Marc H. Hedrick - President, Chief Executive Officer & Director Tiago Girão - Chief Financial Officer & Vice President-Finance Steven Kesten - Chief Medical Officer & Executive Vice President.

Jason Wesly McCarthy - Maxim Group LLC Ken Arnold - Everglades Parkland Advisors LLC Steve G. Brozak - WBB Securities LLC Pooya Hemami - Edison Investment Research, Inc..

Good evening, ladies and gentlemen. Welcome to Cytori Therapeutics First Quarter 2015 Earnings Release Call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation.

Before we begin, we want to advise you that over the course of the call and question-and-answer session, forward-looking statements will be made regarding events, trends, business prospects and financial performance, which may affect Cytori's future operating results and financial position.

All such statements are subject to risks and uncertainties, including the risks and uncertainties described under the Risk Factors section included in Cytori's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission from time to time.

Cytori advises you to review these risk factors in considering such statements. Cytori assumes no responsibility to update or revise any forward-looking statements to reflect events, trends or circumstances after the date they are made. It is now my pleasure to turn the floor over to Dr. Marc Hedrick, Cytori's President and Chief Executive Officer.

Sir, you may begin..

Thank you, Susan, and good afternoon, everyone. Welcome to our first quarter 2015 conference call. As Susan said, my name is Marc Hedrick, President and CEO. And joining me this afternoon is our Chief Financial Officer, Tiago Girão; and our Chief Medical Officer, Dr. Steven Kesten.

Just for your information, our press release was issued today and has been posted on our website. And also, a copy of this transcript can be found there as well once it's posted.

On today's call, I'd like to discuss, first of all in detail, our financial situation has changed over the quarter, then update you on our clinical and operational progress, and then I'll review some of our forthcoming milestones for 2015 and over the next few quarters.

After that, Tiago is going to update you on our financials and then we'll go to Q&A, and the three of us are available to answer your questions following the Tiago's remarks. So let me kick it off first by discussing our financial picture and talk about some of the key moving parts.

Over the last two or three quarters, we've tried to make it very clear on our calls and in our company presentations that strengthening the cash position of the company and resolving some of the key overhanging financial concerns were just absolutely vitally important to the overall health of the company.

There were four things in particular for the longstanding nature in terms of being financial challenges that we believe needed to be addressed as soon as possible. So most importantly, we believe we needed to be bring the cash burn down, while not compromising our research and development efforts.

Second, the Olympus joint venture liability, and those of you that know the company are familiar with that, that's related to the acquisition of previously out-licensed manufacturing rights for our core technology, which was originally negotiated back in May of 2013, needed to be paid off before May 8 of 2015 before it ballooned to $16 million gross liability, $30 million net liability.

That had to be dealt with. Also, the debt level that have been fixed for about $27 million a year-ago needed to be brought down to a rational level and restructured. And then finally, we needed to accumulate cash sufficient to get the meaningful corporate milestones and specifically clinical data. So, that's the backdrop.

So where do we stand today? So we've reduced our cash burn substantially over about $10 million per year from year-end 2013 levels to today.

We've recently raised approximately $27 million in early 2015 through the use of our at-the-market facility, through specific warrant exercises and also capital increases such that we are currently funded to get to some of these key inflection points.

We've also renegotiated our Olympus liability such that we're able to make a one-time payment of $1 million and reduce that residual liability to an additional $2 million which will be paid-off on a schedule over the year, and that's been closed and announced.

We're close to agreement with our leaders to reduce our debt substantially and restructure it such that it's not a meaningful near-term issue or concern for us.

And I'll let Tiago fill you in more on the details in his remarks, and again, we'll be happy to take any question on this and discuss the importance of some of these moves that we've made over the last few months. So now, let's turn to the clinical program.

And just to set the stage in terms of the big picture, we have two corporately sponsored clinical trials, that's ACT-OA osteoarthritis trial, which is enrolling well. And then we're in the start-up phase for our U.S. STAR scleroderma trial. The start-up activities for that trial are going well also.

