Athersys, Inc.
Q3 2014 Earnings Call Transcript

Published: 11 Nov 2014

[Operator:]

Good afternoon. My name is Dustin, and I’ll be your conference operator today. At this time I would like to welcome everyone to the Athersys’ Third Quarter Earnings Conference 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). I will now hand the call over to our host for today our Investor Relations representative, Ms. Lisa Wilson. Ma’am you may begin.

[Lisa Wilson:]

Thank you, and good afternoon, everyone. I’m Lisa Wilson of In-Site Communications, Investor Relations for Athersys. Thank you for joining today’s call. If you do not have a copy of the press release we issued at the close of market it is available on the Athersys’ website at athersys.com. Dr. 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 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 Athersys may make about future expectations, plans and prospects, constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by the forward-looking statements as a result of various important factors, including those discussed in the company’s Form 10-Q, 10-K and other public SEC filings. Athersys anticipates that subsequent events and developments may cause its outlook to change. While the company may elect to update these forward-looking statements at some point in the future the company specifically disclaims any obligation to do so. For the benefit of those who may be listening to the replay this call was held and recorded on November 10, 2014. Since then Athersys may have made announcements related to the topics discussed, so please reference the company’s most recent SEC filings and press releases. With that, I’ll turn the call over to B.J. Lehmann. B.J

[William Lehmann:]

Thank you, Lisa. Good afternoon and welcome, everyone. I’m B.J. Lehmann, President and Chief Operating Officer at Athersys. I’ll briefly review our third quarter 2014 financial results and then turn the call over to Gil for a corporate update, followed by a question-and-answer period. For the third quarter of 2014 revenues decreased to $300,000 compared to $600,000 for the same period in 2013, reflecting a $300,000 decrease in our grant revenues. Grant revenues may fluctuate from period-to-period due to timing of grant-related activities and award and expiration of grants, while contract revenues will be driven by license, royalty and milestone payments from existing and possibly new business collaborations. Research and development expenses were $5.8 million in the third quarter of 2014 compared to $4.7 million in the prior-year period. The difference reflects increases in pre-clinical and clinical development cost, personnel cost, research supplies and stock-based compensation. General and administrative expenses increased to $1.7 million in the third quarter of 2014 compared to $1.5 million in the comparable period in 2013, due primarily to increases in personnel cost and legal and professional fees. The change in the fair value of our warrant liabilities resulted in non-cash income of $2.5 million in the third quarter of 2014 compared to a non-cash expense of [$600,000] in the prior year period, reflecting the impact of new warrant issuances and changes in our share price. As a result we reported a net loss for the third quarter of 2014 of $4.7 million or loss of $0.06 per share compared to a net loss of $5.6million or a loss of $0.10 per share for the same period last year. During the nine month period ended September 30, 2014 we used $19.7 million of cash in operating activities compared to $18.3 million in the prior year period. We ended the third quarter of 2014 with $32.4 million of cash on the balance sheet and remain well positioned to achieve important clinical development and business milestones. With that I would like to turn the call over to Gil for the corporate update. Gil?

[Gil Van Bokkelen:]

