Plus Therapeutics, Inc. (PSTV) Q1 2017 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. Welcome to the Cytori Therapeutics’ First Quarter 2017 Earnings Results Call. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] Before we begin, we want to advise you that over the course of the call and question-and-answer session, forward-looking statements will be made regarding events, trends, business prospects and financial performance, which may affect Cytori’s future operating results and financial position. All such statements are subject to risks and uncertainties, including the risks and uncertainties described under the Risk Factors section, included in Cytori’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission from time-to-time. Cytori advises you to review these risk factors in considering such statements. Cytori assumes no responsibility to update or revise any forward-looking statements to reflect events, trends or circumstances after the date they are made. It is now my pleasure to turn the floor over to, Dr. Marc Hedrick, Cytori’s President and Chief Executive Officer. Sir, you may begin.

Good afternoon, everyone and thank you, Ian for that introduction. Welcome to our first quarter 2016 earnings call. As Ian said, my name is Marc Hedrick, President and CEO of Cytori and joining me on today's call is our Chief Financial Officer, Mr. Tiago Girão; and also on the phone is our VP and General Manager of Cell Therapy Business, Mr. John Harris. Here in brief is the agenda for today's call. First, I'll discuss our overall business clinical and regulatory progress, including key updates on our Cytori's Cell Therapy technology and our nanomedicine technology businesses. Then I'll turn it over to John will is going to discuss our commercial related activities and performance and then Tiago will update on financial performance and after that we'll have time for Q&A, and then thereafter I'll update on forthcoming milestones. So, to start off, let's talk about Cytori Cell Therapy and specifically our Habeo product continue to treat patients with scleroderma. In June 2016, we randomize the 88 patient in the U.S. STAR trial for scleroderma the hand. STAR is a randomized double-blind placebo-controlled trial with a cross over arm to treatment for placebo recipients after 48 weeks. The primary study endpoint for the trial is a Cochin Hand Function Score measured at 24 and 48 weeks after treatment. We have agreement on the statistical analysis plan with the FDA. In one note about that plan, is that the Hartford procedure will be used as a multiplicity adjustment when reviewing the results from ANCOVA for the Cochin score at 24 and 48 weeks. This approach may enable us to obtain approval on potentially either the 24 or 48-week time point without related alpha spent. The key secondary endpoints are Raynaud's condition score at 48 weeks and the scleroderma health assessment questionnaire or the SHAQ at 48 weeks. There are number of other exploratory endpoints that we are also assessing as part of this trial. In terms of the timeline, the full 48-week data lock statistical analysis and readout in STAR is on track and expected by early Q3 2017. The regulatory pass in the U.S. for this product will be as a PMA premarket approval as a Class III device. One note I'd like to make as we been asked a number of times about various alternative regulatory pathways for this product. A regulatory path we think potentially may be available to us for Habeo is the FDA's new expedited access program or EAP. The EAP eligibility extends to devices that treat life-threatening or debilitating diseases that currently have no effective alternative treatments. In its guidance documents for the program, the FDA notes that it may accept less certainty regarding the benefit to risk profile of EAP devices subject to a PMA at the time a premarket approval and a proven EAP device as long as the data still supports a reasonable assurance of safety and efficacy. The first step will be to apply for and obtain EAP designation from the FDA which is currently under consideration here at Cytori. If we choose to pursue this pathway and are successful, despite eligibility for early approval as compared to the standard PMA approval process, we would be subject to post market study requirement until ultimately the data from the trial will ultimately drive our decision-making process regarding the appropriate path. The commercial preparatory work for approval of this product is 100% on schedule and actually John will discuss this in greater detail later in the call. As I mentioned on the previous call, our clinical strategy to seek approval for secondary Raynaud's will be finalized based on the STAR data readout later in the year. In Europe, there is an ongoing trial called the SCLERADEC II trial which is an investigator initiated trial in France and that trials is enrolling. This trial will provide supplementary data to the STAR data for European or EMEA filing for our - and also support our managed access program. The investigator-initiated trial reported they have passed the halfway point of enrollment in March and have the goal of completing enrollment with the total of 35 and perhaps up to 40 subjects by year-end. Square Deck 2 follows an essentially identical treatment approach to our U.S. STAR trial however the primary endpoint is improvement in hand function is measured at six months of follow-up compared to the 24 and 48-week follow-up time points in STAR. Additionally, this trial has a crossover arm that includes the use of cryopreserved version of Habeo which actually has obtained orphan drug status here in the US. Just a quick note about the utility and progress for Habeo in Japan. The clinical and regulatory planning for bringing that product potentially to Japan is ongoing in conjunction with our