Vericel Corp (VCEL) 2010 Q4 法說會逐字稿

Welcome to Aastrom's fourth-quarter 2010 and year-end conference call. At this time, all participants are in a listen-only mode. After opening remarks, we will open up the call for your questions. Instructions for queuing up will be provided at that time. I would also like to remind you that this conference call is being recorded.

I would now like to turn the conference over to Aastrom's Chief Financial Officer, Scott Durbin, for introductory remarks.

Thank you, operator, and good afternoon, everyone. Welcome to our year-end 2010 conference call to discuss our most recent operating results and progress. Before we begin, let me remind you that on today's call, we will be making forward-looking statements covered under the Private Securities Litigation Reform Act of 1995. And all of our projections and forward-looking statements represent our judgment as of today. These statements may involve risks and uncertainties that are described more fully in our filings with the SEC, which are also available on our website. In addition, any forward-looking statements represent our views only as of today, and should not be relied upon as representing our views as of any subsequent date.

Joining me on the call today are Aastrom's President and Chief Executive Officer, Tim Mayleben, and our Vice President of Clinical and Regulatory, Sharon Watling. Following our prepared remarks, we will open the call to your questions. I'll begin my review of our operating results by reminding you that in November of last year, our Board approved a change in the Company's fiscal year end from June 30 to December 31. As of now, we will begin to report all operating results on a regular calendar-year basis. This will also change the regular timing of the Company's annual shareholder meetings, and beginning this year, we expect to hold our meeting in June.

The financial results we're reporting today are for the three months ending December 31, 2010, and the six-month stub period from June 30, 2010, to December 31, 2010. These results will be included in a new 10-K covering the six-month transition period, which we plan to file in March 2011. Going forward, we will report our quarterly and fiscal-year results on a calendar-year basis.

At the end of December, I'm pleased to report that Aastrom had $31.2 million in cash and cash equivalents, versus only $14.5 million as of September 30, 2010. This difference includes cash expenses for the quarter of $5.1 million, a cash increase of $1.1 million from the exercise of options and warrants, and approximately $20.7 million in net proceeds from the sale of 10 million units of common stock in warrants this past December. As a result of these transactions, the number of shares of common stock outstanding as of December 31 was 38.6 million. Including our 4.5 million options and 15.3 million warrants, we now have 58.3 million common stock equivalents outstanding, which is very close to the 62.5 million limit of our authorized shares.

This means we cannot raise additional capital to support our late-stage clinical development programs, or continue to provide equity incentives to employees unless we increase the number of our authorized shares. Therefore, we are asking shareholders to amend our charter, and approve an increase in the number of authorized shares and shares available for the Company's equity compensation plan. Both are obviously very important as we continue to build our Company. As a reminder, a special shareholder meeting will take place on March 21 of this year to address these matters.

Now I will review the Company's operating results. Revenue for the three- and six-months ended December 31, 2010, were $253,000, compared to $16,000 and $89,000 for the same periods in 2009. And this increase relates to the receipt of the qualified therapeutic discovery tax credit in November. Research and development expenses for the quarter and six-month periods were $4.4 million and $8.6 million, versus $3.3 million and $6.2 million for the same periods a year ago. The increase in R&D expenses for both periods is primarily attributable to preparation for our phase III CLI program.

General and administrative expenses for the quarter and six-month periods were $1.6 million and $3.3 million, compared to $1.3 million and $2.3 million for the same periods a year ago. The increase in G&A expenses for both periods is primarily due to expenses associated with stock-based compensation and consulting. Total loss from operations for the quarter and six-month periods was $5.7 million and $11.6 million, and includes $600,000 and $1 million, respectively, in non-cash stock-based compensation expense related to options granted.

Other income and expense not related to operations for the quarter and six-month periods was $7.6 million and $7.7 million of expense, respectively, compared to $300,000 of income for the same periods a year ago. The expense in 2010 predominantly includes non-cash warrant expense related to our outstanding warrants, including those issued in the December financing. This expense was due to the increased market value of our common stock during these periods. Each reporting period, we will carry the fair market value of these warrants on our balance sheet as a current liability, and will incur non-cash income or expense related to the changing fair market value of the warrants, which could have a large non-cash impact on our net loss.

Finally, for the quarter and six months ended December 31, 2010, we had a net loss of $13.3 million or $0.44 per share, and $19.3 million or $0.66 per share, compared to a net loss of $4.3 million or $0.20 per share, and $8.1 million or $0.38 per share for the same periods a year ago. Excluding the change in the fair value of the warrants noted previously, net loss for the quarter was $5.8 million or $0.19 per share, as compared to $4.6 million or $0.21 per share a year ago.

