Athersys (ATHX) Q3 2019 Earnings Call Transcript

Athersys (ATHX)
Q3 2019 Earnings Call
Nov 06, 2019, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Athersys third-quarter 2019 results conference call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to your speaker today, Karen Hunady, director of corporate communications and investor relations. Thank you.

Please go ahead, Madame.

Karen Hunady -- Director of Corporate Communications and Investor Relations

Thank you, David, and good afternoon, everyone. As David mentioned, I'm Karen Hunady, director of corporate communications and investor relations for Athersys. Thank you for joining today's call. If you do not have a copy of the press release issued at the close of market, it is available on the Athersys website at athersys.com.

Dr. Gil Van Bokkelen, our chairman and chief executive officer; and Laura Campbell, senior vice president of finance, will host today's call. The call is expected to last approximately 30 minutes, and a webcast of the audio will be available two hours after the call's conclusion on our website under the Events section. The access information for the replay is also in today's press release.

Any remarks that we make about future expectations, plans and prospects constitute forward-looking statements for purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by the forward-looking statements as a result of various important factors, including those discussed in our Forms 10-Q, 10-K and other public SEC filings. We anticipate that subsequent events and developments may cause our outlook to change. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so.

For the benefit of those who may be listening to the replay, this call was held and recorded on November 6 of 2019. Since then, we may have made announcements related to the topics discussed, so please reference our most recent press releases and SEC filings. With that, I'd like to turn the call over to Laura Campbell. Laura?

Laura Campbell -- Senior Vice President of Finance

Thank you, Karen. Good afternoon, and welcome, everyone. I'm Laura Campbell, senior vice president of finance at Athersys. I'll briefly review our third-quarter 2019 financial results and then turn the call over to Gil for a corporate update, followed by a question-and-answer period.

During the third quarter of 2019, revenues were negative $400,000, compared to $2.3 million in the third quarter of 2018 and related primarily to our collaboration with Healios in Japan. The reduction in 2019 was impacted by our evaluation of variable considerations under the Healios product supplier arrangement and changes that occurred during the quarter resulted in a decrease to the transaction price. Overall, our revenues are derived from licensees, other contract revenue, manufacturing-related services and grant revenue. Our research and development expenses decreased to $8.9 million for the third quarter of 2019 from $9.5 million for the comparable period, 2018.

The $600,000 decrease is associated with reductions in clinical trial costs, process development costs and license fees, partially offset by increases in personnel costs, outside services, stock compensation expense and consulting fees. Included in our clinical expenses are costs associated with manufacturing services that we provide to Healios, which are invoiced to Healios in accordance with our contractual arrangement. General and administrative expenses increased to $3 million for the quarter ended September 30, 2019, compared to $2.6 million for the same period in 2018. The $400,000 increase was due to increased legal and professional fees, outside services and stock compensation costs.

We incurred a net loss for the three months ended September 30, 2019, of $12 million, compared to a net loss of $9.7 million for the 2018 period. Our net loss per share was $0.08 per share for the third quarter of 2019. During the three months ended September 30, 2019, we used $8.2 million of net cash in operating activities, compared to net cash used of $7.5 million in the third quarter of 2018. As of September 30, 2019, we had $40.4 million in cash and cash equivalents, compared to $51.1 million at December 31, 2018.

With that, I'd like to turn the call over to Gil for our corporate update. Gil?

Gil Van Bokkelen -- Chairman and Chief Executive Officer

Thanks, Laura, and thanks also to everyone listening in today. During the call today, I will first provide a brief operational update, which will be followed by a strategic overview related to our portfolio development priorities, partnering objectives and preparation for commercialization. I will then address a few shareholder questions, followed by the analyst Q&A. Operationally, we continue to maintain a focus on our most important clinical development priorities, including our ongoing support of Healios and their TREASURE trial for treating ischemic stroke, a leading cause of death and disability in Japan, and the ONE-BRIDGE trial for treating pneumonia-induced ARDS.

While we are not actively engaged in the operational oversight or conduct of these trials, we do provide input and regulatory support where appropriate. Our most important role, however, has been to oversee manufacturing of clinical material for these studies, overseeing production of material for the completion of the studies at the designated contract manufacturing organizations or CMO's that we work with. As we've described in the past, we work with several CMO organizations at specific sites in the U.S., Europe and Asia. As noted previously, the manufacturing runs for TREASURE were completed earlier this year and have now been completed for the ONE-BRIDGE study as well.