Japanese clinical advisory board and PMDA and will update as we have the important things to say around - for that in the future. Now let me switch over to our BARDA program for thermal radiation injury. The RELIEF trial is a safety and feasibility trial of a single intravenous administration of the DCCT-10 cellular therapeutic rich in adipose derived regenerative cells for the treatment of deep partial thickness and full thickness thermal wounds. We received FDA IDE trial approval for the relief trial in April 2017 the primary objective of the trial is to evaluate preliminary safety and feasibility of the DCCT-10 via intravenous delivery in the treatment of deep partial and full thickness thermal wounds. Preclinical studies previously completed indicate that intravenous delivery of the cell therapy is as effective as topical administration, but IV administration has the benefits of more seamless integration in the current thermal burn treatment protocols utilized in hospitals and also truncates overall time. What's the trial design it's actually perspective open label parallel group usual care controlled multicenter randomized safety and feasibility study targeting thermal burns. So, the randomization is two to one active to usual care alone. Subject in the trial will have at least one partial deep partial thickness or full thickness burn wound of greater or equal to 250 cm that is to be autographed with a split thickness skin graft nested either two or three torn. Subjects randomized to usual care will not undergo the tissue harvest procedure up to 30 subjects will be enrolled each subject will contribute up to three qualified wound areas for the analysis. Randomization will be stratified to ensure that the numbers of wounds treated with 2 to 1 in 3 to 1 grafting a balance across the treatment groups. We plan to include up to 10 burn centers in the U.S. and as I mentioned the primary endpoints are safety and feasibility. Key secondary endpoints however include 1% epithelialization of the graft at day five to four weeks post grafting which will be assessed by surgeon visual evaluation and blinded independent review of standardized photographs. 2% taken of the graft at day five to four weeks post grafting and 3% of the group with complete wound healing at weeks two through week 12 post grafting. Regarding our BARDA contract we are currently operating under a contract extension with BARDA that expires at the end of June and negotiations with BARDA are ongoing for the clinical contract option that will provide the funds to support the relief trial. Now regarding investigator initiated trials, in Japan are urinary incontinence trial called ADRESU is a potential approval trial for our cellular therapeutics in male post-prostatectomy patients with SUI or stress urinary incontinence its primarily funded by the Japanese government MHLW or AMED and it continues to roll at all four sites. The timeline the plan is to complete enrollment in 2017 with the four active sites and we’re well over halfway there. The completed study report is anticipated in 2018 and the regulatory path similar to the U.S. we anticipate that this will be approved as a class III medical device. Earlier this week in terms of a separate investigator initiated trial, we issued a press release regarding a publicly available abstract reporting 12-month follow-up in this investigator initiated study in patients with refractory erectile dysfunction. The trial was conducted by investigators at Odense University Hospital in Denmark and the data will be presented at the American Urological Association meeting starting tomorrow in Boston. The abstract is now available online and a link can be found in that press release which is available on our website. Based on the promising data found in the trial the Danish investigators are planning a larger Phase 2 follow-on trial at the same center. We plan to provide our shareholders an update when we are made aware of that plan in more detail. As has been our practice in the past, we selectively support this and other high-quality investigator initiated studies. Now with respect to our nanomedicine platform as you recall in February we closed the acquisition of substantially all the assets of Texas-based Azaya Therapeutics. This acquisition bolstered our late an intermediate stage pipeline added a new development platform to Cytori and we obtained a fully built out and scalable pharmaceutical manufacturing plant for nanoparticle pharmaceuticals. The lead pharmacologic asset acquired through that acquisition is called ATI-0918 or just 0918 which is a nanoparticle of liposomal doxorubicin. We believe that data from a 60-patient completed European study of 0918 has met the statistical criteria for bioequivalence to the current reference listed drug in Europe. The global market for this drug is large it’s growing and it's chronically supply constraint what are the key milestones for this program that we can discuss on the call today. The key milestones include completing the facility validation in Texas, ramping up the in-house manufacturing activities, manufacturing those registration lots, and preparing for EMA submission. Also, we're actively seeking commercial partners to go-to-market with this product in Europe upon approval. However, there's an opportunity outside Europe and in the U.S. FDA discussions are planned as we complete rolling the FDA regulatory documentation to Cytori from Azaya and that will be going on relatively shortly. In the rest of the world an assessment to commercial and regulatory opportunities are also ongoing and we’ll report more when we have more to say about that. And so now I am going to turn the call over to John Harris who will update on commercial performance and also on the on the marketing work that's been going on in the background. John?

