Athersys' (ATHX) CEO Gil Van Bokkelen on Q3 2016 Results - Earnings Call Transcript

About: Athersys, Inc. (ATHX)
by: SA Transcripts

Athersys, Inc. (NASDAQ:ATHX) Q3 2016 Earnings Conference Call November 8, 2016 4:30 PM ET


Laura Campbell - SVP, Finance

BJ Lehmann - President and COO

Gil Van Bokkelen - Chairman and CEO


Jason Kolbert - Maxim

Stephen Brozak - WBB Securities

Tracy Marshbanks - First Analysis


Good afternoon. My name is Shannon, and I’ll be your conference operator today. At this time I would like to welcome everyone to the Athersys Third Quarter 2016 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]

It is now my pleasure to turn this conference over to Ms. Laura Campbell. Ms. Campbell you may begin your conference.

Laura Campbell

Thank you, and good afternoon, everyone. I’m Laura Campbell, Senior Vice President of Finance 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, or you may call Matt Celesnik at 216-431-9900 to receive it via email.

Dr. Gil Van Bokkelen, Chairman and Chief Executive Officer; and BJ Lehmann, President and Chief Operating Officer will host today’s call. The call is expected to last approximately 30 minutes, and may also be accessed at A replay will be available two hours after the call’s conclusion and access information for the replay is in today’s press release.

Any remarks that we may make about future expectations, plans, and prospects constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by the forward-looking statements as a result of various important factors, including those discussed in our Forms 10-Q, 10-K and other public SEC filings.

We anticipate that subsequent events and developments may cause our outlook to change. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. For the benefit of those who may be listening to the replay, this call was held and recorded on November 9 of 2016. Since then, we may have made announcements related to the topics discussed, so please reference our most recent press releases and SEC filings.

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

BJ Lehmann

Thank you, Laura. Good after and welcome everyone. I’m BJ Lehmann, President and Chief Operating Officer at Athersys. I’ll briefly review our third quarter 2016 financial results and then turn the call over to Gil for a corporate update, followed by a question-and-answer period.

For the third quarter of 2016, revenues were $311,000 compared to $396,000 for the same period in 2015 and are comprised of grant revenues and royalties from our collaboration with RTI surgical. Research and development expenses were $5.3 million in the third quarter 2016, compared to $5.1 million in the prior year third quarter.

The different reflects increases in personnel costs, sponsored research, research supplies and professional fees and a decrease in preclinical and clinical development costs of $0.3 million. Our preclinical and clinical development cost vary from time-to-time and include another things that cost to conduct our clinical studies and manufacture clinical product as well as process development cost to support large scale manufacturing.

General and administrative expenses were $1.8 million for the third quarter 2016, compared to $1.9 million for same period in the third quarter of 2015, with difference due primarily to a decrease in professional consulting fees. Our expenses for both the 2016 and 2015 third quarters included non-cash expense of $0.7 million from stock-based compensation. Additionally, our operating loss for the current three month period ended September 30, 2016, included a net gain from insurance proceeds of $682,000 related to store related damage at our primary facility, the repairs and replacements were completed as of September 30, 2016.

The change in the fair value of our warrant liabilities resulted in income of $191,000 in the third quarter of 2016, compared to income of $255,000 in the comparable 2015 period, reflecting primary the impact of changes in our share price, and fewer our warrant shares outstanding in the recent period. Net loss for the three month period ended September 30, 2016 and 2015 was $6 million and $6.5 million respectively.

Net loss was $0.07 per share for the current three month period ended September 30, 2016, and was $0.08 per share for the prior three month period ended September 30, 2015. At of the end of this third quarter we had $19.4 million of cash, cash equivalents and investments compared to $23 million December 31, 2015.

Cash used in operating activities during the third quarter of 2016 was $5.5 million compared to $3.7 million in the third quarter of 2015; with the 2015 third quarter impacted by $2 million of refund related to Japanese tax withholdings associated with a license fee may during that year.

With that, I’d like to turn the call over to Gil for a corporate update. Gil?

