Athersys, Inc.
Q2 2020 Earnings Call Transcript

Published: 11 Aug 2020

[Operator:]

Thank you for standing by and welcome to the Athersys’ Second Quarter 2020 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Karen Hunady, Director of Corporate Communications and Investor Relations. Thank you. Please go ahead.

[Karen Hunady:]

Thank you, Jessie and good afternoon everyone. As Jessie mentioned, I am Karen Hunady, Director of Corporate Communications and Investor Relations for Athersys. Thank you for joining today’s call. If you do not have a copy of the press release issued at the close of market, it is available on the Athersys’ website at athersys.com. Ivor Macleod, Chief Financial Officer is here to provide us with the financial update and Gil Van Bokkelen, our Chairman and Chief Executive Officer will be providing our corporate update. Today’s call is expected to last 45 minutes and a webcast of the audio will be available 3 hours after the call’s conclusion on our website under the Events section. The access information for the replay is also in today’s press release. Any remarks that we may make about future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by the forward-looking statements as a result of various important factors, including those discussed in our Forms 10-Q, 10-K and other public SEC filings. We anticipate that subsequent events and developments may cause our outlook to change. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. For the benefit of those who maybe listening to the replay, this call was held and recorded on August 10, 2020. Since then, we may have made announcements related to the topics discussed, so please reference our most recent press releases and SEC filings. With that, I would like to turn the call over to Ivor Macleod. Ivor?

[Ivor Macleod:]

Thank you, Karen. Good afternoon, everybody and once again, thank you for joining today’s call. I am Ivor Macleod, Chief Financial Officer of Athersys and it is my pleasure to give you an overview of the financial results for the second quarter of 2020. For the 3 months ended June 30, 2020, we recognized $84,000 in revenues compared to $4.3 million for the 3 months ended June 30, 2019. $4.2 million of the revenues in the prior period were generated from our collaboration with Helios related to manufacturing services performed. We expect our collaboration revenues to vary over time as we contract with Helios to perform manufacturing services and as we potentially enter into new collaborations. Our research and development expenditures were $13.8 million for the second quarter of 2020 compared to $11.1 million for the comparable period in 2019. The $2.7 million increase is associated with increases in clinical trial and manufacturing process development costs of $800,000, internal research supplies of $500,000, stock compensation costs of $500,000, personnel costs of $300,000, outside services of $300,000 and other research and development costs of $300,000. Our clinical development, clinical manufacturing and manufacturing process development expenses vary over time based on the timing and stage of clinical trials underway manufacturing campaigns for clinical trials and manufacturing process development projects. We expect our annual 2020 clinical development costs to increase as compared to 2019. General and administrative expenses were $4.4 million for the 3 months ended June 30, 2020. This represents an increase of $1.5 million when compared to the $2.9 million in the comparable period in 2019. The $1.5 million increase was primarily due to increased personnel costs, outside services, professional fees and stock compensation costs. Net loss for the second quarter of 2020 was $18.4 million compared to a net loss of 9.7 million in the second quarter of 2019. The difference is primarily a consequence of the previously mentioned variances. During the 6 months ended June 30, 2020, net cash used in operating activities was $24.8 million compared to $17 million in the 6 months ended June 30, 2019. At June 30, 2020, we had $18.7 million in cash and cash equivalents compared to $35 million at December 31, 2019. The June 30, 2020 balance includes the proceeds from our public offering in April. The net proceeds of which were approximately $54 million. It also includes the approximately $7 million proceeds received from the exercise of Helios’ warrant as previously disclosed. Further, in accordance with our prior agreement with Helios, we will be filing a Form S-3 to register shares purchased by Helios this week. With that, I will turn the call over to Gil for the corporate update. Gil?

[Gil Van Bokkelen:]

