Marc Hedrick - President and Chief Executive Officer Tiago Girão - Vice President of Finance and Chief Financial Officer Mark Marino - Chief Medical Officer John Harris - Vice President, General Manager of Cell Therapy.

Jason Kolbert - Maxim Group Stephen Brozak - WBB Securities, LLC.

Good afternoon, ladies and gentlemen. Welcome to Cytori Therapeutics’ Third Quarter 2016 Earnings Results 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. [Operator Instructions].

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..

Good afternoon, everyone, thank you and thank you, Kristen. Welcome all to our third quarter 2016 earnings call. As Kristen said, I am Marc Hedrick, President and CEO of Cytori. And joining me on the call today is as usual our CFO, Tiago Girão; our Chief Medical Officer, Dr. Mark Marino both of them are in the U.S.

and then here in Japan with myself is our Vice President and General Manager of Cell Therapy, Mr. John Harris. So let me just give you a brief overview of the call today. So first, I'm going to discuss the progress in our pipeline including some key updates on our clinical programs.

John will then discuss the commercial related activities and related plans. Tiago is then going to update on financials. And then I'll update on forthcoming milestones and then we'll have time for Q&A. So kick things off let’s discuss the pipeline. And then specifically let’s talk about the Scleroderma program.

So recall back in Q2 that we completed enrollment in the STAR US Scleroderma approval trial. Next week at the American College of Rheumatology meeting in Washington D.C. we're going to be presenting some high level preliminary results from that trial.

Again that trial remains blinded, but the presentation will include details about the ease and acceptance of the procedure, it’s safety profile and reveal some of the baseline characteristics of the scleroderma patients treated and that will be presented in poster format and will be happy to make that available to you when it's published.

Also as a reminder the full 12-month data readout in STAR is still expected in mid-2017. Things are going well there in terms of data collection. On the last call I mentioned U.S. orphan status and we're still waiting for approval. We have some interaction with the FDA but nothing formal as of yet and we’ll update you as we get more information.

In Europe, we applied for and have received scientific advice from the European Medicines Agency regarding key questions for the ECCS-50. Based on the feedback we feel as if we are on the right track with our overall clinical program specifically as it relates to ultimate EU approval. Couple of issues I want to point.

Regarding the receipt of a conditional marketing approval based on the pilot trial alone. It seems from the feedback that that's unlikely 12 patients in a non-controlled trial just not quite enough data. I think to likely allow us to do that. However, it seems from the feedback that STAR will likely be a sufficient strength and design for approval.

In addition, you may noted that there's flexibility on the issue as to whether Cytori can register as an advanced tissue medicinal product, which is euro speak for a biologic here in the U.S., or whether we can see device regulators device and that the suggestion by them was made to apply formally to the CAT which is also called the Committee on Advanced Therapeutics for clarification as to designation.

There's really no downside to this and it gives us optionality on regulatory path based on the Company's best interest. And frankly it's very similar to our status in Japan where we have optionality on being approved as a device or as a regenerative medicine product and can also be both depending on what indication we are pursuing.

So our plan is look at the pros and cons which we are evaluating and perceived based on that whatever's in the Company and shareholders best interest. Also as I mentioned related to Europe on our last call, our EU investigator initiated trial scleroderma 2 is enrolling slower than we would like.

10 of 40 patients have thus far been enrolled to date and the essential problem here is because only a single site had received all the specific completed French approval processes from the various authorities and was treating patients, so we had a single site basically. We have made some changes, work with the investigators.

As of today, we have two new sites now approved and ready to begin enrolling. And approval for fourth site is moving forward unlikely and that will be there around early next year and it’s also possible we might get a fifth site. So we think this is going to get done maybe a couple of quarters late.

We don't think it's essential for European approval and supported data, but it's important to us because there's a placebo arm that converts crosses over to treatment with cryopreserved cells and so it's important for us to assess that data. The investigator on the trial believes enrollment to be completed by the first half of 2017.

If that's a case and the primary endpoint at three months and data should be available in 2017. In the meantime three-year follow-up on the predecessor study to that European study called SCLERADEC-I. The evaluation of those patients is complete and we are evaluating that data and we will make that available present that as soon as we are able.

