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Athersys (NASDAQ:ATHX)

Q3 2012 Earnings Call

November 08, 2012 4:30 pm ET

Executives

Lisa Wilson

William Lehmann - President, Chief Operating Officer and Secretary

Gil Van Bokkelen - Co-Founder, Chairman and Chief Executive Officer

Analysts

Stephen G. Brozak - WBB Securities, LLC, Research Division

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

Operator

Good afternoon. My name is Adam, and I will be your conference operator today. At this time, I would like to welcome everyone to the Athersys Third Quarter 2012 Financial Results Conference Call. [Operator Instructions] After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the program over to Lisa Wilson, Investor Relations for Athersys. You may begin.

Lisa Wilson

Thank you, and good afternoon, everyone. I'm Lisa Wilson of In-Site Communications, Investor Relations for Athersys. Thank you for joining today's call. If you do not have a copy of the press release issued at the close of market, it is available on the Athersys website at athersys.com, or you may call Libby Abelt in my office at (212) 759-5665 to receive it via e-mail.

Gil Van Bokkelen, Chief -- Chairman and Chief Executive Officer; and B.J. Lehmann, President and Chief Operating Officer of Athersys, will host today's call. The call is expected to last approximately 45 minutes and may also be accessed through the company's website at athersys.com. A replay will be available 2 hours after the call's completion, and access information for the replay is in today's press release.

Any remarks that Athersys may make about future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's Form 10-Q, 10-K and other public SEC filings. Athersys anticipates that subsequent events and developments may cause its outlook to change. And while the company may elect to update these forward-looking statements at some point in the future, the company specifically disclaims any obligation to do so.

For the benefit of those who may be listening to the replay, this call was held and recorded on November 8, 2012. Since then, Athersys may have made announcements related to the topics discussed, so please reference the company's most recent press release and SEC filings.

With that, I would like to turn the call over to B.J. Lehmann. B.J.?

William Lehmann

Thanks, Lisa. Good afternoon, and welcome, everyone. I'm B.J. Lehmann, President and Chief Operating Officer at Athersys. This afternoon, I will briefly go through our financial results for the quarter ended September 30, 2012, and then I'll turn the call over to Gil Van Bokkelen, our Chairman and CEO, for a corporate update, followed by a question-and-answer period.

For the 3 months ended September 30, 2012, total revenues were $1 million as compared to $2.4 million in the 3 months ended September 30, 2011. The decreases reflect lower contract revenues from our collaborators, Pfizer and RTI, and increased grant revenue in the period. September 2012, we received a $1 million milestone payment from RTI, agreed to provide RTI additional technical support. This milestone in technical support payments and another $1 million to milestone payments before year end are being recognized as revenue during the remainder of 2012.

Our Pfizer contract revenues declined during the period, in conjunction with the end of the estimated performance period for the current collaboration. And on an ongoing basis, these revenues would primarily consist of reimbursements from Pfizer for manufacturing and related costs, milestone payments and royalties on product sales.

Our research and development expenses for the third quarter of 2012 were $4.1 million compared to $4.3 million for the same period last year. The decrease is due to reduced clinical and preclinical development costs, related primarily to clinical manufacturing and reduced patent legal fee expenses, partially offset by increases in personnel costs and sponsor research costs during the period. We currently have 2 ongoing Phase II clinical trials, one in collaboration with Pfizer where MultiStem is administered to treat patients with ulcerative colitis; and second, which MultiStem is used to treat patients who have suffered an ischemic stroke. We expect our 2012 annual research and development expenses to be higher than in 2011 expenses based on our clinical development and process development activities.

General and administrative expenses remained consistent at $1.1 million in both the third quarter of 2012 and 2011. We expect our general and administrative expenses for the 2012 year to be similar to the 2011 levels.

Net other income relates primarily to the change in the valuation of our warrant liabilities, and was $795,000 for the 3 months ended September 30, 2012, which is level with the prior year period. Net loss for the 3 months ended September 30, 2012, was $3.4 million or $0.12 per share. This compares to a net loss of $2.3 million or $0.10 per share for the 3 months ended September 30, 2011.