Gil Van Bokkelen

Thanks, BJ and good afternoon, everyone. I’d like to thank everyone for joining our call today. Especially in light of all the election related activity, which I know has been a focal point for many people. So with that now behind us, I’d like to focus on the road ahead. The team here at Athersys is passionately committed to developing innovative therapies to address serious areas of unmet medical need. This commitment reflects our believes that we can advance the boundaries of medical care. A view that is based on knowledge and data, years of careful preclinical studies and evidence from properly conducted well controlled clinical trials.

Over more than a decade we have worked with a large international network of independent researches and leading clinical KOLs to evaluate how our off the shelf for generative medicine platform might have relevance in areas where current standard of care is significantly limited and where in some cases effective treatments are simply not available to many patients.

By successfully developing these innovative therapies, we believe that we can make a meaningful difference in the life of many patients and their families. Improving clinical outcomes and enhancing patient quality of life. We also believe that by succeeding in these goals we will be able to generate a substantial return for our shareholders.

One of the areas where we have made great strides is in the treatment of acute neurological injury, such as an ischemic stroke. As we have discussed in prior calls and presentations stroke represents a leading cause of serious disability globally, with nearly 17 million stroke victims each year around the world. Unfortunately current treatments are limited and reach only a small percentage of stroke patients, due to the narrow time window for safe and effective intervention.

As a result many stroke survivors are left with significant disability and an impaired quality of life and a meaningful number of victims are dependent on full time institutional care, professional homecare, or family care in the after math of this devastating event.

We recognized that over the past 20 years there have been many previous efforts to develop a novel therapy for stroke and that with the exception of tPA thrombectomy these efforts have failed. However for the people who would point to past failures is valid justification for not trying to understand and overcome these historical obstacles to developing innovative therapies for stroke patients. We would simply point out that the same argument could be made for the treatment of cancer, heart disease and many other areas.

While it’s never easy to develop the first-in-class or best-in-class therapy, we have not been afraid to take on this challenge for stroke and the data generated from leading independent labs and our own results give us confidence that we can and will succeed. The results of our recently completed international double blind randomized and placebo control Phase 2 clinical study refer to as MASTERS-1 suggest that we might in a position to redefine stroke care as we know it.

We have previously discussed the specific result of this trial in detail, during prior earnings calls and presentations, so I will not restate them here. Other than to say that, in our view the trial results demonstrate that MultiStem for the treatment of ischemic stroke is safe and well tolerated. The efficacy data appears to be robust and consistent with our therapeutic hypothesis the study investigators observed that administration of MultiStem was correlated with the reduction in life threatening in severe events, especially among patients that had suffered a more severely debilitating stroke.

Furthermore, biomarker data from the trial was consistent with and we believe collaborates key aspects of the key therapeutic hypothesis and rationale, which was established based on years of preclinical work in stroke and other acute neurological injury models. Specifically the results of the MASTERS-1 study showed that when patient receive intravenous administration of MultiStem following a stroke there is a much higher proportion of subjects that achieved the good or excellent recovery and reduced occurrence of life threatening and sever complications.

We and many stroke experts believe that in contract for the current limited treatment windows several hours for tPA thrombectomy MultiStem could be administered in the treatment window of up to 36 hours after stroke has occur, which will provide a highly practical timeframe for intervention and potentially enabled treatment of the vast majority of stroke victims that currently have not therapeutic options or they did not benefit from available standard of care.

However irrespective of our view of the data or the view of clinicians that have participated in the trial will review the data, a key aspect of clinical development and tails engagement with the FDA and other regulators to define an appropriate path for demonstration safety and efficacy through proper clinical development prior to obtaining marketing approval. Our philosophy has always been to proactively engage with the FDA, PMDA, EMA and other regulators in a collaborative and respectful manner.

We believe that first and foremost regulators are committed to insuring patients’ safety and to working with sponsors to define a practical approach to evaluating efficacy. Ultimately the FDA and other regulators want what we want, the development of safe and effective medicines that can meaningfully improve outcomes for patients and reduce the need for intensive long-term care. During the third quarter we continued our focus on activities that serve to support our primary goal of successfully developing MultiStem for the treatment of ischemic stroke and we achieved some very important milestones.