Now ACT-OA, a few follow-up remarks from the report of the topline 48-week data for the last quarter. So as I promised at that time, we were going to dig deeper into the MRI data and do further post hoc analyses on the readouts and these are the – MRI readout by experienced radiologist blind into treatment arm.

And the goal of that is to better understand what was an apparent beneficial effect of treatment over placebo in the six pre-specified measures of joint disease including cartilage loss, the level of osteophyte and bone marrow lesions which by the way all favorite cells over placebo. Now MRI changes typically take multiple years to show effect.

So looking at changes from baseline to 48 weeks or a year is difficult and the size of the trial really wasn't powered to see such effects. However, we did see interesting findings in the six pre-specified measures and we were curious to dig deeper. We did look at certain MOAKS parameters, MOAKS is the MRI grading scale that was used in the trial.

In certain MOAKS parameters such as Hoffa-synovitis and meniscal tears exhibited so few events that it really precluded meaningful analysis. However, with regard to more common findings of cartilage loss which is an important feature found in the osteoarthritic joint.

The post hoc analysis revealed that from baseline to 48 weeks, three out of 10 patients had advancing disease in at least one MOAKS criteria across all groups, where most patients about seven out of 10 had stable disease during the period.

So as I mentioned before that’s pretty consistent with the published data and the rate of decline in the joint in osteoarthritis patients. So to strengthen the pool size, in other words, we have relatively low [straight] for just looking at a per patient basis, we can strengthen the pool size or the end size.

We pull data from all patients and examine the data by sub region. And based on that analysis, we found that full thickness cartilage loss was reduced in the treatment arm in 10 of 14 knee sub regions examined, all six tibial regions and in all four of the load-bearing important central regions of the joint.

The data also suggests that there maybe a beneficial effect on the knee joint and a possible regenerative paradigm in this data. In fact, trial is showing a beneficial effect, any beneficial effect on the knee joint and a possible regenerative paradigm in this data.

In fact, trial is showing a beneficial effect any beneficial effect on knee pathology and cartilage are rare.

So a very interesting findings, but the despite this I think we want to be cautious not to over interpret this in a single [unpowered] trial and further clinical research is required to both confirm the effects and establish its clinical significance.

A meeting presentation full length manuscript summarizing the data are anticipated and our business goal remains the same. Never want to leverage this data to help enhance our customer base and drive therapeutic utilization in Japan for a therapy that we think works for patients and patients have been happy and have been treated.

And then also number two to find the development partner to kick the ball further and run it down the field which is in full swing. So now the urinary incontinence. The ADRESU trial is taking increasing importance as we get over the hump in terms of enrollment. That trial is fully funded by the Japanese government.

It's essentially now at about 50% enrollment offsite enrolling and we anticipate completion of enrollment in 2017 based on all the sites enrolling in current enrollment rate. And we still look for data that would be available sometime in 2018. It is an approval trial and would drive reimbursement in our view.

The trials also not only gaining clinical enrollment momentum, but it's also creating increased visibility in Japan as it's one of the most advanced regenerative medicine therapy trials ongoing today. And this is actually creating some opportunities for us as well. Now to the BARDA trial.

The FDA IDE filing for the trial which is going to be called RELIEF is essentially complete and will soon be filed. We are waiting on some outside vendor data to send that in.

RELIEF will be officially known as a trial of the safety and feasibility of adipose-derived regenerative cells or ADRC’s in the treatment of partial thickness and full thickness thermal wounds. Assuming no delays, we remain on track for approval by year-end of 2016 with enrollment commencing in the mid-2017.

As mentioned recently, BARDA expanded the current contract option by approximately $2.5 million. Now let me discuss a potential new trial to our pipeline. First the background. So breast cancer is increasing in Japan like it is around the world.

In fact and look back in 2010 there were approximately 50,000 diagnosed with breast cancer and growing at about year-over-year and about 60% of those patients receive breast conservation therapy and treated with concomitant radiation, so a partial mastectomy and radiation. Many osteophyte from the radiation.

