Athersys, Inc.
Q1 2015 Earnings Call Transcript

Published: 12 May 2015

[Operator:]

Good afternoon. My name is Carol. And I will be your conference operator today. At this time, I would like to welcome everyone to the Athersys’ First Quarter 2014 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Ms. Laura Campbell with Athersys, you may begin your conference.

[Laura Campbell:]

Thank you, and good afternoon, everyone. I’m Laura Campbell, Vice President of Finance 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 or you may call Matt Celesnik at 216-431-9900 to receive it via email. Gil Van Bokkelen, Chairman and Chief Executive Officer; and B.J. Lehmann, President and Chief Operating Officer will host today’s call. The call is expected to last approximately 45 to 60 minutes and may also be accessed at athersys.com. A replay will be available two hours after the call’s conclusion and access information for the replay is 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 disclosed 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 May 11 of 2015. 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’d like to turn the call over to B.J. Lehmann. B.J.?

[William Lehmann:]

Thank you, Laura. Good afternoon and welcome, everyone. I’m B.J. Lehmann, President and Chief Operating Officer at Athersys. I’ll briefly review our first quarter 2015 financial results and then turn the call over to Gil for a corporate update, followed by a question-and-answer period. For the first quarter of 2015 revenues were $731,000 compared to $707,000 for the same period of 2014 and are comprised of grant revenues and royalties from our collaboration with RTI Surgical. The $10 million upfront payment from Chugai Pharmaceuticals associated with our recent collaboration to develop and commercialize MultiStem treatment for ischemic stroke in Japan which we announced in March is recorded as deferred revenue at March 31, 2015 and in accordance with our accounting policy for multiple element arrangements. Research and development expenses were $5.7 million in the first quarter of 2015 compared to $6.2 million in the prior year first-quarter. The difference reflects decreases in clinical and preclinical development cost and patent legal fees and sponsored research, which were partially offset by increases in personnel costs and stock-based compensation. General and administrative expenses were $1.9 million in the first quarter of 2015 versus $1.8 million in the comparable period in 2014. The change in the fair value of our warrant liabilities resulted in expense of $5.6 million in the first quarter of 2015 compared to expense of $4.1 million in the same 2014 period, reflecting primarily the impact of changes in our share price. Net loss for the first quarter of 2015 was $12.5 million compared to a net loss of $11.5 million for the first quarter of 2014. The increase in net loss reflects $496,000 reduction in loss from operations as offset by the impact of the $1.5 million increase in expense from the change in fair value of our warrant liabilities. Net loss per share was $0.16 per share in the first quarter of this year compared $0.15 per share in the prior year period. It’s important to note that a reported net loss of $12.5 million for this quarter includes non-cash expenses of $5.6 million related to the change in fair value of our warrant liabilities and $800,000 related to stock-based compensation aggregating $6.4 million of non-cash charges. Further, our reported net loss does not include any impact from the Chugai collaboration, since all of the revenue is deferred as of March 31, 2015. Similarly our reported net loss per share of $0.16 for this quarter includes and eight cents per share impact from the $6.4 million of non-cash charges and also excludes any revenue from Chugai collaboration. As of March 31, 2015, we had $35.5 million in cash and cash equivalents compared to $26.1 million at December 31, 2014. During the first quarter of 2015, cash provided by operating activities was $1.1 million compared to cash used by operating activities of $7.3 million in the first quarter of 2014. Included in the 2015 first-quarter cash from operating activities was $8 million of the $10 million upfront payment from Chugai associated with the collaboration in license agreement. $2 million of the upfront amount was temporarily withheld by the Japan taxing authorities and will be refunded to us under the U.S. and Japan tax treaty. This amount is recorded as a current receivable on our balance sheet. Under the terms of the agreement we have the potential to receive an additional $45 million of development-related milestone based payments including $7 million this year following Chugai’s review of the data from our Phase 2 ischemic stroke study. Additionally, there are approximately $150 million of future sales milestone based payments based on current exchange rates. We’re also eligible for royalties on that sales starting in the low double-digits and increasing incrementally to the high teens depending on net sales levels. Finally, we would receive payments for products supplied to Chugai. Cash provided by financing activities was $8.3 million in the 2015 first quarter compared to $20.5 million in the prior year first quarter. While both periods included warrant exercises and proceeds from the use of our equity facility, the 2014 first-quarter also included an equity financing. With that, I like to turn the call over to Gil for a corporate update. Gil?

[Gil Van Bokkelen:]

