Good afternoon, ladies and gentlemen. Welcome to Cytori Therapeutics First Quarter 2016 Earnings Results Call. [Operator Instructions] Before we begin, we want to advise you that over the course of the call and the question-and-answer session, forward-looking statements will be made regarding events, trends, 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, including -- and Cytori's annual report on Form 10-K and quarterly report 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 statement. 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 you, Dr. Marc Hedrick, Cytori's President and Chief Financial Officer. Please go ahead.

Good afternoon. Thanks, Kristen [ph], for the introduction. And welcome to everyone to our first quarter 2016 earnings call. As Kristen said, I'm Marc Hedrick, I'm the President and CEO of Cytori. And joining me on today's call is our Chief Financial Officer Mr. Tiago Girao and our Chief Medical Officer Dr. Steven Kesten. And joining us from Japan, our General Manager of Cell Therapy, Mr. John Harris. We've recently issued our Q1 earnings release and proxy, they're now posted on our website. And a copy of this transcript will be available there soon as well. So the agenda for today's call is I want to start off with a few opening remarks and provide an update on a number of key issues that are important to shareholders. Then I'll provide an update on our clinical programs. Tiago is going to update on financials. John is going to then discuss the commercial progress on two key fronts. And then I'll discuss the forthcoming milestones and then we'll have Q&A. So let me just kick things off by reminding everyone of our Company's three key strategic objectives, and this is made clear in all of our corporate presentations, and I'll run through them in order of importance. So, most importantly, we want to get a product approved in the U.S. market, on-label, to treat patients and fill an unmet medical need. We like the risk profile and the return on investment on niche and orphan indications. Our ECCS-50 product for scleroderma is on timeline for a potential U.S. approval in 2018 pending the clinical data from the STAR trial. Second, management feels that the combination of the forecasted spend and revenue may be sufficient to get the Company to the point of breakeven by 2018. And we discussed this at length…

Thank you, Marc, and good afternoon everyone. During the first quarter we continued to fully invest in our key R&D programs, while working to reduce our losses and operating cash burn and improving our operating performance. Our operating cash burn in Q1 was consistent with Q1 of last year at approximately $5 million. Our net loss continues to trend in the right direction. When adjusted for non-cash charges related to changes in fair value of warrant liabilities and beneficial conversion feature charge on preferred stock, net loss was $5.3 million in Q1 as compared to $6.5 million in Q1 a year ago. For the balance of 2016, we believe we can realize further additional improvements in operating efficiencies and expect to continue to narrow our losses and operating cash burn. Despite the decrease in our losses, our primary corporate focus is to bring an approved therapy to markets in the U.S. And to that extent, in Q1, our research and development expenses, including share-based compensation, was $4 million, or up 4% over the $3.8 million expense in Q1 2015. The increase in spend from 2015 is primarily related to investments in clinical trials as well as Barda related expenditures. This is intentional and indicative of our focus in late-stage clinical trial programs. We continue to optimize our sales and marketing activity and related expense, which, excluding share-based compensation, was approximately $1 million this quarter, as compared to $0.8 million in Q1 2015. The increase is mainly attributed to ongoing investment in the managed access program in Europe as well as our sales operations in Japan. G&A during this quarter, excluding share-based compensation, was consistent with Q1 2015 at $2.2 million. Although we will continue to focus on reductions in discretionary spend, we expect G&A expenses to stay relatively consistent at current levels. With respect to our revenues. In Q1 2016 we recognized total revenues of $2.9 million, which is an increase of 24% when compared to total revenues of $2.3 million in Q1 2015. Product revenues were $1.3 million during this quarter, as compared to $0.9 million in Q1 2015. Contract revenues were $1.6 million in Q1 2016, as compared to $1.4 million in Q1 a year ago. Turning to the balance sheet, at March 31 we had $9.4 million of cash and $17.7 million of debt. With respect to the 2016 financial guidance, we are reiterating our operating cash burn guidance of approximately $18 million to $20 million and continue to expect total revenues to range from $12 million to $14 million, with growth coming primarily from product revenues from Japan and our managed access program. Looking beyond 2016, based on our current projections, including recent Japan achievements and MAP [ph] in Europe, operating cash burn trends were significantly improved on a year-over-year basis, narrowing our losses into breakeven territory by the end of 2018. And with that, I'll turn over to John Harris, our VP of Cell Therapy. John?

