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Edited Transcript of ATHX.OQ earnings conference call or presentation 9-Nov-20 9:30pm GMT

·45 min read

Q3 2020 Athersys Inc Earnings Call Cleveland Nov 10, 2020 (Thomson StreetEvents) -- Edited Transcript of Athersys Inc earnings conference call or presentation Monday, November 9, 2020 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Gil Van Bokkelen Athersys, Inc. - Co-Founder, Chairman & CEO * Ivor Macleod Athersys, Inc. - CFO * Karen Hunady Athersys, Inc. - Director of Corporate Communications & IR ================================================================================ Conference Call Participants ================================================================================ * Chad Jason Messer Needham & Company, LLC, Research Division - Senior Analyst * David Timothy Hoang SMBC Nikko Securities America, Inc., Research Division - Research Analyst * Gregory Allen Harrison BofA Merrill Lynch, Research Division - Research Analyst * Jason Howard Kolbert Dawson James Securities, Inc., Research Division - Director of Research ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by. And welcome to the Athersys Third Quarter 2020 Results Conference Call. (Operator Instructions) I'll now turn the conference over to Karen Hunady. You may begin. -------------------------------------------------------------------------------- Karen Hunady, Athersys, Inc. - Director of Corporate Communications & IR [2] -------------------------------------------------------------------------------- Thank you, and good afternoon, everyone. I'm Karen Hunady, Director of Corporate Communications and Investor Relations for Athersys. Thank you for joining today's call. If you do not have a copy of the press release issued at the close of the market, it is available on the Athersys' website at athersys.com. Ivor Macleod, Chief Financial Officer, is here to provide us with the financial update. And Gil Van Bokkelen, Chairman and Chief Executive Officer, will be providing our corporate release. Today's call is expected to last 30 to 45 minutes, and a webcast of the audio will be available 3 hours after the call's conclusion on our website under the Investors section. The access information for the replay is on today's press release. Any remarks that we may make about future expectations, plans and prospects constitute forward-looking statements for purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by the forward-looking statements as a result of various important factors including those discussed in our forms 10-Q, 10-K and other public SEC filings. We anticipate that subsequent events and developments may cause our outlook to change. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. For the benefit of those who may be listening to the replay, this call was held and recorded on November 9, 2020. Since then, we may have made announcements related to the topics discussed, so please download, our most recent press releases and SEC filings. With that, I'd like to turn the call over to Ivor Macleod. Ivor? -------------------------------------------------------------------------------- Ivor Macleod, Athersys, Inc. - CFO [3] -------------------------------------------------------------------------------- Thank you, Karen. Good afternoon, everybody. And once again, thank you for joining today's call. I am Ivor Macleod, Chief Financial Officer of Athersys, and it is my pleasure to give you an overview of the financial results for the third quarter of 2020. For the 3 months ended September 30, 2020, we recognized $86,000 in revenues compared to negative revenues of $361,000 for the 3 months ended September 30, 2019, primarily related to our collaboration with Healios. During our evaluation of variable consideration in the third quarter of 2019, we determined that the estimated transaction price of certain product supply provided to Healios decreased due to a reduction in the underlying cost per dose of the product supply occurring during the quarter. In addition, the number of doses of clinical product requested by Healios was amended further reducing our revenues during the period. Our collaboration revenues may fluctuate over time as we contract with Healios to perform manufacturing or other services and as we potentially enter into new collaborations. Research and development expenses were $18.5 million for the third quarter 2020 compared to $8.9 million for the comparable period in 2019. The $9.6 million increase is primarily associated with increases in clinical trial and manufacturing process development costs of $6.9 million as well as increases in research supplies, personnel costs, stock compensation costs and other research and development costs. Our clinical development, clinical manufacturing and manufacturing process development expenses vary over time based on the timing and stage of clinical trials underway, manufacturing campaigns with clinical trials and manufacturing process development projects. We expect our annual 2020 research and development expenses to increase compared to 2019. General and administrative expenses were $3.7 million for the 3 months ended September 30, 2020. This represents an increase of $700,000 when compared to expenses of $3 million in the comparable period in 2019. This increase was primarily due to increased personnel costs, outside services, professional fees and stock compensation costs. The net loss for the third quarter of 2020 was $22.5 million compared to a net loss of $12 million in the third quarter of 2019. The difference is primarily a consequence of the previously mentioned variances. During the 9 months ended September 30, 2020, net cash used in operating activities was $44.5 million compared to $25.2 million in the 9 months ended September 30, 2019. Net cash used in operating activities may fluctuate significantly on a quarter-to-quarter basis, as it has over the past several years, primarily due to the timing of receipts of fees from our collaborations. And our payments of clinical trial costs, such as clinical manufacturing campaigns, contract research organization costs and manufacturing process development projects. At September 30, 2020, we have $61.7 million in cash and cash equivalents compared to $35 million at December 31, 2019. With that, I will turn the call over to Gil Van Bokkelen for the corporate update. Gil? -------------------------------------------------------------------------------- Gil Van Bokkelen, Athersys, Inc. - Co-Founder, Chairman & CEO [4] -------------------------------------------------------------------------------- Thanks, Ivor, and good afternoon, everyone. Our last earnings call was held on August 10, just about 3 months ago. During that time, we have made steady progress on a number of important activities and initiatives, which reflect our focus on and commitment to completing clinical trials, supporting our partner programs and implementing new high-value alliances as well as establishing commercial readiness in multiple areas in preparations for becoming a commercial company. On the clinical trial front, we've been actively supporting the efforts of our partner in Japan, Healios. As