Thanks, B.J., and good afternoon, everyone. Our company was founded on the concept of developing innovative technologies and novel treatments to address areas of serious unmet medical need. We are committed to helping the patient first and foremost, as we pursue the development of safer and more effective treatments that have the potential to improve clinical outcomes, enhance patient quality of life, and increase the efficiency and effectiveness of healthcare. In achieving these things we believe we will be able to create substantial value for our shareholders. From a technology perspective, our major focus is in the area of regenerative medicine, which is regarded by many as an area of tremendous promise. Over more than a decade, a growing body of research has shown that cellular therapies have the potential to advance medicine across a range of areas and in ways the conventional treatment approaches have been unable to achieve. As the field of regenerative medicine has grown and advanced, it has generated unexpected findings of the remarkable capacity of the human body to heal and repair itself, and also about the limits of the human body, especially as we age. The world is in the midst of an unprecedented transition which is being caused by the dramatic expansion of the elderly segment of the global population. While we’ve discussed this trend previously, it’s worth reminding everyone of just how large a transition is occurring and what the ramifications will be on healthcare systems around the world. It is this powerful trend which is driving our focus on developing new treatments that have the potential to address specific areas of unmet medical need that are projected to grow dramatically in the years ahead, as the elderly population substantially expands in size. In order to understand the magnitude of the demographic transition and the corresponding healthcare challenge and commercial opportunity, it’s worth examining some numbers. Within the next several years, the number of people over age 65 will exceed the number of people under the age of five for the first time in recorded history. According to the organization for economic cooperation and development analysis, the expansion of the global elderly population will have a significant effect on healthcare systems, quality of life, and long-term economic prosperity. Globally, the segment of the population over the age of 65, is projected to double in size between the years 2010 and 2030, and national demographic profiles will be meaningfully altered. The trends in Japan, the United States, and the European Union are particularly concerning. In Japan, individuals over the age of 65 already represent about 25% of the population. In the next few years, we’ll represent more than 30%. Perhaps even more concerning, the segment of the population over the age of 80 in Japan will more than double within roughly two decades from 6% of the population to more than 14%. In the United States, the group over the age of 65 is projected to grow by more than 80% between the years 2010 and 2030, representing an increase from 40 million individuals to more than 72 million people in only two decades. In Europe, meaning within the EU 27 countries, this segment of the population will increase to more than 125 million people by the year 2030. This massive and unprecedented increase in the number of elderly is not simply a notable and interesting trend. It has real ramifications for global healthcare systems. Healthcare economic data tells us that, as we age, we become much more susceptible to a range of aging related diseases and conditions that are expensive and resource-intensive to deal with. Data from the National Center for Health Statistics here in the United States shows that elderly cohorts spend 4 to 10 time as much on an annual healthcare related expenses in comparison to young healthy cohorts. This is a direct reflection of the fact that many aging related diseases and conditions take a significant toll, in terms of adversely impacting quality of life, the direct economic costs incurred, and the escalating need for institutional support for homecare for individuals that are partially or extensively disabled as a result of deteriorating health. There is another trend occurring it is also troubling. The growing gap between the demand for healthcare service providers and the supply of qualified providers, both in terms of physicians and skilled nursing staff. Healthcare resources are inherently limited, both in terms of the available financial resources that maybe allocated to paying for the care that is needed and the skilled medical staff necessary to provide the appropriate care. According to the Association of American Medical Colleges, there was already a shortage in the number of primary care and specialty physicians in the United States. The shortfall projected to grow to more than 91,000 physicians nationally by the year 2020 and more than a 130,000 physicians by the year 2025. In addition, the Bureau of Labor Statistics for the U.S. government has projected a national shortage of over 1 million nurses in the United States by the year 2022. If nothing else changes, limited healthcare resources and increase demand will eventually result in mounting challenges in patient access to care and escalating costs, creating an undesirable trend towards rationing of available resources. The shortage of physicians and nurses is also occurring in Japan and the European Union. According to the Ministry of Health, Labor and Welfare, hospital in Japan are already 24,000 physician shy of the estimated clinical need. In the European Union, the European Commission projects that there will be a shortage of 230,000 physicians, and 590,000 nurses, by the year 2020. It is projected that this will result in an estimated 14% of needed care not being provided simply because there are not enough caregivers to provide it. So on both economic and human terms, the expanding aging population is going to have a dramatic impact. In order to address the projected gap and caregivers in the care provided and avoid a scenario of healthcare shortages and de facto, it will require substantial increase in the capital and human resources allocated to providing care, or alternatively technological innovations that enable us to improve clinical outcomes and the efficiency of overall care. These problematic trends create substantial opportunities for innovative companies that have