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Edited Transcript of CYTX earnings conference call or presentation 9-Nov-17 10:30pm GMT

Thomson Reuters StreetEvents

Q3 2017 Cytori Therapeutics Inc Earnings Call

San Diego Nov 21, 2017 (Thomson StreetEvents) -- Edited Transcript of Cytori Therapeutics Inc earnings conference call or presentation Thursday, November 9, 2017 at 10:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* John D. Harris

Cytori Therapeutics, Inc. - VP & GM of Cell Therapy

* Marc H. Hedrick

Cytori Therapeutics, Inc. - President, CEO & Director

* Tiago M. Girao

Cytori Therapeutics, Inc. - VP of Finance, CFO & Principal Accounting Officer

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Conference Call Participants

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* Andrew Jacob D'Silva

B. Riley FBR, Inc., Research Division - Senior Analyst

* Jason Howard Kolbert

Maxim Group LLC, Research Division - Executive MD, Head of Healthcare Research & Senior Biotechnology Analyst

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Presentation

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Operator [1]

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Good afternoon, ladies and gentlemen. Welcome to the Cytori Therapeutics Third Quarter 2017 Earnings Results Call. (Operator Instructions) Before we begin, we want to advise you that over the course of the call and question-and-answer session, forward-looking statements will be made regarding events, trends, business prospects and financial performance, which may affect Cytori's future operating results and financial position. All such statements are subject to risks and uncertainties, including the risks and uncertainties described under the Risk Factors section included in Cytori's annual reports on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. Cytori advises you to review these risk factors in considering such statements. Cytori assumes no responsibility to update or revise any forward-looking statements to reflect events, trends or circumstances after the date they are made.

It is now my pleasure to turn the floor over to Dr. Marc Hedrick, Cytori's President and Chief Executive Officer. Sir, you may begin.

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Marc H. Hedrick, Cytori Therapeutics, Inc. - President, CEO & Director [2]

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Good afternoon. Thank you, Ian, and welcome, everyone, to our third quarter 2017 earnings call. My name is Marc Hedrick, President and CEO of Cytori and joining me on today's call is our Chief Financial Officer, Mr. Tiago Girao; and our VP and General Manager of Cell Therapy, John Harris, who is calling in from Japan.

On the call today, I will provide an overview of the company's key areas of focus and provide a clinical development update. Then John will discuss commercial related activities and performance and finally, Tiago will update on financial performance.

Then we will have Q&A after which I will update on forthcoming milestones.

In early September, we refocused our strategy and restructured our operations. We did this so we can successfully meet our most important near-term objectives that will drive shareholder value. First of all, with respect to our HABEO scleroderma product, based on the STAR trial data set, we will have a PMA pre-submission meeting with FDA soon to determine the next steps for the program.

As shareholders know, while STAR missed the primary endpoint in the combined patient group, in the key prespecified subset of patients with more severe disease, we showed that the treatment was safe and in key end points the therapy approached the statistical significance as defined by p-value of less than 0.05. Also the magnitude of improvement in the treatment over placebo was clinically meaningful in a population of patients that really has no true treatment options.

We're also focused on completing STAR's sister trial in France that is the SCLERADEC-II EU investigator-initiated trial that we hope will provide some supporting data to our regulatory filings. This is a 40-patient trial.

Second, we are allocating resources to our cell therapy assets in Japan, and to BARDA, both of which are self-funding. In Japan where we have the greatest adoption of our technology and where consumer sales has grown over the past 3 years, such that they have turned cash flow positive last year, and then also in the BARDA program, which we have received a recent $13.4 million contract option and are preparing to soon begin enrolling in our U.S. clinical trial called RELIEF. Finally, we're moving quickly to bring ATI-0918 our nanoparticle doxorubicin product through the EMA approval process. ATI-0918 is the company's nearest term and lowest risk pathway to substantial revenue growth in overall profitability. We have validated the manufacturing facility and made upgrades in that facility for scalability. The manufacturing of key pharmaceutical intermediates and shipping validation is now ongoing. Our sterile full-finish vendor is identified and our agreement with them has been signed. We are early in the preparation process for our EMA submission and we are in active discussions with potential commercial partners.