Thanks Mark it's a pleasure to be here today. We have two primary goals for the commercial team in 2017 one is preparatory activities for two product launches that include Habeo cell therapy which we anticipate FDA approval in late 2018, our intention is to commercialize this product ourselves in the U.S. and seek partnerships elsewhere. And two, the ATI-0918 and as Mark mentioned the EU approval has anticipated in 2019 and will be seeking a commercial partnership there. The other area of emphasis is continued focus on sales growth and double-digit utilization growth led primarily by Japan. I will address these two items in more detail later in my remarks, but first allow me to highlight our results for the first quarter. 2017 Q1 product revenues were $591,000, $700,000 less than 2016. The primary reason is that capital equipment sales were behind our internal target as two planned installations were delayed in Q1. I will address this later in the call however, in similar utilization was on target relative to our growth objectives for the quarter. Notably Japan's Q1 consumable utilization was up 21% year-on-year. We anticipate this trend to continue in 2017 while revenue is our key metric in consumable utilization and maintenance of ASP's or average selling prices are important metrics that we track as a leverage our installed base of systems and the resulting contribution margin is important to our overall operation. We anticipate achieving our full year product revenue growth mostly from Japan with continued double-digit consumable utilization growth. Next, I will provide some more color regarding our commercial activities in Japan, Europe and ROW for both Cytori cell therapy and Cytori Nanomedicine. First Cytori cell therapy, we've elected to focus our current commercial efforts in Japan where the market and regulatory dynamics are most favorable and the immediate growth opportunity is the greatest. In Japan, our annual forecasted product mix is approximately 50% capital equipment and 50% consumables this is up from three years ago when it was 90% capital equipment and 10% consumables. Our existing installed base of capital equipment grew 17% last year most of that growth came from new installation at existing customers who expanded the use of our technology in multiple locations. For example, our largest customer has installed solution systems in nine of its 50 nationwide location. As we continue to cultivate new customers but there is opportunity for growth with existing customers the challenge with a product mix that includes large capital equipment is that sales can be choppy from quarter-to-quarter. This is further complicated with novel technology without reimbursement and on small numbers despite the anticipated quarter-to-quarter choppiness we anticipate meeting or exceeding our internal targets in 2017. Shifting to consumables for Japan as we indicated previously that the utilization is the important metric that we track because it's the best indicator of customer satisfaction, a procedural efficacy and also confirmatory of our business model. In Japan in the first quarter alone we experienced 21% year-on-year consumable utilization growth and since 2014 we've experienced 67% compounded annual growth rate in consumable utilization. We are on track this year to achieve our all-time highs consumable utilization forecast and at least double-digit consumable utilization growth. Outside of Japan and in parallel to positioning ourselves for the eventual commercial launch of Habeo, we are pursuing opportunistic regional distribution, supporting direct customers that have made investments in our technology such as Okyanos and facilitating an investigator initiated studies such as the work being done in Denmark with erectile dysfunction. Our managed access program in Europe or MAP has a goal of helping us educate the market and providing early access to our technology. We are in the process of making important changes to the program so it can expand when STAR data is available. For the balance of the year, Cytori will attend key scleroderma meeting such as the Annual European Congress of Rheumatology in Madrid next month, and in July the Scleroderma Foundation National Patient Education Conference that to be held in Phoenix, and then later in the year in November we will attend an American College of Rheumatology's Annual Meeting in San Diego. Now I want to shift gears and give you an update on Cytori nano-medicine. As Mark indicated, our lead nano-medicine drug is ATI0918 a complex generic nanoparticle doxorubicin which data suggests that is bioequivalent to EU reference drug. Current European market size for liposomal doxorubicin is in excess of $300 million and anticipated to be about $450 million by 2024, currently growing at 5.7% CAGR. Currently there are no generics on the market for the reference drug in Europe. Our plan is to complete in-house manufacturing activities this year before going on to execute sterile fill and stability testing such that we are able to file for EU approval in mid-2018 with earliest potential approval in 2019. Our go-to-market strategy in Europe for ATI0918 will be to work together with a partner and this outreach has already begun. Globally the market for this product has been constrained and we anticipate this trend to continue. Third-party forecast for the global market is approximately $1.4 billion by 2024. Opportunities for ATI0918 in the U.S., Japan and China are also actively being pursued. Our other nano-medicine drug ATI-1123 