Thanks, Ivor and good afternoon, everyone. I would like to begin by providing an update on the status of our interactions with BARDA and some related issues, including a brief synopsis of the current state of the COVID-19 pandemic. Our last earnings call was held on May 7, just over 3 months ago. As of that date, there were approximately 1.3 million confirmed cases of COVID-19 that had occurred here in the U.S. And as of today, there have been approximately 5.2 million confirmed cases, representing an increase of 3.9 million new cases in just 3 months. This increase has occurred despite the precautions and protective measures that have been implemented and the number would surely be much greater if those precautionary steps and protective measures have not been taken. While these numbers represent the cumulative cases, it’s also important to recognize that there are currently nearly 2.4 million active cases here in the U.S. As of May 7, less than 80,000 COVID-19 related deaths had occurred in the U.S. And based on the 7-day rolling average as of that date, patient deaths were occurring at a rate of approximately 1,900 per day. As of today, there have been more than 162,000 COVID-19 related deaths here in the United States. Thankfully, the mortality rate has fallen over the past 3 months to the current 7-day moving average of a little over 1,000 patient deaths per day. Current projections are that total patient deaths here in the U.S. will likely exceed 300,000 by the end of the year and maybe well above that number. Many people are concerned about the potential impact of students returning to school and maths and the subsequent impact that may have on increasing the spread of the virus ass evidenced by what has transpired in some other countries around the world. However, we are encouraged that public health officials and school boards are taking the issue seriously and are implementing a range of protective measures, including offering online educational options for the fall term and likely beyond. Globally, the numbers have grown at an even faster rate. As of May 7, there were 3.85 million confirmed cumulative cases of COVID-19 around the world and we are now approaching 20 million confirmed cases with more than 6.4 million active cases. As of May 7, there were approximately 272,000 deaths globally. And as of yesterday, there were more than 734,000. Thankfully, in the vast majority of cases, patients infected with a virus will be asymptomatic or mildly symptomatic. The ultimate resolution of viral infection has three basic outcomes, either the patient is determined to be virus-free and fully recovers; the patient is determined to be virus free, but experiences some form of disability and/or quality of life impairment in the aftermath; or the patient does not survive. Among the fully resolved cases, where the patient has either been determined to be virus free or has unfortunately died, the global mortality rate based on more than 13.6 million fully resolved cases is approximately 5.4%, whereas here in the U.S., it’s approximately 5.9% based on more than 2.8 million fully resolved cases. Given the outstanding healthcare generally provided in the U.S., the reasons for this difference are not fully understood. Complications from COVID-19 are clearly multifaceted, but several things are now very clear. First, the leading cause of death among COVID-19 patients is viral-induced acute respiratory distress syndrome, or ARDS, which is caused by an over-reactive hyper-inflammatory response induced by the virus. As I believe everyone listening on this call is well aware, the data from our previously completed randomized double-blind placebo-controlled trial demonstrated that MultiStem has clear therapeutic potential in this area, where independent clinical investigators observed evidence of a meaningful reduction in ARDS related mortality, rapid improvement in pulmonary function, substantial increase in ventilator free days, and ICU free days during the 28-day clinical assessment and dramatic improvement in functional independence and patient quality of life outcomes over the 1-year follow-up. The Fast Track designation we received from the FDA provides further support of this potential. Second, other complications that may occur from COVID-19, such as stroke and renal complications are also areas where MultiStem has already shown promise, as evidenced by our ongoing Phase 3 trial in ischemic stroke and studies with collaborators, including Dr. Emily Thompson in the UK, illustrating the potential benefit of MultiStem for improving renal function. Third, while there has been a clear emphasis on the expedited development of diagnostics, vaccines and antiviral treatments, we believe that to-date there has been insufficient support for innovative technologies that have the potential to treat patients that are becoming seriously or critically ill from COVID-19 and that require ventilator support. Based on the prior clinical results from our completed study, evaluating the safety, tolerability and potential benefit of MultiStem for treating patients with ARDS, we were able to move very quickly in March and April with the FDA and collaborating clinical sites to design and initiate a pivotal trial for evaluating administration of MultiStem to patients with COVID-19 induced ARDS. In the span of only a few weeks, we designed the study, submitted it to the FDA for their review, responded to their questions, comments and requests for additional information, received FDA authorization for the trial, screened initial clinical sites for the study, obtain IRB, or Institutional Review Board approval, successfully launched the trial and enrolled the first patients into the study. All of this was achieved while the statewide lockdown was in effect here in Ohio and during which many of our employees work remotely. We announced FDA authorization of the trial in mid-April. And less than 3 weeks later announced the initiation of the study and enrollment of the first patients into the MACOVIA trial in early May. While all of this was going on, as we announced in the last earnings call, we were working in parallel with the Biomedical Advanced Research and Development Authority, or BARDA. As we have described previously, we were invited to initially engage with them in late January and early February. BARDA leadership recognized and appreciated several key points, including one that there is no effective treatment for ARDS currently