Our main priorities during the quarter were to deliver on two key regulatory objectives; first working with our partner Healios to gain acceptance from the PMDA of the proposed confirmatory clinical trial for stroke in Japan. And second to work with the FDA to define a clear and efficient development path to potential marketing approval for our stroke cell therapy here in the United States.

We previously summarized the series of meanings and discussions that we have conducted with the PMDA over the past couple of years since the new accelerated regulatory pathway for qualified regenerative medicine products was first announced and subsequently went into effect. As we had indicated earlier this year after announcing our new partnership and after study investigators presented the exciting one year data from the MASTERS-1 trial at both the International Stroke Conference in Los Angeles and the Stroke 2016 Conference Sapporo.

We and Healios established a goal to submit the clinical trial notification in support of a confirmatory clinical trial in Japan by mid-summer and we successfully achieved that objective. In late August the PMDA notified Healios of the acceptance of the proposed clinical trial and shortly thereafter in early September Healios hosted a clinical investigators’ meeting in Tokyo. This meeting was attended by members of the Athersys regulatory and leadership team and more than 30 leading strokes panel specialist from Japan that had indicated their desire to participate in the upcoming clinical trial and their associated study coordinators and support staff.

Healios has designated this upcoming trial as the Treasure Trial. From our perspective the meeting was highly successful and reconfirm the previous interest and enthusiasm that we have seen for this program. Upon returning from Japan we announced the acceptance of the clinical trial notification by the PMDA and the successful completion of the clinical investigators meeting.

Since that time we have continued to support Healios and their preparation and efforts related to the launch and conduct of the study. The Treasure Trial will be a double line randomized placebo controlled study conducted at leading stroke centers across Japan and will involve approximately 220 subjects with 110 in each arm. As we and Healios have disclosed previously treatment of subjects will occur with an 18 to 36 hours post stroke and will involve the same dosing regimen and general criteria that we used for the MASTERS-1 trial.

Patient recovery will be evaluated through approximately 90 days following initial treatment based on excellent outcome in addition to other neurological functional and clinical endpoints. This assessment will comprise the primary evaluation of trial participants. Additional patient follow-up will occur through one year as conducted previously in the MASTERS-1 trial.

Several weeks after releasing the news regarding the authorization of the trial in Japan, we announced the achievement of another significant regulatory milestone. Earlier this year in the spring we presented a summary of key findings from the MASTERS-1 trial to the FDA. We were then invited to conduct an end of Phase 2 meeting with the FDA to discuss potential next steps.

As we have found in other interactions the engagement with the FDA was candid, supportive and highly productive. The FDA provided their thoughts, feedback and suggestions regarding robust and efficient clinical approach, which we subsequently incorporated into a proposed clinical trial plan referred to as the MASTERS-2 trial, which we submitted for FDA review in consideration.

In September we announced that we had reached agreement with the FDA on the proposed approach to the trial, which is defined in a special protocol assessment for SPA. The SPA represents written agreement from the FDA that the protocol designed, clinical endpoints, plan conduct and statistical analysis encompass in our planned Phase 3 pivotal study are acceptable to support a regulatory submission for marketing approval of the MultiStem product for treating ischemic stroke patients, if the study is successful.

In accordance with the SPA the MASTERS-2 trial will be a randomized, double blind, placebo controlled clinical trial designed to enroll 300 patients in North America and Europe who have suffered debilitating ischemic stroke. The enrolled subjects will receive either a single intervenes dose of MultiStem cell therapy or placebo randomized one-to-one with treatment administered within 18 to 36 hours of the occurrence of the stroke. The primary endpoint will evaluate disability using modified Rankin Scale or mRS scores at three months, comparing the distribution or the shift between the MultiStem treatment and placebo groups.

The mRS shift analysis considers patient improvement across the full spectrum of disability enabling evolution of both large and more modest improvements and differences in mortality and other serious outcomes among strokes at different severities. The study will also assess excellent outcome, which requires achievement of an excellent score in each of three clinical rating scales used to evaluate the stroke patients, including the mSR, the NIH stoke scale and Barthel Index at three months and one year as key secondary endpoints.

