Vericel Corp (VCEL) 2012 Q1 法說會逐字稿

Welcome to Aastrom Biosciences First Quarter 2012 Conference Call. (Operator Instructions) I would also like to remind you that this call is being recorded for replay.

I will now turn the conference over to Brian Gibson, Aastrom's Vice President of Finance.

Thank you, Ben, and good afternoon, everyone. Welcome to our First Quarter 2012 Conference Call to discuss our most recent financial results and the progress of our development programs.

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 is Aastrom's President and Chief Executive Officer, Tim Mayleben. Following our prepared remarks, we will open the call to your questions.

Let me start with a review of our financial results. For the first quarter ended March 31, 2012, Aastrom had a net loss attributable to common shareholders of $9.7 million, or $0.25 per share compared to $5 million, or $0.13 per share for the first quarter of 2011.

The increase in net loss reflects a noncash change in the fair value of our outstanding warrants, which accounted for $2.3 million of the increase as well as increased spending to prepare for the launch of the pivotal Phase III REVIVE CLI clinical trial.

Operating loss for the first quarter of 2012, which excludes the impact of the warrants, was $8.6 million, or $0.22 per share compared to $6.3 million, or $0.16 per share a year ago.

Research and development expenses for the quarter ended March 31, 2012, were $6.8 million versus $4.4 million for the same period a year ago. The increase in R&D expense was primarily attributable to advance preparations for the Phase III REVIVE CLI clinical program for ixmyelocel-T, which was initiated at the end of February, as well as an increase in noncash stock-based compensation expense.

General and administrative expenses for the quarter ended March 31, 2012, were down slightly at $1.8 million versus $1.9 million a year ago.

At the end of the quarter Aastrom had $36.7 million in cash and cash equivalents. Our cash used for operations was $6.6 million during the first quarter, which was in line with our previous forecast of $6 million to $7 million.

Looking ahead, we expect our cash spend for the second quarter of 2012 to be in the range of $7.5 million to $8.5 million. The increase in cash spending reflects a significant rampup in clinical activities.

First, we will accelerate enrollment of the Phase III REVIVE CLI study and, second, we will launch our Phase IIb clinical program in DCM.

That completes the review of our financial results. I will now turn the call over to Tim.

Thank you, Brian. We had a very productive first quarter with the launch of the Phase III REVIVE CLI study of ixmylocel-T, the report of new preclinical and clinical findings in support of ixmyelocel-T, and the completion of the largest financing in our history.

Let me begin with an update on the Phase III REVIVE CLI clinical trial, which is now underway and, as a reminder, the goal of this study is to confirm the benefits that we saw in the Phase II study in the treatment of patients with critical limb ischemia, who have already experienced tissue loss and have no other treatment options.

As we've told you before, there are 80, eight-zero, 80 US medical centers that we have qualified to participate in this important pivotal study, with others that are anxious to be included in the study standing by.

As we reported yesterday, we are very pleased to have now enrolled our first patient in this study, and this is an important milestone for Aastrom, and we feel very good about this early momentum in the Phase III REVIVE study and will continue to work with our steering committee members and clinical investigators toward our enrollment target of 594 patients.

Now, as with most severe chronically ill patient populations, we expect that the pace of enrollment of these no-option CLI patients will initially be slow, as we've seen, and this is the result of the sites developing and working the referral networks and pre-screening patients.

But with a very experienced, hardworking Aastrom clinical development and operations team, which you've heard me talk about before, combining efforts with a committed and enthusiastic group of steering committee and eligibility review committee members, investigators and site coordinators, we're pretty confident that we're going to be successful in reaching our enrollment goals for the Phase III REVIVE CLI clinical study.

The enthusiasm of everyone on the team stems from the groundbreaking results from our Phase IIb RESTORE CLI clinical trial, which were presented by Dr. Bill Marsden at the November 2012 American Heart Association meeting and recently published by Dr. Rick Powell in the peer review journal, Molecular Therapy.

I want to highlight for everyone on the call today, but especially anyone who is new to the Aastrom story what these results have demonstrated.

The RESTORE CLI Phase IIb clinical trial was a 12-month study and showed that treatment with ixmyelocel-T significantly reduced the risk of treatment failure by over 60%. That is, these no-option CLI patients treated with our therapy, ixmyelocel-T, had fewer events compared to the untreated or the control group.

Equally important and a potential predictor of our Phase III success, the trial showed, in a subgroup of patients with wounds at baseline, our Phase III patient population, a significant improvement in amputation-free survival, which is our Phase III primary endpoint, again, by over 60%.