available and it is the primary cause of mortality among patients suffering from virus or other pathogen-induced severe pulmonary dysfunction and inflammation. And in the past few years, there have been multiple instances of this. Although this pandemic is by far and away the worst example Two, that MultiStem acts through mechanisms that are not pathogen or virus-specific and therefore it has the potential to be broadly relevant in situations where new or recurrent, viral or pathogen outbreaks occur, they cause severe pulmonary inflammation in ARDS. And three, that in contrast to traditional pharmaceuticals or biologics that act through a single mechanism of action, MultiStem is a living cell therapy that has the potential to act through multiple dynamically regulated pathways and mechanisms of action. We believe this is essential as recent clinical studies with treatments targeted in only a single inflammatory mechanism of action, or MLA, has failed in patients with COVID-19 induced ARDS that require ventilator support. Following our presentation to the Corona Watch Task Force in February, which resulted in our technology being designated as highly relevant for the pandemic, we were invited to submit a formal proposal under the Broad Agency Announcement, or BAA issued in March, describing how we would clinically evaluate and expedite development of MultiStem for this and other similar situations that are likely to arise in the future. We submitted that proposal for BARDA review in late March and were then notified by BARDA in mid-April that the proposal had been reviewed and rated as acceptable, enabling subsequent discussions and negotiations to finalize the project. Following several rounds of additional discussions in correspondence, we were asked to provide further information on certain points, which we fully complied with. Upon review of this information, we were invited by BARDA to submit a revised proposal and the contracting team provided a list of specific requested revisions and questions. We accommodated 100% of the requested revisions from BARDA in our revised proposal and fully addressed all of the questions provided to us. To ensure that we had adequately addressed all the points and that the proposal was properly formatted, in addition to our other advisors, we also engaged an outside expert consulting firm that is highly experienced in BARDA proposals and government contracts. They concur that we have fully addressed each of the outstanding points and the proposal was properly organized, complete and formatted. Our revised submission underwent a lengthy and detailed review at BARDA that lasted several weeks, whereupon, we were advised that the technical review had been completed with only two minor remaining questions, which were both properly and fully addressed. Our understanding at that point was that the only remaining issue that needed to be resolved was a cost share ratio for the conduct of the pivotal clinical trial and that the next step was to enter into a contract with BARDA. We have previously been informed by BARDA that any expenses incurred by us prior to the execution of the final contract would not be reimbursed. We acknowledge our understanding of the point. However, given the urgency of the pandemic and our desire to move forward as expeditiously as possible, we advise the BARDA treat that we would proceed with FDA discussions, engagement with our CRO and certain study site investigators and initiation of the study while we worked in parallel with BARDA to complete the contracting process. Given the strength of our data, how quickly the process that advanced to that point, the enthusiasm expressed by BARDA and our desire to move as quickly as possible to help patients that are becoming seriously or critically ill, we felt this was reasonable and prudent. It was somewhat of a surprise therefore when we saw that in early June that BARDA had publicly announced a discontinuation of the evaluation of immunomodulatory therapies under Section 9.3 and certain other activities under the BAA. Initially, however, we did not believe this would or should apply less, given that our proposal had already been evaluated and accepted. We learned in a subsequent discussion with BARDA that they have been instructed to discontinue all activities related to the development of immunomodulatory therapies for treating COVID-19 induced pulmonary damage. It is also important to note that BARDA personnel indicated to us that this was a decision that they did not agree with. We later learned that we were the only company that had submitted a proposal under BAA Section 9.3 that was reviewed and formally accepted, addressed all of the questions that were asked, fully complied with all BARDA requested proposal revisions, and had undergone a complete technical review. Since our June discussion with them, we have been engaged in additional interactions with BARDA and the Department of Health and Human Services, or HHS, who have informed us that our proposal remains under consideration and it’s under a formal re-review. However, no timeline has been given for when we should expect a response. We note that all of the previous funding allocated to BARDA under the supplemental appropriations passed in mid-February has been designated. Therefore, any additional awards from BARDA will likely require funding from Congress. Given the discussions that Congress have recently broken down and there appears to be a significant impasse, nobody has clarity on what might happen from here. We understand that the most recent version of the legislation contains a significant amount of proposed funding for BARDA. But even if the legislation passes, it’s unclear whether such funding will actually be administered through BARDA or whether it will be funneled through other initiatives, such as operation work speed, project active or through other vehicles. As we have stated previously, in regards to our efforts, nothing is final until the process is complete and we cannot provide any assurances at this point on the eventual outcome. We can only state that we remain committed to this initiative and to helping patients that are seriously and critically ill. In the meantime, in addition to BARDA, we have submitted information to project active, and that information is also under review. So it’s not to jeopardize either of these parallel efforts, we are not able to provide further comment at this time. However, upon