This globally is an unmet need and there are currently no approved therapies in Japan to treat this population of patients. Shareholders who known us for a while know that we've completed two trials in this area and actually osteophyte has been working on an approval trial in Japan for some time quietly behind the scenes.

We were informed the Q3 that Cancer Center Ariake in Tokyo which put that perspective for those are familiar with the hospitals in Japan. That's a sister hospital to M.D. Anderson here in Japan.

They have received both internal IRB and Japanese government approval to begin an approval trial for Cytori Cell Therapy for breast reconstruction after partial mastectomy. The principal investigator will be Dr.

[indiscernible] who is the Chief of Reconstructive Surgery at Cancer Centers Ariake an important leader in the field in Japan and a member of the reimbursement committee at MHLW in Japan and I want to congratulate thank him for all his hard work behind the scenes and helping to drive this through.

The trial as I mentioned is based on the previously reported restore one trial from Japan in their restore two trial in Europe both of which they have published.

So what we're waiting on with respect to this trial is the final administrative protocol approval from MHLW and PMDA and at that point we can further discuss the details of the trial and the time line. And right now we more or less anticipate enrollment beginning next year.

Regarding the funding of the trial, it will be internally funded, but will receive logistical support from Cytori, no direct cash support at this time and actually maybe associated with consumable revenue to Cytori, more on that later. So with that, I will hand the ball over to John..

Awesome. Thanks Marc. That’s good to have you here and I appreciate the opportunity to provide an overview of our results about Q3 and our year-to-date and then some of the key activities. We've seen some seasonality in our historical revenue and Q3 for us ended a touch softer than those trends.

Now year-to-date excluding Lorem Vascular our results are pretty good, revenues up by 28% and consumable utilization is actually up 35%. Our Q4 looks like it will be in line with previous years. In other words, we should have a strong quarter as our funnel is robust. I want to start off by highlighting Japan which remains central to our strategy.

Our clear objective in Japan is to build a robust and profitable business and why is that while the environment in Japan is favorable to Cytori. The new regenerative medicine law which was enacted in 2014 is well understood and it’s now providing regulatory stability.

Our year-to-date metrics are solid revenue Japan year-to-date is up 60% when compared to 2015 and our year-on-year consumables are up 76%. Now this growth is driven by our base of business in the aesthetic market and where we see continued demand. Additionally, we remain very encouraged with opportunities in knee osteoarthritis.

We've done extensive evaluation of the market and noted a sizable number of patients who have few good treatment alternatives.

Elderly Japanese have a good amount of disposable income and we've seen three more osteoarthritis approved protocols including one with our [indiscernible] preservation process under the new regenerative medicine law and we also have more of these facilities in the pipeline.

Additionally, our team has been working very diligently as Marc mentioned to move clinical trials forward particularly in SUI, the ADRESU trial and then the new trial at Ariake is being initiated. So net-net Japan remains a very strong market, central to our strategy with a favorable environment and metrics to support continued investment.

Outside of Japan we're seeing growing global demand and in Europe and the Americas. So I want to give you just a few highlights there. First, our licensee for alopecia global licensee is Kerastem and they just recently completed their STYLE trial. We'll wait on the results later.

We're also actively engaged to support efforts in Lorem Vascular’s territories and working in renegotiating the current agreement. Now we have a regulatory approval in Korea for this solution device the disposables will be next and from there we can begin market development activities.

Our full system both the solution device and consumables are available to import into Vietnam for aesthetic applications, we're identifying channel partners and planning for market development. Lastly, I want to give you an update on our managed access program or MAP.

Now MAP is an important program as we have – and with that we bolstered and deployed our assets in Europe to complement [Iris’s] expertise, Iris is our partner. And focus our strategy to deliver proof points relative to demand and pricing assumptions. Now.

I want to reiterate that there are really three primary purposes to the MAP and in this order is choice full. First, MAP provides early unethical access to unlicensed treatment for conditions that have suboptimal alternatives.

MAP also is a market development tool allowing physicians to familiarize themselves with products such as the ECCS-50 therapy prior to the regulatory authorization and collect real world data. And third a MAP is a source of near-term revenue opportunities. Now let me just add a quick note here.

