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TOPIC: Strolling Down memeory lane

Strolling Down memeory lane 21 Apr 2014 11:30 #1575

  • rothco619
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Thought I would post this so we can all remeber what we have to look forward to,in 2014 and in particular the 1st and 2nd quater
QUESTION AND ANSWER SECTION
Operator: [Operator Instructions] Our first question comes from the line of Steve Brozak with WBB Securities.
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Stephen G. Brozak
Analyst, WBB Securities LLC
Q
Well, good afternoon, gentlemen. This – how shall I put this, on budget and ahead of schedule is really always something you want to hear, but can we go back and go over the specifics to what BARDA was looking for and specifically how and what you had to do because obviously that's going to be critically important in having investors understand what the value proposition is and what you are able to accomplish. So can you start with, I guess, the human study and what you had to do there?
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
Hey, Steve, it's Marc Hedrick. So yeah, the three objectives that we had negotiated with BARDA to get through this first proof-of-concept stage of the contract were very clear and straightforward. The first one was showing that we could take a patient that had been burned and go into that burned tissue and remove the ADRC or stem cell fraction and that would basically be just as good as a non-burn patient. So that was the key objective that we accomplished early on by looking at human tissue. That was a human study.
The second thing is, on the pre-clinical side, we basically had to go backwards because remember a lot of the things that helped make BARDA enthusiastic about working with this are the reams of human data that we were able to bring to bear in breast reconstruction, radiation, wound healing and so forth. So they asked us to go back and in a more circumspect way look at pre-clinical models, particularly pigs and other things, and show that we can repeat in pre-clinical models what we did in patients.
And then finally, BARDA is thinking two to three steps down the road and, okay, how we are going to scale this in the market and what are the, in their terminology, con ops, how are we going to get this technology throughout the U.S. in all hospitals so that in the event of a disaster, it's pre-deployed and ready to work. And so they asked us to validate some key things on the next-generation system in terms of making it faster, more scalable, quicker, more cost effective and so forth. So those are the three things they asked us to do. Those are three objectives that we believe we hit and in, really, constant communications with them we believe that they feel like we've hit those as well.
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Stephen G. Brozak
Analyst, WBB Securities LLC
Q
Okay. And I've got a follow-up and I'll do it in reverse order. In terms of equipment, today's equipment and future equipment, the equipment that you have right now is capable of doing everything that is required but obviously people look for better, faster, easier to handle and equipment that for all intents and purposes you can easily transition into, is that an accurate statement?
Cytori Therapeutics, Inc. (CYTX)
Q4 2013 Earnings Call
Corrected Transcript
11-Mar-2014
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Copyright © 2001-2014 FactSet CallStreet, LLC
Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
It is accurate. Current equipment can do everything we need to do in terms of treating patients with the kinds of things that BARDA would anticipate needing to respond to.
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Stephen G. Brozak
Analyst, WBB Securities LLC
Q
Now, with the current equipment, obviously, one of the things that people look at is the ability to leverage. So it wouldn't be as if this equipment was just going to be put into mothballs in just preposition. This is something that, in theory, what you look at is to have clinicians and different facilities being able to use this for other indications, for other purposes throughout the United States and obviously potentially throughout the world. Is that also an accurate statement?
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
That's true. Let me give you a little color, Steve. So when going into this discussion with BARDA, I'd heard a lot about stockpiling and knew of several companies whose core relationship with BARDA was built around stockpiling big orders and then renewing that. I think BARDA felt burned because of that. It wasn't a great economic model for the government, particularly now looking back on it, 10-plus years after 9/11. What they're looking for is new, more innovative, more cost effective models by which they can partner with companies and get technology available for the public if they need it. What they like about ours is this kind of warm deployment opportunity where we build it; we take it to market for a variety of things; it's pre-deployed; it's out there; they don't have to stockpile it; it's in the market, doctors are pre-trained using it. So when the worst happens, a switch can be flipped and immediately patients can go through a variety of different types of care facilities and be treated in a seamless way. They like that model. It makes total sense to us, our technology's perfect for that and I think that's a lot of what's driving their interest.
