Good afternoon, ladies and gentlemen. Welcome to the Cytori Therapeutics Year-End Earnings Conference Call. Today's call is being recorded. 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 and business prospects which may affect Cytori's future operating results and financial position. Some of these risks and uncertainties are described under the Risk Factors section in Cytori's Securities and Exchange Commission filings which Cytori advises you to review. Cytori assumes no responsibility to update or revise any forward-looking statements to reflect events, trends or circumstances after the date they are made. I will now turn the call over to Chris Calhoun, CEO. Please go ahead, sir.

Great. Thanks, Dave. Good afternoon. Welcome to the quarterly business update. Cytori is pioneering a new era in medicine in the emerging field of Cell Therapy. Much progress is being made each quarter to advance Cytori to be leader in cell therapy. Since our Q3 update, we've made tangible progress in many of the core areas identified during that call, including: the FDA approval of U.S. ATHENA chronic myocardial ischemia trial in only 30 days after submitting the IDE application; the APOLLO 6 months heart attack data publication in Journal of American College of Cardiology; issuance of several new core market patents, further strengthening our proprietary position; and positive developments relating to breast reconstruction reimbursement in the U.K. We entered 2011 on the heels of what appeared to be accelerating revenue growth. However, unfavorable regulatory challenges in Japan and the U.S. impacted that growth. We did not -- we did post positive growth in Europe, in the emerging markets and in the launch of our approved PureGraft product. This partially offset the revenue lost in the U.S. and Japan. Year-over-year, revenue was essentially flat. We recognized the growing complexity and challenging needs of our nascent Commercial business and successfully recruited a highly accomplished industry veteran, Clyde Shores, who came on board in mid-2011 to lead our global sales and marketing team. Under Clyde's leadership, we've shifted our sales strategy in the near-term to a profitable growth strategy that substantially reduced sales and marketing expenses while simultaneously maintaining our investment and focus on long-term market access requirements for our products. The immediate impact is lower expenses. For the intermediate term, this series of moves should result in a positive contribution margin to Cytori, more predictable consumable sales, and ultimately, breakout growth once full market access is achieved. Looking forward in 2012,…

[Operator Instructions] And we'll take our first question from Steve Brozak with WBB securities.

Congratulations, gentlemen on the trial approval announcement. But frankly, that's what I'm going to go directly into. I'd like to know what has transpired since the approval announcement? And I've got a question to follow up on that, on that process, please.

It's Chris. Now that we have approval from FDA to move forward on the trial, I can give a lot more color on the design of the trial and then talk a little bit about what they've done today and what the next steps are over the next few weeks. So the design is a double-blind placebo-controlled, fully randomized trial of 45 patients that will be randomized 2:1. So we'll have 30 treated patients and 15 placebo. The trial will be conducted at 5 sites in the U.S: The Co-PIs are Emerson Perrin at Texas Heart and Tim Henry at Minnesota Heart. The remaining 3 sites have been identified and will be announced in due course once everything is completed and are up and running. Our schedule is to get the first patient in and enrolled during Q2 with full enrollment in similars in 12 to 18 months thereafter. The 12-month time point will be the primary assessment of outcome, and we're looking predominantly at safety, but in addition, the key functional measurements like MVO2 and mechanistic measurements like profusion. There will be other time points, for example, we will gather data at 6 months and then longer-term data but the 12 months primary assessment is the kind of the primary time that we're going to evaluate. So next steps are to -- and we're in the middle of this now, getting these sites online and up and running. That means local IRBs, getting all the legal and contractual arrangements in place, and then getting the first patient in. So we're on track to kind of mid-next quarter of having the first patient enrolled in the trial and then expecting to see the enrollment really get going as we have 5 sites up and running.