We've spent the time, effort and energy assessing the various aspects of our MAP initiatives such as MAP awareness, due diligence regarding pricing and the sources of MAP funding.

And we have established our internal reference price actual average selling prices that will reflect a number of factors including customer demand, availability funding, and perceived strength of our clinical data and related factors. Now here's what we've done thus far.

We've been working with Iris and we have confident authority approval to treat scleroderma in nine countries. And we’ve received queries from greater than 50 doctors in the EMA countries who have expressed interest in ECCS-50 therapy. And we focused our small EU teams efforts on getting centers of excellence established in four countries.

The UK, France, Switzerland and Spain. We will funnel patients treated via the MAP to these centers. Now we had originally forecasted that the first MAP patients will be treated in Q3 of this year. We now foresee that the first two patients will be treated via MAP later this year or in the first quarter of 2017.

We’re basically a quarter or two behind our original forecast. Now it has been my experience that forecasting from scratches is a particular challenge and this new therapy is not different.

Given that this delay you know a slight delay in the MAP enrollment, we think it's prudent to lower our revenue guidance for 2016 down by about $1 million as we all likely be unable to compensate with additional upside from Japan or ROW. Now that being said, there are upside opportunities that our team is strongly pursuing.

Now with that, I'd like to hand out to Tiago who will walk you through the specifics of our financial results.

Tiago?.

Thank you, John, and good afternoon everyone. Our priority remains continuing wise investment and development in our cell therapy platform as we approach achievement of new milestones. Over the past two years, we have increased R&D investments while reducing G&A and sales and marketing spend.

Improving our operating performance was a key to deliver shareholder value. Specifically, our operating cash burn in Q3 was $4.6 million which is substantially down from $5.7 million last quarter and $6.1 million Q3 2015.

Also our net loss continues to improve when adjusted for non-cash charges related to changes in fair value of warrant liabilities, net loss was $5.4 million in Q3 representing decreases of 16% and 7% when compared to losses of $6.4 million and $5.8 million in Q2 2016 and Q3 2015 respectively.

For the nine months ended September 30, our net loss when adjusted for non-cash charges related to the changes in fair value of warrant liabilities and a beneficial conversion feature charge on preferred stock was $17.1 million in 2016 or a decrease of 18% when compared to a loss of $21 million for the nine months period ended September 30, 2015.

Specifically regarding research and development expenses, Q3 our R&D expenses when excluding share-based compensation were $3.9 million. The small decrease in spend from 2015 to 2016 is as planned related to STAR and OA clinical trial enrolling ahead of schedule and therefore the acceleration expand earlier this year.

For the same reason, we expect R&D expenses to slightly decrease for the remainder of the year. We continue to manage sales and marketing activities and related expenses carefully. Excluding share-based compensation sales and marketing expenses were approximately $0.8 this quarter as compared to $0.5 million in Q3 2015.

The incremental increase was as related to slightly increased investments in pricing, reimbursement, consulting and coding services as we prepare for potential therapeutic launch of our technology in the U.S. and Europe for scleroderma hand dysfunction. We also slightly increased investments in marketing in Japan.

G&A spend during this quarter when excluding share-based compensation was further reduced to $1.9 million compared to $2.1 million in Q3 2015.

The decrease primarily coming from the reductions in professional services then although the reduction in discretionary spend remains a priority, we expect G&A expenses to stay relatively consistent at the current level.

With respect to our revenues, Q3 we recognized total revenues of $2.6 million, a slight increase when compared to a total revenue of $2.5 million in Q3 2015. Product revenues were $0.7 million during this quarter compared to $0.8 million in Q3 2015.

As John indicated, we are experiencing delays in the implementation of European Managed Access Program that has impacted our current quarter revenue performance. In addition, the third quarter is historically lighter relative to seasonal patterns.

That said, Japan revenues continued to its positive trend and increased by over 25% quarter-over-quarter comparing this year to last year going from $451,000 to $575,000 in Q3 2016. A significant portion of this growth is driven primarily via consumable utilization.

