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

Jason Kolbert - Maxim Joe Pantginis - ROTH Capital Steve Brozak - WBB Securities Sarah Engel - Stonegate Capital.

Good afternoon, ladies and gentlemen, welcome to the Cytori Therapeutics third quarter 2015 earnings results call.

[Operator Instructions] Before we begin, we'd like 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 Factor section included in Cytori's Annual Report on Form 10-K and Quarterly Report 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..

Hi Jackie. Good afternoon, everyone. Thank you and welcome to our third quarter 2015 earnings call. As Jackie said, I'm Marc Hedrick, President and CEO. Joining me today is our Chief Financial officer, Tiago Girão; and we also have here Chief Medical Officer, Dr. Steven Kesten.

We have recently issued our Q3 earnings release that should now be posted on our website. And a copy of this transcript will be available there soon as well. So here's the agenda for today's call.

We're going to start off with an update on our lead clinical programs, specifically in scleroderma and osteoarthritis; then talk a little bit about those timelines and the related activities; then discuss the pipeline development activities that we have ongoing, including a brief update on the topline findings from our Athena trials; then Tiago is going to update you on our financials and discuss upcoming milestones; and then we'll have time for Q&A.

So before I get into the nuts and bolts of the clinical programs, I'd like to officially recognize and welcome on this call, Mr. John Harris to Cytori. John began officially in October on the 1. And I'd like to spend a little time on the rationale for bringing John in.

John is going to be our new Representative Director in Japan, which means the highest management authority in Japan. And also on a global basis will be our GM for Cell Therapy. This is a new position for Cytori.

And John will assume the lead in Japan on the ground, but he's also going to assume a leadership and advisory role on the commercial planning activities that we have ongoing today on a global basis. For the time being, John is going to be domiciled in Tokyo, where we have regulatory approval. We're enrolling an approval trial today.

It's where majority of our sales are coming from. And in our view it's greatest opportunity to grow revenue over the next couple of years. So from my perspective this is a very significant addition to our team. And that's why I'm highlighting it.

It's fully consistent with our vision to lead the way and bringing cellular therapies to market for the patients that need them. And also I feel as if we must take better advantage of the opportunities that have been given to us in Japan.

We've recruited John over the course of 2015 from his role as President, Representative Director, Becton Dickinson in Japan, where he led a substantial sales and marketing-focused organization of over a $300 million a year in annual sale.

But more importantly, he's been really on the inside of the regenerative medicine cell therapy activities in Japan, not only at his leadership role at BD and in selling into this exact customer base, but also on the Board of Governors of the American Chamber of Commerce in Japan.

And as I mentioned on previous calls, we actually were very involved in writing the position paper for the new regenerative medicine law for the ACCJ. And John also is on the Executive Committee of the American Medical Device and Diagnostics Association, and actually led their working group for regenerative medicine as chairs.

So despite the fact that John is a seasoned U.S. Executive and he gets the whole U.S. multinational expectation situation, John does know Japan. He speaks fluent Japanese. He knows the medical industry. He knows the regulators. He knows the customers.

And on a personal level, John is a great guy and he might be the perfect person to build upon the progress of our previous leader there, Shirahama. Shirahama founded our K.K. about 13 years ago and I want to formally thank him for his great efforts in getting us to this point.

And Shirahama will assume the new role as Head of Customer Acquisition in Japan. So the bottomline here is this hire is indicative of our full commitment to the Japanese market and what we think can be made out of that opportunity. And also it shows our full commitment to ongoing development of our commercial preparatory activities.

So now on to the clinical program. And let me just give you the headline first, that Cytori is now in a position to potentially have four approval trials enrolling in 2016, two in the U.S. and two abroad. So first let's talk about the U.S. Our STAR trial is showing enrollment that's proceeding as per plan.

Nearly all the sites have been initiated and about half are actively screening patients. Please recall that STAR has sponsored 80 patient pivotal Phase III trial to assess the safety and efficacy of our ECCS-50 therapeutic on patients with hand dysfunction related to their scleroderma.

Also recall, it's a randomized double-blind trial that's 20 sites, looking at a single-dosing regime, a one-to-one randomization schedule comparing active to placebo. STAR contains a crossover arm for placebo patients after a year of follow-up at a crossover to active therapy.