the vision, technology, and relentless determination to address them. By extension, it also creates meaningful opportunities for investors. We believe that there are several key areas where our technologies can address substantial unmet medical need. These include the neurological, cardiovascular, and inflammatory and immune areas, as well as certain other areas. Despite the risks and obstacles, we are unafraid to pursue solutions for these challenging clinical areas. Based on years of research conducted with leading investigators across a range of disciplines and a growing body of clinical and preclinical data, we are confident our technologies can and will provide effective and practical treatment solutions, and as a result will enable us to create substantial value, while we meaningfully improve clinical outcomes and patient quality of life. Recently we announced preliminary results from a Phase 2 clinical trial we are conducting to evaluate the safety and efficacy of administering MultiStem to patients that have suffered an ischemic stroke. Stroke is more than just a medical problem. It’s a healthcare infrastructure and social problem that is having an impact on a global basis that is projected to grow in the years ahead. This ongoing study represents our first clinical trial evaluating the administration of MultiStem to ischemic stroke patients. As we explained on the call two weeks ago, the initial results from the trial show that MultiStem exhibit the consistent safety profile and also suggested it has the potential to substantially improve clinical outcomes for patients if it is administered within an appropriate timeframe. As we heard from two distinguish clinical investigators involved in the study, we are learning some important lesson from the ongoing trial. Specifically, we believe the data shows that early administration of MultiStem can provide a meaningful benefit to patients who are treated within 36 hours of the stroke. The lesson that earlier treatment is better is not a new concept. It is the same lesson learned from early clinical studies conducted with the current standard of care tPA more than 20 years ago. While these early studies were initially viewed as failures since they did not meet their primary endpoint, analysis of the data suggested that if tPA was given early enough, they could provide a meaningful therapeutic benefit with a reasonable risk profile. The lessons learned from those initial studies were then applied in subsequent clinical trials that ultimately led to the approval of tPA. Today, it is considered as the standard of care for many ischemic stroke patients, despite the fact that it may only be administered within the first several hours after an ischemic stroke is occur. And it is widely recognized that there is an elevated risk of cerebral hemorrhage among patients that receive treatment with tPA. We believe that the initial results from our ongoing study indicates several important differences between the current standard of care in what MultiStem appears to be capable of. Put simply, these include evidence of the superior safety profile, a much longer and more practical window of therapeutic intervention, and a substantial therapeutic benefit for stroke patients with meaningful deficits when MultiStem is administered within 36 hours or less. In terms of safety when evaluating all patients enrolled in the trial, we observed that administration of MultiStem corresponded to a favorable safety profile and was not associated with any infusional toxicities or allergic reactions or have abnormal patterns and safety labs or vital signs. Furthermore, administration of multi-stem was associated with significantly lower mortality and life-threatening adverse events, as well as fewer pulmonary events and infections. In terms of the relevant time window for administration in contrast to the current window of 3 to 4.5 hours for tPA, depending on the relevant regulatory jurisdiction, we observed that the relevant time window for administration of multi-stem appears to extend out to approximately 36 hours. While the 3 to 4.5-hour window afforded by tPA is only sufficient to enable treatment of approximately 10% or less of ischemic stroke victims, we’ve been advised by stroke specialists in Japan, Europe, and the United States for the treatment window that extends out to the 24 to 36-hour timeframe suggested by the results from this initial study, is sufficient to reach the vast majority of stroke patients, perhaps 95% or more. While the initial assessment of the results was disappointing and that we did not see clear evidence of benefit has reflected in the primary endpoint and component secondary endpoints in the pre-specified efficacy population as we’d hoped. We did see highly suggested indications that administration of multi-stem was, in fact, providing benefits. When considering all patients enrolled in the study, we saw encouraging signs of the impact of multi-stem treatment. In addition to the reduced mortality fewer life-threatening adverse events and fewer infections, a higher proportion of patients achieve an excellent clinical outcome. There was a trend and faster recovery, and hospitalization times are reduced. Examination of initial cellular biomarkers also provided mechanistic support for our therapeutic hypothesis. Our pre-specified analysis of circulating immune cells show that the levels of CD3 positive cells were substantially lower in MultiStem treated patients. When we evaluate a patient that receive treatment with MultiStem within 36 hours, excluding the limited number of patients that receive both tPA and mechanical reperfusion, we saw even clear evidence of clinical benefit. These include a statistically significant difference in patients that achieve an excellent clinical outcome, meaningful improvement in each of the three clinical rating scales, the NIH stroke scale, Modified Rankin Scale, and the Barthel Index and a statistically significant improvement using a pre-specified shift analysis of patients utilizing the modified Rankin Scale. We also saw very strong odd ratio use what utilizing the global stroke assessment, the pre-specified primary endpoint for the trial, which combines the three clinical rating scales used, and a statistically significant reduction in average hospitalization time for patient of 3.6 days, as well as shorter average duration of time and intensive care hospitalization, as well as improvements in other