Contract revenues were $1.9 million during the quarter as compared to $1.7 million in Q3 2015. The increase is mostly related to increased activity supporting the BARDA IDE submission and does not include the additional contract award announced in Q3, the $2.5 million additionally awarded to us.

Regarding our balance sheet, at September 30, we had approximately $15 million in cash and $17.7 million in debt.

Our forecasts indicate that the cash on hand coupled with efficient management of expenses, projected revenue growth, and modest influx of capital from a combination of business development activities and potential use of our ATM facility, will fund operations through at least mid-2017 and to important future milestones.

Turning to the update of our full-year 2016 financial guidance. We expects full-year 2016 combined product and contract revenues to be lower than prior expectations based on the Company’s third quarter 2016 revenue results and the Company’s revised forecasts for the MAP.

As a result, we are lowering our total revenue guidance to be within a range of $11 million to $13 million. In addition, we are narrowing our operating cash burn guidance to be within $19 million to $20 million. Now back to Marc..

Hey, Tiago, thank you. Let me talked about milestones for a minute. You can find that listed in our corporate presentation on the website, but regarding the second half 2016 milestones. First of all, in terms of treating patients under the compassionate use program as John mentioned we are really now in the scheduling phase.

We've focused down on what we think that the best countries to be and going to one specific center in each country and working hard to make that happen. And I think we're making a ton of progress despite the fact that we only have about one and a half employees on the ground in all of Europe.

Our plan is to stick with that level of investment that's not going to increase until we fully validated the opportunity and at that point we will make increased investments as is wanted. We have obtained the EMA feedback as I mentioned on the conditional marketing approval in Europe and the U.S. orphan designation is still pending.

I also mentioned our U.S. IDE FDA approval trial for BARDA is on track and ready to file soon. And that the European Scleroderma trial for the reasons I mentioned before is delayed, but they're adding side so we think that will get done next year, more on that later. And then just around the corner 2017.

I would say everything's on track to file our U.S. PMA for scleroderma pending receipt of the data, getting enrollment started on the Phase I burn trial RELIEF getting full enrollment on the ADRESU approval trial for urinary track incontinence in Japan and getting enrollment started on this new breast trial once we get formal protocol approval.

And just as an aside in early 2017, we will be rolling out the naming and branding convention on ECCS-50 which is largely done, but we look forward to rolling that out to the market. So with that, Kristen, I will turn the call over to Q&A..

Thank you. [Operator Instructions] Our first question comes from the line of Jason Kolbert with Maxim..

Hi, thank you for the very comprehensive front down. Marc terrific [indiscernible] and I understand you're in Japan. Talking a little bit about Lorem Vascular.

Can you discuss with me what the plans are in terms of China? I was recently in China and I realize what a tremendous opportunity is in that country and so I’d like to understand kind of the relationship with Lorem Vascular and how that might go. And also by the way I'm very excited about the breast cancer reconstructive trial.

I think that's very exciting. And then I want to ask you a few more questions about the scleroderma program and STAR and kind of exactly what kind of feedback you might be hearing from investigators and what your net feel is on how the trial was going? Thanks..

Hey, Jason. Thanks for the question. So China is I think potentially a great market despite the fact that they've had a recent law change that I think the market is still cycling through our view is the market still open for business there.

Lorem Vascular has five licensed territories and they effectively have all fields of use in those five territories which includes China except for alopecia. So enormous opportunity there and we think that there's opportunity to drive things faster in that market that are being driven today.

And so we're in discussions with Lorem as to how we can find some sort of solution to make sure that investment dollars and strategic plans are developed that can really leverage those opportunities. So I think the stage of the discussions with them is sensitive.

So I want to be careful not to say too much more, but suffice to say we view it as a great opportunity and want to make it happen there. Regarding the breast trial so you and I talked about this a lot the therapy is safe and it works in breast and I've done many of these procedures myself.

In fact I did the first 20 myself here in Japan and we had the benefit of following those patients over a number of years. And seeing them and follow-up and their spin on growing use of the product in Japan, but what's changed is that the new regenerative medicine law that can't understate how important this is.