Thanks B.J and good afternoon everyone. Athersys is committed to developing proprietary therapeutics with the potential to address significant areas of unmet medical need. We are particularly focused on serious clinical indications that have substantial commercial potential and for which we believe that MultiStem, our patented allogeneic stem cell product could have particular relevance and meaningful advantages over current standard of care. Our regenerative medicine programs are focused on developing MultiStem as an off-the-shelf therapy for the treatment of inflammatory and immune disorders neurological conditions, cardiovascular disease and other areas where standard of care is limited and significant medical need exists. We are currently focused on executing our strategy to develop MultiStem for therapeutic areas where based on the growing body of clinical and preclinical data we believe this novel regenerative medicine therapy has great potential. Our approach of taking multiple shots on goal increases the odds of having one success or more and also increases the revenue generating potential of the MultiStem product platform. Additionally we benefit by spreading the development costs across a range of programs. Further we have been able to efficiently advance our pipeline by conducting cost effective and focused translational research activities through a broad international network of collaborative relationships. This has reduced our need to invest in significant additional infrastructure to support our research and development allowing us to focus on our clinical stage programs and other activities. During the third quarter of 2014 we made significant progress with two of our late stage clinical programs, while also advancing important initiatives on the regulatory preclinical and business development fronts. Our top near term objective is completing our Phase 2 study of MultiStem for ischemic stroke. Ischemic stroke is caused by a blockage of blood flow to the brain and accounts for more than 85% of all strokes in the United States according to American Heart Association estimates. Due to an aging global population, the incidence of stroke is projected to increase substantially in the next 20 to 30 years above the current number of more than two million individuals who suffer a first time stroke each year in the United States Japan and European Union combined. Stroke often results in serious neurological injury and represents a leading cause of death globally and it’s typically the leading cause of serious disability in most of the developed countries in the world. We estimate the potential market for a new therapy to treat stroke patients to be a $15 billion to $20 billion annual market opportunity possibly higher. We believe this indication represents perhaps the greatest area of unmet need in medicine today and is a priority for healthcare systems around the world. We have made good progress with our trial during the third quarter as patient enrollment rebounded from the summer slowdown and remains on a favorable trajectory that we are confident will enable us to complete enrollment of the trial in the very near term most likely sometime between Thanksgiving and Christmas depending on the precise timing of the accrual of the last patient. In this trial patients are treated with an intravenous administration of MultiStem cell therapy one to two days after the ischemic stroke followed by clinical assessment of the subsequent 90 days. Factoring in the time necessary for data lock and analysis by the CRO, we anticipate reporting top line results around the end of the first quarter 2015. As we approach the completion of the trial and the announcement of the results we thought it would be appropriate to provide some additional clarity regarding how the results from the trial will be assessed. If MultiStem is shown to be a safe and effective therapy for stroke as we are optimistic it will be, it can also be administered in the clinically practical timeframe we believe we could change stroke medicine as we know it. Based on discussions with leading neurologists from the US, Europe and Japan, the one to two day post stroke timeframe we are currently evaluating represents both the relevant window for intervention and the clinically practical timeframe for the vast majority of patients. Consistent with this thinking late last year we engaged independent advisors that conduct an analysis that included perspective from key opinion leaders, key clinical sites and international reimbursement experts. The results of this analysis suggest that if we are able to demonstrate safety clinical effectiveness and practicality such as the ability to administer MultiStem in a simple and straight forward manner in a clinically practical timeframe we are likely to see strong demand. Furthermore the analysis suggested we are also likely to see strong support from a reimbursement perspective provided we address certain issues that are important to the clinicians and reimbursement agencies. Importantly, the analysis resulted in the identification of appropriate measures and parameters that should be used to demonstrate safety and effectiveness for this clinical study which are incorporated into the analysis of the trial results. Accordingly we worked with our advisors to refine and finalize our statistical and analytical approach for this trial, commonly referred to as a statistical analysis plan. Patients will be assessed for key safety parameters including mortality within the initial 90 day clinical assessment period as well as the occurrence of serious adverse events and other clinically relevant safety measures. In addition our primary objective for this study is to evaluate patients for meaningful recovery using the well accepted and standardized clinical rating scales, including NIH stroke scale, modified Rankin Scale and Barthel Index each of which evaluate and reflect important parameters related to clinical outcome and patient quality of life. Like the original NINDS study evaluating TPA we are evaluating these parameters on a global basis to provide a more robust picture of MultiStem’s impact on recovery. This also consistent with the feedback we have received from clinicians, payers and other stakeholders that have suggested that a comprehensive evaluation of this patient population, including multiple measures of post stroke deficit and function and determining improvement across the stroke severity spectrum is important to understanding the true potential for this investigational therapy. The global assessment approach we are utilizing provides the sensitivity to detect a treatment related effect in this subject population, including among patients of more severe strokes which we believe will be very relevant from a reimbursement perspective. We will assess the [inaudible] modified Rankin Scale outcome, NIH stroke scale, and Barthel Index outcomes as independent secondary endpoints, along with other secondary and exploratory endpoints that will be evaluated. We will also assess the impact of MultiStem administration in specific sub-groups such as patients that have suffered more severe strokes based on the NIH SS enrollment criteria. These patients represent an important sub-group since they typically experienced meaningfully lower rates improvement and recovery and experience an even greater clinical in quality of life impact, adding to the already high cost in both human, economic and social terms. Based on the extensive preclinical work we and our collaborators have conducted that has consistently shown safety, robust efficacy and has also elucidated and reinforced the key mechanisms of actions through the effects in the brain, spleen and elsewhere we are optimistic about the study’s outcome and clearly the demonstration of statistical significance on our key endpoints would be a big success. The study is designed to give us a