Healios has indicated previously, they are approaching completion of enrollment in 2 clinical trials. There are ongoing pivotal study focused on treating patients that have suffered a serious and debilitating ischemic stroke, the 220-patient TREASURE trial; and the smaller ONE-BRIDGE trial that is focused on the treatment of patients suffering from acute respiratory distress syndrome or ARDS. Healios has previously indicated that they are focused on trying to complete enrollment for both trials around the end of this year. If they achieve that goal, it should mean that they have seen top line results for both studies in the first half of 2021. Specifically, the primary clinical assessment for ONE-BRIDGE is designed to occur 28 days, or approximately 1 month, after enrollment. And after all patients have been enrolled for the trial is followed by inspection, verification and analysis of the clinical data for this study, which typically takes a few weeks. This means that if enrollment of the last patient is completed by the end of the year or sometime in early January, they should be on track to have top line results for ONE-BRIDGE before the end of the first quarter. The primary clinical assessment for the TREASURE trial occurs at 90 days after each patient is enrolled. So depending on when the last patient is evaluated, Healios could be on track to have top line results sometime in the second quarter of 2021. Once again, after enrollment is complete, inspection, verification and analysis of the clinical data for the trial will likely take a few weeks to finalize. As we previously announced, we completed the production and delivery of the material to Healios complete both of these trials last year. In recent months, our focus has been on providing regulatory and other assistance to Healios as they prepare for their rolling submission for potential approval in Japan. In the meantime, we've continued to work with Nikon CeLL innovation as well as other contract service providers and manufacturing organizations in anticipation of product launch following successful clinical trials and subsequent approval. In parallel, we have advanced our own clinical programs and negotiations with other potential partners. On the clinical front, despite the chaos created by the COVID-19 pandemic, which has had a significant impact on hospitals and clinical trials around the world, we have forged ahead in the face of all the obstacles and uncertainty. Our most advanced program is our 300-patient MASTERS-2 clinical trial evaluating administration of MultiStem for the treatment of ischemic stroke. This is a randomized, double-blind, placebo-controlled pivotal trial that has received multiple important regulatory designations from the FDA, including both Fast Track and RMAT designations. As we reported previously, beginning in the late spring and throughout the summer, like many other companies, we experienced significant operational issues at a meaningful number of clinical sites. Some of these disruptions included hospitals suspending enrollment activity in clinical trials. And these institutions were off-line for a period ranging from weeks to months. In Europe and other international territories, significant travel restrictions were put in place and many remain in effect, which has delayed sites in those geographies from coming online. Accordingly, we've had to adjust our expectations and timetable for the study. Today, however, we're pleased to announce that all of the MASTERS-2 clinical sites in the U.S. that had previously been taken off-line as a result of COVID-19-associated operational restrictions are now back online, and we've been adding new sites at a meaningful pace. We've also qualified a large number of additional sites for inclusion in the study beyond our initial goal of 50 sites. Importantly, our aggregate enrollment rate at active sites has exceeded our initial expectations and projections for the study, which we believe reflects strong clinical investigator and staff enthusiasm for the trial. We also believe this illustrates investigator confidence that this treatment approach has the potential to substantially improve the standard of care for patients that have suffered a debilitating stroke. And who are facing potential extensive disability and complications in the aftermath due to limitations in current standard of care. While we cannot control the course of the pandemic, how effectively it's being dealt with, the impact it might have at hospitals we are working with or intend to work with, international travel restrictions or other obstacles, we continue to forge ahead. As we described in our last earnings call, our goal is to complete enrollment of the MASTERS-2 trial by the end of next year. This will, of course, depend on a number of different factors, including the potential for new or recurrent operational disruptions at clinical sites in light of the recent spike in new COVID-19 cases; and the corresponding increase in the number of patients that have subsequently become seriously or critically ill. Significant clinical resources have to be devoted to caring for these patients. And this increase in the number of cases, means that the clinical institutions and hospital staff may be forced to divert their resources or impose restrictions designed to reduce the further spread of the virus thereby impacting operations in clinical trial activity, even for unrelated areas. Just to illustrate the increased threat level. As of our last earnings call 3 months ago, there were approximately 2.4 million active cases of COVID-19 here in the U.S. and 5.2 million cumulative confirmed cases had occurred. As of this weekend, however, there are more than 3.5 million active cases with more than 10.2 million confirmed COVID-19 cases having occurred here in the U.S. Disturbingly, in recent weeks, the 7-day rolling average of new cases occurring here in the U.S. has surged upward, and last week, exceeded more than 132,000 new cases per day for the first time with a 7-day rolling average of more than 100,000 cases. Both well above the observed rates and highs from this summer, which, at their peak, topped out at about 70,000 new cases per day. And if they're low, we're approximately 35,000 cases. It's somewhat tempting to attribute to recent rise in cases to an increased frequency of testing. However, the data suggests that things are not that simple. While the mortality rate has come down appreciably since the early phases of pandemic, it's important to recognize that this too has increased in the fall and recently exceeded 1,200 reported deaths in a single day here in the U.S. with a 7-day rolling average that has risen from the low of about 520 per day in July to the current level of approaching 1,000 patient deaths per day. Globally, the increased incidence of confirmed cases and mortality levels have risen substantially in recent weeks, both the new highs. The mortality rate from fully resolved cases globally is currently approximately 3.4%, whereas the mortality rate from fully resolved cases here in the U.S. is more than 3.6%. Even with the U.S., having one of the highest per capita testing rates in the world. So