In the third quarter of 2012, we used net cash of $3.6 million in our operating activities as compared to $4.2 million in the prior year period. At September 30, 2012, we had $7.9 million in cash and cash equivalents.

Early in the fourth quarter, we completed a public offering of common stock, generating net proceeds of approximately $21.1 million through the issuance of 22,772,300 shares of common stock at the price of $1.01 per share. This includes the full exercise of the over-allotment option by the underwriters, and we are pleased that both new and existing quality investors participated in this offering. The net proceeds from the offering should put us in a strong financial position to achieve important business and clinical development milestones, including top line results from our Phase II ulcerative colitis and Phase II ischemic stroke trials.

With that, I'd like to turn it over to Gil for a corporate update. Gil?

Gil Van Bokkelen

Thanks, B.J. Good afternoon, everyone, and thank you for joining our call today.

In the third quarter of 2012, we've made noteworthy progress with our 2 ongoing Phase II clinical studies involving MultiStem, our patented and proprietary stem cell product candidate, particularly for treating ischemic stroke. We have also completed work that will enable us to submit our detailed plan for a new Phase II/III clinical study of MultiStem for GvHD prophylaxis to the FDA this month, and regained further understanding of the benefits of MultiStem in potential new indications through preclinical research, as evidenced by the publication or presentation of data from 3 preclinical programs. We believe the continued successful execution of these programs, either directly or through collaborations, will enable us to deliver substantial long-term value for our shareholders.

The majority of our resources are focused on developing MultiStem for the treatment and/or prevention of diseases and conditions that are underserved or where there is a significant unmet medical need. We also believe these represents substantial commercial opportunities. Our key programs evaluating the potential utility of MultiStem include the following: neurological conditions notably treating damage from ischemic stroke, which affects 15 million people annually, including approximately 2 million patients per year in the U.S., Europe and Japan combined. We estimate this represents an annual market opportunity of approximately $15 billion to $20 billion.

Inflammatory and immune disorders, including the treatment of inflammatory bowel disease, such as patients with refractory ulcerative colitis. IBD affects approximately 4 million patients globally and approximately 2.4 million people in the U.S., Europe and Japan. Other areas of opportunity include the prevention of graft-versus-host disease in patients with leukemia or other conditions that require a hematopoietic stem cell transplant and the area of solid organ transplant support, such as for liver, lung, heart and other transplantation procedures.

Cardiovascular disease, where we have focused initially on treating damage from acute myocardial infarction, commonly known as heart attack. In this area, we have completed and published initial results from a Phase I clinical trial. We have also conducted work in preclinical models of chronic heart ischemia and published work in vascular disease models. Success in any of these initial indications could open up a broader set of opportunities for us and our partners in related areas.

We are particularly excited about our recent progress in the neurological area, where we are currently conducting a 136-patient double-blind, placebo-controlled Phase II clinical trial to evaluate the safety and efficacy of MultiStem when administered to patients who have suffered a moderate to moderately severe stroke, as defined by the National Institutes of Health Stroke Scale score of 8 to 20. Patients enrolled in the study received a single intravenous dose of MultiStem therapy or placebo in the 24 to 36 hours following the stroke, which is a significant extension of the current treatment window over existing standard of care. We believe this represents a clinically practical time frame during which a majority of stroke patients could be treated, in contrast to the current standard of care.

During the third quarter, we completed enrollment of the first 2-patient cohorts of the study. Each cohort included a placebo group and a treatment group. The first treatment group received either a low dose of MultiStem or placebo; and the second group received either a high dose of MultiStem or placebo. The findings from this initial phase of the trial added to the growing body of evidence that demonstrates a consistent safety profile for MultiStem. The independent clinical safety committee conducted a pre-specified review of the data from these patients, and found that both of the doses evaluated were safe and well-tolerated. And therefore, recommended proceeding with high dose administration to patients for the remainder of the trial. Accordingly, patients from the final cohort will be randomized 1:1 to receive either treatment with a high dose of MultiStem or placebo, administered in a randomized and double-blinded manner.

