Plus Therapeutics, Inc. (PSTV) Q4 2012 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. Welcome to the Cytori Therapeutics Business Update and 2012 Fourth Quarter and Full Year Results Call. [Operator Instructions] Before we begin, we want to advise you that over the course of the call and the 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. It is now my pleasure to turn the floor over to Chris Calhoun, Cytori's Chief Executive Officer. You may now begin.

Thank you, Paula. Good afternoon, and welcome to our 2012 year-end results and business update conference call. I'm joined today by Dr. Marc Hedrick, our President; Mark Saad, our Chief Financial Officer; and Clyde Shores, our Executive Vice President of Marketing & Sales. Cytori is in a unique position. Our 6,000 patients treated, 3 completed and 2 active company-sponsored clinical trials and more than 40 investigator-led clinical studies is irrefutable evidence our technology is safe, effective and our business model is sound. Operationally, the company is effectively utilizing capital and driving toward profitable revenue growth. In 2013, we're focused on delivering on 4 principal objectives, which when achieved will significantly increase shareholder value. These 4 principles are: to advance our cardiovascular disease pipeline with emphasis on full enrollment in ATHENA; achieve proof of concept in our BARDA contract; drive profitable revenue growth in our commercial business; and meet our operational and financial performance goals. Before we move into the question-and-answer session, I'd like to spend some time reviewing the highlights from the quarter and the year, as well as looking forward into 2013. Management has delivered strong results during the quarter and for the full year in each of our business areas, achieving the goals established for 2012 and setting the foundation for leadership and growth in the Cell Therapy field. Let's start with both our commercial and financial performance. Cytori delivered record total revenues for both the fourth quarter and full year in 2012. Cash revenues, which include cash-generating product and contract revenue, more than doubled to $4.3 million compared to $2.1 million in the fourth quarter of 2011. We achieved our full year revenue target, with $9.1 million in cash revenue, representing a 14% growth over prior year revenues of $8 million. Gross profit was up 126% in the fourth quarter to $2.6 million compared to $1.1 million in the fourth quarter of 2011. Full year gross profit was also up to $4.7 million compared to $4.1 million in the prior year. We delivered on our promise to do more with less and on our directive to move toward profitable sales growth. We achieved record revenue growth, while at the same time, sales and marketing expenses were reduced by 31% over the prior year. And in the fourth quarter, gross profit exceeded sales and marketing costs, providing our first quarterly positive contribution margin. Research and development expenses came in slightly under budget for the year, with the planned increases due to clinical trial activity to $13.6 million compared to $10.9 million in the prior year. Comparably, SG&A expenses were reduced to $25.2 million for the year compared to 20.83 -- $28.3 million in 2011. Turning to the balance sheet. We ended the year with $29.6 million in cash and accounts receivable. In January, the company received an additional $2.8 million as a result of the full exercise of the over-allotment provision from the December financing. While the company is making progress in reducing the quarterly cash operating loss in parallel with growing the commercial business, we still require additional capital to reach breakeven. The company has a detailed capitalization plan that includes multiple elements and is prioritized towards maximizing our access to and use of capital while, at the same time, minimizing technology and/or shareholder dilutions. We continue to pursue potential strategic partnerships but have nothing new to report as of this call. Looking forward, consummating the right strategic partnership is a top priority of both the management and the board. Historically, Cytori has delivered more strategic partnerships than any company in our peer group, and we continue to believe that we have the ability and opportunity to deliver on this. What we don't have is the ability to accurately predict which deal will come through and by when. In order to ensure that the company remains in a strong financial position, the company will continue to evaluate multiple financing options in parallel, and we will announce the consummation of a partnership at such time that our deal terms are met. Looking forward on our commercial business, we are guiding the cash revenue of $15 million in 2013. Continuing our theme of doing more with less, we are intending to achieve this growth while holding SG&A costs flat year-over-year. Additionally, for the full year, we expect to deliver a positive contribution margin from the commercial business. Or said differently, as we are driving toward profitable revenue growth, our sales and marketing costs for the year are budgeted to be less than our annual gross profit. We do budget for a small increase in R&D expense directly related to the BARDA contract, which will be more than offset in contract revenue. Revenue growth will come from a combination of sources but most importantly, will come as a result of the Class I clearance received last year in Japan. As it has historically, the majority of our product revenue will come from Japan in 2013. Due to the cultural and business practice differences, we will likely recognize much of the revenue from Japan upon payment of the accounts receivable rather than upon receipt of the purchase order and shipment of the product. This will essentially cause a 1-quarter lag of recognizing revenue in this market, and our guidance is that revenue will be weighted toward the second half of the year. In addition to the revenue growth in Japan, we anticipate revenue growth in both Europe, as well as other new markets we anticipate opening later this year. The recent Intravase approval, coupled with our previous certifications, will permit on-label sales of our technology for safe intravascular use in tissue ischemia. We have a growing global sales funnel based on this approval. We continue to see strong demand for investigator-led studies of our ADRC-based products. These studies are an important part of our commercial strategy. The first step has been to enable physicians to investigate the use of Cell Therapy towards specific areas of interest within our specialty, and we are seeing demand for this growing. Currently, there are 40 investigator-led clinical studies around the world which are in development, in