporting these data. And let me give you a little bit of detail around this.

First of all it's dependent on patient accrual. It is very hard to project these kinds of things. But please recall we are working with five really major cardiac centers, and this is a quite large patient population. So we expect accrual to be good in this trial.

The second point as far as these patients faring and based on our [interim] experience, it has turned out that functional improvement in these at least first two patients was observed fairly early on the first couple months. And based on this and based on other data we have negotiated with the FDA that we will do an interim analysis on this trial after six months of follow-up on these patients.

So all the major end points on these patients which are major imaging end points also major clinical end points, such as heart failure stage and so on, will be measured at six months. And that's the most important time end point on those trials. So as you can seat these are different time lines, for example, from the time lines we had on the osteonecrosis trial. It is much faster.

So basically you are saying, though, you are going to start enrolling in September and within six months have interim data. And you are doing five clinical sites and there's lots of patients. And you are only enrolling 20.

We are enrolling 40. We are enrolling 20 per cohort. Remember there are two different cohorts to the DCM population.

We have the patient population consisting of ischemic DCM patients. These are patients that have typically incurred blood flow to the heart. They typically had what they call chronic myocardial ischemia or multiple heart attacks.

Another really major patient population, which accounts for the other 20 patient cohort, is so-called nonischemic DCM patients. And these are patients where the heart muscle is really sick or there is a connective tissue disease, so there is no impaired blood flow.

So you don't see a problem with enrollment?

You know, before something starts it is really hard to say, but based on my past experience and based on the experience of the centers and so on, I'm really optimistic about this.

And the other patients, the other two patients you had in Europe, how is the follow-up with them? I mean that hasn't really -- initially that was presented, but now it's been quite a few months.

There is a reason for this and the reason is in the referral pattern in Germany. Remember these were patients that were treated under compassionate (inaudible) so they were really desperate patients. One patient was -- [in fact] one patient was terminal heart disease who had to the treated really on an ad hoc basis at the University of Dusseldorf.

Now the pattern, the typical treatment pattern in Germany is that the cardiac patient, the cardiac surgeons take care of these patients as long as they are in the hospital, as long as they are in critical condition. All of these patients were in critical condition. And when they were released they had so much improved that they were referred on to their treating cardiologist for rehabilitation and so forth.

Now this referral pattern also means the treating cardiac surgeons, Dr. [Klein] in this case, does not have direct access to the patient unless the patient is directly referred again to the cardiac surgeons. For example if there is a problem with the (multiple speakers)

Okay. So no news is good news (multiple speakers).

So we -- in short we are -- or we and Dr. Klein are looking to get follow-up data, but it is not something that is regularly obtained on these patients.

Okay, but it looks really positive on the cardiac program in the United States for enrollment and then more follow-up six months later?

Yes. And please also recall that the data we had on the first two patients were reviewed by the FDA and that they were we think also instrumental in the FDA's inclusion to let us go forward with our IMPACT-DCM trial.

Thank you.

There are no further questions at this time. I would like to turn the conference back over to Mr. Dunbar for closing comments.

Okay. In conclusion I would like to thank people for participating on the call and joining us today. We tried to outline and answer questions to augment the press release that has come out.

I think you can look forward in the near future to see our 10-K filing and our proxy for our annual meeting. And we look forward to talking to you further about progress with the Company in the future.

Everyone have a nice Labor Day weekend. Talk to you next time.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.