The initial findings from the trial support our belief that MultiStem could represent a major advance in clinical care for ischemic stroke patients. We believe MultiStem has the potential to significantly enhance patient recovery, as well as meaningfully extend the treatment window over the current standard of care for stroke victims, enabling many more patients to receive treatment. Our current focus is on initiating enrollment in the final stage of the trial, which is being conducted at leading stroke centers across the U.S. and is also expected to involve some leading stroke centers in the United Kingdom.

Our goal is to have initial top line results from this study by early 2014. If the results of the trial are consistent with our preclinical findings and demonstrate the treatment with MultiStem can achieve a meaningful clinical benefit in a clinically practical time frame, we believe it will be a very exciting step forward for stroke clinical care.

There is also been progress in another ongoing Phase II clinical trial involving MultiStem. It's part of our global collaboration for treating inflammatory bowel disease. Pfizer is conducting a Phase II clinical study to evaluate the safety and efficacy of MultiStem for the treatment of refractory ulcerative colitis. This trial continues to enroll patients at clinical sites in the U.S., Canada and Europe. Although enrollment has been slower than planned for the trial due to several factors, such as competition with a number of other studies, Pfizer has added some additional clinical sites for the trial, and there has been some encouraging progress in recent enrollment rates. Currently, enrollment's completion is targeted for the second quarter of 2013, which would yield initial results around the end of the third quarter next year. We will keep -- we will continue to keep you informed of the progress in the trial.

Next in our pipeline is our program developing MultiStem for the prevention of graft-versus-host disease. We are specifically targeting GvHD in patients with leukemia or related hematologic cancers or conditions, who have been treated with radiation or chemotherapy, followed by a donor-derived hematopoietic stem cell transplant to help restore the patient's blood and immune system. Roughly half the patients that received a hematopoietic stem cell transplant will develop GvHD, which is triggered by the activation of donor-derived immune cells, such as activated T-cells that attack the transplant recipient's host cells as foreign tissue. This causes significant pain, disability due to organ damage and even death. A therapy that could meaningfully reduce the incidence and/or severity of GvHD without increasing relapse or risk of infection in these types of patients would provide substantial clinical benefits.

Based on the positive outcomes of our Phase I clinical trial, which evaluated the safety and maximum tolerated dose of a single or repeat dose administration of allogeneic MultiStem delivered intravenously. We believe MultiStem holds great promise for this area, as well as other applications in transplantation medicine.

Recently, we've been finalizing our proposed plan for a Phase II/III study of MultiStem in this clinical area. During the summer and third quarter, we refined our intended trial design with input from key opinion leaders in our clinical research organization, and we now intend to submit the detailed clinical trial plan and statistical plan for the study to the FDA within the next couple of weeks.

GvHD is an indication for which we have had protection through the year 2028 and for which MultiStem has been granted orphan drug designation by the FDA. These factors, combined with the unmet clinical needs, make GvHD an attractive opportunity for us to develop, either on our own or with a partner. Based on current plans, we intend to be ready to start this study in the second half of 2013, which provides us with time to incorporate certain process development and manufacturing improvements. The actual timing of trial initiation will also depend on several factors, such as other clinical activity and the achievement of certain business development and financial objectives.

There have also been positive developments in some of our preclinical programs as well, especially in areas of neurological injury or disease. Over the past several years, we've been very successful with building a broad international network of collaborations with leading investigators and key opinion leaders that we have worked with to evaluate whether MultiStem may have relevance in various neurological areas.

Last month, you saw the presentation in peer-reviewed publication of new data from preclinical programs evaluating MultiStem to treat multiple sclerosis, spinal cord injury and traumatic brain injury. This research was funded by Athersys as well as third parties through grants and development alliances, and was conducted by our scientists working in collaboration with investigators at leading research institutions. This approach, which we have also utilized in the cardiovascular and immune disease areas, allows us to advance our preclinical programs in an efficient manner, without adding substantially to our R&D expenses.

