Lisata Therapeutics, Inc. (LSTA) Q4 2016 Earnings Report, Transcript and Summary

Welcome to the Caladrius Biosciences 2016 Fourth Quarter and Year-end Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following managements prepared remarks, we will held a Q&A session [Operator Instructions] As a reminder, this conference is being recorded today March 17, 2017. I’d now like to turn the conference over to Anne Marie Fields. Please go ahead Ma’am.

Thank you. Good morning. This is Anne Marie Fields with LHA, Investor Relations firm for Caladrius Biosciences. Thank you all for participating in today’s call. Joining me from Caladrius Biosciences are Dr. David Mazzo, Chief Executive Officer and Joseph Talamo, Chief Financial Officer. Yesterday evening Caladrius issued a news release, announcing Hitachi Chemicals acquisition of the company’s remaining interest in its PCT subsidiary and earlier this morning Caladrius issued a news release announcing the Company's 2016 fourth quarter and yearend financial results. If you have not received these news release or if would like to be added to the Company’s distribution list, please call LHA in New York at 212-838-3777 and speak with Carolyn Currin or email update@caladrius.com. Because Caladrius's sale of its remaining interest in PCT is subject to stockholder approval, Caladrius intends to file with the Securities and Exchange Commission, allow its stockholders of proxy statement in connection with among other things to sale to Hitachi Chemical Company America Limited or the purchaser of the 80.1% membership interest in PCT that purchaser did not already own or close to sale. Indebtedness to stockholders of Caladrius are urged to read the proxy statement and the other relevant materials when they become available, because they will contain important information about Caladrius and the sale. The proxy statement and other relevant materials when they become available and any other documents filed by Caladrius with the SEC may be obtained free of charge at the SEC's Web site at www.sec.gov. In addition, investors and stockholders may obtain free copies of the documents filed with the SEC by Caladrius by directing such requests to Caladrius biosciences Inc., 420 Lexington Avenue, Suite 350, New York New York 10170. Attention Jacqueline Briggs or jbriggs@caladrius.com. And for telephone number, its 646-606-2221. Caladrius and its Directors and Executive Officers may under SEC rules be deemed to be participants in the solicitation of proxies from Caladrius's stockholders in connection with the sale. Information regarding Caladrius's Directors and Executive Officers is contained in Caladrius's proxy statement on schedule 14 A filed with the SEC on May 10, 2016. Additional information regarding the participants in the solicitation of proxies in respect of the sale and a description of their direct and indirect interests by security holdings or other one will be contained in the proxy statement when it becomes available. This conference call contains forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995 including forward-looking statements regarding the proposed sale, the possibility of obtaining the earn out payments, the possibility of obtaining a stockholder or other approvals or consent for the proposed sale in Caladrius and future prospects. These statements are neither promises nor guarantees, but involve risks and uncertainties that could cause actual events or results to differ materially from those set forth in the forward-looking statements, including without limitation risks and uncertainties relating to potential adverse reactions or changes to business relationships resulting from the announcement or completion of the proposed sale, unexpected costs, charges or expenses relating to or resulting from the proposed sale, litigation or adverse judgments relating to the proposed sale, risks relating to the completion of the proposed sale, including the risk that required stockholder vote might not be obtained in a timely manner or at all or other conditions to the completion of the proposed sale not being satisfied. Any difficulties associated with requests or directions from governmental authorities resulting from their review of the proposed sale, any changes in general economic and/or industry specific conditions, and other risks detailed in Caladrius's filings with the SEC, including disclosed under item 1A Risk Factors in Caladrius's annual report on form 10-K filed with the SEC on March 16, 2017 and in subsequent reports on form 10-Q and 8-K and other filings made with the SEC. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this conference call. Caladrius does not intend and disclaims any obligation to update or revise any forward-looking information contained in this conference call or with respect to the matters described herein. The sale of the Company's remaining interest in PCT is subject to the approval of the Company's stockholders and customary closing conditions. There can be no assurance that such sale will be completed in the anticipated timeframe or at all. So with that said, let me now turn the call over to Dr. Mazzo. Dave?