clearly, the increased number of confirmed cases is also correlated with elevated rates of patients that are subsequently becoming seriously or critically ill, many of whom are dying. In total, there have been more than 243,000 COVID-19-associated patient deaths here in the U.S. So the evidence seems clear that despite the best efforts and advice of politicians and public health officials, enhanced public awareness, increased testing and the imposition of operational restrictions at schools, businesses and many other establishments, the pandemic hasn't resolved and things are currently moving in the wrong direction. While we are encouraged by the announcement earlier today regarding one of the candidate vaccines in development, until and unless effective vaccines are developed, demonstrated to be safe and effective through properly designed and executed clinical trials, with data appropriately reviewed by the FDA and other regulators, and appropriately qualified vaccines are subsequently approved and made available on a large scale with people being vaccinated, we may continue to experience additional chaos and uncertainty for some time while the pandemic continues. However, that scenario also provides us with an opportunity to make a difference for patients that are becoming seriously or critically ill as a result of COVID-19 for other pathogens that can arise and have a similar effect. As I believe everyone listening in today is aware, in addition to our ongoing MASTERS-2 clinical trial, we are also conducting a clinical trial to evaluate administration of MultiStem to treat patients with ARDS. This program was designed as a pivotal trial and has received both Fast Track and more recently, the RMAT designation from the FDA based on the strength of our prior results and clinical data. In response to outreach from BARDA earlier this year, we worked closely with the FDA to design and initiate a clinical trial focused on the treatment of patients with COVID-19-induced ARDS, which remains the leading cause of death in patients that are becoming seriously or critically ill from the virus. Unfortunately, we have now surpassed 1.26 million COVID-19-associated patient deaths globally. And there are now more than 13.7 million active cases, more than double the number from 3 months ago. This year, we've witnessed a major mobilization of innovative technology and organizations that are focused on the expedited development delivery of personal protective equipment, diagnostics, vaccines, antivirals and treatments for patients suffering from COVID-19. There's been tremendous progress on multiple fronts, but there has been one area that is glaringly underemphasized. Funding to expedite development and delivery of treatments for patients that are seriously or critically ill, and on a ventilator, because they have COVID-19-induced ARDS. A number of innovative approaches have been tried including antivirals and others, but none of them have provided highly meaningful or effective relief for these patients, as evidenced by the mounting number of patient deaths occurring here in the U.S. and around the world. The focus of our program has always been on treating patients that are becoming seriously or critically ill with ARDS because our data strongly suggests that we can help them. The strength of our results are why we have received both Fast Track and RMAT designation from the FDA for this program. However, while politicians and bureaucrats struggle to find common ground on what approaches to prioritize, whether and how to fund key programs and what institutions, groups or individuals should be in charge of such an effort, our focus and priority objectives have never wavered. In response to the interest from BARDA leadership, who reached out to us early in the year before the pandemic was even declared a national health emergency by health and human services, we have prioritized the advancement of MultiStem for the treatment of COVID-19-induced ARDS, and that led to the design and expedited authorization and initiation of our 400-patient MACOVIA trial. As we stated in the prior earnings call, we are focused on trying to complete enrollment of the trial sometime next year. However, we have watched with mounting frustration as BARDA funding authorized by Congress in February was commandeered and redirected to other initiatives, and key personnel were transferred out of or left the agency. In our view, while the administration has appropriately emphasized efforts in advancement in certain areas including expediting development of personal protective equipment for health care workers and expediting development of diagnostics vaccines and antivirals. They have failed to recognize or address other key issues including emphasizing the advancement of treatments that have shown clinical promise for these seriously and critically ill patients. Despite our best efforts, we've been unable to find common ground with BARDA while the current leadership remains in place. However, following the ultimate resolution of the election, it now appears that there may be a change in leadership and a key institution, creating opportunities for the new administration to focus on things that have been neglected or ignored. Specifically, putting greater emphasis on expedited development and delivery of treatments for patients that are seriously or critically ill and that are at risk of dying. We look forward to seeing how the new leadership team approaches the challenges of the pandemic. And to working with them where possible. As recognized by BARDA early on, one of the strengths of our approach is that MultiStem is not a pathogen-specific treatment. Our mechanistic and clinical data give us confidence that it has the potential to be broadly relevant to the treatment of ARDS, whether the condition is induced from a virulent coronavirus, influenza, bacterial pathogens or a range of other scenarios. As we noted in our earnings release today, we are in the process of modifying our clinical study to broaden patient eligibility for the trial, and to accommodate enrollment of patients with non-COVID-19-induced ARDS. Once these proposed modifications are finalized, they must be reviewed and authorized by the FDA and eventually other regulators. As we move towards potential inclusion of clinical sites in Europe, which we intend to do in coordination with a partner. Our goal remains the complete enrollment of this trial by the end of next year. Importantly, companies that we have been actively engaged in partnering negotiations with in recent months, also recognize the breadth of potential relevance of MultiStem for treating ARDS. This quarter, we have moved closer towards establishing an alliance that would focus on expediting development and commercialization of multiple programs in our critical care portfolio. With an emphasis initially on development and commercialization in Europe, while enabling us to focus in parallel on development and subsequent commercialization here in the U.S. This also provides us with an opportunity to achieve several important goals. The first goal is to finalize and implement a transformational alliance with a major multinational