areas. In short, we believe this study demonstrates a very attractive risk-benefit profile for multi-stem and then also illustrates that if it is administered in the appropriate timeframe, it has the potential to deliver substantial benefits to patients that have suffered an ischemic stroke. It is important to remember that while we have generated years of data from preclinical studies with independent researchers in a range of neurological injury and disease models, this study represents our first trial in ischemic stroke. Like the early trials with tPA, we believe there are important lessons being learned from this trial. The response from leading stroke specialists has been very positive. They understand that while early studies frequently generate unexpected findings, there is widespread acknowledgment and appreciation of the concept that early intervention is likely to be better. There was also recognition that extending the effective treatment window out to 24 to 36 hours with a therapeutic intervention that is both safe and that can help a meaningful number of patients would be a major accomplishment, one, it would potentially make it possible to treat the vast majority of stroke victims, including those which arrived at the hospital too late for tPA or mechanical reperfusion, and many of which were left with substantial and permanent disability in the aftermath of the stroke. We intend to apply what we learned from this clinical trial and subsequent studies. If the results for patients receiving MultiStem therapy within 36 hours or confirmed in future trials, there is no question in the minds of many international clinical experts that we have spoken with over the past several weeks that it will have a dramatic impact on stroke care, as we know it. It will also create substantial value for our shareholders. Currently, we are focused on completing additional analysis and preparing for meetings in the coming weeks with clinical experts and regulators to map out the next steps in the clinical development process. We’ve already heard from many clinical experts that have expressed their enthusiasm and requested the opportunity to participate in the next trial. This past weekend, we met with a group of leading stroke specialists in Japan. We reviewed the interim trial results with them and sought their input and feedback on a number of important issues. Many of these investigators stated their desire to participate in the next clinical trial. A few days ago, we also met informally with representatives of the Ministry of Health, Labor and Welfare in Japan and senior leadership from the PMDA, who expressed their encouragement and support. In short, the enthusiasm for the results from this trial is very high. Clinicians understand that a consistent and favorable safety profile coupled with encouraging evidence of a meaningful therapeutic benefit and the potential to extend the treatment window to a clinically practical timeframe is a powerful combination. In the weeks and several months ahead, we will continue to prepare for the next phase of clinical development activities, and continue our dialogue with our partner in Japan, Chugai, and we will provide updates to our shareholders when it is appropriate to do so. In the meantime, we also continue to move forward with other clinical programs. We are actively engaged in site initiation and launch activities related to our Phase 2 clinical trial evaluating the safety and efficacy of MultiStem administration, the patients that have suffered serious heart damage, as a result of a myocardial infarction, and preparing for the initiation of a clinical trial evaluating the administration of MultiStem the patients that have been diagnosed with acute respiratory distress syndrome. Both of these conditions represent serious areas of unmet medical need, and are also significant commercial opportunities. But these are not the only opportunities we are pursuing. We continue our efforts in other neurological indications where we continue to garner meaningful grant support, conducting additional research and completing necessary preclinical work enabling the subsequent advancement of programs in the clinical studies. Based on the progress of the past two years, we recently were notified of the award of $900,000 for the final phase of grant funding, which has been supporting our work in traumatic brain injury, and we recently received a perfect score on an SBIR grant application from NIH reviewers related to our work in acute spinal cord injury. These achievements reflect the high quality of the science here Athersys, as well as the potential of our technologies, and also reflect the outstanding commitment and capabilities of the team here. We also continue to make progress in ongoing partnering discussions with other companies, and are actively evaluating new partnering opportunities in several areas. With respect to our collaboration with Pfizer in the inflammatory bowel disease area, based on the ulcerative colitis study results announced last year, the fact that further investigation of MultiStem therapy for ulcerative colitis for other forms of inflammatory bowel disease would require multiple studies and meaningful additional investment in a very competitive area. And that it has several other promising programs for IBD in its internal portfolio. Pfizer has notified us of its intention to no longer invest in the program and is elected to return the license rights to us. While we are disappointed in Pfizer’s decision to discontinue our partnership to develop MultiStem for the treatment of inflammatory bowel disease. We remain optimistic about the potential clinical relevance of the technology in many areas. As we’ve stated previously, our near-term emphasis will continue to be on evaluating conditions, where we believe acute intervention with MultiStem can make a meaningful difference in approving clinical outcomes for patients in areas, where there are some substantial unmet medical needs, and where we believe there are significant clinical and commercial opportunities. In summary, despite the fact that the broader markets has failed to recognize or understand our recent progress. We remain very optimistic about the future. We will continue to execute against our strategic plan to develop our portfolio, and work to achieve our goal of establishing Athersys, as a leading biopharmaceutical company. With that, we’d be happy to take a few questions.