Additionally, the study will consider other measures of functional recovery, biomarker data and clinical outcomes including, hospitalizations, mortality and life threatening adverse events and post-stroke complications such as infection. We believe that reaching agreement with the FDA of the design of this pivotal study is a significant event and is important to our shareholders for several reasons.

First, by achieving clarity on the trial design endpoints and analytical approach in the context of the FDA, we believe we have meaningfully derisk development by proactively establishing that our approach is acceptable to the FDA. This clarity is beneficial to the company, our shareholders and potential partners. Unfortunately there have been many instances where company has designed and conducted pivotal studies without taking regulatory guidance or input fully into considerations.

Upon conclusion of such studies it may then be difficult for investors and others to gauge whether or not the result of the trial were sufficient to warrant approval. The SPA however provides clarity in that regard while there is no requirement for the FDA to agree to utilize SPA, we believe it reflects our willingness and ability on the part of regulators to streamline the regulatory path when justified and when there is a clear area of serious unmet medical need.

Second, under the terms of the SPA, if this pivotal study is successful we may submit our application for marketing regulatory approval. Based on those results and other supplementary data we provide in the application. This is faster and more cost effective than running multiple very large pivotal studies, which has been historical norm and would have likely been our cap absent to recent SPA agreement.

Furthermore, given the modest size of this Phase 3 study with 300 patients and approximately 50 leading stroke sites across North America and the European Union, we believe that it is a study that can be conducted in an efficient and cost effective manner. We are engaged in preparations for the MASTERS-2 trail that we anticipate would put us in a position to start this study sometime next summer.

Having reached agreement with the FDA, we've continued our interactions and engagement with European and Canadian regulators, which have also been very supportive. By successfully establishing the SPA and achieving alignment with EMA and Health Canada prior to the initiation of the MASTERS-2 trial, we strengthen our position with respect to potential partnering activities. Since we are able to convey specificity regarding the approach and key operational parameters related to the conduct of the study.

In short, we believe regulatory clarity reduces risk, clarifies the efficiency of our approach with the support of regulators, and puts us in a strong position to succeed with respect to our partnering and development objectives. It's worth noting that success of either the Treasure study in Japan and or in the context of the MASTERS-2 trial in North America and Europe may enable us to seek approval from the PMDA or the FDA and other regulators respectively for one of the largest areas of unmet medical need in medicine today and put us in a strong position to create substantial value for our shareholders.

Entering into high value partnerships around specific programs remains a core focus for the company. And we believe that by clarifying the regulatory path to approval continuing our steady advancement with respect to its development and advancing our core operational capabilities puts us in a strong position to achieve the kind alliances that we envision.

While a substantial amount of work remains to be done, it’s important to recognized that we are now a relatively short distance away from being able to achieve development and commercial success in one of the most significant areas in medicine today and we remain as committed as ever.

While we continue to support in advance these programs, we also continue to advance our other clinical programs in treating acute myocardial infarction and in treating acute respiratory distress syndrome. We expect results from both of these studies to be available sometime next year. In addition, we continue to make study progress with the refinement and advancement of our other efforts that are needed to support our commercialization objectives, including process development and manufacturing scale of activities.

In closing, while many have questioned whether it is possible to develop a safe, effective and practical cell therapy treatment for stroke for the other indications we are focused on. Based on years of efforts and a substantial amount of data, we are convinced we can. While many still question whether regenerative medicine in cell therapy will be a wide spread clinical reality, we are convinced it will be and that our organization will be the way.

We also believe our approach to developing and delivering safe, effective, practical and simple to use off the shelf cell therapy products that are well characterized, well validated and that could be manufactured and delivered on a consistent and scalable basis will be key to unlocking the potential of this field. While that’s not an easy task, we were committed to achieving these goals. And as always we thank you for your continued support.

And with that we will be happy to take some questions

Question-and-Answer Session


[Operator Instructions]. Your first question comes from the line of Jason Kolbert from Maxim. Jason, your line is open, please go ahead.

Jason Kolbert

Hi, Gil. So, much good news Athersys has really been executing and yet it seems like the market is just not paying attention to the microcap universe. So, can you help me understand and your discussion with other analysts and with IR firms and PR firms what steps do you think it’s going to take in order to kind of bring the shareholder base to the stock. We’re certainly with you in trying to do that, but I just really be interested in what feedback you have.