The primary endpoint is hand function as measured by the Cochin hand function score, which is a validate measure of hand function. There are also a number of other subjective and objective secondary endpoints that will be measured as well. And also as a reminder, the U.S.

regulatory pathway for the cellular therapeutic being studied in this trial and the products required for the autologous cell therapy manufacturing process will be regulated as a PMA device. And that's based on our negotiated request for designation with FDA many years ago. The advantages to this approach in the U.S.

market for us, in terms of time to market, it represents a very straightforward pilot pivotal clinical approach and it also gives us ability to make iterations, improvements on the core technology software, et cetera, in a much less onerous way. So we have great advantages and a very clear regulatory approach in Japan.

On timing side, with respect to scleroderma in the U.S., there is no change in the anticipated timeline or on schedule to our projected enrollment timeline. We anticipate last patient in, in mid-2016 timeframe. We anticipate 12 months to follow the data, and that should be available about one year afterwards.

Therefore, that would mean roughly filing for PMA approval towards the end of 2017. In parallel, we continue to assess for safety and the longevity of efficacy response noted in our European pilot clinical trial. So the 12 month data from that trial called SCLERADEC-I was published this past quarter in the general rheumatology.

The key findings in brief showed sustained affect on key endpoints such as Raynaud's phenomenon in the number of episodes, pain, ulcers and hand function. The two year follow-up data for that trial is now out, although still confidential. We've reviewed it. It's overall consistent with the 12 month data.

And we plan to work with the investigators to prepare that data for presentation as soon as we are able. So now on Europe. We are actively enrolling in a follow-on trial to SCLERADEC-I, called SCLERADEC-II. We're actively enrolling patients of multiple sites.

And this trial in summary is similar to STAR, but it's an investigator initiated trial, but fully supported by Cytori as needed. It's a 40 patient pivotal approval trial. And like STAR, the goal is to assess the safety and efficacy of our ECCS-50 therapeutic on patients with hand dysfunction related to their scleroderma.

It's a randomized double-blind trial at six sites in France. Six sites are actually doing the procedures. It's studying a single-dose regime, a one-to-one randomization schedule and comparing active to placebo.

SCLERADEC-II contains a crossover, like STAR, but in this case the crossover is for placebo patients at six months and follow-up to active therapy for a cryopreservation of ECCS-50 therapeutic. Now, like STAR, the primary endpoint of hand function measured by Cochin, and also there are a number of others subjective and objective secondary endpoints.

In Europe, the regulatory path for the cellular therapeutic and the products required for autologous cell manufacturing will be as an ATMP or Advanced Tissue Medicinal Product, and we intend to leverage the orphan disease designation as well.

We're actively preparing to use the EU pilot and pivotal data in Europe, potentially supplemented with the U.S. STAR data to obtain EMA or European Medicines Agency approval for this therapeutic in the EU.

In the interim and as I mentioned on the previous call, we're actively investigating opportunities to make this therapy available to patients as permitted under EU legislation and individual member state laws, prior to formal and full market authorization. And we'll update you as we move forward each quarter as to how that's progressing.

And finally, to tie this up, as I've mentioned previously, our global scleroderma strategy is to take the product direct in the U.S.

We're going to have approximately 20 sites trained and how to use the technology and procedure, which is a significant percentage of scleroderma sites in U.S., but then in the Europe to identify a suitable commercial partner or partners for that region. Now, let me switch over to our osteoarthritis program. We have completed enrollment in our U.S.

Phase IIb trial and we're actively following these patients. Let me just refresh your memory on that trial. That's a sponsored 90 patient pilot Phase 1/2 trial to assess the safety and efficacy of our ECCO-50 therapeutics in patients with osteoarthritis of the knee.

It's a randomized, double-blind trial, single-dosing regime comparing two doses, a low dose and a high dose to placebo, so it's a 1:1:1 randomization schedule. All these patients are going to be followed over the course of 48 weeks.

There is an interim analysis planned at the 24 week time point and that primary endpoint for the trial is pain unlocking, and like our Scleroderma trials there's number of other subjective and objective secondary endpoints. The U.S. regulatory pathway for OA is the same with the scleroderma.

Our current plan with this trial is to release the topline data likely through a press release at 24 weeks and that would be approximately Q1 of 2016 when that data is available. We'll also try to present the full dataset when we can get that into a suitable medical meeting in rheumatology or orthopedics space.