progress or have already been completed. This includes several multicenter trials. The second step of the strategy is to leverage these investigator pilot studies to fund clinical trials, leading to expanded labeling and reimbursement. In many cases, the funding is coming from external sources, such as hospitals and governments. Last year, our arrangement with BARDA was an example of this. Now we can announce that our early feasibility study on both men and women with urinary incontinence has been expanded to a larger multicenter trial funded by the Japanese government. Nagoya University has received a grant in the amount of JPY 500 million or approximately $5 million to fund the clinical trial, amend the labeling for the syndication and establish reimbursement. We intend to provide more detail on this trial throughout the year. Beyond these 2 studies, many of these investigator-led studies and research work are actively funded by numerous governments around the world. We anticipate this to be a growing aspect to our business strategy. One area in which we have not had success in is in the process of obtaining nice endorsement of our technology for breast reconstruction in the U.K. Our file submitted last year and subsequently revised was returned to us for further data to better substantiate cost-effectiveness. There were 2 important contributing factors in their decision. One was a significant reduction in the fat grafting payment to the NHS hospitals that negatively affected our cost-effectiveness modeling. Overcoming this issue would require an additional comparative trial with prospective cost-effectiveness data. Secondly, since the vast majority of these patients are not reconstructed today, our treatment could represent additional new cost to the NHS. And in the current austerity mode of the NHS, this would not require -- this would require additional quality-of-life data. And while we strongly believe in the effectiveness, patient quality-of-life benefit and ultimate cost-effectiveness of this treatment, we have not budgeted additional trial work in Europe for 2013. We will update you as the situation changes, but we will continue to sell globally for this indication under our existing claims. Additionally, we're pursuing approvals in several new markets, including Australia and Canada, which we believe could come through later this year. While not specifically in our revenue growth plan, we expect this could represent more revenue upside this year. Finally, our Puregraft product line continues to experience record year-over-year and quarterly growth. We expect this will continue into 2013. And we are planning on launching an important line extension targeting a significantly larger market that's planned for this fall. Now let's turn to our cardiovascular pipeline. Our U.S. ATHENA trial for refractory heart failure in patients with irreversible ischemia is now actively screening and enrolling at all 6 U.S. trial sites. As a result, we are currently on track to achieve full enrollment by mid-summer, as previously projected. To-date, the study has demonstrated a healthy enrollment rate, and no safety issues have been reported. Achieving full enrollment in this trial and preparing for the follow-on trial is an important goal for this year. Currently, 9 of the anticipated 45 patients have been treated by the first 2 centers: Minneapolis Heart Institute, which initiated the trial last September; and Texas Heart Institute, which began treating patients in November. Today, with all 6 sites now screening patients and with good visibility in the list of patients currently scheduled for treatment, we have high confidence that the trial is on schedule for full enrollment by mid-summer, as we projected last year. Moving on to the advanced trial. In 2012, we amended our European advanced pivotal trial for acute myocardial infarction. The goals of these trial amendments were to speed enrollment, better assess the apparent trend toward the reduction in adverse ventricular remodeling and better meet the evolving regulatory standards in Europe. 4 sites in 2 countries are approved, and enrollment is proceeding such that we are now at 15 total patients toward our interim analysis of 72 patients and 216-patient total enrollment. This pivotal reimbursement-oriented trial is strategically important to Cytori for several reasons, beyond the fact that the STEMI market represents a potential $7 billion market in Europe alone. Specifically, this trial has provided Cytori an opportunity over the preceding 2 years to identify key opinion leading physicians, working through important regulatory objectives unique to each European country and beginning to train numerous centers throughout the EU in the benefits of Cytori technology for cardiovascular disease. This has been critical in laying the foundation for the current introduction of our technology in Europe based on the recent tissue ischemia claims and Intravase approval. At this point, we have budgeted for enrollment for up to 25 patients in this trial in 2013. Additional funding into the company during the year could be used, in part, to expand enrollment. Our most notable achievement last year was the award of our BARDA contract for up to $106 million in development funding for Cytori Cell Therapy as a treatment for thermal burns combined with radiation injuries. It's an important accomplishment that serves as recognition of the value of our technology and leadership position, validates our investigator-initiated study strategy, 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 first phase or the base period of the contract is $4.7 million and is actively underway. Approximately $400,000 of that was recognized in the fourth quarter of 2012. Importantly, we are already making progress on the 3 specific milestones that trigger the next phase of the contract, which is valued up to $56 million. This next phase includes funding for a pilot U.S. clinical trial in the soft tissue indication. We expect to complete the base period and demonstrate proof of concept in approximately 12 months. Our innovative and novel science, engineering and clinical developments are being translated in patents around the world, including 15 new patents granted in 2012, a 36% increase, bringing our total issued patents to 57 worldwide. We believe that we have strong patent and trade secret protection and have a dominant position related to ADRC Cell Therapy. In closing, I would like to note that significant clinical, regulatory, commercial and corporate accomplishments continue to define our progress. We're committed to building shareholder value throughout 2013 and beyond. Paula, now I'd now like to open and take this opportunity to have any questions for you -- for me and my leadership team.