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Stephen G. Brozak
Analyst, WBB Securities LLC
Q
Okay. Number two, give us an example of the clinical proofs, not the preclinical proofs that you just went through, but the clinical proofs that you had had in your armamentarium to give us examples of what they saw, what you had done previous, because obviously the value proposition is that you have clinical data that basically says, okay, this is what you were able to do. Give us some examples of that.
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
Yeah, it starts with, believe it or not, breast reconstruction. So most of the women that we treated in RESTORE 1 and RESTORE 2, the Japanese and European clinical trials and studies related to patients that have had radiation and a partial mastectomy was important data because that data to them showed that we could reverse the effects of radiation. There's really nothing to my knowledge out there that can reverse the effects of radiation to that degree. So I think that was compelling. The second is that we – based on the breast reconstruction data, we partnered several years ago with the Atomic Bomb Institute in Nagasaki and one of their key researchers there to take our technology and use it for wounds that, although very small market but a very difficult to treat market, patients that have had radiation for cancer, had open wounds and were at risk of dying for sepsis.
So we showed that not only when the skin was intact we could repair the burn tissue, that when the skin was open and there was an ulcer, in the context of radiation, we could heal that. So that was important data. There's several
Cytori Therapeutics, Inc. (CYTX)
Q4 2013 Earnings Call
Corrected Transcript
11-Mar-2014
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Copyright © 2001-2014 FactSet CallStreet, LLC
published clinical theories supporting that. So that was important. And then finally, we've taken that beyond just radiation into wound healing in general and showed, anecdotally, mainly in some smaller clinical series, that it can help heal wounds that would otherwise not heal. So I think you added all that up, you had a BARDA team that was very excited about the possibility.
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Stephen G. Brozak
Analyst, WBB Securities LLC
Q
Okay, that leaves us with the first item which is the human study that you just went through and obviously it is a very difficult study but give us examples of what you were – and I don't, obviously, want to get into nauseating detail but if you can give us examples of what you had to do, what you found and what may have been surprising in terms of the results? And after that I'll hop back into the queue. Thank you.
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
Just one clarification, Steve, so what clinical study you are referring to?
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Stephen G. Brozak
Analyst, WBB Securities LLC
Q
I'm sorry, this human study that you just engaged in, in terms of the collection of samples, I apologize, it's the...
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
Oh, yeah. No, I got you. So, yeah. So we've developed research protocols with burn centers in our area who typically take care of medium to large burns. The typical treatment pattern for those patients is to remove the burn tissue and then do some sort of grafting procedure. That burn tissue that they typically throw away was the subject of the study. So we took the tissue, took it through our process and showed that from that tissue we could get viable cells that were perfectly useful and retained all their functions. And we did that in multiple patients and multiple samples around different areas of the body and so that was one of the three key objectives that we accomplished in our proof-of-concept base.
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Stephen G. Brozak
Analyst, WBB Securities LLC
Q
Great. Well, obviously, this half of the year is going to be critically important, so I look forward to the next call that describes it. Thank you again and congratulations, gentlemen.
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
Thank you.
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Operator: Our next question comes from the line of Jason Kolbert with Maxim.
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Jason H. Kolbert
Analyst, Maxim Group LLC
Q
Hi, guys. So I want to talk just a little bit about what happened in the fourth quarter because you had been guiding us to $7 million and I understand that product revenue, well, it fell and $3.6 million will probably be recognized in the first quarter. What was that shortfall and how was performance in Japan?
Cytori Therapeutics, Inc. (CYTX)
Q4 2013 Earnings Call
Corrected Transcript
11-Mar-2014
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Mark E. Saad
Chief Financial Officer, Cytori Therapeutics, Inc.
