Good afternoon, ladies and gentlemen. Welcome to the Cytori Therapeutics Business Update and Third Quarter Results 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.

Thank you. Good afternoon, and welcome to our quarterly business update. I'm joined today by Dr. Marc Hedrick, our President; Mark Saad, our CFO; and Clyde Shores, our Executive VP of Marketing and Sales. Management has delivered strong results during the quarter, and for the 9 months of the year in each of our 3 business areas, achieving many of the goals established for 2012 and setting the foundation for leadership and growth in the Cell Therapy field. To review, our 3 principal objectives are to advance our cardiovascular disease pipeline, grow the commercial business and achieve our operational and financial performance goals. We've provided a shareholder letter that discusses our progress in greater detail. This is available on the homepage of the Investor Relations section on our website. Before we move into the question-and-answer session, I'd like to discuss some of the highlights from the quarter. Let's start with our 2 major achievements in Q3. Our most notable achievement during the third quarter was the award of our BARDA contract for up to $106 million in development funding for Cytori's Cell Therapy as a treatment for thermal burns combined with radiation injury. It's an important accomplishment that serves as recognition of the value of our technology and leadership position, expands and accelerates our U.S. product pipeline and provides a very achievable path to substantial, non-dilutive funding. From a strategic perspective, this contract complements our ongoing efforts in soft tissue repair indications, specifically wound healing. The second major achievement during the third quarter was establishment of a full commercial license in Japan and subsequently we obtained Class I clearance for our portfolio of products, including the Celution System, StemSource System and Puregraft. This clearance is expected to accelerate sales growth in Japan, leading a growing demand from researchers at academic…

[Operator Instructions] Your first question comes from the line of Stephen Brozak with WBB Securities.

I'm going to head straight to the point. Obviously the BARDA contract is a significant contract and I wanted to try and get greater granularity on it in terms of what you need to do for the "commercial" application for it and how that'll work and what the rough time frames that you're looking are going to be. Because obviously it's something that differentiates you from a lot of other companies.

It's Marc Hedrick. With respect to the timelines, it's a 5-year contract but the payments are relatively small at first, approximately $5 million. Those are geared towards achieving some proof-of-concept milestones. So we feel confident that we can get those done ahead of schedule, perhaps at the end of 2013, early 2014, depending on how quickly we can get up and running and the corporate hires and so forth. So we have a high likelihood of getting to those. Then assuming we hit those, then it initiates a couple of different milestones. Those preclinical proof-of-concept studies trigger about $55 million in -- up to $55 million, which includes a path to a pivotal study in the U.S. And that's another key facet of this. It does open up a unique and far-reaching soft tissue application in the U.S. And then ultimately, assuming that there is success in that pivotal, then there's an additional option payment, $45 million roughly, to go into our pivotal -- sorry, pilot before pivotal now. So those represent the $106 million of the contract. That doesn't include the potential commercial applications of the government helping us to pre-place these systems around the U.S. in hospitals, from level 1 trauma centers down to community hospitals, so the nation's prepared if, in fact, the worst-case scenario happens and there are multiple casualties with radiated-related burns from a nuclear accident.

Now just a follow-up on that has to be, how do you see this leveraging, and I'll ask it 2 ways and then I'll hop back out, how do see this leveraging your technology, both on the commercial and on the regulatory side? And again, I'll hop back out.

Well, from a technology leverage perspective, and kind of looking forward now to some point during the contract or the development phase or thereafter, should the government decide to purchase these systems and help place them around the country, it puts our technology into many, many hospitals in a pre-deployed, fully trained fashion, so that doctors have access to our technology and it does what -- it does for us what Cytori would otherwise have to do alone, which is to go out and sell hospitals on the technology. The government effectively becomes the main driver in preplacing the capital equipment infrastructure. But then we can leverage, not only for this critical national defense application, but for really any application across the spectrum. And that's a key strategic part of this. And I think Bill recited a couple of -- 3 key things with respect to this that BARDA provides and also NIAID, who was part of the evaluation process, at least for us, substantial third-party validation about the utility of this technology. It took us a long time to get where we are today and there was a lot of scrutiny with respect to our technology and our business model. Secondly, this development contract helps more rapidly move us to next generation technology, which completely changes the cost and pharmacoeconomic equation and that's built into this particular study. And finally, and just to remind you what I mentioned before, it sets up the U.S. government as a if not the key potential customer in the relative near term.