[Operator Instructions] Your first question comes from the line of Jason Kolbert of Maxim Group.

I'm going to have to revise my numbers up. I hadn't anticipated that you did $4 million in the quarter. Can you help me understand a little bit though, since you're already reporting a lag in Japan, how the numbers annualize? I think you were talking about $15 million in revenues projected for 2013. Could that number actually -- first of all, I guess how much of that number is based on Japan? And if I were to annualize the quarter, I'd actually come up a little bit higher. So help me understand that.

Jason, it's Mark Saad. A couple -- just going to answer that from different points of view. From the finance point of view, we've looked carefully at the overall global commercial strategy and activities and funnel. And we certainly have a high expectation for Japan as a proportion of the total commercial revenue for the year. Specifically, if you were to look at the at least $15 million number, we do expect about $2.5 million to $3 million of that number is likely to be recognized contract revenue under the BARDA contract. As we are performing those activities, we're earning more and more revenue. We see that happening ratably throughout the year. So if you net that out, it gives you a picture of what we think the remaining part is likely to be the at least part for the commercial side. And of that, I would fully expect 60% or so could very well end up being from Japan, thanks to the significance of that approval.

Okay, that makes some sense. And I understand, too, what you're saying in terms of keeping the SG&A flat during the number, and I can imagine how tough that is. Can we talk a little bit now clinically. It seems like the focus is really on the CMI trial in the U.S. Congratulations. Having 6 sites up and running this quick is great. Having 9 patients enrolled as you're going to 45, sounds great. Here we are in March, so we have April, May, June. So I guess the assumption is that among the remaining 6 sites, that you're going to be able to get another 35 patients enrolled. So help me understand kind of how those calculations play out.