A
Hey, Jason, it's Mark Saad. I will address the revenue and shipment number and like you said, we were guiding towards sales to be higher and would have seen that happen if we had not made a change subsequent to our last call regarding the way in which we will book revenue and that's based on observation of a number of cases that we've been tracking where particularly when you are international just to give a quick perspective, I think we are in a pretty unique situation as a U.S. medical company where in many course the vast majority of our sales come from Japan. And so that's a fairly unique situation. So what we've done and have sought to do is to maximally align our sales contracts, et cetera, with traditional U.S. GAAP and that's how we've embarked upon it and have managed the sales process and the accounting revenue recognition side of the equation.
Knowing that Japan is a very different marketplace in terms of culture, everything and knowing that what we see today on a small scale may well only expand over time. I mean we think there is a lot of near-term growth that's going to come from Japan particularly with these new regen med laws and we are in a unique position with a dedicated team there to capitalize on that. It was really important for us to get this right and to make sure we're being maximally minimizing future risks in terms of where a customer could implicitly look at a contract different than the way the explicit language of a contract exists.
And so in looking at a number of cases where that could be the case, we took the step following review of the quarter to really put all new customers into a – effectively a holding pattern from a recognition point of view basically even if they met clean U.S. GAAP contract terms, we would still put an additional filter of, okay, let's still defer to other things particularly collections but there is a number of things that we want to make sure are really final and not take revenue risk. And that was something that took place in the fourth quarter review based on, I would say, a number of individual cases which really made it hard to know prospectively in a given situation even if the contracts were clean would it be not better to take a more conservative approach overall. And so given our growth needs and growth objectives particularly in Japan, we felt in combination of talking with our auditors and committees that that was the right way to go. So we're putting in place a number of changes like that.
And so the outcome there, Jason, was that we had a fairly large number of sales predominantly from Japan as identified in that number that we did not take as revenue in 2013, but they were successfully shipped, received and we would anticipate them being picked up this year. So while that certainly is consistent with what you said in terms of not to be in the fourth quarter, we do think that the inherent demand for the product is there and now we just want to make sure that we've aligned recognition practices in a way that best protect us going forward.
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Jason H. Kolbert
Analyst, Maxim Group LLC
Q
Mark, I totally understand, but does that mean that we should be adjusting our guidance for 2014, or should we make any change to that number? In other words, or is this just a mouse going down a snake and we'll just push everything out a quarter?
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Mark E. Saad
Chief Financial Officer, Cytori Therapeutics, Inc.
A
That's a good question, Jason. I think, in general, as we look at what our 2014 results will be, we recognize that you have this existing business and, yes, to the extent that you've got this existing business that's predominantly to researchers, you're going to have that extra mouse, as you call it, of revenues that's in there that will obviously enhance what we accomplish in 2014.
Cytori Therapeutics, Inc. (CYTX)
Q4 2013 Earnings Call
Corrected Transcript
11-Mar-2014
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Copyright © 2001-2014 FactSet CallStreet, LLC
We'll also have based on this policy, I think, a scenario where until we see individual customer experiences particularly in Japan cleanly go the route of where the customers are really following the U.S. contracts the way we would need them to per U.S. GAAP. Then I think you could safely say, well, we'll probably embed a one to two quarter delay on when a shipment is made particularly in Japan and when we'll see the revenues. So I think it's partially true, Jason, at the same time, I think we can also infer inherent lag of shipments and booking particularly in Japan for those customers. So that's one fact I would point out.
The other fact is that while the existing research business has been the nature of link, particularly given the – whether it's the reimbursement environment or the fact that the market exit points really get to a consumable business have not yet been fully put together such that it's really been the capital equipment sale phase that we are seeking to then graduate from to the consumable phase to predict exactly how the year will shake out, given the, I'd say, the large funnel of opportunity but the inherent variability quarter-to-quarter and the fact that we've got now this Lorem Vascular transaction with the China approval that could have any magnitude on the revenues as an example.