the completion of the process, we intend to provide more thorough and detailed update. To be clear, we remain supportive of the administration’s efforts to develop diagnostics, vaccines, and antiviral treatments for patients with COVID-19. However, like many others, we have questions and concerns about the degree of support being provided for innovative therapies focused on treating patients that are seriously or critically ill and fighting for their lives. We are encouraged by recent statements by the President and others on recognizing innovative therapeutics for patients that are seriously or critically ill our priority however, so far congress in the administration has spent several trillion dollars towards economic recovery efforts and only a tiny fraction of that amount towards advancing and expediting technologies that might ultimately advance clinical care for these patients unfortunately no funding has been deployed to advance innovative therapies for patients that are critically ill and on ventilator support. This appears to be a somewhat glaring gap, and it needs to be properly addressed. We urge Congress and the Secretary of Health and Human Services, the Vice President and the President to take glare action. Furthermore, we urge everyone listening in on this call to contact your congressional representatives, Senators, Health and Human Services and the White House to ask them to address this important issue. While we have engaged in these activities we continue to make substantial progress in other key areas, including advancing our other clinical programs our support of Helios our ongoing partnering discussions and our continued preparations for commercialization in terms of our clinical programs, while we have advanced on the MACOVIA trial for treating patients with COVID-19 and do start, we await the resolution of our ongoing activities with BARDA and the project active teams as I described. In the meantime, we continue to prep and qualify additional clinical sites and engage in corresponding manufacturing related activity. We also continue to advance our ongoing phase III MASTERS-2 clinical trial for treating patients who have suffered a disabling ischemic stroke. Some of the sites that went offline due to COVID-19 induced operational restrictions have recently come back online and are actively screening and enrolling patients. Other sites remain a work in progress. While it’s still too early to say what the ultimate impact of COVID-19 operational restrictions will be. At this point, our focus is on activating or reactivating clinical sites. In the coming months, with a goal of having all MASTERS-2 sites up and running in the first half of 2021, and a goal of completing enrollment for the trial around the end of next year. In the meantime, as Helios has reiterated in their quarterly earnings call several days ago, they remain on track to complete enrollment for both the treasure trial and ischemic stroke and the ONE-BRIDGE study in ARDS by the end of this year, and based on industry standards, they should have top line results a few weeks after the clinical assessments are completed, which will include the three month and one month follow up periods, for TREASURE and ONE-BRIDGE respectively. Finally, as we have described previously, entering into additional partnerships around our critical care programs is a key objective. And over the past three months, we have made continued progress on that front. We remain actively engaged in negotiations and discussions with companies that are multinational bio-pharma companies and highly qualify potential partners, and feel that we are in a good position to formalize an alliance in the coming months. We must reiterate however, that nothing is final until the process has been fully completed. In the meantime, we maintain a strong and healthy balance sheet and are continuing to advance key initiatives that will support our transition to becoming a commercial company. With recent and other planned additions to the leadership team and other parts of the organization, we have meaningfully advanced our plans for commercial manufacturing, strengthening our supply chain and advancing our informatics capabilities, such as our proprietary seafood technology, including entering into an alliance with the company that has the capability to manufacture the technology when we are ready to commercially deploy. We remain fully engaged and focused on achieving our long term goals and objectives on behalf of our shareholders and the patients we are committed to serving. As Ivor summarized earlier, from a financial perspective, we have the strongest balance sheet we’ve ever had in the history of the company. With the completion of multiple important clinical trials that are in process, the potential for new and substantial partnerships and other goals we are focused on achieving, we believe the future of the company is very bright. With that, I will address a couple of questions that we received recently from shareholders. By far and away the most questions we have received in advance of the call today had to do with BARDA. I tried to cover that as extensively and clearly as I can in my earlier comments although there is one additional question I would like to address. Specifically, some have asked whether we have a contingency plan as it relates to BARDA in the conduct of MACOVIA trial. The answer is yes. We do have such a plan. And it entails a multifaceted set of activities that relates to BARDA and other institutions specifically and also to specific parameters regarding the conduct of the trial, but we are not going to elaborate on that today since it’s premature. The second question has to do with our ongoing partnering discussions. Do we intend to enter into an alliance around only one therapeutic indication or multiple indications and can you comment on the geographic scope? There are still several possibilities in this regard, but our primary objective is to partner around our portfolio of key critical care programs and to enter into a high value alliance that focuses on development and commercialization in Europe initially, but that could be expanded over time. Accordingly, an ideal partner will be strong in Europe and have global commercialization capabilities. And those are exactly the types of organizations that we are currently in discussions with. With that, we would like to open it up for a few additional questions from analysts and others.

