Athersys Management Discusses Q4 2012 Results - Earnings Call Transcript

| About: Athersys, Inc. (ATHX)
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Athersys (NASDAQ:ATHX) Q4 2012 Earnings Call March 12, 2013 4:00 PM ET


Bill Bunting

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

William Lehmann - President, Chief Operating Officer and Secretary


Edward A. Tenthoff - Piper Jaffray Companies, Research Division

Jason Kolbert - Maxim Group LLC, Research Division

Greg Chodaczek - First Analysis Securities Corporation, Research Division

Christian Glennie - Edison Investment Research Limited


Good afternoon. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Athersys Fourth Quarter Year-End 2012 Earnings Call. [Operator Instructions] Thank you. Mr. Gil Van Bokkelen, you may begin your conference.

Bill Bunting

Thank you.

Gil Van Bokkelen

Good afternoon, and -- yes, go ahead, Bill.

Bill Bunting

Okay. Thank you, and good afternoon, everyone. I'm Bill Bunting 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,, or you may call Libby Abelt in my office at (212) 759-5665 to receive it via email.

Gil Van Bokkelen, 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 30 to 45 minutes and may also be accessed through the company's website again at 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 the forward-looking statements as a result of various important factors, including those discussed in the company's Form 10-Q, 10-K and other public SEC filings. As 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 March 12, 2013. Since then, Athersys may have made announcements related to topics discussed, so please reference the company's most recent press releases and SEC filings.

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

William Lehmann

Thanks, Bill. Good afternoon, and welcome, everyone. I'm B.J. Lehmann, President and Chief Operating Officer at Athersys. I'll briefly review our financial results for the period and year ended December 31, 2012, and then I'll turn the call over to Gil Van Bokkelen for a corporate update, followed by the question-and-answer period.

During the fourth quarter of 2012, revenues were $2.3 million as compared to $2.6 million for the fourth quarter of 2011. The relative decrease reflects, in particular, lower contract revenues from our Pfizer collaboration.

Our Pfizer contract revenues declined from period-to-period, in conjunction with the completion in June 2012 of our response to research program, which marked the end of the collaboration's estimated performance period.

During the fourth quarter, we also had approximately $1.9 million of revenues from milestone in technical support payments associated with our RTI collaboration.

Our research and development expenses for the fourth quarter of 2012 decreased to $4.9 million from $5.6 million for the same prior year period. The decrease was due primarily to reduced clinical development costs during this period compared to the prior year. We expect that the clinical development expenses will continue to fluctuate from quarter-to-quarter, in conjunction with changes in our clinical trial activities. There were modest increases from period-to-period in other expense categories, including personnel costs, which offset the decline in clinical costs to a small extent.

General and administrative expenses were $1.3 million for the 3 months ended December 31, 2012 and $1.2 million in the comparable period in 2011.

Income from the change in the fair value of our warrant liabilities was $1.1 million for the 3 months ended December 31, 2012 and $118,000 in the comparable period of 2011.

Net loss for the 3 months ended December 31, 2012 was $3.2 million compared to $4.3 million for the same 2011 period.

Turning to the full year results. Our 2012 revenues were $8.7 million compared to $10.3 million in 2011. The decrease largely reflects lower contract revenue from our collaborator, Pfizer. As noted above, our Pfizer contract revenue declined during the year, in conjunction with the end of the collaboration's estimated performance period in June.

Contract revenues also include license fees and milestone payments from our ongoing Bristol-Myers-Squibb relationship.

Our 2012 grant revenues of $1.3 million matched our 2011 grant revenues.

As our research and support commitments under the Pfizer and RTI collaborations near completion, we expect our contract revenues to decline significantly in 2013, absent any new collaborations and will -- can be comprised of manufacturing services, revenue under the Pfizer arrangement and potential RTI royalty payments in Bristol-Myers-Squibb license fees and milestone payments.

In 2012, our research and development expenses increased to $19.6 million from $18.9 million in 2011. The overall increase is primarily due to the $558,000 increase in clinical and preclinical development costs and to increases in personal costs and research supplies of $456,000 and $119,000, respectively. These increases were partially offset by a decrease in patent and legal fees of $330,000 and decreases in sponsor research costs and stock-based compensation in 2012. We expect our 2013 research and development expenses to be higher than 2012 based on our planned clinical development across these development activities.