One other note of interest -- the therapy was very well tolerated with no difference in the rate of severe adverse events between the treated and the control groups, and both the AHA presentation and the Molecular Therapy publication reflect Aastrom's commitment to peer review of our work and to transparency in our data disclosure.

It was in this spirit that we attended the Keystone Symposia on Atherosclerosis in March to present data on the potential athero-protective effects of ixmyelocel-T due to the CD-14 positive autofluorescent cells, or the so-called M2 or anti-inflammatory macrophages that are unique cells to our product.

As we reported at the Keystone conference, these alternatively activated, or M2 macrophages, appear to have positive effects on atherosclerotic lesions through active removal of apoptotic cells and activating the reverse cholesterol transport pathway.

Our continued research into the mechanism of action of our product has found that the CD-14 autopositive cells are a unique cell population. These cells are found in significant quantities only in our autologous cell therapy product, ixmyelocel-T, and no other cell therapy product.

CD-14 autopositive cells are not found in any allogeneic cell therapy products, which are, as you probably know, CD-90 or MSC cells nor are the CD-14 autopositive cells found in cell therapy products derived from fresh bone marrow.

Needless to say, we are continuing to explore the biology of ixmyelocel-T and evaluate the activity and the potential benefits of this unique multi-cellular therapy.

Let's turn our attention now to the DCM program, which is also progressing well and today we reported the positive final results from our Phase IIa catheter study at the Society of Cardiovascular Angiography and Interventions 2012 Scientific Sessions.

Tim Henry, Dr. Tim Henry, the Director of Research and an interventional cardiologist at the Minneapolis Heart Institute at Abbott Northwestern Hospital and the study's principal investigator presented these findings, which showed that ixmyelocel-T repaired damaged heart muscle and improved heart function in patients with ischemic DCM, or progressive heart failure due to dilated cardiomyopathy.

The treatment was well tolerated and nicely improved symptoms in patients after one year compared with those patients receiving the current standard of care.

In the meantime, we have been planning and are prepared to initiate our Phase IIb clinical study of ixmyelocel-T and the treatment of ischemic DCM patients, which has been named RENEW DCM. The RENEW DCM Phase IIb clinical trial will be launched in June, enroll up to 100 ischemic DCM patients at up to 15 sites across the US and deliver the therapy in a single treatment of up to 20 IM injections via the NOGA MyoStar catheter.

The patients in the study will be followed for 12 months with final results available in the first half of 2014.

Both the CLI and DCM programs have made great progress during the past year, and we are now in a much stronger financial position to maintain this pace of progress thanks to our recently completed $40 million financing with Eastern Capital. This was the largest financing in Aastrom's history and was completed on very attractive terms. The preferred stock that we issued to Eastern will convert into common stock at a price of $3.25 a share and not until March 2017.

So not only has their investment given us the capital to expedite our drug development work, especially the pivotal Phase III REVIVE CLI clinical study, it has also allowed us to avoid the smaller, much more expensive and dilutive financings to which other biotech companies have had to turn.

As we noted in March, this financing was transformational for Aastrom and our shareholders. We were able to avoid having to issue warrants, and we avoided issuing our stock at a significant discount. In fact, we issued the stock at a premium.

We believe this was a compelling investment opportunity not only for Aastrom and Eastern, but we thank Eastern again for their confidence in the Aastrom team.

Let me close with a brief comment on business development activity by reporting that we are continuing to speak with potential partners who continue to seem very interested in our work and impressed with our scientific and clinical progress.

And as I've said to many of you before, the timing of any agreement is impossible to predict, so I won't. But we remain very, very optimistic.

In summary, we are off to a very productive start this year with the resources and talent to advance our clinical programs and move ixmyelocel-T toward commercialization.

So that concludes our prepared remarks, and we'd like Ben to open the call to your questions. Ben?

(Operator Instructions) Steve Brozak, WBB Securities.

Well, congratulations and thanks for taking the call, gentlemen. The financing you did was remarkable. I don't often say that, but let me dive into one question, and then one follow-up after that in order not to monopolize the call.

Everyone understands your -- how critical a clinical development program is, and you've got a late-stage program. But can you tell us what the current palliative and state of the industry treatments are for CLI? And can you give us a little color on what improvement you would see and what the differential is? Because I don't think most people would really understand that or understand it as well as they should.

Yes, hi, Steve, thanks for the question and thank you for the compliment as well.

So a little bit of background on CLI -- so today the -- let me just maybe make a couple of comments on the numbers here. So it's estimated that there are somewhere between 10 million and 12 million patients in the US with what's called PAD, or peripheral arterial disease. Of those, it's estimated, again, about 10% or 1 million to 1.2 million of those patients have CLI. And then taking one step down further, there are about one-third of those, or about 400,000 patients that have what's call no-option CLI. And no-option CLI or what we term as the most severe form of PAD -- these patients are no longer candidates for interventional procedures.