As we and Healios have discussed previously, the ischemic stroke program in Japan has received Sakigake designation from PMDA, which provides the opportunity for expedited regulatory review under the accelerated development framework for eligible regenerative medicine therapies in Japan. We've also received Fast Track and RMAT designations for our stroke program here in the U.S., and our ongoing Phase 3 clinical trial is being conducted under Special Protocol Assessment. As a result of the Fast Track and Sakigake designations, these programs are eligible for both rolling submission and priority review, which are specifically designed to make the regulatory review process and path to approval faster and more efficient. Earlier this year, we retained the leading CRO to assist us in our efforts to prepare the information and materials for this process, which will ultimately support regulatory submission efforts for Japan, the U.S., Europe and other relevant jurisdictions.

Several months ago, we held a kickoff meeting here in Cleveland with members of the Healios regulatory team and the CRO to initiate the planning and commencement of the process. These efforts have continued to progress over the most recent quarter. In parallel of this work, we are focused on ongoing activities in support of our Phase 3 clinical trial for stroke, referred to as MASTERS-2. We continue to make progress in the conduct of the trial, while we work with our CMO network to complete manufacturing operations for this study.

As we have described previously, this is a randomized double-blind placebo-controlled pivotal study that will enroll 300 patients in more than 50 leading stroke centers in North America, Europe and other international locations, and it represents our most important internal clinical development priority. While enrollment at the operational sites has been very good, our current focus is on bringing additional sites online, and we have done substantial work over the past few months in support of that objective. While Healios focuses on completing the ONE-BRIDGE and TREASURE studies in Japan and we focus on advancing and completing MASTERS-2, we are pleased to announce that the one-year follow-up visits for our exploratory ARDS clinical trial, referred to as the MUST-ARDS study, have been conducted. The primary results from this double-blind randomized placebo-controlled trial, which were presented at the annual American Thoracic Society meeting in May, demonstrated a consistent safety and tolerability profile and the results suggest meaningful improvements in mortality, ventilator-free days and ICU-free days among the patients treated with MultiStem at the primary clinical assessment approximately one month after treatment.

We anticipate having the one year results in the form of the final clinical study report around the end of the year or early in 2020. In advance of that, however, we have had the opportunity to preliminary assess certain metrics, which appear to provide strong support that MultiStem administration to patients in the trial correlates with meaningful improvement in the one-year quality of life evaluation, as evidenced by patient report of the assessments using EQ-5D. This improvement in quality of life outcomes appears to be particularly robust among more severely ill ARDS patients, where we have previously also observed the most meaningful differences in mortality ventilator-free days and ICU-free days at the primary clinical assessment. We believe this provides additional evidence that we cannot only impart clinically relevant outcomes, but also impact things that matter to the patients and their families, including their quality of life in the aftermath of ARDS.

Once we have the final results and completed our corresponding analysis, we will provide a further update. But in the meantime, we are grateful to the patients and families that participated in the study, and once again to the FDA for their bestowing Fast Track designation on this program, which represents the third such designation that we have received. We have already initiated planning for the next phase of development and will provide more specific information once we are further along in that process. In the meantime, we are also focused on completing preparations for our planned Phase 2 study in trauma, the Matrix 1 trial, which is being supported by a grant from MTEC through the Department of Defense.

As we have described previously, this trial will be conducted in collaboration with one of the leading Tier 1 trauma centers here in the U.S. at the Herman Memorial Trauma Center in Houston, Texas. Although our preparations for the study have taken a bit longer than we had planned as we have engaged in helpful discussions with the FDA and others on how best to approach certain issues and proceed, we believe that we are now nearing the end of the process and are excited about getting the study under way as soon as possible. In parallel, we continue to advance other critical care programs, including additional preclinical work in the hemorrhagic stroke area where we believe that MultiStem can provide a meaningful benefit.