I would now like to provide some guidance on our projected future operating results, which will support our ongoing clinical programs, and the preparation for our phase III CLI program. For the first quarter of fiscal year 2011, we expect to spend between $6 million and $7 million in cash, over $2.5 million of which is projected to be directly attributable to preparation around our phase III CLI program. As a reminder, these amounts exclude any ongoing charges related to the warrant liability, which will flow through other income and expense.

That ends the financial overview, and I will now turn the call over to Tim. Tim?

Thank you, Scott. To begin, I want to thank our shareholders for your continued financial support, which has enabled us to make some very good corporate and clinical development progress in almost every aspect of our Company during the past year. I would like to highlight several of the more important developments for you.

To begin, our recent financing put us in a much stronger position to execute our critical limb ischemia and dilated cardiomyopathy programs. The CLI program is advancing rapidly toward phase III testing after we reported encouraging results from two interim analyses of the phase II CLI study, known as RESTORE. We plan to report the final 12-month results from the phase II study in the second quarter.

We've also obtained FDA fast track designation for the CLI program, and submitted two special protocol assessments to the FDA's Center for Biologics Evaluation and Research for phase III studies in patients with CLI. We've had constructive feedback from the FDA regarding our proposed phase III protocols, and we're on track to complete the SPA process in the second quarter for the first phase III trial. That is, the no-option CLI patient population trial, which will use amputation-free survival as the primary endpoint.

We expect to launch the first phase III trial by mid-year in CLI patients who have no remaining therapeutic options. Again, we refer to this as the no-option phase III study, and again, this trial will use amputation-free survival at 12 months as the primary endpoint. We are currently working with FDA to reach agreement on the design of a smaller, supportive phase III CLI study in patients who are poor candidates for existing surgical revascularization options. The issue that we're discussing with the FDA concerns which endpoint to use for the poor-option patient population. And as we've discussed previously, we have proposed using major adverse limb event free survival, or MALEFS, which is a composite endpoint which includes major revascularization in addition to major amputation and all-cause mortality.

MALEFS has been accepted as a valid clinical endpoint by another division of the FDA, and it is one of several of the endpoints that we could use in this study. However, we don't want to negotiate publicly with the FDA, or tip our hand prematurely to competitors, so we're going to reserve further comment on this question until we finalize the protocol for the poor-option study with the FDA. Fortunately, we have very good working relationship with the FDA, and outstanding clinicians advising us. So I'm confident that we can complete this process in time to launch this poor-option study in the fourth quarter. I want to emphasize that CLI is a very complex disease with many co-morbidities, including diabetes, hypertension and heart disease. As such, it requires a multifactorial approach to treatment, but also a rigorous approach to clinical testing.

Now to help ensure the success of the phase III program, we've taken some additional steps I would like to review briefly with you. First, we're assembling an independent steering committee of outside physicians who have had direct experience with other phase III CLI programs. Second, we're utilizing a centralized review committee comprised of very experienced vascular surgeons to screen these patients for entry into a trial, and ensure we have the right patients enrolled. Third, we're requiring that the no-option patients meet very rigorous criteria for entry into the trial. And fourth, we are minimizing geographic variability and standard of care variability in patients by conducting the trials only in North America. And finally, we're working with a very experienced clinical development team here at Aastrom, and our external CRO has relevant experience in this therapeutic area. I believe these measures will be important to the design and successful execution of our phase III CLI studies, and we expect will help reduce the risks associated with the phase III CLI program.

Let's talk about the DCM program now, which is also progressing very well. We completed enrollment in the phase II surgical DCM study last year, and last month we reported six-month interim results from this trial showing positive trends in quality of life, and in functional and structural measures. Now, since many of you may not have been able to see the presentation at the IC 3D meeting last month in New York, Sharon Watling, our Vice President of Clinical and Regulatory, will review the key data from that meeting with you in a few minutes.

In December, we completed enrollment in the open-label phase II catheter DCM, and DCM surgical extension study, and looking ahead, we plan to report final 12-month results from the DCM surgical study and six-month results from the DCM catheter study in the third quarter of this year. We plan to start the next fully-controlled DCM clinical study by the end of this calendar year. And as many of you know, DCM is an extremely debilitating condition, and the results of these ongoing studies are going to help us successfully design the next phase of the DCM program.