The Japan regulations which could have a big impact, the implementation of that act is the part that we are really trying to make sure we understand before we go out and say, well, this is how fast the revenues are going to grow now because of these potentially sea-changing events. Instead of doing of that, what we are saying is we are going to keep growing demand for the product, we expect you'll see modest growth on the baseline consistent with that research business, however, we do have identified inflexion points, pivot points based on defined events such as the Lorem contract, such as the Japan regen med laws and all we are saying is we want to evaluate those, really make sure we are seeing them implement and then come back to you with, okay, this is what now how we think that's going to impact based on experience rather than getting too far in front of those and how fast it's going to cause our revenues to grow. So that's how I look at 2014. We should grow but we know that quarters can be variable and we're going to come back to you with as we see Japan and China and anything else that really moves the needle in that way come back to you as we see those play out.
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Jason H. Kolbert
Analyst, Maxim Group LLC
Q
Okay. A couple of quick questions which is, I'd like to come back at offline at another time and talk a little bit about the growth of Japan and China because you're right. I could see those as being very pivotal events. Can we just briefly touch on BARDA which is now that you have achieved the three objectives, there is the next tranche in the contract would be $56 million, how would that be received is kind of upfront cash and does that get built against time and materials or is that money that you can use as you see fit?
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
Hey, Jason, it's Marc. So the short answer is that the cash and the contract will go into a variety of buckets. One is it offsets current burn, so there are current individuals and current projects and development and so forth that it would offset. And ultimately the degree to which it does have any impact depends on what the ultimate negotiated next steps are with BARDA. But that's one area. Second area is that it goes to outside contractors and, in particular, if we have a hopefully a clinical trial that supported to BARDA, then some of those dollars will go through directly to those potential clinical trial sites and our CROs and so forth that help manage that trial with a profit margin to us. So the best dollar is the dollar that come – in terms of contract, it comes internally, offsets our current costs, maybe marginally increases our research and development expense, but generally those increased R&D expenses are things that are strategic and important to us anyway and the – not as important dollar is the dollar that goes to the outside contractor and ultimately you will see a mix of both of those and that degree of mix will depend on what the final negotiated next steps of the contract can be.
Cytori Therapeutics, Inc. (CYTX)
Q4 2013 Earnings Call
Corrected Transcript
11-Mar-2014
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Copyright © 2001-2014 FactSet CallStreet, LLC
Jason H. Kolbert
Analyst, Maxim Group LLC
Q
Okay. Terrific, Marc. Now, that we switched Marks, I think the most exciting thing I heard in this call was the potential for a QOL endpoint or an endpoint that would not expand on or that would not be mortality-driven and we all understand that dramatically impacts the time and size of the trial. Can you give us anymore insight into that? Are we talking about something like Kansas City, KCCQ questionnaire or some composite endpoint, help us understand kind of where you are in that process and when you might expect to have that nailed down?
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
Sure. No, I think we're very excited about the direction of the discussions and frankly the direction of our two phase 2 clinical trials in the U.S. And so we recently had a very revealing discussion with the FDA. I think we built a strong relationship with them. We have presented to them what we feel like our – what we feel like is the ideal approach should our phase 2 of support go into the next phase which we, of course, hope they will. There are a couple of different options. One is to go to a bigger more mortality MACE oriented trial, the other one is, as Chris mentioned, is to go to a more quality-of-life composites functional endpoint. They seem open to both. We happen to think that given our PRECISE data and obviously the way the ATHENA trials have been constructed, there is a tremendous commercial opportunity in that group of patients that have kind of mid level of heart failure where they are not in extremist but they are significantly symptomatic and that's a population that we think we can target and a quality of life based endpoint plus or minus a treadmill test or some other measure of exercise capacity would serve those and we think potentially drive reimbursement and adoption. So I think we're early. So we don't want to get too far ahead of ourselves, but I think the first discussions with the FDA are positive. We need to continue to collect the data. We'll continue the ongoing discussions with the FDA. It's a dialogue, not a single conversation and update you as we learn more.
