Athersys, Inc.
Q4 2019 Earnings Call Transcript

Published: 16 Mar 2020

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the Athersys’ Fourth Quarter 2019 Results Conference Call. At this time all participant are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]I would now like to hand the conference over to Karen Hunady. Thank you. Please go ahead.

[Karen Hunady:]

Thank you, Chris, and good afternoon, everyone. I’m 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. We have several members of our leadership team on our call today. Gil Van Bokkelen, Chairman and Chief Executive Officer, will be providing our corporate update; and Ivor Macleod, our new appointed Chief Financial Officer; and Laura Campbell, Senior Vice President of Finance, are here to provide us with the financial update. Today’s call is expected to last approximately 45 minutes, and a webcast of the audio will be available two 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 make about future expectations, plans and prospects constitute forward-looking statements for the 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 may be listening to the replay, this call was held and recorded on March 16th of 2020. Since then, we may have made announcements related to the topics discussed, so please reference our most recent press releases and our SEC filings.With that, I’d like to turn the call over to Gil Van Bokkelen. Gil?

[Gil Van Bokkelen:]

Thanks, Karen. I’m very pleased to introduce Ivor Macleod to all of you. Ivor brings tremendous leadership and commercialization experience to the company, which is important as we continue on our journey of building a leading regenerative medicine company that’s focused on the development of innovative therapies that have the potential to advance the boundaries of critical care medicine. I’ve asked him to first provide a summary and a bit of background on his experience before turning to our financial results.So with that, I’d like to turn it over to Ivor.

[Ivor Macleod:]