Now, in addition to our clinical progress over the past year, we've significantly strengthened our management team, which has spent considerable time and effort restructuring our R&D, clinical and regulatory, finance and manufacturing groups to make them more efficient, responsive and accountable. We've also recently initiated new business development efforts, and begun discussions with a number of potential corporate partners for our clinical development programs. We've also continued to strengthen our patent estate. In January, we received an important composition of matter patent covering our unique mixture of autologous cells of hematopoietic, mesenchymal and endothelial lineage. The claims in this patent are broad, and support the basis for the proprietary cell product used in our clinical programs.

Now, I would like to turn the call over to Sharon Watling, Vice President of Clinical and Regulatory, to review the six-month IMPACT-DCM data, which were presented last month at the IC 3D meeting. Sharon?

Thank you, Tim. It's a real pleasure to be able to present these data and share these data with those folks on the phone. The data were presented at IC 3D in January in New York City, and everyone that was able to see these data was very excited about the idea. I think we've achieved the proof of principle with this study, which is really interesting. If we can go on to the next slide, please.

So just to remind everybody what the study was about, what we did is, patients underwent a small thoracotomy, so a small opening in the chest, not a full open heart procedure, but a smaller procedure, in which the surgeons were able to directly visualize the left ventricle. Once they visualized the left ventricle, they were then able to -- then the surgeons were able to directly inject the autologous cells directly into the left ventricle, which was an important thing to determine whether or not we could do reasonably safely. If you remember, this patient population is extremely ill, and so undergoing a surgical procedure is actually very difficult in this patient population; they're at high risk for adverse events.

So the first objective of this study is really whether we could safely deliver cells directly into the left ventricle, and whether or not patients could tolerate them. So we enrolled patients that were either ischemic or non-ischemic dilated cardiomyopathy patients, and they received either our autologous cell therapy or control. The goal was a 3-to-1 randomization; we actually ended up with more of a 2-to-1 randomization, and I'll show you those data in a few minutes. The patients who received our autologous cell therapy had standard of care as background, but they also had a bone marrow aspiration and a direct injection of the cells into their myocardium. The control patients just had standard of care therapy.

The study started in November of 2008, and will end in March of 2011. We randomized 40 patients, of which 39 patients were actually treated; and of those 39, 19 patients actually received cell therapy and completed the study. 11 patients are continuing on, and nine patients have discontinued. Three of the patients who were in the control group -- remember that's the group who received standard of care therapy only, had the opportunity to switch over to the treatment group after six months, and three patients chose to do that and received cell therapy, and they're summarized separately. Can I have the next slide, please.

So this is a slide depicting the population we studied in this study. Again, they were half ischemic patients and half non-ischemic patients. That non-ischemic group would be anything that would cause dilated cardiomyopathy that wasn't due to a blockage for -- a blockage that occurs like in ischemic patients. These patients were all class New York heart class 3 or greater, so the majority of patients were class 3; there was one class 4 patient. All the patients were supposed to have a left ventricular ejection fraction of less than 30%. You can see that across the board, all the patients did have a left ventricular ejection fraction less than 30%.

So I want to remind you of a few things about this study; this is an open-label study. When you think about how you would design the study and how you would actually execute the study, we really can't justify having the control patients undergo a surgical procedure in which they do not receive treatment. They're just too sick at this stage of their disease; so it's an open-label study. We know which patients were actually actively treated versus those patients who were standard of care. So it's a little difficult to be really unbiased here, but we do have the ability to at least understand whether or not we can effectively deliver the cell therapy, and then get some ideas about whether or not we are actually making patients better. I think you will find that we're actually able to do a pretty good job of making patients feel better when I show you those data.

The other interesting thing to keep in the back of your mind is, these are patients who are very end-stage patients. Their options really are to go on to a heart transplant or a left ventricular assist device. So, the ability to avoid those endpoints is really important to this patient population, but we know that they are so late stage that they're likely to go on to an LVD placement, and so that does make it a little difficult to understand exactly how well the patients do. So once they do have an LVD placed, we no longer follow them for efficacy, is the bottom line there.

In terms of safety, which again, was the most important thing is we wanted in this very sick patient population to understand whether or not we could deliver our cell therapy, and I think the answer to that question is a resounding yes. Yes, we did see adverse events that were associated with a surgical procedure. And if you start looking at the upper numbers, you will see patients had serious adverse events that they are treated, but most of those serious adverse events were associated with the actual surgical procedure. It's a very difficult procedure to do in these patients who are pretty sick.