General and administrative expenses decreased slightly to $4.8 million in 2012 from $4.9 million in 2011, primarily as a result of reduced legal and professional fees and a decrease in other general and administrative costs. We expect our general and administrative expenses to continue at similar levels in 2013.

Income from the change in the fair value of our warrant liabilities was $2.4 million in 2012 and $812,000 in 2011.

In 2012, net other expense was $1.2 million compared to $863,000 in 2011. This expense consists primarily of cash and stock-based milestone payments to our former lenders, and these expense payments are now completed.

Our net loss increased to $14.7 million or $0.45 per share for 2012 compared to $13.7 million or $0.59 per share in 2011.

During the fourth quarter of 2012, we completed a public offering of common stock, which generated net proceeds of approximately $21.2 million through the issuance of 22,772,300 shares, including the full exercise of the over-allotment option.

For the year, we raised a total of $30 million in net proceeds through the issuance of common stock, putting us in a strong financial position to achieve important business and clinical development milestones.

In 2012, cash used in operating activities was $17.7 million compared to $14.5 million in 2011. At December 31, 2012, we had $25.5 million in cash, cash equivalents compared to $12.8 million at the end of 2011.

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 fourth quarter of 2012, we were focused on execution in several important areas. We continue to advance patient enrollment in our 2 ongoing Phase II clinical studies of MultiStem, our patented and proprietary stem cell product candidate for ischemic stroke and ulcerative colitis. We refined our proposed clinical plan for the next clinical study at MultiStem and GvHD. We presented data from 3 preclinical programs, demonstrating our increased understanding of MultiStem in areas of neurological, injury and disease. And we raised net proceeds of $21.2 million through an underwritten common stock offering to new and current investors, which significantly strengthened our balance sheet and will support our ongoing clinical trials and other activities.

The continued successful execution of our programs, either directly or through collaborations, will enable us to deliver substantial long-term value for our shareholders. We continue to focus the majority of our resources on developing MultiStem for the treatment and/or prevention of diseases and conditions where there is significant unmet medical need.

Our key programs address the potential benefit of MultiStem to treat neurological conditions, inflammatory and immune disorders and cardiovascular disease. Success in any of these indications could open up a broader set of opportunities for us and our partners in related areas.

We are pleased to be collaborating with Pfizer to evaluate MultiStem for inflammatory bowel disease. IBD is a group of inflammatory and autoimmune conditions that affect the colon and small intestine, typically resulting in severe abdominal pain, weight loss, vomiting and diarrhea.

The most common forms of the disease include ulcerative colitis and Crohn's disease, which are estimated to affect 4 million people or more in the Unites States, major European markets and Japan.

Under our 2009 global collaboration agreement, Pfizer is conducting a Phase II clinical study to evaluate the safety and efficacy of MultiStem for the treatment of refractory ulcerative colitis in approximately 130 patients.

This study continuous to enroll patients, and we anticipate initial results from the study will be reported in the second half of this year.

Our reprogram in the neurological area involves administration of MultiStem to treat patients that have suffered an ischemic stroke.

Currently, over 2 million people in the United States, Europe and Japan suffer a stroke each year.

The vast majority of these are ischemic strokes, which are caused by a blockage of blood flow in the brain that cuts off the supply of oxygen and nutrients and can result in tissue loss and neurological damage, as well as long term or permanent disability.

Current therapeutic options for ischemic stroke victims are very limited. The only available therapy, the clot dissolving agent or thrombolytic tPA, must be administered within several hours of the occurrence of the stroke. However, as a consequence of this limited time window, only a small percentage of stroke victims are treated, most simply receives supportive or palliative care and many patients subsequently undergo physical or rehabilitative therapy or in severe cases, requires substantial institutional or home care.

It's estimated that approximately half of all stroke victims are left with meaningful permanent disability and over a quarter of stroke victims over the age of 65 require a full-time institutional care and support.

We are conducting a double-blind, placebo-controlled Phase II clinical trial to evaluate the administration of MultiStem to patients who have suffered a moderate to moderately severed ischemic stroke as defined by the National Institutes of Health Stroke Scale score of 8 to 20.