Thank you, Gil. Good afternoon everybody. I’m Ivor Macleod, Chief Financial Officer of Athersys. I’d like to thank all of you for joining today’s call. As most of you know, I joined Athersys at the end of January this year and I’m looking forward to making a significant contribution to the company as we continue down the path of potential approval and subsequent commercialization of the MultiStem product. Before I give you the 2019 financial results, as Gil requested, I will take a few minutes to talk about my background.I hold a Bachelor of Science degree from The University of St Andrews in Scotland, an MBA from the University of Arizona and I’m a certified public accountant licensed in Virginia. I have been in the pharmaceutical industry for the better part of three decades, working both in Europe and the United States. I have experience working in all areas of the pharmaceutical value chain from basic research to commercialization, having held executive financial and leadership roles of some of the world’s leading companies.Well, originally from the UK, I began my pharmaceutical career with a private German company, Boehringer Mannheim, firstly leading their financial function in the Washington, DC area, but then in Mannheim, Germany as Chief Financial Officer for their therapeutics division. A major part of my responsibility in Germany was negotiating with major pharmaceutical companies for a global alliance whereby we could achieve global geographic reach for our brands and realize a meaningful return on our overall investment. In 1997, we were purchased by F. Hoffmann-La Roche based in Basel, Switzerland. I moved to Switzerland as the Vice President of Finance for Research. A primary responsibility in my new role was working on the integration of the research sites of Boehringer Mannheim and Roche.After two years in Switzerland, Roche transferred me to New Jersey, where I was the Chief Financial Officer for North America for the next 10 years. In that capacity, I participated in the launches of many successful compounds in multiple different therapeutic areas. These included Hepatitis C, oncology, HIV/AIDS, rheumatoid arthritis, osteoporosis, weight loss and influenza among others. In 2009, Roche merged with the San Francisco based biotech company, Genentech. Genentech remains Roche’s U.S. commercial arm today. After participating in integration of the two companies, I became General Manager of Roche’s east coast campus until my departure at the end of 2011.After leaving Roche, I joined Merck as Vice President of Finance for Merck Research Laboratories, their research and development division. While at Merck the highlight for me was being part of the team responsible for the development and subsequent approval and commercialization of KEYTRUDA, pembrolizumab, the first PD-1 inhibitor. I left Merck in 2015 and joined Eisai Inc, the North American subsidiary of the Japanese company Eisai Limited based in Tokyo. As Chief Financial Officer and Chief Compliance Officer at Eisai, I led several strategic projects addressing their go-to-market strategy in both neurology and oncology.I also participated in the negotiations of the global oncology alliance with Merck combining Merck’s KEYTRUDA and Eisai’s LENVIMA, lenvatinib, in several different tumor types. That brings me to Athersys. Since joining, I’ve become fully integrated into the team at Athersys and it has been an incredibly rewarding experience so far.I’m impressed with the knowledge and expertise of the management team and the hard working employees here. The culture here is unique and it is exciting being part of a small company that works in a fast paced environment. It is a privilege to join the company with compelling science in the regenerative medicine space focused on the critical care segment of healthcare where we can make a meaningful contribution in an area of high unmet medical need and improve the quality of human lives. With that, I will move on to the 2019 financial results and then turn the call back over to Gil for the corporate update followed by a question-and-answer period.First, I’ll give an overview of the fourth quarter 2019 and follow it with the financial results for the full year. Revenues were $300,000 for the three months ended December 31, 2019, compared to $1.5 million for the same period in 2018. The reduction in our fourth quarter revenues from year-to-year reflects the conclusion of certain services related to our Healios collaboration in Japan such as clinical product supply. Research and development expenses were $7.6 million for the three months ended December 31, 2019, a reduction of $2.6 million compared to $10.2 million in expenses for the comparable period in 2018. The decrease between the two quarters is associated with the conclusion of the manufacturing campaign to supply Healios clinical product as well as a reduction in technology transfer services and reagent purchases for our internal process development activities in the fourth quarter of 2019.General and administrative expenses decreased to $2.4 million for the three months ended December 31, 2019 from $2.8 million in the comparable period in 2018. The $400,000 decrease in the fourth quarter of 2019 was due primarily to lower professional service fees and personnel costs. The net loss for the fourth quarter was $9.9 million in 2019, compared to a net loss of $11.3 million in the fourth quarter of 2018. The difference of $1.4 million is reflective of the previously described variances as well as the decrease of $400,000 in other income items.Turning now to the results for the full year, revenues were $5.6 million in 2019, compared to $24.3 million in 2018 as contract revenues from our collaboration with Healios decreased $16.8 million year-over-year. The highest 2018 revenue reflects the monies received for the expansion of our collaboration in June 2018 to include additional licensed indications. In 2019, we also experienced the reduction in certain Healios funded services as certain projects were concluded. Our 2018 revenues also included royalties and other contract revenues of $1.5 million, primarily related to our collaboration with RTI Surgical, which has since been terminated.We expect our collaboration revenues to continue to vary over time as we contract with Healios to perform future manufacturing services as well as to reflect the impacts of potential new collaborations. Research and development expenses were $39 million in 2019, compared to $38.7 million in 2018. The small net increase of $300,000 is related to a combination of variances including increased personnel and stock compensation costs of $1.5 million, consulting costs of $600,000 and other costs of $100,000. These increases were partially offset by decreases in clinical trial and manufacturing process development costs of $1.1 million and license fees of $800,000.Based on our current plans, we expect 2020 research and development expenses to be higher than 2019. Such costs will continue to vary overtime based on clinical trials underway, manufacturing campaigns and process development activities as well as other initiatives. General and administrative expenses were $11.4 million in 2019, compared to $10.4 million in 2018. The $1 million variances related to increase legal and professional services, outside services and stock compensation expense.Our general and administrative expenses may increase in 2020 primarily related to personnel costs. Our net loss was $44.6 million in 2019, compared to a net loss of $24.3 million in 2018. The $20.3 million difference reflects the aforementioned variances as well as an increase of $300,000 in other net expenses.During the year-ended December 31, 2019, net cash used in operating activities was $35.3 million, compared to $13.4 million in the prior year. The prior year number reflects the moneys received related to the June 2018 Healios expansion, with the 2019 number reflecting overall uses of cash to fund our clinical development activity. We ended 2019 with $35 million in cash and cash equivalents.With that, I’d like to turn the call back over to Gil for the corporate update. Gil?

[Gil Van Bokkelen:]