So to meet all these various objectives successfully, we conducted a substantial operational and financial restructuring and decreased our cash burn to match our strategy. Specifically, we reduced our headcount from 70 to approximately 35 employees, which are positioned equally throughout areas of business, about a 1/3 are in San Diego, about a 1/3 are in Japan and about 1/3 are in San Antonio. We substantially reduced our operating cash burn, which is reflected in our revised [verb] guidance and that will be covered by Tiago later on the call.

We restructured our loan with Oxford to provide potentially up to 1-year period of interest only and we filed a prospectus to proceed with the financing via rights offering to obtain sufficient capital to meet key forthcoming milestones.

Now a little bit more about the scleroderma program. As you know, on July 24, this year, we reported top line STAR trial data. The full data review is essentially complete and the abstract reflecting that data has been submitted and expected for presentation at the Systemic Sclerosis World Congress in Bordeaux, France, this February. Beyond the previously reported top line data, our analysis of the complete data set suggests that, of course, the treatment is indeed very safe, including both the tissue harvest and the injection procedure into the compromised hands of moderate to severely affected scleroderma patients. In our statistical analysis plan, the FDA approved a prespecified subgroup analysis of limited versus diffuse patients, anticipating a potential difference in the effect between these 2 very distinct subgroups. The diffuse subcutaneous scleroderma disease is the most lethal of all the rheumatic diseases and these patients tend to have more severe functional impairment of the hand as well as the solid organs. HABEO showed a clinically meaningful effect size and a borderline statistically significant effect on both hand function, which is the primary endpoint, and hack the eye, which is a key secondary endpoint in the diffuse patients over placebo.

Other key secondary endpoints that we've recently looked that were also suggestive of an improvement in hand function and health.

An overview of that data is shown in our pre-writing prospectus, that's available on our website.

So next steps with respect to this, as I touched on briefly before, is that we anticipate pre-submission meeting with the FDA soon. Likely, it will be after the holidays. The goal there is to determine the PMA device approvability or conditional approvability, perhaps, with restrictive claims. If the approvability is not an option, then we intended to obtain clarification on the exact next steps for approvability ultimately in the U.S.

In addition, we are nearing full enrollment in the SCLERADEC-II trial in France with a planned enrollment of up to 40 patients as I mentioned. The trial design in that trial in France substantially mirros STAR except that principally that the efficacy determination is to be evaluated at 12 weeks as opposed to 24 and 48 weeks that we looked at these end points in STAR. Of note, in the STAR trial, after 12 weeks, the primary endpoint, which is Cochin Hand Function Score and secondary endpoint is namely hack the eye and Raynaud's condition score were statistically significant in a combined group at 12 weeks. Improvement at 12 weeks in SCLERADEC-II married with STAR data maybe sufficient to support expanded approval in Europe beyond our existing capacity use approval. SCLERADEC-II results are anticipated in 2018.

Likewise, with additional data in diffuse patients from SCLERADEC-II, this could support the STAR trial findings for our U.S. and Japanese regulatory efforts for HABEO. Our most recent PMDA feedback suggest that like the ADRESU, stress urinary incontinence trial, an open label trial without placebo may be acceptable for approval as an orphan device.

Now onto our thermal and radiation injury program. The trial is called RELIEF and it's a safety and feasibility trial with single IV, intravenous administration of our cellular therapeutic and in this case DCCT-10, which is adipose-derived regenerative genetic cells for the treatment of the partial thickness and full-thickness thermal wounds. The trial and its related activities are fully funded by a cost-plus contract with BARDA, a division of the U.S. government. In terms of the trial initiation progress, we received FDA IDE approval. We're now actively working with multiple clinical sites, about half of the planned sites have been identified and we are working through the initiation process. BARDA has asked for a small protocol change recently that would likely delay first patient in late Q4 to early Q1, but with a rationale that it would speed overall trial enrollment, and it's worthwhile doing. Details of the trial were presented on the last call and could be found in the transcript.

Now quick update on the Japanese urinary incontinence trial called ADRESU. ADRESU is a potential approval trial for a cellular therapeutic in male post-prostatectomy patients with stress urinary incontinence, it's primarily funded by the Japanese government that continues to enroll in multiple sites. We are nearing complete enrollment in late 2017 or early 2018. And at 6 months, after the final patient is enrolled, there'll be an interim readout with a full readout at 12 months. Our intention is to file for Class III device approval thereafter if the data is indeed positive. And actually, probably next week, we plan on updating our shareholders on the broader set of investigator-initiated trials that we have going on around the world, likely in the capacity of an investor note.