is a novel liposomal formulation of docetaxel. With preliminary clinical results suggesting superiority to docetaxel, we are evaluating the market potential and engaging in targeted partner outreach and anticipate having more detail regarding our plan later this year. As we continue to prepare for the U.S. market launch of Habeo, I will now provide some select detail surrounding these activities and our overall strategy noting that are EU strategy will mirror the U.S. but we will seek a partner there as opposed to a direct business model. Pending STAR data Cytori intends to file for an FDA PMA approval as soon as possible. Our technology will be regulated as a Class III medical device. This would position Habeo cell therapy as one of the first FDA approved cell therapy and offer healthcare providers with an on-label treatment option to potentially improve hand function in patients with scleroderma. The EU pilot trial data thus far have shown safety, feasibility and up to three years of clinical benefit and published and presented data. As previously mentioned, we feel the market in the U.S. is comprised of approximately 50,000 patient suffering from scleroderma and over 90% of those patients have hand involvement. There is nothing approved in the U.S. and first and second line therapies to treat scleroderma related hand dysfunction are not effective or well-tolerated. Third line therapies used off label are very expensive despite being poorly tolerated and provide only limited symptomatic relief. Our market estimations indicate that there is an opportunity to achieve peak annual worldwide sales of $600 million with this product. Our experience for the STAR trial has confirmed the viability of the procedure in various healthcare facility settings. Habeo is uniquely focused on treating hand dysfunction a major source of disability and socioeconomic impact for these patients. Pending positive STAR trial data, we anticipate potential approval approximately a year after PMA filing. Our overarching commercial strategy is to take Habeo direct in the U.S. and look for partnerships outside of the U.S. Market research and validation activities are largely completed. Some of the key completed activities include in-depth interviews with a number of U.S. and EU payers, hospital administrators, physicians, KOLs and patient to analyze and understand the scleroderma patient population, current treatments, unmet needs and the patient journey and of course the reimbursement landscape and potential pathways. We have further tested with these key stakeholders the Habeo target product profile annual pricing model and market potential product adoption, reimbursement coating strategy and the clinical evidence portfolio in support of coverage. Habeo cell therapy pricing is anticipated to be similar of those biologic therapies when launched that were targeted to hand dysfunction in rheumatic or inflammatory disease. Working with the STAR principal investigators and specialty societies for plastic surgery rheumatology and hand surgery Cytori has already submitted an application to the AMA for category three CPT codes that would cover the comprehensive procedure. We anticipate these category three CPT codes may be published in January of 2018 following up CPT coding and activities are also plan post data. The activities that we have planned for Q3 and Q4 include health economics evaluation a burden of illness study, payer budget impact, cost-effectiveness analyses with leading experts, and expansion of our existing relationship with patient and rare disease advocates on national, regional and local levels. Based on our experience in treating over 100 patients in our pilot and pivotal trials rapid enrollment in our U.S. trial and understanding of the referral pattern, market evaluation results in coupled with our long-standing commercial experience in Japan with this technology. Our U.S. go-to-market strategy is as follows we anticipate deploying a highly focused specialty sales force in case specialist concentrated in high population centers of the U.S. with immediate coverage of the approximately 40 scleroderma centers of excellence. Note that nearly half of these centers have already successfully used our technology, understand and have established the internal referral process and most importantly have already implemented the simple bedside procedure as a part of the STAR trial. These STAR trial sites will serve as our beachhead for commercialization activities surrounding our planned launch. Our plan is to place a solution system at each one of these centers and provide procedural support to the facility. We will be able to broaden our outreach to the remaining centers of excellence in the U.S. and ultimately the EU. This center of excellence approach which is a manageable number will position Cytori to address the needs of the majority of the market and then we will extend our outreach to the rest of the rheumatology community. In conclusion, our focus is on preparing for two key product launches one, Habeo with peak worldwide annual revenue estimated to be $600 million we’re on track with the key commercial preparation activities. And two, ATI-0918 via partner in Europe the current annual market for this product is in excess of $300 million and forecasted to grow partner outreach is ongoing in 2017. And currently we will continue to focus commercial efforts in Japan to both increase the number of active system and drive continued utilization growth. Now let me hand off to a Tiago. Tiago?