Thanks, Ivor. I want to begin by addressing several important topics including where we have been inundated with questions recently related to the ongoing COVID-19 pandemic and the potential relevance of MultiStem. As most people are already aware, the recent outbreak began in Wuhan, China in November of last year. According to public health statistics, while there was concern regarding the spread and progression over the first few weeks of the outbreak, it’s important to recognize as of January 23, there were still less than a 1,000 confirmed cases globally and only 25 deaths that occurred, with essentially all of those cases occurring in China at that point,Less than two weeks later, as of February 1, there were more than 14,500 cases with several 1,000 additional cases being announced per day and more than 300 deaths. As of today, less than two months later, there are now more than 179,000 confirmed cases of patients with COVID-19 infection globally and more than 7,000 deaths. In United States, our incidents has been far lower than for many other countries with confirmed cases occurring at a frequency of about 12 cases per million individuals.However, given the recent evidence of community spread in various parts of the country, that incidents number has been increasing and may rise substantially in the days and weeks ahead. At the beginning of March, just a little over two weeks ago, public health authorities observed a meaningful and disturbing increase in the incidence and mortality trends outside of China, particularly in certain European countries and other parts of the world.Unfortunately, many individuals that have contracted COVID-19 have subsequently become seriously or critically ill. Prior to the recent surgeon incidents that became evident at the beginning of March, approximately 15% to 18% of COVID-19 patients had become seriously or critically ill and the mortality rate among fully resolved cases was fairly consistent at around 6%. Fully resolved cases essentially have two outcomes. Either the patient recovers and is determined to be COVID-19 free, which has happened well over 90% of the time or unfortunately the patient dies.The global mortality rate in fully resolved cases is currently approximately 8% based on observed outcomes for more than 85,000 cases. It’s important to understand that the primary cause of these patients becoming seriously or critically ill and subsequently dying is because COVID-19 like a range of other viruses and pathogens including SARS, MERS, virulent influenza strains like H1N1 and others we have seen in recent years, is inducing Acute Respiratory Distress Syndrome or ARDS.The recent World Health Organization assessment and other clinical observations and epidemiological data indicates that the primary cause of death for these COVID-19 patients is ARDS. As we have described previously other than placing patients on a ventilator, currently there is no effective treatment for ARDS, and the mortality rate and morbidity is high, especially among older patients and/or individuals with certain underlying health conditions or comorbidities.Public health authorities have stated that there are currently approximately 63,000 ventilators in the United States with a modest additional supply in the national stockpile. There is concern that if the number of patients that become seriously or critically ill from COVID-19 begins to rise substantially, there won’t be enough ventilators to go around.In response to the COVID-19 pandemic, the federal government working in close coordination with various states and public health agencies have taken multiple important steps. First, they have mobilized in an unprecedented manner in terms of speed and scale with the imposition of temporary travel restrictions, school closures or mandates to continue education remotely and implementing prudent restrictions on public assembly and events including sporting events, concerts, and arrange of other activities.As of yesterday, the government here in Ohio temporary closed all restaurants and bars and that is now happening in other parts of the country as well. These steps are all designed to slow and ultimately stop the community spread of the virus. It’s a bit too early to say what the ultimate impact will be, but many of us believe that these actions will be effective at blunting the spread of the COVID-19 virus and we completely support the steps that have been taken.Some have criticized the government or government agencies for acting too slowly or too quickly in imposing these restrictions or taking other actions. I’d like to address that for just a moment because in our view that is a serious misconception. In January, when there were only a small number of COVID-19 cases globally and no confirmed cases in United States, we were approached by the Biomedical Advanced Research and Development Authority or BARDA. As many people listening on the call today are aware. BARDA’s mission as part of health and human services is to protect the nation against chemical, biological, radiological, and nuclear threats as well as against pandemic influenza and other emerging infectious diseases like COVID-19.Various members of BARDA including leadership were already aware of our company and our technology based on some prior interactions and collaborative work we had conducted. They have seen our recent announcements and presentations regarding the primary trial results and subsequent one year follow-up results from our now completed clinical trial evaluating the administration of MultiStem to ARDS patients.They realized that while there is no treatment for ARDS currently available. Our technology might play an important role in helping to establish and provide more effective intervention for patients that have become seriously or critically ill following viral or pathogen induced ARDS. In the days and weeks that followed, we were invited to be part of an intensive process that included multiple meetings, discussions and presentations with BARDA leadership and others including the Inter-Agency corona watch Task Force that was established to evaluate diagnostics, vaccines, antivirals and potential therapeutic treatments as well as other technologies or capabilities.This task force included representation from BARDA, HHS, FDA, NIH, CDC, and DOD among others. BARDA’s mission is to expedite the development and delivery of promising technologies by providing funding and other support. And they and other relevant agencies move rapidly and efficiently to take action. We are pleased to announce today the following this intensive evaluation, our technology was designated as highly relevant, which is the highest classification possible. This designation was based on a rigorous assessment of clinical data and other evidence and information and it’s supported and reinforced by the Fast Track designation we had received previously from the FDA specifically for the treatment of ARDS.This represents our third Fast Track designation for our MultiStem programs. In addition to the other important designations we have received, including RMAT