And, again, the standard of care today for most CLI patients is some form of -- starting with endovascular procedures, so atherectomies, balloon angioplasties, many of the same interventions that are done in the heart are done in the legs to try -- and the whole goal of these procedures is to open up blood flow to the lower extremities; try to restore blood flow to ischemic tissues, which, as you know, ischemic tissue is not perfused, it doesn't get blood flow.

So the standard of care, as we understand it today, is interventional procedures. When the endovascular procedures are no longer working, then the patients progress to bypass, open bypass, which, again, the strategy there is, again, to re-vascularize these patients, take a vein from another part of the body and try to use it to restore blood flow to the lower extremity.

When those fail, the physicians really don't have a whole lot of -- left in the armamentarium -- the treatment armamentarium. There is, of course, wound care management, which, again, for anybody who has looked at this, there's the goops and gauzes, as the phrases goes. There's negative-pressure wound therapy. A number of devices and efforts -- technologies to try to manage the wounds, I think, as Dr. Hyatt, who was on a conference call last June with us said if you can manage the wounds then you can typically manage the CLI disease. But these wounds, these open wounds that form on the legs of these patients -- and the feet -- of these patients are very, very difficult to manage.

So once they progress to open wounds, it's very difficult to manage those wounds, and 25% of these patients are going to end up dying within a year; 25% are going to end up with an amputation. So we call it, and I think the industry calls it, a no-option CLI patient population because none of the options are very good. An amputation is not good, obviously, death is not good, and the palliative care that is available is not very helpful at this point.

Okay, and the follow-up on that is, obviously, given -- you've just gone down on, unfortunately, the worst laundry list possible. To be able to effect a positive outcome, what would you describe that market in terms of a commercial market on the expenditures that our system is currently facing, and I'll jump back in the queue after you've had a chance to answer that, thank you.

Yes, thanks, Steve. So, again, a very good question, one that we've been pondering since we -- even before we got the Phase IIb results. And it turns out that the amount of money that is spent on these patients today is probably going to be surprising to a lot of people.

But we've talked to about a half a dozen payors across the US, and what is currently spent on these late-stage, or very, very severe PAD patients, is somewhere between $80,000 and $120,000 over the course of a 12-month period. So let me say that again -- $80,000 to $120,000 is the cost of treating one of these severely ill patients to try to keep them from amputation. And then if they progress to amputation, the cost of the amputation, the cost of the prosthetic, and then the cost of rehab associated with these patients -- so very expensive to try to manage these patients.

We have a goal of reducing the number of amputations as we saw in our Phase IIb. We had an impact of about 60%. So we reduced the number of events in the patient population here, this very ill patient population, by 60% -- both looking at the time to treatment failure and by looking at this more severely ill patient population, the no-option CLI patients with tissue loss.

And I think as I said to some of you, if we see anything like that sort of treatment effect in our Phase III study, and we're not powering it based on that. We're powering it based on an effect rate that is less than half of that, then we are going to see some very compelling results coming out of that Phase III study.

So we're, as I said, we're aggressively working to enroll that study because, honestly, we can't wait to see the results.

Boris Peaker, Oppenheimer.

Congratulations on the progress on the financing. A lot has been said about this DMI study, so I'd like to ask more questions regarding DCM. Could you (audio break) right now and what is the strategy in recruiting the right patient?

I'm sorry, Boris, could you repeat that again? We were just -- you were breaking up a little bit, so it was difficult for us to hear.

Sure. So could you remind us again the specific recruiting characteristics for patients in the DCM study that you're starting? And what is your strategy for finding these patients?

Sure, sure, a very good question. So as I mentioned, just for everybody's benefit, so we're starting a Phase IIb study next month. We are planning to use approximately 15 sites across the US, and we're focused on ischemic -- the ischemic DCM patient population. And, as a reminder, we have orphan designation from the FDA, which gives you an idea of the size of the overall DCM patient population. It's something less than 200,000.

The ischemic section, or the ischemic group of that patient population comprises the majority somewhere around 60% of the patients are ischemic DCM, which is a nice, homogenous patient population. That is, all of them have this ischemic heart tissue and then, obviously, the dilation in their left ventricle.

So as with a lot of these severely ill patient populations, they tend to congregate where there are experts. So expert physicians that treat patients with heart failure like the CLI, they end up exhausting the current treatment options. So they gravitate toward the large academic centers to -- as they continue to seek out treatment for their condition -- or their families do.