Thanks, Tiago, and good afternoon everyone. As Marc indicated in the opening today, I would like to cover two primary topics. I'll give you an update on where we are today with regard to our managed access program or MAP in Europe and I'll provide more details surrounding our commercial activities in Japan. Let me start out first by talking about Europe at our managed access program, which is also known as a named patient program. It's intended to provide patients and their healthcare providers with early and extended access to therapies for rare and serious diseases in advance of marketing authorization when no satisfactory alternative treatments are available. Now, keeping in mind that patients with hand dysfunction related to scleroderma don't have many good treatment options, and the 24-month data from the 12 patients, open-label SCLERADEC-1 trial from France reported a positive risk-benefit profile. There's been a lot of progress in our first quarter relating to MAP, and I'll give you a quick overview. Our partner for MAP in EMEA is Idis, which is considered a leader in these types of programs. We've also promoted Russ Havranek who spearheaded this program to Cytori's VP of marketing, who will have a primary responsibility and accountability for driving this program. Now we're targeting MAP approvals in 38 countries across EMEA, and thus far we've received written authorization of our ability to access and charge from a number of competent authorities, and we anticipate others coming online in the near future. Based on Q1 progress, we are on track to -- for patients to be treated this year via this program. The key logistical components are now in place with Idis. Cytori's analysis of country-specific pricing for MAP with ECCS-50 has been completed and the data will support both the MAP and…

Hey, John. Thank you. And now let me conclude the prepared comments of the call by just going through our 2016 and early 2017 milestones. So in the first half of 2016 we've completed our plans to get the E.U. managed access program up and running. We've reported the 24-week interim osteoarthritis data. And we've also reported 24-month SCLERADEC-1 scleroderma data. For full STAR enrollment, also a first half objective, to grow on track to complete that as mentioned. In the second half of the year, I would guide you to look to full SCLERADEC-2 enrollment, and that's our best guess, that that'll be finished by the end of the year at this point, 48-week osteoarthritis data, and the ongoing development plan for that indication, on track for that. We also plan to provide more granular updates on how things are going in Japan, our strategy there, and our managed access program in Europe over the second half of the year, when we should have more traction. We also intend to file for European traditional market authorization, assuming our discussions go well with EMEA. And then also our burn IDE funded through Barda is also tracking to approval this year. In 2017, some exciting things we're looking forward to, both the STAR and the SCLERADEC-2 data, on track to be available. That's -- there'd be approval data sets. We intend to file for U.S. PMA approval for that indication if the data supports it. We also intend to file for EMA approval based on that same STAR data set. We also intend to begin enrollment in the phase 1 Barda burn trial and then also complete full enrollment in the Japanese urinary incontinence trial. So with that, I'll turn it over to you for Q&A.

The floor is now open for questions. [Operator Instructions] Our first question comes from Jason Kolbert with Maxim Group.

Hi guys. Thanks a lot. What a great rundown, we really appreciate it. Marc, can you talk a little bit about the E.U. strategy in the ODD? How did that come about? And also, if you could give me a little bit more granularity on how the timelines in 2017 and 2018 come together for scleroderma and how you transition from the conditional marketing approval in Europe and kind of the patient access program to the commercial strategy? And then I'd like to follow up a little bit with a question on Japan.

Yeah. Sure, Jason. So the big difference between the U.S. and Europe is that, in Europe, we're going to be ultimately regulated as an ATMP or an Advanced Tissue Medicinal Product. And unlike the U.S., that gives us access to the whole orphan drug infrastructure. And so based on that fact, we're able to apply for orphan drug designation but not for only the limited products for bedside approach but also kind of looking downstream, and this is built in as a crossover arm in our European trial as -- from an exploratory data perspective, to see if the cryopreserved drug will work as well as a fresh drug. So the new orphan drug designation not only gets us approval through the -- in the benefits of the orphan drug designation for the fresh product but also for the cryopreserved product. An important part of that orphan drug designation though is the ability to apply for conditional marketing approval, which allows you to sell the drug on-label in Europe, achieve reimbursement, but you have to renew that every 12 months. And that's a great interim strategy kind of bridging us between the named patient program that's ongoing today through a partner Idis to full European approval once we have the STAR data. And the timeline on that in Europe still a little bit up in the air because this is a little bit of a new twist and I think we got to wait to see how you may respond. But that might accelerate the timeline from a 2019 or so European approval which is what's at our current timeline to maybe 2018, putting it more from a timing perspective on parity to what we're doing in the U.S. The transition to -- from the managed access program to conditional marketing approval, to full marketing approval, is beautiful synergistic and seamless. So we're talking to doctors now in Europe. We have some sites that have treated patients outside the trial, plus a number of trial sites. We have growing interest from patients. So it will just be a pretty straightforward handoff through those three different programs. Now the key for us is we have one employee in Japan, our intention is not to be the primary commercial driver, we hope to partner this. We have some discussions, we have some interests. But we want to do the right deal there. So we'll continue those until we find the right partner. But we're not waiting. And I think, Jason, you had a follow-up, right?