Thanks Anne Marie and good morning to everyone and to those who are celebrating Happy St. Patrick's Day. Thank you all for joining on today's call. Yesterday evening we announced an event that is transformational to Caladrius both in terms of our financial position and in terms of our business strategy. I’m delighted to report the entry into an agreement for the acquisition of our remaining 80.1% interest in PCT by Hitachi Chemical. This transaction has the potential to unlock the tremendous value of our PCT asset in a way that was unimaginable just a few years ago, and creates a well-capitalized debt-free pure play cell therapeutic development company with compelling opportunities for near and longer term value creation. Before getting into the financial results from 2016, let me begin by reviewing the terms of the agreement with Hitachi. Yesterday we signed a definitive agreement with Hitachi Chemical under which Hitachi agreed to acquire the remaining 80.1% of PCT that Caladrius owned. As you may recall, Hitachi Chemical purchased 19.9% of PCT in March of 2016. Under the agreement we announced yesterday, we will receive a $5 million payment immediately and $70 million is due upon the closing of the transaction. $5 million of which will be placed in escrow to cover indemnification claims if any. We expect the closing to occur in May following our annual stockholders meeting at which we will solicit approval of the transaction from Caladrius shareholders. Details regarding the sale will be included in the proxy statement, which will be distributed to Caladrius stockholders in the near future. In addition, we will receive an additional $5 million payment should PCT achieve a predefined revenue milestone by the end of 2018. And finally as part of this agreement, Caladrius will maintain a strong relationship with PCT as a customer and will receive seven years of discounted T-regulatory cell platform developments in manufacturing services. There is a strong rationale underlying this agreement. While we are very pleased and proud of the progress we've made to stabilizing and growing the PCT business, especially in the last year. We are increasingly challenged by the tens of millions of dollars of additional capital investment need over the next several years for PCT to fully realize its cell therapy commercial manufacturing growth goals. Hitachi on the other hand is in a position today to deploy the capital and engineering capabilities needed to ultimately achieve those growth goals and establish a global commercial manufacturing enterprise. All of PCT's clients, including and perhaps especially Caladrius, stand to benefit from PCT's integration into Hitachi's global footprint along with the resulting access to advanced and/or proprietary engineering applications to improve operations and provide solutions for process optimization and automation for cell therapy development and manufacturing. This transaction unlocks and creates value. This agreement will redefine Caladrius as a pure play cell therapeutics development company with multiple proprietary technology platform and significant capital resources to support future programs. Once closed, we intend to use some of the proceeds from this transaction to fund compelling initiatives both existing and yet to be identified, including the following. We will now have the capital necessary to complete our U.S Phase 2 clinical trial for our lead T-regulatory cell product candidate CLBS03. This trial, the Sanford project T-Rex study is currently enrolling patients in the second of two patient cohorts and is evaluating CLBS03 as a treatment for recent onset Type 1 diabetes. We will initiate a Phase 2 trial in Japan to evaluate our CD34 cell platform-based product candidate CLBS12 as a treatment for patients with no option critical limb ischemia. Recall that we have negotiated a 35 patient open-label protocol with the Japanese authorities, that if successful, should qualify the product for early conditional commercial approval in Japan. We will access additional clinical development candidates based on our T-regulatory cell and CD34 cell platform, [indiscernible] into the evaluation of new indications in autoimmune disease and/or cardiovascular disease based on these platforms will be influenced heavily by our ability to secure grant support for the proposed work. We will judiciously and opportunistically evaluate new opportunities to acquire additional products at various stages of development as appropriate and we will fully eliminate our remaining $5.5 million of outstanding debt with Oxford Finance. During our strategic review in early 2016, we identified our immune modulatory platform as a program with significant competitive potential across multiple indications with development costs that would allow us to reach the next clinical milestone more in keeping with our financial resources. Throughout 2016 we made significant progress with our CLBS03 program and we can look forward to a number of value creating milestones in 2017 that will further establish Caladrius as a leading cell therapy development company. As a recap, in 2016 we initiated our U.S Phase 2 trial, the T-Rex study of CLBS03 to treat recent onset Type 1 diabetes in collaboration with Sanford Research. We completed enrollment of the initial cohort of 19 subjects of that trial and following the favorable safety recommendation from the Independent Data Safety Monitoring Board, which came ahead of our originally planned schedule, we resume enrollment of the second and final cohort of the study. We received orphan drug and fast-track designation from the U.S Food and Drug Administration and advanced therapeutic medicinal product classification from the European Medicines Agency for CLBS03 to treat Type 1 diabetes. We expanded the strategic collaboration with Sanford Research beyond operational support for the T-Rex study to include a $5 million direct investments in Caladrius. And in February 2017 we were awarded a grant of up to an aggregate $12.2 million from the California Institute for Regenerative Medicine payable upon the achievement of certain milestones to support the development of CLBS03 as a treatment for type 1 diabetes, specifically directed towards the T-Rex study. We look forward to driving this landmark study through a series of milestones throughout 2017, culminating in the scheduled interim analysis of early therapeutic effect expected at the end of 2017 or early in 2018. Before we move into a more detailed discussion of our clinical progress and plans, allow me to turn the call over to Joe Talamo, our Chief Financial Officer, for a review of the 2016 fourth quarter and year-end results. Joe?