Okay. Actually, that -- I'm delighted to hear that because it seems that everything is progressing quickly. And that actually leads me to the next question. Since he did have such quick trial approval from the FDA, can you give us color on the FDA relationship in terms of how you work with them? Do they understand what you're doing and obviously, you have to have an intimately close relationship with them. But as much as you can provide obviously, on an open conference call would be really helpful --

Steve, it's still Chris. As we think about the different avenues through FDA, there's a number of potential pathways. So the one we've talked quite a bit about over the years has been the 510k pathway, which really provides tool claims in kind of a device-only approval. And we've been working with that for some time. But it's not our core pathway through the regulatory system and it really doesn't give you the imagers you need for market access. So the primary path for us is, and has always been, the PMA/IDE pathway. So as you know, we spent quite a bit of time going through the process with FDA because we do a very different approach to Cell Therapy here, and it took some time to really align everybody that we are on a device track and not on a BLA biologic track. And so once that was done, then we began to work with FDA about going through a device-based, in other words IDE, for looking at some therapeutic indications. And over the summer, we spent quite a bit of time preparing and then providing to FDA the trial design and all the details from our 2 cardiac trials in Europe based on the very good dialogue with FDA over the summer in our pre-IDE meeting. We were able to resolve a lot of the issues up front with them, create a very good dialogue. And then, when we went and put in the applications late last year, I think in addition, we can take a little credit here. As the application was also very well put together and there's a lot of tremendous data in there that we've generated over the next last 8 to 10 years that supported this. But based on all those things, the FDA reviewed the applications in a very, very quick timeline, 30 days, and came back with an approval, which we are very pleased with. So I think it's a sign that we're moving on the right track with FDA, and we're on the pathway that we want to be on and that they want us to be on, and we're really looking forward to initiating and getting the first patient in and getting the trial underway.

And now we'll go to John Putnam with Capstone Investments.

And I wondered if you could talk a little bit about your cash burn mark for the quarter, and can you give us a little guidance word on a quarterly basis through 2012?

Sure, John. We continue to reduce our operating expenses in the second half of 2011. Consistent with what Chris was talking about, largely on the sales and marketing side that we had invested more heavily in going into 2011 and early in 2011 and in response to some of the regulatory and overall market issues we then carried that back to try to rightsize that business to emphasize that profitable growth objectives for sales and marketing. And so you start to see that really in Q4. So when you look at Q4, obviously, a much lower operating expense number than you had seen. The cash burn, on the surface, is going to look pretty close to what we saw in Q3 in the high 7s. But if you dig in there a little bit, you'll also see we paid off about $1 million of accounts payable in the quarter, and actually grew some AR in the quarter as well. So when you offset that, it actually ends up getting closer to the mid-6s on a pro forma basis. So there's been fairly meaningful improvement in the cash burn over the course -- on an operating basis over the course of 2011. And as we look forward to 2012, our objective is to keep that number below 7 per quarter. And the quarters -- there is variability in quarters on expenses on a cash basis go out the door, typically more go out in Q1 than any other quarter. But over the entirety of 2012, while there will be quarterly variability, we expect that number to be below 7 on a quarterly basis when you normalize the year. Potentially better if certain things come through, and as always, the ability we have to have to try to tighten further where necessary, so it's not as if we don't have a fair amount of control, but we're investing in other things that we believe are going to result in the commercial growth that we're looking for, the strategic objectives that we're working on in a number of cases, as well as the clinical objective. So we'll be spending less money 2012 than we did in 2011, for sure.

Okay. And I wondered if you might talk a little bit about Japan and what, Chris, what's your regulatory hurdles are there and how you can kind of get around those?

Yes. So currently, because the products are approved in Europe, physicians in Japan have the ability to bring that technology into Japan under a doctor's license. A few years ago, the government instituted some cell therapy guidelines for physicians even during translational work that they needed to get approval to do that, that anything with stem cells, through the Ministry of Health. And early on, we interpreted, along with a lot of the lead investigations in some of these translational centers, I'm talking about people at some of the leading hospitals across Japan, interpreted this. Our approach was not included in that Cell Therapy guidelines. While it's under review, it turns out we are, and so what we've done is we've taken all of those translational trials, received approval through the Ministry and have them up and running. But new trials, new things take a little time because you have to go through that application review period. So that's slowed down our revenues a little bit last year in terms of the translational sales which were a large part of our overall sales worldwide but also certainly in Japan. So -- but that's not the end goal there. The real avenue is going through the Ministry of Health as a device, much like we're doing on the rest of the world, and gaining specific indications. And on the breast reconstruction side, which is the one we're furthest along, we have an application in last year for breast reconstruction and the device. Subsequently, we've provided all of the data on the breast reconstruction trial called RESTORE 2 in Europe, to the Ministry, and they've reviewed that. We're now going back, reformatting that into a format they call the Japan's version of the Good Clinical Trial protocol format, their GCTP. And we think we're on track for that review. And hopefully, unless something new comes up, so that'll be enough to win our first approval in Japan with the indication of breast reconstruction. And then you probably know in Japan, reimbursement typically follows pretty quickly after approval and unlike other places in the world. So I think we can really get the imagers for market access fairly quickly in Japan, once we achieve that first goal of getting the approval. Looking forward, I think there are opportunities to bring several of our cardiac, one more of our cardiac programs into Japan, that wouldn't be multi-hundred patient studies but more satellite-type design trials that can mirror and echo and be supported by some of the larger international trials to expand those approvals in Japan, but based on smaller, clinical trials, which we expect to have to run in Japan.