It has really brought crystal clear clarity to the market about how things are moved through the regulatory process and because we are still advanced in Japan with respect to regulatory approval and we treated so many patients here we do have a leg up and this is an example of working with leading physician that we can leverage all the work we've done in the safety profile the 80 or so place systems around Japan.

And you know a decade's worth of relationships and move a trial directly into an approval trial that is not going to really be much the cost center for us.

The trial protocol is still under negotiation with PMDA we announce it now because it's been made public over here, so we wanted to just get that news out but I’d rather maybe wait until we have final protocol to really talk about the number of patients the primary endpoint of the trial design, length of follow-up and so forth..

Marc that’s great. Yes, if you talk just a little bit about kind of what anecdotal feedback you're hearing from the U.S. trial and kind of how that's going as we kind of march towards data. And then my last question will be you know how you plot the financial resources of the company, first is the next major inflection point? Thank you..

Yes. So Jason in terms of scleroderma we are blinded to the data. So our ability to understand how it's tracking is limited the American College of Rheumatology poster will provide some insight as to what we do know there's nothing in that that leads us to believe anything different that it's safe and it works.

The blinded data that we've seen suggest our powering assumptions and so fourth are solid. And the feedback from physicians and some of the patients that I met with gave me a little bit of warm fuzzy feeling that we're on the right track..

Marc by the way. That’s extremely helpful, that’s exactly what I'm looking for that there is no changes in terms of your assumptions and powering data and then anecdotally you don't see anything outstanding or different about this trial versus the prior experiences. So that's really good feedback..

Yes, I think we feel good but at the end of day we don't know and will have to wait for the data. I would say that kind of - and this kind of leads into your next question about application of financial resources.

As we become clear about the mechanism of action of the technology specifically around anti-genesis, improvement of inflammation, [invasive constriction] and wound healing. We are increasingly attracted to the opportunity of autoimmune and inflammatory conditions of the hand.

There are a number of diseases besides scleroderma that include secondary renos, osteoarthritis of the hand, Sjogren's and so forth that have a hand component that fit overlap nicely with the mechanisms of the hand.

So as we think about new trials and partnering we see the opportunity to build off scleroderma franchise and broaden the technology into that group of conditions related to the hand.

And so I think we're going to spend a lot of time over the next few months really understanding where the opportunities are maybe make additional with careful investments there. Beyond that, we continue to grind away on expenses. We continue to demand profit from all the commercial activities that we perform.

And we think that as I mentioned there is some BD opportunities that could help offset some of these investments and help get the Company to profitability..

Thank you, Marc. I really appreciate the overview..

Thanks, Jason..

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

Hey. Good afternoon, gentlemen and thank you obviously for the detail that you've gone into.

Just a quick question on business development updates, I mean you intimated at it in terms of going out there in interest, but can you describe anything on the biz dev side and especially in the heightened interest on the programs now that you've completed enrollment of the Phase III on hand dysfunctional trial in scleroderma.

And can you give us much color is that is possible because obviously people are looking to see what you might be able to look at as far as external interest to validate everything you're doing? Thank you..

Hey, Steve. Okay, happy to do what I can and I think I understand the question and I'll be sensitive as I can on what we could talk about and what we can’t. Talking about deals that aren’t fully negotiated and reported is the sensitive matter.

We start with just big picture, what if we've been trying to accomplish and is that a little bit like a broken record, but we've been focused on trying to find a regional partner in Japan for scleroderma and a regional partner in Europe for the managed access program because we can't afford to invest the kind of dollars you need to build that program out without a partner.

So having partner there would be good. And so we have discussions which include term sheets in both of those areas and so there are some possibilities there, but we want to see some things from a partner and we're not going to deal until we see. We have a list of few things we want to see.

But we have some interested parties in both of those and kind of in parallel because of the U.S. data and that trial being enrolled and I think showing some promise in the pilot trial.

I think there is some interest in expanding out to a global partnership and that partnership might extend beyond scleroderma into these autoimmune conditions of the hand which represent much bigger markets. We are actually putting that on the table in terms of our dialogue. So I think there are some opportunities there. No promises.

We won't do a bad deal. We will say no before we do a bad deal, but we're looking to get either a global regional deal done from the parties that we’re talking with today. So that was sort of BD strategy number one. BD strategy number two is to try to identify global OA partner. And that process is really early.