This represents another area of significant unmet clinical need and also a substantial potential commercial opportunity. As it relates to the current status of our Phase 2 AMI study, unfortunately, as we have described previously, participating sites have struggled with enrollment in this trial, primarily due to changes in standard of care during the past several years, and while we have implemented a number of things in an effort to address this, we've been unable to do so. Accordingly, we have made the decision to suspend further enrollment in the trial and complete the follow-up visits for the patients already enrolled. We anticipate completing those follow-up visits in the first half of next year and providing a further update at that time.

While we remain confident that MultiStem has relevance in the cardiovascular area, we believe it is more appropriate to focus our efforts on the other areas we are actively pursuing. On the business development front, we're engaged in discussions with several companies exploring a range of opportunities, and we are particularly focused on potential alliances for development and commercialization of our critical care portfolio programs in Europe. We are specifically focused on companies that we view as logical and highly qualified partners for commercialization in the critical care segment and that we believe can help us maximize the impact and value of these programs. We also continue to explore partnering and collaboration opportunities in other relevant territories, including here in North America and other regions of interest.

However, while we explore these possibilities, we continue our preparations for potential independent commercialization here in the U.S. There are several reasons why we believe this strategy makes sense. First, by preparing for independent commercialization in the U.S., we strengthen our position in partnering discussions by helping -- by establishing a greater depth of knowledge about the critical care market. It also helps us better assess what we should be looking for and expecting from potential partners, if we decided that was the most appropriate way forward.

Second, by analyzing the clinical landscape for the critical care indications we are focused on, we develop better understanding about how to effectively approach the critical care market in commercialization. Third, it helps us map out and precisely define our domestic logistics capability requirements and identify areas where there are potential operational efficiencies. As an example of this, during our work over the past couple of years, we have developed a deeper understanding of key aspects of the critical care market and where potential clinical and commercialization synergies may exist. For example, we understand the geographic distribution of the approximately 6,200 hospitals across the United States and have a good understanding of stroke centers certifications and corresponding institutional capabilities.

We know all the Tier 1 comprehensive stroke centers, where they're located and already have relationships with many of them. We also know the top Tier 2 certified stroke centers and where they are located. Collectively, these institutions treated disproportionate share of the stroke patients that we believe might benefit the most from treatment with MultiStem, and we know they are also geographically concentrated in specific areas. Furthermore, we have developed an understanding as to where there are potential clinical and geographic synergies, which -- with the other clinical care indications we are focused on, including institutional or geographic colocalization of advanced stroke centers with leading trauma centers and the most advanced pulmonary critical care centers.

Based on this work, we are confident that we are well positioned to efficiently develop an effective marketing and distribution capability to serve the critical care market in the indications that we are prioritizing when the time comes. It's worth reiterating that we are focused on these critical care indications for several, very specific reasons. First, years of evidence from clinical and preclinical research conducted in collaboration with outside independent key opinion leaders and translational researchers tells us that this is where our technology appears to have some of the greatest therapeutic potential. Second, these critical care indications represent some of the most significant areas of unmet medical need where standard of care is limited or simply unavailable to many patients, cost of care is typically very high and the adverse impact on patient quality of life tends to be greatest.

By delivering more effective treatment options in these areas, we believe that we cannot only improve clinical outcomes and patient quality of life, we can deliver substantial value to patients, their families and the healthcare system as a whole and in the process, create substantial value for our shareholders. It's also worth noting that the indications we are focused don't just have an impact on patient quality of life, they frequently impact family quality of life by forcing family members to become caregivers at home or by putting them in a position where they may have the financially cover the institutional care cost of an individual that has meaningful disability. Third, clinical development for these types of indications can be efficiently conducted. Whereas clinical trials for certain conditions may require very large studies involving thousands of patients and may further require a patient to participate in the clinical trials for several years in order to determine a treatment effect, based on our prior results, we believe we can conduct moderately sized, highly efficient, cost-effective studies with relatively rapid assessments regarding whether a therapeutic benefit is being achieved.

Our work in ischemic stroke and ARDS are relevant examples of this with moderately sized trials and primary clinical assessments being conducted at 90 and 28 days respectively with one-year follow-ups. In short, by focusing on relevant critical care indications first, we believe we optimize our likelihood of clinical and ultimately commercialization success, reduce development cost and maximize our clinical development efficiency. In terms of commercialization in Europe, however, we believe it makes sense for us to work with a well established and experienced commercialization partner because while the EU has a centralized regulatory system, market access, marketing and distribution in Europe are more complicated and should be approached on a country-by-country basis. Establishing an alliance with the right partner is top priority for us and for our shareholders, and we believe that represents a major step toward the creation of substantial shareholder value.