Thank you, Dave, and good morning, everyone. Before I review the -- our 2016 financial results, I briefly like to touch upon the financial impact both immediate and upon closing of the agreement with Hitachi for the sale of our remaining 80.1% interest in PCT. Under the terms of the agreement, upon closing, we will have received a total of $70 million in cash, $5 million of which should be received in the next few days, plus an additional $5 million to be received at the expiration of the escrow period assuming no indemnification claims are made. It goes without saying that an infusion of non-dilutive capital of this magnitude enables us to fully fund our ongoing CLBS03 clinical development program to selectively and opportunistically invest in other pipeline programs and to pay-off the balance of our $5.5 million debt with Oxford. In addition, the agreement provides for the potential of an additional $5 million milestone payable if PCT achieves a predefined revenue milestone by the end of 2018. Lastly, this agreement will secure long-term manufacturing services with PCT in support of our T-regulatory platform development and manufacturing at very -- at a very attractive price point. Overall, this is a transaction that will substantially stabilize our financial position and will enable us to fully pursue our near-term initiatives with financial confidence. Lets now turn to our 2016 financial results. We’ve completed a very strong 2016 with full-year results meeting or exceeding our guidance established at the beginning of 2016. Fourth quarter 2016 revenues of $10.1 million, increased 35% compared with $7.6 million last year. Revenues for the full-year of 2016 increased 57% to $35.3 million due to higher clinical service revenues at PCT. Overall, revenues significantly beat our full-year guidance of greater than $30 million and better than 30% growth. Regarding operating expenses, we continue to drive down costs by focusing on prudent expense management. In the fourth quarter of 2016, R&D expenses decreased 19% to $2.6 million from the previous year and for the full-year R&D expenses decreased 37% to $15.1 million. R&D declines in both the fourth quarter and the full-year were primarily related to the discontinuation of non-core R&D programs announced at the beginning of 2016 and related reductions in R&D staffing and departmental cost, partially offset by costs related to our ongoing Phase 2 T-Rex study. Moving to SG&A, fourth quarter 2016 expenses decreased 15% to $4.3 million compared with the prior year, and for the full-year SG&A expenses were down 32% to $20.4 million, showing the results for our continued focus on improving cost management. The net loss attributable to Caladrius common stockholders for 2016 fourth quarter was $6 million or $0.73 per share compared with a net loss of $33.2 million or $5.92 per share for the same period in 2015. For the full 2016 year, the net loss attributable to Caladrius common stockholders was $32.7 million or $4.99 per share compared with a net loss of $80.9 million or $16.67 per share in 2015. As a reminder, the 2015 net losses did include non-cash and process R&D and goodwill impairment charges and the reversal of deferred tax and contingent consideration liabilities related to the discontinuation of our non-core programs, and at the beginning of 2016. Looking now to our balance sheet and cash flow, we ended 2016 with cash and cash equivalents of $14.7 million and long-term debt of $5.5 million due to Oxford Finance. Of particular note, we began 2016 with $15 million of long-term debt and over the course of 2016 we aggressively pay down nearly two thirds of this amount by year-end. Our net cash used in operating activities during 2016 was $23.7 million, which was below the lower end of our $25 million to $28 million 2016 guidance range. In 2016, we invested $2.8 million in capital expenditures for equipment and improvements, primarily in our PCT facilities. One additional note, our financial statements included in our Form 10-K filed last night includes an unqualified audit opinion from our auditors and also includes a going concern opinion, which is measured as of the date of filing the Form 10-K. However, with last night's announcement of the agreement with Hitachi, we believe upon closing -- the closing of this transaction, we will have mitigated any going concern. As a note about financial guidance, given the announcement today and our agreement with Hitachi Chemical, we will defer providing financial guidance for Caladrius for 2017 until after the transaction closes. With that, let me turn the call back to Dave.