comprehensive evaluation of this patient population and also help guide us in subsequent clinical development. You might find that MultiStem therapy works better for certain patients than for others or that it has better effects on certain clinical outcomes, information that we would build into future studies. Evidence of meaningful clinical impact would represent success even if we did not necessarily achieve statistical significance on all key endpoints. Whatever the outcome as we have always done in the past we will honestly and accurately communicate the results and objectively assess their impact. Needless to say we eagerly await the results from this trial. Our next clinical priority is our program in acute myocardial infarction or AMI. Myocardial infarction or heart attack is caused by the blockage of one or more arteries that supply blood to the heart. This can result in a significant injury to the heart muscle which can severely affect the patient’s overall health and quality of life or cause significant damage that can ultimately lead to heart failure. Despite the positive impact of statins and other medications AMI and related forms of heart disease remain a leading cause of death and disability for many countries. According to Data Monitor and other sources an estimated 1.7 million s myocardial infarctions occur each year in the U.S., European Union countries and Japan combined. Effectively treating patients that have suffered damage from AMI remains an area of great unmet medical need and it also represents a significant commercial opportunity. Our study will build on promising Phase I clinical results in supporting non-clinical data which demonstrate the consistency and the consistent safety of the product and the delivery approach and also provide meaningful evidence of therapeutic effectiveness and a thorough understanding of key mechanisms of action. As a reminder this study is support by NIH grant funding. This quarter our efforts in this area were focused on advancing preparations for our Phase II clinical trial in AMI. This is a double blind randomized and controlled clinical study to evaluate the safety and effectiveness of MultiStem administration to subjects who have suffered a heart attack. The planned enrollment target is 90 patients. The primary objective of this study is to compare the difference in the incidence and severity of adverse events between patients treated with MultiStem versus control group at the 30 day follow up. A secondary objective is the assessment of VFX or MultiStem therapy using established parameters in cardiac function comparing the changes assessed by MRI based analysis of heart function between patients treated with MultiStem versus the control group at four months and one year. We expect the first couple of study sites will be ready to go by the end of this year with IRB approvals and contracts in place with multiple additional study centers up and running in Q1 2015. We expect to begin dosing patients for the trial sometime in Q1. We also continue to make progress in preparation for clinical activity and other important areas. Without getting into the details today over the past several years we have done some exciting work in the pulmonary area that we believe represents the serious area of unmet medical need in an exciting clinical and commercial opportunity. In collaboration with key opinion leaders and clinical experts we are working to complete the necessary preparatory work to enable us to advance this program in to clinical development. I’d like to quickly touch on our program in preventing Graft-versus-Host-Disease or GvHD. We continue to receive feedback from the FDA and the EMA regarding our proposed Phase 2/3 GvHD prophylaxis study. This feedback will enable us to finalize the design of the trial such that it will meet our objectives in regular standards. However as we’ve described previously we would look to further advance this program in conjuncture with a partner once adequate resources to fund this trial are in place. Recall that our GvHD prophylaxis program has been assigned orphan drug designation from both EMA and the FDA which among other benefits would assure us a seven year period of market exclusivity upon approval. These programs that I discussed represent just a portion of the exciting work on going at Athersys. We have a broad set of preclinical programs that further evaluate potential applications of MultiStem and upon obtaining the appropriate resources we hope to advance additional promising opportunities into the clinic overtime. Turning to our regulatory initiatives an important part of our development strategy is to engage with regulators in U.S., European Union and Japan that may lead to opportunities for accelerated development and commercialization as well as enhance opportunities for significant partnerships. In particular as we discussed on prior calls we are excited about the evolving regulatory landscape in Japan, that is specifically designed to provide support for the accelerated development of regenerative medicine therapies. This visionary new regulatory framework stems from a growing recognition in Japan that unprecedented demographic trends threaten the national healthcare system there. There is also a recognition that innovative areas like regenerative medicine may provide highly effective solutions for the clinical, social and economic challenges ahead. The regulatory reforms are needed to facilitate and support the necessary innovation. Last November important legislation was voted into law by the Japanese DIET or national legislature with overwhelming support formerly authorized in the new regulatory framework. For the past year a dedicated team has been crafting and refining the detailed regulations for the new framework. The explicit intention of the laws is to hasten clinical development and application of cell and regenerative medicine therapies such as MultiStem. The new regulatory framework enables promising new cell therapies to obtain accelerated conditional approval in Japan provided the sponsor can provide evidence of safety coupled with evidence of a probable therapeutic benefit. We expect implementation of the new legislation may come as later this month and certainly by the end of this year paving the way for an important new era in Japan. To ensure we are well positioned to capitalize on this emerging opportunity we have been working over the past year to build and strengthen our relationships with the PMDA, potential business partners clinical experts and other collaborators in Japan. In keeping with our goal to commercialize MultiStem in Japan for multiple therapeutic areas, execution of our strategy in Japan will remain a key priority for the foreseeable future. A few weeks ago we reached an important milestone in the regulatory process in Japan. Following a series of informal discussions, formal submissions of materials, and formal discussions with PMDA we obtain confirmation from PMDA that our manufactured MultiStem product is suitable for clinical development in Japan. This represents a critical step in the regulatory process, and an important regulatory achievement and we are now focused on the next set of activities that will ultimately pave the way for conducting clinical trials in Japan in stroke and other areas. We also remain actively engaged in discussion with potential partners that are interested in the development and commercialization of MultiStem in Japan across several important therapeutic areas, discussing potential opportunities and approaches. We believe that partnering in Japan represents an important part of our strategy and we will make announcements as appropriate regarding our progress in these activities. To conclude we continue to make headwinds several important areas and do so in a focused and cost effective manner and with that operator we would like to please open the call to questions.