The disease areas we are focused on represent conditions with substantial unmet medical needs, and in the neurological area include both acute and chronic conditions. For example, members of the Athersys team recently presented at the Second Midwest Conference on Stem Cell Biology & Therapy, describing preclinical results that demonstrate potential benefits of MultiStem therapy to treat multiple sclerosis or MS. According to the National Multiple Sclerosis Society, MS affects approximately 400,000 patients in the U.S. Currently available therapies treat the relapsing remitting forms of the disease. But unfortunately, there are no effective therapies to treat the chronic progressive forms of the disease, which remains an area of tremendous clinical need.

In standard preclinical models of MS, researchers have observed that administration of MultiStem results in sustained behavioral improvements, arrests the demyelination process that is central to the pathology of MS and supports out remyelination of affected axons. Demyelination is the loss of the myelin sheath insulating the nerves, while remyelination refers to the regeneration of that protective sheath.

In preclinical experiments, rodents were given either an intravenous injection of MultiStem or placebo after the onset of symptoms in an MS model. The rodents treated with MultiStem displayed sustained and statistically significant improvement in functional testing compared to placebo-treated animals. This functional improvement correlated with the statistical decrease in demyelinated lesions in the nervous system of cell-treated animals compared to placebo, as well as increased remyelination in cell-treated animals. This result has been confirmed in the second animal model of demyelination, providing further evidence that MultiStem treatment may accelerate the process of axonal remyelination and repair.

Long-term successful treatment of demyelinating diseases, such as MS, will likely require both the regulation of the immune system and the promotion of remyelination to protect axonal integrity. The data presented in October suggest that MultiStem treatment influences both aspects of the disease, which means it has great potential as an attractive therapeutic option. This study was conducted in collaboration with scientists from Case Western Reserve University School of Medicine, and was funded by Fast Forward, LLC, a nonprofit subsidiary of the National Multiple Sclerosis Society under a 2011 development alliance with Athersys.

Next, we recently announced the publication of an article in the peer-reviewed Journal of Neuroinflammation. This article describes preclinical study results demonstrating that administration of MultiStem modulates the inflammatory environment that follows traumatic brain injury, or TBI, by reducing immune cell and cytokine activity associated with inflammation. The publication further illustrates mechanisms through which MultiStem treatment may provide benefit to patients suffering significant injury to the central nervous system.

In preclinical experiments, rodents underwent controlled cortical impact brain injury, following which, they received either MultiStem or placebo. The injured MultiStem-treated animals had significant increases in regulatory T-cells in the spleen and plasma at a 24- and 48-hours post-treatment, respectively, compared to the placebo-treated animals.

Furthermore, MultiStem treatment was associated with an increase in the ratio of neuroprotective (M2) macrophages relative to proinflammatory (M1) macrophages, which are responsible for the production of inflammatory cytokines and associated neurotoxicity. Additionally, MultiStem treatment resulted in a reduction of blood brain barrier permeability and preserved splenic mass following the injury, suggesting that treatment may provide benefit to TBI patients through multiple pathways.

These preclinical results provide additional insight into the mechanisms by which MultiStem alters the detrimental effects of the innate immune response following injury, and increases our ability to develop effective treatment strategy using MultiStem. The data further confirms a substantial anti-inflammatory and immunomodulatory properties of MultiStem, which could be important in treating multiple central nervous system disease conditions, including TBI, as well as ischemic stroke and spinal cord injury.

The TBI study was conducted in collaboration with scientists from UTHealth, the University of Texas Health Science Center at Houston, and was funded by Athersys in funding for the National Institute of Health.

In addition to stroke and traumatic brain injury, MultiStem is also showing promise for treating other forms of acute neurological damage, such as from spinal cord injury. We recently presented data from a preclinical study demonstrating the potential benefits of MultiStem therapy to treat acute spinal cord injury at the Society for Neuroscience Annual Meeting in mid-October. In preclinical experiments, rodents with spinal cord injury caused by an injury in the thoracic regions were given an intravenous injection saline or MultiStem 1 day after the injury occurred. The animals treated with MultiStem showed significant, accelerated and sustained improvement in gross and fine motor function contained compared to saline treated animals over the 10-week evaluation period. Additionally, substantial improvements in bladder function were observed in the animals treated with MultiStem after the spinal cord injury.