[Operator:]

Thank you. [Operator Instructions] The first question comes from Craig Harrison with Bank of America. Your line is open.

[Craig Harrison:]

Hi, guys. Thanks for taking the question. First one, I guess, could you maybe provide some additional color on the COVID trial timeline, is there a possibility for an interim analysis in the ongoing trial or some other way to either demonstrate proof of concept or some sort of differentiation prior to the final results, just thinking that in the context of competing therapy, starting to read out data, people would be very interested and even seeing just a few patients are some signal of what the efficacy could be here?

[Gil Van Bokkelen:]

Yes, that’s a great question, Craig. Thanks for joining today. So, just on a high level, I would like to remind people that the MACOVIA study is designed as a 400-patient trial. It’s a randomized, double-blind placebo-controlled study. And as we indicated previously, we I think somewhat conservatively estimated that it would take us about a year to complete the study. But that obviously depends on a number of factors that are still unclear to us like our – so for example, nobody really knows what’s going to happen in the remaining months of this year whether or not we are going to see another surge when kids go back to school and then if that results in greater spread of the virus and kind of secondary wave beyond that. Nobody really knows. So, that’s going to be an important determinant factor. But the way we designed the study was to build in an interim assessment our way through this study, which basically arrests on the assumptions from the data that we – from the results that we generated from our prior study. So, at less than halfway into the study, basically, we have built in a DSMB assessment, that if we see results anything close to what we saw in the last study, they might be able to declare early victory and then make a decision based on that. Okay, I am not going to give any more detail on that, because I really don’t want to go into that for competitive reasons. But I think that hopefully gives you an answer to your question less than halfway through the study, there will be an interim assessment conducted by the DSMB. They will evaluate the results. And essentially, this has done essentially so they can resize this study, but in an extreme success scenario, they might actually be able to declare early victory.

[Craig Harrison:]

Okay, that’s helpful. And then just one other one, when talking about your discussions for partnerships, how big of a priority is that right now to be able to maybe secure some non-dilutive capital given the increasing questions around BARDA and also the larger number of trials that you are conducting recently?

[Gil Van Bokkelen:]

Yes. I’d say it ranks in our top two to three priorities. And I would also say that our optimism level is very high, we are going to be able to get the type of partnership that we want. There is no guarantees until we are done, given who we are in negotiations and discussions with, given the type of discussions that we have been having with people, our belief is that this is a very achievable goal and we think we are in a really good position where we are at right now.

[Craig Harrison:]

Great. Thanks a lot.

[Gil Van Bokkelen:]

Thanks. Appreciate it.

[Operator:]

Your next question is from David Hoang with SMBC Nikko. Your line is open.

[David Hoang:]

Hey, Gil. Hey, team. Thanks for the update and taking the questions. So, I have a few. My first one is in relation to thinking about non-COVID ARDS. So obviously, you have MACOVIA ongoing, but I just want to get a sense if you had thought about advancing non-COVID ARDS development and how that might look like and whether the fact Helios reports out positive data in TREASURE on the 30-patient non-COVID cohort, will that influence how you proceed there?

[Gil Van Bokkelen:]

Yes, so, two really good questions. So actually, I think you are referring to ONE-BRIDGE, that’s their ARDS study, their 30-patient study. TREASURE is there. There are 220-patient randomized, double-blind, placebo-controlled study for stroke, but people get mixed up all the time. But in any event, we have thought very carefully, in fact, the design of the MACOVIA study was actually based on our envision design for a pivotal study in ARDS more broadly defined. For all intents and purposes, these study designs are essentially identical with the exception of the fact that the MACOVIA study has been designed to focus on patients that have specifically COVID-19 induced ARDS, because that’s what BARDA was most interested in. But without revealing too much information, one might imagine that if we needed to pivot and broaden up that trial, so that it included other forms of ARDS, we think that, that could actually be pretty straightforward in terms of working with the FDA to make that happen. So that the trial was designed again based on our prior clinical results, which was not focused on a specific cause for ARDS, it basically was more broadly defined in terms of accommodating patients that had viral pneumonia or bacterial pneumonia or other types of things that could induce ARDS, including trauma, aspiration, idiopathic ARDS for example. So, our ultimate goal from a commercialization standpoint, everybody’s hope is that COVID-19 is going to be a time limited phenomenon. So, I don’t think it would be a great strategy to basically build around developing a therapy for something that there might only be one customer for it at the end of the day that being the government or other governments around the world, which obviously we are evaluating that – those possibilities as well. However, our commercial strategy was to do it what has always been to advance this technology for ARDS broadly defined, for a broad range of different things that might actually cause ARDS and that’s what our prior clinical data reflects. So, we think that if we need to make an adjustment, there is a pretty good path for us to be able to do that and essentially, our goal at the beginning of the year was to actually finalize what a pivotal study might look like for ARDS by the end of the year, using a more traditional regulatory environment mindset, approach, all the other things that we needed to do. So given the fact that we have already got a study up and running and we are already kind of meaningfully down that path, we feel like we are kind of ahead of the curve in terms of where we anticipated being at the beginning of the year. Now, essentially an open question is to whether or not are we successful with BARDA or with one of the other institutions that we are engaged in discussions with in terms of conducting the COVID-19 induced ARDS study specifically, in which case, we may, it’s not a guarantee certainty, but we would probably have to run a different more broadly defined non-COVID-19 induced ARDS study. But again, that would be the discussion of – that will be based on discussions with the FDA and other regulators. Does that help?