Now to our nanomedicine business. Our lead nanoparticle drug is ATI-0918. It's a nano particle of liposomal doxorubicin that is bioequivalent to the current reference listed drug in Europe. Our goal remains to be the first generic on the market in Europe and it's a substantial market opportunity. But tangibly, our plan is to complete manufacturing at our San Antonio, Texas, plant in 2018 and then file for centralized EU approval after 6 months of stability testing is completed, which will then allow a preliminary review of our filing by EMA, which then can be fully completed once we have 12-month stability data and that's finalized.

In previous work, we've shown that the product is stable well beyond 12 months. I believe this to be relatively low risk, that is the risk of ultimate stability testing at 12 months. As mentioned, our manufacturing ramp up is ongoing to meet the 2018 EMA filing time line that we set for ourselves. We have hired an experienced team in San Antonio that is fully up and running, has extensive experience in successful liposomal drug formulation and manufacturer and we've actually contracted with a sterile full finish vendor for packaging. Manufacturing capacity in our Texas facility is sufficient to meet all global supply scenarios for this product and commercial sales will be accomplished through a generics focused partner with an emphasis on the EU market. We're also evaluating opportunities in the EU and China and will update you as those become more real. So with that, I'd like to turn the call over to John Harris in Japan. John?

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John D. Harris, Cytori Therapeutics, Inc. - VP & GM of Cell Therapy [3]

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Thanks, Mark. Cytori commercial areas of emphasis for the balance of 2017 are: one, continued double digit consumable utilization growth in Japan; two, enrollment of patients in our Managed Access Program through our new partner, myTomorrows, in Europe, Middle East and Latin America; and three, securing a commercial partner for ATI-0918 in Europe by the time we have submitted for EMA approval. I will address each of these in more detail later in my remarks, but first allow me to highlight our results for the third quarter.

2017 Q3 global product revenues were about $470,000. Q3 is typically light and Q4 is typically the strongest quarter of the year. Our global Q3 consumer utilization was flat when compared to 2016 timing and seasonality elements are at play. There are less elective surgeries done in the summer months, but generally that increases in the late fall through the end of the year. As I mentioned, Q4 is typically our best quarter. We have a good funnel with new initiatives to support new system sales and consumable growth.

Now let me give you some more details surrounding our commercial activities. First, Cytori, Japan's January through September consumer utilization net a 17% increase, which is in line with our double-digit growth objectives. Driving this year-on-year increase of consumables for self-pay indications is our installed base of 77 solution instruments in Japan. Our customers have over 75 discrete regenerative medicine law approvals in a wide variety of therapeutic areas. We continue to pursue opportunities to extend our installed base in Japan. In response to customer interest to lower the capital equipment entry level, we have identified ways to lower the capital hurdle for clinics to acquire our devices and recently executed a distribution agreement with a well-known company that rents capital equipment to aesthetic clinics throughout Japan. This company will buy devices from Cytori and then rent them to the clinics. We feel that this will provide our customers with additional attractive ways of bringing our system into their clinics as well as support continued growth of device installations and consumable growth.

The Cytori Japan team with its long track record in Japan, regulatory familiarity with our technology and a plan to register consumables with a higher class will be an ongoing deterrent to competitive entrants. Second, we continue to work with myTomorrows towards enrolling patients in the Managed Access Program for HABEO in Europe, Middle East and Latin America. As I mentioned previously, myTomorrows is a globally active, innovative and fully integrated early access provider with the goal of delivering fully compliant choice to patients while simultaneously creating value for physicians, pharmaceuticals, payers and regulators. Previously, clinicians only had the SCLERADEC-I data to evaluate when considering map for their patients. The STAR trial data offers more rigorous scientific evidence of safety and efficacy and further supplements the profile of the procedure.

Outreach with caregivers and KOLs using only publicly available STAR data -- STAR trial data has driven genuine interest and we anticipate subsequent map enrollment. Initial priorities are Turkey, France, Italy and Spain. Third, our objectives with Cytori nanomedicine remain unchanged. We are seeking partners for ATI-0918, our liposomal doxorubicin chemotherapy drug, which is a generic version of Janssen's Doxil Caelyx product. The EU is our primary target where we are closest to market with the completed bioequivalence trial, but we're also evaluating opportunities for the U.S., China and Japan. Further, we have put together an ATI-1123 development plan and are actively seeking a strategic partner.