On the other hand, we also have trials that we're supporting but not sponsoring, and frankly, don't have the degree of control that we have in our sponsored trials, but we continue to make steady progress there as well. We'd love for that to be going faster, but that's the nature of the beast.

And I'll update you on the European SCLERADEC-II trial and also the urinary incontinence trial in Japan. So, let's talk about scleroderma, and focus down there is more of a clinical program than an individual trial. So about a few weeks ago, we've released top-line 12-month follow-on data from the pilot trial in scleroderma called SCLERADEC-I.

And so, while the complete data set has already been submitted for publication, we wanted to release the high level data and the findings at 12 months. Now, the caveat again with that data, it's only 12 patients. It's an open label study.

But we showed that in the three and six months data that there was a substantial effect that occur almost immediately in those patients. The question in the 12 months data is will that be seen at a longer turn follow-up and be sustained.

And what we found is after only a single treatment in these patients that the clinical improvement persisted largely unchanged for about 12 months in terms of the improvement in hand function. And the only symptom that really began to move back towards baseline was pain, although the mean pain score remained improved over baseline.

So, on the whole, the data – top-line data, as well as the data more specifically suggest that with a single treatment at the steady dose range, a long duration of effect can be obtained. And I think that's – putting that in perspective, that's consistent with what we've seen in some of our other trials in other indications. So in the U.S.

generally, we're making good progress towards enrolling the first patient in our pivotal scleroderma trial. We've interviewed the top 35 to 40 U.S. clinical trial sites. The feedback from those centers both on a trial and on the application of this technology to these patients and then from the scleroderma community more generally has been quite good.

I would say today we're at the IRB submission contract negotiation phase of the trial. We're still working on a few protocol amendments, which is relatively normal at this stage in the process, given the fact the trial was just approved the first part of 2015.

Currently, the primary goal of these optimizations is to just to improve the clinical implementation of the trial and deal with some of the practical issues.

For example, in these female patients, some of which have a low body mass index, we want to be sure that in the context of a multi-site trial situation that we can get the dose in all of those patients. And those are the kinds of things we're working through.

As we said before, we anticipate enrollments to begin after we receive IRB approval at the first sites and anticipate approximately one year to enroll. And I think roughly speaking, we are still on track to begin enrollment kind of in the mid-2015 timeframe. So, it'll be easier to forecast this trial once we get it up and running.

So, crossing the Atlantic to Europe, SCLERADEC-II is a follow-on pivotal trial to SCLERADEC-I and that should begin enrolling its planned 40 patients. And we're told from the investigators to anticipate that approximately in September. And we're also anticipating that to take about a year to enroll at the five selected sites.

But again, we want to be cautious about forecasting that until we have some enrollment history with those sites and we'll update you as we know more about the enrollment rate.

So, there's a few take-home points that I'd like to convey to you based on the experience we've had with scleroderma over the last six months or so in trying to get these two trials up and running. Like one thing that's clear to me is we now have a very straightforward pathway to getting definitive clinical data both in U.S.

and Europe for this indication. We're spending an increasing amount of time with our internal team, our external experts and consultants to define the optimal commercial and reimbursement approach, and we stopped taking anything for granted there.

Our market activities and development work needs to catch up with our clinical development execution and we'll be about where I think we need to be in the next one to two quarters. Also recall that about a few weeks ago, we announced that we obtained orphan drug status by the European Medicines Agency in Europe.

That's a very significant fact for us, because it provides a number of benefits such as potentially providing an expedited path to market, so lower fees to get approval, and protection in terms of the technology and some potentially important downstream commercial benefits. So, that was something we had strategically targeted.

However, the U.S., we don't see that there's likely an advantage in a named orphan path and don't plan on pursuing that in the U.S. at this point. There's no incremental benefit in other words. So, let me talk about osteoarthritis for a moment. So, our osteoarthritis U.S. Phase IIb pilot trial in knee osteoarthritis is enrolling well.

It should be at 50% of the trial enrolled or greater by the end of the week. That's over 45 patients. So, we're on track to meet our goal for enrollment in 2015. And assuming the present enrollment rate continues, data should be available in the first half of 2016, on track with our forecast.