These results suggest that non-invasive, off-the-shelf cell therapy, such as MultiStem, administered intravenously shortly after acute neurological injury may have the potential to provide substantial and meaningful benefits to patients. They build on data published last year in The Journal of Neuroscience demonstrating that MultiStem reduces inflammation in the region of injury, and also promotes the regrowth of neurons in the site of injury.

The spinal cord injury research was conducted by Athersys scientists in collaboration with scientists from Case Western Reserve University School of Medicine, and funded by a grant from the Ohio Third Frontier.

In addition to our clinical and scientific progress, we remain actively engaged in discussions and diligence activities, with multiple companies regarding potential partnerships and collaborations on several fronts, including various clinical and preclinical programs in the regenerative medicine area, as well as our 5HT2c agonist portfolio for obesity and other disorders such as schizophrenia, which I discussed in detail on the August call. We intend to proceed with one or more of these business partnerships, if we determine the terms are in the best interest of the company and our shareholders.

In closing, we continue to execute our business model, advancing multiple clinical and preclinical programs, evaluating MultiStem for diversed indications and pursuing attractive partnering opportunities. We look forward to keeping you updated on our further progress.

With that, we welcome your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Steve Brozak from WBB Securities.

Stephen G. Brozak - WBB Securities, LLC, Research Division

There's one item now that, frankly, I'd like greater, I hate the word but it's appropriate, granularity. Can you talk about the CNS side? Because obviously, when you're dealing with the different components of CNS, how applicable would your therapeutic approach be for all different types of CNS, CNS recovery? And then I've got a follow-up on GPCR, so I want to go back on that tack for a minute.

Gil Van Bokkelen

Yes. I think it would be a mistake to assume that the technology would be relevant to all CNS types of indications. I mean, I think really the only way to evaluate whether or not it's going to have relevance is to test it in the best available models for each indication areas that we're going after. But one thing that we have seen over the past few years that we've been working with key opinion leaders and leading research labs across a range of different neurological indications and injury models is that there appear to be some common themes that are central to causing damage in many of these different types of models. For example, inflammation is clearly a driving factor in causing both acute but also permanent damage in the range of different models and indication areas. And one of the things that we see over and over and over again, and it's quite comforting that we see this having worked with so many different labs in the U.S. and Europe over the past few years, is that MultiStem has profound properties with respect to mitigating or reducing the inflammatory damage that occurs in both acute and chronic disease or injury situations. I think that the other things that we see are that there are differences in how the cells will react depending on the underlying nature of the injury that occurs. So for example, we've used some pretty powerful techniques to evaluate when you administer human MultiStem in preclinical models of stroke or TBI or MS or other models that we've looked at, we see there are common pathways and common mechanisms, such as the inflammatory area that are relevant across many of these indications. But there are also some differences depending on what the underlying driver of the disease or the condition might be. And interestingly enough, we see that MultiStem will change its profile in terms of how it responds depending on the underlying environment or the nature of the injury that we see. The very encouraging thing that we're seeing here is that although we have -- I wouldn't say we've generated compelling data in all of the neurological indications that we've gone after. There are a couple of examples where, frankly, they didn't look nearly as promising as the other areas that I was talking about today. But we are seeing a consistent benefit over and over and over again from MultiStem administered intravenously in clinically practical windows in the various models that we're looking at, and we're also seeing tremendous consistency in terms of how the cells are modulating the body's response and accelerating healing and tissue repair by shifting it away from inflammatory mediated mechanisms and into reparative mechanisms, and we see this consistently as I've described across multiple different dimensions. So the exciting thing from my perspective is, is that if we're successful in 1 or 2 of these areas, it may very well open up a whole host of possibility in other neurological indications, both acute and chronic, where the therapy may have very powerful relevance.

Stephen G. Brozak - WBB Securities, LLC, Research Division

I guess you just opened up the can. I was going to go on GPCR, but since you said not all cells operate the same way, can you go back and talk about that? Because obviously, the JAMA piece, that I'm sure you're familiar with, has just come out, and it talks about how your advantages in terms of your therapeutics seem to be significant. Can you -- I'll use my follow-up to go down that path. Can you briefly comment on that? Because I'd like to get your opinion on that.