In conclusion, while we reassess our approach in the U.S. with HABEO, we have a clear focus on our priorities for the balance of 2017. First, obtaining feedback on HABEO from the FDA in the next steps; second, execution of our commercial strategy in Japan; third, enrolling patients to be treated in the expanded Managed Access Program with our new partner myTomorrows; and fourth, partnerships discussion in Europe for ATI-0918 and continued ramp-up of the manufacturing infrastructure. Now let me hand off to Tiago.

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Tiago M. Girao, Cytori Therapeutics, Inc. - VP of Finance, CFO & Principal Accounting Officer [4]

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Thank you, John, and good afternoon, everyone. Our primary focus continues to be the development of our late-stage clinical pipeline and related commercial preparatory activity with the objective of driving shareholder value. In parallel, we are wisely managing our resources to continually improve our operating performance. Despite the additional new investments in our recently acquired assets from Azaya, operating cash burn was reduced to $4 million in Q3 of 2017 from $4.6 million in Q3 2016. The reduction in cash burn was mostly related to reductions in operating expenses. Net loss totaled $4.8 million in Q3 2017 or $0.14 per share as compared to $5.4 million or $0.26 a share in Q3 of 2016.

For the year-to-date period, net losses, when adjusted for a noncash charge of $1.7 million, were $16.7 million as compared to $17.1 million during the same period in 2016. For research and development expenses, in Q3, our R&D expenses, excluding share-based compensation, were $3 million as compared to $3.9 million in expense for Q3 of 2016. The decrease in R&D spending is due to the completion of enrollment of the STAR trial as well as completion of option 1 under the BARDA contract, offset by our investments into ATI-0918, our nanoparticle doxorubicin, for which manufacturing activities are ramping up in our San Antonio facility. In addition, the decrease is also attributed to the decrease in headcount from the restructuring activities implemented in September of 2017. As a percentage of overall spend, our R&D expense for Q3 was 55% of total operating expenses when excluding share-based compensation. This is in line with our plans and indicative of our focus in late-stage clinical programs.

Furthermore, as outlined during our last earnings call, our year-to-date figures include a noncash charge of $1.7 million related to reprocess R&D intangibles acquired as part of the Azaya asset acquisition where following the accounting literature, we accounted for such item as an operating expense and such intangibles would have otherwise been capitalized in our balance sheet if such acquisition was to be treated as a business combination.

And to be clear, this is a onetime noncash R&D charge.

Now on our sales and marketing. Our sales and marketing activities and related expenses remain consistent this quarter as compared to Q3 of 2016 at approximately $800,000. The expenses in Q3 include HABEO pre-commercial activities mostly in the U.S. as well as Japan-related commercial activities as outlined by John earlier on this call.

G&A expense, excluding share-based compensation, was $1.7 million this quarter as compared to $1.9 million in Q3 of 2016. The continued tightening of our G&A expenses was related principally to reductions in salaries and benefits resulting from our September 2017 restructuring as well as reduction in discretionary spend.

Now with respect to our revenues. Q3 total revenues were $1.8 million as compared to $2.6 million in Q3 of 2016. Product revenues were approximately $500,000 in Q3 2017 compared to $700,000 in Q3 2016. The decrease in product revenue has been discussed by John earlier on this call. And overall, we continue to expect product revenues to reflect at least a double-digit growth of consumables in Japan where we have a regulatory approval.

Government contract revenues relate to our activities supported by BARDA and resulted in $1.3 million in Q3 2017 compared to $1.9 million in Q3 2016. The decrease is attributed to the kickoff of RELIEF activities as we anticipate a transition to the clinical phase of this contract from the development activities at this time last year, we are well underway under Option 1 of the contract. As mentioned earlier by Marc, the FDA approved the IDE for RELIEF trial in April of this year and renegotiated the BARDA's Option 2 under this contract in May where we were awarded approximately $13.4 million related to this Option 2. We have selected our CRO and are in the final stages of contract renegotiations with the goal to begin enrollment of the RELIEF trial relatively soon.