In contrast, the treatment was thrombolytics. We are treating patients 1 to 2 days after the stroke has occurred. This is a significant extension of the treatment window and we believe represents a clinically practical timeframe.

In our published preclinical studies, the administration of the single dose of MultiStem, even several days after a stroke, resulted in significant and durable recovery.

During the fourth quarter, we initiated enrollment activities for the third and final cohort of this 136-patient study, which will involve leading stroke centers across the United States.

The patients in this cohort will be randomized 1 to 1 to receive either placebo or treatment with MultiStem.

All patients in the treatment arm received high-dose administration of MultiStem, which was the recommendation of the independent safety committee, following its prespecified review last fall of the data generated from the first 2 cohorts.

We intend to complete enrollment of this study by Q1 2014 and to announce initial study results in the first half of next year.

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 who have been treated with radiation or chemotherapy, followed by a donor-derived hematopoietic stem cell transplant or HSCT to help restore the patient's blood and immune system.

Roughly half the patients that receive a traditional HSCT will develop graft-versus-host disease, which is believed to be 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 a significant pain, disability due to organ damage and even death.

The therapy that can meaningfully reduce the incidence and/or severity of graft-versus-host disease without increasing relapse or infectious risks in hematopoietic stem cell transplant patients will provide substantial clinical benefits.

Based on the positive Phase I data we've summarized previously, we believe MultiStem holds great promise for this area. In the fourth quarter, we submitted our proposed clinical plan to the FDA for their consideration, and it is currently under review. We look forward to hearing their feedback so that we may continue preparations for the next phase of development for this program.

We are also collaborating with a leading transplant group at the University of Regensburg in Germany that recently obtained authorization to initiate an institutional sponsored clinical trial, exploring the administration of MultiStem in patients following a liver transplant. We will provide limited financial support for this investigator sponsored Phase I study and provide clinical grade product to conduct a trial.

In addition to these clinical programs, MultiStem is being evaluated in numerous ongoing preclinical studies for a variety of possible indications, including traumatic brain injury, spinal cord injury, multiple sclerosis, peripheral vascular disease and congestive heart failure.

In October, we presented at the Second Midwest Conference on Stem Cell Biology & Therapy, summarizing preclinical results, demonstrating the potential benefits of MultiStem therapy to treat multiple sclerosis or MS. This is a disease that affects hundreds of thousands of individuals in the U.S. and an estimated 2.5 million individuals worldwide according to the MS Trust in the U.K.

While there are therapies that can provide relief for patients suffering from relapsing-remitting MS, there remains a great need for safer and more effective therapies, especially those that can address the chronic progressive forms of the disease.

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

In preclinical experiments, rodents were given either an intravenous injection of MultiStem cells 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 or vehicle-treated animals. This functional improvement correlated with the statistical decrease in demyelinated lesions in the nervous system of cell-treated animals compared to the placebo or vehicle-treated animals, as well as increased remyelination in cell-treated animals. And this result has been confirmed in a second animal model with MS, suggesting that MultiStem treatment may promote the process of axon remyelination.

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 Fast Forward, LLC, a nonprofit subsidiary of the National Multiple Sclerosis Society under 2011 development alliance with Athersys.

Next, the peer-reviewed scientific journal: Journal of Neuroinflammation, published an article that describes preclinical study results demonstrating that administration of MultiStem cells modulates the inflammatory environment that solves traumatic brain injury, or TBI, by reducing inflammation as well as enhancing tissue repair. The publication further illustrates the mechanisms through which cellular therapy 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 cells or placebo. The injured cell treated animals had significant increases in reparative T-regulatory cells in the spleen and plasma at 24 and 48-hour posttreatment, respectively, compared to the placebo treated animals.

Further, MultiStem treatment was associated with an increase in the ratio of neuroprotective, M2, macrophages relative to proinflammatory, M1, macrophages responsible for the production of inflammatory cytokines and associated neurotoxicity. Additionally, cell treatment resulted in the reduction of blood brain barrier permeability and preserved splenic mass following the injury, suggesting that MultiStem 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 to injury and increases our ability to develop effective treatment strategies using MultiStem.