So in large part, we rely on the network of the physicians that we recruit to the clinical study itself, and their referral network, which we found from our Phase IIa study tends to be quite broad. So, again, this is a US-only study because we are, again, looking for not only our homogenous patient population but also a homogenous practice of managing these patients.

That's very helpful. And the patients that you're recruiting, are they considering other choices of therapy? Or are these the patients that no longer have any options remaining?

Again, that's a very good question, Boris, and the answer is that they are, for the most part, out of options or have very limited options. And when I say limited options, there are two that we're aware of. One is heart transplant. Some of these patients will be eligible for the approximately 2,000 spot on the transplant list that are actually filled each year. And, again, 2,000 compared to the estimated patient population of 120,000 or so of the ischemic DCMs -- so not an option that's available to most of these patients.

The second option that's out there, and you may be aware of this as well, is the LVAD, the left ventricular assist devices. And those devices, as you know, they are very expensive -- estimated cost of about $200,000. The mortality rate associated with those devices is 50% at two years. So it's not -- and they're not the most convenient of devices to be working with and carrying around.

So the options, I guess I would say, there are some options -- not necessarily good options. Or, as I said, with heart transplant, very limited in terms of the availability of that option. So -- in large part, most of these patients don't have either one of those options, because you have to be, obviously, in pretty good health to even get on a transplant list. And many of these patients are just not meeting those criteria.

My last question is could you just comment in terms of the cost per patient for the DCM study versus the CLI study? Just so we get a ballpark figure?

Hey, Boris, this is Brian. We're still working on kind of finalizing everything. I would expect it to be a little bit more on a per-patient basis than the CLI trial we have, given that it is a heart procedure, there's a little bit more cost to the investigators. I wouldn't expect it to be significant, but we should be able to comment more specifically on that next quarter.

Joe Pantgini, Ross Capital Partners.

A few housekeeping questions on the Phase III, the REVIVE Phase III, if you don't mind. Maybe I'll just rattle them off, and then we can address them.

The first question is just curious to see about what the Company's policy might be with regard to enrollment updates, going forward.

The second question that I have is, obviously, you said there are 80 sites that are qualified and others that are standing by. I was wondering about whether these standing-by sites are definitely going to come on, or you're going to depend on what the enrollment looks like or what have you. So I just wanted to address that.

And then, I guess, that could sort of tie into the third question, if you could just remind us what your enrollment goals are again?

And then the last question, which is sort of related, but I just wanted to know if there's any updates with regard to your plans for the second Phase III for the [poor]-option population. Thanks a lot.

So I'll just run down these in order here. So in terms of what we're going to be doing in terms of communicating enrollment updates, going forward, just step back. We said in our prepared comments that we're committed to peer review, and we're committed to transparency, and I think you've all heard that from us many times. And what we stated historically is still true, and that is we will provide quarterly updates on our enrollment progress. And, again, our perspective on that is if we're sitting on the other side of this call, or if we're investors in this Company, which we are, it's what we want to know.

So we're not going to keep anybody in suspense over where we are from an enrollment standpoint. We will be providing enrollment updates. Some folks have asked how much detail -- screen failures compared to enrolled, et cetera, et cetera, and I will say we are formulating a policy on that, and as Brian indicated about some of the DCM information, we will have a more definitive comment on the next quarterly call for all of you in terms of hey, here is the kind of information that we think you guys will find useful, and happy to take inputs on that, going forward. But we're being very thoughtful about that.

In terms of the sites that are planning to -- or as I think we call them, sort of "standing by." Again, you guys may know that when you run a trial like this, not every site that signs up initially is going to be a well-performing site. And our goal, obviously, is to have well-performing sites, a majority, if not all of our sites, be well performing.

So -- we do have sites in backup. Our goal is to maintain at least 80 sites, and that's a number that we feel like we can manage. But we're certainly going to give the investigators the sites some time to demonstrate to us that they're performing. But we won't give them all the time. And, again, we haven't formulated an exact policy. Again, we've got a very experienced clinical operations team, so we're really relying on their judgment and experience to make those determinations. But I can tell you, I feel very comfortable with the judgment that they're going to be exercising there.

And then just to remind everybody what our enrollment goals are for the Phase III REVIVE -- we said that we expect to be able to enroll this study in about 18 months. I think by the third quarter call, so in the October timeframe, we should have a very good idea of what sort of momentum we are looking at and what we've been able to build. And, obviously, you guys will be, as well, because we'll be disclosing that on both the second and third quarter call. And if we need to adjust our goals, we certainly will but, again, we're expecting to be able to enroll this study in about 18 months.