I don’t think we need to talk about the stroke trial in Japan, I don’t think we need to talk about the stroke trial in U.S. and Europe I mean clearly that looks like it’s well defined on a plan and I agree with you I think the data here could be very compelling. So what I would like to really do is kind of change the topic from what I would normally do and just talk a little bit about what you think it’s going to take to get enthusiasm back into the story?

Gil Van Bokkelen

Yes, it’s really a great question and I think there was a number of topics related to that, I mean we’ve obviously seen a very choppy chaotic market environment over the past few weeks in the run up to the election. I think that certainly healthcare has been one of those sectors and I would say smaller cap healthcare has been one of those sector that’s been under the microscope and unfortunately that’s impacted us that’s hurt us a bit.

But in a direct answer to your question I think there is no magic bullet for basically building awareness in terms of getting the message out. And so, we are actually taking some specific steps to improve our communications capabilities and looking at working with some new firms that I think can help us amplify the messaging and can really help educate people and build better exposure particularly among the media and among other channels that we think are going to be important to helping people understand what we are doing, why it’s important, frankly why it’s a very exciting investment opportunity.

And that’s not an easy thing to do and there is really no single simple step that you could take to make it happen, but I can tell you the team here has been working very hard with that. And not just tell you because I know you are asking that question on behalf of a broader audience, we’ve been working very hard at that over the past few weeks working with our institutional allies and friends and others to really try and educate and build awareness and we’re going to continue to do that. And I think that ultimately that will generate the kind of traction and the type of visibility and momentum that I know we all want and we’re not giving up just because the market environment has been challenging over the past few weeks.

And look I think today was the beginning of - last night was a little bit scary because it’s like many of the people that are listening in today, I am sure we were all focused on the initial reaction of the election results that were come in and people were prognosticating that the market was going to have an epic down day today and it turned out that sanctity prevailed and things actually began to recover and frankly we began to see a little bit of momentum coming back into the healthcare sector and I think that’s a good thing.

I think that ultimately the needs haven’t changed, the opportunity hasn’t changed, our ability to do exactly what we intend to do and what we have agreed to with regulators and what we’re committed to doing hasn’t change at all. And so we’re still committed to that. And I think the upside certainly haven’t changed and if anything it continuous to get bigger and bigger with every passing quarter, with every passing year. And I think that that’s just helps reinforce or resolve and puts us in a better position to ultimately accomplish our goal, which is to get the product approved, successfully execute the clinical development then actually go for approval based on that.

And in so doing we think we can create not just good value for our shareholders, but extraordinary value for our shareholders. And again it’s not going to be a short or fast process, but we’re absolutely committed to it.

Jason Kolbert

And Gil, just one of the things that I think is interesting to note is the performance of Healios stock in Japan, what actually has been very strong. Can we transition to kind of two other areas that I’d like to talk about and that is kind of the partnering assumptions behind the U.S. and or Healios trial in Japan; and two, just for mind us kind of in terms of the cost of the Healios Japan trial? That trial was being 100% funded by Healios, so you’re basically - give us a little bit of an idea of when we could expect that trial to start and kick in.

Because I think people are a little bit worried about how you’re going to pay for two pivotal trials and may not be understanding the partnership arrangement there. And again close with me on your vision in terms of the powering assumptions for the endpoints in the trials? Thanks.

Gil Van Bokkelen

Yes, thanks. Great question and I am a bit limited in terms of the amount of detail that I can go into on certain things related Healios’s activity because by agreement they are responsible for conveying that information and I don’t want to get out ahead of them, but I can make a couple of comments. So first off is as you noted, they are paying for the study in Japan, we’re responsible for certain manufacturing related activity, but they are paying for the study in Japan. So it’s important for people to recognize that.

In terms of the general powering assumptions, I know that Helios has disclosed that this is better than 80% powered. So it’s a very robustly designed study. And based on a very - in fact in some respects I think they actually overbuild what would have been required in order to achieve success in Japan and they did intentionally because they don’t want to run the risk that there are any small anomalies that might actually, if you we ran a really small study which could be done in the near accelerated regulatory framework in Japan.