Thank you, John and good afternoon, everyone. Our primary focus is on the development of our late stage clinical pipeline and related commercial preparatory activities which should drive shareholder value in parallel we seek to widely manage our resources and improve our operating performance despite the recent acquisition of Azaya asset we reduced our operating cash burn to $4.8 million in Q1 2017 from $5.1 in Q1 2016. The reduction in cash burn was mostly related to working capital improvement. Net losses when adjusted for non-cash charge of $1.7 million associated with an IP R&D charge far off the Azaya asset acquisition was $5.9 million in Q1 or $0.26 per share as compared to $5.3 million or $0.41 per share in Q1 2016. For research and development expenses in Q1 our R&D expenses excluding share-based compensation were $3.2 million versus a $4 million expand in Q1 2016. The decrease R&D spend is related to completion of the enrollment in the Phase 3 STAR clinical trial offset by our initial investment into the ATI-0918 or nanoparticle doxorubicin. As a percentage of overall expense R&D spend for Q1 was 53% of total operating expense when excluding share-based compensation this is in line with our plans and supports our focus in late stage clinical programs. Further to clarify following the accounting literature we accounted for a non-cash charge of $1.7 million related to in-process R&D intangibles acquired as part of the Azaya acquisition. Thus, such intangibles would otherwise have been capitalize on our balance sheet if we had determined the transaction was to be accounted for as a business combination and to be clear this is a one-time non-cash R&D charge. Now on our sales and marketing our sales and marketing activities and related expenses slightly decrease in Q1 2017 to $0.9 million as compared to $1 million in Q1 2016. The decrease is mostly related to lower revenue performance in Japan offset by ongoing precommercial activities mostly in the U.S. as outlined by John earlier on this call. G&A expense excluding share-based compensation was $2 million this quarter as compared to $2.2 million in Q1 2016. The continuing tightening of G&A expenses was related principally to reduction in salaries and benefits, professional services and discretionary spent. Now with respect to our revenues Q1 total revenues were $1.6 million as compared to $2.9 million in Q1 2016. Product revenues were $0.6 million in Q1 compared to $1.3 million in Q1 a year ago. Japan revenues continued to show substantial growth in consumable utilization up over 20% from Q1, 2016. However, this growth was offset by deferred capital equipment sales placement and that significantly impacted the results for the quarter which was earlier explained by John. Government contract revenues relate to our activity supported by BARDA and resulted in $1 million in Q1 of 2017 compared to $1.6 meeting in Q1 2016. The decrease is attributable to the completion of the release IDE activities as we anticipate transition to the clinical phase of this contract. As mentioned earlier by Mark the FDA approved the IDE for the relief trial earlier in April and we are negotiating with BARDA our next contract option execution which we expect to be completed soon. Note that the current contract which would originally expire last month has been extended until the end of June. While we work through these negotiations. Turning to the balance sheet at March 31 we had $6.3 million of cash approximately $50 million pro forma when including the recent proceeds of the financing in April 2017. In spite, a $15.9 million of principal amount of debt the equity facility we recently put in place with Lincoln Park Capital which allow us to draw up to $20 million has now been made effective. And this coupled with our ATM facility and partnership discussions ongoing are part of our strategy to increase our optionality and raise funds in a less dilutive way. We plan to balance ongoing capital requirements through a number of targeted activities that include revenue growth, business development opportunities, accessing the capital markets, operational efficiency measures and working capital management. On 2017 financial guidance, we are reiterating our operating cash burn guidance as a range from $26 million to $29 million for the year. A sizable number of planned activities and related expenses as part of our anticipated 2017 operating burn will be triggered by a positive STAR data readout in early Q3 2017. Further revenues for the balance of 2017 will result from a product mix -- mix of contract and product revenues. We have elected to not give revenue guidance in 2017 of any negotiations and final contract with BARDA with finding of their relief trial. We continue to expect product revenues to reflect at least a double-digit growth of consumables in Japan. And what that I'll turn over the call back to Dr. Hedrick.