And then lastly, I think, Joe, your question was about any second study for CLI, and I just want to remind everybody -- so we have a special protocol assessment for the Phase III REVIVE CLI study that we negotiated with FDA. And we completed that negotiation with them in July of last year. We reported at that time that while the negotiation for the SBA took longer than we expected, we were originally hoping to wrap it up in the second quarter and get the trial launched. It did take longer, but the good news coming out of that was that through our discussions and negotiations with the FDA, we had gone in expecting that we were going to have to do two Phase III clinical trials, and we came out of that [SBA] process with assurances from the FDA that a single -- a large -- single, large, well-controlled study like we negotiated with them could be sufficient for BLA submission.

And, again, the caveat there is the trial obviously has to show statistically significant positive benefit from the therapy. So -- we're open to the idea, and we continue to think about additional studies in the CLI patient population but at this point we don't feel compelled to have to launch another study for the BLA. We're looking at this more from a commercial standpoint -- when to stage a label-expanding additional CLI trial. And, again, as we formulate our plans, we'll be talking to everybody about those.

Chad Messer, Needham & Company.

I was just wondering if you could walk through what the screening process looks like? I know it's a little bit cumbersome and, obviously, given the time from initiation until we saw the first patient, that's taking a little while there. Could you just remind us what that is? And also is it possible to let us know how many patients are in screening at this time? Thanks.

If you could see me, I'm smiling, because it's a great question, Chad, what the actual screening process is, and I will confess that I haven't memorized it, and I don't want to give you any misinformation on it. So I'll have to defer that question for now, and I apologize for that. I just don't have enough knowledge that I want to be telling you something that would be inaccurate.

And then the second question was -- ?

How many patients?

Oh, how many patients are in screening right now, and so this is -- again, it's a very good question, Chad, and it's one of the data points that we've been talking about internally about whether it's something that we want to disclose routinely. At this point, we've only obviously disclosed actual patients enrolled. And so we're still thinking about whether that's a data point that we want to be sharing with folks routinely.

Because, obviously, once we start disclosing a data point, then we always want to be disclosing it. We don't want to put it out there and then not include it in the future. As I said earlier, we're being thoughtful about that but, for now, all we're talking about right now or plan to talk about is patients enrolled. But we'll continue to be thoughtful about that, and when we talk after the second quarter, we may have additional data points that we feel comfortable sharing with everybody.

Jason Butler, JMP Securities.

I guess I wanted to follow up on Chad's question and maybe ask one part of it in a slightly different way. First of all, can you talk maybe, even, in a ballpark range, about approximately how many patients you had to screen to get the first patient enrolled? And acknowledging that you may not want to give that data point, can you just give us an idea of whether you expect the screening success and failure rate to change as you progress through the trial?

And then the last question, I know you don't know whether the screening process, but you had talked in the past about some measures that you put in place to ensure in the Phase III trial that you were getting the right patients enrolled? Do you have any signal, so far, that those measures are working? Or is it too soon to say?

Jason, I would say let's hold those questions for next quarter because I think we'll have a bigger data set to work with. But I will tell you the questions are helpful. I'm glad you're asking them now because, as we're thinking about what data points are going to be helpful to you and other investors, this is very helpful.

So, you're right, I think at this point, we're not ready to talk about how many patients [are talked to] screen to get to -- I think it's just too early to get to the patients enrolled. So I think it's just too early. When we have a bigger set of numbers, like I said, I think we'll be able to answer those kinds of questions more intelligently than we can sitting here today.

And, like I said, we're -- our objective is to be transparent and, again, we just want to be thoughtful about the kinds of things that we commit to to make sure that they're the right things, and they're the right kinds of things that we can sustain disclosure on.

So -- we'll have much more information here in -- when is our call -- in July or August.

Okay, great, understood. And, obviously, we appreciate the fact that you're being so thoughtful about the data that you give. So congrats on the progress.

Thank you, Jason, and, again, we will be back on this, right, so I'm not kicking the can down the road. Absolutely, I just want to be giving you guys information that's going to be helpful.

Jason Colbert, Maxim Security.

Hi, Tim, congratulations on the first patient. That's a real milestone, I get it. One question -- I want to maybe change gears a little bit and talk about manufacturing. I know when I was last out there, which is a while ago, we were talking about pods, and can you talk a little bit about how many pods are active today, what the current capacity is to support the trial, and when you think about commercialization and scale-up?

Boy, the exact number of -- and for everybody else's benefit, the pods that Jason is referring to are the -- what we call our ARS systems that are in pods of four -- so four manufacturing incubators, or bioreactors, per pod. And I think we have a couple of dozen that are active right now, Jason. It may be a little bit more than that, but two or three dozen of these that are active right now in our clean room.