designation and others. As the FDA has previously indicated the RMAT designation is equivalent to breakthrough therapy designation for cell therapy and other regenerative medicine technologies. Each of these designations is designed to expedite the development of and regulatory process for promising therapies that have shown the potential to address areas, where there is significant unmet medical need and limitations in standard of care.There are several aspects of our technology and approach that BARDA and other institutions have recognized as being important. In particular, MultiStem acts in a pathogen independent manner, which is relevant since we’ve seen in recent years that ARDS can be induced by a range of pathogens, including COVID-19, SARS, MERS, virulent strains of influenza such as H1N1 and other viruses in pathogens.Unfortunately, traditional approaches including vaccines, certainly antivirals and other treatments are typically dependent on the isolation and characterization of the specific pathogen, which means that public health officials, clinicians and researchers are frequently chasing the threat after it has emerged so to speak.In contrast, MultiStem could be broadly relevant to treating ARDS caused by a range of pathogens that induce severe lung inflammation and pulmonary dysfunction. Since it is not act in a pathogen specific manner, MultiStem could compliment and be deployed much more efficiently than conventional approaches, since it focuses on addressing the underlying condition, which is severe lung inflammation and ARDS that is induced by the virus or pathogen. And that causes some patients to experience for long critical illness and unfortunately results in the death of some individuals.As we’ve described previously MultiStem is also highly scalable, easy to administer and can be steadily maintained in frozen form for years if needed. Furthermore, we have a clear plan for how we intend to make MultiStem broadly available and how we can deliver on that plan.We believe that MultiStem will ultimately be approved for one or more indications and we also believe that we are well positioned to work with BARDA and or potentially other agencies to establish and maintain inappropriate inventory buffer that could be rapidly deployed in the event of an outbreak or other scenario, where our technology has demonstrated relevance.The treatment of ARDS has long been a challenging area for clinical medicine. As noted previously, no effective medicine is currently available and no treatment other than ventilation. But even with ventilation, there’s significant morbidity and mortality. Amongst surviving patients, there are frequently complications and meaningful quality of life issues.To our knowledge, we are the only company that has an active program that is received Fast Track designation for the treatment of ARDS. We and our collaborators are confident that MultiStem can and will play an important role in treating patients with ARDS. And I would briefly like to summarize some of the clinical observations from our recently completed randomized double-blind placebo-controlled study that support that view.As we had described for the entire study population, we observed a meaningful reduction in mortality, improvement in pulmonary function, as well as an increase in ventilator-free days and in ICU-free days during the 28 day clinical assessment period. More relevant to the current situation, is that study investigators also observed even stronger effects for patients suffering from pneumonia-induced ARDS.Specifically, mortality among patients with severe pneumonia-induced ARDS was 50% among patients receiving best available standard of care, whereas when patients received a single dose of MultiStem within four days of being diagnosed with ARDS and placed on a ventilator, mortality was only 20%. Rapid improvement in pulmonary function was also observed among patients in this study, as evidenced by the finding that 45% of MultiStem treated patients were off the ventilator within seven days or less, whereas only 20% of patients treated under best available standard of care. We’re able to achieve ventilator independence in that same timeframe.This is relevant, because the odds of full recovery are increased when patients are liberated from ventilator dependence earlier. And this could also help address a potential shortage of ventilators should they become limited due to a surge into the number of patients that need them. If treatment can help patients become ventilator-free faster, it will in essence free up capacity to provide more patients with access to the limited number of ventilator units available.Mean, ventilator-free days amongst severe pneumonia-induced ARDS patients were 14.8 for MultiStem treated patients versus only 7.5 for placebo patients. Median ventilator-free days were 18 for the corresponding MultiStem treated patients and only three days for the patients receiving placebo and being treated under best available standard of care.Mean, ICU-free days for these patients during the 28 day clinical assessment period or 12 for MultiStem treated patients versus only five for placebo patients, whereas median ICU-free days were 15 for the MultiStem treated patients and only one day for the patients receiving placebo and being treated under the best available standard of care.These and other data including evidence of a consistent safety and tolerability profile, as we have observed in other studies, substantial improvement in patient’s self care and independence, quality of life improvement over the one year follow-up and biomarker evidence showing down regulation of key inflammatory cytokines among MultiStem-treated patients. And that also had been shown to be important in COVID-19 patients, provide clear and compelling evidence of therapeutic benefit.Working with outside clinical experts, biostatisticians and other collaborators, we have already conducted extensive modeling and planning for a Phase 3 registrational trial involving administration of MultiStem for the treatment of ARDS. We intend to present this plan to the FDA and other regulators soon, after we have completed some additional preparations.It’s worth noting that this study could potentially involve an arm that specifically evaluates COVID-19 patients that had developed severe pulmonary inflammation or ARDS. And that is something we intend to discuss and coordinate with the FDA, BARDA and others as appropriate. In addition, we are continuing our efforts in other areas, where there is potential relevance to BARDA’s mission and scope of interest.While we are not addressing those activities in today’s call, we would just like to point out that BARDA recognizes the importance of these additional activities and has also participated in our recent meetings with the NIH and other institutions focused on the design and execution of relevant studies. We continue to make good progress in our other clinical programs. As Healios has conveyed publicly, the anticipate completion of enrollment for both TREASURE and ONE-BRIDGE in the coming months. And we have