Thanks, Joe. As the Hitachi Chemical agreement has the potential to redefine Caladrius as a pure play cell therapy development company, let's turn now to a discussion of our business strategy. Our clinical strategy is to develop select assets and to advance them to the next development milestone representing a significant increase in value, most often to proof-of-concept demand. Our long-term goal will be to partner those assets for further clinical development and ultimately commercial sale. We believe this strategy will create value for our shareholders, first, by virtue of simply achieving development maturation and derisking and then through the ultimate economics associated with partnering them. As I noted earlier, last year we identified our immune modulation program based on T-regulatory cell technology and as one with significant competitive potential across multiple indications and we made CLBS03 our primary clinical focus. CLBS03 is a personalized autologous cell therapy consisting of each patient's own regulatory T-cells or T-Rex, which have been expanded in number and functionally enhanced by a proprietary method developed through the collaboration with renowned researchers at the University of California, San Francisco or UCSF. The program is supported by promising published early clinical work conducted by respected leaders in the area of T-regulatory cell science. In a Phase 1 open-label dose escalating study using a product analogous to CLBS03 and conducted at UCSF and Yale University evidence for safety and tolerability of autologous expanded polyclonal T-regulatory cell therapy in 14 adults with established Type 1 diabetes were shown. Supportive to the follow-up data from this study were published in November 2015 in the peer-reviewed journal Science Translational Medicine. Additionally, early evidence of utility of T-Rex for Type 1 diabetes was provided by a study of pediatric patients age 5 to 18 with new onset Type 1 diabetes as published in Clinical Immunology. In that open-label non-randomized study the authors reported that treatment with expanded autologous T-Rex preserved function of pancreatic beta cells and reduce the need for exogenous insulin in the majority of patients treated. Prominent clinicians and scientists on our Scientific Advisory Board and the T-Rex study executive steering committee such as Dr. Jeff Bluestone and Steve Gitelman of UCSF and Kevan Herold of Yale University are associated with the trial and provide us confidence in the clinical and scientific rationale underlying CLBS03. As to the specifics of the Phase 2 T-Rex study, the Sanford Project T-Rex study is a prospective randomized placebo-controlled double-blind Phase 2 clinical trial to evaluate the safety and efficacy of CLBS03 in adolescence with recent onset Type 1 diabetes. The allowable range for the study has been expanded from ages 12 to 17 to ages 8 to 17. The study will include 111 subjects across approximately 12 to 15 U.S sites. We have already completed the 19 patient first cohort and an interim safety review and following a favorable safety recommendation from the independent data safety monitoring board, we resumed enrollment of the second final cohort of the study in October of 2015. Patients are being randomized to placebo or one of two active arms receiving either 2.5 million or 20 million of their own T-Rex cells per kilogram of body weight, respectively. The study uses standard endpoints for diabetes study including C-peptide measurement which is an accepted measure of the preservation of beta cell function, insulin use, severe hypoglycemic episodes, and hemoglobin A-1 C levels. The study has a pre-specified interim analysis of early therapeutic effect that is scheduled when half of the subjects reached the six month post treatment follow-up visit. Given the high-level of interest in this study, we expect to reach the corresponding enrollment milestone by mid-2017 with the top line data from the interim analysis to be announced in late 2017 or in early 2018. Data from the 12-month follow-up of all subjects are expected in late 2018 to early 2019. In conjunction with our private placement from September 2016, enrollment of the 70th subject will trigger an additional infusion of capital, which was previously defined to occur in mid 2017. As the name study -- as the study name implies we are in partnership with Sanford Research for the conduct of this Phase 2 trial. Sanford Research is a non-profit research organization that is part of Sanford Health and supports an emerging translational research center focused on finding a cure for Type 1 diabetes. Through our partnership, Sanford is providing the operational resources to execute subject recruitment, enrollment, treatment and monitoring along with corresponding support services at their two clinical sites. In addition, Sanford