Jason, it's Marc. Yes, you're right. So the plan is by -- as Chris said, by the summer to have that study fully enrolled. As Chris also said, we have a couple sites that have been responsible for all the enrollment thus far. The remainder of those sites come on -- this month. That just takes a variable amount of time, depending on the contracting and IRB approvals, training, introduction of the NOGA System and so forth when it's not there. So we're just simply saying that we think those remaining sites come onboard, and they will continue to enroll at the rate that we've seen thus far, which is a little bit over one patient per site per month. So there's some variability there, best case, worst case, but that's sort of medium-case assumption.

And so, Marc, is there, though, a bolus of patients that's -- I understand that at Texas and Minneapolis, there were some patients kind of pre-identified. How strong are these sites in terms of their ability -- are they pre-identified patients ready to go?

Well, the physicians are super enthusiastic about this trial. One reason they're so enthusiastic is you've got patients that have no other clinical options. So you can imagine, as one physician told me the other day, that they're kind of tired of going to clinic and basically having a social visit with patients that they can't do anything about. And so, they're -- these centers are some of the U.S. best cardiovascular centers, and they have a tremendous number of patients they would like to treat and therefore, a long list of patients. And you can imagine the sites, as they anticipate coming onboard this month, have been looking for patients over the last few months. So a trial this size, we just don't anticipate difficulty in having access to patients. We do have to bring them through a relatively complex screening process, and that accounts for some of the variability, but patients with this disease is not a limitation.

And 2 more questions. One is mVO2. So remind me how often mVO2 will be measured. mVO2 is the primary endpoint of this trial. And is it correct in my understanding that since we already have 9 patients that have been treated, you're going to have some mVO2 data 6 months from now?

Well, so again, it's -- this is not a pivotal trial, so there's no primary endpoint. There are safety endpoints and therapeutic endpoints. So here, we do think that mVO2 at 6 months is -- which is one of our efficacy or feasibility endpoints, is a key endpoint for determining efficacy in this trial. So [indiscernible]

There's no such thing, though, like an interim analysis or there's no point at which you can adjust the numbers or the DSMB will have a look based on whether you're hitting your expectations on mVO2. And also can you remind me how is mVO2 measured? Because I found this very compelling when we last talked about it.

Well, the mVO2 is -- it's basically a quantitative, highly advanced physiologic treadmill test. So the patient's oxygen consumption and carbon dioxide production are measured through gas exchange in the lungs. And that's basically a measure of overall cardiovascular fitness. And you can imagine these patients who have failing hearts don't have the ability to keep up and therefore, don't have the ability to process the same amount of oxygen in work that a normal patient does, and this measures that. And the good thing about this and why we like it so much is it's a clinically -- it's a measure that's used to assess fitness in these patients every day, by virtue of being on one of the factors that's used for listing patients on transplant. And these patients are dying. Over time, their heart function continues to deteriorate. So this is something that's actually used to stratify patients and put them on the transplant list. So we think it's the best measure, and it's a thing we really want to hang our hat on as we make -- do our decision-making in going to a pivotal trial.

And any idea of whether that would be unacceptable endpoint in a pivotal trial?

Well, I think we're under active discussions internally and also with FDA. So we think that will be part of the mix, but we really need to wait for the ATHENA data to be able to talk intelligently about what ultimately we decide with respect to endpoints.

The next question comes from Yale Jen of Roth Capital.

Just a quick question, say, in terms of the revenues guidance, as well as some operation and other things in Japan. You -- when you mentioned the $15 million you anticipate for this year, I should say 2013, is that include or exclude the BARDA revenue or that's -- that's the first question.

Yale, it's Mark Saad. Thanks for giving me the chance to clarify that. Yes, I mentioned that we would include -- really cash revenue is what we see -- there has been some historical noncash development revenue. I think it's important to distinguish the cash revenue as both the product revenue carries a very healthy margin, and we actually infer a fairly substantial margin from the BARDA revenues as well. So what I said was that about $2.5 million to $3 million -- and it's based on the amount of contract activities that actually occurred during the course of this year. That's our current schedule accrual this year. It would be attributed to the BARDA contract. And then the remaining part of the $15 million would be attributed to the expected commercial product revenue. So in aggregate, we're saying at least $15 million of the combined.