[Operator:]

[Operator Instructions] Your first question comes from the line of Jason Kolbert from Maxim. Your line is open.

[Jason Kolbert:]

Hi [indiscernible] thanks for the rundown. I’d like to segment the two parts. One part focusing on stroke and just really understanding, since the last call you made, you are still going through the data. What’s the next step in terms of talking with regulatory agencies and moving forward with the Phase 2b trial? And the other thing is I’d like to pick up a little bit, you were discussing, Chugai, where is Chugai, I’m sure, it’s still early days for them, but how will they factor into the next clinical program? And then the last thing is, I’m surprised by Pfizer’s decision. They’ve been with you for so many years and such a long time. Was this only really because of the IBD trial? Do they still have an option to come back and into other programs, or are you now free to really seek out any partner in any direction from MultiStem in any indication? Thanks.

[Gil Van Bokkelen:]

Great. So let me address the first question related to the stroke and next steps with respect to regulatory authorities, and what we’ve been doing since the last call. So one of the important things we’ve been doing is continuing to engage with and interact with leading stroke specialists around the world and get their feedback on a number of questions related to the next phase of clinical development. Obviously this relates to things like modifying our inclusion exclusion criteria, applying lessons that we’re learning from the data that we’ve already anlayzed. I mean, clearly we want to emphasize in the next phase of clinical development a shorter time window or, I guess, I should say a time window that extends out to potentially 36-hours for intervention with MultiStem, consistent with the data and the impact that we’ve seen from this current study. But there is also a number of fine points that we need to address with them related to potential design elements of this study and in fact that was a lot of the discussion that we had with the stroke experts in Japan that we met with just over the week. And again, I think that there is very good understanding and appreciation of this concept that earlier is better and that’s a notion that many people in the stroke field have been living with in acute neurological injury field, they’ve been living with for many, many years. So that’s something that I think they are very, very comfortable with. In terms of the next steps with regulatory authorities, what we hope to do in terms of our interactions with these experts is refine as many things as possible to develop a perspective and then come to the regulatory agencies in Japan here in the United States and also in Europe, with a proposed plan. And this will probably happen in informal discussions first with regulatory leaders. And then be followed-up by more formal discussions once we’ve actually iterated and gone through a number of issues related to how we would propose to design the study. And we have a variety of different design options that we can pursue and we also have options in terms of how we approach things geographically. And I’m not going to walk through all the scenarios today, but you can imagine that we might do something in Japan, we might do something internationally; we might do something in the European Union and in the United States. That’s distinct from what we do in Japan or we may kind of roll-it all up into one study or couple of different efforts. And that depends on a number of different factors, which we’re going to have to sort out over time, which leaves me to my next point about Chugai. So we also met with the team from Chugai last week, when we were in Japan. Again, those conversations are very constructive. Chugai is still doing a lot of analysis with their team as are we, we’re both defining specific points of consideration and questions and things that we want to dig into a little bit more deeply and I think that process is going to take a little while as we’re sorting through all the data. It really is kind of a large amount of data that we’re going through and we’re trying to do it systematically as possible while we address points that are important both the Chugai as well as the clinical experts we’re interacting with. And things that we’re anticipating will be questions that the regulatory authorities may have as well. So I think that over the next several months we’re going to get greater clarity on what that path looks like and our goal is to really have it pretty well mapped out by the end of this summer. In terms of Pfizer, yes, we were disappointed. And I think that this kind of illustrates one of the pitfalls of working with a large company that has multiple programs in any one particular area. We’re not just competing with the current standard of care; we’re competing with the other programs that that company may be supporting. And it’s no secret in the pharmaceutical community or among people that have done partnerships with these types of companies that when you got an outside program and inside programs there is always going to be a certain amount of tension that revolves around those various efforts if you will. Pfizer doesn’t have any ability to opt back in. When we regain the right to this, it belongs to us and we can do whatever we want. And it gives us the complete freedom and latitude to engage in partnerships in the inflammatory and immune disease area or specifically the IBD area, if we wanted to do that, or any of the other areas that we would like to focus on. Again, as I mentioned in my comments, we really have a heavy emphasis right now in focusing on acute intervention first, because we think that’s where we are the most likely and it’s not just likeliest, but it is also kind of in a time with respect to the time of the studies and the cost of the study. That’s where we think we’re going to get the biggest bang for the buck in terms of being able to deploy our resources against studies in an efficient way. So that we can get the clear indications of providing of benefit or not as the case may be.

[Jason Kolbert:]

Got it, Gil. Thank you very much for the rundown. We look forward to additional datasets as you have a chance to talk with regulators and understanding what the design and global nature of the follow-up stroke trial might look like. Thanks

[Gil Van Bokkelen:]

Thanks, Jason.

[Operator:]

Your next question comes from the line of Tracy Marshbanks from First Analysis. Your line is open.

[Tracy Marshbanks:]

Thanks. Thanks for taking the questions and good afternoon. A couple questions maybe not on stroke, just to flesh out some of the history here, so as the Pfizer program and study winds down, were there any additional learnings, understanding biology that was uncovered that you can now use on a go-forward basis to your benefit. We just sort of never wrapped it up and if you would could you just kind of put a wrap on it as far as you know what you got out of it besides of money?

[Gil Van Bokkelen:]

Yes. I mean, I think we got some encouraging hints in science of activity when we administer MultiStem, I mean as talked about on prior calls, there were some indications that when we provided a single dose MultiStem to patients that were suffering from this longstanding chronic disease indication, that we were seeing indications of activity out to four weeks or so, which is one of the points that we use to evaluate the patient. But by the time we got out of the 8-weak assessment, we weren’t seeing anything or we weren’t seeing anything meaningful. And so I think that that ultimately let us to the perspective that in order to really assess this in the way that I think would be required, we would really need to do a study where we’re looking at multiple dose administration and perhaps even several different dosing regimens to try and gauge, what’s the right approach to be able to achieve a more robust therapeutic effect and something that is more durable as well. In terms of the biomarker analysis, I mean, again we saw some things that were suggestive, some other things that didn’t really appear to reinforce any substantial activity at least based on those biomarkers. Some of the biomarker analysis was actually never completed or fully analyzed and so I think that remains something that we’d like to pick-up at some point. As part of actually reacquiring the rights to the program will actually get custody of the samples and the information, so that we can continue to evaluate some other things as we have resources and the bandwidth to be able to do that. But for now, I think that the results that we saw from the study have obviously made this a lower priority for us and obviously for Pfizer, which ultimately led to their decision to return the rights back to us. But we do have latitude to apply whatever we’re learning from other programs or from future research programs or from the subsequent biomarker analysis if we wanted to, to be able to decide what to do down the road.

[William Lehmann:]

Yes, I think, Tracy, one other thing to note is we had a couple of other parallel activities underway as part of the Pfizer collaboration. That was a very robust kind of nonclinical research program and really focused on mechanism. I think we learned a lot from that. We’ve actually published with some of the folks at Pfizer, and that’s given us some clues I think with respect to mechanism that’s applicable in a variety of different indications. Also we have parallel activity related to process development. And that is also going to benefit us with other programs as we move forward. So we do drive benefits and as Gil mentioned we get all the data back, we get tissue samples back, we get to marry all that up and understand that a little better. And we get to apply the learnings from this program into any of our indications. So we think it provides real value going forward as well.

[Tracy Marshbanks:]

Okay. Thanks a lot. Another - you’re going into much heavier clinical phase, let’s assume a stroke moves forward and maybe stroke moves forward clinically in multiple countries and geographies, AMI, ARDS. That’s a heavy clinical burden, but I’m thinking about sort of on the backside of supply, and logistics, and manufacturing, and compliance. Could you just update us? I know we’ve talked in detail at times, but where you stand on, if you will been able to deliver given that heavy clinical program and you know deliver sort of the off-to-shelf in multiple geographies?