What we can say thus far in terms of the data, although the blind, does remain intact, that the procedure is well-tolerated and that there are essentially no complications in the now 94 patients that have been treated in that trial.

So should trial yield promising clinical data, then we would be prepared to go into a pivotal Phase 3 trial in the U.S., which could began as early as the mid-2016 timeframe and the time to enroll should be a year or less for that trial.

The decision to proceed on that trial is based primarily on the strength of the Phase 2 data that we'll see six months in Q1 and of course on availability of resources and we hope to potentially pay for that trial through partnerships. So now let me move to our pipeline indications and talk about our urinary incontinence trial in Japan.

The ADRESU pivotal Phase 3 approval trial is actively enrolling at multiple sites in Japan. This is an investigator initiated trial primarily funded by the Japanese government, but again, Cytori behind the scenes is fully supporting this trial.

It's a 45 patient trial with the goal to assess the safety and efficacy of our ECCI-50, which is a combination of cellular tissue therapeutics for male urinary incontinence after prosthetic surgery or prosthetic intervention. It's an open-label, single-arm trial, single dosing regime with patients serving as their own control.

The primary endpoint is urinary leakage volume at 52 weeks. There also number of other subjective and objective endpoint. If the therapy is shown to be safe and effective, our plan is to submit that along with the clinical team leading the trial in Japan for approval as a device under the Japanese medical device regulation.

The current timelines suggest that it may take a year or two to enroll all 45 patients at four sites, although we are working with the sites to help speed that enrolment timeline as much as possible. I think it's safe to say right now to look for data to be available sometime in 2018. Now to BARDA and a thermal radiation injury program.

On the scientific side, we are currently active in the preclinical phase in terms of our contract work with the government to develop a medical countermeasure against the nuclear detonation here in the U.S.

Simultaneously we're developing the next generation of the solution manufacturing technology as a cornerstone of the countermeasure development program. The key proof of concept work is largely complete. We are now also active in a clinical feasibility assessment of the technology and a very demanding U.S. burn unit setting.

To be clear, we're not treating patients per se, but we're actively using our latest technology to assess its ability to be used successfully to process tissue for burn patients successfully in a challenging clinical setting.

Upon successful completion of the milestones, which should be mutually negotiated with BARDA, Cytori intends to file an IDE approval and began a U.S. feasibility trial for burn therapy in the U.S. and that should open up additional pre-negotiated burning support and potentially support beyond that from the U.S. government.

A best estimate right now in terms of the timeline is to file in the second half of 2016, but we'll update you when we have more information on the timelines based on our ongoing interactions with the government, ultimately that will be a big driver of that timeline.

But on the whole, I would say our contract activities with the government under our BARDA program are going quite well. Now, let me turn to Athena, which is our cardiovascular trial. In last quarter, Cytori received and reviewed the 12 month data from a truncated Athena I, Athena II trial.

As you know we stopped enrollment in the Athena program prior to full enrollment. A total of 31 patients with end-stage ischemic heart failure were enrolled.

We learn the following from the combination of six and 12 month data, that delivery of Cytori Cell Therapy in patients with advanced coronary artery diseases impaired left heart function is feasible in a U.S.

critical care setting, which includes that harvest procedures, cell processing, mapping of the left heart to find an optimal location for cell delivery and then multiple injections into heart muscle, all done in the same day.

We made a number of modifications to that trial through protocol amendments, which allowed us to improve the overall efficiency and safety profile of that very long and taxing clinical trial procedure day.

That whole process was extremely helpful in showing us and proving to us that autologous therapy, such as this can be used in a critical care patient setting in very sick patients.

It's not surprising, as we look at the data and it's consistent with our previous guidance that definitive conclusions on a limited sample size 31 patients that have associated variability in underlying disease was just not possible, however, trends we're seeing and endpoints related to symptomatic benefit in these patients with end stage disease, although we can't say that those are associated with changes and physiologic variables, such as those measured by ejection fraction.

The six months data alone was submitted, but was not accepted for presentation. And we are currently combining the six and 12 month dataset to present at a scientific meeting and also developing a manuscript concurrently for peer-review journal.

So our plan at this point is to put the full dataset out there once we have acceptance to a scientific meeting and also peer-review publication. So to be clear, we saw some very interesting signals in the data. However, at present, we have no plans to invest in further development of cell therapy technology for cardiovascular disease.