Okay, great. Thank you for that clarification. The second one is that you mentioned that even the leverage, the infrastructure end up -- going forward, you might have the gross profit exceeds that of the marketing expenditure. And you -- do you anticipate this to be a norm going forward -- or at least most of the time? Was that the expectation?

Yes, we need to look at our full year basis because a lot of our revenues still are effectively capital equipment-weighted between that and just historical norms. And the comment that Chris made about how we expect to recognize a substantial portion of our Japan revenue, it's likely you're going to see the second half of the year carry a greater proportionate contribution of the number than the first half. And your margins do fluctuate, particularly when you have a manufacturing infrastructure that you pay for, irrespective of if you have $1 of revenue or $10 million in revenue. So what you saw in Q4 was actually a very healthy step up in gross margin, I think about 65%, which compares very favorably to the 52% we had in Q4 of 2011. That's largely attributed to the fact that we doubled the revenue base, and so your incremental fixed cost is very low. So naturally you see a very healthy jump in gross margin and we think that would continue as the overall year, over years, continues to trend. So I think when you're thinking -- when we're approaching the overall statement of we expect to be having more gross profit than sales and marketing costs this year, which is a very substantial progression over where we had historically been, I think we need to look at the full year and put the majority of that pick up on the second half, knowing that between the capital equipment reality and just the historical norms and the Japan factor, we think the first half, while we think it should compare well, is likely going to be weighted to the second half, where you really see that coming together.

Okay, great. That's very helpful. And looking more in the housekeeping side as well in terms of the fourth quarter revenue, you say -- I mean, you -- the revenue reported would be a lag of a quarter. So is the thought where a quarter revenue reflect a lot of things happening in the third quarter, and on that note, the first quarter revenue of this year will be something that actually, already happened in the fourth quarter of last year, was that the expectation or the thoughts there?

There will be some of that. Yes, there were some of our revenues in Q4 were actually shipments that occurred late in Q3 that we did not recognize in Q3, so there was that factor. There were also substantial Q4 orders as well. And I think as you go quarter-to-quarter, we would likely expect to see shipments exceed the reported revenue. The total shipments would likely exceed that because we are growing. And at the end of the quarter, we're likely to have shipments go out that will likely defer, from a recognition point of view, in the fourth quarter. So we fully expect you're going to see that incrementally quarter-over-quarter, and that probably grows over time as the business grows.

Okay, great. And the last question here is the clinical ones, which is about the ATHENA study. In terms of inclusion, not exclusion, criteria, was, overall, the patient will be more in much more severe stage, 3, 4 stage patient or the New York classified stage 4 -- 3, 4 stage or a patient a little bit less every year or would that be a little bit more or I'll come around that, that sort of several brackets there?

The inclusion criteria in the study regarding functional class, New York Heart Association, heart failure stage Class II or Class III, and from a CCS anginal functional class, it's II to IV.

Your next question comes from Steve Brozak of WBB Securities.

This question is actually for Marc Hedrick, if you don't mind. Congrats on the CE Mark that you guys received last week for Intravase. I actually want to know what this means for you commercially, clinically, on the approval in 2013 and going forward as far as what you look at it and how it opens up the market for you. And then I've got a question after that.

Steve, let me answer that by first referring back to Chris's opening remarks about our core strategy. And one element of our core strategy has been in this early commercial phase to drive market development and sales by doing these investigator-initiated studies or providing the devices so doctors can treat their biggest clinical problems with Cell Therapy. And that's resulted in sales and continued incremental sales growth. That bucket of investigator-initiated study is based on Intravase approval, and our tissue ischemia claim a few months ago effectively doubles the size of that bucket. What do I mean? Well, we -- while we had the ability to -- under our CE Mark claims, to treat patients with Celution, Celase and so forth, we couldn't do it safely in terms of intravascular delivery. So Intravase and the tissue ischemia claim are critical to allowing doctors to do their own studies or their own therapies and including charging patients for those if they can find the right buckets of reimbursement for patients that have, broadly speaking, tissue ischemia. So the idea is really to open up that universe, physicians and hospitals and types of physicians, to build -- to add on the intravascular use, which is a significant increase in our ability to target groups of patients.