Turning to our balance sheet. As of September 30, we had $4.8 million of cash and $13 million of debt. This past September, we amended our debt with Oxford providing additional flexibility by pushing out our interest-only period by up to 1 year and decreasing our debt covenant to $1.5 million of cash. We plan to balance our ongoing capital requirements through several targeted activities that include revenue growth, business development opportunities, operation efficiency measures and working capital management in addition to accessing the capital markets. We recently filed a prospectus for a public rights offering where all holders of record as of October 27 are entitled to receive the right to participate to the offering. Investors have November 21 to complete their subscription. Note that certain brokers and clearinghouses have different cutoffs for submission and if you plan on participating, we recommend that you check with your broker. We expect the offering will close soon after November 21.

Now on to our financial guidance. Considering the impact of our restructuring announced in September, we are updating our operating cash burn guidance to range from $17 million to $19 million for the full fiscal 2017, which is an improvement from our revised guidance of $20 million to $23 million for a full year announced earlier in the year. Another sizable portion of the reduction in operating burn guidance discussed in our last earnings call comes from pre-commercial HABEO activities that can be deferred pending feedback on FDA post-STAR trial meeting which we expect to have after holidays.

Our short-term goal is to decrease our operating cash burn to approximately $12 million a year. With that, I'll turn the call back over to Dr. Hedrick. Marc?

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Marc H. Hedrick, Cytori Therapeutics, Inc. - President, CEO & Director [5]

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Thank you, Tiago. So quick update on anticipated milestones that are on the near-term horizon. As I mentioned multiple times, we expect to hear back from the FDA regarding our meeting and the outcome of our discussions with respect to the approval path on next steps for HABEO. #2, we intend to complete enrollment in the Japanese ADRESU SUI pivotal trial and the European SCLERADEC-II trial and report data out in 2018. First patient in for BARDA for the RELIEF trial should be forthcoming soon and we're also working diligently to complete the manufacturing and related activities for our nanoparticle doxorubicin 0918 product for EMA filing in 2018 and seeking potential partners. So now I'll turn the call over to you, Ian, for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Jason Kolbert from Maxim.

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Jason Howard Kolbert, Maxim Group LLC, Research Division - Executive MD, Head of Healthcare Research & Senior Biotechnology Analyst [2]

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I just wanted to get into a little bit of detail on HABEO and this upcoming catalyst with the FDA. Marc, can you just review with us what's some of the dynamics were of the trial? And what's some of the possible outcomes might be at the FDA? For example, one of the things that I know, you and I previously discussed, was the effective placebo and why the placebo group may have been better than expected. How rational do you think the discussions are going to be with the FDA? And then how do you look at the possibilities in terms of the outcomes, that would be very helpful?

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Marc H. Hedrick, Cytori Therapeutics, Inc. - President, CEO & Director [3]

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Jason, first of all, just the broader dynamics with respect to this product that I think they are important. They sort of fit nicely with what's going on and with regulatory laws in the U.S. and elsewhere. First of all, scleroderma on the hand unmet medical need, nothing approved in the U.S. The diffuse subgroup of which seems to show the strongest effect was a prespecified group and it's 1 of the most severe, in fact the most lethal of all the rheumatic diseases. So there's a real patient need here. We've got strong support from the physicians and from the advocacy groups. So I think that's point #1. #2, is that, I think the regulatory environment might be moving a little bit in our direction with the 21st Century Cures Act and the [add] MAP guidance as well as the expedited access program for devices. Our view is to give the regulators a bit more latitude to kind of weigh the safety and efficacy decisions they'll have to make. We take the [collar-wear] device, the [class-3] device and we've completed now one pivotal and potentially another data from [miracle] will be forthcoming potentially to be abode into the equation. I think those issues, also the fact that scleroderma in orphan disease I think also is probably-- it should enter into the dynamic. With respect to the trial itself we did prespecify a readout on the group that had diffuse disease and we are agonizing we close to hitting up the p-value an we did show a clinically meaningful effect, so you know, I think while we are guiding towards needing to do a further clinical work we do think there is some room from the FDA to maybe look at different alternatives. And to your last part of your question, you know I think we would propose that we'd be happy to do a Phase IV trial or a second conditional approval, we could potentially supplement the trial with additional patients from either Europe or from U.S. These patients they don't have anything, there is nothing we could offer and there's really a medical need here, and so we will go in and fight as best as we can for the best possible outcome for patients. And at the end of the day, this was clearly safe, so we don't think the safety issues just a matter that we meet the efficacy bar in this particular unique circumstance.