We're being told there's nobody currently in the queue, but we did get an e-mail question in that I'll kind of paraphrase. It references the data coming out of the meeting up in Los Angeles, the American Heart Association. So if any of you are following the news, there's been a number of studies that were presented earlier this week in a late-breaking clinical trial session that predominantly looked at bone marrow cells used in acute heart and the takeaway from most of these studies is that bone marrow is safe but has a weak signal towards therapy. So they're seeing slightly positive outcomes, but generally not seeing a tremendously powerful signal here. One of the headlines that received quite a bit of attention was a study from Dr. Hare in Florida, and he effectively looked at autologous cells as compared to allogeneic cells, both derived from bone marrow. And while the headline focused on the safety aspect, that they both appear to be equally safe, they didn't pick up much of the story on the effectiveness, which really didn't seem to have much improvement. Again kind of a -- something that's very dramatic. So as we look at the field, I think that -- and we look at the data that we're seeing in our differentiated approach that really uses this mixed population of cells, we're seeing a very strong signal even in similar indications like acute heart. So again, I think as the field matures, we don't want to kind of lump everything as Cell Therapy as one bucket, but we want to really start to define what types of cells are companies or investigators studying because each of these different approaches will likely have different safety profiles, different mechanisms and different clinical outcomes. And in the studies that we have seen using the mixed cell approach, which is fairly unique to Cytori, we have a very strong signal towards efficacy, as well as a clearer signal in safety. So we have another e-mail coming in. What does the Class I mean to the business? Mark, why don't you take that one?

Thanks for the question. The Japanese commercial approval perhaps represent one of the biggest, most important developments in the Japanese market since our partnership with Olympus many years ago. What's probably not apparent, as it is been going on behind the scenes for well over a year, we've been working on transitioning our K.K. [ph] to a fully operational, fully resourced medical -- independent medical company in Japan. Remember previously we were only able to sell in the Japanese market under a physician's prescription, which is relatively a limited way to sell. And so the transition from selling on prescription to having a fully functional medical business is a nontrivial exercise. We've been working on that for a while. That includes new headcount, logistics center, it includes pharmacovigilance capability, enhanced regulatory and quality certifications and so forth. So this is a massive improvement into our operational capability in Japan. At the same time and in parallel, over the last year, 1.5 years, we've been working with MHLW in a dialogue as to how we can ideally regulate our products in the Japanese market, and we have agreed with them to a 2-pronged strategy. The first is Class I, which is effectively 2 claims [ph], not too dissimilar to 510(k), and they've allowed our key technology platforms to be introduced in the market in this way. And that's the regulatory approvals that Chris just discussed in Japan that led to, from a -- at least from a sales perspective, our best quarter ever. The other aspect of that two-pronged strategy is that for specific commercial applications where we want -- go after a specific indication that we have the Class II and Class III path available and we're working on approval in that as well. So the -- I think the key for us is that, while we don't really get too far ahead of our skis, we think this represents a much heightened ability to sell and to market our technology in Japan, to provide enhanced customer support and we think that this is one of the keys to being able to expand in the translational medicine area that's driving a lot of our sales right now. And this will help drive growth in 2013 and beyond.

We do have an audio question from the line of Stephen Jackman [ph], private investor.

This contract with the government and -- does that -- with the completion of that or as that goes forward, does that give us any additional ability to use any of the approved soft tissue approvals that have been granted in Europe here in the United States? Or do we have to go through a trial process for each one of those?

It's Marc Hedrick. It's a good question. The way that the contract is set up is it presumes that we would develop a specific indication in the U.S. related to burn reconstruction and take that from a pilot clinical trial into a pivotal trial and get claims in the U.S. However, a couple of caveats to that. That burn wound claim is not limited to a terrorist incident. In fact, BARDA wants the technology to be used frequently and broadly in the U.S. so the U.S. is prepared in case the worst-case scenario happens. They don't want to have to get centers up and running in this kind of chaotic time frame around something like this happening, God forbid. So they want the technology used. And this allows it to be used beyond just this very narrow indication. However, the second caveat is BARDA doesn't have to wait until we have a clinical trial or a full regulatory approval to buy the technology for us and put it out because of a potential nuclear disaster and emergency. So they can buy ahead of a potential regulatory approval. There's one other point that I think is relevant. It's related to your question and that is that this validation that comes to this BARDA contract has direct implications in discussions that we're having with governments beyond the U.S. government who have similar concerns about nuclear power plant-related injuries and/or nuclear detonations. And they see BARDA as the global leader and then they are now more interested in establishing a similar relationship with us because of what BARDA has done.