So in addition to 2013, this is basically then a jumping-off point for you for the future as far as that goes for broader clinician applicability. So you would say this should pretty much allow for them to leverage this. Is that an appropriate way of looking at it?

Exactly. So they can leverage our technology now for intravascular delivery, for tissue ischemia, what sorts of things are ischemic diseases, cardiovascular, stroke, renal, peripheral vascular disease. Awful lot of diseases are at their core ischemic diseases.

All right. Let me ask one last question, and then I'll hope back in the queue. On the commercial outline for the rest of sales, can you give us a breakdown on what you would look at in terms of the high points or highlights that you would expect in 2013 and thereafter? Because obviously, that's -- that lend -- the 2 lend hand in hand with each other?

Steve, it's Clyde Shores. So yes, I think, as you've heard already from Chris, really the big things we're going to focus on in 2013 over -- the overlay is positive contribution margin, but it really is leveraging these 3 big changes in market access that we had last year. It's the Japan Class I, so there'll be a big focus on driving that, where we really have our greatest market access of all our countries and have still -- continue to have large contribution at revenue. The second is what Marc just described, which is taking advantage of the expanded claims we have and particularly the Intravase approval. And then the third is really continue geographic expansion. So we expanded into 14 countries last year. And this year will be about really pulling through the sales that we have and the distributor channel that we have in those major countries. And as we -- was mentioned earlier, we've got an extension in our Puregraft line, which Puregraft continues to grow at a tremendous rate around the world, and we'll leverage our distributor network that we are expanding to drive that. So really, I think it's about cost-effective market development on 3 levels. Strategically, it's establishing these clinical relationships, it's generating data via the investigator-initiated studies.

Great. So this pretty much comes down to being the pivotal year for you in terms of going out there and meeting the clinical flesh into the commercial side. Is that about right?[Technical Difficulty]

Steve, can you tell us -- sorry, we got -- somehow got disconnected. Steve, can you tell us where we lost you guys?

Well, that's a good question there. Let's see. I was basically bridging into -- so 2013 is the year that you guys will look to break out on the clinical to commercial transition. Is that pretty much a good wrap-up of what you would be looking to, say, the hallmark for 2013 will be? And I'll jump back in the queue after you answer that.

It is. Well, Steve, I'm not sure where we got cut off, so I apologize for repeating my answer. But the big themes, it's really about cost-effective market development on 3 levels: strategic, economic and patients. Strategically, we're going to keep establishing our clinical relationships, generating data, lead these investigator-initiated studies in Cytori trials and building access, and that's really across a number of levels: it's regulatory approvals, we'll still have additional ones coming in this year; expanding claims, particularly the ones we just got last year with the CE Mark and the Intravase approval; it's generating more data; and it's strengthening our channel. One of the things I'm not sure if you heard this, but in the last year, we expanded into 14 more countries, where we established relationships with distributors, and we'll continue to drive sales through that channel. The second part is economics. It's really about profitable system and consumer revenue that supports our long-term commercial foundation and yielding positive contribution in the near term. And then it's really about getting Cytori therapy to patients, particularly those who have no option, like the chronic ischemia patients. So those are really the themes. And as we said earlier a couple times, Japan Class I approval was significant for us because that's the country where we have the greatest progression in market access, and so we'll put a big emphasis on that.

Your next question comes from Kaey Nakae of Ascendiant Capital.

A couple questions. The first one is can you give us the actual number of Q4 product sales that were shipped but not recognized in the quarter that will carry over into Q1?