Now, despite the fact that we're blind to this data, we have no idea of how the technology is acting in these patients. We've learned an awful lot from this trial so far in the U.S. And I think I just want to point out a couple of things which I think are relevant.

First of all, this procedure with our current technology, not the next-gen system, but our current system is technologically very feasible in a U.S. outpatient day surgery type setting with a single system. In fact, we have one site that's done up to three cases in a single day without a hitch. We haven't had any safety issues thus far.

And although it's a little bit of a softer point, I think it's relevant and that there's a good patient demand for the procedure. Despite the fact that this is a randomized trial, patients have a chance of getting placebo, there is a lot of demand to be entered into this trial.

And I see that as a potentially hopeful sign for the possible downstream commercialization for this indication. So, besides the company's current two sponsored clinical trials in the U.S.

and the supported trials in Europe and Japan, the company behind the scenes is evaluating bringing an additional cellular therapeutic for a new niche of rare indication forward in the U.S., provided of course we have sufficient capital at that time to do so.

And we're really just trying to follow the paradigm that I think we validated in scleroderma and that with pilot the promising early clinical data in a o-U.S. market. If that data looks good, the safety profile looks good, we have the opportunity to bring that back to the U.S. and go into a pivotal study design.

And so, we'll continue to update on our internal research in terms of filling out our pipeline. So that's where we are in terms of our corporate sponsored trials. Let me spend a little time updating you on our trials that we're supporting, but not sponsoring.

First of all, in Japan, as you know if you follow the company, we have a trial for using our cellular therapeutic approach for urinary incontinence.

It's in a trial that's been jointly sponsored by our company, but primarily funded by the Japanese Ministry of Health, Labor and Welfare, and the primary site is Nagoya University, plus three other sites. That trial's received local IRB approval and enrollment is planned to begin pending PMDA approval.

We've currently submitted that trial to PMDA and it's under review. We anticipate that that approval should be relatively soon assuming no further questions, and the Nagoya team is telling us they believe it will start in the summer of 2015 in terms of enrolling.

As a reminder, that's a four-site, open label, multi-center trial in men with urinary incontinence. And once enrollments begun at each of those sites, we'll be in a better position to forecast that enrollment rate.

But right now, I think it's safe to say that's going to take over a year to enroll, given our history with the single site trial in Japan and the same indication. Now, from our perspective, we're just supplying the device and the consumables. The real cash funding is being provided the government.

But we probably will do all we can working with the investigative team to try to support the enrollment, to try to speed that as much as possible. And I think we can help there as an additional way to help support that trial.

Now, again, if that treatment is effective, that trial could provide specific on-label claims and potentially reimbursement for that indication. And so, we'll update you more once enrollment begins there. So now, let me talk about our program with BARDA around treating thermal and radiation injury.

As we released a few weeks ago at the recent American Burn Association Meeting in Chicago, Cytori presented a lot of the preclinical and proof-of-concept data that ultimately supported the decision by BARDA to increase its funding to Cytori such that we can complete the development of this national countermeasure for thermal and radiation injury.

So at a high level, that data showed that addition of Cytori cell therapy to both the thermal wounds alone without radiation and mixed thermal and radiated wounds improve the wound healing in animals. And more specifically, that improvement occurred in three clear mechanistic pathways.

First, it improved the wound bed vascularization, something we noted before in other models, but it was clear in these animal models. It appeared to increase the rate of epithelialization in covering the wound and it seemed to improve the sub-structural organization of the wound bed at the same time it's speeded epithelialization.

And then finally, there was a clear effect on the addition of the cells to these inflammatory wounds to reduce the inflammatory response on the acute (17:49) level in these animals. So, a portion of that data has been submitted for publications currently under review.

And Cytori under the new funding that BARDA has freed up is conducting a number of experiments and development projects to help support the IDE submission for an ultimate U.S. burn trial, and that would be a pilot trial in the U.S.

Given the nature of the ongoing projects that we're working on that have been funded by BARDA and the time required to collect the data for IDE submission and frankly that it's going to be sometime in 2016 before we submit to FDA, it's hard to be any more specific at this time.

So, a part of that submission relates to the core CTX-2, the new generation of the technology and its development.