[David Hoang:]

Yes. Go ahead.

[Gil Van Bokkelen:]

And then the second question with how much are we going to be influenced by what Helios sees from their 30-patient study? It’s a little bit difficult to say. I mean, obviously, they are taking a different approach where their enrollment criteria, is a bit different than what we are doing. We are optimistic that they will see positive results in that trial. But again, they were focused on intrinsic pneumonia and specifically limiting it to specific types of patients. So, our criteria is a little bit different, but they have applied some of the key learnings from what we saw in our prior study. So, I think we will be informed by what they are doing. The 5 patients that they are treating and I know they announced recently that they enrolled their first COVID-19 patient in Japan. It’s unclear what that’s really going to reveal by patients is kind of a small, first off it’s open label and it’s a small dataset. We believe that the right way to do it is to use randomized properly controlled studies as a way to really develop useful information that can be employed, can be employed in a, simple clinical trial regulators tend to not place so much emphasis on small. I don’t want to call it anecdotal but small studies that are not designed as randomized clinical trials. But I think it would be helpful and might tell something.

[David Hoang:]

Okay, great. Thanks for that. And then just add one other question around. I know you have a Phase II trial in trauma that’s plated to begin soon. So can you just remind us a little bit about what that Trial could look like or on the study, design would be great and then in terms of the funding for that, is that something that that classes will be picked up by UT Health or are you guys on the hook for any costs there?

[Gil Van Bokkelen:]

Yes three questions so it is approximately 150 patients study and again is properly randomized, double blind and placebo control to two arms. And that trial is now the thing that makes that different is being conducted At the Hermann Memorial Trauma Center at Houston, which is widely regarded as being the leading or, if you don’t put it in number one, you can certainly put it in the top handful of trauma centers in the United States, if not the world, that study is pretty close to being getting ready to watch. So they have already they have already undergone IRB approval. So the FDA is already signed off on the study design. There were a few things that we are just trying to walk through with, with the FDA and a couple of other issues I won’t go into but the point is, is that the studies authorized for initiation, the IRB approval has been obtained. They are undergoing one final internal clinically clinical approval mechanism where they should have done shortly. And then I think they are going to be ready to go. So, again, there is a funding for this study and reference to second part of your question there’s three sources of funding for the trial. The first is from the Department of Defense. And specifically, they have a funding arm called MTEC switch. So as you might imagine, the DOD is very interested in finding better solutions for dealing with trauma. Battlefield is a huge problem for them. But non Battlefield related trauma is also a problem because you might imagine there are plenty of risky jobs that having served in the military one upon a time, way back when I was in the Navy, I can tell you firsthand, there’s a lot of people that are doing very dangerous jobs, even where they're not on the front lines of what's going on. So they have to deal with trauma on kind of a widespread basis, if you will furthermore there are a lot of people that when they come home from having served are susceptible to various types of trauma. So it’s something that the DOD is deeply committed to coming up with better trauma related solutions or treatments. And so we work collaboratively with them the clinical leadership team at UTH, which by the way is all ex military. They actually, some of the clinical investigators ran field trauma units in places like Iraq and Afghanistan and other parts of the world. And so not only did the DOD provide funding for the trial, but UTH, also provided funding for the trial because they believed in it so much. And I think that speaks to their commitment. And then of course, we are the third part of the funding for the trial primarily was responsible for producing the clinical material providing regulatory support and covering off on some other things basically, that would not be specifically covered by the funding provided by the DOD or MTEC and UTH, but there is a great partner which will be working with them and we look forward to getting those first patients in the study and then completing it very efficiently.