But at some point, we may revisit that in the future. So at this point, I'm going to turn the call over to Tiago to discuss our financial result in greater detail.

Tiago?.

Thank you, Marc, and good afternoon, everyone. Our cost reduction initiatives implemented throughout 2014 and 2015 continue to deliver results.

Our net loss when excluding non-cash charges related to the changing fair value of warrant liability was $5.8 million in Q3 or $0.04 per share, as compared to $8.7 million or $0.06 per share in Q2 and $9.5 million or $0.12 per share in Q3 of 2014.

On the same basis, for the first nine months of the year, we had a net loss of $21 million or $0.16 per share or over $10 million lower when compared to our $31.8 million or $0.41 per share net loss for the same period in 2014.

Our Q3 operating cash burn, although higher than in Q2 was better than planned at $6.1 million compared to $7.2 million in Q3 of last year. Our year-to-date operating cash burn was $15.9 million; almost $10 million lower than our $25.4 million cash burn for the same period in 2014.

We continue to work on expense reductions and operating efficiencies with focus on G&A and sales and marketing reductions. As we begun enrollment of our Phase III STAR trial in Q3, we expect higher operating cash burn in the fourth quarter of 2015 when compared to Q2 and Q3 of this year.

That said we are decreasing our annual operating cash burn guidance by another $1 million to approximately $23 million for the full fiscal year 2015. This is $2 million lower than the operating cash burn guidance we provided in the beginning of the year.

With respect to our operating expenses, research and development expenses excluding share-based compensation were $4.2 million in Q3 compared to $5.9 million in Q2 and $3 million in Q3 of 2014. The decrease in spend from Q2 to Q3 is primarily related to the rapid enrollment of our ACT-OA clinical trial in Q2.

The increasing spend from Q3 2014 to Q3 2015 is mostly related to increases in clinical trial related costs and broader research efforts. Further, our Q3 R&D spend was approximately 61% of total operating expenses excluding share-based compensation and changing fair value of warrant liability, as compared to 67% in Q2 and only 39% in Q3 of 2014.

The increase is planned and indicative of our focus in an ongoing Phase II and Phase III clinical program. We continue to manage down sales and marketing expenses, which excluding share-based compensation were down to approximately $500,000 in Q3 compared to $600,000 in Q2 and $1.3 million in Q3 of 2014.

The decreases are mainly attributable to salaries and benefits. We continue to expect positive margin contribution from our sales and marketing organization in the near-term. G&A excluding share-based compensation was $2.1 million, down from $2.3 million in Q2 and significantly reduced from $3.4 million in Q3 of 2014.

We experienced significant G&A expense decreases in salaries and benefits as well as professional services, as we renegotiate key service contracts and minimize discretionary spend. With respect to our revenues, in Q3 we recognized $2.5 million in product and contract revenues compared to $3.5 million in Q2 and $1.1 million in Q3 a year ago.

Product revenues were $766,000 during this quarter compared to $518,000 in Q3 of last year. With respect to Lorem Vascular, we continued to work closely and monitor their progress in China. And Cytori will support them at International Society of Aesthetic Plastic Surgery Conference in Fuzhou, China, from November 19 to November 22 this month.

We are reaffirming our product revenue guidance of $5 million to $8 million for 2015. Contract revenues are driven by activities with BARDA, who continues to fund ongoing research and development activities required to enable a pilot trial in thermal burn.

Contract revenues were $1.7 million during Q compared to $1.8 million a quarter ago and $585,000 in Q3 of last year. We are reaffirming our contract revenue guidance of $6 million to $8 million for the year. Overall, we expect total revenues to fall between $11 million and $16 million for 2015. Turning to the balance sheet.

At September 30, we had $19 million of cash and outstanding debt principal balance of approximately $17.7 million. Based on our current projections, we expect our cash will provide liquidity for at least nine months of operations, without further capital infusion.

We are actively working on partnering activities with a goal to identify a global partner for osteoarthritis and an European partner for sclera that, if successful, would provide additional liquidity for the foreseeable future. Operationally, we are focused on the execution of our key clinical objective with continued emphasis on our U.S.

trials for scleroderma and osteoarthritis. With that, I'll turn back to Marc for the forthcoming milestones..