[Operator:]

(Operator Instructions). Our first question comes from the line of Ted Tenthoff with Piper Jaffray.

[Ted Tenthoff:]

Thank you very much. Can you hear me okay?

[Gil Van Bokkelen:]

Yeah, Ted. How are you doing?

[Ted Tenthoff:]

Hi. Real quickly just with respect to things you were mentioning about stroke? Do these actually represent changes in the primary end point or is this more of a kind of reprioritization, maybe you can just kind of clarify that a little bit more for us?

[William Lehmann:]

Yeah, Ted maybe I’ll take a first cut at this and Gil could add. I think one of the important thing Gil mentioned was the information we developed over the past year really focused on reimbursement and what’s going to be necessary for making the case for strong pricing in Europe and other geographies. And one of the key themes that we’ve heard is that we need to understand the impact of the MultiStem therapy across multiple measures of stroke recovery, such as the NIHSS scale or Barthel Index and the modified Rankin score and we also need to be able to evaluate the improvement across the severity spectrum. So as you recall one of the key enrollment criteria is a stroke severity of 8 to 20 and we need to be able to evaluate across that whole spectrum improvement. And so what we done as you said secondly is the prioritized the need for developing that information and finalizing our statistical analysis plan and we done that by bringing the global test or the global recovery evaluation forward as an important tool for providing that information. The components include the modified Rankin score. We have the good recovery, so modified Rankin zero to two. So we look at proportion patients that achieved that. Another component would be NIHSS improvement or looking specifically at a 75% improvement for these patients which is something as important with respect to seeing improvement at the upper end of the severity range and we’re going to look at Barthel Index as well, looking the threshold score of 95 at 90 days. We’re also looking at those as individual components in our secondary endpoints. So we’re getting a very comprehensive look at this patient population and the impact of MultiStem on this patient population. So I think we’re accomplishing what we need to accomplish to set the stage for subsequent development but also importantly for making the case from a reimbursement perspective.

[Ted Tenthoff:]

Okay. So let me just make sure I understand this, so the primary is now this global recovery evaluation comprised of those three factors and then those three factors were also individual secondaries.

[William Lehmann:]

That’s correct.

[Gil Van Bokkelen:]

Yeah, that’s right.

[Ted Tenthoff:]

Great and we should have the full data at the end of the second quarter. How is enrollment and where – how many patients are you anticipating in total and then I’ll hop back in line.

[Gil Van Bokkelen:]

Yeah, actually we’re anticipating around the end of the first quarter. In terms of the total numbers of patients there is 136 patients in total in the study. There is two cohorts, low dose cohort which included 8 patients. So 6 of them received MultiStem two they got placebo and a second high dose cohort. Six that got MultiStem, two that got placebo. And then the final cohort which is a 120 patients. The data from the second cohort can actually be combined with third cohort. So we will aggregate that data and access of this one package. So 128 patients actually in that analysis.

[Ted Tenthoff:]

Around 128 excellent. All right thanks so much.

[Gil Van Bokkelen:]

Thanks, Ted.

[Operator:]

Our next question comes from the line of Tracy Marshbanks with First Analysis.

[Tracy Marshbanks:]

Good afternoon and thanks for taking the question. On the finding of suitability for the manufacture in Japan, what were the key elements that they evaluated and you guys sort of scored very well in light of that.

[Gil Van Bokkelen:]

Well it was kind of a long list of issues that they wanted to detailed information on and in fact it took us several months to gather all that information and prepare in a form and then obviously translated into Japanese and reverse translated so that we were confident that the translation accurately picked and reflected all the information that was in there. There was also a lot of secondary documents I mean basically lot of our suppliers that provided for material to go into the manufacturing process they wanted to make sure that those materials were adequately characterize and evaluated and treated any kind of advantageous agents. And frankly that was a lot of work was making sure that we had the appropriate documentation in the proper format translated in most of the emphasis. Some information was provided in English but the vast majority that was ultimately provided in Japanese. So it was a pretty comprehensive evaluation, and the reason why we regard it as pretty significant milestone if you think kind of a long history of companies that particularly in the biologics area that have tried to develop manufacture biological products. And if they didn’t meet the very vigorous criteria and standards established by the PMGA they didn’t manufacture the product in Japan than they weren’t able to move forward. And in our case, we’re working with our partner, contract manufacturing organization, Lonza that is doing the manufacturing and of course they are global player but we had not used manufacturing facilities in Japan in order to product products in the ongoing clinical trial that we’re running right now. And so a key question we had was would those types of facilities have be established or would we be able to use the manufacturing facilities are already up and operational and thoroughly validated to meet the very high standards in Europe for example which is the Japanese standards are counted off the standards in Europe. And so again just a kind a say at a same way there was lots of things that might have been problematic and we managed to work through the entire process and provide them with all the information they wanted. We answered all the questions that they had and we appreciated their guidance and their input. And so I that that it’s a pretty substantial milestone it has a ramifications for more than just than the stroke area.

[Tracy Marshbanks:]

Yeah and that I assume that puts you in good status. You go in like you said different areas or even different geographies you’ve been through a pretty tough test and so now you’re sort of prepared and ready.