agreed to make a $5 million equity investment in Caladrius in support of this very promising program in the September 2016 private placement, 60% of which has been received. The remaining 40% originally agreed to be received when the 70th patient has been enrolled in the study is now expected to be accelerated based on their enthusiasm for the study and should be received shortly. The potential of T-Rex as a therapeutic platform has applicability in many other autoimmune modulated diseases. Our redefined focus on cell therapy and the fund expected to be available through the agreement with Hitachi Chemical for the sale of our remaining interest in PCT will allow us to identify and pursue the most promising of these opportunities. Additionally, Dr. Jeff Bluestone, one of the originators of the technology at UCSF and an advisor to Caladrius is currently running clinical trials supported by the National Institutes of Health evaluating autologous T-Rex as a treatment for cutaneous lupus and to induce tolerance in post-kidney transplant patients, two indications for which Caladrius holds intellectual property rights. We look forward to the completion of those studies and the results of Dr. Bluestone's work, as that information will contribute to our decision to further pursue development to these indications. Let me now move to an update regarding our CD34 technology. CD34 plus cells have been shown to induce the development of new blood vessels preventing tissue death by improving blood flow. CD34 cells have been investigated in clinical studies encompassing over 700 patients with over 400 receiving CD34 cell therapy exposure. Notably, one potential application of this technology is in critical limb ischemia or CLI. Our program for CLI, CLBS12, is based on previous studies of autologous CD34 cell therapy for no option CLI patients in both Japan and the United States. From those previous studies, researchers found that CD34 cell injection was safe, lead to improvement in CLI free status and improved amputation free survival and other clinical parameters. We have constructed a development program for CLBS12 in Japan based on that country's new regenerative medicines law. Under their newly defined process, we worked with and reached an agreement with the Japanese regulators on a Phase 2 clinical development plan, that if successful, should qualify CLBS12 for early conditional commercial approval in Japan for the treatment of CLI. The agreed trial is a 35 patients Phase 2 prospective randomized controlled open-label multicenter study in patients with no option CLI to be conducted in Japan. Those patients randomized to treatment will be dosed with autologous, UCSF mobilized peripheral blood derived CD34 plus cells to CD [ph], which is CLBS12 through intramuscular injection in addition to standard of care. Patients randomized to the control arm will receive standard of care pharmacotherapy alone. The study is expected to cost between $7 million and $8 million over approximately three years including an initial investment of approximately $2.5 million in the first year. Our goal is to initiate this study in 2017 and to follow results closely, recall that it is open-label, not only to decide on timing and appropriateness of continued investment, but also to manage discussions with potential developments and commercial partners. CLI is just one entry point to explore the broader applicability of the CD34 cell therapy platform, a platform which could potentially be effective in the treatment of major conditions such as chronic heart failure or dilated cardiomyopathy. We have two grant applications pending and a third expected to be submitted later this year to support clinical work for our CD34 cell technology and coronary microvascular dysfunction and other cardiovascular indications. We expect to learn the results of these applications during 2017. Our plan is to initiate clinical studies of our CD34 cell therapy technology platform based on the results of these grant applications. We also continue to explore other means of collaborative support such as partnerships or licensing to contribute to any development programs on which we embark for this technology. In closing, we are excited by the opportunities unfolded by the proposed acquisition of our remaining interest in PCT by Hitachi Chemical. And we're thrilled with the significant opportunities for Caladrius as a cell therapy development only company if the acquisition is completed. And the expected new form Caladrius would be in a strong position to contribute to and capitalize on the clinical utility of cell therapy as a viable approach to disease treatment. We appreciate the continued support of our shareholders and look forward to sharing with you our successes in cell therapy product development. And now, operator, we’re ready to take questions.