Once they got outside of the postoperative period though, the adverse event profile looks quite [similar], so that the control patients and the treated patients do not have a different rate of adverse events once they get through the surgical procedure. So that was very good for us to learn, and it gives us lots of hope for the future of cell therapy in this patient population.

The other thing we took a look at is how do patients feel and how do patients report that they feel, and we use this as standard measure of that, which is the New York Heart Association classes. We saw a couple of very interesting things that will help us in the development of our future programs. One thing that was really important to us is that we saw that patients felt better very quickly after receiving TRC, or our cellular therapy. Once they received the cells, we were able to pick up a signal that patients were feeling better within a month of treatment, which was important for us to learn. And more important to us is that we also learned that this treatment effect is sustained, and that's very good to see.

We also were able to learn that ischemic patients seem to respond more favorably than non-ischemic patients do. That wasn't a big surprise to us, because when you think of it, ischemic patients have a disease that's much more similar. Each patient is much more similar, whereas non-ischemic patients have multiple different reasons why they may have dilated cardiomyopathy, so this was not a big surprise, but it was nice to get confirmation that ischemic patients do very well, and we're able to pick it up through New York Heart.

A couple of other things we saw in this data is that patients improved their New York Heart classification by at least a single step. They went from New York Heart 3 to New York Heart 2, which is a significant step. And some patients actually improved by two steps, up to a New York Heart of 1, which was good to see. We also saw sustained effect in the treated group, which was important for us to see. We wanted to make sure it lasted for six to 12 months.

Another thing we looked at was a functional assessment of six-minute walk. And the six-minute walk is a nice way of understanding whether or not patients can go to the mailbox or not. Some of these patients are so debilitated and so sick, they can't get out of bed, so the six-minute walk gives us a way to measure that, and it's truly how far a patient can walk in six minutes. What we were able to pick up, and pick up very readily, was that patients improved their walking distance in as early as one month, and that was sustained as well. Again, we're seeing the pattern of more efficacy in ischemic population versus the non-ischemic, but very good signals that we were hoping to see and quite pleased to see. Next slide, please.

So the other thing we did in this study is we took a look at multiple structural endpoints by using imaging techniques, such as echocardiography and computed tomography, as well as MRI. The majority of the patients actually had a CT angiography is how we looked at these data. One of the things we were looking for is whether or not the actual dilation, in other words, the bagginess of their heart, whether or not that actually improved and whether the muscles actually contract more efficiently, become thicker and more like normal rather than this pathologic abnormal state of dilation. And one of the things we were able to pick up in a relatively small patient population was an increase in septal thickness, which is a positive sign for our cellular treatment. And again, we see that more commonly in the ischemic dilated cardiomyopathy population. Next slide?

So what did we learn? We learned a lot of very important things that will help us move this program forward, and we were very excited to see these results. We learned that we can give these cells safely directly into the myocardium, that, yes, there are some risks with the operative procedure itself, but in terms of delivering TRCs directly into the myocardium, we did not see adverse events due to that direct injection. We also saw that once patients recovered from the surgical procedure, their adverse event rate was quite similar to the control group, suggesting that the TRC therapy is very safe.

We also saw treated patients, in patients who received our cellular therapy, we saw several things that suggest that there is efficacy with our therapy, and we were quite pleased to see this. We saw structural endpoint change. We saw functional endpoint; and patients are telling us that they are feeling better.

All those things added together suggest to us that we do see a treatment effect that's important, especially when you consider this is a very small patient population. So we didn't see statistically significant results; we didn't expect to. Again, it's a very small patient population, but we saw very encouraging trends that suggest to us that we should go further. Next slide, please.

And to that end, our next steps are as follows. We will complete the 12-month data collection for the surgical study, and report that out in third quarter of 2011. We also will do an interim analysis at six months from the catheter data, and take those two studies and put them together in aggregate to really understand the efficacy and safety signals that we're seeing from the DCM program. The nice thing we have going for us as well is we do have orphan drug designation for this program, which gives us a lot of latitude in terms of discussing with the agency endpoints and other things that are very important for moving this program forward. It also gives us a very good idea in terms of number of patients we have to treat, and we've now learned from this study that it's most important for us to target the ischemic population at this point. So those were important things for us to learn.