Great, John and thank you. Ian do we have any questions queued up.

The floor is now open for questions. [Operator Instructions] Thank you. Our first question is coming from Andrew D'Silva from B Riley and Company.

Good afternoon, everyone. Thanks for taking my questions. I just got a few here you answer most of them on the call. As far as just gross margins go for your product sales what should we figure as an appropriate gross margin level, it was negative with amortization this period obviously revenues were for less than you think anybody anticipated. Where would you expect it to shake out for the full year based on your guidance?

Thanks Andy for the call. This is Tiago here. I expect gross profits to be in the 50% plus, 50% to 70% range. As you noted, we did have a very small revenue base this quarter that significantly impacts our capacity in the idle capacity of the manufacturing. So, because COGS is overloaded and as you mention it does include an amortization of intangibles in the tune of $300,000 that caused the margin to be negative. But for the full year we expect a 50% plus gross profit. Most of that comes from Japan, which has a very healthy gross profit history.

Okay. And then related to product revenue consumables more specifically, is there any sort of seasonality there that we should be made aware of? I think just back of the envelope looking at the fourth quarter product consumable revenue versus the first quarter result, pretty steep deep decline, is there a way that we should think about that?

Andrew it’s Marc, I would say it is variable -- fourth quarter often times is pretty strong Q3 because of the summer can be weak quarters one and two are a little bit up and down. So that's some guidance that's in precise, but I think it's so related to capital equipment and that kind of come in ways and it’s hard to predict.

Okay, fair enough. And then moving over to the U.S. payroll trial for Habeo, when you start thinking about potential hick-ups or risks related to positive data, is the biggest one just the potential for placebo effect that didn't exist in the European pilot trial or is there something else that maybe keeps you awake at night related that we should be thinking about as potential overhangs?

I think we were blinded to the outcome. We don't know what the data will show. We think we’re sufficiently is not overpowered to shown an effect even in fact half the size seen in the pilot trial. There could be some placebo effect although other scleroderma trials have really not shown too much of a placebo effect. So, I think it could be naïve that there won't be any but we think we're sufficiently powered to show that. Actually, the trial was originally powered for 80 patients we actually over-enrolled by 10%. And we feel like we’re going to lose very few patients as part of the trial. So, I think having said that, we always worry about the outcome of the data but I think we're very optimistic about the result. We think that there a lot of patients out there that want this are routing for it. Doctors are rooting for it. We know shareholders are rooting for it. So, I think we are just -- we’re planning for success and as John mentioned, we are absolutely 100% on track with our commercial plan, and we're going to be ready to execute once we have data.

Okay. Great to here that. And then that $1.7 million non-cash R&D charges that you recognized in the first quarter Tiago, was that the same working capital approximately $2 million hit that we were supposed to be expecting or are those two separate things?

They are separate completely different things Andy. The $1.7 million charge relates to an allocation of value that we paid as consideration to Azaya for evaluation of intangibles. So that's what the 1.7 relates to. Think about it, if we were doing a business combination, we would capitalize that the charge into the balance sheet that will be evaluated for impairment every year. But because this is still in process in R&D phase, we have following the accounting guidance for asset acquisitions, we had to charge for the P&L. With respect to the assumed obligations or the liabilities that you and I discussed and that we talk about it on our previous call in I believe at the end of March that's $2 million is actually the number it's 1.8 to be precise and is mostly related to assets that Azaya prior to our acquisition had acquired manufacturing equipment and other type of asset that we assume the liabilities because we wanted the facility that we acquired and manufacturing facility that we acquired.