And that work is proceeding on track in terms of having working prototypes of the devices, manufacture consumables, software that's capable of driving the process and getting to important cellular output milestones that we target in the development programs. So that's going well.

The other work that's critical to the more practical aspects of treating burn patients in the kind of timeframe and with the clinical constraints that both BARDA and Cytori have put on this project.

For example, BARDA and Cytori are going to implement in this project a capability that will go into the system to process fat tissue not obtained suction-mediated procedure, but through an excision, like the kind of excision that occurs normally in patients that have burn injuries.

So, implementing that type of – we're adapting our technology to accommodate that kind of tissue, and that creates some timeline risk and some development risk. Now, we're trying to mitigate that. BARDA has agreed to fund a project management professional in-house to help drive the timeline.

So we're doing a number of other things to help mitigate any timeline risk. But those are the kinds of issues that we're working on right now. We're doing everything we can to speed that timeline.

In terms of publications, on the whole, the company intends to submit the truncated ATHENA heart failure trial data for presentation at a cardiology meeting this fall, likely TCT or American Heart Association. Also the scleroderma and burn publications are currently under review and they've been submitted to journals already.

So with that update on clinical, Tiago, will you come in and just provide some more color on the financials?.

Sure, thanks. Thank you, Marc. Good afternoon, everyone. Our cost reduction initiatives implemented throughout 2014 continue to deliver significant results. Our Q1 operating cash burn was $5 million, which is consistent with the Q4 2014 and significantly under our $9 million burn in Q1 2014.

We continue to work on expense reductions and operating efficiencies with focus on G&A and sales and marketing reductions. But as enrollment in our ACT-OA trial picks up and the beginning of the enrollment of our Phase III STAR trial, we expect such quarterly operating burn will increase over the following quarters.

Our guidance is unchanged, and we continue to expect operating cash burn of approximately $25 million in 2015. With respect to our operating expenses, research and development expenses excluding share-based compensation were $3.8 million in Q1, compared to $2.8 million in the preceding quarter and $4.2 million in Q1 2014.

The increase in spend related to the prior quarter is primarily driven by study-related expenses, mostly attributable to the ACT-OA clinical program. The decrease in spend when compared to the prior year was primarily related to higher clinical costs associated with the ATHENA trials, as compared to ACT-OA and STAR trials.

Further, our Q1 R&D spend was approximately 56% of our total operating expenses, as compared to 45% in the preceding quarter and 42% in Q1 2014.

With our effort to turn our sales and marketing into profitability, we continue to manage down such expenses, which excluding share-based compensation were down to $800,000 in Q1, compared to $1 million in the preceding quarter and $1.8 million in Q1 2014.

G&A excluding share-based compensation decreased to $2.2 million, compared to $2.5 million the preceding quarter and $3.9 million in Q1 2014. G&A expense decreases across the board with the main drivers being head count reduction and decreases in professional services.

With respect to our revenues, in Q4, we recognized $2.3 million – I'm sorry, in Q1, we recognized $2.3 million in product and contract revenues, compared to $1.3 million in Q1 2014. Product revenues were $900,000 during this quarter, compared to $1 million in Q1 of last year.

Product revenues are driven mostly by research sales of Celution equipment and have been heavily concentrated in Japan. As we have discussed, the Japanese Government finalized new regulations for regenerative medicine that went into effect late last year.

We believe that these regulations will provide clarity to our potential customers and could facilitate the sales process. In addition, Cytori and Lorem Vascular recently received Chinese FDA clearance for the Celution System.

And Lorem Vascular placed its opening purchase order, which we have partially fulfilled in April, with the balance to be fulfilled in the remainder of the year. We reaffirm our product revenue guidance of $5 million to $8 million for 2015.

Contract revenues are driven by activities with BARDA, who recently amended their first contract option extension resulting in a $14 million contract to continue to fund ongoing research and development activities required to enable our pilot trial in thermal burn.

We expect contract revenues to be increase throughout 2015, and we reaffirm contract revenue guidance of $6 million to $8 million for 2015. At March 31, Cytori has had $13.2 million of cash and outstanding principal debt balance of approximately $25 million.