Gil Van Bokkelen

Well, it's interesting. So we've taken the opportunity to conduct comparative studies looking at our cells versus other cell types that we work with. And so I think that's really kind of under the central aspect of your question, is that correct?

Stephen G. Brozak - WBB Securities, LLC, Research Division

Yes, that's right.

Gil Van Bokkelen

Yes. And what we see across a number of these studies is that there are some things that certain cell types have in common with our cells, but there are range of other things that MultiStem appears to be capable of doing that other cell types we've looked at don't appear to be capable of doing therapeutically, or don't do nearly as well. So we actually look at the expression of specific factors, whether it's angiogenic factors where we've published some work actually around some of those findings, again, comparing it to multiple other cell types. Also, we see the same thing through the inflammatory properties or anti-inflammatory properties of the cells or immunomodulatory properties, if you will, where we see that these cells are doing things that other cell types don't appear to be capable of doing or they don't do it nearly as well. So without getting into the weeds in terms of all that, we do think it's very important to not just understand whether or not there is a benefit that's being achieved in well-validated preclinical models of disease or injury or whatever the underlying condition that we're focused on, but really diving deep to understand just exactly how the cells are behaving. What is it that they're doing that's driving therapeutic benefit in healing at the molecular level, at the cellular level, at the organ system level, and we've done a tremendous amount of work. Thanks to not only our internal efforts but with some outstanding investigators that we've worked with over the past few years, that yielded a ton of information about how these cells are behaving and how they're different and, in many ways, superior to other cell types that we've looked at. I think if you couple that to what we feel is one of our central advantages and scalability advantage that we have that, that's a pretty powerful combination. If you make a product that is very convenient to use, can be administered very simply, whether it's locally or intravenously, and also shows therapeutic properties that maybe other approaches can't achieve, well, I think that puts us in a pretty strong position. But ultimately, it's the clinical data that is going to validate that and it's going to put us in the best of all possible positions. But it's kind of an interesting place to be, right? We've got one product platform that could have relevance in a variety of different disease areas or indication areas. And if we're successful, frankly, in just 1 or 2 of those, let alone a few of them, I think that's going to put us in pretty good company in terms of the other biotechnology companies that are out there.

Operator

Your next question comes from the line of Ed Tenthoff from Piper Jaffray.

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

I guess focusing on stroke. I think you guys got a really exciting signal here and are moving forward rapidly here. Can you give me a sense on what this means to the community? Are doc's excited about this, and how many patients will we be enrolling in the second phase of the study? If you could give us an update on kind of what to be expecting there.

Gil Van Bokkelen

Sure. So the final phase of the study will involve enrollment of about 120 patients. So the first 2 groups that we included in the study were relatively small groups of patients, but I think that they were very informative and very important from -- in a couple of respects. But I think that really, what this puts us now in the position of doing is the first part of the study was run with a very limited number of clinical centers. There were about 10 clinical sites actually that were involved in that first phase of the study, and they didn't all come online at the same time. What we're now planning on doing is actually expanding in a pretty substantial way the number of clinical sites that are participating in the remainder of the study so we can run as quickly as possible, and as I mentioned in my prepared comments, adding some sites in the U.K. as well. And I think that in terms of interest among the clinical investigators that are out there, I can honestly say that it's extremely high. And one of the reasons for that is, one, I think people are very intrigued and excited about the data that we continue to produce across a range of different neurological indication areas, both including stroke, TBI and others, and people see that the mechanisms that are relevant for a number of these things are probably going to be common. But I think that the other reason why people are so excited about it is, is that if we're right about this, and we can actually administer MultiStem in anything close to the window that we're talking about here, say 1 to 2 days after stroke has occurred, that is going to be a substantial advance. Because I think as most people listening on the call here have heard us described previously, right now, the current therapy in terms of intervention with tPA, that's going to be done within about 3 to 4, and most, 4.5 hours. And as a practical consequence to that, you've only got patients that fits roughly 5% of the patients from the U.S. that actually gets treated with tPA. We've seen studies suggest that number is somewhere between 3% and 8%. So I think that if you actually had a therapy, you can give the patient in, say, 24 to 36 hours or even maybe a little bit beyond that as our published preclinical data suggests, that will be a huge step forward, because all of a sudden, you'd go from a situation where a very, very small percentage of patients can be treated to now a substantial majority of patients could actually be treated, and the administration of the product is actually very simple. It's simple IV administration. It doesn't take very long. And we're -- as you know, we're developing this as a true off-the-shelf kind of offering. So I think that if we meet our objectives and if the clinical data actually shows what we believe it can show, I think people are going to be very excited about that.