You could run the risk that there are some small anomalies that might actually skew things or throw things a little bit of wagon, Helios didn’t want to risk that and either did we. Ultimately with their call, but we fully supported and endorse the idea to run this 220 patient study. And then again it’s a robust and well powered study.

In terms of our study, it’s an even larger study, and it’s more robustly powered and again I am not going to give you the specific numbers in terms of confident levels and powering around it, but I can say that it’s well north of 80%. And we will give more information about that in due course, but we and the clinicians and the statisticians that are experts in the field that have helped us actually design the study feel very confident that we’ve designed a very robust well-constructed trial.

And as I mentioned during my comments, we are evaluating and we’ll continue to evaluate partnering opportunities that relate to that particular program as well as other programs that we’re engaged in. And so I think that we’re in a good position by achieving the regulatory clarity that we sought to obtain, we’re now in the process of sinking up with the European regulators as I mentioned, which is going to be important to partners that are interested in the European landscape in particular. And so we’re going to continue to focus on that in the coming weeks and over the next several months.

While we engage in other activities that put us in a good position to meet our goal of launching the study next year on the timeline that we’ve laid out. So I think that again we’ve tried to be conservative, cautious and kind of overbuild things if you will to just make sure that we’re doing this in the most robust way possible.

And learning from the last - that we gathered from the last study and apply them in an intelligent way.

Jason Kolbert

Really appreciate the answer, thanks Gil. We’re looking forward to seeing the start of the trials.

Gil Van Bokkelen

Thanks, Jason. Appreciate it.


Your next question comes from the line of Stephen Brozak from WBB Securities. Your line is open, please go ahead.

Stephen Brozak

Hey, congratulations and good afternoon gents. Look I understand what we’re looking at here in terms of all the trials, but one of the things that I'm really, really curious about is how your approach is going to specifically highlight everything you learned from the last trial specifically with the clinicians. Because obviously you’re working with a narrow window, you’ve got administrative just literally laser like focused, can you give us anything specifically color on that in terms of everything from terms of instruction, training and recruitment?

Gil Van Bokkelen

Yeah I think one of the big things is that we’ve actually shifted the treatment window little bit earlier than we did in the last study. So last time recall that we originally designed the trial three patients in a 24 to 36 hour window. And then we had to extend that for just the reasons that we’ve talked about previously.

This time based on the data from the last study, we’ve actually moved that treatment window a bit earlier. So now we’ll be treating patients in an 18 to 36 hour window post stroke and the reason why we did that is because the data tells us that earlier is clearly better. And that we think that we can actually improve our odds of success by extending that treatment window to treat patients within that earlier timeframe.

Now ultimately clinically and in a real world setting, we’ll probably go even earlier than that, but in the conduct of this study we felt and the clinicians that are participating in this study that are kind of our core team of clinical experts and advisors felt it was important to maintain that window that early window in the first 18 hours or so that would allow them to assess patients that might have suffered a TIA or that might be exhibiting meaningful spontaneous recovery for whatever reason.

So that those subjects should be excluded from the trial, because that’s been a big source of background in prior clinical studies in stroke, which has been unavoidable for the neuroprotectants or the thrombolytics or other treatment approaches that have to be administered within the first several hours after the stroke has occurred.

In our case we’ve applied I think in a very intelligent and rational way what we know about the profile of the patients that we enrolled in the last study and actually done it in a way that I think meaningfully enhances our odds of success. We’ve made some other protocol refinements and adjustments in terms of screening and characterization around the patients and putting limitations on certain types of things.

I'm not go into that today, but I will say that we the team, the statistical, the biostatistical experts, the clinicians and ultimately the regulators feel very confident that the approach we’ve laid out is a well thought out, well robustly constructed approach. And frankly if we see the kind of results that we saw from the last study then we’re going to be successful.

Stephen Brozak

Great. Well obviously this is an exciting time for the franchise so good luck with that and we really appreciate the update. Thank you.

Gil Van Bokkelen

Thanks, Steve.


Your next question comes from the line of Tracy Marshbanks from First Analysis. Your line is open, please go ahead.