So those -- that $2 million in working capital changes that's already -- was that effect of last quarter?

I'm sorry, I do not understand that…

Were all the cash flow from operations impacts related to that recognize last quarter?

The majority of that was I believe we paid $1.5 million off the $1.8 million, it was paid out in Q1.

Okay. Great and just last couple of questions more related to your financing efforts. What’s the current principal pay down on the debt at this point and then just based on where you are right now, where do you feel is an appropriate time for us to start thinking about may be a follow-on offering to the one that you just did in April?

Sure, I'm going to address the first amortization of the debt and I'll give it back to Marc with respect to plans and you probably heard from my remarks. But with respect to the amortization of debt, it's a flat $590,000 a month that we are bringing that principle down and with that I'll turn it over to Marc to address the cash runway and what to expect.

Thank you, Tiago. Andy, I know that's a supported question. So, part of the reason we put to the capital markets recently as they gave us more flexibility and gave us more insurance as we tried to move forward as fast as possible, within the nanoparticle asset and get that drug filed with EMEA as soon as possible. Tiago answered I think the question very generally in his comments but we do have the current equity facilities they give us buffer and Tiago also mentioned that a lot of the spend that we anticipate related to commercial efforts come after data and we do have some legal room in terms of the timing with respect to that. As I mentioned on the last call, we've been very active on the business development front in a couple of tracks and we continue to be very active. There has been a lot of time on that and I think that's something that we're hoping will pay off in the interim that will forgo need to go back to the capital markets in a significant way. We have a lot of potential milestones coming up, which could be great catalysts for a number of positive things for so we're just focusing on executing those.

All right, well thank you very much for taking my call and I'll hop back in queue.

Great.

And our next question is from the line of Kenneth Grutman from Bio High Tech.

Yes, I'm just wondering if you guys have quantified the amount of market cap that's has been eroded over the past decade in your company and if you have any -- what your immediate plans are to improve the stock price. And I am seeing now that it's again under a dollar looks like it's getting set up for a reverse split again potentially and another 50% haircut if you would inline and finally is anyone going to resign over?

Well, I can answer some of your questions, thank you. In terms of how do we create shareholder value, I think that's right upfront in our press release and very clear. In the biotech space the way to create value is clinical data and so this company is now at a place where it's ever been before, where it's been it's to a point where we have a fully enrolled potential approval trial in the U.S. for a relatively large unmet medical need in the U.S. And so, I think that data comes forward if it looks good I think that will be a positive outcome for the company and I think will change the environment value for shareholders.

I heard you say though that or it sounded like all the reagent sales were down across the Board and I thought we had hired new guys eyes from maybe working in Asia or something like that, it sound like he was very good. I'm surprised to hear that the reagents were down this quarter why?

I’m not sure what you're talking about consumable utilization is up in Japan, John you want to comment on consumable utilization there?

Yes, I'm happy to Marc and thanks for the question. As mentioned in the call consumable utilization is a very important metric for us to track and our performance for the quarter were spot on where we had anticipated to be. And in fact, in Japan the year-on-year growth was at 21% and so and to be clear when we refer to consumable utilization that also includes the reagents and so rest assured that the consumable utilization including reagents is on track and growing.

[Operator Instructions] Our next question is line of Jason Kolbert from Maxim.

Hi guys, thank you. I promise I won't ask any accounting questions. But in all seriousness, what I'd like to understand a little bit better as the expedited access program. It seems to me a little bit like a double edged something that I hadn't considered in the past and I think what I hear you saying is that it might be just as expeditious to go through the Class III devices pathway versus the EAP am I reading that correctly?

So, Jason, I appreciate the question. The reason I brought it up is because we've been asked repeatedly as we got closer and closer to data about the regulatory path and people have asked about the orphan status humanitarian device exemption breakthrough status and so forth. And none of those really applied particularly in this case, but there is a new program called the CAP that I mentioned and I think we're actively looking at it, we think we potentially apply, this potentially applies to our technology. The benefits would be that it might allow us to get to the market more quickly the downside being that we would likely be -- would have to do a Phase 4 trial a post marketing trial. But it may actually get us to market more quickly. So, depending on what the data shows, we think this may be an option for us and we have a number of secondary endpoints that might come into play in terms of the effect on Raynaud's and so forth. And this might provide a pathway that we could potentially expand the claim. So, I bring it up only so that we’ve been asked about it and to be complete is something we're looking at, but we’re going to wait until we have the data until we decide whether this is going to be better for the company or whether to proceed directly to the PMA route as the Class III product is actually the more -- the better approach.