[Gil Van Bokkelen:]

Yeah. I mean we’ve already been just – to put in context, I mean we’ve already been through this process in Europe and in United States and our methodology for people to know our regulatory philosophy and approach is we’re always very, very careful and systematic with the regulators and the regulatory agencies that we interact with and I that that is generated a lot of safe in our approach I mean quality of the work that we do which is paying clear dividends now and we believe will continue to play big clear dividends as we move ahead.

[Tracy Marshbanks:]

Yeah. A little bit a business related question. You’re – sounds like you’re attacking more aggressively some new areas of indication. Obviously you’ve got sort of geographic expansion and you also have sort of an expansion in the, I don’t know the capabilities or the areas within your process that you’re dealing with. What’s your evaluation of the organization’s readiness and maybe capabilities that you might need to add over the one to two year timeframe as you’re going to this rapid sort of the evolutions.

[Gil Van Bokkelen:]

Well I think that’s a great question actually. There is a lot of things that we intend to do but we’re staging things in a very careful and systematic way. But kind of the question behind your question is, are we going to be ready for success. I don’t want to put words in your mouth but that’s kind of how I interpret, is that a fair way to assess it.

[Tracy Marshbanks:]

That’s fair. Even a dog cases what happened when you catch it.

[Gil Van Bokkelen:]

Right. So we have for example an entire – actually two teams of people that are focused on process development and manufacturing related issues, another team of people that are focused on other things that are important to ensuring when the time comes. We’re going to be ready for success and so, without going all the details and the all component kind of activities that are part of that, I can tell you that there are a lot of people hear in the organization that are working extremely hard to make sure that when that moment comes that we will have a very clear prioritize with the things that we are going to be doing and thinks for something that we are doing and have been doing for months to make sure that we are ready to take advantage of the window of opportunity.

[Tracy Marshbanks:]

Okay, so when I think about sort of the organizational infrastructure and staffing you feel you are there at least for the planning phase of an expansion if you need to?

[Gil Van Bokkelen:]

Yeah, well I think that’s exactly right, I mean clearly, let’s just kind of – in for a moment and just say what’s happens if we are successful in stroke, are we thinking about adding capabilities and other types of things that we can take advantage of portfolio of opportunities that we have in front of us. Clearly we would have a mindset to do that. But I think as we have always done we would do it in a very careful systematic and methodic way so, we don’t get ahead of ourselves from but I think that there is lots of opportunities and we have I know I speak for the entire leadership here when I say we have enormous stake and all of the people that are part of the organization that are working very hard to ensure success and then once we have got pass in significant milestones that are out in front of us be able to make sure that are well positioned to do the things that come after that.

[Tracy Marshbanks:]

Yeah, thanks a lot for taking the questions.

[Gil Van Bokkelen:]

Thanks Tracy.

[Operator:]

Our next question comes from the line of Jason Kolbert with Maxim.

[Jason Kolbert:]

Thanks Gil, hi. Yeah, I have just a very few questions given the excellent questions you have already been asked. But I wanted to talk a little bit about what’s the difference between approval in Japan using the new law and reimbursement given the government nature of health insurance in Japan? And would reimbursement require a differential clinical trial strategy than approval based on your consultant and your assessment of land escape in Japan?

[Gil Van Bokkelen:]

Yeah, thanks Jason that’s actually a ready good question. As you know we are working with one of the foremost exports on the reimbursement landscape in Japan and he is somebody that we have a lot of faith and confidence and he has ready helped, guide our thinking over the past few months about how to approach this from an analytical and strategic perspective. And he has been really incredibly helpful and informative in terms of number of things that we’re currently evaluating, analyzing and getting ready for. We all are keen to see what the regulations will look when they come out a few weeks from now. But our understanding is that this new regulatory framework will be linked to a pathway for reimbursement in Japan and we want to make sure that we are ready for that which is why we started not just with respect to Japan but in other geographies beginning to accumulate data and analyze factors that we think are going to be very important for establishing a strong case for reimbursement, should we achieve what we are believe we are going to achieve which is the demonstration meaningful clinical success. The accelerated regulatory approval in Japan is interesting because reimbursement dynamics in other geographies around the world tend to be a little more fragmented for example Europe is very fragmented in comparison from Japan. And Japan is actually very streamlined and centralized and in contrast to what can take a year sometimes even lot outside of Japan and Japan it’s a process that typically happens with a several month timeframe once you deliver the information and you need to deliver and have submitted the dossier for formal consideration there. So, I think we are going to be ready for that. I think that obviously obtaining reimbursement upon a demonstration of clinical success in Japan and just to remind everybody the current clinical trial that we are working and the discussions that we have been having with PMDA are designed to put us in position to be able to run a subsequent study in Japan that builds off the knowledge that gain from the current study that we are running in the U.S. and in the UK. We can incorporate knowledge into subsequent, what I refer to as a confirmatory study then that allows us we believe to present that aggregate dataset and be able to make a what I think could be a very strong case for approval under the new framework in Japan and then subsequently reimbursement. There are other possibilities. It’s possible depending on what the dataset looks like that we might be able to pursue a pathway that leads before approval in Japan and we are open minded and we got some very encouraging feedback from some of the key decision makers in Japan that I think have been very supportive and helpful but ultimately it’s going to come down to the data and the other pieces of material information that we need to aggregate and present to them for their consideration. So that we can take advantage of this new regulatory framework and opportunity.