[Gil Van Bokkelen:]

Well, that’s kind of three questions rolled up into one. I’ll take a first stab at in hen I’ll let B.J. add color. So one, I think it would be, it’s premature to project right now just exactly what the next phase of clinical development or as you put it the significance of that burden, what that’s actually going to be, because I think we have a number of interesting design options and choices about what we might elect to do next. I mean, one of the things that was actually encouraging from this study is that with a fairly modest number of patients, we saw what certainly appear to be highly suggestive of a meaningful clinical impact, which I think gives us optimism that we don’t necessarily have to design an enormous study in the next phase of clinical development to be able to achieve whatever our goals might be. But again, I think it’s a bit premature at this point to kind of project out what exactly that next phase of clinical development might be. It’s also interesting that the jurisdictional requirements might be different depending on where we decide to emphasize things in that next phase of clinical development. They might be a little bit different in Japan or in certain other jurisdictions or we might be looking at where accelerated approval opportunities might be a possibility. With respect to the process development that B.J. had referred to a moment ago as it links to our ability to achieve the ability to supply meaningful amount of product whether it would be for clinical studies or ultimately for commercialization. I mean frankly, I think that’s one of the great hidden successes, if you will, of what we’ve accomplished here at the company over the past several years. We put a lot of effort and energy into optimizing and refining the manufacturing approaches and the process development side of things, so that we can achieve things on a better more cost-effective scale if you will. That ultimately I think will provide substantial benefits to us as well as to our partners. In terms of the thawed and administration aspect of it, that is something that I am very confident in. I mean, we still have a little bit of additional work to do in terms of doing stability studies in various vial formats. But the reality of it is that we already using a thawed and administer formulation of the product in our myocardial infarction study. And ultimately we think that’s going to be a key competitive advantage in the - not only in terms of actually running clinical studies but also in the commercialization realm. Because I think that what we’ve referred from clinicians over and over again is they really prefer simplicity and a product profile that is associated with ease of use, ease of administration. And frankly, the thawed and administration profile that we’ve been committed towards and are actually now utilizing in clinical trials, is something that were very proud of, because I think that it is something that is exactly what clinicians are actually looking for ultimately and it’s going to represent something that is adopted because it is easy to use and it doesn’t require highly specialized facilities or highly specialized personnel to handle the product or deal with the product. It’s something that can be done as David Hess was saying in the call we had a couple of weeks ago. It can be done in virtually any hospital you can think of. And I think that’s a key advantage and is something that we’re really committed to delivering.

[Tracy Marshbanks:]

Thanks so much.

[Gil Van Bokkelen:]

Thanks, Tracy.

[Operator:]

Your next question comes from the line of Ted Tenthoff from Piper Jaffray. Your line is open.

[Ted Tenthoff:]

Great. Thank you very much, and I apologize if I ask some more quick questions. I have been sort of juggling between calls. But back to stroke is a primary driver and obviously precious dataset. Where are we now? And what are kind of the next steps? But I’m sure you’re going to be repeating yourself, so I apologize for that, but just to reinforce where - what about the next step for stroke and which we’d be anticipating?

[Gil Van Bokkelen:]

Yes. I mean the next - the near-term focus is really on interacting with the clinical experts in Japan, the U.S. and in Europe. As we’ve been doing over the past couple of weeks in particular, really beginning with the stroke conference in Glasgow, where David made his presentation and then continuing that discussion with the variety of different experts since then, and then more recently, Ted, I’m not sure you were on the call, when I was talking about it, but more recently with the leading stroke experts in Japan that we met with over the weekend. And getting input from them and perspective on them on a number of different issues that relate both to what we’re seeing from the current study but also about how to utilize that information and apply it towards the next phase of clinical development that we’ll be running. I think we’ve already gathered a lot of relevant information but we’re going to be continuing that process in the coming weeks, but we’re also moving forward with having informal meetings with regulatory agencies in Japan here in the United States, in Europe to discuss with them our thoughts on the next phase of clinical development. So that will happen informally first in a series of meetings in various jurisdictions and then that I’ll be followed-up with more formal interactions with the agencies as we really layout in a more definite way, in a more refined way, what we want to do in the next phase of clinical development. Obviously in parallel with that we’ll be continuing to interact with the team at Chugai and continuing to engage in other activities that relate to other people we might work with, in the next phase of clinical development.

[Ted Tenthoff:]

Okay, got it. All right, helpful. I look forward to more color on the path further.

[Gil Van Bokkelen:]

Thanks, Ted.

[Operator:]

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

[Steve Brozak:]

Hey, good afternoon, gentlemen. Most of the questions have been asked and answered, but there is one way of looking at this. And I’m kind of curious about, because obviously you do have this relationship with Chugai, you did have the relationship with Pfizer, and you’ve had relationship with multiple companies. And obviously, they all understand that your technology is significantly impressive, significantly important. What would you look for in let’s say the next partnership that you would approach and how would you try and put it together so that I’m not going to say you’re more in control, but that you have the ability to go out there and give your “first-hand” knowledge of MultiStem, what needs to be done and everything else along lines. Obviously, you got a remarkable relationship with FDA, but now I want to know more about with corporate partners going into the future and one follow-up after that, please.