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Jason H. Kolbert
Analyst, Maxim Group LLC
Q
Okay. My last question was just understanding where you're going with the RECOVER trial and just help me understand how many patients have been – has that trial begun, how many patients have been enrolled and is that something that you might consider bringing to Japan sort of the fast track side of the regulations there?
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
It's important to put RECOVER in context for what it is and what it isn't. It's basically a small exploratory feasibility trial of 10 patients with a pre-negotiated option that's effectively a phase 2b option to exercise should we want to. We're at two sites. I think our plan is to enroll that first 10 as soon as we can, evaluate the data and then make a decision about whether to move forward based on that. As Chris mentioned, it's going to be very difficult to handicap enrollment. So I think our plan is to let you know when we get those 10 patients in and then guide towards what our next step might be.
The importance beyond just the option is that it really does support feasibility in acute musculotendinous injuries, which have implications throughout orthopedics and sports medicine and that idea is consistent with what we've seen, frankly, in our cardiovascular patient. The heart is a muscle; it has tendinous components. We've seen repair in the acute and chronic sides in APOLLO and PRECISE trials. And so we think that that's supportive data. We've also got sports medicine pilots in Europe and Australia and we think that the data from the 10 patients will support and align with what we're doing outside of the U.S.
Cytori Therapeutics, Inc. (CYTX)
Q4 2013 Earnings Call
Corrected Transcript
11-Mar-2014
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Copyright © 2001-2014 FactSet CallStreet, LLC
Secondly, I think it's going to support what we're trying to do commercially in Europe, potentially expanding our claims, which could have an important commercial impact in the near-term given our good relationship with our notified body. And then finally and I think less important, but important to mention that this data could support a future orthopedic sports medicine related IDE in the U.S. So I would look at it really with that lens and probably no more.
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Jason H. Kolbert
Analyst, Maxim Group LLC
Q
All right, terrific. Thank you so much and for Mark Saad, I want you to know that everybody at Maxim is enjoying your favorite whisky. Thanks, guys.
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Mark E. Saad
Chief Financial Officer, Cytori Therapeutics, Inc.
A
Thanks, Jason.
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Operator: Our next question comes from the line of Yale Jen with Laidlaw & Company.
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Yale I. Jen
Analyst, Laidlaw & Co. (UK) Ltd. (United States)
Q
Thanks for taking the questions. I think a lot of questions been answered. So I just want to start with the BARDA contract. Given that you guys already spoke with FDA and [ph] about to spoke (44:58) with FDA, is there any additional agency you need to speak with. And if everything goes smoothly, if I model that potentially a decision to be maybe in second quarter of this year, will that be something not farfetched?
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
Hi, Yale, it's Marc Hedrick again. I think a little bit of context. So with respect to BARDA, we have weekly, sometimes even more often than weekly, twice a week conference calls with BARDA. On a weekly basis we have non-BARDA related individuals on that call; from other agencies within the government even outside of HHS and going into DoD and so forth. So there's a recognition beyond just BARDA that Cytori has a BARDA contract; that we're moving the process forward and intend to go into a greater stage of our contract. So at DoD, FDA and a variety of other agencies that sit at the decision-making table, we won't be new to them. So when we get to the ultimate decision-making forum, they will be very aware of Cytori, our data and then our joint plan at BARDA and BARDA in a way is helping to shepherd us through a complex governmental process to try to achieve their own governmental ends.
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Yale I. Jen
Analyst, Laidlaw & Co. (UK) Ltd. (United States)
Q
Okay. So we'll have possibly a government decision maybe in the first half of this year is a possibility.
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
Yeah, I think that's absolutely a possibility. A flurry of activity in Q2 related to that and assuming things happen on schedule and there are not delays, which there certainly could be, a Q2 answer is very possible.