The data further confirms the substantial anti-inflammatory and reparative properties of MultiStem cells, which could be important in treating multiple central nervous system disease conditions, including TBI as well as ischemic stroke and spinal cord injury.

As further evidence of this, data from a preclinical study demonstrating the potential benefits of MultiStem therapy to treat spinal cord injury, or SCI, was presented at the Society for Neuroscience Annual Meeting in New Orleans in mid-October. In a preclinical model of spinal cord injury, researchers observed intravenous administration of MultiStem cells, one day after injury, results in accelerated recovery, significant and durable improvements in gross locomotor and fine motor skills compared to vehicle-treated animals over the 10-week evaluation period, as well as significant improvement in bladder function.

These and other results suggest that a noninvasive off-the-shelf cell therapy such as MultiStem, administered intravenously in a clinically practical timeframe following injury, may have the potential to provide substantial and meaningful benefits to patients.

They build on data published previously in the Journal of Neuroscience, demonstrating that this cell therapy reduces inflammation in the region of injury and also promotes the regrowth of neurons at the site of injury.

The findings of these 3 preclinical studies add to a growing body of data supporting our belief that MultiStem may have relevance to multiple forms of acute or chronic neurological injury and disease.

We look forward to further increasing our understanding of the distinct mechanisms by which MultiStem conveys benefits, including reducing inflammatory damage, protecting at-risk tissue at the site of injury and through direct neurotrophic effects that stimulate the recovery of damaged neurons in the future.

We remain engaged in active discussions and diligence activities with multiple companies regarding potential partnerships and collaborations including for a 5HT2c agonist program for the treatment of obesity, schizophrenia, or both and for the development of MultiStem for certain indications.

We intend to enter into one or more business partnerships to advance these programs and establishing the right partnerships for our various programs as a key priority for the company.

To support our ongoing development and partnering activities, we successfully completed an equity offering during the fourth quarter of 2012.

Through this transaction, as B.J. described, we generated net proceeds of $21.2 million including the execution of the underwriters over allotment option from the sale of common stock to new and existing investors. The financing puts us in a strong financial position to achieve important clinical development and business milestones, and strengthens our position in Business Development negotiations.

Finally, we received a few accolades during the fourth quarter. Our subsidiary, ReGenesys BVBA received the BioProcess International Award for the Technical Application of the Decade in Manufacturing for its work involving advancement of an automated bioreactor systems for the production of MultiStem.

Also, Athersys was named to Deloitte's Technology Fast 500 for the second consecutive year. Our revenue growth of 217% during this period placed us at 351st in the listing well above our ranking of 488 in the prior year.

In closing, we continue to execute our business model: Advancing multiple clinical and preclinical programs evaluating MultiStem for diverse indications in treating neurological conditions, inflammatory and immune disorders and cardiovascular disease while pursuing attractive partnering opportunities. We look forward to keeping you updated on our further progress and to announcing specific events as circumstances warrant.

With that, we welcome your questions.

Question-and-Answer Session


[Operator Instructions] Your first question comes from the line of Ed Tenthoff with Piper Jaffray.

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

Gil, perhaps you can give us a little bit more insight into some of the interesting work that you've been doing with respect to MultiStem and some of the neurological efforts. Towards the end of last year, you guys started to indicate some of the progress that you were making with some of the interest in preclinical work and you touched on some of that this year earlier in your comments. How should we be looking for that to progress? Obviously, there's a lot of things on your plate, a lot of clinical trials ongoing, but how do you expect to maximize the value from some of these neurological potential indications?