As we've mentioned before, perhaps, we have capacity right now in our current clean room for somewhere between 2,500, right around 2,500 products per year. So we can manufacture, we can treat -- we can manufacture and treat about 2,500 patients a year with our current clean room.

So -- we are going to have to expand as we file our BLA and wait for approval. And we have plans in place to do that, but it's a little bit early for us to actually -- start -- start, actually, implementing that, but we certainly have thought through it, understand the timelines, and certainly understand the ramp in cost associated with that.

And, again, for everybody's benefit here, we have, unlike the other -- I guess there's not a lot -- but the other autologous cell therapy product that has been approved. As we understand it, that manufacturing process is very manual-intensive and very costly. Aastrom has, over the last -- almost 10 years now, invested quite heavily in the automation and the closure of our system. And by closure I mean that the cells don't come in contact with the air or any human or anything else from the time that they're put in a bag in the physician's office until the time that those cells are -- the cell product is actually injected back into the patient.

So we have a fully closed, highly automated system that the benefit of which is that it is very cost-effective, it's highly scalable and, I think, as we've reported recently, we're expecting margins, gross margins, on our product that are pharmaceutical-like. Again, much different than, perhaps, people have expectations for.

So we love our manufacturing platform. We're benefiting heavily from the investment that we've made over the last five or 10 years, and we expect to continue to benefit from that.

That was perfect. That was exactly where I was going. Let me just switch gears and ask a question about DCM and the NOGA system and the cost of the trial. Who actually pays for NOGA in the process? And then, going forward, how does NOGA get covered in terms of procedural codes?

Interesting questions, for sure. So the NOGA system -- so part of our site qualification process is the site has to have a -- not only it has to have the NOGA system, but they also have to have been trained and have experience using that NOGA system.

And the nice thing about the NOGA system, there are, obviously, there's no perfect catheter system out there, but the nice thing about the NOGA system is the installed base. There is a very broad installed base. I think if you look at most of the heart failure studies that have been done by other cell therapy companies, they've been done using the NOGA system.

So it's -- even though it's not approved other than for investigational use, it is a very well-used and tried-and-true system at this point. The answer to the question of who pays for it -- it is the sites that have invested in that system for -- not only, obviously, for our trial but for other clinical trials and for other experimental work that they do.

What was your other question?

Well, I guess if (inaudible) covered as part of the overall procedure code.

Yes, thank you for reminding me. When we go to file for our BLA in the DCM space and, again, the DCM indication, and that's a little ways out, because we're just in Phase IIb. But just projecting ahead, as you probably know, the device, the NOGA device and our cell therapy enter into the world of combination products; that is, the regulatory world of combination products.

So we will seek to have our cell therapy approved with the NOGA system. And, again, for an orphan population, we think that is just fine because, again, this orphan population, as I said earlier, gravitates toward these very highly experienced academic centers for treatment. So we feel like that's a good match of the product -- our cell therapy product and this very sophisticated NOGA catheter with this patient population, which is, again, an orphan population and a good match.

So -- the product will be approved and reimbursed. I can't say, Jason, that we know how it will be reimbursed. We haven't explored that yet with BDS, which, I think you know, is a subsidiary of J&J, but we are actually quite happy that we're working with a system developed by a company like J&J simply because we know they're going to be around, and that's important for a product like this as well.

Tim, I guess one last question, and I guess it's more of a statement than a question. But it will be a lot of fun to catch up with you on the next quarter and see whether you find yourself bumping into Baxter, who is also using an autologous cell therapy using NOGA, although different indication -- angina. But not completely different, right -- similar?

No, that's right. But I do think the -- at last as we've been putting together and I don't have them right in front of me, but as we've been putting our inclusion/exclusion criteria together, we have looked at the other trials that are going on, and we actually feel pretty comfortable that our inclusion/exclusion criteria, as you indicated, are not going to bump up against an AMI trial or some of the other trials that are out there.

Again, we've been thoughtful about the -- and not just us. I mean, we're working with some outside investigators, obviously, on this that are very experienced guys that have been quite helpful in that.

Thanks, Tim, congratulations on the progress.

Jason Napodano, Zacks.

It's the Jason parade. Just a quick question on -- go back to DCM. Can you compare the results from the data you presented today from the catheter study versus the impact study with surgical. I have not yet seen the data that you presented today, but maybe you could just give us a quick rundown of how that compared to the previous impact DCM study.