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Jason Howard Kolbert, Maxim Group LLC, Research Division - Executive MD, Head of Healthcare Research & Senior Biotechnology Analyst [4]

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Do you think that there was any efficacy result associated with the placebo itself?

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Marc H. Hedrick, Cytori Therapeutics, Inc. - President, CEO & Director [5]

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It is a good point, and a little bit misleading to say it was a placebo. Because we did do a so-called placebo effects to patients that get a fat removal, they did get a subcutaneous needle deflection with the blood needle and they did infuse a blood pin and start cells with saline, from the blood system in the subcutaneous space. So we know from other clinical trials osteoarthritis that saline actually has a therapeutic effect, it wouldn't be crazy to think also that it has a therapeutic effect in this trial. Unfortunately, that was the trial we agreed to, and there was a placebo effect was borderline at the minimally important clinical difference but it seem that at the diffuse population that we nearly doubled the level of the minimally important clinical difference for the primary end point. It just made the numbers basically not go in favor to therapy over the placebo.

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Jason Howard Kolbert, Maxim Group LLC, Research Division - Executive MD, Head of Healthcare Research & Senior Biotechnology Analyst [6]

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And jumping to the commercial side Marc, I know you have talking a lot about Japan, can you talk a little bit about what's happening in the clinics, and I know some people are being treated for osteoarthritis associated with the knee, can you talk a little bit how that business is developing in Japan?

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Marc H. Hedrick, Cytori Therapeutics, Inc. - President, CEO & Director [7]

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You know Jason, we have an expert on the phone who is sitting in that country today. John would you mind providing a little bit of color on what's going on in Japan with respect to commercial utilization?

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John D. Harris, Cytori Therapeutics, Inc. - VP & GM of Cell Therapy [8]

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Of course, I am happy too, and Jason, it's good to talk to you again. What we are seeing now in Japan with the regenerative medicine law that has been in place over the past few years now is that there are a growing number of facilities that are using our technology via the regenerative medicine law and what we are seeing is, since our base of business is in the aesthetics and all of these is self-pay. But the base started with the aesthetics but what we are seeing is a pretty rapid growth in osteoarthritis as well and so we've had a few new customers that have come online, some very high profile locations in the country that are now treating osteoarthritis on the knee and sports injuries as well. So we are kind of seeing this emerging customer based not only in aesthetics which continues to be a good strong base for us but also in the osteoarthritis space as well, and I think that bodes well for us at the balance of the year but also in 2018. And that's important because we anticipate that sometime in 2019 we'll have approval with the addressed trial so we are kind of working what we have today with this regenerative medicine law approval and self-pay while we work in parallel to position ourselves for the with reimbursed indication in SUI. I do think that we are seeing some pretty strong growth and encouraging metrics internally on both OA and aesthetics.

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Jason Howard Kolbert, Maxim Group LLC, Research Division - Executive MD, Head of Healthcare Research & Senior Biotechnology Analyst [9]

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One last one for Tiago, can you talk a little bit about the fact that you're doing a rights offering, you have a cash balance, how much money are you hoping to raise on this rights offering and how long will that take you? In terms of the capital runway, how far will the capital extend your runway.

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Tiago M. Girao, Cytori Therapeutics, Inc. - VP of Finance, CFO & Principal Accounting Officer [10]

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Sure, Jason, just before I go on to the question, I want to reiterate one important point on John's response which I am not sure if it came across, but I think it is important for you to know that back last year, we announce the first clinic that started using our therapy for osteoarthritis of the knee and that was in around end of June, or beginning of July of last year. We now have 7 -- over 6 clinics , I believe 7 clinics that are treating OA of the knee in Japan, including some that do treat with cryopreserve cells and some that treat with the fresh cells, and that's a good news. But back to your question on the rights offering, the perspective has been filed for $10 million, and we do expect if the offering is fully subscribed we will have about 1 year of cash run away from that point. So, say that this would cover us throughout 2018. The other important point, the milestones we have coming up over the next year, so we believe there are number of different islands will be able to hit before we run out of cash. Those are my remarks on that.