The other thing we learned is that while we were able to effectively deliver the cells, and we know where they were delivering, with the advent of new catheter-based systems, that is probably the best approach for patients in terms of their overall safety, limiting their exposure to surgical procedures, since they are such a group of sick patients, and go with a less invasive, safer approach, direct injection or something on that order using a catheter instead. You can imagine it's much easier to have a catheter placed in the myocardium than it is to undergo an operative procedure. So that's where we're heading going forward.

And I believe that's the last slide. Thank you very much.

Thank you, Sharon. So, I would like to go back and just summarize for all of you the key upcoming events for Aastrom, and let me just do this in chronological order. So as Scott mentioned earlier, we're holding a special meeting of shareholders next month to vote on the proposed increase in both the number of authorized shares, as well as increasing the options for our colleagues here.

Second, we plan to report final 12-month results from the phase II RESTORE CLI study in the second quarter. Also in the second quarter, we plan to launch the phase III no-option CLI study. In the third quarter, we plan to report final 12-month results from the phase II DCM surgical study, and the six-month results from the phase II DCM catheter study, as Sharon just mentioned. And we should announce plans and launch the next phase of clinical development for the DCM program in the fourth quarter. So, again, this year, 2011, which is both our calendar and fiscal year, is going to be a very eventful year for Aastrom.

Now that concludes our prepared remarks, and we'd like the operator to open the call to your questions at this time. Operator?

Thank you.

(Operator Instructions)

The first question is from Mark Monane of Needham & Company. Your line is open.

Hi, thank you. Good afternoon from New York city.

Hi, Mark.

The snow has melted. Snow came down really nice, looked excellent. Got to be 60 today. The big weather came, and it rained all out. There's nothing left here, nothing.

Good.

And that brings me to the question on the clinical development in CLI. A lot of trials we've seen so far in phase II look beautiful, like the snow. The data are pristine, and everybody is real excited, but phase III comes and it just gets washed out. So, the question I have for you is, can you talk about what you've learned from the phase II trials and what you expect to implement in the phase III that would be gathered from that learning?

As you can imagine, Dr. Monane, we learned a lot in the phase II program. Most importantly, I think, is paying very close attention to patient selection, as well as paying very close attention to data collection. If anybody out there has done a wound study before, collecting wound data is an important and critical aspect of these types of trials, and doing it correctly is an important thing to learn in Phase II, so you do a better job of it in phase III. So, we've learned a lot of things about selection and collection that will help enable to us do better studies for phase III.

The other additional things we've done that Tim alluded to, are put in place some check points for patient selection that are very important, and I will run through those check points again. One of them is we've put a steering committee in place that's manned by vascular surgeons that will help us with the overall execution, and paying attention to detail, so the trial, and it will be very important for us to work with that group. We already have an active DSMB from the phase II trial, and we will continue to have a very active DSMB for the phase III trial to make sure that patients are safe.

The other thing we've done is we made sure that there's an eligibility review committee in place that reviews the patient's background and geographic data as well as some clinical history data to make sure that we get patients that are appropriate for the study. The other piece we put in place is a wound care core lab, again, to take a look at photography of baseline to help us make sure we get the right patients into the study and limit the variability that often occurs in these trial.

Finally, I think one of the most important things we've done, in addition to all those measures, are, we've made sure that we have kept the geographic variability to a minimum. I think it's fair to say that the standards of care in certain parts of the world are different than they are in other parts of the world, and so we're trying to limit that variability by staying in North America at this time, so that we really get an understanding of what kind of efficacy signal we see here.

That was helpful, thank you. And then how many people now at the Aastrom Biosciences, what's the optimal number for 2011?

Mark, this is Scott. We currently have approximately 56 full-time employees, and we expect that to grow, depending on the rollout of our Phase III program, to approximately 74.

Thanks very much for the added information.

Thanks for your question, Mark.

Thank you. Our next question is from Jason Napodano of Zacks Investment. Your line is open.

Hi, guys, thanks for taking the question. What additional analysis will we see from Restore coming in the next few months?

Sure. So, our last patient last visit for the 12 months visit point is in March of this year, and so, we'll be able to report out all of the data from all of the patients for a full 12-month time period in second quarter. Of course, it will take us some time after the last patient, last visit, to get the database cleaned, and locked, and report the data out, but, we'll be able to report full 12-month data.

I'm sorry, just one other thing to add to that. I think if you look at -- if you recall the presentation that we made at the [Veith] symposium with the second interim analyses, the scope and breadth of the analysis that you can expect to see would match that pretty closely. I think we set a nice standard there for the breadth of disclosure, and I think we intend to stick to that.