Gil Van Bokkelen

Yes, that's a great question. So I think that the strategy, and this actually apply to the other clinical areas and therapeutic areas broadly defined that we're focused on, has been to pick lead indications that we're pursuing to get some additional -- to get some initial clinical proof of concept or evidence of activity around, but then at the same time, put ourselves in a position to be able to move laterally into other indications. In the neurological area, for example, you'll notice that we focus a lot of our activity on acute neurological damaged indications, so things like TBI or spinal cord injury. We've also done extensive work in neonatal hypoxic ischemia, which in many respects is kind of functionally equivalent to what happens in a stroke, just with a very different type of cause in neonates. And so one of the nice things about the preclinical approach we've taken, as well as the clinical approach that we've taken, is that we've been building a very strong foundation of safety data, as well as a deep understanding of mechanisms of action. And we see over and over again, that there's tremendous commonality or consistency in terms of the distinct therapeutic mechanisms that are promoting healing and tissue repair across these indications. Now, what does that mean from a long-term development standpoint? Well, we've already demonstrated that we can actually take programs and move directly into proof of concept-type studies, Phase II proof of concept studies, a good example of this was our stroke trial or previously, we had set ourselves up to run a Phase I trial, but we were able to reconfigure what the FDA's buying, obviously, that trial to make it a larger and a Phase II study, which provides us evidence of safety and, ultimately, we believe will provide us meaningful evidence of therapeutic effectiveness as well. We then believe that we can actually move laterally, most likely in the context of partnerships with another entity into other neurological indications and, I think, what we're doing is we're setting these indications up by completing extensive preclinical work and staging ourselves and doing a lot of the preparatory work that would allow us or a partner to subsequently move directly into informative clinical trials in a very efficient and effective way. As you can imagine, what potentials really care about -- what potential partners really care about is being in a position where you can actually get to clinical data that is meaningful and impactful to them in the shortest possible timeframe, that where I think you can create the greatest value in the partnering efforts. Now all that being said, and we're taking a similar strategy in the cardiovascular area, as well as in the inflammatory and immune disease areas, we're not required to partner, nor do I believe we will, long-term, be required to partner in each every program or each and every area. So it might be that we partner in some areas and we hang onto certain other things that give us the greatest potential for value creation and putting ourselves in the best possible position if we continue to develop those indications for our own account. So I think there's multiple different possibilities. We could do a partnership in the cardiovascular area, and we can hang on to some of the neurological indications for a while longer, but this is all going to be driven by -- as different discussions and opportunities continue to advance and progress, then we'll make our decisions accordingly about which ones we want to hang onto and which ones we want to partner off in the near to intermediate term. Does that make sense?

Unknown Analyst

It does. And a quick follow-up, if I may, to that. You mentioned partnering and you mentioned it in your prepared remarks and there's, obviously, more than Athersys can do alone. What are partners -- maybe you can give us a little more color on what partners are looking for? So, do they have the safety and the efficacy that they need to partner and it's just a matter of negotiating a deal? Do they need more confidence in stem cell therapies with the -- what are partners looking for to really get them over the goal line?

Gil Van Bokkelen

Yes. It depends on the company, it depends on the potential partner and it also depends on the indication. One of the things that we've been doing is we've actually been conducting pilot studies with prospective partners in specific areas that are of great interest to them and of interest to us. And I think, to just take a step back, the larger question that you asked really relates to what do partners need to see to do the really marquee type of deals that we aspire to? And one -- I think there's kind of 3 fundamental components. One is that you need to have a well-thought-out development strategy. You need to see very consistent safety and you need to have a thorough understanding and ample evidence for mechanisms of action or how the cells can actually convey a therapeutic impact. The more clinically related data you have, the better. But I think that -- and for some companies, that will be kind of a requirement, right, to see that kind of evidence over time. For others, that's not necessarily a requirement and I think it just depends on the indication and I think it depends on the particular company. In our case, we spent over a decade now building a tremendous amount of data and information about the various ways that MultiStem can convey therapeutic benefits and, of course, data that underscores its clean and consistent safety profile. That is helping us in our partnering discussions. And right now, we're evaluating partnering opportunities in several different areas around MultiStem across different therapeutic indication areas, while we continue to advance our discussions around the 5HT2c program. So again, were doing this very methodically, very systematically and we aren't going to partner in every area, we're going to pick the things that makes the most sense to us and, we believe, put us in the best possible position to maximize value for our shareholders.


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

Jason Kolbert - Maxim Group LLC, Research Division

Can we get a little bit granular on what some of the watershed moments might be as we look forward in 2013? For example on the stroke trial, can we expect any data this year to come out of the stroke trial that will give us positive belief that we've got a viable -- that we're close to proof of concept?