Great, Tiago. Thank you very much. So I'd like to finish up this afternoon before we go into Q&A, by talking about our forthcoming milestones for the remainder of the year and throughout 2016. This is shaping up to be a very important year for the company. So today, we mentioned of the topline data from the U.S. Athena Phase II cardiovascular trials.

And the full dataset, as I mentioned, likely will come out in presentation and publication format next year. We'll keep you abreast to that.

We also will be presenting this week at a scientific meeting in New Orleans, more detailed insight into the mechanism of action of our technology, specifically in burn wounds and how we plan to deliver those cells in the context of the critical care environment for burn patients.

That data has also been accepted for publication and that will come out likely in the next few months, and that's based on the work funded by the U.S. government and BARDA. And kind of looking beyond 2015, into 2016, more or less in a chronological fashion.

So we anticipate presentation of the full 24 month follow-up data from the SCLERADEC-I pilot trial, which has been submitted for presentation. In Q1, we anticipate having and reporting via press release topline six month data from the U.S. ACT-OA Phase IIb trial.

And then later in the year, approximately Q3, reporting 12 month data from that same trial. Approximately in Q3, we anticipate completing enrollment in our two scleroderma pivotals, STAR and SCLERADEC-II. And then in the second half of the year, we anticipate beginning U.S. Phase III osteoarthritis trial.

That depends on funding and a number of other matters and of course data. And then, although still a lot of decision making is with BARDA, we anticipate being ready in second half of 2016 to start the IDE or submit the IDE, get approval for our pilot burn trial in the U.S. related to our BARDA relationship.

So with that, Jackie, I'd like to open the call up to Q&A. And then I'll have a few closing remarks..

[Operator Instructions] Our first question is coming from the line of Jason Kolbert with Maxim..

Can you take a couple of minutes and help me understand what drove the changes in Japan? And what you think on the ground will be kind of the next event that Cytori will drive towards? Also can you help me understand the relationship now of the EU scleroderma trial to the U.S.

trial, and how those two might work together towards regulatory filing?.

So in terms of Japan, I mentioned on the call, let me just re-highlight a couple of those issues. The first thing is we're planning for success clinically and then commercially successful in our key clinical programs. We need somebody that's experienced that I feel can lead that effort, and we have that in John Harris.

In addition, I think we've been chronically underperforming in Japan. And it's been my view that we need to make a significant change there. We looked far near to find, who we thought could be the exact right person to not only lead the effort there in Japan, but also contribute increasingly on a global basis.

And we are very fortunate to find somebody like John, with his background and his very granular experience in Japan, specifically overlapping the areas that we are interested in. So that really drove that. That decision wasn't taken likely, and it was really a year in the planning to make that transition.

We do see some improving trends now that the dust is settling in the new Regenerative Medicine Law. We're getting a number of our existing customers to satisfactorily complaint with that law. And we're actually seeing an increase in utilization, about a 50% increase in utilization year-to-date on consumables.

And you'll hear more about that from us overtime. Hopefully, as that trend continues, I think it's still a little early to make too much out of that. But we are hopeful we will begin to see some signs of positive change over there, and we may be seeing that. But we'll reserve that more definitive comment to later.

So then, Jason, we also discussed that the EU and the U.S. scleroderma trials and how those could maybe work together on a more global regulatory basis. So while the trials are very similar, they do have some differences that are important.

The EU scleroderma trial may be sufficient to get a conditional market approval and/or full market approval in Europe, and we are planning to have that dataset and submit that for a full market approval. The U.S.

data, because it's a little bit longer timeframe and a bigger dataset will come later, so the preference is to leverage that EU data to more rapidly obtain for market approval. But the U.S. trial will come behind that and potentially provide additional support for full market approval in Europe.

And then in the U.S., based on our discussions with the FDA, the U.S. data alone is sufficient for U.S. regulatory approval, if we successfully show safety and efficacy. So U.S. could potentially help us in Japan, but may not be necessary -- in Europe that may not be necessary. Europe data should be sufficient. And in the U.S.

the STAR trial should be sufficient..

Our next question comes from the line of Joe Pantginis with ROTH Capital..

First, I want to go back to Japan for a second. You mentioned in your prepared comments, you had a position paper with regard to Japan, and obviously the recent Japanese legislation regarding regenerative medicine.