Kaey, it's Mark Saad. We're not disclosing that at this time because you do not know for sure what you end up getting specifically in Q1 until you get all that verified in Q1. So it will be a little premature to say to what extent. I will say I would expect a meaningful number in any given quarter that's likely to be carried over into the forward quarter. It's not likely to be a onetime thing. I think it's likely to be an ongoing part of the business, where there's going to be -- we have rigorous, robust revenue recognition standards that are either met or they're not met. And then the carryover sales will be a continuing theme quarter-to-quarter. So I don't think that's a onetime thing that needs to be sort of dialed in, but we certainly will give directional signals on shipments in general quarter-to-quarter in terms of how our outlook changes up, down or sideways relative to what we see at the beginning of the year. So we'll certainly provide you directional signals based on how we see the shipment's going. But I think just given the complexity of rev rec, we don't want to sort of make specific statements on what we think we should recognize in a given quarter before it's done.

Okay. Yes, we can appreciate that but understand what you're saying. As it relates to ATHENA, can you give us a sense qualitatively? Once you've identified an appropriate candidate to be enrolled, logistically, how long does it take to then go ahead and schedule procedure and have that occur so that the patient officially is in the study?

I'd say it takes a few weeks.

With respect to the CE Mark, following the latest approval for the Intravase component, where do you now stand in terms of your effort to get a more specific CE Mark for the no-option chronic myocardial ischemia patients?

We're in active dialogue with our notified body. We -- the ATHENA data should help resolve that situation with our notified body, and that's our hope. However, from a commercial perspective, we think we have 90% of what we need to accomplish our commercial goals through the layering of regulatory approval, starting with our Celution 800, our Celase approval, our tissue ischemia claims and our recent Intravase approval. So we think through a little bit more torturous path, we got exactly what we wanted, so we could get to that commercial point that we wanted to be. But we do think it's important to expand those claims, and we think that ATHENA is the most likely way to do that.

Okay. And then a final question. I know this is given in your 2013 revenue guidance, but if you were to get approval in Australia or Canada, what types of applications do you see driving revenue in those countries? Is it a continuation of having investigator-led study being conducted in those countries or perhaps other commercial applications?

It's Clyde. I think it's a continuation of what we've talked about. Australia is very similar, and Canada will be along the same route, where we'll drive investigator-led studies, and we'll get us to court and use the approvals that we've got. Certainly, no-option chronic ischemia is an indication that's important in every country with the unmet need there, that's probably at the top of the list.

Your next question comes from Marco Rodriguez of Stonegate Securities.

This is Dan Trang sitting in for Marco Rodriguez. Kind of wanted to see if you could provide some color on the next phase of the BARDA contract, just on those things behind that.

So we're -- as Chris indicated from the -- his opening comments that we are fully engaged, I assure you, in trying to meet these milestones at BARDA as soon as possible. There are basically 3 milestones that relate to device development, to showing that we can get viable cells from burn patients, and then developing a preclinical model in which to validate, frankly, what we've already done in the clinical situation. We feel good about all the milestones. There are some risks in terms of model development in the pigs that we're using, but we think we can solve those. So the milestone value, as Chris said, about $56 million, if we can hit these first 3 triggers that I've discussed, are really a focus of our effort right now. And that's a -- and to that perspective, that puts Cytori within 12 months of really a pretty transformational corporate event with the U.S. government. So it has enormous value to us, and we're fully putting our resources into achieving those milestones as quickly as we can.

The next question is a follow-up from Jason Kolbert of Maxim Group.

That was my question that was BARDA, but I'd like to step back and talk a little bit about ADVANCE. So my understanding from the press release is that you're going to continue to enroll patients in ADVANCE with an expectation of 25 patients in 2013. But help me understand how you reach an interim analysis at 72 patients. And what I hear you saying is that the priority right now is to move ATHENA forward in CMI, and while ADVANCE continues to build infrastructure throughout Europe and kind of gradually pave the way. But I'm just a little bit confused by how we move from 15 patients enrolled to getting up another 25, and then how we ultimately end up at 72.