seen strong enrollment progress at the active clinical sites in our MASTERS-2 trial.However, it is difficult to precisely predict what the impact of travel restrictions and other limitations that have recently been implemented and are currently in effect will be on the addition of new sites for MASTERS-2, particularly in Europe and other sites outside the U.S. We will have a better idea of impact by our next earnings call in May, but we are anticipating that there will be an impact.For now, we are committed to moving ahead as quickly and prudently as circumstances allow. I’d also like to briefly comment on the status of our pending trauma trial MATRICS-1 study. We are fully committed to conducting this study and we are working hard to address several outstanding points related to the trial with the FDA. Some people have question, why it is taking so long. And I just want to make two points in response.First, as we have stated repeatedly, our philosophy is to work in a collaborative and collegial manner with the FDA and other regulators. And sometimes the issue we consider and discuss with them are complicated and take time to work out. Second, I’d like to describe one specific issue that we’ve been working on with the FDA that provides a relevant example of the point I just made.Timely enrollment of patients will be important for the efficient conduct of the study and given the acute nature of trauma. That means that the process for obtaining consent is extremely important. As in our other critical care trials and programs, patients themselves will not ordinarily be in a position to provide informed consent. And therefore it will require consent from an authorized family member or other representative, which complicates the process. There are ways to address the consent process to make it as efficient as possible, which is a very important issue for a study, where timely administration will be essential or even critical.We have been working with the FDA and our clinical collaborators to ensure that we address this in an inappropriate manner. And I’m confident that we are doing everything necessary to achieve that goal and doing so in a manner that is consistent with FDA priorities, policies and procedures.This has taken a bit longer than we would like. But as I said previously, the most important thing is to ensure that we get it right. and then everyone involved in the study is on the same page. I’m confident that we will accomplish our objectives and are getting close to resolve any outstanding issues. But in the meantime, it will require a bit of additional patients.Finally, I’d like to briefly comment on our ongoing discussions with potential partners. We remain very actively engaged on the business development front and it made solid progress in some of our discussions. Delivering a high value partnership with the right partner is a priority for us, and I believe we are in a strong position to achieve that objective. Our recent progress and current events both illustrate why our programs are so important, and it’s clear that other organizations recognize that.In summary, we believe that we are at a unique time in the history and evolution of the company, and we remain fully committed to the advancement, successful development and delivery of our technologies to help patients in need and their families and to fulfilling our goals and objectives on behalf of our shareholders and other stakeholders.And with that, we would first like to address a few questions that were submitted by shareholders and others before we open it up for questions from analysts and other institutions.The first question is MultiStem potentially relevant to patients that develop ARDS from COVID- 19; I’ve addressed this question in my comments. So, we got this question from quite a few people.And yes, we do believe that MultiStem has relevance to COVID-19 induced ARDS as well as other viruses or pathogens that can induce severe pulmonary distress and acute respiratory distress syndrome. To reiterate, to our knowledge, we are the only company with a Fast Track designation from the FDA for a therapy for the treatment of ARDS that is an active clinical development and we believe that puts us in a very unique position.The next question is Athersys treating COVID-19 patients under compassionate use?Our current policy precludes the treatment of patients under compassionate use for any indication and there’s specific reasons for that. While we reserve the right to modify this policy in the future, we are committed to designing and executing inappropriate clinical trial to further evaluate the safety and efficacy of MultiStem for patients with ARDS, and to advance that program as fast as we can. This trial could include evaluation of COVID-19 induced ARDS patients and such an evaluation could be conducted separately or in parallel, that will have to be definitively established in coordination with the FDA and other relevant agencies.Unfortunately, in prior instances of compassionate use, Expanded Access or Right To Try were companies engaged in limited and discretionary application of non-approved therapeutics for certain patients. Other groups complained that the access was not broad enough and tried to forcibly broaden access to include everyone that wanted treatment. People need to realize that under compassionate use treatment, the company bears the entire cost of providing the therapy to patients. Obviously in the current situation, we couldn’t afford to do that. So, our current policy remains in effect. We are prioritizing appropriate in FDA authorized development in order to ultimately provide the broadest access possible following regulatory approval of a therapy.The next question is, have there been any conversations between Athersys and any authorities regarding the use of MultiStem in connection with COVID-19. And if so, what information can be shared about them?Well, yes, I’ve addressed this in my comments. We have had ongoing discussions, and as I mentioned, we’ve been involved in an intensive evaluation process, which is involved BARDA and other agencies that have also been part of that process.Why hasn’t Athersys previously commented publicly on the potential relevance of MultiStem to treating COVID-19 patient?In the past few weeks, there has been a lot of speculation on message boards and other forums regarding the potential relevance of MultiStem to patients with COVID-19 induced ARDS. However, just as we don’t name or comment on specific companies that we’re engaged in partnering discussions or negotiations with, we don’t comment on discussions we may be having with governmental or public health agencies until it is appropriate to do so. Nor do we respond to speculation. We are providing the update today, because it is directly relevant to how we intend to move forward, but it would have been inappropriate to comment prior to today.We’ve received other similar questions from people in recent days and over the past few weeks. but for now, we’d like to open it up for a few additional questions from analysts and institutions that are dialed in.