I was wondering if you could link the two and provide some color, as to what you think the benefits will be to you guys, as you look to provide efficiencies with your new hire? And I guess, I'll ask a reach question, as even if you put in these efficiencies, what kind of potential initial revenue targets might you have?.

On the regulatory side, which is a great question, I think the dust is settling over there, but I think there is still a tremendous amount of ambiguity about that law.

Steve Kesten, our Chief Medical Officer, just came back from there, and I've been there three times in the last couple of quarters, part of that time meeting with regulatory consultants and officials at PMDA and MHLW.

I think, right now, there is a risk that this evolves and regulations get clarified, but it seems to us that we have the ability to be regulated, either as a device or as a regenerative medicine product.

And it looks like our current trial going on will be through the device path, but potentially we could bring in other self therapy trials that we're maybe working on globally elsewhere or even new trials, and bring them into regenerative medicine pathway and leverage some of the conditional approval provisions in that law.

But I'm not sufficiently satisfied that the regulators really have a good handle quite yet on how they're going to look at one situation versus another, but it's clearly very important to them.

And in terms of the position paper, Ken Kleinhenz, our VP of Regulatory Affairs is one of the leading global experts in the area of cell therapy and regulation. He working with the American Chamber of Commerce in Japan, actually put a position paper prior to November and that law being finalized.

So we are very much involved in making comments and suggestions to the Chamber of Commerce in Japan, which by happenstance, John Harris, our new leader, there was a Board of Governor. So that's sort of how that developed. And I appreciate the inherent optimism in the question about the revenue. So I think it's too early to really to say.

I think we're optimistic about what can unfold there. Our focus will be more on consumable utilization and trying to get the technology in a more high penetration way into that market and leverage some of the new provisions of the law, which I think we're seeing some benefit from. And then focus on utilization, and then getting reimbursement.

I think there is some opportunities there, but I think we want to be very careful and not get too ahead of ourselves on that..

And if I could just switch gears to BARDA for a second, I guess, if you look at it from a two-pronged standpoint, your current technology and also you said you're working on the next-gen technology and bringing into potential burn study.

So with the current contract from the preclinical standpoint, is there anything left and what are you likely eligible for from a revenue standpoint on that end?.

If you need more then I can give you. I'll ask Tiago to talk more specifically about the economics on that, but big picture, the current focus is on mechanism reactions, specific preclinical development work and the next generation of the technology and it's far worth clarifying that our technology is not so much the device, but it's the process.

And we're actively implementing some of those improvements today, but they will be fully visualized in the next generation device that we're actively working on, so we're learning a lot and improving our ability to provide cell therapies in a rapid fashion at a low cost for a variety of different indications as a result of this project with BARDA.

I think right now what we know is we have the original $14 million that we're working through. We have another year of that plus an additional pre-negotiated $8.3 million or up to $8.3 million to fund a pilot clinical trial. That's all pre-negotiated and is pending IDE approval.

We're moving closer and closer to the five year window that was the framework for that $100 million or so contract, and then opportunities to renew the contract, push it out longer and to load in some other aspects to that. So that's something that we're thinking about and we're discussing with BARDA, but we're good today. We know we have to do.

The team is doing it and in tremendous fashion. And so we're kind of behind the scenes with BARDA, not only to execute in our current contract, but perhaps try to improve it in the near term..

And if you would give me the patience of just asking one another quick question here, little bit of a reach here, but I think that's a good segue with regard to your comment about the next generation technology, how you said it's not the device, but the process. And I guess I want to link that comment to the Athena study in cardiovascular.

You obviously have your hands full and I think you deserve a lot of kudos for the streamlining that you've done at the company, and also as Jason mentioned, your very thorough update today.

With regard to streamlining of process, do you see a potential path forward in cardiovascular, maybe not in your hands, but as you develop the process and further, is there a potential path forward? And that's my reach question..

It's a good question and it's a not a reach question. As I mentioned, and I'll let Steven comment, if you would like, but a lot of the challenges with that trial were related to doing a lot of things to these patients in a short period of time, one day. So some of those were just trial related and some of those were frankly are technology related.

And the new technology will save a lot of time of the procedure. And I think in a critical care setting, like burn, but also like cardiac that should provide some benefits.