partner that has the essential capabilities, expertise, resources and commitment to work with us to efficiently and successfully advance as well as ultimately commercialize our critical care programs in Europe, with the additional potential to work together to expand the reach of the alliance to deliver safer and more effective therapies into other parts of the world as well. The second objective is to work with a partner to accelerate and successfully complete ongoing and planned development efforts in multiple high-value indication areas where our technology has shown promise, where there is substantial unmet clinical need and where we both believe there is a strong value proposition for our innovative treatments. Third is to provide us with the substantial financial resources to help accelerate our evolution and growth as we work towards completing the transition to becoming a fully commercial company. Throughout this year, we've been working methodically with prospective partners to define and ultimately finalize an alliance that meets our strategic, financial, operational and commercial objectives, and we have made steady progress in that regard. We are highly focused on achieving this very important near-term goal with a world-class organization. And doing so in a manner where there is genuine alignment and a solid commitment to achieving success together. Once we accomplish this, we believe it will be a transformational moment for the company and our shareholders. While we approach that important event, in parallel, we continue to advance our other clinical programs and our efforts directed towards achieving commercial readiness. As one example, we are pleased to announce that the University of Texas Health Science Center, or UTHealth, has finished required institutional reviews and are now commencing patient screening for the Phase II clinical trial evaluating administration of MultiStem for trauma-related inflammation and complications or MATRICS-1 in patients at the Memorial Hermann-Texas Medical Center, a leading level-1 trauma center. This study represents another important application of MultiStem for the critical care area targeting the severe inflammatory responses and other complications associated with poor outcomes following trauma. As we've indicated previously, this trial is being supported by the Department of Defense through MTEC, UTHealth and Athersys. In terms of establishing commercial readiness, we remain focused on our process development efforts to establish manufacturing processes and procedures for large-scale manufacturing of the product and commercialization following approval, conducting planning and facility design work for a commercial-scale manufacturing facility; defining requirements and establishing supply chain integrity essential for a large-scale commercial operations; and implementing an enterprise resource planning, or ERP system, suitable to support commercialization, a process that we first initiated in 2018. We've also continued to map out our envision commercialization approach here in North America. In addition to these activities, we are focused on many other important objectives. All of which are in direct support of achieving our goals to develop and ultimately deliver innovative and more effective treatments to patients in areas of unmet clinical need and deliver substantial value to our shareholders. Some of those objectives include strengthening the organization through key hires, which we have done throughout the course of this year. It also means taking proactive steps to strengthen and diversify the board, which we are also in the process of doing. All of this is intended to help the company and serve the interest of our shareholders, and we look forward to updating you on these and other activities soon. With that, I'd like to address a few questions submitted by some of our shareholders. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Gil Van Bokkelen, Athersys, Inc. - Co-Founder, Chairman & CEO [1] -------------------------------------------------------------------------------- One question that many people have asked since the election is, what impact do you think the election results will have on our program to treat COVID-19-induced ARDS? The answer is, this remains to be seen. And it depends a lot on what the new administration's priorities are and how willing Congress is to support that agenda. At this point, it's too soon to say, especially since the election results haven't been certified yet. But we are encouraged by some of the things that we are seeing. ================================================================================ Presentation -------------------------------------------------------------------------------- Gil Van Bokkelen, Athersys, Inc. - Co-Founder, Chairman & CEO [1] -------------------------------------------------------------------------------- I want to emphasize that our priority is to pursue development of MultiStem for the broader clinical need including for use against influenza-induced ARDS as well as from other viral or bacterial pathogen or other causes, and to find the right partner to help us in that effort. We're confident that we are on a path to do just that. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Gil Van Bokkelen, Athersys, Inc. - Co-Founder, Chairman & CEO [1] -------------------------------------------------------------------------------- Another question people have asked is, whether the development, approval and delivery of one or more vaccines against COVID-19 will impact our program or interest in the area. The answer is, no. Because as we've stated numerous times, in a typical year, even without COVID-19, there are more than 200,000 ARDS patients in the U.S. alone and many more around the globe. Many of these are caused by or associated with influenza despite the fact that every year, many people receive the annual flu vaccine. It's estimated by the CDC that typically less than half the population in the U.S. received the flu vaccine. Usually, it's between 1/4 to 1/2 of the population, with a much higher rate of vaccinations in children. In contrast to COVID-19-specific vaccines or antivirals, our approach is pathogen independent, and we believe has much broader relevance against a range of things that could cause or contribute to ARDS. In the past 20 years, we have seen repeated instances of the emergence of novel viruses that can induce ARDS and cause patients to become seriously or critically ill. It seems pretty likely that, that will continue to happen again in the future. Finally, many people asked about the status of our ongoing partnering negotiations and discussions. For obvious reasons, we can't provide detailed comments on this. Other than to say that, one, it's a near term priority, and we've made good progress. Two, we are in negotiations and discussions with very high-quality multinational companies. They have the types of capabilities we require in a partner. And three, choosing the right partner and negotiating the right deal structure are the most important objectives, and people should be patient while we complete the process. And with that, we'd like to open it