Gil Van Bokkelen

Well, I think that right now, we think that the conservative timeline is to actually have enrollment completed for this study around the end of the year, but most likely this is going to happen sometime in Q1 and we've got a 90-day clinical endpoint, as we've talked about before. So roughly a quarter after we complete enrollment, we will be in a position to have top line data. So again, just trying to manage expectations here, we think that this is likely going to be enrollment around the end of the year, early 2014, and then have data roughly a quarter -- call it, a quarter in change after that. So I don't think we're going to have clinical data this year. That being said, we are doing some things to actually expedite enrollment in the trial. Let me give you an example of that. We've been focused primarily on getting the sites in the U.S. up and running here but we've also been taking steps to initiate clinical sites in the U.K. and we have a big effort on that and one of the nice things about the U.K. is that we have -- that we're working with or have been interacting with stroke clinical trial network there, which is really well designed or well set up to be part of a trial like this. That's still very much in process, but I'm optimistic about where it's going to go. It's too early to say right now exactly what the impact of all these activity is going to be in terms of expediting our trial enrollment. So what we're really trying to do is just a bit conservative about managing expectations in terms of trial enrollment and when we expect to have the data. Does that answer your question on the stroke side?

Jason Kolbert - Maxim Group LLC, Research Division

Well, on the stroke side, it does, but maybe we could switch gears and talk a little bit about how we might see data from Pfizer on ulcerative colitis and what you think Pfizer might do on good days and what that means for kind of the transition to maybe a pivotal phase on that side?

Gil Van Bokkelen

Yes. So Pfizer's original plan, and I think this is actually specified in, is they were actually hoping they report top line results out sometime around early summer. They're not -- currently, we don't believe that we're on a path that would allow us to achieve that goal, which is why we've been guiding people towards having enrollment done in the next several next months and then actually being at a position to have top line data sometime in the second half of the year. So we think that, that's the current state of where we're at with Pfizer right now. Pfizer has done a lot of work over the past several years. One of the key elements of the relationship is that we've been engaged in studies and preclinical research that really has broadened and deepened our knowledge around the various mechanisms of action for MultiStem in these types of conditions. So working in well validated, preclinical models of inflammatory bowel disease and the like and, in fact, we've been working on publishing some of that data with Pfizer, which I think will be inform -- helpful. So in terms of where we go next from this, I think, it's really all going to depend on what the data would look. I mean our expectation is that the data will give encouraging signs of therapeutic impact in treatment-refractory patients that are suffering from moderate to moderately severe ulcerative colitis and that MultiStem can provide some relief with those patients. I think the longer-term commercial objective is probably going to be more focused on Crohn's disease and I think that once we have the data in hand that'll be the time for us to sit down with Pfizer, go through the results and actually talk about what happens next from a clinical development path. But I suspect that it would probably be more focused on a Crohn's population as opposed to an ulcerative colitis population. It's certainly possible that we could take something of a parallel path, but all that remains to be determined and it's going to be based on the results.

Jason Kolbert - Maxim Group LLC, Research Division

One more question. You talked a bunch about multiple sclerosis and the rationale and, specifically, I could understand that. It sounds like if you were to go after multiple sclerosis, can you just kind of go through very briefly what you need to do and would you start in kind of Phase II proof of concept study, I assume that you kind of -- where it becomes a Phase I/II/POC type study based on animal model that would give you an idea of dosing. Is that right?

Gil Van Bokkelen

Yes, I think, that's exactly right. I think we can design studies where it might be that there's some additional dose ranging on the front end as we've done in our stroke trial before we roll into a larger cohort that is really more focused on and powered to look at efficacy in those types of patients, but I think the advantage of where we're at right now, again, given the consistent and clean safety profile that we've seen even when we administer very high doses of MultiStem, that -- and remember in the stroke study, we're treating patients with -- at the high dose level with over 1 billion cells IV. So I think that really kind of underscores the fact that this really -- we've enjoyed a very consistent safety profile to date. So I think that when we move into something like MS, again, we would really want to design it, such that we're giving ourselves the best possible chance to see quantitatively or rigorously-defined indications of therapeutic effectiveness. The good news there is that we've got a good partnership with the Multiple Sclerosis Society and Fast Forward and they've been a very effective partner and a very excited partner about the work that we've been doing today.