[Operator:]

[Operator Instructions] Your first question comes from Chad Messer with Needham & Company. Your line is open.

[Chad Messer:]

Great. Thanks. Good afternoon and thanks for taking my questions and a hearty welcome to Ivor, you have an impressive background and I’m sure you’ll be an asset to the team. I’m just wondering if you could sort of lay out for us advantages that MultiStem might have in treating ARDS specifically over some other sort of anti-inflammatory type approaches. And so specifically here, today there was an announcement that Regeneron’s Kevzara, their IL-6 antagonist is imminently going to be tested in a COVID trial, and at a very high level, that’s also kind of an anti – general anti-inflammatory and it’s approved for RA. What do you think MultiStem potentially could do better than approaches like that?

[Gil Van Bokkelen:]

Yes, that’s a great question. Well, unfortunately there’s a long history of people trying to administer anti-inflammatories in patients with ARDS or severe pulmonary inflammation, and they really haven’t worked that well. I think that the gap that exists in clinical medicine today is that once the patient has progressed to severe pulmonary inflammation and their pulmonary function has been so compromised that they are – that they technically have ARDS or acute respiratory distress syndrome. Their oxygenation or pulmonary function capacity has fallen below a critical threshold and the only thing you can do for them at that point is to put them on a ventilator to force oxygen in the lungs, but that has long-term consequences.So, an answer to your question, I don’t really see it necessarily as an either/or, what I think people should be thinking about is, there’s going to be a spectrum of things that people are doing. It starts with the accelerated development of the antivirals to kind of blunt the broader exposure or impact of the virus, but as we know from a long history with vaccines that isn’t going to protect everybody.So, if you look at people that get the flu vaccine every year; some years, it works better than others; and other years, it doesn’t work as well. It leaves a lot of people exposed. And many of those patients, even though they’ve been vaccinated, go on to develop severe complications. I think the recent health statistics that people refer to is that every year, despite our best efforts, there’s still about 30,000 to 40,000 people on an average year that are typically dying from the flu.And again, I think, I’m not going to comment specifically on Regeneron’s approach or any other specific anti-inflammatory approach, but I think that really what people are trying for is developing vaccines, hopefully some of those will prove to be highly effective against COVID-19. The next is to basically develop the antivirals or even potentially anti-inflammatories that can be administered relatively early to stop the progression in the cascade of that intense pulmonary inflammation that is pushing the patients into severe or critical illness. And then there’s the spectrum on the more severe end of things, which is really where we think we can have a role.Look, we’d love it, if things are being developed that blunts the progression of many of these patients into severe pulmonary distress or ARDS that would be a victory for everybody. However, history teaches us that there’s probably still going to be a meaningful gap. In some case, patients are going to progress and unfortunately, a lot of these patients might be individuals that have other conditions or comorbidities or things that make them highly susceptible to this type of pulmonary infection and they’re going to be very susceptible to progressing to severe pulmonary inflammation in ARDS.And I think that, again, it’s about creating a line of defenses and therapeutic interventions or other things that can really put us in the best position to minimize it. Ultimately, if MultiStem were used in conjunction with something else, where we could drive that mortality rate down to zero and offer up the potential for everybody to be able to recover, that would be a fantastic outcome for all of us. But anyway, I hope that, I hope that answers your question and kind of makes the point.