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Cytori Therapeutics, Inc. (CYTX)
Q4 2013 Earnings Call
Corrected Transcript
11-Mar-2014
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Yale I. Jen
Analyst, Laidlaw & Co. (UK) Ltd. (United States)
Q
And in terms of ATHENA study that for the first one that you have treated 33 patients, so there's about 12 left to be recruited and treated. And given that timeline you mentioned that the possible completion of recruitment will be second or third quarter of this year? And with that timeline, if I consider early 2015, you might have the top-line data, would that be a possibility?
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
Let me just correct one thing that you said, so we're absolutely clear. So we're at 23 not 33. I wish we were at 33; hope to be at 33 soon enough.
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Yale I. Jen
Analyst, Laidlaw & Co. (UK) Ltd. (United States)
Q
Okay.
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
But so we have a little bit more work to do. We're over halfway there. Between Chris Calhoun, Steven Kesten and myself, we've been out to every single clinical trial site in ATHENA I and ATHENA II. There's a lot of enthusiasm out there for getting this trial enrolled and people can see the finish line. Of course, the key gating item is when do we finish enrollment. And it could be middle of the year depending on what the enrollment assumptions are that one makes and are there any other issues that occur.
So six month data is going to be critical. It'll take about eight months after we finalize enrollment to have that data available, the database unlocked and reviewed. So, yes, so your timing is about right. It's going to be early next year before we get the data. But in the meantime, we're going to continue to drive forward on ATHENA II and roll those ATHENA I sites directly into ATHENA II. And I think on a practical way, that's the way we keep the momentum going. We've changed the trial, as Chris mentioned, I think that was the tough but right call. Momentum's building and we hope to get ATHENA I done and roll right into ATHENA II and then be prepared for the decision discussion about a phase 3.
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Yale I. Jen
Analyst, Laidlaw & Co. (UK) Ltd. (United States)
Q
Okay, great. And last question before I get back to the queue is that in terms of the China approval process, I guess the guidance is up potentially to toward the fourth quarter, end of this year. And should that be the case, is Lorem has committed additional, I guess, about $7 million purchase, is that something still hold and also do you have any comment in terms of the process right now in terms, for the FDA approval?
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Christopher J. Calhoun
Vice Chairman & Chief Executive Officer, Cytori Therapeutics, Inc.
A
Yeah. Hi, it's Chris. So we've just spent the last couple weeks with the leadership team from Lorem who's been over here in the U.S. meeting with cardiac centers and potential – several of the board members and other centers that they can learn from. So they're getting that business up and running. In addition, they did buy the product that was part of the contract in Q4 and that's really to sell into the current market, Singapore and Australia, and they're building up their commercial team to do that. And there is an existing funnel that we already had in place
Cytori Therapeutics, Inc. (CYTX)
Q4 2013 Earnings Call
Corrected Transcript
11-Mar-2014
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Copyright © 2001-2014 FactSet CallStreet, LLC
for those markets that we'll be pursuing. So we should see some commercial activity generally over the year from the existing markets.
Now, for opening up China, we're making a series of moves that will allow us to bring our device and get it approved into China. We think by the end of the year, obviously, any time you're dealing with international regulatory authorities, it's hard to give an exact timeline. But we've mapped out a plan and a pathway on how we can get there and we're pursuing that aggressively together with the team from Lorem. And upon approval, it's their vision to bring 50 systems into 25 of the top cities within China. And by bring I mean they want to buy the systems and place them into the hospitals and then feed those hospitals with 10 or 20 or 30 consumables so that they can get going and then do all of the appropriate training and education to create kind of well prepared centers of excellence to get that clinical experience under their belt that they treat people safely and they're sophisticated and then they can become training centers to spread it more actively across China. So that's kind of their model.