Tracy Marshbanks

Yeah, thanks for taking the calls. And it’s been a big third quarter, but obviously even more important things on the horizon here. A couple questions just to make sure I understand the process and what’s going on in Europe, you used the term synching up and consulting with European regulators, could you to some degree discuss what that means and what that involves?

And then the other obviously the European payment and healthcare delivery system is a little bit different than the U.S. are there fewer sites with more patients, just what is the structure look like with the I think you said potentially 50 sites U.S. and Europe? And then the third part of that is in a number of instances because of the payers in Europe governments have funded some very important or high benefit clinical trials. Is there that sort of opportunity for you to get non-dilutive financing if you will?

Gil Van Bokkelen

So I'll actually start with that last question first. We are looking at project financing initiatives that we think would provide non-dilutive capital or other forms of capital that we think could augment our efforts in terms of advancing this program. We're looking at that from multiple different sources.

With respect to the first question in terms of synching up with regulators. Basically, there is couple of different ways you can go in trying to get alignment between the FDA and EMA in Europe. You can conduct the simultaneous process, which frankly can be sometimes a bit challenging to convene and orchestrate just given that it poses schedule and limitations on all the principles from both regulatory agencies and there is other things you need to do in order to be able make that happen.

In our case we decided since the FDA had reached out to us and suggested that we have the end of Phase 2 meeting with them and also offered up their initial thoughts on ways that we could advance this program in an efficient and constructive manner. We decide to start with the FDA and that's what we did. But we then shortly after that began the process of reaching out to European regulators so that we could gauge their thoughts, their feedback, their perspective just to make sure that everybody was in general alignment with respect to what we were thinking about doing.

And we've already had a number of meetings with European regulators and I’ve also met with Health Canada and I can say without going into the details that there is very good alignment between all the people that we've met with and talk to. What we need to do now is just make sure - so basically going to the regulatory process with EMA there is a specific set of steps that you need to go through and there are some regulatory designations in terms of rapporteur, co-rapporteur and other things that you need to do in order to be able to facilitate that process.

And so we're deep into that process right now, I won't go into very details on it, frankly would be boring the most people that are not familiar with it. But the point is that there is a systematic set of things that you need to do. And we think it's critically important to make sure that we have explicit alignment between EMA, between FDA, between other regulators so that everybody says yes we've signed off on what specified in the SPA, we've signed off on the approach that the company is proposing to take.

And there that is no lack of clarity or any kind of confusion. That's important not only for - you need to do that before you start the study because if something did come up and you needed to make some sort of minor modification, you really can't do it or shouldn't do it after the trial has already commenced. So we're taking the time now to make sure that we’ve got everybody in alignment so that there is no potential for confusion, kiosk or any kind of misstep along the way.

The second question you asked I believe related to - and hopefully that's clearly, but if you need me to provide further clarity on that I am happy to do it. The second question that you asked actually related to reimbursements. And I think it kinds suddenly moving into that related to marketing and distribution in Europe. Look Europe is a large complicated territory, there are - they essentially the EU represents itself as one common marketplace, but it's a bit more complicated than that with respect to healthcare as I'm sure most if not everybody on this call can appreciate.

So I actually believe that the right way for us, so first off we've already done some reimbursement analysis in Europe, it gives us a very good perspective and frankly a lot of confidence that the product that we have the therapy of product profile that we defined is going to be extremely well received. And frankly that we will be able to get a very competitive reimbursement rate. And again that's based on the data that we've seen that's is based on our engagement with the consulting firm that specializes in these types of activities in terms of assessing reimbursement.

And so it's based on knowledge and information and a lot of confidence that - and frankly just a general recognition that stroke remains one of those areas, which is not only is a significantly debilitating for many patients it's hugely expensive. I mean if you have to put patients in a full-time institutional skilled nursing facility where they could be spending several years or even longer in some cases, it's incredibly expensive.

And for those patients that have to have professional homecare assistance or frankly just impose a burden on their families where they have to have family care taking care of some of their most basic fundamental needs. And that’s on top of the hospitalization care, the rehabilitative and physical therapy that the patient may actually be undergoing and a whole host of other things that basically create an incredible expense burden and economic burden for these patients and their families.