We'll now move on to Chad Messer with Piper Jaffrey.

I was hoping you could give a little bit more color about the deal pipeline that you were talking about, maybe just in terms of bucketing what kinds of conversations are going on. And then anything you can help out with what sort of size or terms you think you're getting, especially given your stated goal, like getting to 2 years of cash primarily using non-dilutive funding?

Chad, hey, it's Chris. Yes, I'm probably not going to give you a lot of color on some of these deals, but you can imagine there are a variety of things in our funnel that we've talked about, north of half a dozen active deals that we're working on. And kind of equipment shareholder Letters. I mean, some are, some are non-core. There's a lot of different options that we're pursuing. Some are regional so they're not all global-type deals. But there's just a whole variety of different things, which allows us to work in parallel on a variety of different deals. So in terms of scale and size, I'm just not really allowed to give you much color on that right now. But I can give you an example of one. For example, a couple, that maybe a little over a year ago, Astellas came in with a premium equity as a first step towards a therapeutic partnership. They locked us a 2-year option for the first right on a liver indication. And I think we've been fairly public about this, and it's pretty well-known that we've been working together with them towards the goal of achieving a therapeutic deal in the liver area, which to us has been a typically pretty non-core but it would represent a potential deal. So there's a number of deals like this out there that we're working on. The timing is difficult to exactly predict, but I would say we're kind of standing here today looking forward, we're highly confident that we'll achieve at least one, if not more of these partnership deals this year.

What's the level of interest in your ongoing cardiac programs? As kind of being one of the more advanced, and certainly from my point of view, interesting indications that you got?

Well, I think there's a lot of things coming together to support not only potential cardiac partnerships, but all of these different partnerships. You now have a much clearer picture of the U.S. regulatory pathway. I think people, even up until we announced the IDE approval question, whether we were actually going to be an IDE, or we'd have to kind of retrench and be a BLA. So I think that clarity helped. Publication of the data from the acute trial in January was important because peer review publications give validation that your data's real and been reviewed. As you know, I think we've, we put out there that both the RESTORE data and the longer-term APOLLO data and the longer-term PRECISE chronic trial data are all submitted to various journals for publication and those will be coming through part of the next month. So I think that also helps drive some of these partnerships. Cardiac is -- we think probably our most valuable pipeline indication because it's furthest along. We've completed 3 trials. If you look at the [indiscernible] deal as a precedent, we think that the number of patients in their trial compared to the number of patients in our trials were fairly similar. It's not going to surprise you for me to say that I think our data is far superior. And we think in Europe, we don't have to take that into another pivotal trial, large, pivotal trial, but working towards getting that right into the market and then following with the post-market registry, U.S., moving that into a trial here. So I think that there's an enormous value there if you look at that as a surrogate for just that indication alone. So I think the opportunity is that these are huge markets. And for the most case, a lot of the things that we're going after are really no option indications, treating the heart muscle after heart attack and that damage. There's nothing out there that really does that. Trying to restore these no-option heart failure patients their function and improve their survival and benefit. These are things that other things haven't been able to do. So I think it's really representing no-option markets, that can be enormous. And we're going to be pretty careful about protecting that value as we've had, but we also can see the significant value a partner can bring, not so much even in terms the upfront cash and the value of that, but just in the terms of access and partnership and sophistication. I just reiterate that there's a number of deals in our funnel, and they're nearing completion, and we're confident that we're going to get at least one of these done and we're working to get it done as soon as possible.

We'll now move on to Ren Benjamin with Rodman.

Can you give us a little bit more color, Chris, or maybe it's a Mark question, regarding the amendment for the ADVANCE trial? And just some sort of an idea as to what exactly is being amended and how long this should take?