In the meantime, we are committed to being financially efficient and to maintaining a stable financial position, as Laura described, and as we once again illustrated this quarter. By proactively putting in place another equity facility to replace the current facility as described in our quarterly filing, we ensure access to more moderate amounts of capital in a cost-effective and efficient manner, while we continue to focus on achieving key clinical development and partnering milestones. In summary, we are committed to doing all the things we need to do over time to ultimately establish Athersys as a leading commercial biotechnology and regenerative medicine company. This will include adding new members to the leadership team and organization over time, further strengthening our capabilities and taking other actions that we and the board believe to be appropriate.

And with that, I'm happy to address several questions from shareholders before we open it up for additional Q&A. One question we get from a lot of shareholders relates to the projected time line for the ongoing trials in Japan. We refer people to Healios public statements and filings on this. However, we also note that they have stated publicly that they are focused on completing enrollment of the TREASURE trial around mid-next year, and we believe they remain committed to achieving that goal and to finishing the study as soon as possible.

Regarding the ONE-BRIDGE trial, recall that it is a -- this is a 30-patient study focused on pneumonia-induced ARDS. Even though they initiated the trial in April, which is at the tail end of last year's flu season, they have made very good progress so far. We believe that their enrollment rate over the fall, winter and spring in Japan will depend somewhat on the severity of this year's flu season, given that the flu is a common cause of pneumonia and directly impacts the occurrence of ARDs. We know that Healios is placing a high priority on the efficient completion of enrollment for this trial.

Another question we frequently get relates to the estimated timetable for MASTERS-2. As we have stated previously, our goal is to complete enrollment of the trial by around the end of next year. We believe our activities over the next few months will have a big impact on our ability to successfully achieve this goal, and we will provide further updates as appropriate. Some shareholders have asked about the number and location of sites in MASTERS-2 or how many patients have been enrolled.

As a standard practice in the industry, and as we have stated previously, we do not disclose this type of information while a trial is ongoing. We have seen unfortunate cases in the past for people who tried to contact study sites, investigators or staff at sites to obtain sensitive information about the trial. To protect the integrity of the study, the patients and their families, medical staff involved in the trial, as well as the company and our shareholders, we minimize the detail provided, while laying out a clear, high-level plan for what we are committed to doing. Finally, we frequently get questions about the commercial potential for MultiStem in the core critical care indications we are currently focused on.

People ask about the estimated market size and what that might mean from a shareholder perspective. These are actually pretty complicated questions, and the answer's dependent on a number of factors and assumptions. But here's how we think about this issue. First, we have a good understanding of the estimated annual incidents for ischemic stroke, ARDS, trauma and hemorrhagic stroke and the relevant geographies we're focused on, including North America, Europe and Japan.

While these critical care indications aren't the only areas where we believe MultiStem may be relevant and aren't the only things we are focused on, we can use them as relevant examples to illustrate a couple of key points. We know that stroke affects about 17 million people globally each year, and it's impacted by the rapid global expansion of the elderly segment of the population, which is more susceptible to stroke and other aging-related diseases and conditions. Let's assume that the core addressable market in North America, Europe and Japan is approximately 1 million patients per year, which actually represents a minority of the annual stroke incidents. A number of years ago, a leading healthcare economist an MV, PhD from UCF of California assessed the value and pricing for a thrombolytic and concluded that pricing of approximately $46,000 per dose would be fair and makes sense using $2,004.

Based on our analysis, using results from MASTERS-1 and other relevant data, we believe the clinical impact and value of treatment with MultiStem would deliver substantially greater value to the healthcare system and could justify a substantially higher price point. But for the sake of discussion, let's use this as a reference point. To be totally clear, I am not providing guidance on a reimbursement strategy or indicating what I think the appropriate price point for MultiStem might be. I'm simply using this for the purposes of illustrating a very important point.