The reduced operating cash burn combined with the renegotiated Olympus liability, the proceeds from recent warrant exercises, ATM usage and the first closing of $19.4 million of our recently announced equity offering, significantly strengthened our balance sheet and enhances our ability to restructure our debt obligation.

And more importantly, it provides liquidity for well over 12 months of operation. We can now stay laser-focused on execution of our key clinical objectives with continued emphasis on two late stage U.S. clinical trials. With that, I'll turn it back to Marc for forthcoming milestones..

Tiago, thank you. I'd like to finish up this afternoon by focusing on some of our milestones for the next 12 months in a rolling fashion, and then the three of us will take questions thereafter. So number one, our goal is to complete enrollment in the ACT-OA trial and data is still expected first half of 2016.

We're initiating enrollment in three trials, the scleroderma start STAR and two trials that are partially funded externally, the SCLERADEC-II and the Japanese urinary incontinence trial.

We've got three sets of data that we're in the process of publishing or presenting, our SCLERADEC-I 12-month data, data funded from the pilot work conducted in the BARDA contract and the ATHENA data, which will be submitted for presentation.

We intent to complete the key development activities for the next-generation Celution System and move the burn specific development work forward as fast as possible, so we can get that IDE filed likely sometime in the first half of 2016.

Our goal is to restructure and make partial payment on our term loan, and we're working hard behind the scenes on that within the focus of our activity over several months.

And behind the scenes, we'll continue to explore a number of grant opportunities and business development opportunities that could be at a minimum cost offsetting further reducing the burn or create expanded commercial opportunities for us downstream. So with that, let's open up the lines to questions. And Susan, we'll take the first question..

The floor is now open for questions. Your first question comes from the line of Jason McCarthy with Maxim..

Marc. Hi, Tiago. It sounds like everything is going really well with the corporate restructuring. And thank you for taking the question. And I wanted to go back to the thermal and radiation burns and the BARDA contract.

I know you presented your compelling data in the preclinical models, and my understanding from the literature is that kind of like antibiotics, what you see in animal model is usually very telling of what you might see in a human. So I was wondering how quickly you can get to the pilot study and kind of accelerate development in thermal burns..

Hi Jason, it's Marc. You're right. So in translating promising data from a preclinical model such as a pig model and going into the clinic, and particularly in this case in patients who might be very sick of other comorbidities and have lesions that are of varying degrees of severity, it creates challenges on the clinical trial side.

And so, I think the right answer to that question is that the things that we're doing on the preclinical side right now are – while they're taking a little bit longer maybe than we would like, they are quite detailed and should provide the best foundation upon which to go in the clinic, with the maximal chance of being successful in a Phase II study.

So, taking a little bit more time upfront to try to be successful in a pilot clinical study in the U.S. So, I don't know that there's anything specifically that we can do today to accelerate that. We'll be ready on the device side when the rest of the preclinical data is ready. That's going to be sometime in 2016 that we'll file that IDE.

We have and we'll continue to spend a lot of time with the FDA just to make sure that that situation goes smoothly. And then, at the same time, with respect to BARDA, where we do have some opportunity to accelerate things or expand things is we're really scratching the surface of the opportunity with the late stage burns.

And I think there's some other opportunities to expand our relationship and the infrastructure we've built with BARDA. We'll be increasingly looking at ways to do that going forward..

Your next question comes from the line of Ken Arnold with Everglades Parkland..

Good afternoon, gentlemen. I'd like to ask if you could take a little deeper dive and expand on the latest secondary. It had a discount to the last sales price with a large warrant coverage. Can you explain – it looks like the ATM was pretty effective.

Why that – was chosen to do then? Was it the Olympus liability or just the loan covenants? Can you go into a deeper dive on last week's secondary please?.

Hi, Kenny. Yeah. I think the answer to that is very clear to us, and hopefully I can convey the thinking behind that clearly to you.

For the last six to eight months, Tiago and I've spent a tremendous amount of time on the road talking to a variety of investors from hedge funds to mutual funds and trying to figure out what people want to see in terms of our data, our financial picture, our trials, that are really going to drive institutional ownership and shareholder value.