They're committed to investing and really building out market. And the secret for China, as you probably will know, it's a really a numbers game. We are talking about from a population base and a need base really one of the largest opportunities in the planet and so getting those systems out there, getting the teams trained is their goal and they don't want any barriers to do that. So, yeah, there is a committed order once we get approval, I think, it's in the $5 million range. And that really is to get these systems and deploy them across targeted cities around China and then also seed them with a meaningful number of consumables so that they get trained and that they can treat essentially autonomously without a lot of oversight from the company. So there is an active plan that's coming together and we're very, very excited about the relationship with Lorem. He finished off the equity investment as you've seen and this is – the value beyond the equity relationship, the partnership value, I think what we're going to see from Lorem is going to be important for the company.
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Yale I. Jen
Analyst, Laidlaw & Co. (UK) Ltd. (United States)
Q
Okay, great. Thanks a lot and I appreciate it.
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Operator: Our next question comes from the line of Keay Nakae with Ascendiant Capital.
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Keay T. Nakae
Analyst, Ascendiant Capital Markets LLC
Q
Yes, thank you. First question relates to the BARDA contract and your upcoming meeting with the FDA. So in order to be able to move forward into the next phase of BARDA, what specifically do you need the FDA to agree to? Do they actually have to have approved an IDE for your proposed indication for treating thermal burns or what exactly does the FDA have to sign up before you can move forward?
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
No, I think the way discussions with BARDA had gone that the key was the three objectives which we've done and then subsequently they have asked us to at least have a preliminary discussion with FDA. So the discussion itself becomes the gating item and that meeting is on the schedule.
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Keay T. Nakae
Analyst, Ascendiant Capital Markets LLC
Q
Okay. Thanks for that. And then related to Lorem, what else can you tell us at this point about their infrastructure? What do they physically now have in place to begin selling your product?
Cytori Therapeutics, Inc. (CYTX)
Q4 2013 Earnings Call
Corrected Transcript
11-Mar-2014
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
So – it's Marc Hedrick. I'll take that. The answer is they're beginning to build an infrastructure. So I think as we discussed on the last call, they are a new company that has deep connections within the Chinese market, the FDA, medical device, big pharma and so forth. They're very interested in building distribution channel for us throughout China. China is a gigantic market as you know, difficult and complex. They have the connections to be able to do that. So I would say it's still very early and we're just a handful of employees, but over subsequent quarters, our plan is to update you and let you know kind of how that's progressing and how that's building. Right now, the key is just move towards regulatory approval, which doesn't require a lot of infrastructure.
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Keay T. Nakae
Analyst, Ascendiant Capital Markets LLC
Q
Have they shared with you a plan for how they are going to build that out in terms of hiring X number of people and having XYZ systems in place by such and such dates?
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
Yeah.
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Keay T. Nakae
Analyst, Ascendiant Capital Markets LLC
Q
Do you have that kind of visibility?
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
Yeah, the discussions with Lorem went on for a good year leading up to the signing of the contract and during that time, a collectively agreed upon business plan was produced but the key gating item is ultimately regulatory approval that triggers a lot of the subsequent investment and ultimate commercial work which is where a lot of the cost will go.
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Keay T. Nakae
Analyst, Ascendiant Capital Markets LLC
Q
Okay. And thanks for that. And then just finally back to the hamstring study, I know you're going to do the initial 10, but is there at least an idea of how many additional patients you would then look to be enrolling and evaluating?
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
Yeah, so the RECOVER trial that we've – that the FDA has agreed to has 10 patients and sort of, I guess, I'll call it, an A phase which is a feasibility. And if I may speak it's a rule and safety study, a feasibility study and we look at two doses in five patients. It won't tell us a lot but it gets to that initial feasibility stage and accomplishes some of the goals that I mentioned before. It's our decision whether go into part B which is a 60-patient double-blind, placebo-controlled safety feasibility study looking at low-high dose compared to placebo 20 patients in each trial. So that's been fully vetted and planned out but we have the option to pursue it assuming the FDA would agree that we would do so.