[Gil Van Bokkelen:]

That’s a great question and I think we’ve learned a lot in our experience as of partnering with a range of different entities over the past decade or even a little bit longer than that. A partnership is more than just about the money it is obviously the economics of it and the potential for creating substantial values critically important part of the partnership. But I think a lot of it has to do with consistency of the vision and the depth of the commitment between the organizations. I mean, I will tell you that with Pfizer’s, I mentioned, there is the complexity that we weren’t just competing with the outcomes of the own study we were running, we were competing with internal Pfizer initiatives that have their own internal champions and groups that were lobbying for resources from the business unit and another thing, so that that creates a certain level of tension. Whereas if you’re working with a company that they look at you or look at us, as their gateway to success in a particular therapeutic area. I would say that that’s a slightly different commitment and frankly something that we favor because we want to be viewed as the appropriate gateway into a highly attractive and highly valuable therapeutic area with our technologies and we looked for those types of areas where we believe we can be first-in-class and best-in-class. And we want other companies thinking about us in the same regard. I think that we’ve had relationships in the past, some of which have worked out really well and others maybe not so much, but I think the common theme is, there’s got to be a good consistency of vision between the teams in the organization and there has to be a very, very strong level of commitment and advocacy within the company that is partnering with us, to achieve success. That’s absolutely critical. If you have a partner that might be distracted by multiple different initiatives in a particular area or maybe even ambivalent about some things and then not really sure that this is an area they want to get into. That creates kind of a bigger hill decline. And all things considered, I think we want to work with people that are really, really committed an enthusiastic and energized by what they think we can accomplish. And that’s really who we’re focused on in terms of our discussions at the moment with other companies that have that depth of commitment and can demonstrate it in a variety of different ways. The size of the company frankly is less important than the consistency of the vision between the two organizations and the depth of that commitment is deployed and - or is illustrated in a variety of different ways. Does that help?

[Steve Brozak:]

Yes. No, no, that’s exactly the type of answer I was looking at. Last question and I’ll hop back into the queue. Obviously, you’ve gone in front of the regulatory agency more than some large pharmas do and in the same period of time. Obviously, you’ve had results that were not what you’re looking for, but they did provide you with additional information. How would you describe, let’s say, for instance the next round of interactions you have with FDA based on what you know today in terms of the trials that you submitted the day that you got back and what would you say the take away would be from that in dealing with the FDA going to the future? And I’ll hop back in the queue. Thank you.

[Gil Van Bokkelen:]

Yes. I don’t really see it as so much an FDA question as the regulatory authorities that we’re dealing with, EMA in Europe, as well as FDA as well as PMDA, and even more jurisdictional entities like….

[Steve Brozak:]

I’m sorry, I’m just - talking about the regulators in general, obviously, FDA is synonymous for all the different agencies.

[Gil Van Bokkelen:]

Yes, I don’t think we really have kind of a defined perspective, yet. And so I’m not really sure I can answer the question as specifically as you want. I do think that - regulatory agencies in general are not going to tell us how to interpret our own data. I think what they will do is, they will give us points to consider as we’re thinking about the next phase of clinical development, no plan intended. They will ask questions that are meant to be thought-provoking. They will usually, if you’re headed into something that has registration or potential, we’re going to ask questions about the statistical approach that you intend to take, to be able to analyze the data. Our discussions in the past with regulatory authorities whether it would be the FDA or others that we’d engage with has tended to be very productive. We may always agree with them in terms of how they think about certain types of things. But I can tell you those discussions have been very constructive and very productive. And in general, I think it reflects not only our philosophy, but their desire to work with companies to come in with the right attitude and that are committed to the right things, first and foremost patient safety that that they are really willing to work with them and constructive way. And so we’ve engaged in lots of informal discussions with regulatory leaders, as well as formal discussions with regulatory leaders. And I think that our hope is that we’re going to be able to continue to do that and that we’ll see good consistency in terms of the response from regulators in each of them major jurisdictions that we care about. When I talk about the United States, I also include Canada in there. I mean, we’re really talking about North America. But it’s interesting that in a few different jurisdictions, they’ve created the opportunity for accelerated approval options or opportunities in ways that we find quite exciting, because it shortens the development path and the emphasis in each one of those areas is always on, first, if you can show us good, consistent safety, which I think we’ve been able to achieve across multiple different clinical programs and then it becomes what is the benchmark by which we’re going to be judged in terms of showing clinical impact, if you want to use one of these accelerated approval approaches. And we spent a lot of time examining options in different areas and we’re continuing to evaluate different options. And I think that there are some very interesting possibilities or even exciting possibility that we see out in front of us. But we still have a lot of work to do, and I think we want to make sure that we’re not taking any shortcuts or doing anything that we want to make sure that we’re developing a full sense of what the technology is capable of and taking the approaches that regulatory authorities think or prudent in our bowel, as we go to this next phase of clinical development, and that’s what we’re going to do.

[Steve Brozak:]

Like I said, I’m looking forward to the next phase of clinical development as is everyone else. Good luck. Thank you, gentlemen.

[Gil Van Bokkelen:]

Thanks a lot, Steve.

[Operator:]

The last question that we have time for today is from Christian Glennie from Edison. Your line is open.

[Christian Glennie:]

Hi, good afternoon. Just a follow-up on the - sort of quick ones on the last point in terms of potential timings of end of Phase 2 meetings with the FDA?