up to a few additional questions. -------------------------------------------------------------------------------- Operator [2] -------------------------------------------------------------------------------- (Operator Instructions) And your first question comes from Greg Harrison with Bank of America. -------------------------------------------------------------------------------- Gregory Allen Harrison, BofA Merrill Lynch, Research Division - Research Analyst [3] -------------------------------------------------------------------------------- Just wondering on the MACOVIA study, how are you thinking about the hurdle for success or good data? When it comes to COVID patients, relative to your previous data in patients with ARDS from other causes, is there any reason to think that the COVID patients could have better or worse outcomes? And how does that kind of impact your strategy for expanding the study to other ARDS patients? And then what it takes ultimately for approval. -------------------------------------------------------------------------------- Gil Van Bokkelen, Athersys, Inc. - Co-Founder, Chairman & CEO [4] -------------------------------------------------------------------------------- Yes. That's a really good question. And one of the difficult things as it relates to evaluating COVID-19 patients with ARDS, the good news is that there's a lot of data out there that has emerged over the past few months actually, that give us some insight into how those patients are faring and some of the complications that are observed. Now it's absolutely true that some of the patients, I would say, on average, patients with COVID-19-induced ARDS tend to be a bit sicker and experience a higher mortality rate than patients with, let's just call it, traditional ARDS, whether it be from influenza or other types of pathogens or other events that can cause ARDS in these patients. But we recognized that very early on when we were designing the study, and so we actually designed it very conservatively. So we did not anticipate the same type of response rate that we saw in our prior clinical trial. We were actually much, much more conservative than that. And we also built into it -- into the study design, the opportunity to do a recycling analysis partway through the trial. So that the data safety monitoring board or the DSMB could actually look at the data and then come back and say, we recommend -- so one scenario is that our data is tracking closer to what we saw from the last study, and they come back and say, you know what, you don't need to run a study as big as you guys thought you were going to. You can actually downsize the number of patients that you include in the trial. The -- another possibility is that we're close to our somewhat more conservative expectations and they say, no, 400 patients is about right. We just recommend that you continue with the path and you continue moving on that. Or they could come back with something that's in between those 2, which is to say, "Hey, you don't need to go quite as far as you thought you were going to go, you can do something that lasts." Or conversely, they could say, no, we recommend that you increased the size of your study by some amount just based on the emerging data set that we see partway through the trial. So all of those are possibilities. And I think that we tried to design this approach such that we don't need to make hard and fast assumptions or predictions. It's basically designed with some flexibility, and also appropriately leveraging the data that we generated from the prior clinical trial. In terms of how we determine success, the primary end point of the study, we don't think it's going to change as we go through this exercise, right? It's really about how large the study might be and then modifying inclusion criteria that we allow for patients in the study. Modifying the inclusion criteria is a reasonably straightforward exercise, but there's still a process that you have to go through with the FDA in order to get them to sign off on that. And we don't think there's going to be any problems on that front. For us, it was simply a finally reaching the conclusion, then you know what time to basically initiate that process move forward and advocate for broadening of the study. But again, we will take a look at the data in terms of making that. We'll take a look at the COVID-19 patient data. We'll take a look at the other non-COVID-19-induced ARDS patient data, and we'll evaluate all the patients in the trial holistically. And that's something that we look forward to discussing with the FDA in the not-too-distant future. So our belief is that if we see a reduction in mortality, and we see an improvement in ventilate pre days and the clinical metrics that the FDA has signed off on in terms of in terms of the things that are built into the study design. But that is going to remain intact. And it's really just about modifying again the types of patients that we include in the study, and then moving forward on that basis. And it's also fair to say that our potential partners or partner, may actually have insight into how they would like to think about the trial as it relates to, for example, clinical sites in Europe. -------------------------------------------------------------------------------- Gregory Allen Harrison, BofA Merrill Lynch, Research Division - Research Analyst [5] -------------------------------------------------------------------------------- Okay. That's helpful. And then I guess just a follow-up on that. How are you thinking about your enrollment speed assumptions in light of the increase we've seen in the pace of infections? Is that kind of assumed already in your guidance that you try and fully enroll the study by the end of next year? Or could that be sooner based on the increase we're seeing lately? -------------------------------------------------------------------------------- Gil Van Bokkelen, Athersys, Inc. - Co-Founder, Chairman & CEO [6] -------------------------------------------------------------------------------- If we think it's going to happen sooner, then we'll give guidance to that effect once we finalize our strategy for Europe, for example. But the 2 big things that we're currently focused on right now are number one, actually broadening up the inclusion for other non-COVID-19 ARDS patients. And then number two, the potential for more countries and more clinical institutions that are seeing a meaningful number of patients. But right now, our goal is to try and get it done sometime next year, and we'll provide further updates as we get a little bit further along and are closer to providing some more granular perspective on that. -------------------------------------------------------------------------------- Operator [7] -------------------------------------------------------------------------------- Our next question comes from David Hoang with SMBC Securities. -------------------------------------------------------------------------------- David Timothy Hoang, SMBC Nikko Securities America, Inc., Research Division - Research Analyst [8] -------------------------------------------------------------------------------- Congrats