So we believe as our data has shown that if we can meaningfully shifts the odds in favor of not just the good recovery in many instances, but potentially even a complete recovery for a meaningful percent of patients. Frankly that's going to put us in a very strong and a very attractive position especially given that the current standard of care only reaches a tiny percentage of patients that have had a stroke.

So without throwing out specific numbers again we feel we've done a lot of work and we work with outside firms that have helped us evaluated this. And we feel like we're in a very, very strong position and now our focus is on turning that potential into reality.

Tracy Marshbanks

I appreciate that. And just because you've called it out a bit and it's my - a unique area of interest for me on the process development and manufacturing. You called it out are there specific areas that you're working on? And also just I know we've talked about supply and the ability to supply to Japanese market, but if you're doing North American trials, European trials, Japanese trials. Are there additional regulatory or I'll call it supply chain manufacturing issues that still need to be resolved for the European side of things?

Gil Van Bokkelen

So with respect to kind of what we’re focused on, as I've talked about at various presentations and events. We're focused on transitioning our way to larger and larger bioreactors. We have an incredible team that's focused on process development and manufacturing assay development and refinement. In fact we have two teams; we have one our European facilities and one here in Cleveland.

And I can tell you that they are incredible, they are very hardworking, they’ve overcome some serious obstacles over the past several months related to the flood, the unexpected flood that we had that put some of our core facilities out of commission for weeks that required significant intervention from our insurance company to come in and actually completely deal with all the issues that were done, which they did a phenomenal job of doing that.

And we're back online and doing all the things that we need to be doing. And it's been a tremendous amount of hard work and frankly a lot of flexibility adjustment on the part of the members of the team and the organization here.

So but the short answer Tracy is that working our way at the larger and larger bioreactors, I mean we’ve made no secret of the factor that in the not too distant future, we anticipate being able to produce manufacture our products in a large scale basis in 2000 liter bioreactors that frankly once our full capabilities are in place, which isn't going to happen instantaneously it takes time and a lot of effort and capital to make that happen is going to put us in a position that is far ahead of everybody else in the field.

And I'm absolutely convinced that we are going to make that happen and it's a question of how quickly we can actually get there. As the team here has made exciting and outstanding progress in terms of getting us down that path.

The other question that you asked about supply chain, the whole set of logistics that you need to solve for in order to be able to make this a practical reality as stroke centers and other clinical institutions around the world is a lengthy complicated exercise. So we spent years focused on thinking about and planning for the fundamental aspects of how we're going to do that and we haven’t solved for everything yet, but I can tell you we've got very clear plan of attack.

And I'm absolutely convinced just the progress that we’ve made in terms of overcoming the limitations that we experienced in the last clinical trial the MASTERS-1 trial, where we were working on trial bags and product had to be processed in bone marrow transplant cell processing facilities that severely limited us in terms of our ability to enroll patients and like. We've overcome that. And now we have a true off the shelf product format, which is simple to implement, I mean it takes just minute to procure the product and then transfer the product into the IV bag so that you can take it directly to the patient.

And I think that solving for little logistical things like that as well as the bigger logistical challenges that you've alluded to in terms of distribution of the product and how we will handle those types of things. We are very confident that our plan will allow us to accomplish all the things that we need to accomplish.

One of the nice things about the distribution end is that the stroke clinical universe is fairly concentrated when you think about - there is a number of large treatment centers here in the United States and in other core countries and territories that we're focused on. And frankly we have a relationship with a lot of those centers already.

And so being able to solve for the types of issues that they are presented with to make this as user friendly and as simple to do as possible, I think bodes well for the other institutions that will ultimately be supplying products or through one of our partnerships. And in Europe I think we're more inclined to actually do it through a strategic partnership, because again things are a bit more complicated it’s not just one entity it's multiple countries that you've got to deal with.

Tracy Marshbanks

Great. Thanks for your time and thoughts. I appreciate it.

Gil Van Bokkelen

Thanks Tracy.


As that was our last call. I will now turn the conference back to Athersys.

Gil Van Bokkelen

Right, once again we'd like to thank you all for your time and your attention today. And we wish you all the best and we look forward to updating you again soon. Thanks very much.


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