[Gil Van Bokkelen:]

Yes. So, thanks Christian. We’re already thinking about a timetable for one more following up with some of the regulatory authorities, we’re actually reaching out to them to schedule meetings. To a certain it depends on what their docket looks like in their windows of availability. So what we typically tend to do suggest Windows for potential meetings with them, as well as kind of a preliminary set of points of discussion. And fist you submit your meeting requests and kind of give them a general indication of what the nature of the meeting is going to be about and then you can submit more specific points for consideration as you get closer to the meeting day. Obviously, we want to conduct these meetings in the near-term. And then I think conducting the informal meetings will give us better perspective on a variety of different issues and then from there we can refine that knowledge and that information apply towards options where plans for the next phase of clinical development and we can sit down and actually discuss those in more detail with the regulatory authorities here in the United States as well as internationally. So, I guess, I would characterize it as we want to make some meaningful progress over the course of this summer, and it’s probably going to happen in a few different iterations, and it’s going to be meetings with each of the regulatory authorities across the major geographies that we care about. But I can’t give you specific dates just yet, because honestly, we - I just got back from Japan last night, so I’m still kind of suffering from a little bit of jet lag. And I know the team is focused on in the coming several weeks figuring out timetables for some of the meetings we want to conduct in the near-term, and then we’ll go from there and update people as appropriate.

[William Lehmann:]

Yes, Christian, I think it’s worth nothing, obviously the next study in stroke is a very important study for the company. And so we’re going to make sure, we do the right study. And so we’re going to be spending appropriate time on the design upfront and in discussions with regulators to get that right study in place. So it’s going to take a little bit time, I think we’ll update as we go along with respect to timing. Obviously, the broad parameters of what we’re going to do are pretty well known right now. I think the information that we learned from this study guides us very nicely to that next study. But there are obviously a lot of choices we have to make both with respect to where we’re going to do the studies and a variety of operational kind of choices we’re going to have. So we’re going to work through that, make sure we do it right, interact with the regulators as we go, and will update with the financial market as we go as well to set some expectations about timing of the next study.

[Christian Glennie:]

Sure, yes. Thank you. And then, I mean presumably an element or a feature of next steps is would clearly be that Chugai’s decision on its next steps. Is that fair to say?

[Gil Van Bokkelen:]

Yes. Well, that’s clearly going to have an impact with respect to what we decide to do in Japan.

[Christian Glennie:]

Right. Yes…

[Gil Van Bokkelen:]

And that by extension may actually have an impact on what we decide to do. I mean one option would be to run a Japan-centric study, another option will be to run an international study which Japan - sites in Japan are part of. And you can imagine if we decided to run a Japan centric study you could design that in a number of different ways or even the international study which would be consistent with either utilizing the accelerated approval pathway in Japan or going for more traditional form of approval, which alleviates the need to invest in some of the downstream follow-up studies or other things that might be required under the conditional approval pathway. And we just don’t know yet exactly where we are going to be and all of that, because we’re still analyzing data. We’re going to be doing some modeling, obviously, having ongoing conversations with Chugai and having ongoing conversations of the PMDA and clinical experts to kind of figure out where we are on that. But it’s obviously a huge priority for us right now and something that we want to get greater clarity on in the coming weeks and the next several months.

[William Lehmann:]

Yes, I think you can say that our plans will be affected by Chugai. It’s decided to continue on with us. We hope it does. We think it’s a good partner. They’re not going to be dependent on that, right? So we have a couple of different projects and strategies that take into account, things that they might be interested in pursuing in Japan and other-wise.

[Gil Van Bokkelen:]

Right.

[Christian Glennie:]

Great. Thank you very much. And then we’re sort of slightly running out of time, but quickly on R&D run rate for the rest of the year. And then also just some sort of brief highlights of the AMI study. And just to confirm that sort of what’s on the clinical trials is what we should be working with.

[William Lehmann:]

With respect to run rate, we haven’t given any precise guidance. I think if you take a look at the numbers we’ve reported, if you take a look at our 10-Q, you’ll see that from an operating perspective we’re spending compared to the first quarter of last year, we spent a little less, I think in general. And we’re going to spend roughly in the same kind of range, what we spent last year, at least with the end of this year, but I don’t want to be more specific than that. Obviously, as we kind of leg into stroke study that will have some impact on expenses, but we’ll provide some more guidance about that as that time approaches. With respect to AMI, we’ve launched the activity there. There is a lot of work still to be done. We only have the first sites through the process. we’re going to have several other sites that we add here in the near-term, again I think that’s something we’ll provide some guidance and update on perhaps in the next quarterly call. So we’re moving forward there. With respect to what’s on clinicaltrials.org, to be quite honest I haven’t taken a look at that recently, but I think that’s updated and current, but I can’t say it definitively because I haven’t personally taken a look at that.

[Christian Glennie:]

Okay. Thank you very much, guys.

[William Lehmann:]

Okay.

[Gil Van Bokkelen:]

Thanks, Christian.

[Operator:]

And I turn the call back over to the presenters for closing remarks.

[Gil Van Bokkelen:]

Thanks, Carol, I appreciate it. Well, since there are no further questions. I would like to thank everybody once again for their time and attention as well as their continued support of the company. We look forward to providing additional updates in the coming weeks and months, but for now, good night, everyone.

[Operator:]

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