[Chad Messer:]

No, definitely. Thanks. I appreciate that perspective and obviously, a highly important work you guys are engaging in there. I apologize for maybe, a more naïve question and I know you did talk about this a little bit, but I’d never come across a highly relevant classification that you were saying you received. Could you maybe, just try to repeat and dumb down a little bit more what that means for MultiStem specifically moving towards some sort of approval or recognition regulatorily of COVID?

[Gil Van Bokkelen:]

Yes. So that’s not a regulatory designation. That is a designation that was used as part of the classification process by BARDA and the other agencies that are part of the CoronaWatch task force. And so as they’ve done in tack watch, which is kind of the historical nomenclature that they used for evaluating technologies for various different areas of interest or relevance for BARDA and some of the other agencies that are involved. essentially, you should just think about it as the following. There are things that, so they undertook a structured series of presentations and this took place over a number of weeks, where one section was focused on diagnostics and another was focused on vaccines and another was focused on antivirals and another was focused on therapeutics and other sections or sessions that were focused on development of other technologies that might have relevance.And of course, some of these technologies are being talked about in terms of how do we scale it up to provide support in some of the areas, where the public health agencies kind of feel like we’re undersupplied or maybe, we don’t have adequate solutions for some of the things that are being done. So, the basic classification system essentially ranges from little or no relevance to moderate relevance to all the way up to the category that we were recognized in, which is highly relevant. And again, that’s the highest classification you can get. Basically, this is just a step in the process, but I think if that positioned us very well for what we intend and are committed to doing with BARDA, which is to see this all the way through the NIAM and work with them and other health agencies to make sure that we can be in a position – a strong position to advance our technologies in an efficient way and ultimately, make them available and deliver them to patients ultimately, but also agencies that are responsible for helping to expedite that in the event that there is a widespread outbreak or an occurrence of another event, where they need something like this, okay.So again, there’s no regulatory connotation associated with that. the regulatory connotation that I think is the most relevant is our fast track designation, which we had received from the FDA a few months ago. It’s more of a systems and a process determination, which I think puts us in a good position.

[Chad Messer:]

All right, well, again best of luck with that important work. I appreciate the added clarification.

[Gil Van Bokkelen:]

Yes. Thanks, Chad.

[Operator:]

Your next question is from Jason Kolbert with Dawson James. your line is open.

[Jason Kolbert:]

Hi Gil, God bless America, very trying times. I wonder that if the number of people get infected – that could get infected and the system does get “overrun.” What would it take for BARDA or the U.S. government to initiate a request to start working with Athersys in MultiStem? There must be some kind of plan in the works. Is that possible?

[Gil Van Bokkelen:]

Well, I can look, it’s a great question, and I think it’s important for people to take a step back and see how much has already happened at the federal level just in the past few weeks. Again, I walked through kind of the timeline and how quickly things have progressed. But one of the misconceptions, which I felt was really important for us to address is, I’ve heard some of the media and other folks out there that have said, well, we didn’t move fast enough, and some of the agencies didn’t actually, they weren’t on top of it. I can tell you in the case of BARDA in particular, but also some of the other agencies that had been involved in this that nothing could be further from the truth. They were on top of this from the very, very early days reaching out, not only to us, but other companies that they thought might have technologies that could play a role in helping bolster the national strategy and the national defense against these types of events.And I think that, look, there’s a process that they go through, but I can honestly, say it was not even two weeks ago. It was only about a week and a half ago when the federal government passed an unprecedented amount of funding or authorizing an impressive amount of funding, $8.3 billion to basically support the accelerated development of a range of things and capabilities. And I think that they’re moving very quickly on that front in addition to all the other things that they’re doing. So, we’re basically, Jason, and I know you recognize this. We’re kind of an uncharted waters right now, in the sense that I don’t think there’s ever been a time in the history other than maybe, during World War II or something like that, where we had such sweeping restrictions in terms of travel restrictions or other things that were limiting people’s ability to do a lot of the things that we were narrowly take corona.So, I think that the analogy that was used in the briefing the other night, which is this is the early innings of this thing and people have to – and I’m actually quite gratified like a lot of people to see that our government is capable of working together in a bipartisan manner and take steps to really focus on putting in place a number of different capabilities and accelerating things, so that we can address this in the most effective way possible. It’s going to be uncomfortable, at least for the next few weeks, and it’ll probably still be a little bit of – it’ll be a little uncomfortable beyond that. but I’m actually like a lot of people, I think we’re doing the right things and we’re doing it pretty rapidly and we just have to continue to work together. And I’m confident that we and other groups that interact with BARDA and some of the other agencies involved in this are going to be in a position to maximize the impact no matter what the tactics are or what the ultimate specifics are of how we do that.