[Operator Instructions] Your first question comes from the line of Keay Nakae from Chardan. Your line is open.

Yes. I know you’re not giving guidance for the obvious reasons, but at least for the things you are committed to doing such as the continuation of the T-Rex study, what do you think the R&D spend allocated to that will be in 2017?

Keay, thanks for joining and thanks for the question. I will let Joe, perhaps embellish upon what I’m about to say, but as you know we're not prepared to give specific guidance. And one of the reasons is that as those who have paid attention to the terms of the CIRM grant recognize that there are two conditions within the CIRM grant, which determine exactly how much of the $12.2 million, if not all, that that we will receive during the course of the trial. One of those conditions is that the manufacturing cost that is the preparation of clinical supplies will basically be covered for all patients going forward because we do our manufacturing in California. The other condition is that the clinical costs for those patients who are enrolled in California will also be covered and given that we don't know exactly at this point in time how many patients we can project in California, because we're presently opening additional sites in that state. It's difficult to provide exact guidance, but I think it's fair to assume that the majority perhaps certainly a good portion of the CLBS03 R&D spend in 2017 will be offset by the CIRM grant. Joe, would you like to add anything?

No, nothing. That’s great.

Okay.

Okay. And then, with respect to the Hitachi purchase going through, other than shareholder approval, are there any other conditions that need to be satisfied that if not prevented from going through?

No, it's just a customary closing condition. The specific details are in the filings that we made, but no it's really just the shareholders wealth [ph] that is I would say, the critical path to closing.

Okay. And then with respect to the CLI study in Japan, what other work needs to be done before you commence that study again predicated on the Hitachi transaction being completed?

Right. The rest -- the only work that remains is sort of the typical operation planning and startup work for study. So, we already have an arrangement with a manufacturing facility in Kobe that we help to establish and is basically standing by, ready and we'll just have to then initiate sites -- identify and initiate sites, but all that planning work can take place now, it really costs nothing other than internal effort. No capital will be outlaid until the closing of the Hitachi deal and then we will be poised hopefully to initiate patient enrollment fairly quickly after that.

Okay. And while 35 patients doesn't sound like a large study, given the criteria no option patients with what degree of disease and, I guess, at the of the day, what I’m looking for is how difficult will it be to actually sign these patients to participate in the study?

The -- our Chief Medical Officer is actually on a flight at the moment unfortunately, otherwise I would defer to him to give you the specifics of the scoring criteria necessary for the patients to enroll. But based upon previous work done in this population, in Japan by the person who will be the principal investigator for our study we believe that the study will enroll very readily, especially given that in conjunction with the agreement with the Japanese PDMA. This is an open-label trial typically the difficulty especially in Japan of enrolling patients has been due to the previous requirements of the regulators to have a double-blinded trial and people with no option CLI who are facing amputation and perhaps death as a result of their disease are generally not enthusiastic about joining a trial where they might be randomized to placebo. So this open-label trial should also enhance our ability to enroll this program relatively effectively.

Okay. That's all I have. Thanks.

Thanks, Keay.

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

Hey, congratulations, Dave. Getting an 81% premium to your entire market cap on PCT is obviously an accomplishment. Let me ask you, because obviously Caladrius's has been known for as a research entity, a clinical entity and/or manufacturing entity. How would you describe yourself going forward in terms of you still have an expertise in understanding of the manufacturing requirements for cell based therapies? How would you describe yourself going forward as far as that goes? And I’ve got a follow-up question on different programs, please.

Sure. Thanks, Steve. I appreciate your comments, and thanks for joining. I think as my introductory comments indicated, we will be describing ourselves as a pure play cell therapy development company, one with we hope will have a very attractive and promising pipeline of a variety of clinical programs and one I think that will be noted that will be still very conservative in the way that we deploy capital even though we will now be in a much more favorable capital situation than the Company has been maybe ever, but certainly over the course of the last several years. The arrangement with Hitachi both in terms of our -- I would say commitments to continue to work on CLBS03 and the T-regulatory platform with them, the favorable rates ironically post-closing, I think we'll actually -- have less expenses associated with manufacturing of those products than we did pre-closing. I think all of those things will allow us to maintain a certain level of manufacturing and CMC expertise on the Caladrius side of the business using PCT as many of our current clients do as that arm of the business, but without the burden of having to try to support and grow that business due to the -- very, very large capital needs necessary to remain competitive. So I think that we will be a pure play cell therapy company, one that is well-capitalized and one that I hope people will see will have a diversification of risk as we spread our capital across several programs, across several cell therapy platforms and where we will be exploiting maximally our ability to acquire non-dilutive support through partnerships and grants.

Actually you just hit on the topic that I wanted to ask about. On the non-dilutive supports and grants, you probably have more collaborations than any other company, certainly any other cell therapy company. What do you think this is going to add as far as your ability to go out there and just focus on additional collaborations and the ability to go out there and raise additional funds on a non-dilutive basis?