[Jason Kolbert:]

Very exciting, thank you. Can we switch gears to cardiology a little bit and just talk about, clearly you are getting closer to launching this Phase 2 proof-of-concept study can you just take a minute for me and connect the doubts with me to the earlier Phase 1 study and help me understand what’s different in terms of delivery, dosing what did you learn in the Phase 1 trial that you have now modified in order to find the sweet spot for the current design in the heart attack space?

[Gil Van Bokkelen:]

Yes, so the Phase 1 study that we ran just to refresh everybody’s memory was a 25 patient study that consisted of four different groups. There was a control group, a registry group and then three different dose groups; so low dose, medium dose and a high dose. And in the medium dose and the high dose groups this is published information, it’s been presented at some of the leading cardiology conferences as well, that one investigator study, Dr. Marc Penn the data showed a very strong picture although the study was not designed to evaluate, the study was really designed to evaluate safety first and foremost but we also looked at various efficacy parameters that are well established recognized efficacy parameters for these types of patients and prior to conducting the study we specified based on the input of Dr. Penn who at the time was with the – clinic and other cardiologist like Dr. [inaudible] who is at Columbia. We specified that we’ve really focused on trying to look at patients that had severely impacted or reduced cardiovascular function heart function as reflected for example by reduced ejection fraction in the 30 to 45 range. And in those patients at the published data reflects we actually saw a very robust improvement in the medium dose group. We saw it was close to 14% absolute improvement in ejection fraction among those patients that had severely compromised cardiovascular function and we saw comparable effects although the end turned out to be a little bit smaller in the high dose group but that really kind of mirrored them reflected that data. So we took all that information we actually presented it in a grant application to the NIH the NHLVI and we were awarded approximately $3 million grant to run this 90 patient Phase 2 study and in an ideal world frankly we would like to run a larger study that we think that this study is large enough for us to be able to assess a therapeutically relevant dose, one administration of MultiStem in patients. Now the patient group in this study is going to be slightly different than the patient group in the first trial we ran. The first trial was focused on STEMI or ST elevated myocardial infarction patients, the patients that we were running in this trial are N STEMI patients so non-ST elevated myocardial infarction patients. This actually is the more common myocardial infarction patient population these days. The ST elevated MIs have been dropping in frequencies and I know you know Jason. And so the N STEMI is kind of more of the urgent need if you will and so the study was designed to evaluate multi-stem using the dosing information that we generated from the first patient trial. And we’re excited about moving ahead we think that the information that we generated from the first trial is going to be very helpful and informative in this current study and we’re excited to get going.

[Jason Kolbert:]

Got it, thank you. Thanks for the comprehensive answer. We are all looking forward to the stroke data.

[Gil Van Bokkelen:]

Thanks Jason.

[Operator:]

Next question comes from the line of Steve Brozak with WBB Securities.

[Steve Brozak:]

Hey good afternoon gentlemen. Seems like a lot of questions have been asked but I do want something that you have been giving a lot of transparency on data and evaluating data. Can you go back on one item here and tell us about the data or I should say the dosing data differential that you had between what you are doing now on the stroke trial and in terms of Pfizer and what the major differences there because that’s something I really want to get a better grasp of and my hands around it? And one follow-up after that.

[Gil Van Bokkelen:]

Yes so in the Pfizer study again that focus was on patients that had been suffering from long standing severe inflammatory valve disease so treatment refractory ulcerative colitis. So approximately just to refresh everybody’s memory there was almost 70% of the patients that got treated with MultiStem in that trial I think it was just under 70% about two-thirds of the patients had already failed the TNF alpha blocker therapies as well as multiple other forms of treatment. So it was a pretty severe patient population that was suffering from long standing chronic disease on average patient had been suffering from IBD for ten years with some patients that suffered from IBD for as a long as 30 years they were in the trial. So, it was a pretty severe and pretty substantially sick long-standing group of patients. In that trial we administered a dose of 750 million cells one time IV into these patients to access the primarily outcome in the study which was effect at eight weeks in these chronic patients. In the case of stroke trial we are actually giving a higher dose we are dosing at a 1.2 billion cells to these patients and we are treating an acute indication and the analogy that I used to explain the people, kind of illustrate the concept of them imagine if you had somebody that suffered a stroke ten years ago versus somebody that suffered a stroke yesterday, which would be easier to treat? Or which do most people think would be easier to treat. And I think most people intuitively grasp that treating somebody and helping somebody that just suffered a stroke in the last day or two is probably going to be a lot easier than somebody that suffered a stroke a few years after all the resulting tissue loss destruction and scarring and everything else has already occurred over an extended period of time. So it’s not maybe the perfect metaphor in terms of comparing what we did in IBD with Pfizer versus what we are doing with stroke. But we are really weighted more heavily these days towards acute indications where we think that early intervention based on a lot of the data we have generated over the past few years can have a profound impact on improving the outcome, and so kind of getting ahead of curve as opposed to waiting for patients that are much sicker. We still believe we are going to have an impact in chronic indications. In fact there is few chronic indications that we are extremely excited about based on data that we generated but we think the differences is that in chronic indications you are going to get multiple doses overtime as opposed to giving a single dose which is what we think is going to appropriate for various acute indications that we have been pursuing and are actively pursuing now and we also think that getting a dose, the dose ranging right is very important. We think in this case in stoke we are giving a pretty high dose of multi stem in these patients and again the history of the work that we have done to explore the safety of MultiStem IV tells us that’s a prudent thing to do which is why the regulators have said that we can do and we have undergone multiple safety assessments from our clinical work that also reinforces the notion that we see a consistent and a very safe product here.