[Jason Kolbert:]

Gil, I just want to put this a little bit more, which is when I look at what’s going on in Italy and when I see some of the very, very early experimental trials going on in China, and I know you’ve been very heavily involved in China. I also know as you know for many personal reasons that there’s a lot more going on in Japan than the Japanese government is saying. And I know you and Healios are very connected there. is there – is an opportunity is the wrong word, but I mean, clearly those countries and others around the globe are going to need help. It’s not just a U.S. problem. So, I’m just wondering whether you’ve had any talks outside of this country, even in Israel, let’s say, or what is the international interest look like?

[Gil Van Bokkelen:]

Yes. So, I’m not really going to comment on that today, but I think your line of thinking is absolutely correct, which is – what, this isn’t just the problem here in the United States. Frankly, the impact here has been less than it’s been in other countries that are scrambling and are a bit desperate. I do think that we’re going to see some unprecedented mobilization and activities that are focused on trying to address this and it’s going to happen internationally. And I think that’s a good thing. Look, one of the things that we should be proud of as a country and in a scientific and medical community here is a lot of the medical innovation and the technological innovation that is going to have a major impact, not only here in North America, but in other places around the world has come from things that have started here in the United States.We still lead the world in biotechnology and biotechnological innovation on many different fronts. It’s not that other countries aren’t doing any – aren’t doing things or doing things that are important. They clearly are. But the reality of it is, is that companies and researchers here in the United States, I think are going to have a lot to offer and will have a meaningful impact as we all work together to try and get things under control and address this in the most effective way possible.The specifics of that will become visible to everybody over time. It’s going to take a lot of additional work and there’s a lot of agencies and people and organizations that are working together. We’re in discussions about how we might be able to do that. And so I think it’s – people should be paying attention to it and it’s good that a lot of people are, but the reality of it is that it’ll become more transparent when it’s appropriate for that to happen.

[Jason Kolbert:]

Gil, I’ve been talking a lot about the ARDS data and about the value proposition, which is that they’re – are, in my opinion, no, very few adverse events, side effects of very de minimis risk when we talk about regenerative medicine and specifically, this type of cell therapy. So, it’s very clear to me when I see kind of vaccine companies and their valuation spike, and it’s unlikely they’ll have a product for a long, long time, a year out of the time window if this pandemic and I see the value disconnect in regenerative medicine and I just find it baffling. And I can tell you as someone who studied the science and who’s really evaluated your data, I see a dramatic valuation disconnect right now, and I want you to know personally, I really appreciate the work you’re doing and just keep going.

[Gil Van Bokkelen:]

Well, thank you very much. And speaking on behalf of the entire team here, we really appreciate your support and the support of other people that are listening in on the call today or that may be listening to the webcast either live or a bit later. It means a lot to us. We’ve received a lot of thoughtful e-mails and in addition to the question that we’ve been inundated with, but we perceived a lot of really positive feedback and people understand why our commitment to doing the things that we are doing is so important. And I think it’s really illustrated by the current situation that we all find ourselves in, but I think it’s going to become even clearer as we continue to move forward, why that’s so relevant and why it’s so important.

[Jason Kolbert:]

I’ll do everything I can to help people understand the value proposition here. Thank you.

[Gil Van Bokkelen:]

Yes, thank you.

[Operator:]

Thank you. That concludes our Q&A session. I would now like to turn the call over to Dr. Van Bokkelen for closing remarks.

[Gil Van Bokkelen:]

Thanks, Chris. I appreciate that and I’d like to thank everybody for listening into the call today and for your continued support. As I mentioned, we remain fully committed to achieving our goals and we look forward to making additional announcements and providing additional updates as we move forward. Thanks, again.

[Operator:]

ladies and gentlemen, this does conclude today’s conference call. Thank you for your participation and you may now disconnect.