[David Hoang:]

Okay, thanks for taking my question.

[Gil Van Bokkelen:]

Thanks, Steve. Appreciate it.

[Operator:]

Your next question comes from Steve Brozak with WBB Securities. Your line is open.

[Steve Brozak:]

Hi, Gil, thanks for taking the question. I just have one quick follow up on that you would started down the path of specific to arts and the agnostic nature of MultiStem, can you just cover what the advantages are? And what the issues might be into the future dealing with ARDS whether it’s from COVID, or whatever COVID becomes, and then everything else that might take place? And I’ll just hop back in the queue. Thank you.

[Gil Van Bokkelen:]

Yes. Thanks Steve thanks for joining us today as well. So one of the thing that I think has become abundantly clear based on some of the recent data when people have been working at some of the innovative antiviral interventions or some of the immuno-modulatory or anti-inflammatory drugs some that are approved, some that are in clinical development, but all of which share kind of single constraint and that they focus on a single specific mechanism. So whether it’s anti-IL-6 or is designed to kind of blunt the IL-6 pathway or other types of inflammatory cascade and the reality of it is that we now have data when I say we, I mean collectively, everybody that’s following what’s going on at COVID-19. There has been data generated from multiple different studies. And I think one thing is consistently and pretty abundantly and emphatically clear at this point. None of those approaches were working on patients that are seriously or critically ill and they are on a ventilator with COVID-19 induced ARDS. And I think one of the reasons for that, that a lot of people that we have spoken with, for example, folks at the NIH or others, they recognize that, you know what, a single focal point is may not work. And in fact, our belief is that it won’t work and that is because a lot of emerging clinical data from people who have looked at what is happening in COVID-19 induced patients have correctly ascertained and I think there is a lot of data to support this that just stopping one particular cytokine or one particular point in that cascade is not going to address all of the things that are happening in these patients. As you and I think a few other people that are on this call realize we have done extensive work looking at the impact of MultiStem clinically, but also through years of preclinical and various animal models and we have tons and tons of data that shows that when we administer MultiStem that it regulates multiple inflammatory pathways and cascades and these cells are dynamically regulated. They are homing decisive tissue damage and inflammation. They are homing, us to key peripheral immune organs like the spleen or other locations that are relevant and they are dramatically down-regulating the things that are going haywire in COVID-19 patients in terms of the multiple inflammatory pathways and in cascades that are spiraling out of control. And at the same time, these cells are stimulating other pathways that are really important and a key part of the healing process. So, we have talked about that on the prior earnings call, I am not going to go into detail on it today, but I think one of the things that appears to be resonating with people and this BARDA leadership correctly recognized early on was that look, great if we find a magic bullet that focuses on one thing, some single cytokine or whatever it might be, if that really turns things in the right direction, then hey, that’s great. That’s good news for everybody. And we agree with that. But I think what is becoming more and more clear is that is probably not going to provide a comprehensive and effective solution. And frankly, even if it did, it might be complimentary to what we are doing. And the point is that the mortality rate among patients with COVID-19 induced ARDS is still uncomparably high, as evidenced by the numbers that I referred to a little bit earlier. Now, you might be able to blend it with corticosteroids like dexamethasone, some of that data looked encouraging, but if you look at the delta, in terms of hospitalization and some of the other things that frankly, they didn’t talk about, it appears that the effects of that are not nearly as much as you would want the end of the day in terms of being able to really help these patients on a path of speedy recovery and a higher probability recovery and getting them out of hospital and back on their way with hopefully full – the ability – the full ability to actually regain their quality of life and functional independence. Our prior clinical data shows we can help in that regard. And I think what we want to do now is resolve the outstanding issues, move forward with a committed institutional partner, and demonstrate that MultiStem can help patients with COVID-19 induced ARDS through the proper conduct of a randomized double-blind placebo-controlled study. That is the way that the FDA and others have said it needs to be done. That is what we have already gotten authorization to do. And we are excited about being able to do that.

[Steve Brozak:]

Well, thank you for the detail. I really appreciate it. Thanks again.

[Gil Van Bokkelen:]

Thank you.

[Operator:]

And the next question will come from Gil Blum with Needham & Company. Your line is open.

[Gil Blum:]

Hello, gentlemen. Thanks for taking my questions and congrats on the progress. My – we kind of saw an uptick in R&D spend probably related to the MACOVIA study, should we expect this acceleration on R&D spend to continue throughout the year and next year?