Okay. So, there are patients, both drug -- or cell patient and control, that have yet to report ASF at 12 months.

Correct.

Okay, so, we'll see additional patients beyond what you reported in the second interim analysis.

Right. There are 10 patients who are outstanding at the second interim analysis, and the percentage was not evenly divided, because five were in the treated group, but when you remember it's a two-to-one randomization, the higher percentage is actually in the control group that would read out.

Okay. Now, when you look at the number of patients that enrolled in that program, and then either received bone marrow aspiration or never -- or enrolled and never actually had a bone marrow aspiration, or had an aspiration but then never showed back up for reinjection, how many patients was that, and what were the primary reasons for, I guess, losing those parents in that two-week period? If you don't know the exact number then maybe give me a percent.

So, we know that 14 patients fell out between actual enrollment and actual treatment, and they were divided across the control and treated group, and contrary to popular belief, that seems to be out there, it wasn't because we couldn't adequately aspirate patients, or we couldn't actually grow up cells for them. That was the minority of cases. There were only two patients that had an inadequate aspiration, and one patient who we couldn't grow cells.

The rest of them were -- they had an interceding event , which when you think about it, would be really common. This is a very sick population that has multiple interceding events, such as a [mace] event or has an amputation before they can actually get scheduled and treated and aspirated. So, a lot of patients actually did not get aspirated because they had an interceding event before they could even get aspirated.

So, that looks like it's maybe 15, 20% of the patients that you had an intent to treat, never actually received reinjection?

And many of those didn't even get aspirated, yes.

Okay. And as far as moving to the phase III trial, is that enrolled population going to be the -- essentially the intent to treat population, or are you still kind of having those discussions?

We're still in those discussion with the agency.

Okay. I mean, you've got a target enrollment for that first phase III trial of 500 patients, and I guess you said you're still in discussions. But, is that 500 patients kind of what you're looking to enroll, or 500 patients what you're looking to actually treat?

Treat.

Treat, okay, so its possible --

Yes, I'm sorry, I was going say, it's pretty common to -- obviously you have to screen and enroll -- screen, primarily, more patients than you actually end up treating. I think that's just a -- as you're probably aware, that's a very common [multiple speakers] from these kinds of trials.

Okay, no, I was just trying to get a sense of actually how many patients you were looking to actually treat.

Yes, we're basing it on treatment, yes.

Okay. Moving to the poor-option program, I promise I won't ask you about to male FS endpoint, but is that a trial that the FDA specifically asked you to conduct, or is this something -- you called it a supportive trial. But, is this -- is that something the FDA specifically asked you to conduct, or are you just looking for an additional label expansion?

Well, as you're very well aware, the regulations really, for an indication, are to conduct two well controlled trials, to make sure that you just don't get lucky in one trial gives you an efficacy signal that's not true, and so the standard approach to drug development is to do two well controlled studies.

It gets to be difficult in this population to do that, of course, but we didn't want to take the risk of doing just one large well controlled study, and get to the point of registration and have the agency say, that's really good, but you need to do another confirmatory trial, because that would take us longer. And, so, we made the strategic decision to go ahead and provide two well controlled trials for our Phase III program because we thought that was in our best interest in terms of most efficient drug development and most-likely-to-succeed approach.

But, I guess I'm just curious as to why you wouldn't run two kind of mirror image trials and no-option populations.

We certainly thought about it, and there's a couple of things that went into that thinking. One is, we know how difficult it is to actually find no-option patients at this point, and what all of our key opinion leaders and all of the people out in the field are telling us is that the poor-option patient is much more common and really an important group that needs access to care. So, that went into our thinking.

The other thing that went into our thinking is, if you remember back to our discussions with the agency in June, they did suggest to us that they really understood how hard it was to enroll no-option patients, and suggested to us that maybe an option would be to go after a slightly different patient population. So, we didn't run down that road without a little bit of nudging from the agency.

Okay, that's what I was looking for then. I appreciate that. Just one final question on the DCM program. When we see additional analysis from the impact study, where we start to see the six month data from the catheter study, I guess more specifically, though, the 12 month analysis from impact, will we see ejection fraction data?

We would certainly disclose all of the data we have together at the end of the 12 months. We showed you the data that were most encouraging at this point. We have probably 50 different endpoints we could look at and show to you. We didn't see a strong signal in ejection fraction. That wasn't real surprising to us when you think about the variability in echo-based ejection fraction for example, and we are seeing some differential in the reported echo-based findings versus the MRI CT based findings, and so we're waiting to have the full data set to really understand that.