So I think that will open up some opportunities for us on the cardiac side, but as we look at potential indications, we see a lot more bang for the buck when we look at niche or orphan indications that we can get to market very quickly as opposed to cardiac, which is still at the end of the day going to be a very difficult road for any company bringing any technology pretty much to bear on those patients.

So my personal belief is the technology can work for patients with cardiac disease and could be a benefit to them. And I hate to pull that back. We've ultimately got to get the trial done, get the data and prove that it works. And right now I just think that there's so many low- hanging fruit, to use it all the time, on this set.

I think we're going to just sit on that for the time being totally and reassess periodically..

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

Let's go back, because obviously in terms of the sclero trial, if I go back, the FDA initially, from what I remember, was only looking at a six month data when they approved the pivotal trial, you're currently enrolling on it. You've mentioned that your findings for the 12 month data are consistent with the six month data.

But can you give us more color into that, because that's obviously one of the things that people are feeling interested in. Everyone use this unmet need, but I've got a list of items here that I'd like to ask as far as that goes, grip strength, fibrosis, blood flow and how it all compares on the baseline.

Could you just give us much detail as possible on that?.

Steven Kesten is here today and I'm going to let him answer that question..

The preface of the remarks, the one year data was recently published in Journal of Haematology, so it's really available including some of the variables that you've mentioned.

That being said, we saw evidence for a lot of the variables to have basically a plateau of improvement of six months, which was sustained throughout the 12 month follow-up reported.

And that includes items such as the health assessment questionnaire -- scleroderma health assessment questionnaire measuring quality of life, Raynaud's phenomenon improvement, pinch strength and grip strength were reported, and they appear to be improved and that improvement is sustained through 12 months. So we're seeing consistency.

Regarding blood flow vascularization, a test was done called capillaroscopy, which is a visualization under the microscope of the capillary bed under the nailfold. And that suggested that improvement was there as well.

The big take home on that is when you look across multiple endpoints we see improvement relative to baseline that's sustained over 12 months just saying that there is the durability of response..

And going back, because obviously having looked at the study, there wasn't anything that I saw that basically talked about any kind of regression or any kind of issues as far as that goes, so strictly a pronto, can you come back and say anything about that?.

Yes. So first off, there is going to be some variability and there is certainly standard deviation around that and there is a little some go up and some go down a little bit. But the issue becomes, what is happening to the underlying disease.

So we're affecting by nature of the improvements in the hand, there is something affecting the underlying disease. However, that being said, we're not expecting the therapeutic cure of the disease.

Hence, so at sometimes there is going to be a progression, and presumably the patients will become more systematic, that have more signs of the feet and their hands and elsewhere. And there is going to be therefore an opportunity for retreatment.

Now when that is, fortunately the results of the data are at least one year out, so it's not going to be immediate that, but we expect that retreatment will become a very viable option for these patients..

Which actually leads me to the next question, on the implications for dosing, so far given the time periods you're talking about, its like one and done or one and you've seen what you're looking for, but the idea would be that there would be in essence some future opportunities or future needs for additional dosing and for improvement in therapies.

How would you characterize that?.

I think you explained it well that that at sometime in the future patients will progress again. And depending upon how rapidly they progress, there will be a patient-driven desire to see if they can gain their improvement again.

And at that point, we anticipate that physician would want to retreat them, given how well-tolerated the option for treatment is, we think that's very real, that's very likely to occur..

And I'll end at this question. So the idea would be that in future doses, now it's becomes the function of titration and whether or not you would start with larger dose initially, and then have maintenance doses. Those are all things obviously that you're starting to learn about and that you'll see into the future.

And obviously, I think that's the kind of color after you look like in terms of when they decide to approve something or when the community and the clinicians actually say, yes, we're comfortable with this?.

So we anticipate that the approved dose is going to be what we're doing in clinical trials, which is shown in the earlier trials, to be effective and to sort of averaged about 40 million cells divided up into 10 fingers two hands. Our approval will be based on that. So any new treatments will be based on that.

So any new treatment will be based on that dosing. However, as you said, we're learning more and there maybe some further studies in the future that allow us to say, well, is there more or less, but right now, the 40 million cells is readily achievable. Our early experience in the U.S. suggests that's absolutely the case. It's tolerated well.

That is anticipated the approve dose, so we should anticipate that at least in near-term that will be the dose that will be use..