[Steve Brozak:]

Actually you just led into my second question. When you are looking at acute selling and you see that inflammatory cascade continue big time it seems like your product is almost tailor made for that kind of approach to look at that not so much reducing the inflammation but moderating modulating the inflammation and working with it. Can you end for me by going over where MultiStem really achieves that critical kind of significance and what your thoughts are there and I’ll hop back in the queue?

[Gil Van Bokkelen:]

Yeah, we and our collaborators have produced a lot of data that shows that we administer MultiStem intravenously a lot of the cells go [inaudible] and it’s now well recognized and I think this first started to come to light several years ago based on some work done in a couple of independent labs that were doing work along the same lines that we and some of our collaborators were doing which shows that the spleen is a critically important immune organ. And what we know is that when we administer MultiStem in situations, for example like a stroke or like a traumatic brain injury or other situation we see activation of this immune response emanates from the spleen. But that hyper inflammatory cascade really is responsible for driving a lot of the damage in the brand as well as is relevant in other indications. In fact I was just looking at a publication the other day that somebody here at the company had sent me that illustrated that there is evidence that is emerging and its relevant to cardiovascular disease as well. So the spleenic effects in down regulating and kind of mitigating or neutralizing that hyper inflammatory cascade which is clearly a major driver in the damage that accrued is a key effect. But what we will show is that we also stimulate reparative effects in the brain that actually help accelerate the repair of the comprised brain barrier both in stroke models as well in traumatic brain injury models as well up regulating [neurotropic] neuro-protector factors in the brain. And we know that in contrast to kind of a single agent pharmaceutical which really designed to do one very specific thing MultiStem of capable of driving therapeutic effects through multiple different pathways and doing in some very powerful ways. Lot of that mechanistic data that we and our collaborators have accumulated over the last several years, those are some of the big reasons why we are very confident and optimistic that this trial could be successful.

[Steve Brozak:]

Great again, thanks.

[Gil Van Bokkelen:]

Thank Steve.

[Operator:]

Our next question comes from the line of Christian Glennie with Edison.

[Christian Glennie:]

Hi, good evening gentlemen. Just a bit more follow-up on the end points to be clear in the stroke trial. First of all obviously the expectations the one to one run [inaudible] effectively about 64 patients on MultiStem versus placebo and then in the final analysis and then on the primary efficacy endpoint effectively you are talking about composite of the improvement in the three, NIHSS, MRS and Barthel. In other words you are looking for percentage movements within those?

[Gil Van Bokkelen:]

Let me answer the first question. I think the numbers with respect to the patients, we’re doing one to one randomization for the third cohorts. So there – it would be 60 patients in each group, treatment group and placebo group and then with respect to the cohort two, which will be added to the analysis there were six patients that were treated and two that were placebo. So you would have potentially 66 patient’s data for evaluation and 62 obviously there will be some patients that we don’t have all the data for the 90 days. But that will be kind of foundation. With respect to the composite – with respect to global – it’s not composite per se. This is actually and is important to note, this is an approach that was used in the original TPA study and for them and for the data monitoring board that was responsible for driving the statistical analysis plan of basic end point approach, I think the view point was you needed to look at multiple measures of stroke function recovery. In that particular case they use four, we have three here available to us. They had in common with us the Barthel, MRS and the NIH stroke scale but they also had the Glasgow Outcome scale as well to be used. And essentially what this is, is statistically speaking in a kind of summary level to multi-dimensional determination of patient recovery. So each of the individual components were looking at favorable outcomes for three different scales but then statistically we’re doing a simultaneous what they call global test analysis of those results. So it’s not a composite in the sense that each – we have to hit for each patient all of the outcomes. What it’s doing is evaluating the three different outcomes simultaneously as a multidimensional kind of determination of patient recovery. But again importantly it was used in the TPA study, it’s been used in several other stroke studies since that time and it’s really designed to bring to bear power that you get from looking at the different components or measures for stroke recovery. Each of them are tailored to a particular kind of outcome. The NIHSS stroke scale is focused on neurological deficit, the modified Rankin score is focused on global disability, the Barthel Index is really focused on activities of daily living and so focusing on any individual one basically eliminates certain aspects of the evaluations sort of covered. So that’s what the intention is. We’re following the footsteps of the important TPA studies in the mid-90s. We think this is going to give us the best possible evaluation, of the potential of the MultiStem therapy and set us up well for subsequent development not only reimbursement discussions.