Thank you, Marc and can you talk a little bit about what the secret is going to be unlocking value around the Azaya acquisition? How active has BD been, what kind of inbound interest you're seeing and I know you've been focusing a lot on being manufacturing ready. So just give me an update on what your expenses in terms of timing for a potential partnership there?

Partnerships are always difficult to time and however with respect to the 0918 product and the 1123 also aside for a moment where there's a real market today we've already shown to our satisfaction that bioequivalent to the reference product we need to have a partner in place in Europe by the time that we hopefully have approval. So that's a more systematic outreach but there's been inbound interest as well as there's been press coverage of the acquisition, but there are also some potential opportunities outside of Europe and the U.S. including China in particular, which is undergoing quite a change in terms of the CFDA related to similar products and we think there may be an opportunity there. And in the U.S. the U.S. is a little bit -- there is work to be done with the FDA because of the relatively recent change in the reference drug and J&J's product being off the market now back on and Sun Pharma is the reference drug but RLD is now Doxil which is J&J's product. So, we have some work to do with the FDA to better understand what the regulatory path is and I think that'll clarify the partnering situation in the U.S. as well. Under no circumstances are we planning on taking this direct. We will commercialize the partners and likely it will be regionally-based partners and it's as I mentioned, it's an area of focus.

And at this time, I'm showing no further audio questions. I'll now turn the call back to you Dr. Marc Hedrick.

Thank you, Ian. We actually have two email questions that I'll address. The first question is about the precise timing with respect to the readout on the STAR trial and can I be more specific about that other than Q3? And what I can tell you about the timing is that as I mentioned in the call, the 48-week was the last follow-up. It's approaching 88 patient was randomized in June 2016. So, you can do the math and if the patients are on time to their appointments and there has been strong patient commitment to the trial and follow-up as I mentioned before, then as we've gotten closer and closer to data readout, we've now the focus from Q3 down to early Q3. It could be before Q3 and it just depends on the mechanics of when that last patient comes in, how quickly we can clean the data, lock it, turn it and assess the statistical analysis. So, we're trying to be conservative with an early Q3 date, but our goal would be to have that data in our hands as fast as possible and then at that point we'll get it out. There's one more question, so the other question is that it's asking about Kerastem and their clinical trial and its related results. So, this question is about to remind those of you on the call we will back licensed the rights for alopecia to a private company called Kerastem. They have the worldwide rights to alopecia and in the fall of 2016, I believe we announced that they completed enrollment in a Phase 2 randomized four group double-blind trial here in the U.S. investigating early female and male pattern baldness. So that trial is fully enrolled. I think the target enrollment was 70 patients here in the U.S. and the primary endpoint is safety and tolerability at six months and subjects are being followed for out to 12 months for hair growth. And I believe that the company has received topline results and is analyzing those now and at such time that we get those results from Kerastem we'll communicate that appropriately, but no specific update on that data is available at this time. So, no further questions, so once again everyone thank you for joining the call. I want to just mention and recap what those forward-looking milestones are for the remainder of 2017. As I mentioned and Tiago mentioned, our plan is to extend our option with BARDA. We plan on reading out the topline results from the STAR pivotal trial. We're in the process of completing the facility validation, the manufacturing and related activities for nanoparticle 0918, chemotherapeutic and preparing for EMA filing and then seeking potential partners. We also intend to complete enrollment in the Japanese SUI pivotal trial and in the EU scleroderma -- SCLERADEC II trial. So as always, I want to thank you on behalf of the Board and Management for participating in this call and the company is also very appreciative to the patient that have trusted us throughout the course of these trials in our various commercial endeavors, advisors and analysis who follow us and of course always still are hard-working and dedicated employees. Thank you and have a good evening.

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