Okay, so I suppose you have to meet with the FDA to discuss all this, but what would be a proposed endpoint in a phase IIB program?

So what we --

For DCM.

Yes, sure. So, what we really think would be in our best interest at this point, given where the heart transplantation literature is going in terms of both device work and other types of therapies, is really to look at a very standardized functional endpoint, which would be cardiopulmonary exercise testing. There's very good data out there now that suggests that [vo2 peak and ve over bco2], are very good endpoints that correlate with morbidity and mortality, and those would be the types of discussions we would have with the agency in terms of endpoints.

Okay. And things like six minute walk?

So, it's more variable. It's the same idea as getting cardiopulmonary exercise testing, but it's more variable, and so, we'd like to have something that we could more tightly control.

Got you. I appreciate that, guys. Thank you.

Thanks for your questions, Jason.

Thank you. Our next question is from George Zavoico at MLV. Your line is open .

Hi, Sharon, Tim, and Scott. Congratulations on a good quarter.

Hi, George.

Hi.Just a couple of quick questions about the DCM trial. I think some of my questions already Jason posed. With regard to the three switched patients, can you provide any more information on those, or does that have to wait the 12 months?

So, they're housed in a separate database, because they're really patients who are different than the original treatment group, if you can think about it that way. So, the way that the extension trial worked is if a patient was in the control arm, and they reached a six month endpoint, we got through six month endpoint data, and then we allowed them to be treated with the cell therapy.So, we'll be able to report out individually how those three patients did, but they won't necessarily be in a conglomeration with the original study, because there's kind of a different patient population by time they've been in the clinical study for six months.

Yes, they're probably somewhat sicker.

Yes, among other things. So, you almost have to think about it kind of like a compassionate-use type exposure. So, we'll learn more, we'll get more exposure data and more understanding of individual patient response that will be helpful to us, plus patients were clamoring for this therapy. They were knocking down our doors for it. So, we really want to make sure we could offer it for them.

You mean the patients that were in the control arm were clamoring for it?

yes.

Yes, okay.

Yes.

And I think, George, that speaks to, I think, as Sharon was saying earlier, one; how sick these patients are, and two; how limited the therapeutic options are for them, and then, three, I think, you know, at -- again, since this was open label, they had obviously heard from some of the other patients how well some of them had responded. So, I think there was some good reasons for folks really seeking out the therapy.

So, these patients formed their -- kind of formed their own unofficial support group through blogs and Twitter and Facebook or whatever? Did they find out about each other, or were able to find out how they were doing?

So, some of the centers have the groups that they treat, and obviously the same folks that are working with the patients from the center talk about the success of some of the other patients.

I see. Okay. Well, that's a good way to get the word around. I mean, that always works for a lot of other indications, a lot of trials, get patients hearing about how other patients are doing.

With regard to the CLI, you've got two layers for this eligibility review committee as the second layer, the first layer is I guess the treating physician. Is this -- I mean, I presume that they will to have pass both layers before they're aspirated.

Yes. And the final arbiter is actually the eligibility review committee, again to standardize and limit the variability of the patients who are enrolled, and we've got it set up so it's all going to be done electronic and be very efficient and very quickly done.

Yes, that was my next question was how much of a delay might you expect to go through both layers.

Yes, we're trying to get it down to one or two days at the most.

Okay.

Yes, and we're trying to make it very quickly, and we're doing everything electronically, review of angiography, the whole nine yards.

Okay. And you had a pretty good amputation-free benefit and quality of life benefit. Could you speak at all to what kind of improvement you're expecting in amputation-free survival at all, or is it too early to talk about that?

So, yes, we're expecting a control rate to be somewhere around 33%, which is right in line with where Tamarus was and where the rest of the literature is. We never believed a 50% event rate in the control group and so, we powered the study more on a 33% event rate, and then consistently we're seeing a treatment effect in the cellular therapy product of roughly 21, 22%, and so that went into our power calculations as that treatment effect.

You mean 20 to 22% improvement?

Yes.

And that 50% number comes from your earlier -- your interim data, right?

Right, and what's really interesting is we're not the only ones who saw that. When Talusman reported their results they had a 50% event rate, too, and so it does appear that there's a real difference between going from a very tightly controlled phase II study to a larger phase III study. So, we made sure to account for that ahead of time.

Yes, yes.Okay. Very well. Thank you very much.

Thanks, George.

