If you start with the initial investment case, Cytori has approval of its Celution system for regenerative medicine in both Japan and Europe. The company's focus now, in Europe, is on various ongoing translational studies, getting physicians used to the Celution system and getting physicians to do various studies to generate clinical data. The same is true in Japan.
In H1/14, we're going to see the phase 2 data from the ATHENA study in chronic heart failure patients.
Again, regenerative medicine is a risky proposition. It's very volatile. It's a headline-driven space, but one thing that has provided a lot of buoyancy to the space is cash flow from agencies and groups such as the California Institute for Regenerative Medicine, which is throwing millions of dollars—$20M grants here, $40M grants there—to various companies working in regenerative medicine.
TLSR: If the ATHENA study is your driver right now, what's your case for it?
JP: The ATHENA study is based on intriguing earlier-stage data that the company generated from both heart failure patients as well as heart attack patients. The company has presented excellent visuals with its clinical reports of actual functional remodeling of the heart and, I would go so far as to say, tissue healing in the damaged areas where you might have seen an infarct.
With that said, and with all the volatility we've seen in this stock, it's been languishing. The upcoming clinical data will be a major catalyst for the company, giving confidence not only to investors but also to the physician community in the U.S. with regard to Celution and Cytori's regenerative medicine approach.
TLSR: Lorem Vascular has committed up to $531M in license fees. Does that mean buying consumables?
JP: First, Lorem is providing the equity investment into Cytori. Cytori has provided an exclusive license for the Celution system for 30 years. Cytori is going to get a milestone fee, or a licensing fee, for this exclusive license every year. On top of that, there will be the purchase of the actual Celution system machines, as well as the consumables for the Celution process. You have the licensing fees, which are part of the $531M over 30 years based on revenue milestones. Then you also have the sale of the Celution system and consumables through the transfer pricing.
TLSR: The ATHENA trial is only 45 patients, versus the 27 patients that we saw in the phase 1 PRECISE trial, where mortality was only slightly improved versus placebo. We had tremendous upward move in this stock after the Lorem Vascular deal was announced— the company's value shot up by $90M. I wonder if you think the ATHENA trial is going to move the needle even further on this stock, if the data are good?
JP: I do. Even though, like you said, it only includes up to 45 patients, I think it's a well-designed study.
This phase 2 clinical data from ATHENA will be very important for the regenerative medicine space because currently stem cells are still considered a relative science experiment. So much of the industry is in early-stage development; there are not a lot of late-stage data."
The Life Sciences Report: Cytori has a machine called the Celution System, which processes a liposuction aspirate into cells in a syringe in 60–80 minutes. The Celution System costs $100,000, or the company leases it. Does Cytori charge a license fee for each batch of cells processed?
JK: Every time the machine is used, a consumables package must be purchased. So the question is, if you are processing a lipoaspirate for chronic myocardial ischemia, is that a different consumable package with a different price point than, say, a package for breast reconstruction or burns? I think the answer is yes, that different packages will go with each application, and there will be different margins. . .but because the Cytori process is so cost-effective, I believe it is going to be able to have biotech-like margins, at a very attractive price point that will be priced on a per-use basis for the machine.