Your next question comes from the line of Greg Chodaczek with First Analysis.

Greg Chodaczek - First Analysis Securities Corporation, Research Division

Jason stole all my colitis and stroke-related questions, so I'm going to jump onto GvHD. When do you expect to hear back from the FDA? Is this at any time? Can be at any time? Do you think they'd come back with more questions and you go back and forth for a while on this?

Gil Van Bokkelen

Yes. I suspect they'll come back with questions. In relation to the timing, I think we're going to hear from them relatively soon. Typically, there's a defined window of about 45 days where you submit the proposed plan and then the FDA tries to get back to you within that defined window. In this case, we realized that what we had submitted was somewhat atypical clinical trial design and we did that for a variety of reasons, which really get to efficiency of resources and effort going into the study. And so we had kind of upfront conversations with the FDA and they said, look, we're probably not going to be able to get back to you within that 45-day time frame on this, and we said, that's fine. From our perspective, one, we worked very hard to build this solid relationship with the FDA. We certainly want to maintain that. And so from our perspective, it's better to get it right than it is to do it as fast as humanly possible. I mean, obviously, speed is important but really more focused on making sure that we're doing a thorough assessment of this and that we're on the same page with the FDA. I suspect given the nature of these types of things, whenever you're focused on running a study like this that would move us into later stage clinical development, that the FDA is probably going to have thoughts and questions around various things. My hope is that we would be able to address those in a fairly straightforward manner and then go from there.

Greg Chodaczek - First Analysis Securities Corporation, Research Division

Well, staying on GvHD. If I look at the trial, when all is said and done, typically, well like a 2-year enrollment type trial with 6-month follow-up, something like that?

Gil Van Bokkelen

I think you're in the ballpark there. I mean I think we might want to follow these patients out for a little bit longer than. It just kind of depends on what the FDA says. But you can imagine that 1 year follow up would probably be a reasonable timeframe for these types of patients. And again, it just kind of depends on what you're looking at. Remember, our primary focus here is on preventing the occurrence of acute Graft versus Host Disease and that's clinically defined as occurring within the first 100 days, but I think that you would probably want to follow the patients out a little bit beyond that, say, 6 months to 1 year just to make sure that you're taking into consideration things like overall survival and things like that.

Greg Chodaczek - First Analysis Securities Corporation, Research Division

Okay. And switching over to the Pfizer trial for colitis. I'm assuming Pfizer owns the data. Once it's fully enrolled, data comes through, is it then up to Pfizer to present this data? Is it something that you could push them saying, listen, we need this data out there? How does that work?

Gil Van Bokkelen

Well, we've been on the same page with Pfizer since the very beginning of that. I mean, they understand that this is a material study for us. They're running it but we're supporting and this is obviously something that's very important to us. So I don't think there's going to be any disagreement about the need to go through the results and announce the data. I do think that we'll probably have a conversation with them about when and where and how that's going to happen. I suspect it will be Pfizer personnel maybe actually presenting the top line results but, again, that's something that we need to walk through the mechanics of that with them and kind of figure out exactly how they want to do it.

Greg Chodaczek - First Analysis Securities Corporation, Research Division

Okay. And this is kind of piggybacking on something that Ed or Ted asked earlier. Are there companies dragging their feet a little bit, a partner waiting to see some Pfizer data? Or I'm reading way too into this?

Gil Van Bokkelen

Yes. I'm not really going to comment on that. I think we're making good headway in terms of our partnering discussions. And as I mentioned, we're trying to do this very kind of systematically and methodically. I mean, if you can imagine, as I mentioned, we have discussions that's going around several different MultiStem programs and our 5HT2c program. So that's a lot of activity. And -- but again, it's better that we do it right and one of the reasons why we did the financing towards the end of that last year was to put ourselves in a position where we weren't forced into doing something quickly just because we heard the clock ticking, but it's a priority for us and we're focused on it. And we've told people it's a near-term priority for us and we meant that. And -- so we're busy on several different fronts.

Greg Chodaczek - First Analysis Securities Corporation, Research Division

And last but not the least, going back to GvHD. FDA gets back to you, good to go, is that quickly turning on that trial or is that something that takes a while, or you look for a partner? Or is that something you're doing on your own if somebody doesn't come down and sign something with you?