I did. I just wanted to talk a little bit about the dynamics in Japan because we've been hearing so much about the fast-tracked approval process there, and I just wondered if you could touch on the size and nature of the scleroderma market, and also on urinary incontinence and osteoarthritis of the knee, I think, you know, is there ultimately going to be a commercial strategy emerging out of Japan that's going to take advantage of these new regulations? Thanks.

Thank you, Jason. And I'm going to take advantage of having John on the phone here and let him talk through kind of how he sees that market developing on the commercial side.

Hey, thanks for the question, Jason, and Marc, appreciate the opportunity to address this question head-on. A couple of things that we understand here in Japan well, and one, I think that is probably not emphasized enough is, is that Cytori, by virtue of our class one, you know, device registration already, is taking advantage of this new regenerative medicine law. You know, facilities that use our products need to go through a process in order to register the site and then also the protocol. And so we've been beneficiaries of this new wrinkle in the regenerative medicine offer the past couple of years. These laws were enacted in November of 2014. And we also see this as a potential to really look and address not only kind of the cosmetic approaches, which is breast augmentation and facial rejuvenation, but also for other indications -- therapeutic indications such as osteoarthritis of the knee. So we think that that's a pretty significant near-term driver for us. I think many of you are aware of the demographics of Japan and the well-to-do nature of the elderly population. So we think that bodes well for us moving forward. Now as far as therapeutic applications are concerned, we really think that's what's going to drive the breakthrough growth for us moving forward. We've done a very thorough deep-dive into the scleroderma market in Japan. We feel it's significant. It's a good patient population. And more so than in other regions of the world, scleroderma patients in Japan, you know, are affected by Raynaud's syndrome which is a primary target for us in our therapy. So we think it's going to be a very significant market for us in Japan. But as we indicated in the prepared remarks earlier, we're going to need to navigate the approval process with that. And with that, we have optionality in that we can approach it either on a device or regenerative medicine pathway. And we're in the process of building that strategy today to optimize shareholder value for the Company.

Our next question comes from Joe Pantginis with Roth Partners.

Hey guys, good afternoon. Thanks for taking the question. A couple of little questions. First, with regard to ADRESU in Japan for urinary incontinence, what would you say are the rate-limiting factors with regard to enrollment of 45 patients?

Hey, Joe, it's Marc. Thanks. So, you know, the biggest challenge for this trial honestly is it's not our trial. It's really been driven by Nagoya University. There are multiple sites. They're not all enrolling patients right now. There's really no advertising going on. We're offering to help. And I think they're letting us do more, but ultimately it's kind of being driven as more of an academic-driven site, and that just, you know, just limits our ability to really -- to take full responsibility for enrollment. The patients are there. They continue to follow up, frankly, the ones in the pilot trial, continue to show good results. And I think it's just a matter of getting all the sites up and running frankly. And I think it will enroll. It's just -- we budget it a couple of years for that. I think right now that seems reasonable. The regulatory path here though will be a class three approval as opposed to regenerative medicine product. And as John said, it's kind of a cool feature of our technology, is, depending on a couple of different levers that we can choose to flip, we can make this a class three device or, for a different indication, we can make it a regenerative medicine product, depending on how it best fits our strategy.

It's helpful. Thanks. And then I guess a quick question on Athena but it's a long-term, long answer. Obviously with the results on hand, and you said obviously it's a very large investment if you were going to move further with cardiovascular, so, does it potential open up the arena for business development?