[Gil Van Bokkelen:]

I think what you are going to see in the second half of the year is pretty consistent to what we have seen in the first half of the year, some things may tick up a little bit, but I think that the – we have been spending over the past couple of quarters a fair amount on process development related work that we are committed to completing by around the end of the year. And so I think some things are actually picked up while other things will tend to subside over time. So, one of the things we pride ourselves on is that we are very, very frugal and efficient. And we are very much a measure twice, cut one kind of organization. What we really are focused on are building the resource base so that we can run faster in the areas that are really meaningful and most important, and we are going to do that through strategic collaboration and alliances, not only with other partners, but also with other institutions potentially with BARDA, potentially with other institutions that are committed to the things we are committed to. And really funding that expedited development. But as i said some of the things that we basically did in the second quarter when we made a conscious decision to run faster on some of these things. Frankly, we did that because we had conveyed part of that but we were actually to get this pile up and running while we were trying to finalize things with that. So it's a little bit frustrating to kind of be in a holding pattern which we now find ourselves. But in answer your question, I think what you will see in the second half of the year is pretty consistent with what you have seen in the first half of the year. But again, some things will move around a little bit. And most importantly, we expect that as we put new relationships in place that can have a meaningful impact on our financial position, always very strong position, I would say.

[Gil Blum:]

And just clarify for me as well, if you had to, would you consider continuing enrollment in the MACOVIA study by yourself?

[Gil Van Bokkelen:]

What we are doing now? I mean, the reality of it is that we are going in a very measured pace, while we try to resolve things, but the reality of this it is like kind of alluded to, if we decided that we wanted to modify this and turn it into kind of a more pivotal study, that is something that I think we could discuss pretty efficiently with the FDA and other regulators and do that. And if we needed to do that, then we could do it. And the net effect based on where we started the beginning of the year that our whole timetable would have stopped by a few months. I am not saying. I am not trying to find the so we will be allowing [indiscernible] in the storm clouds. I am just making the point that we thought about the contingencies, we planned for them, and I think we are in a very strong position to do what we need to do. We are still planning on seeing it through with BARDA and other institutions that we are on discussing with in terms of the COVID-19 specific focus from MACOVIA. But the reality of is that we have other ways we can go. And frankly, we feel like we have a number of good options in front of us.

[Gil Blum:]

It makes sense. And maybe another classification from it, so, as you – the basically discontinuing all in any ARDS related therapies. I mean, there were some positive data from a really small group of patients this morning. And my understanding is that company is in discussion with BARDA for funding?

[Gil Van Bokkelen:]

Yes, which gives obviously a lot of people are asking questions about who's really driving the bus, right, is because so first half, when we began this whole thing, there was no operations Steve. There was no project active. There weren't some of the other initiatives that have basically emerged over time. And what is clear is that some of the funding that was originally designated by Congress to go directly to BARDA has been kind of diverted in other directions and focus on other activities. But it's still a bit of a mystery to folks about who's making the calls on this stuff. And, and is that going to continue or what's really going to happen over the course of the next several months, we get the emphasis on trying to get as much done between now and early November. We understand why people would focus on that and why people want to make as much progress on diagnostics, vaccines and some of the antiviral therapies over the course of the next couple months, but one of the things that we have always been committed to is thinking through how things should be done. So yes, we want to do things quickly, efficiently. But the reality of it is that we want to make sure that things are done properly. That's the most important focal point for us. And I think a lot of other people that we are discussing with feel exactly the same way. So we are all trying to get to a better place of stability as soon as we all can. But the reality of it is that we have to do the right thing. So we are trying to get to that point. And your question about BARDA is a good one. We are not really sure exactly how some of the things are being done. All we know for sure was what they publicly stated. And some of the other things we have learned from our discussions with them, some of which we can't really go into.

[Gil Blum:]

Alright. And thank you for taking our questions. And congrats on the quarter.

[Gil Van Bokkelen:]

Yes, thank you. I appreciate for the time.

[Operator:]

This concludes the Q&A for today. I will turn the call back over to Gil for closing remarks.

[Gil Van Bokkelen:]

Thanks, Jeff. Well, as always, I would like to thank everybody for being part of the call today and for your continued support. We always say we are fully committed to advancing our programs and achieving our goals and we look forward to making additional announcements and providing updates as we move forward. Thanks very much.

[Operator:]

This concludes today’s conference call. You may now disconnect.