Well, in some cases our ability to attract some non-dilutive grants was hampered by our capital shortage, because in some cases not always, but in some cases the grantor requires a contribution to the program -- of capital contribution from the company to which the grant was made and in the past we've had such a shortage of capital that we weren't able to actually take care of that. Going forward now, we will be able to very carefully and judiciously decide how much of our capital that we may want to contribute to certain program, but that will now open the door to a wide variety of grant -- substantial grants that we really consider. In the past, I think that the fact that we also in the past at times had our financial viability questions by granting agencies you can imagine that -- whether it’s a government agency or an NGO that’s providing millions of dollars of support for a clinical program to a company they want to be sure that that company is going to stay in business throughout the life of the trial that they’re supporting and with this transaction a lot of those concerns dissipate in fact I think they’re eliminated and as a result that will I think also open the door to our ability to collect grants from more conservative agency. So I think, in overall, the simple answer to your question I think this is going to help us.

Well, again congratulations on the transformation and look forward to all the results in 2017. Thank you.

Thank you, Steve.

And your next question comes from the line of Robert LeBoyer with Aegis Capital. Your line is open.

Good morning and congratulations on this transaction. My question has to do with the pipeline and some of the products that may be moving into clinical work advancing through more preclinical stages. There was a mention of Dr. Bluestone's work and I was wondering if you could just briefly elaborate on that or any other products that you call our attention to in order to get an idea what the pipeline looks like?

Sure. Thanks, Robert, and thanks for joining this morning. I appreciate it being on the line. So, the pipeline obviously will develop and mature and we will be able to provide a lot more specific information over the coming weeks and I'll just add that a lot of what I'm about to say is contingent upon the closing of the transaction. But our vision of a post transact -- a post-closing Caladrius obviously encompasses a fully funded CLBS03 T-Rex program and Type 1 diabetes and I'd say that the strong possibility that we will engage at least one other clinical indication for that technology we have in the corporate presentation that will be made available in the coming days sort of a pallet of those autoimmune diseases where we believe T-regulatory cells could play a therapeutic role and we will be looking at which of those indications make the most amount of sense from a clinical perspective based upon a set of criteria that will include the commercial viability, the size and extent of the unmet medical need, the competitive environment in which we would work and the time necessary to get to a meaningful clinical result. The availability of accepted regulatory and medical endpoints in those state [ph] and the ability to enroll those studies relatively quickly and easily and ultimately how much those studies would cost and our ability to garner perhaps partnerships in there. And so among the things that we will be looking at will be a variety of autoimmune diseases, but I think that there's a -- an interest at the moment in the orphan disease neuromyelitis optica that could be one that meets all of our criteria and one for which there may be some grants collaboration available. And so we will be exploring that over the next couple of weeks and months and hopefully be in a position to initiate a trial testing T-regulatory cell therapy in NMO. And then as you mentioned, Dr. Bluestone in UCSF under NIH funding is performing a series of Phase 1 studies evaluating autologous T-regulatory cell therapy as a treatment for a number of diseases. He has chosen initially to look at dermal lupus and also at the ability to induce tolerance in kidney transplantation patients, and we expect that he'll be publishing the results of those studies in the coming months. And of course positive results in those areas will give us -- I think a set of information to consider as to whether or not in the context of all the other criteria that I outlined previously whether we might want to engage in some work in those areas as well. We are going to be very careful though as I said several times now about how we deploy the capital and making sure that the capital that comes from this transaction will be deployed judiciously and conservatively so that it will last for quite some time. On the CD34 front, in addition to the CLI program in Japan, which we do plan to initiate, we have grant applications into several agencies to study coronary microvascular dysfunction which is CMD or sometimes called Syndrome X, which is a disease that manifest itself as an inexplicable angina often in females. And so we expect over the course of the next several months to get results on those grant applications and we’re I think cautiously optimistic that one or both of them will be funded in which case we would be in a position to initiate Phase 1 or Phase 2 work with our CD34 cell technology in that area. And we’re presently investigating other potential indications and collaborations for the CD34 program and as always as every company of our size is we’re looking broadly as complementary technologies or partnerships that either makes sense from a therapeutic complementarity or a technology complementarity and we will evaluate those carefully and judiciously as they arise.