On a different subject, can you comment on the partnerships, the existing partnerships in Japan with Olympus and Green? And if you talked about that in the beginning, I'm sorry I didn't get on at the very beginning of the conference.

It's Chris Calhoun. So yes, as you've mentioned, Cytori has established multiple partnerships over the years, 2 of which -- actually 3 of which are in Japan. We have a partnership with Astellas and that's essentially an option for a therapeutic indication that they want to co-develop around the world. And while that option exercise period's kind of timing out here pretty soon, we're actively working with them towards defining which areas they want to work on and what a larger, more formal strategic partnership looks like. And I think that's going to ultimately end up in a larger, more formal partnership based on our current activity dialogue with them and that's moving forward. Timing on that's probably, I'd say, sometime into Q1 or Q2. So when I talk about some of the late-stage stuff that we're working on, on the partnership side, I'm not specifically talking about Astellas, although they are one of the ones in the queue that we think is positively moving forward and we expect will get completed. The Olympus relationship, as you know, they've undergone a significant amount of change over the last year or 2, and they're refocusing their efforts on kind of their core business, which is really around the medical technology side. And we've been working pretty closely with our counterparts at Olympus to define how we might or might not fit into that longer-term strategy for them and what would be the best outcome for both of us. And while there's nothing that's finalized yet, we're exploring different paths and some paths include working together and there are paths that include that we kind of go our separate ways. And I think there are advantages to both ones. So as soon as we have something more specific there in terms of the final outcome, we're going to share that. But as of right now, it's kind of status quo and we're working together as we always have. But at the same time, we're really exploring what does this relationship look like going forward and how might that change. So nothing definitive to say about that yet except that we're really looking at it together. Green Hospital has been a partner on the banking side in Japan. There's a number of banks that are in the funnel. I think we're expecting one more this quarter. Some of them, Green Hospital is really behind, selling and driving these bank sales and we're supporting them. And they've been a good partner to us and they continue to be a good partner and nothing's really changed on that front. So that's the kind of the overview of the Japanese partnership discussion.

Your next question comes from the line of Lee Graham with RBC Wealth Management.

This is probably to you, Mark Saad. On the partnership, the potential partnership deal, is it -- can I assume, and I know it may be a high assumption, but can I assume that -- or should I assume that it will be enough to fund your operations for the foreseeable future until maybe BARDA kicks in?

Thanks, it's Mark. The way I would describe the transactions, which include multiple at the contract stage is that the value -- the aggregate value of the near term or upfront money of the proposed transactions go well beyond the stated capital needs of the company. So on that basis alone, we feel as if the realistic achievable outcomes go well beyond our capital needs. Over and above that, and I don't know how well understood it is, the BARDA deal, which has been delivered, as we achieved that within Q3, does carry a substantial capital improvement to the company when one looks at the aggregate elements of that contract and then within that, look at the attributed overhead recruitment that goes to the company, the direct cost that we're currently incurring that can be reasonably applied to the contract activities and the profit margin that's negotiated in. And if you look at the aggregate of those things, the pickup potential to the company of an already delivered contract meets or exceeds our aggregate capital needs on its own and then you factor in other things. So we have several things that are completely strategic that have either already been delivered or we believe have a high probability that do cover us there. And then we look elsewhere as in parallel for -- as we need to, are always in parallel discussions on the investor front as always. But we see a lot of strategic potential.

Ladies and gentlemen, we have reached our allotted time for questions. I would now like to turn the floor back over to Mr. Chris Calhoun for any additional or closing comments.

Great. Thanks, Jackie. We want to thank you all, again, for your time and support as stakeholders and shareholders in our organization. For the remainder of the year, we remain committed to executing across the 3 core areas of our business, advancing our cardiovascular pipeline, growing the commercial business and strengthening our balance sheet through strategic partnerships. Thank you very much.

Thank you. This concludes today's conference call. You may now disconnect.