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Jason Howard Kolbert, Maxim Group LLC, Research Division - Executive MD, Head of Healthcare Research & Senior Biotechnology Analyst [11]

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I know we didn't talk about the Azaya acquisition which is now integrated in the company, but that certainly represented very significant milestone on the other side of the business.

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Operator [12]

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[Operator Instructions] Our next is from the line of Andrew D'Silva from B. Riley SBR Inc.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [13]

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Just a couple of question most of them has been answered, as far as the 12-week data that you recently released. I was looking at the chart for the RCS, in the end point and how impacted do you think you were by the inclusion/exclusion criteria that was used on the STAR trial, and if you believe that, that was a hindrance as you move through the data over time? Have you guys talked to the square 2 trial in Europe to resolve some of those issues?

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Marc H. Hedrick, Cytori Therapeutics, Inc. - President, CEO & Director [14]

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It's Marc. You are oscillating on an important point in the pilot trial that was used in planning the U.S. trial, those patients were highly affected with the Raynaud's Phenomenon, so you had from a severity perspective, they had Reynaud's severity scores that were 7.5 out of 10, 10 being the worse. If you look at the U.S. trial where we set out primary end point is Cochin hand functions score. We really were-- we really used data as primary inclusion/exclusion criteria not so much the Reynaud's. And so what that did, the Reynaud's patients in the trial ultimately and start trial were significantly less effective by Reynaud's, they have average score 2.5 out of 10 versus 7.5 in the pilot trial. What it did is it intended to bring in more patients with the more severe diseases, 51 out of 88 patients that had diffuse scleroderma, the more severe variant. And so our readout-- our readouts really reflected a population that was skewed much more towards the diffuse, more severe phenotype that the one that have limited disease that tends to have more severe Reynaud's. That was the right thing to do, I think Cochin was the primary end point in retrospect, I wish he had done a trial on our diffuse patients, but we really can't predict that coming out of the 12-patient pilot trial but we were just really literally a few patients away from the diffuse group showing significance in the key end points.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [15]

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And how important in your opinion is it that you had a defined subgroup when you actually went in there with-- the subgroup wasn't something that you extrapolated separately without discussing it with FDA that was actually the group that they wanted to have data on, correct? And what does it mean in your opinion that you got so close to showing statistically significance?

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Marc H. Hedrick, Cytori Therapeutics, Inc. - President, CEO & Director [16]

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Well, I think we had this discussion previously. And when you sit across the table from FDA, they know oftentimes know more about your disease than you do because they have access to data that you don't have access to in terms of multiple trials and these indications. So I think they feel like it was important to look at the difference between scleroderma that was the diffuse versus limited. But that was prespecified, as you mentioned, that's a big reason why we included it. We were just -- we were underpowered to show an effect in that group. But the effect was clinically meaningful and as Jason mentioned, it was actually less placebo effect in those patients because you'll tend to have more severe fixed disease and make sense they less likely to respond with the placebo effect.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [17]

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Okay. And just last question, the whole DOD being able to essentially run the FDA in some capacity not have to utilize them astringently to get things out to help the general military population. Do you feel like that could help your endeavors what's going on with BARDA right now? Or do you believe that you could potentially be excluded from that?

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Marc H. Hedrick, Cytori Therapeutics, Inc. - President, CEO & Director [18]

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Well, I think, it actually you're right. I think we do have pretty long-standing relationship with the FDA in bringing this technology to them for clinical utilization. And I think, they are highly aware that what we're doing with BARDA as well as this orphan disease scleroderma, but I think, at the end of the day -- they want to approve technologies that are first of all safe but likely effective, but I think this is a big picture at the end of the day it's really on us to show scientifically convincing way that our technology is both safe and effective and to the most rigorous standards set by the FDA.

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Operator [19]

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(Operator Instructions) And at this time, I'm showing that we have no further questions. Dr. Hedrick, I would like to turn it back to you for any further remarks.

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Marc H. Hedrick, Cytori Therapeutics, Inc. - President, CEO & Director [20]

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Ian, thanks, everyone, for dialing in for the call. Thank you to the questions. And just on behalf of the board and management, we appreciate your interest in the company and the company is very appreciative to as we always say that patients have trusted us with this therapy and our advisors and analysts that follows us, and of course, our hard-working and dedicated employees. Thank you, and please have a good evening.

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Operator [21]

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Thank you. This does conclude today's conference call. Please disconnect your lines at this time, and have a wonderful day.