on the progress this quarter. Just had a few questions. So first, just on the regulatory path for Europe, can you just remind us are you looking to file an MAA in the same time frame as the BLA for ischemic stroke? And then have there been any differences in the types of feedbacks and guidance you've gotten from EMEA versus FDA on what the agencies are looking for in terms of results outcomes? -------------------------------------------------------------------------------- Gil Van Bokkelen, Athersys, Inc. - Co-Founder, Chairman & CEO [9] -------------------------------------------------------------------------------- Drop from the share price. Specifically? -------------------------------------------------------------------------------- David Timothy Hoang, SMBC Nikko Securities America, Inc., Research Division - Research Analyst [10] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Gil Van Bokkelen, Athersys, Inc. - Co-Founder, Chairman & CEO [11] -------------------------------------------------------------------------------- Yes. No, actually, the feedback has been pretty consistent and very much aligned between Europe and the FDA here in the U.S. And it's been that way from the beginning. There was only a slight difference between the perspective, the feedback that we got from PMDA in Japan when we engage in our initial discussions with them very early on in the process. But EMEA and the FDA have been pretty aligned in terms of how they do think. Yes. Ultimately, in terms of the filing strategy, in part, that's also going to depend on the preferences and kind of the orientation of our partner in Europe. And my expectation is that, that's going to be done in parallel and may even be done kind of around the same time as both by jurisdictions. But some of that actually comes down to things that haven't been decided yet, which I think will -- once we're a little further down the road, then we'll be able to make a determination on that. -------------------------------------------------------------------------------- David Timothy Hoang, SMBC Nikko Securities America, Inc., Research Division - Research Analyst [12] -------------------------------------------------------------------------------- Got it. And just I guess on the topic of the EU partnership, or what -- within what you can disclose given the conversations remain ongoing. But in terms of a potential economics of the deal, is that something you think can be improved by having (inaudible) from ARDS and/or stroke? And then in terms of sort of the priority, how do you think about the capabilities of the partner versus, for example, the ability to provide an upfront payment? -------------------------------------------------------------------------------- Gil Van Bokkelen, Athersys, Inc. - Co-Founder, Chairman & CEO [13] -------------------------------------------------------------------------------- Well, obviously, a meaningful upfront payment is mandatory for us to do a partnership. I mean that's -- in fact, we're -- I think, it's fair to say that we're not looking for something incremental. We're looking for something that is very substantial that I think our shareholders will look at that and say, "Yes, this represents the transformational type of alliance between the company and the partner." I didn't quite understand the first question that you were asking. So maybe you could just restate that. -------------------------------------------------------------------------------- David Timothy Hoang, SMBC Nikko Securities America, Inc., Research Division - Research Analyst [14] -------------------------------------------------------------------------------- Yes. I was wondering if waiting until sort of post the Healios readout, having that data in hand is something that you feel would help you in terms of negotiations or bringing some additional data points on the table. -------------------------------------------------------------------------------- Gil Van Bokkelen, Athersys, Inc. - Co-Founder, Chairman & CEO [15] -------------------------------------------------------------------------------- Yes. It's an interesting question. So again, we're more focused on this alliance as a near-term priority. And so I guess, I don't want to get too granular in terms of how our response to that other than to say that this is something that we're actively working on. It's something that we really regard as a near-term objective, and the companies that we're in discussions with know that. As it relates to -- I think the second question related to kind of the portfolio structure, the portfolio nature, we are very much focused on and the capabilities of the partners. That is one of the things we've been actively (technical difficulty) what are the capabilities of the partners in the therapeutic areas that we're going after. That's actually critically important for us. And it's something that we strongly emphasize and have spent a lot of time doing due diligence on the companies that we're in negotiations and discussions with to kind of evaluate what might make them a good partner. Because you as you can imagine, obviously, the financial elements of this and the overall structure is very, very important. But what you really also want to do is you want to make sure you're aligned with somebody that understands the market the critical care indications that we're focused on. They have demonstrable capabilities and expertise in those areas, and they thought a lot strategically and commercially about how to go after it. And so that is something that the team has really been emphasizing in our conversations with respect to partners. And I think that they feel really good about the information, the things that we've learned. Obviously, some entities profile better than others. But I will say that we're -- all of the companies that we're in discussions with are serious contenders. They're all serious players. -------------------------------------------------------------------------------- Operator [16] -------------------------------------------------------------------------------- And your next question comes from Chad Messer with Needham & Company. -------------------------------------------------------------------------------- Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [17] -------------------------------------------------------------------------------- So it's pretty exciting, the next data we're going to get here is going to be from Healios, and it's going to come pretty quickly in 2021. TREASURE, obviously, you talked about, that's a good size, a stroke trial there. I'm a little more interested in your perspective on what we might expect out of ONE-BRIDGE. It's smaller and it has a small COVID cohort there. Just wondering if you have any perspective on what you think that might be Healios in terms of the label or ability to sell with PMDA, particularly given their leniency towards regenerative medicine. And that's also in consideration of the fact there is potentially some positive growth data from a larger study coming behind that. -------------------------------------------------------------------------------- Gil Van Bokkelen, Athersys, Inc. - Co-Founder, Chairman & CEO [18] -------------------------------------------------------------------------------- Yes. So as it relates to the ARDS trial, it's -- what's interesting, it's a smaller study that there's actually several relevant examples that we and Healios believe a relevant example where companies have received approval under the regulatory framework in Japan that first went into effect just several years ago. And so the 2 studies that we're talking about here, the 220-patient TREASURE trial, that's a larger, more robustly powered study. Of course, our study is even larger in 300 patients, and it's even more robustly powered. So I think we're going to learn a lot on the stroke landscape in both of those trials. In terms of the smaller studies, in some ways, it was reflective of the approach we took in our study, which was about 30 patients. And which actually showed pretty substantial data that we were having a positive impact in benefiting a lot of patients that were enrolled in the trial. Now of course, the one difference is, is that ours is a double-blind, randomized, placebo-controlled trial, and their study is an open-label trial. But nonetheless, there are examples in Japan, that's based on open-label or even small or modest data sets, that PMDA reviewed that data and said, "Hey, this represents an area of substantial unmet medical need, and we're willing to provide conditional approval for an investigational therapy or product on that basis." Approval, using the conditional approval pathway in Japan, means you're on the market for 7 years, and you're eligible for full reimbursement. So you'll get a full reimbursement for your product for a period up to 7 years. But then during that time frame, you'd have to run confirmatory studies that the PMDA has to sign off on to demonstrate that your product is, in fact, safe, low tolerated and shows meaningful therapeutic benefit. But the first hurdle in terms of conditional approval, which, I think, is really being emphasized for or reserve, if you will, for things that are targeted at patients or indications where there's substantial unmet medical need, and there's really limitations, meaningful limitations in standard of care. That's really what that, I think, doorway is best suited for. And Healios decided that they were going to run the study that they're running and that, that might provide them with the basis for pursuing that as a potential option and approval. But at the end of the day, they're going to look at the data, see what they've learned, have a conversation, obviously, first with us, but have a subsequent conversation with PMDA and make a determination about how they think they should proceed. And I think that's a very reasonable thing to do. And of course, they're going to have the opportunity to learn from our larger trial that we're running, and we have data results from that, just like we're going to have the opportunity to learn from their TREASURE trial on top of ONE-BRIDGE. And then they're going to have the opportunity to learn from our MASTERS-2 trial as well. So we're both learning from each other and benefiting from the investments that we're each making in conducting these clinical trials and building additional information. So I'm not sure if that fully answers the question that you asked but happy to answer a follow-up if you want. -------------------------------------------------------------------------------- Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [19] -------------------------------------------------------------------------------- No, that answers it well. And very excited (inaudible) -------------------------------------------------------------------------------- Gil Van Bokkelen, Athersys, Inc. - Co-Founder, Chairman & CEO [20] -------------------------------------------------------------------------------- Yes. I think that's exactly right. It's going to be a very exciting next few months in the first couple of quarters of the year, and I think even out beyond that. So we're looking forward to it. And the team here is pretty fired up about it. I mean there's obviously a lot of stuff going on around this. But I can honestly say, I'm incredibly proud of the team and I know in Ivor and Karen are as well, for how the team has navigated through this stuff and dealt with all the operational obstacles or logistical things that people have had to deal with. And they just never lost focus and they continue to move ahead. And it's -- I think it's a testament to the strength of our team and how excited and committed there. -------------------------------------------------------------------------------- Operator [21] -------------------------------------------------------------------------------- And your next question comes from Jason Kolbert with Dawson James. -------------------------------------------------------------------------------- Jason Howard Kolbert, Dawson James Securities, Inc., Research Division - Director of Research [22] -------------------------------------------------------------------------------- I want to ask you a question, kind of picking up on where the question started, which is when you're pursuing a disease like stroke or a disease like ARDS or even COVID ARDS, there are a lot of variabilities. There's a lot of noise. There's competition. Clearly, one thing that Athersys understands that given your experiences is how you zero out that noise and the assumptions that you're making about power that leads you to clinical trial size. So I wonder if you could try to be a little bit specific on what those assumptions are, whether it's the COVID-based ARDS study that you're working on now. And just remind us kind of where we are in terms of power on both the Japan and the global stroke trial. -------------------------------------------------------------------------------- Gil Van Bokkelen, Athersys, Inc. - Co-Founder, Chairman & CEO [23] -------------------------------------------------------------------------------- Okay. So it's interesting when you're making assumptions as you move into a clinical trial, we always think that the prudent thing to do is take what you've learned and that you're highly confident in it. So in this case, our -- the -- our knowledge about what the historical landscape looks like for patients that suffer from ARDS. And we know historically, the mortality rate for patients in the ARDS area has typically been around 40%, plus or minus, right? There are some, if you focus on slightly severe ARDS cases and the mortality rate can be somewhat lower than that. But basically, we tried to learn from a lot of the data that was out there when we were designing our initial study in terms of the type of patients that we wanted to enroll in the trial and how we wanted to analyze the data. So you'll recall that when we set that trial up, we prospectively defined 2 populations: one, the entire group of populations in the trial; and then more specifically, the more severely ill patients with ARDS. And sure enough, it turned out that the mortality rate for the trial as a whole was about 40%, which is very much in line with historical expectations. And the mortality rate for patients with