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

That makes a lot of sense. And I guess just following up on that, with all these preclinical stuff and spinal cord and traumatic brain, how quickly do you think you could actually move that into human research?

Gil Van Bokkelen

Yes, I think it depends on the indication area. I mean, we're still trying to -- there's a lot of questions that we want to ask. For example, if you look at something like spinal cord injury, we have to figure out -- we've been looking at things like what's the -- what are various routes of administration? Locally? Intravenously? The study results that I've described earlier and that were presented at the recent conference showed that intravenous administration which, frankly, is the simplest way to do this, is very effective under the study parameters that were used for the study where we were treating animals that were injured 1 day prior. And I think that also represents a clinically practical window as well. But there's a lot of other questions we don't know. So how far out might we be able to go? Is the window 1 day? Is it a week? Is it longer than that? We know some things about the inflammatory cascades that occurs after an acute injury like that. But there's a still a few other questions that we want to get answers to, and I think that this is going to take us a little bit of time, actually, to sort that out. In some of the other indications that I've been talking about, it might be that those were actually a little bit closer to clinical development because we're making rapid progress in those studies, and I think that it could very well be that some of those might be able to leverage the data in the information that we get out of the stroke trial, so that we have the resources, we could advance other dimensions or other programs of our neurological portfolio very quickly in the clinical development. I think one of the strategies here is, if you're building up a portfolio of programs, whether it's in a cardiovascular area or the neurological area or the inflammatory and immune disease area, what we're really offering up to potential partners. It's not just a single program or a single indication. It's a group of indications and a group of opportunities. And the more data and information we have about how the cells can provide benefit and really diving down deep in terms of how they're accomplishing that, the stronger the position we're in. And ultimately, the other thing that I think is somewhat unique about our situation is we've already shown in a couple of instances that we can take the clinical safety data that we've already generated and the other information. And once we're ready to advance programs into clinical development, we can move into proof-of-concept studies very, very efficiently. So we're not going to have to keep running Phase I studies over and over and over again for every new indication that we're moving into. We've shown that we can actually accelerate the development process. And every time we do that, it saves us millions and shaves a significant amount of time off the overall development process. So I think it's a rather unique, highly parallelized opportunity, or set of opportunities that we can go after, whether it's alone or in conjunction with our partners.

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

That makes a lot of sense. And if I may, just one quick one for B.J. Did you say, B.J., that the $1 million milestone from RTI would be recognized in the first quarter then? Or how is that kind of coming in?

William Lehmann

Yes, essentially, there are a total of 2 million milestones that'll be paid in 2012 from RTI, and there's some additional technical support payments. And from a financial perspective, we're recognizing that over the fourth quarter essentially. There was a small amount that was recognized in the third quarter, but the lion's share of it will be recognized over the fourth quarter.

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

So most of the $2 million in the fourth quarter?

William Lehmann

Yes, $2 million plus in the fourth quarter, yes. Essentially, it was straight line over that period of time according to what our auditors thought was the right way to recognize revenue.

Operator

[Operator Instructions] We have no further questions at this time. I'll turn the call back to the presenters.

Gil Van Bokkelen

Well, I'd like to just say thanks, everyone, for listening and participating in today's call. With our ongoing clinical trials and preclinical programs and additional opportunities for partnership, we remain very excited about the future, and we're working hard to build significant value for our shareholders. And we appreciate your continued support. Thanks very much.

Operator

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

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