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Cytori Therapeutics, Inc. (CYTX)
Q4 2013 Earnings Call
Corrected Transcript
11-Mar-2014
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17
Copyright © 2001-2014 FactSet CallStreet, LLC
Keay T. Nakae
Analyst, Ascendiant Capital Markets LLC
Q
Okay, thanks.
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
Thank you.
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Operator: Our next question comes from the line of Dan Trang with Stonegate Securities.
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Dan D. Trang
Analyst, Stonegate Securities, Inc.
Q
Thank you, guys. Actually, all my questions have been answered.
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Mark E. Saad
Chief Financial Officer, Cytori Therapeutics, Inc.
A
Okay. Thanks very much, Dan.
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Operator: I would now like to turn the call back over to Chris for email question.
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Christopher J. Calhoun
Vice Chairman & Chief Executive Officer, Cytori Therapeutics, Inc.
A
Mark, do you have one?
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Mark E. Saad
Chief Financial Officer, Cytori Therapeutics, Inc.
A
Yes, we do. We have received an email question that came in that I think probably that's for Marc Hedrick to answer.
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Marc H. Hedrick
President & Director, Cytori Therapeutics, Inc.
A
So the question from [indiscernible] (57:59) is that there have been many adipose-derived stem and regenerative cell therapy clinics opening up in the U.S. in the last couple of years despite the fact they are likely operating in violation of FDA regulations related to the concept of "minimal manipulation." Could you explain how Cytori's technology fits into this regulatory picture? How this may play out? When it might represent an opportunity for the company?
So [ph] Ray, (58:23) thanks for the question. Yeah, first let me just mention what Cytori's position in history is over the last 10 years. And this comes from an awful lot of back and forth with the agencies. Celution, it's consumable, Celase, Intravase, the ADRC output, they are all regulated as a device by CBER. That was a – came as a result of a lot of discussion and negotiation. Ultimately, it was a decision made outside of CBER/CDRH at the Ombudsman level through a process called a request for designation. So we are clearly a device regulated as a device and the therapy is regulated as a device. As for other approaches such as cell culture, taking adipose tissue from a patient and applying any other "manufacturing or manipulating" the tissue or cells whatever, that's really
Cytori Therapeutics, Inc. (CYTX)
Q4 2013 Earnings Call
Corrected Transcript
11-Mar-2014
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Copyright © 2001-2014 FactSet CallStreet, LLC
seems to be increasingly directed by FDA and CBER to the BLA or drug path, biologic path. And so that has a very different timeline and regulatory path and deliverables and so forth than the device path has.
So kind of implied in your question and I can't answer is that we're not really privy to what the FDA strategy is relative to other companies and how they might employ some sort of enforcement strategy on clinics that might be doing a homebrew sort of thing. So we don't know. I can tell you that over the last two or three years, I've seen redacted letters to clinicians by the FDA implying as much that they would be regulated under the BLA and ask as a biologic and if they should submit a biologic application. So when you take all this together, it's self-serving but I think it validates our path and a lot of the hard work that we've been doing with FDA over the last 10 years to get that anchor as a device, not a biologic in contrast to pretty much every other group where they're biologic. There is some sort of cell culture or something, as you mentioned, beyond the minimal manipulation. So I think it's a competitive advantage for us and because of where we are with FDA in some of our trials and so forth, I think our path is clear and it's a relatively direct way to the market.
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Operator: And at this time, we have no further questions. I would like to turn the floor back over to Chris Calhoun for any additional or closing remarks.
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Christopher J. Calhoun
Vice Chairman & Chief Executive Officer, Cytori Therapeutics, Inc.
Great, thank you very much. I want to thank everybody for your time, interest and support of Cytori in our important mission to innovate and market Cytori's cell therapy products that we believe will improve the lives of millions of patients around the world. Thank you very much.
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Operator: Thank you. This concludes today's conference call. You may now disconnect.
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