Thanks, Jason. So I mean, I think it's good to circle back with our top corporate priorities because it just helps keep ADVANCE in perspective. The top corporate priorities, as Chris said, are getting ATHENA enrolled as quickly as we can, growing revenue and, as I just mentioned, plowing through those BARDA milestones. That's the key. ADVANCE is a secondary priority. But really, right now relates to that first goal, I think the first goal I just mentioned, but it's really profitable growth. It's a strategic importance in terms of linking to our Intravase approval and helping to drive incremental revenue in 2013. So just keep that in mind. However, from a budgeting perspective, we can't do everything we want to do all at once. So we made an internal decision that we will take our clinical resources, make sure ADVANCE is -- excuse me, ATHENA is fully funded. We can authorize about 25 patients under our current budget projections in ADVANCE over the year. And then at such time when our balance sheet improves, it's - the apparatus is all in place to significantly increase ADVANCE enrollment and then drive to that 72 patients, which is the first goal. And then beyond that through the '16 [ph], if we're statistical -- its statistical significance in the 72, that's important for us. But then, we were -- part of the goal of the study is to get reimbursement for the syndication. And those reimbursement-related time points are farther out.

Marc, I really appreciate that, and I think shareholders will too. What I hear you saying is that you're prioritizing resources in sequence with how you expect the data to come.

The next question comes from David Musket of ProMed.

I was just looking for a little clarity about whether you are going to be supporting any of the EU sites with the registry work. I would guess that some of these sites, even without the specific no-option approval, are raring to go with some of these types of patients.

David, a plane flew over in the middle of your question. Could you just summarize it real quick again for me?

Sure, I'd be happy to. So one of the things that we had long-awaited was the no-option approval and granting the fact that you've got 90% of the way there with the Intravase. The thought was that you would probably be supporting the -- this type of claims with some registry work, at least at some of the top EU centers, whether that be Okyanos or some of the other advanced sites that are already set up and ready to go. Can you just fill us in on what type of registry support we should expect over the next year?

Sure. So -- and we have been, as you said, anticipating the claims for tissue ischemia and also for Intravase approval for a while. While a relatively small number of advanced sites are approved, we've been working with a much larger group of investigators over the last couple years. And part of the feedback we've been getting from them is that they're -- they have, just like in the U.S., a list of patients that they really can't do anything for, and they think this is the best option for them. So they're -- so on one hand, we think there's going to be some sales related to that and some IRB-related studies for those patients. In terms of a potential registry or registries in Europe, we're in active discussions with clinicians about what those look like, either whether -- and what specific types of cardiovascular disease or ischemic disease we might treat. So sales are going to be driven next year by -- as a result of those discussions. And we think we're laying the groundwork for on label approval and ultimately, reimbursement for that as we refine our overall clinical strategy for the syndication over time.

And just a follow-up on the specific claim for no-option, how should we think about that? Is that still active but running in a somewhat delayed or lower priority path at this point?

No. I'll reiterate, David, what I -- I've probably said it very clearly before, but we think with what we have now, we basically have 90% of what we wanted with that chronic myocardial ischemia claim, which is to begin to drive the utilization of the technology in CE Mark-recognizing countries. We're continuing to interact with our notified body on things like Intravase, which we just got approved, and continuing claims expansion and having the appropriate clinical data for that. So we will continue to expand clinical -- our claims in Europe over the next year. And a focus of that is for chronic myocardial ischemia. And when we think -- when we and our notified body believe we have the appropriate data to do that, we think we'll get it.

This concludes the allotted time for today's question-and-answer session. Management will be happy to have investors follow up with them tomorrow and next week. Now we'd like to turn the floor back over to Mr. Chris Calhoun for any additional or closing remarks.

For more than a decade, there's been much discussion around the hope and promise of regenerative medicine and Cell Therapy. Cytori is uniquely delivering on that promise today, improving the lives of thousands of patients around the world. With validation and support of key clinical thought leaders, hospitals and governments, Cytori's technology is at the epicenter of innovating this emerging new field of medicine. As a company, we're expanding our platform and our markets, more efficiently utilizing capital and driving toward profitable revenue growth and ultimately, toward highly profitable and high-growth company. And we're focused on delivering on our 4 principal objectives in 2013, which we believe will drive momentum in increasing shareholder value in both the near term and the long term. Thank you for your interest and support for our company and in our mission.

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