It's a very good question. Maybe just start on the safety front -- what we saw with the catheter study is much better safety and, again, not to rewind the clock on the impact study, but you probably remember, and others may, as well, that the surgical procedure, which is a mini-thoracotomy that we used in the impact DCM surgical study was a challenge for some of these very sick DCM patients.

And so we experienced some serious adverse events not associated with the product but with the procedure, the surgical procedure, because the mini-thoracotomy as, again, for those of you that don't know, is a 2-inch incision on the left side of the chest between a couple of ribs, and then the cells are injected through this mini-thoracotomy.

That surgical procedure is challenging for a very sick DCM -- one of these heart failure patients. So, by contrast, we found that the catheter administration of the product was very well tolerated, especially by comparison. So from a safety standpoint, we love the catheter administration, and the data that we have from the Phase IIa catheter trial that was reported today bears that out. So from the safety standpoint, love it -- love the catheter administration.

On the efficacy, again, what we saw was very similar to what we saw in the impact DCM surgical study from an efficacy standpoint, we saw some variability in this non-ischemic patient populations, but in the ischemic DCM patient population we saw nice improvement, reduction in MACE events, improvements in six-minute walk, and improvements in MACE events.

Again, not statistically insignificant because the numbers were small but some very nice trends. And we'll have the slides that Dr. Henry presented up on our website in the next couple of days, and so folks can take a look at those and see what he spoke about there.

Excellent. And then just real quick, can you remind us of when the interim analysis is for REVIVE? I know that you were getting a blinded interim analysis. Just kind of remind us on the numbers there, what you're looking at?

The interim analysis will be after we've enrolled half the patients. So 297 patients have been enrolled, and after that 297th patient has seen six months past their treatment. So six months post the 297th patient being treated. And I'll have to go back and -- I don't recall, exactly, Jason, in terms of the calendar when that is, but we can look it up and send it to you.

By that time, you probably would have a pretty good chunk of patients that have passed the 12-month mark?

Yes, that's right, that's right.

(Operator Instructions) George Zavoico, MLV & Company.

Tim and Brian, congratulations on a whole lot of things this quarter. It's been a very, very productive quarter for you, for sure.

Could you tell me about the DCM Phase IIb trial? Is that going to be randomized double blind? Are you going to be catheterizing and injecting [myocardial] patients with saline in the placebo arm?

Yes, so the Phase IIb trial is going to be double-blinded, randomized placebo controlled. So it will be -- this is not an industry term, but I've been calling it a definitive Phase IIb study because we are going to subject ourselves to the rigor of, again, a fully controlled study -- double-blind, randomized, placebo-controlled, and, yes, it's our intention to aspirate every patient just like in the REVIVE CLI study to maintain the blind. And we will be -- we are expecting to inject a controlled, or a placebo solution into the ventricles of the heart.

So yes to all of those, and, again, I think it's going to be a very good trial. Part of the reason I also call it definitive is that the endpoint that we're using in this study is a registration-quality endpoint. It is a MACE, major adverse cardiac event, endpoint. We'll have secondary endpoints, as well, which we'll talk about once we get the trial started, but the primary endpoint is definitely going to be -- the primary efficacy endpoint is definitely going to be a registration-quality endpoint.

But the main objective of the trial will be safety. So it's not a big enough trial, even though you've got that efficacy, that (inaudible) efficacy endpoint, it's not powered for significance, or is it?

Well, no, we will power it for significance. But as with other Phase II studies, the powering will be less strenuous than for a Phase III. I think the term of [art] is an 80% power as opposed to a 90% power, which is common for the Phase IIIs.

Okay, very interesting. You spent a lot of time in your prepared remarks talking about the CD-14 M2 macrophages. This clearly is emerging as one of the finishing features between (inaudible) products and the alginate products on the market. And, also, it sounds like you're doing a tremendous amount of scientific work behind it to sort of validate the role of the M2 macrophage in the regenerative process.

Can you tell me a little bit more about the role of this cell? Is it on the anti-inflammatory side? It's not really regenerative or is it anti-inflammatory in the NAGO regeneration?

Yes, no, I think you hit on it, George. I think what our work is showing, and we're not being totally forthcoming yet because we're submitting this work to peer review journals, scientific journals. But what we can say at this point is the CD-14 autopositive is a very important -- is a very important component of our cell product. As you've heard me say before, it accounts for about 25% to 30% of the final product. So our final ixmyelocel-T product is about 25% to 30% of the CD-14 autopositive cells, the M2 macrophages, and in the literature the M2 macrophages are known to be anti-inflammatory. The M1 macrophages are pro-inflammatory, the M2s are anti-inflammatory, and, again, this is in the literature. So we're certainly leveraging that work.

