Good day, ladies and gentlemen, and welcome to the StemCells, Inc. Q2 2013 Earnings Conference Call. My name is Bree, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Martin McGlynn, President and CEO. Please proceed Sir.

Thank you, Bree. Welcome, everybody, and thank you for joining us today. So on the call today, Rodney Young, who's our Chief Financial Officer, will present our financial results for the second quarter of 2013. Following that, Eliseo Salinas, our Executive Vice President and Head of Research and Development, will make a brief presentation on the 2-year PMD data that was announced last Friday, as well as provide an update on the very exciting translational activities that are underway at the company. And then after that, we'll open up the lines for a question-and-answer period. So over to you, Rodney.

Thank you, Martin. Before we proceed, I would like to remind everyone that during today's call, we will be making some forward-looking statements, which reflect our current views and are based upon certain assumptions that may or may not ultimately prove valid. We assume no obligation to update these forward-looking statements anytime in the future, and our actual results may differ materially from anything projected during today's call due to risks and uncertainties to which we are subject. These risks and uncertainties are described in our public filings with the SEC and at the end of our earnings release, which you are encouraged to consult. We just issued our earnings release a little while ago so let me take you through our financial results. So starting with the top line. Total revenue in Q2 of 2013 was $282,000 compared to $249,000 in the second quarter of 2012. Our SC Proven sales totaled $250,000, which was an 18% increase compared to the $211,000 we reported in the prior period of last year. Q3 sales are actually off to a very good start with a very strong July. On the expense side, operating expenses increased by $891,000 or 16% in the second quarter of 2013. They totaled $6.4 million compared to $5.5 million in the second quarter of 2012. All of this increase was due to increased R&D expenses, as we focused our activities to accelerate our clinical development agenda, and increased spending on preclinical research with our HuCNS-SC cells. R&D expenses were up just over $1 million in the second quarter of 2013 compared to the prior period of 2012, while SG&A expenses actually declined $194,000 or 11% in the second quarter compared to Q2 of last year. So our loss from operations increased in the second quarter of 2013 to…

Thanks, Rodney. So as we've shown over the past few quarters, the data emerging from our clinical trials is encouraging and continues to build our confidence in our human neural stem cell clinical development program. Obviously, our operational priority now is to accelerate patient enrollment, complete the ongoing Phase I/II trials and quickly initiate Phase II proof of concept trials. Much of our effort in the second quarter was dedicated to these objectives and we made some very significant progress. So I'd like to introduce Eliseo Salinas, our Executive Vice President and Head of Research and Development, who will talk today about our ongoing clinical development program. Eliseo joined StemCells, Inc. in June of this year and brings with him extensive experience and expertise in drug development, particularly in CNS, and a proven track record in getting products to market. Prior to joining StemCells, Eliseo was Executive Vice President and Chief Medical Officer of Elan Pharmaceuticals; Senior Vice President and Chief Medical Officer of Adolor Corporation; and Executive Vice President and Chief Scientific Officer at Shire. So over to you, Eliseo.

Thank you, Martin. Good afternoon. I would like to take you through a few slides. Last Friday, Dr. Stephen Huhn, our VP of CNS Clinical Research, presented additional data from our long-term follow-up study in PMD that confirms and strengthens the conclusion from the 1-year data we reported last fall. As a reminder, summarizing the slide, our Phase I results, which were published, as I said, in October showed evidence of progressive and durable donor-derived myelination in all 4 patients transplanted with the cells. In addition, we saw gains in motor and/or cavity function in 3 of the 4 patients -- of the forward patient remained clinically stable. Now, 2 years after the transplantation with the cells, the data showed that the MRI evidence of myelination is more pronounced compared to the 1-year post-transplantation. And the gains in neurological function reported in our Phase I study 1 year of transplantation were maintained with no new or emerging safety concern. Now given the generative nature of PMD, those neurological changes and MRI changes measured at time points long after transplantations with the cells suggests a departure from the natural history of the disease. As most of you probably remember, there's a compelling preclinical rational for the use of the cells in PMD. Based on the demonstration of de novo myelination in the hypo myelinated shiverer mouse with the MRI and electronic microscopy demonstration of physiological myelin produced by newly formed human oligodendrocytes. As you know, we injected cells in those children in 4 locations in the frontal lobes, 2 in each hemisphere indicated in this slide by the blue dots. Adjacent to the corticospinal tract, a key conduction area for locomotor function. We published last October the result of the trial, in particular, the MRI data assessing myelination. We measured with…

Thanks, Eliseo. So, as you can see, and we have a lot of translational activity going on in the company and delighted that Eliseo has had the opportunity to bring everybody up to speed today. I've stated this before, and I'd like to reiterate today, that we continue to believe that our best strategy is to build shareholder value by generating meaningful clinical data in a cash efficient manner. In the second quarter, we took important steps to accelerate our ongoing trials and to complete their enrollment, and to ensure that we have the expertise and the resources necessary to execute those trials. Of course, going forward, we will continue to provide interim updates on the spinal cord injury and AMD trials as the data becomes available. So with that, I'd like to thank you for your attention. And we'll open up the call for questions.

[Operator Instructions] Your first question comes from the line of Stephen Dunn with LifeTech Capital.

It's a very thorough presentation and a lot of good progress. I may have missed it, but on the 2-year PMD data, could you characterize -- again, I may have missed it, what it look like for patient 4?

Yes the patient -- okay, patient #1 and 3 were the youngest patients. Patient #1 was 1 year and 2 months when enrolled, and patient #3 was 1 year and 4 months when enrolled. Patient #2 and 4 were the oldest. Number 2 was 3.5 years and #4, 5.5 years at the beginning. I say that because the literature show that there is a lot of maturation changes before the age of 2. So -- and when you look at patients 1 and 3, those are the ones that you see -- they look more unstable in terms of the evolution of the curves. Patient #4 was very similar to patient #2. So at the end of the trial, as I said, the difference is about 8 percentage points and at no time points -- at no time point, the curves between the control areas, and the transplanted areas became close, as was the case with patients #1 and 3.

Okay, are all these patients still alive?

Yes. These patients are alive and doing well in terms of safety. Some of them, as we reported in the initial publication, have had some modest, but detectable clinical gains. For example, decreases in the nighttime need for CPAP, or continuous pressure ventilation. Some with improved truncal support. Some -- including with improved local motion. As I said, modest, but detectable gain.

Okay. And my final question, you said patient 1, you had the 3-year data already. Are the other 3 patients still compliant in the long-term follow-up? Or have we lost a need to follow-up?

No, no, no. These patients are being followed up. They are known -- no, no, no, we have no concerns about the following these patients for a longer period of time.

Okay. Now you have -- you stated you have not yet met with the FDA for the, I guess, Phase II discussions or have you had preliminary discussions with them already, but you just haven't had the big meeting yet?

No. We have not had -- since I've been working with StemCells initially, as a consultant, since October, we haven't had discussions with the FDA regarding the path forward, but we plan to do that soon.

Well, ladies and gentlemen, it appears that we don't have any additional questions, so I will take that as a complement to the very good explanation and presentation by Eliseo and Rodney. I want to again thank you all for joining our call today and we look forward to continuously updating you when we convene again to talk about the results and progress in Q3. Thank you, all, very much.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.