more severe ARDS, it was about 50%, which is also more in line with historical expectations. Despite the fact, it was a fairly modest data set. But when we analyze the data, that -- those are some of the things, along with the biomarker data that we got, the obvious clinical improvement, it seems like getting 45% of the patients off the ventilator within 7 to 8 or less. It contracts only 20% of the patients that were being treated under best available standard of care. The isolation for days, ventilator for days and everything else. But we believe that it wouldn't be the best thing to take your data, even though it's just really -- I don't want to say it exceeded our expectations, but it came back as a very strong pattern that we were helping these patients. And particularly in light of the fact that COVID-19 is something that nobody has ever seen or dealt with before, and the early data that was coming out suggested that the mortality rate and the impact on these patients was pretty dramatic and pretty negative. So we made the decision, particularly when we were in discussions with the FDA going back and forth, that we were going to make a conservative set of assumptions about the clinical effect that we would see that were meaningfully below what we saw in our last study. And so in a way, that's the philosophy that we try to employ in other things. So for example, we also did the same type of thing in our MASTERS-2 trial. We -- for example, the study in Japan is 80% or better power to median end point for that study. Our trial is actually powered well over 90% to achieve statistical robustness. And that's -- we designed it that way intentionally. So we were trying to be conservative and, if you will kind of overbuild it in terms of what people would normally do. Just because we know that when you run a trial, sometimes your patient population might be slightly different than you had in the prior study. And so we really want to make sure that we were being conservative about how to design the studies and conduct them so that we maximize our probability of being able to achieve success at the end of the day. In the TREASURE trial, we also did things like we knew that we were going to be able to move our window of treatment earlier than in the last study, which we felt would meaningfully move beyond further in our favor because the last trial told us that the earlier we were treating patients within that 24- to 36-hour window last time around, the better the patients were doing. This time, by moving the trial -- the treatment window to 18 to 36 hours and emphasizing early treatment in this study, we felt like we might be able to further maximize our chances of success and move it in the right direction. And there's a number of things that we did to really try and leverage what we learned from the last study that we ran, both in ARDS and also in MASTERS-1 in stroke. And apply them, in the current ARDS studies that we're currently running, but making conservative assumptions about the mortality rate. So for example, when we saw a difference in the seriously ill patients. So a mortality rate of 25% in the multi (inaudible) treated patients and 50% in the more severely ill patients. We didn't assume that we were going to see that big of an effect in the MACOVIA study. And same thing when we looked at other parameters, so we didn't assume that it was going to line up perfectly. We back off that with the clinical parameters so that we could design the study in a way that we think was more conservative. But the other thing that we did, as I mentioned, is in the MACOVIA study is building in the opportunity for doing a resizing analysis by the DSMB, partly through the study, so they evaluate that data reflect on us and then give us reflect on it and then give us some feedback about, okay, where do we think -- what's the appropriate sizing of the study given the company's objectives based on the data set partway through the trial? And we thought that was a reasonable important thing to do, and we still did. So just as we thought of a reasonable imprudent thing to make conservative assumptions about what we might see in MASTERS-2 to kind of overpower that, if you will. (inaudible) sorry, go ahead. -------------------------------------------------------------------------------- Jason Howard Kolbert, Dawson James Securities, Inc., Research Division - Director of Research [24] -------------------------------------------------------------------------------- So how close are we in terms of -- and I hate to use the phrase confidence level, but how good do you feel about where you are in terms of the ARDS study now? Or I guess you just have to wait to kind of get feedback from the DSMB. -------------------------------------------------------------------------------- Gil Van Bokkelen, Athersys, Inc. - Co-Founder, Chairman & CEO [25] -------------------------------------------------------------------------------- Yes. We just have to wait until we get that feedback. So first off, our policy is that we don't watch the top line with corona. So we're not expecting the data that rolls in. I mean, obviously, there's a team of people that are responsible for doing that kind of thing. But for example, I don't scrutinize the data when it comes in, and nor do other members of the leadership team. We focus on the execution of the trial of getting there as quickly as we can. So it would be -- I think, it's spotty to try and prognosticate line the data or interpret it and make a determination about what it might mean or what it might not. We believe that if we design the trial the right way, if we select the end points properly, if we've got full support buy-in from the FDA and other regulators, and we execute the study properly. And we're working with good sites that understand exactly how they're supposed to evaluate patients both in terms of enrolling them, but then also during the course of the conduct of the trial that, that's how we optimize that plus the design elements, obviously, which are critical. That's how we optimize our chances of success. And that's really what we're focused on doing. -------------------------------------------------------------------------------- Operator [26] -------------------------------------------------------------------------------- That's all the time we have for questions today. I will now hand the call back over to Gil Van Bokkelen for closing remarks. -------------------------------------------------------------------------------- Gil Van Bokkelen, Athersys, Inc. - Co-Founder, Chairman & CEO [27] -------------------------------------------------------------------------------- Well, once again, just in closing, I'd like to thank everybody for listening in on the call today or the webcast and for your faith and your confidence. We remain fully committed to advancing our programs and achieving our goals, and we look forward to making additional announcements and providing further updates as we move forward. -------------------------------------------------------------------------------- Operator [28] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes today's conference call. You may now disconnect.