Okay, great. Thanks. And just one other question about the transaction. In terms of the assets that are being transferred, could you just specify which laboratories and the asset values that have been assigned to them?

I can give you the general rule. I’m not sure that the values assigned to them is public and I will let Joe comment in a moment. But generally, the agreement defines or describes the acquisition of our 80.1% share of PCT by Hitachi Chemical. PCT comprises a two manufacturing facilities. One, in Mountain View, California, which is the least facility and of course all the personnel equipment and know-how that goes with that facility, and our flagship facility in Allendale, New Jersey, which is an owned facility and all of the personnel equipment and know-how that goes with that. And so that's basically what what’s being transferred at the closing of this. Joe, I don’t know what we can say about value other than its valued at $75 million plus $5 million is the milestone, its net.

Yes and Robert there will be more clarity coming through we -- when we do put out our proxy statement that will include the carve [ph] out information and provide a little more granularity around the operations of PCT that’s being sold. And the assets for the most part are fixed assets [indiscernible] on the books are largely on the PCT side and that is going to be purchased by Hitachi with the remainder of this. So you'll see that the Allendale side as you know is owned, so that's going to go with the transaction as well. So there will be more granularity that you will be able to see once we put the proxy on.

Okay, great. Thank you. Just anticipated my next question, so I'll just thank you very much and congratulations again.

Thanks, Robert.

And your next question comes from the line of Yi Chen with H.C. Wainwright. Your line is open.

Thank you for taking my questions. First question just to clarify, you have already received $5 million from Hitachi and you expect to receive the rest $70 million in May, is that correct?

Hey, Yi, good morning, and thanks for joining us. To be technically correct, the first $5 million is expected to be transferred today and so I haven't had a chance to speak with our treasury function. So I don't know if the wire has come through, but that’s the agreement, $5 million should arrive today and then the remainder arrives on the day or within a couple days of closing.

Yes, and just $1.5 million of the remainder would be placed in escrow for 12 months, so 60 -- so of the total $75 million, $70 million of that amount will be available to us on closing.

Okay. So for the second quarter of 2017, on your income statement you were still recognized part of the PCT revenues, is that correct?

Yes, so we’ve both a first quarter and a second quarter impact here. This is scheduled to close in the second quarter. We would report the PCT operations through the closing date. We would expect, beginning with the first quarter that the PCT operations would be reported as discontinued operations, but will clearly that the 10-K was filed last night and it is still as you’ve seen in the past. But effective with the first quarter of the presentation of all the PCT operations will be potentially -- its likely to be collapse into discontinued operations.

Okay. Thank you. Regarding the ongoing CLBS03, before the interim data analysis which can potentially reported in late 2017, do you still plan to report some initial biomarker analysis from the first cohort in near-term?

We haven't yet decided on that and one of the reasons why is that we are actually working on the partnership for the generation of that data that may affect the timing of when that information from the first cohort would actually be available for public consumption. So I think that as we identify material or noteworthy information that we can communicate, we certainly will do so.

Okay. Got it. So for the Phase 2 trial of CLBS12 in Japan, do you plan to fully fund that trial yourself or do you -- are in the process of looking for some partnership in Japan?

We've actually had partnership discussions ongoing for a while with two categories of potential partners. One would be, I guess, under the general category of pharma companies and the other the general category of venture capital or something or just financial capital. And so, our plan is to initiate the trial using the capital proceeds or a very small portion of the capital proceeds from the closing and at least to plan to fund the trial to its first year and probably the first, roughly third of the patient enrollment. Although there is still a possibility that a partnership could be consummated that would allow us to minimize or even avoid any capital outlay ourselves, but the goal would be if nothing could be consummated under terms that we find acceptable prior to the closing, then after closing we will initiate the trial ourselves and we believe since its open-label as we generate data that would be positive enthusiasm for the product from potential partners and our ability to negotiate a partnership that is attractive to us and our shareholders will increase with time. So, our initial commitment is $2.5 million or less and we will play it by year after that.

Got it. And escrow is likely to be starting in the second half of 2017, right?

Yes, correct.

Okay, got it. Thank you.

All right. Thanks.

This concludes the question-and-answer portion of the presentation. And I will now turn the call back over to Dr. Mazzo, for closing remarks.