Yeah, Joe, I think it does. I would say it's importance -- BD is critical importance for us. We're focused on Europe and the scleroderma market and partners in Japan which are where we have I think the most momentum commercially. We hope to take scleroderma direct in the U.S. On the cardiovascular side, we are talking to potential partners. But in terms of our overall BD strategy, I would say that's sort of tertiary. I think in the secondary position it's finding a partner for OA. And I think that's an indication where, like cardio, we'd want to have a global partner, and I think that's sort of pending the data that we anticipate getting in Q3.

Great. And my last question I guess, I just want to make sure that I heard correctly because I don't want to overstate, with regard to the MAP update that was provided. You mentioned about country-specific pricing initiatives have been completed. Can you be a little more specific about that?

Sure. So it's a little bit like an iceberg. You sort of -- you see the enrollment in the trials and talking about the MAP. But kind of looking below the water surface is actually a tremendous amount of effort and attention going in to building the commercial nuts and bolts both in the U.S. and in Europe. And that includes coding strategy, we've got two consultants that are helping us build a coding strategy, one in the U.S. and two in Europe. We also have a well-known pricing strategy group that's been helping us define the pricing bans for optimal adoption of the therapy. You know, it's very unique. And we think there's opportunity to price it in a way that rewards its uniqueness and its benefit for a very unmet medical need. And so getting that pricing right is obviously critical. And then we've also talked to well-known rare disease epidemiologist who's been modeling that, that feeds important inputs into the pricing strategy. So on the MAP side, it's where the rubber hits the road, at least here initially. Idis is going to handle all the key logistics for us. We're looking at other groups that have in themselves -- that can support our single employee, who largely does trading in Europe. And then we think that's going to help bridge us to a partnership. And I think by continuing to show progress on that, I think it just makes this opportunity only more valuable for a potential partner who's looking for a novel innovative therapy for the unmet medical need.

Great. Thanks a lot, Marc.

Thank you, Joe.

I'm sorry. Our next question comes from Steve Brozak with WBB Securities.

Hi, this is actually Emad Samad for Steve Brozak.

Hi, Emad.

Hey. So I've got two questions. The benefits of the orphan designation in Europe. Clearly the conditional market approval ability is a major boom to the Company. But could you speak to the other two benefits you mentioned in your press release, primarily around therapeutic formulations for systemic scleroderma administration, and then the cryopreservation, and how that works into your strategy? Because that's a little bit different being able to have that [inaudible] disposal as an orphan designation. Then one more question on Japan.

Yeah, the original orphan designation, Emad, was restricted to using the solution technology and the enzyme technology. And I think that was written kind of reflective of where we were strategically at the time with an investigator-initiated study SCLERADEC-1 in Europe. Now that we have a desire and likely we're anticipating a need to retreat these patients and we're building that in to our commercial modeling, a way to do that in a low-cost way is to use a cryopreserved product so the patient comes in, has the procedures treated, it generates additional doses of the therapeutic that could be stored and called in if needed, the patient needs to be retreated. So this will put those therapies under the rubric of that individual designation. So, just really gives us flexibility downstream, kind of an all-in-one in that drug designation. So, really proves that concept and brings that all together. You know, and I think as we mentioned, sort of alluded to in that release, we get substantial reduction in a lot of regulatory fees by virtue of having that as well. So we've got that locked in as part of that orphan designation.

Yeah, excellent. And the question on Japan actually ties into the Athena data and I guess to a degree the preclinical STAR data that you released as well. To what degree do those data sets now inform or enhance your programs in Japan? I mean you -- in other words, is there an implication positive, you know, positive implication there [inaudible] leverage with the Japanese authorities or not?

Yeah. So, yeah, I mean I cut it back to a point that John made in his prepared remarks about the commercial plan in Japan. We do have the enormous benefit of having a class one approval. Couple that to the new regenerative medicine law, which allows us for many indications, both ascetic and medical. Physicians, clinics and hospitals can get approval to use our technology under the practice of medicine with a relatively straightforward registration process, not approval process but really a registration process. And they can bill patients. And as you probably know, Emad, in Japan, most patients are covered under the social welfare system. Patients pay about 30% for all their medical care and 70% is covered by the government. So when you look at the incremental costs, for example, the elderly patient that has osteoarthritis, that wants to benefit but maybe has limited approved options, they can go to a clinic, get treated, and pay an amount that's not that different than what they might pay for full hospitalization for something else, if they were paying for that at a rate of 30%. So, 100% of the self-pay therapy that's approved under the new regenerative medicine law might be relatively equivalent on a cost basis to 30% of what would be built within the healthcare system. So that opens up a number of these indications, we call them lifestyle indications, if they're not serious life-or-death medical issues but they're potentially addressable under the regenerative medicine law.