At an estimated $46,000 per treatment and addressable market of 500,000 to 1 million patients per year would represent a potential annual market opportunity of somewhere between $23 billion and $46 billion. Logically, this makes sense given that ischemic stroke is the leading cause of serious disability in many developed countries in the world and the leading cause of death. It also carries a huge cost, as well as quality of life and social burden. As I have described previously, the average cost for full-time institutional care for stroke patients that are substantially disabled is now more than $100,000 per year, and this does not include treatment or hospitalization costs, rehabilitative therapy cost, loss or earnings potential or quality of life impact.

The similar analysis can be conducted for the other indications we are focused on. For example, the annual incidents for ARDS across these core geographic markets is estimated at approximately 500,000 patients per year. If the addressable market is estimated at only half this number, say 250,000 patients per year and use the same price point, it would translate to an annual potential market opportunity of more than $11 billion per year. Trauma represents another meaningful opportunity where current standard of care is limited and in the U.S.

and Europe, trauma from vehicular or transportation-related injuries and falls alone results in the hospitalization of more than 3 million people a year. Most people don't realize that in the U.S. trauma represents the leading cause of death on individuals up to the age of 45 and as a leading cause of visibility, both among young people and the elderly alike. It also represents another massive opportunity to improve clinical care and patient quality of life.

The point I'm making is simply this, these are each very large areas of unmet medical need and corresponding market opportunities, and we believe we are well-positioned to address them. We are committed to advancing our portfolio programs in these areas because we believe we can meaningfully help patients and generate substantial value for our shareholders in the process. And with that, we'd like to open it up for a few more questions.

Questions & Answers:

Operator

[Operator instructions] Your first question comes from the line of Jason Kolbert with Dawson James. Please go ahead. Your line is open.

Jason Kolbert -- Dawson James -- Analyst

I don't know if you've realized this, but for the first time, I'm hearing you talking really aggressively with an eye toward commercialization, and I love the notion that you feel like you could market this yourself in the U.S. So can you talk just a little bit about -- more about what that means? You talked about kind of the size of the U.S. market and how that impacts partnering discussions? Obviously, I'd love to talk about trial enrollment and get specific on U.S. and Japan time lines, but I think you've done that already.

So I'd like to think a little bit more about what you're going to do over the next year as you work through your cash runway with an eye toward commercialization or BD because I see the focus of the company is shifting. Thanks.

Gil Van Bokkelen -- Chairman and Chief Executive Officer

Yeah. Thanks, Jason. So let me talk about the BD front first. We're spending a lot of time on this right now.

In fact, BJ and I are going to be back in Europe for next week for a series of meetings and active discussions that we're engaged in with a few different companies that we believe could make really good partners in terms of the things that we're focused on. So we'll provide at least on that front, but we do believe that business development activity is going to provide a huge catalytic impact on the company as we enter into additional partnerships and it strengthens us financially and also gives us other capabilities that the partner can bring to bear with respect to commercialization in areas like Europe or other jurisdictions that we might be focused on. In terms of commercialization in North America, I know it's tempting for a lot of people to say, hey, just go find a partner, but as I talked about at our Investor Day event in May and as I've talked about at various events and presentations since then, the more we learn, the more we become convinced that commercialization in the United States is a very real possibility for us and the good news is that we have a very experienced board of directors, guys that are overseen commercialization activities at major pharma companies and other organizations that they've been part of, and they can provide very valuable perspective on this stuff. As we think about commercialization, if -- you have to spend a lot of time thinking about the market structure that you are trying to attack, if you will.

The nice thing about the critical care market. So first off, all of the indications that we're currently focused on concentrate on common hospital environments. These are patients that are very sick, they're typically in the ICU and they're being treated in intensive care environments for things like stroke, trauma, ARDS, hemorrhagic stroke, other conditions that actually fall into this category as well. Geographically, one of the things that we know is that these treatment centers are distributed across approximately 40 core geographic regions in the United States.

Now if I -- and I've actually asked this question to people, both institutions and analysts and other people, how big of a marketing and distribution capability do you think we would need to attack an indication like stroke if the core leading institutions are located in approximately 40 geographic regions across the U.S., which, not surprisingly, are located in the more densely populated regions of the country. And they see a disproportionate number of the stroke patients that are out there that we think fall into our sweet spot, if you will, in terms of patients that could really benefit from treatment with MultiStem. And most people come up with a number that's somewhere between 25 and 50 people, and I think that's a very reasonable and realistic range. The reality of it is that there are additional synergies in terms of what we think we could realize looking at the other critical care indications that we're focused on.