[Christian Glennie:]

Okay, thanks. That make sense and then obviously but then you still have the secondary where you look individually and is that still according to the proportion that will be in those sort of low score where each of those were low or high depending on which is...

[Gil Van Bokkelen:]

Right, we’re looking at with respect to our NIHS stroke scale and the MRS we’re using it common approach, an independent secondary endpoints. We’re also looking at other endpoints as well in terms of things like being changed in some of these different measures. We’re looking at – tests as well. We are playing here to get comprehensive evaluation across these different measures for patients that we have in the study [inaudible]. So we wanted to get look across the spectrum. So that’s going to be the tools and the data we’re going to have available to us now and narrowing the outcome and then recovery success study.

[Christian Glennie:]

Okay. And then just sort of housekeeping on this, is this presumably something that’s still to be updated on the clinical trials record or…?

[Gil Van Bokkelen:]

Yeah we’ll update that – I mean the registry it ordinarily lags a little bit the activity but yes we’ll update that in near term and you’ll get a little bit more clarity on that what we start, yes.

[Christian Glennie:]

Yeah great. Just turning to the update on the Japan, is about sort of put into the context of your getting signed off on the manufacturing prices versus other stem cell companies that obviously more so companies are obviously looking to develop their products within Japan and one of the fact obviously I mean there are so – well there’s only one other I can think of probably already has this but any context there.

[Gil Van Bokkelen:]

Sorry you’re talking about the Mesoblast JCR.

[Christian Glennie:]

Yes.

[Gil Van Bokkelen:]

Yeah so that partnership is actually kind of a carryover if you will from the prior partnership between Athersys and JCR that was established a few years ago, that I think it was probably close to a decade ago.

[Christian Glennie:]

Yes, about 10 years.

[Gil Van Bokkelen:]

And so they completed a trail JCR completed a trail evaluating clinical impact in treatment of patients that has serious [inaudible] disease. And then the program at least our kind of a understanding of it is kind of went into a whole different line but they took that clinical data and they recently submitted it as to be considered part of the – as a potential program for consideration under the new regulatory framework. And I think that that’s – that was very interesting. I mean obviously we’re hopeful for them that they will achieve some success there. Obviously we haven’t had a chance to scrutinize the data but I think that that’s a good indicator. I think that we and Mesoblast and maybe one or two other companies I think honestly we’re among the first really kind of a break the opportunity and take action based on what’s going on in Japan. And a number of us here at the company have been making fairly regular trips over there for regulatory activities, partnering discussions, interactions with key clinical experts and others that are very excited about what we are doing and what it might mean. So to be honest I went in with the bit of a skeptical mindset and just because of the things that I heard from others that have been doing this for a long time, not when I say others I mean of the business that have been doing it for a long time. We found the PMBA be nothing but accommodating and very supportive and the leadership that [inaudible]. So it’s clear that they want the new framework to be successful, it’s clear the U.S. has an important early case study if you will in utilization of this new regulatory framework and they’ve been consistently quite supportive of the whole process and I think that bodes well. Ultimately our data is what allows us to claim victory but I think that the interaction and the progress we have been making over the past few months is very exciting for all of us here.

[Christian Glennie:]

Okay. And then one final one if I may just on potential guidance or indication at least maybe in terms of R&D spend for Q4 and into 2015. Obviously you have the [Strike] study finishing up although continue in early part of next year but then to be replaced by the AMI study to some extent in terms of clinical activity. Any guidance at this stage in terms of R&D run-rates.

[William Lehmann:]

We’re not providing specific guidance. So I think our thinking is that our overall kind of burn will kind of continue at rates it’s done over the past couple of quarter. As we transition from stroke AMI and even in emphasis in the other clinical activity that Gil was referring to in the pulmonary space, but we may be able to provide some more guidance early next year, kind of the way it will play out. But at least for this quarter it should be pretty similar and expect going into next year probably would be similar as well.

[Christian Glennie:]

Okay and sorry just finally on AMI obviously I presume you still have the grant money to flow in to offset those cost?

[William Lehmann:]

Yes, and that would be offset to the stock.

[Christian Glennie:]

Okay, great thank you.

[William Lehmann:]

Okay.

[Operator:]

There seem to be no further questions. Do you have any closing remarks?

[Gil Van Bokkelen:]

Well I like to thank everyone and if there are no further questions I would just once again like to thank you for your time and attention and your continued support of the company. And we look forward to keeping you updated as we advance and move things ahead.

[Operator:]

Ladies and gentlemen thank you for joining the Athersys’ third quarter earnings conference call. This concludes today’s call. You may now disconnect.