It's early because as I mentioned on the call the Holy Grail is showing you cartilage benefit. Our goal was never to be another AJ, it was to be something that improves the symptoms, but also approve the cartilage in these patients.

And within the limits of that trial it looks like there is a cartilage effect and is that clinically significant? We don't know, but we know just from our early part of discussions that's the thing that's on potential partners minds is can you change the cartilage curve.

So we're having early – but active discussions there that will take awhile I think to work itself out.

But the utility of the ACT-OA data as I mentioned it’s hard to drive the partnership, but also to drive utilization in that data we're actively sharing with a number of customers in Japan and that’s creating some – I think some pull-through in terms of new clinics that want to offer the therapy and allowing them to help better explain what the therapy might do to patients that they treat.

This finally sort of a third issue that because of the advancements in Japan in urology, breast reconstruction, ascetics that's surfacing some interest on other areas and so I think there might be some opportunities to monetize the platform in broader ways and really start driving some utilization and use with outside of those two core areas I mentioned before.

So bottom line is getting a deal is a priority for me personally for a team, but we want to do the right deal and I think the right deal will really help to show proof-of-concept and create shareholder value..

Thank you for that detailed answer. You hit the nail on the head. The right deal is obviously what all the shareholders and investors are looking for. Good to go. Thank you for taking the question..

Thank you, Steve..

Just quick Marc. I got a question here on email. This is Tiago.

With respect to BARDA and the schedule payments and the expectation, I can comment on that and please chime in if you have any thoughts in addition to mine? So we recently reported in September, we got a $2.5 million extension of our current contract with BARDA that allows us to bridge the funds on the program up until we believe the time when we're going to initiate a clinical trial.

And that clinical trial is a milestone that BARDA will likely fund and we expect to be somewhere between the $8 million and $9 million, but we don't know yet until we file and get the FDA feedback we won't know the exact number, but that's what we anticipate.

And I don't have yet guidance for 2017, but I expect – for Marc’s comments I expect that we will have some spend of that money, hopefully a decent amount of revenues related to those funds in 2017 as we expect to initiate enrollment in the trial in mid-year or so of 2017. So that's the comment about BARDA. They remain very good partner of ours.

We maintained that monthly invoices and we're actively discussing with them the next steps in the project. End of Q&A.

And there are no further audio question at this time..

Thank you, Kristen, and thanks to those on the call and you listening after the fact. Appreciate your interest and support to Cytori. I got three things to close off here that I want to highlight. First, regarding the R&D pipeline.

It's critical for the Company to continue to drive enrollment in our existing trials that are late stage approval trials, but we're still trying to wisely expand our thoughts and goal without materially increasing our cash burn. And we are trying to be cagey about how we do that, but we think we have some opportunities there as I mentioned.

Secondly, now that the dust is settled on the regulatory situation in Japan as John mentioned. I want to really highlight the promising commercial trends that we're seeing there in terms of consumable utilization and new center approvals.

There's a real business there that has a big upside and we have our broadest regulatory approvals there, a strong installed base, a really permissive environment and a lot of KOL.

So I think that – in effect that’s doing over there is it's showing proof-of-concept that this idea and this technology can work broadly speaking economically in a market and profitably. And then finally follow-up to Steve's question about deals.

I think we don't want to commit to any deals, but the advanced clinical pipeline we have and promising data is increasing the partner interest and we’ll try to leverage that in some logical, but multiple ways and we'll keep you updated when we have something done there.

So finally, on behalf of the board and the management as always we really appreciate shareholders hanging tough and their support on the Company and its mission. We continue to be highly optimistic and really just doubt about what we're seeing, it’s been a long hard road, but we're really close.

And to the patients and the doctors who trust us we thank you and thanks to our advisors and analysts who are on this call. And finally thanks to our hardworking and dedicated employees for all they do. Thank you again and have a good evening..

Ladies and gentlemen, thank you for joining Cytori’s third quarter 2016 earnings conference call. This does conclude the conference call and you may now disconnect your lines. Have a wonderful evening..