Gil Van Bokkelen

Yes. Well, it's not -- it wouldn't -- it would be great if it were so easy that once we got that information back from the FDA that we could flip the switch and get going, but as you know...

Greg Chodaczek - First Analysis Securities Corporation, Research Division

Right. I'm over simplifying it, Gil.

Gil Van Bokkelen

Yes. No. But I appreciate the context setting for the question. So it would take us a little while before we get into a position where we're actually ready to pull the trigger on that and I think that the timing of our being in a position to actually initiate the study is going to depend on other events, right. So partnering activities or other things that might be going on. I certainly believe that there are opportunities to partner around indications like GvHD, as well as other opportunities in the transplantation space more broadly. As I alluded to earlier and as we've talked about, we've done some pretty exciting work in the solid organ transplant area that we think could be in the mix on that. So and as you know there are companies that are focused on those types of opportunities. So I think, for us, it's a question of kind of evaluating where the opportunities are to make the greatest amount of sense. I think as you have clarity around what the clinical path looks like for a later stage study, then that definitely helps. Because the partner, once they get their arms around that, I think it provides kind of a clear understanding of what it's going to take to actually get to the finish line.


Your next question comes from the line of Christian Glennie with Edison Investment Research.

Christian Glennie - Edison Investment Research Limited

Just a follow-up on the 5HT2c, talk a little bit about the potential collaborations you're considering there in terms of deal structures and potential timing.

Gil Van Bokkelen

Yes. So well thanks for being on the call first of all, Christian. So as we've talked about before, there are really kind of 3 different types of scenarios, if you will. Historically, when people think about 5HT2c agonist, they tend to focus on obesity first and foremost. But as we've talked about, there has been a growing body of data over the past -- in evidence, over the past several years, that really indicates that the compound that have a certain type of profile could have relevance in schizophrenia area. You could imagine that there are, at least, 3 distinct possibilities here. One is we do a partnership with somebody around the obesity dimension of the program that does not include schizophrenia or that we do a partnership with someone around the -- at least initially; or that we do a partnership with somebody around the schizophrenia dimension of it but does not include obesity, again, at least initially; or that we're doing something that actually encompasses both. And those are all possibilities. And again, the companies that we're talking to, I think, there is good appreciation for the relevance of the compounds that we developed and the strength of our platform in the areas that we've focused on and, of course, we've run studies and we've presented some data publicly that illustrates the potential relevance of the compounds and the distinctive profile of the compounds that we've developed. And I think another key aspect of that is that these are not one offs. We feel like we've unlocked some key structural elements or understanding, if you will, about how to achieve a selectivity profile that we've actually had other companies tell us they tried for quite some time and were never able to achieve. So I think that puts us in a very good position. As I mentioned, we're engaged in discussions as we speak and I think that, that puts us in a good position to ultimately get to where we want to go to.

Christian Glennie - Edison Investment Research Limited

Just on the potential timing, is this a 2013 event or...

Gil Van Bokkelen

We're definitely actively engaged in things right now and I think this is a near-term priority for us. So I don't think it's unreasonable for us to think about this as kind of a near-term event for us.

Christian Glennie - Edison Investment Research Limited

Okay. And just a quick rundown on the financials, I think, I might have missed it earlier, your sort of guidance on R&D spend for '13 versus '12?

William Lehmann

We didn't provide specific guidance, but suggested that the expenses would be higher than 2012, really reflecting our clinical activity.

Christian Glennie - Edison Investment Research Limited

Okay. And then, obviously, related to that is sort of estimate for sort of cash run rate as it stands today.

William Lehmann

We haven't provided a guidance on that. But I think as I said and Gil said, we feel that our strong cash position at the beginning of the year, $25.5 million, puts us in a very strong position to achieve multiple milestones including Business Development and clinical milestones over the period they have in mind.


[Operator Instructions] And there are no further questions at this time.

Gil Van Bokkelen

Okay. Well, I'd like to thank you, all, again, for listening and participating in today's call. We look forward to an exciting year ahead and including the initial data from the Pfizer study and the progress on other fronts as well and we appreciate your ongoing interest and support. Thanks very much.


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

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