Our next question comes from the line of Sarah Engel with Stonegate Capital..

A lot of my questions have been answered, but I'm wanting to see with as someone getting somewhat refamiliarize with the Cytori story. And given the different uncertainties and often it could cause some confusion with understanding the different regulatory pathways among the different countries, U.S., Europe and Japan.

I wonder if you could give me your thoughts on how certain you are with your current selected regulatory pathways and what do you see as the biggest uncertainties surrounding this?.

I'll take that question. It's a very good question, and if you follow the company over an extended period of time, you will have known that we've had an evolution in terms of our own regulatory strategy on a global basis.

And that's really been -- it's occurred largely, because governments have been clarifying internally what their own regulatory position is.

So, yes, I think we're now at a point whether based on lot of ongoing dialogue between Cytori and the regulatory authorities or their own internal regulatory-driven policies, we have a tremendous amount of clarity in many markets.

So for example, in the U.S., we have the maximum clarity that we are PMA device, that the devices, the enzymatic agents, the software, the consumable and the output of the cell therapy, the therapeutic itself, will be regulated under the umbrella of a PMA device, which generally will mean a pilot pivotal or Phase I/II to Phase III clinical trial approach.

And that appears to be ironclad and appears to be consistent across multiple indications, cardiac, osteoarthritis and scleroderma. And we think that's a real advantage for us, the clarity is an advantage, but also having the two trial path to market is better than having a three trial path or Phase I, Phase II, multiple Phase III path.

So we think that's a real advantage for us. So that's where it's most clear. Where I think it's becoming increasingly more clear, although not quite fully clear yet is in Japan, where we think that we have the ability to be regulated as a device.

And there are some real advantages to being a device, there might be a one trial path, for example, to getting approval in Japan for a device, a very small Phase I going to the definitive, more Phase III pivotal trial. And with a relatively small number of patients, we get some benefits from being a device over there.

However, with the new Regenerative Medicine Law, depending on how those will ultimately be interpreted. And the feedback thus far is that we may qualify for both that there may be advantages for certain indications to be regenerative medicine products. So I think right now, our current thinking is that we'll have the ability to do both, but we won't.

We'll kind of continue that to clarify that as we go along and that is subject to some change, but I think increasing clarity. In Europe, well, we initially were approved as the CE Mark Process. What that really got us is the ability to sell a cell processor for the doctor to use the cells in whatever way he or she saw fit.

It really didn't provide a pathway to reimbursement.

And so with respect to the orphan designation around scleroderma with our connections with not only the EU regulators and the CAT, the Committee for Advanced Therapeutics, which is at the EU level; and great relationships between Ken Kleinhenz and the CAT members, which represent the member state; plus also specific regulations that have been given by member states such as Spain and so forth related to our technology.

I think increasingly we'll be able to maintain the CE Mark, which will give us some freedom to use the technology and some simplicity in terms of getting into the clinic. But ultimately, we're going to have to use the ATMP path to get approval, which has had a lot of challenges quite frankly over the years.

But I think what we're hearing from the regulatory bodies over there is a greater permissiveness and realization that the technology we bring is inherently very safe. So that's a very long answer, it's a very complicated question, but I hope that clarifies it..

There appear to be no further questions at this time. I'd like to turn the floor back over to Dr. Hedrick, for any additional or closing remarks. End of Q&A.

Thanks again, Jackie. And I want to thank those of you on the call for you interest and support of Cytori. I can tell you from my perspective that we've made a major turnover in our team here that was large part intentional, and we've never had a more talented team and they continue to just absolutely get the job done.

They do it meticulously and they do it each and every day, and I can't tell you how proud I am of the job that our team is doing. From my perspective also, I think we're really on the cusp. We're in the cusp of delivering U.S. randomized trial data and a big indication osteoarthritis in the next quarter.

We're very close to being able to say that we have four actively enrolling approval trials in 2016. And we are increasingly laying the groundwork, preparing for success with our clinical initiatives, so that we're ready on the commercial side when data and reimbursement is available.

So I don't want the hard work and dedication of our team to go unnoticed. And I'd like to thank them, publicly acknowledge them for their efforts. And then, once again, thank you for your interest and your questions. And please don't hesitate to call us separately, if you have other questions or would like to follow-up. Once again, thank you..

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