Thank you. Thank you for taking the questions.

Thank you.

[Operator Instructions] Our next question comes from Ed Woo with Ascendiant Capital.

Thanks for taking my question. I just had a clarifying question in terms of, did you say that you should have the MAP program up and running and billing by the end of this year? And how quickly do you think it's going to wrap up [inaudible]? How does it lead you guys in terms of thinking about commercialization, I guess, hopefully by 2017-2018?

So, Ed, thanks for the question. So the third part of your question, can you repeat that for me one time?

Sure. Just in terms of how -- I know you mentioned about MAP to, you know, conditional approval to full approval, just in terms of how it's going to lead you to think and how you guys are going to strategize eventual commercialization of scleroderma.

Okay. All right. So in terms of the utilization this year, we've put some what we think are conservative numbers in our projections for this year, since we're getting it up and running, it's a new therapy for a group of patients that really don't have anything to rely on. We're building that from scratch. This is [inaudible] program that we built up. So we're conservative there but we've developed a backlog of patients. So we have a list of patients and physicians who've come to us and said, we want to use this therapy. And so that's continuing to grow on a daily, weekly basis. On the other hand, we also have our Idis who we're working with who's sort of our partner on the ground there that's handling the backend of things, including the logistics, the billing, the regulatory context, every competent authority, 30-some-odd in Europe have to be contacted, and each one of them has got to sign up on that program. We're getting favorable feedbacks generally speaking thus far from each of those competent authorities. And then they also handle the front end. They go to meetings, conferences and help supply information and so forth. And they'll respond to our growing list of patients if physicians here are interested. That'll fall to them. So we do think we'll get some patients treated. There'll be some -- we will be getting -- remunerated for that. And we've set our internal pricing and so forth related to that. So this program can in theory be ongoing until we get full approval. As long as we're -- we've qualified for the compassionate use rules in Europe, which we do now, this program can continue to -- can be a source of revenue for us and therapeutic benefit to patients until we get European approval. And in fact, we've heard that there are some companies that use this as their primary commercialization strategy. That's not our plan but it's an option for certain companies.

Very well. Thanks for the clarification and wish you guys best of luck.

Yeah, Ed, thank you. And I just want to -- I'm going to just bring Steven Kesten, our Head of Clinical, Chief Medical Officer, to comment.

Ed, I want to just further elaborate on your question about how this helps commercialization. There's two very important aspects. With any new technology, there's a period that you have to educate and get advocacy as well as adoption. Then there's the logistics side of setting up new technology. What the MAP program does is it takes that -- it accelerates that process prior to commercialization. By the time of commercialization, you have all your logistics set up in terms of doing procedures, you have adoption of that advocacy, so you could really hit that inflection point without that normal startup period. The second part of this is that we will be seeking to acquire data in a real-world setting. And using that real-world setting, leveraging it as we seek further adoption, advocacy and also to support pricing. So there's some very important features that go beyond to the early revenue that helps in commercialization.

Great. Thank you that. Really appreciate the added feedback. Thank you.

At this time we've used the allotted time for our questions. I will now turn the call back over to Mr. Hedrick for any closing remarks.

Hi, Kristen. Thank you. And once again, thanks for those of you on the call, for your interest in the Company, for your support of the Company. In behalf -- on behalf of the board and management, I want to thank you, shareholders, for approval of the proxy items this year. And I want to say, I hope you guys that are following the Company see what I see every day, and that the Company's near-term prospects are becoming increasingly positive, thanks principally to the hard work and discipline of our team here in San Diego, our team in Japan, and our team in Europe. And I think in addition, there's really been no change to the very bright future prospects for the Company for this amazing technology and for the many patients we hope to treat in the future. So, once again, thank you, and that concludes this call.

Ladies and gentlemen, that does conclude today's conference call. You may now disconnect your lines, and have a wonderful day.