I think one of the things that was sort of the flashing red light for us is that, given the debt load, the Illumina Olympus (31:48) liability and the fact that we didn't have enough data to get to – enough cash to get the data, it really made it a tough investment thesis for the kinds of funds that we felt like we needed to attract.

So, while there's never a good time, I think we two laid out a plan where we could maximize the use of the ATM, the warrant exercise and then add a capital raise to that, if needed.

The problem with using – with capitalizing the company on the heels of the warrants or the ATM is that it's just not sufficient a tool to be able to overcome the $25 million in debt, and we have recently started to pay principal on that debt.

Also, we had Illumina Olympus (32:43) liability that, as I mentioned in my prepared remarks, that on May 8, that unpaid liability went from about $3 million up to about $13 million. And we couldn't risk having that jump that far ahead of us. That was really – it put us in a very difficult spot.

So, the ATM now is sufficient to top off one's balance sheet in a period of high volume or it was good news. That's the ideal way to use that instrument. It's not, in our view, an instrument that can be used to capitalize the company.

Therefore, we tried to maximize our use of the ATM, the warrant exercises as much as we could, and then we figured out working with the lenders and where we likely were tracking with Olympus as to what the exact kind of minimum number on a capital raise that we would need to bring in to allow us to deal with the loan, the liability and the cash to data issues all at once, sort of a challenging game that Tiago has really been directing and that amount was about $27 million when you look at the amount we're able to obtain through the warrant exercise, through the ATM and then that left about another $19 million or so that we needed to raise upfront to be able to get the loan in a position where it could be substantially restructured.

Tiago, would you like to add anything to that? You've been closer to many of those issues..

Yeah. Ken, just one more thing. I think you addressed it really well, Marc. But just one more thing that it's not very well transparent to everybody. But the ATM, for a number of days throughout a quarter, we are actually locked out, because we have confidential material information that we cannot use and sell it into the market.

So that cannot be the just sole strategy that the company can raise money. We will continue to have that available to us on a stock GAAP (34:57) basis, but not so on a situation to fully the finance the company on it. I hope that makes sense..

It just seems that the placement agent, the terms seem a little tough with the coverage, considering the milestones the company has achieved over the last few months. Like I said, just what the book showed..

Yeah. So I understand why one would think that and – we don't like the terms either, right. So, the challenge is trying to raise money when some of that's going to debt repayment and debt restructuring and to pay off an Olympus liability such as that. So, that created, in our view, more of a challenge in terms of optimizing the terms.

To your question about the ATM, the terms are much better when you use the ATM given the degree of discount fee to the banker and no warrant coverage. That clearly is the lowest cost of capital.

But in the situation we found ourselves in, we had – now was the time to make that decision, not bear anymore market downturn risk, get the best possible situation, raise the least amount of capital to be able to address those three issues that we had.

And I think – I understand where you're coming from but – I get that, but this was in our view the right thing for the company at this time..

All right, thank you for the clarification. Appreciate it..

Thanks Kenny..

Your next question comes from the line of Steve Brozak with WBB..

Hey, good afternoon, gents. You've done a really good detailed job on the finances obviously, but I do have a question. And Marc, this is specifically for you. Between scleroderma and burns working in conjunction with BARDA, you've got two different types of companies in a way.

You got one which is an orphan or even ultra-orphan company and you've got another one which is more designed, let's say, for general applications.

How do you position your company or how should we expect for you to position the company going into the future? And what models do you like best about both? And what should we expect as – or as how you decide to run the company? And I'll jump back in the queue. Thank you..

Steve, it's a good question. And I look at it two different ways.

One is what's the path to create in the fastest possible way the most shareholder value, and there's one way to address that question and then there's another way to address that question, which is based on how do we preserve the cash that we just mentioned could be painful to raise and not incur substantial cost in terms of development in that regard.

So, kind of let me look at it two different ways. First of all, on the growth side, I think it's pretty clear to us that these niche indications can represent very substantial markets and could be relatively quick half the market. And I've alluded to the fact that the paradigm that that we used to bring scleroderma to a Phase III in the U.S.

was based on an investigator initiated study, a little cash investment that we're able to fortunately saw good data and we're able to bring that to the U.S. And so, we think that there is ability to replay that scenario more than once and do that in a way to create substantial shareholder value in a very quick way.