What's unique is, to our knowledge, we are the only ones that have been able to grow these cells in vitro. That's the beauty of our bioreactor and the conditions that we provide in our bioreactor to grow them. So that's what's unique, and as you noted and I said earlier, it's not an MSC product. Again, 25% to 30% of our product, our mixed multi-cellular product, as we call it, is also MSC cells or the CD-90 cells. But we have this engineered multi-cellular product, and the focus of my comments earlier was on the CD-14 autopositive cells because they, as you said, they promote the conditions under which angiogenesis can happen and sustain itself.

So I think, again, it's in the literature that the CD-90 cells have these angiogenic potential, and that's why it's important for us to have those cells in our multi-cellular product. But in order for those cells to be able to sustain this angiogenic process, you first have to turn off, we believe, our hypothesis is -- your first have to turn off the chronic inflammatory conditions that exist in a disease like CLI or in the tissue that is in the lower legs of these patients -- this chronic, runaway inflammation that these CD-14 cells, these CD-14 autopositive cells seem to manage.

And so the first thing that we think our product does is turn down or turn off that chronic inflammatory response so then the CD-90 cells and other cells can go in and start to do that remodeling of the tissue and then the promotion of the angiogenesis process.

How can you measure that when the patients you're treating (inaudible) DRP or some other inflammatory (inaudible)?

Yes, so the work that we're referring to in terms of the mechanistic work is work that we've done in animal models and in vitro and, again, some of that work we've presented recently at the ATVB and at the Keystone Symposia. But, again, keep in mind that we have this very robust Phase IIb database that we can correlate that pre-clinical mechanistic work with things that we're seeing in our Phase IIb data set. I don't want to say too much about that because, as I said, this is stuff that we want to be publicizing or publishing in a peer review journal.

But the bottom line is that you've measured it and will be publishing it, I guess.

Yes, that's right. Well said.

Wonderful, wonderful. I look forward to that. Is that still in progress or has it been submitted?

Don't know. It's in progress, so we're polishing it up, and we may get it in before the end of the -- we may get it in before the end of the quarter but look for it later this year. I think that's, broadly speaking, I think that's what we're looking for.

Joe Pantigini, Ross Capital Partners.

Tim, earlier you spent a little time regarding your manufacturing, and you talked about the fully closed and highly automated process and the potential cost benefits to, obviously, Provenge. I can say it, you didn't want to. I want to expand a little on that, maybe more with regard to the potential benefits even on, I would assume, potential orders of magnitude with the actual footprint.

So when you think about Provenge and what Dendreon went through, people were obviously saying we need to make a manufacturing facility. It's going to cost us $80 million per facility. So I just wanted to see if you can discuss again what I think would be orders of magnitude differences on your part?

Yes, so it is. You're right. We're expert on our stuff. We only read and hear what's being reported about Dendreon and their product, and understand or at least, again, understand globally what some of the challenges and concerns have been.

And, certainly, have read about the tens of millions, if not hundreds of millions of dollars that they've invested in facilities. And I think, as you said, we -- as you indicated, we think that we're going to be an order of magnitude less than that. And, again, I think it gets to -- the amount of manufacturing space, or clean room space that we require to manufacture a product because of our automated closed system is fractions of what a manual process requires.

And, again, that's -- we're -- it's hard to picture. I don't know if you've seen -- we have a video, a three- or four-minute video that we put together on our website that walks through the manufacturing process and shows what one of these manufacturing units looks like. And it literally takes up a 3x3, 3 foot by 3 foot space, about -- being generous here, about 12 inches high.

That sort of nine square feet of space to manufacture a product is just, again, orders of magnitude different than other autologous systems that we're certainly aware of. And, again, the cost associated with that is similarly much less.

So -- again, we don't know all the details of the other programs and the other products that are out there, but, you're right. And I appreciate you highlighting it, because it is -- it's just a totally different scale. And, again, it's something that we've concentrated on with Ronnda Bartel, who is our CSO, and I know you've talked to her. She's just so darn knowledgeable, so experienced. She's been doing this for 20 years. She's manufactured allogeneic products. She's manufactured autologous products, and she has the ability to see around corners.

So we've really benefited from her expertise and helping ensure that we have a very cost-effective system, and that's where we are today.

With no further questions in the queue, I would like to turn the conference back over to management for any closing remarks.

Thank you, Ben. I just want to say a quick thank you to everyone for your continued interest in the Company and, certainly, for participating on today's call. And as we indicated several times, we really look forward to updating you on our progress on our next call and wish you all the best until then. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may all disconnect. Have a great rest of the day.