Ischemic stroke patients and hemorrhagic stroke patients are treated by the same clinical institutions, the same types of teams in the very same part of the hospital. Trauma centers and pulmonary critical care centers tend to be colocated with those types of institutions. Again, in the same geographic areas, and in many cases, in the very same institutions. And the critical care capabilities in each of these areas are arranged like a pyramid, you've got the top tier institutions at the very top of the pyramid that see a disproportionate share of the patients for each of those indication areas.

And again, they tend to be highly concentrated. So as we have looked at this and thought about it, it really generates the benefits that I mentioned in my comments. Not only does that help us better understand what types of questions to ask among companies that we're in discussions with that would like to be our partner in terms of understanding what are their capabilities and distribution capabilities, if you will. But it also helps us down that path of independent commercialization.

We've always said, and Jason you've heard me talk about this and you and I have had numerous conversations about this subject over time, we are committed to becoming one of the leading companies in the world in the biotechnology area and specifically in the regenerative medicine area. If we're successful in any of the indications that I'm talking about today, we can achieve that goal. There are no promises, there are no guarantees, there's no assurance that we're going to be able to a compass that. However, we're doing all the things that we think we need to be doing to make that goal come true.

So I appreciate the questions, and hopefully I've effectively addressed them.

Jason Kolbert -- Dawson James -- Analyst

Yeah. Thank you, Gil. And I appreciate your travelling a lot. So thank you so much for taking time out to kind of present at our conference.

It was great seeing you. Thanks.

Gil Van Bokkelen -- Chairman and Chief Executive Officer

Yeah. It was great being there, Jason. Thanks again for the invitation.

Operator

[Operator instructions] Your next question comes from the line of Chad Messer with Needham & Company. Please go ahead. Your line is open.

Chad Messer -- Needham and Company -- Analyst

Great. Good evening, and thanks for taking my question. Gil, I'm kind of interested in your view on the sort of the regulatory reimbursement environment in Europe because that's one of your focuses for partnering. Obviously, you have a lot of expense in Japan and things are quite favorable there as we know and we've discussed, but my top-line impression of Europe is that that maybe it's a little tougher, but I'm interested in your opinion on that and sort of how that affects the way you approach looking for a partner over there.

Gil Van Bokkelen -- Chairman and Chief Executive Officer

Yeah, that's a great question. So Europe is complicated by virtue of the fact that it's not one big, common market the way people tend to think about the EU. It's actually 30 different jurisdictions. That's if you include places like Switzerland and Norway, which most people kind of mentally include in the EU even if they're not actually EU members.

And of course, where you put the U.K., but let's just consider it as part of the European landscape as a whole even if it's not going to be part of the EU for very much longer. But the point is that regulatory -- from a regulatory perspective in Europe, it's one common central framework, but from a market access reimbursement and logistical perspective, it's 30 different countries. That's kind of a big thing to bite off for a company in that type of a complicated landscape. And that's why we concluded some time ago that we really need to work with a partner that already has those types of capabilities in place, particularly in the hospital environment and ideally in the critical care environment that we're focused on.

By working with somebody that already knows the landscape that has gotten products approved through that type of complex process, if you will, and already has the distribution capabilities and clinical capabilities and relationships with the key institutions across Europe, we would put ourselves in a much better position and frankly in a much better position to not only realize value, but deliver value to our shareholders as well. So that's why we're focused on that. You touched on another point related to reimbursement. So you're absolutely right.

In fact, Japan has, in many ways, led the way for reimbursement for regenerative medicine therapies that are being approved under their new accelerated regulatory framework, and we've seen a number of products that have gotten reimbursement rates between $100,000 and $150,000 per patient. And they're doing that intentionally because they want Japan to be a destination of choice, a priority destination for development and commercialization. In fact, the Sakigake designation specifically says you get that priority designation provided your intention is to actually launch product in Japan before any where else, OK? So it's a very big carrot that they're offering up to try to incentivize people to focus on development in Japan. And the reasons for that are pretty obvious.