And I think if – and you look at that as more of a specialty pharmaceutical type of offering. And I think there's opportunity to continue to do that and leverage that. And I think we'll continue to look at opportunities to expand our pipeline in that area, as I mentioned in our prepared remarks.

That's the way we can create shareholder value the quickest in our mind. And then there – besides the U.S., I think there are opportunities potentially to obtain licensees or partners for those more niche orphan indications outside the U.S.

On the cost side, it aligns nicely with that approach, because if you look at the cost of these trials, these aren't expensive trials. You look at the scleroderma trial, that's less than a $5 million trial in terms of those expenses for a Phase III to get to a approval in a very sizable, potentially $1 billion opportunity in the U.S.

So I think we can leverage our balance sheet significantly by targeting those trials that can get to market quickly, but we can also at the same time marry those with opportunities more on the specialty pharmaceutical space that can create shareholder value in a relatively short period of time, both leveraging our technology platform and the device-based regulatory pathway..

Got it. So you've got the hybrid large-scale economics with the specific focus on quicker outcomes.

That encapsulates it?.

Yes, absolutely, Steve..

Great. Thank you, gentlemen..

Thanks..

We do have a question from the line of Pooya Hemami with Edison Group..

Good afternoon. Thank you for taking my question. I just wanted to know with regards to the scleroderma program, if you had any discussions with insurers about potential reimbursement there.

It might be early in the process, but just what are your strategies in case it does get approval on getting reimbursement?.

Steven – our Chief Medical Officer, Dr. Kesten, who is very involved in developing the longer term commercial approach and reimbursement modeling with respect to scleroderma principally in the U.S., but also to some degree in Europe..

Yeah, thank you for the question. It obviously is a critical component of the success of the company. We've been focusing on the development pathway and looking to various data to get us to an approval, and we've had some early look. But now, we are engaging specific specialty assistants who understand the reimbursement issues that exist in U.S.

and elsewhere. So, I can't give a specific answer now. I can tell you that we are engaging the right people to allow us to move forward and get those answers..

Okay, thank you..

And we have reached our allotted time for questions. I would now like to turn the floor back over to Dr. Hedrick for any closing or additional remarks..

Thank you, Susan. From my vantage point today here in first half of May 2015, I believe the company is in a fundamentally different position than it was about a year ago. If you look at our cash, that's substantially up. Our expenses remain down. Our debt and liability picture are improving and will continue to improve.

We've substantially increased the financial support from BARDA from $5 million to $14 million plus another $8 million that's possible. And I think most importantly, we fundamentally repositioned the clinical program to focus only on later stage principally U.S.

opportunities that we think we can bring to market quickly and that should expand our partnering and commercial opportunities over time for this company. At the same time, we're making great strides in bringing our next-generation platform to the development process.

I can tell you that that product is performing at or better than expectations currently where we are. I have a good feeling that that's going to significantly change the economic proposition of bringing adipose-based cellular therapies to market.

It's going to enhance the customer experience based on the amount of engineering fire power that's gone into this thing, and then it's going to expand the business model. We've talked about not only device-based model, but potentially selling the therapeutic as well. And this system is going to address all of those issues.

And then finally on a practical level, the implementation problems that we've seen using the current technology in terms of the time it takes to process, the costs and so forth should be solved substantially in this forthcoming generation of technology. So, we're excited about where we are.

We're in a fundamentally different place than we were a year ago. We're going to protect the capital and the progress that we've made over the next few quarters. We're going to be thoughtful and we're going to question everything, but we are very excited as a management team about where this company is today.

And we're in a great position and we're going to do our best to create value for our shareholders. As always, we appreciate the thoughtful questions, the e-mails that we've gotten, a considerable number in fact over the last couple of weeks, and we appreciate the continued interest for those of you who have followed us over the years.

So we'll do our best to keep you updated, to be transparent, and thanks again for your interest and support. Please have a good evening. Susan, thank you..

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