Thanks, George.

Thank you.

(Operator Instructions)

Our next question is from Stephen Willey of Stifel Nicolaus. Your line is open.

Yes. Good afternoon, guys. Thanks for taking my question.

Yes, hey, Steve.

Just quick question. Can you just remind us what the [fino tip] -- the characteristics of the remaining control patients look like for the second look and restore, and I guess we talked about how that control rate was 50% at that time first interim look, and if there's anything you see in those baseline characteristics that would perhaps suggest that you might see these patients come in at the closer to historical 33% norm.

So, we saw some real slight differences between the first interim and the second interim, because as you can imagine, we looked at every variable we could think of to try to understand what happened between the two. And what I'm about to tell you is based on very, very small patient numbers, because once you start slicing and dicing out of 72 patients, it's really small numbers.

We did see some interesting things in terms of, for example, increased statin use in the control group, and we saw things like more minor amputations at baseline in the treatment group, and I think it just goes to say that some of these small [fino] typic -- differences, as you suggest, can really make a big difference in a very small study like a phase II study. It shouldn't make as big of difference in the phase III trials, but that being said, we're being very cautious and conservatives about what we think that, that control event rate will be, to the extent that we're actually going to do an interim analysis to check that control event rate.

Is there anything that you can think of that might come out of this 12 month look that would maybe -- not change the pace of discussions with the FDA, but maybe just -- is there any data that you can take from that to inform your discussions with the FDA and maybe provide a little bit more fodder for some of the design points you're trying to emphasize here?

So, at the time of the first interim analysis, we had all the patients enrolled, and so we understood their baseline characteristics and all the issues that go along with the baseline. What we didn't have is 10 patients, 12 month endpoint data, that's about all we are missing. It's possible that 10 point -- 10 patient data points can make a difference in terms of what kind of effect rates we see and all that. It's very possible.

That being said, even if it turns out that we regain statistical significance on amputation-free survival again, which we very well could, I don't know that, that would have the -- I wouldn't expect the agency to move any differently, or more quickly, based on that. They were pretty excited with the first set of data we shared with them back in June, and I think they continue to be interested and excited in the data we have.

Just thinking about the poor-option patients in the back half of the year.I think you have talked previously about really not expecting to see much in the way of better yields with respect to harvesting from a no-option versus a poor-option patient. But is there any data to suggest that you would see potentially better engraftment in a poor-option patient versus a no-option patient?

Not at this point, no.

Okay. Thanks.

Thanks, Steve.

Thank you. Our next question is from Jason Napodano of Zacks Investment. You may ask your question.

Hi, guys. Thanks for taking the follow up. I just got intrigued by something Sharon said as far as -- and again, I can appreciate slicing and dicing of a small number of patients, probably doesn't mean a whole lot at this point, but intrigued by the fact that you said maybe smaller amputation sizes in the TRC group, and I'm wondering if there is an amputation size or an amputation level that would qualify as a major amputation-free survival event, a toe versus a foot versus a leg. Is there any kind of scale there?

Yes, so actually the way the restore RESTORE-CLI trial was set up and many trials are set up the same way, is you only count a major amputation if it occurs above the ankle bone. Anything below the ankle bone is termed a minor amputation.

There are some data that suggest if you've had a previous minor amputation, and it totally makes sense when you think about it, that you're more likely to go on to have a major amputation. When you think about what happens to patients you start with toes, and then transmetatarsal, and you keep going up the leg quite often. So, it's pretty well set in the literature and the standards of how you run these studies of what a major versus a minor amputation is, a that was set up in the RESTORE-CLI, and we would take that forward into phase III.

Okay, and as far as what is considered amputation-free survival, is that a major amputation?

Yes, that is a major amputation, and in terms of the male FS endpoint that is again a major amputation, anything that's above the ankle bone.

Got you. Thanks for taking this all up.

Anytime. Yes.

Thanks, Jason.

Thank you. I'm showing no further questions on the phone. I will now turn the call back over to Mr. Mayleben.

Thank you, Latoya.

And again, thanks to all of you for listening in, and we look forward to talking with you again in a few months as we continue to make progress here in 2011. Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. A replay will available, 7.30 pm, eastern standard time, on February 28, 2011 until 11.59 pm, on March 13, 2011, by calling 800-642-1687 or from outside the US, at 706-645-9291, the pass code for the replay is 17933343. A replay of the webcast along with the pass code will be available after the live event on the Company's website until 11.59 am on May 10, 2011. Thank you.