For a long time, Japan experienced something called the drug lag where innovative medicines might be developed here in the United States or other parts of the world, but they would only make their way over to Japan five years later. And there was literally a five-year, on average, gap between innovative medicines being introduced in the U.S. and then their corresponding introduction in Japan. Well, thanks to the innovative regulatory framework that was established in Japan over the past few years under the fantastic leadership of Dr.

Kondo, who recently retired as the head of PMDA. He basically put in place a system of initiatives that has eliminated that drug lag. And now for many drugs, they are being introduced in Japan, either about the same time or approximately commensurate with their introduction in the United States or other parts of the world. And I've already talked about the reimbursement piece of it, so I think that's very attractive.

The reimbursement landscape in Europe is complicated because every country does their own thing. We have a very clear pan -- plan for how we want to approach reimbursement here in the United States. And actually there was a fantastic article that was written just a couple of days ago on -- in the Wall Street Journal that talked about the use of healthcare economic metrics and the role that ICER and other institutions are playing in evaluating the value that innovative therapies can bring to the healthcare market. Now, I wouldn't say that I agree with everything ICER does or how they do it, I've got a meaningful difference of opinion on a number of different fronts, but I think that article, and I encourage everybody to read it, actually explains an understandable term some of the concepts that they talk about.

Like for example, how do you value a quality adjusted life year? How do you value a year of good health for patients that are effectively treated with an innovative medicine? And there's been a lot of evolution in the thinking on this, but it's taken place over the past decade and even a little bit beyond that. These days healthcare economists, including the folks at ICER, place the value of $150,000 on what they refer to as a quality. And I think the point here is that we've done a lot of analysis already on what we believe the value of MultiStem is and just based on the data that we generated from the MASTERS-1 study, we can demonstrate very substantial impact and value being delivered to patients in the healthcare system as a whole. And I think that that puts in a very strong position from a reimbursement perspective, but one of the things that we want people to understand is you have to walk the line between pricing maximization and value delivery to the healthcare system as a whole.

We don't live in an era of completely unlimited healthcare resources anymore. So we believe that it is incumbent on companies like us to make a compelling value argument for the innovative therapies that we're developing and ultimately delivering into the clinical landscape. The good news is that we think we're going to be able to make that argument with MultiStem space. And I think that that is a -- and we intend to price this in a way where we think it will drive rapid uptake.

That is very, very key. So hopefully, I've addressed the points that you asked about, Chad. But if you have any other questions, we're happy to address them.

Chad Messer -- Needham and Company -- Analyst

No, thanks. That was very helpful, and congrats on all the great progress.

Gil Van Bokkelen -- Chairman and Chief Executive Officer

Thanks a lot. Appreciate it.

Operator

Your next question comes from the line of Kyle Bauser with Dougherty. Please go ahead. Your line is open.

Kyle Bauser -- Dougherty and Company -- Analyst

Good evening. Thanks for all the update here. And just one quick question. I apologize ahead of time if you've already kind of addressed this, just been jumping between calls.

I did appreciate kind of your comments around the synergies of kind the same call points, if you will, of all the key opportunities, which even one of those would be I think a massive TAM. So given the positive signals in the data for MultiStem and then the compelling value proposition that SIFU commands, can you kind of speak to the level of interest you're receiving from potential partners and geographies outside the U.S. and outside of Japan? Any sort of updates here or thoughts on how you're thinking about other business partners?

Gil Van Bokkelen -- Chairman and Chief Executive Officer

Yeah, so that's a great question. It's great to have you on the call, Kyle. And I know you had to join late because you had another activities that you were focused on, but we appreciate you joining in and asking a question. So we're actively evaluating opportunities in multiple different dimensions right now, and that includes multiple different geographies.

So we'll refer to Europe as basically being a primary geographic focus for us, and it's obvious to understand why. I mean Europe, if you think about it holistically, it represents perhaps one of the largest healthcare markets in the world, without question. And there are -- the good news is that there are a number of qualified entities out there that understand that landscape, particularly in the hospital segment in the critical care segment that we're focused on that we think can make for highly qualified partners where we could work together. Now the interesting thing is that these companies also look at us in terms of what we're doing.