Ren, it's Chris. So just really just for summary, we identified, evaluated and collected now 27 sites in 12 countries, with an emphasis on the G5 and that also includes Canada. We received the full approvals in 2 countries, and we initiated enrollment back in May. But as you know, Ren, our approach to Cell Therapy is unique. Solution is GMP in a box. This has been validated by FDA, the European Notified Bodies and many of these country-specific competent authorities. But I think when the regulations were made, they didn't really contemplate on what we're doing. They didn't consider point-of-care device systems. And so when we go individually to various countries, the regulations regarding cell therapies, they're inconsistent, country to country, and it's a dynamic environment over there, and I would say the regulations are changing, in some ways, dramatically around the world. It's -- they're trying to catch up with what we're doing as a front-runner in this whole area. So the focus of what we're really targeting isn't around the device and the cells and the GNP or cell characterization or those kinds of things does that's been well-established. It's really looking at how hospitals and how groups within certain countries regulate Cell Therapy. And in our case, that really means is what's the GMP of the overall procedure? So looking at tissue from the patient to the device, and then the cells from the device back to the patient, and the procedures and protocols around that. So that's really probably where we're really more focused. But our goals in this are to establish a consistent regulatory review and pathway country-to-country across Europe. So this not only applies to our trial, and getting the approval for the trial, let's say in Germany or France or Italy, but…

Okay. And just as a follow-up maybe, I didn't read, unless I missed it, any comments regarding the stem cell banking business? Can you just give us an update there?

Well, I'm going to turn it over to Clyde for a second and let him give you an update on the, more on the commercial side.

It's Clyde. Yes, we just mentioned that I think in the write-up that we, some of our growth that we had in Europe and even in the U.S. offsetting some of that decline, and in Japan was due to increase in our banking business. So we continue to place more banks and we have a sharp focus on that, particularly in the United States where adipose-only banks and then full-adipose and stem cell banks globally. So we have an increased focus on that.

We'll now go back to John Putnam with Capstone Investments for a follow-up.

Chris, I was wondering, it seems like the CE Mark is taking longer than you'd anticipated. Would you agree with that? Or can you give us a little color on what's going on there?

Yes, John, I'm going to hand that one over to Mark. He's over in Europe right now, and actually been working on this. So he's probably is the most fresh to answer it. Mark?

John, can you hear me okay?

Yes, I can hear you.

Well, in short, we're making progress. You then recall that the issue is claims expansion. We already have claims reported from clinical areas, one expanded claims for a narrow group of patients, although a large group of patients who have no-option cardiac myocardial ischemia. It's an important priority to us to get that done. I don't view it as a delay at all. A key gating item was the getting the 18-month data to them, which we're able to do in mid-to-late Q4. Remember, we've only got only 27 patients in that study, so having longer-term data is critical to convincing them of not only safety, but clinical efficacy. CSI has actually reviewed the 18 month data. They've responded. In fact, we've had 2 face-to-face meetings with them in Europe since then, which was -- which have all been in 2012. I can tell you that we expect, as part of those discussions, if we ultimately obtain approval to have a registry. We think that's important, not only from the regulatory perspective, but also to drive utilization and then ultimately there's your pharmaco-economic benefit, and end pricing. So I think that's a reasonable expectation for investors to have. From the timing side, I think we expected to have -- to get the idea whether we're going to see claim expansion, the overall timing, and too, although that definitely, at that time I can be pushed out if we have requests for more data and so forth. So I think we're making progress. We are closing out issues, issue by issue, with a notified body. And I think we could see the progress and kind of working towards Q3 for a resolution.

Well, we have no further questions in the queue at this time. I'd like to turn the call back over to Mr. Chris Calhoun, CEO of Cytori.

Great. Well, thank you, all, very much. I've been cautioned I use too much flowery language, but I think it's important to say that I feel about 2012, that we're on track for this to be a transformational year for Cytori. The focus on advancing the company in 3 core areas that we believe will substantially build shareholder value and just to reiterate those: Advancing our cardio-vascular pipeline; our commercial business growth and profitability; and then strengthening our balance sheet through strategic partnerships. I'd like to thank you all for your time, interest and ongoing support.

All right. Thank you very much. Well again, ladies and gentlemen, that does conclude today's conference.