Our depth of expertise, not only as it relates to the product itself, but as it relates to things like process development and manufacturing and other things that are central to this, and they want to work with us. And traditionally a lot of relationships, particularly among some of the bigger companies is they kind of view it as a hand off, right? We give it to them and then they take it from there and then they run with it, and then we just sit back and cash our checks from time to time. Those aren't the types of relationships that we're interested in, nor are we interested in relationships that focus on a specific series of kind of one-off transactions, OK? We are really focused on patients that understand the potential impact of MultiStem across the critical care spectrum and that are very excited by that and want to pursue it aggressively with us in the context of understanding the synergies and efficiencies that also exist in Europe by the way because a lot of the dynamics that I referred to in the United States also exist in Europe. You have -- you see a tendency to have the critical care institutions and the leading stroke centers and others colocating in the highly populated -- more densely populated areas there as well, but we just don't know that landscape.

We know that the clinical institutions, some of the leading stroke centers in Europe if you will, but we've never been through the process thinking about OK, how are we going to manage reimbursement in 30 different territories or 30 different countries in Europe in contrast to what we would need to do here in the United States or what Healios would need to do with our support in Japan. Japan is probably the best possible location because they have a centralized system, and it basically is one point of entry and then once your reimbursement rate is established, everybody accepts without question and it's embraced nationally by all the different pair groups, which is a reflection of the national healthcare system that they have ther. I don't think that approach would work here for a lot of different reasons, but the point is that if we have a very strategy and we're spending a lot of time and effort on our medical affairs and related activities working with outside independent firms that have deep expertise in this area, preparing for those activities, building our case, evaluating our data and making sure we're in a position to really make sure that we end up in the right spot at the end of the day. We're also -- and we have done work in Europe looking at this as well.

And I'm convinced that we're going to be in a very good position both in Europe and in the United States and any other markets that we're focused on. Then you asked about some of the other geographies. We're still looking at China, but China -- and in effect we've had a number of companies that have approached us since we made the decision to discontinue the dialogue with Healios about the option that they had to pursue China. We've been approached by a number of leading Chinese companies.

The reality of it is though is that China is still a highly uncertain and chaotic environment, and its one of those things that until that gets resolved, it's going to be difficult to make any definitive decisions about how we want to approach that. The good news is that we have other dimensions of opportunity, which I'm not going to go into today that we're actively exploring and have been evaluating and discussions and negotiations with other entities. And so I feel very good about the position we're in. I also see other dimensions of opportunity that may be of interest to -- well organizations like the Department of Defense or other things based on work that we've done in collaboration with outside groups.

So I feel very good about where we're at. I understand that people are impatient, they want us to get it all done as soon as possible, we're focused on that. We get lots of questions, and in fact, Karen fields a lot of questions, a lot of inquiries from people that call in and say where are we? What's going on? Is there any news that we can announce this week? We -- I get it, but the reality of it is that we're trying to -- we committed ourselves to completing a marathon. We're deep into the race.

I feel good about where we're at it, and we're excited about where we're going to end up. And I think that we're getting closer and closer to the finish line. So I don't know if that effectively answered your question, but I'm happy to answer any other comments or questions you may want to offer.

Kyle Bauser -- Dougherty and Company -- Analyst

Got it. That's helpful. I appreciate that. I'll jump back in the queue here.

Thanks for the updates.

Gil Van Bokkelen -- Chairman and Chief Executive Officer

OK. Thanks, Kyle.

Operator

Thank you. That concludes our Q&A session. And now I'd like to turn it over to Gil Van Bokkelen for closing comments.

Gil Van Bokkelen -- Chairman and Chief Executive Officer

Well, once again I'd just like to thank everybody for participating in the call today. I know that there's a bunch of people who dialed in and there's a much people listening to the webcast. We appreciate you taking the time to hear about our progress and listen to us talk about where we're going and how we intend to get there. It means a lot to us.

So thanks again for your time, and we'll update you again soon.

Operator

[Operator signoff]

Duration: 46 minutes

Call participants:

Karen Hunady -- Director of Corporate Communications and Investor Relations

Laura Campbell -- Senior Vice President of Finance

Gil Van Bokkelen -- Chairman and Chief Executive Officer

Jason Kolbert -- Dawson James -- Analyst

Chad Messer -- Needham and Company -- Analyst

Kyle Bauser -- Dougherty and Company -- Analyst

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