10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission file number: 001-33876

Athersys, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-4864095
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3201 Carnegie Avenue, Cleveland, Ohio	44115-2634
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (216) 431-9900

Former name, former address and former fiscal year, if changed since last report: Not Applicable

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):    Yes  ¨    No  x

The number of outstanding shares of the registrant’s common stock, $0.001 par value, as of August 1, 2014 was 77,282,158.

ATHERSYS, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements	1
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	15
ITEM 4. Controls and Procedures	15
PART II. OTHER INFORMATION
ITEM 6. Exhibits	16
SIGNATURES	17
EXHIBIT INDEX	18

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Athersys, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

	June 30, 2014			December 31, 2013
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	38,750		$	31,948
Accounts receivable		715			520
Prepaid expenses and other		310			387
Total current assets		39,775			32,855
Equipment, net		1,343			1,333
Total assets	$	41,118		$	34,188
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,817		$	2,243
Accrued compensation and related benefits		731			1,067
Accrued clinical trial costs		104			88
Accrued expenses		641			884
Deferred revenue		24			86
Note payable		179			—
Total current liabilities		4,496			4,368
Note payable		—			176
Warrant liabilities		5,744			9,823
Stockholders’ equity:
Preferred stock, at stated value; 10,000,000 shares authorized, and no shares issued and outstanding at June 30, 2014 and December 31, 2013		—			—
Common stock, $0.001 par value; 150,000,000 shares authorized, and 77,247,412 and 70,749,212 shares issued at June 30, 2014 and December 31, 2013, respectively, and 77,247,412 and 70,683,480 shares outstanding at June 30, 2014 and December 31, 2013, respectively		77			71
Additional paid-in capital		306,048			284,323
Treasury stock, at cost; 65,732 shares at December 31, 2013		—			(135	)
Accumulated deficit		(275,247	)		(264,438	)
Total stockholders’ equity		30,878			19,821
Total liabilities and stockholders’ equity	$	41,118		$	34,188

See accompanying notes to unaudited condensed consolidated financial statements.

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Athersys, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except share and per share data)

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Revenues
Contract revenue	$	36		$	194		$	80		$	278
Grant revenue		352			377			1,015			619
Total revenues		388			571			1,095			897
Costs and expenses
Research and development		5,754			5,107			11,981			10,683
General and administrative		1,827			1,555			3,607			3,062
Depreciation		93			86			182			171
Total costs and expenses		7,674			6,748			15,770			13,916
Loss from operations		(7,286	)		(6,177	)		(14,675	)		(13,019	)
Other income, net		42			15			71			32
Income (expense) from change in fair value of warrants, net		7,919			216			3,795			(2,347	)
Net income (loss) and comprehensive income (loss)	$	675		$	(5,946	)	$	(10,809	)	$	(15,334	)
Net income (loss) per share - Basic	$	0.01		$	(0.11	)	$	(0.14	)	$	(0.28	)
Weighted average shares outstanding, basic		77,077,492			56,028,461			76,468,506			54,744,254
Net loss per share - Diluted	$	(0.04	)	$	(0.11	)	$	(0.16	)	$	(0.28	)
Weighted average shares outstanding, diluted		78,778,181			57,841,167			78,407,380			54,744,254

See accompanying notes to unaudited condensed consolidated financial statements.

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Athersys, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six months ended June 30,
	2014			2013
Operating activities
Net loss	$	(10,809	)	$	(15,334	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		182			171
Stock-based compensation		1,180			313
Change in fair value of warrant liabilities		(3,795	)		2,347
Changes in operating assets and liabilities:
Accounts receivable		(195	)		(86	)
Prepaid expenses and other assets		80			(41	)
Accounts payable and accrued expenses		11			30
Deferred revenue		(62	)		51
Net cash used in operating activities		(13,408	)		(12,549	)
Investing activities
Purchases of equipment		(192	)		(273	)
Net cash used in investing activities		(192	)		(273	)
Financing activities
Proceeds from issuance of common stock and warrants, net		19,756			5,834
Purchase of treasury stock		(292	)		—
Proceeds from exercise of warrants		938			352
Net cash provided by financing activities		20,402			6,186
Increase (decrease) in cash and cash equivalents		6,802			(6,636	)
Cash and cash equivalents at beginning of the period		31,948			25,533
Cash and cash equivalents at end of the period	$	38,750		$	18,897

See accompanying notes to unaudited condensed consolidated financial statements.

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Athersys, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Three- and Six-Month Periods Ended June 30, 2014 and 2013

1. Background and Basis of Presentation

We are an international biopharmaceutical company that is focused primarily on the field of regenerative medicine and operate in one business segment. Our operations consist primarily of research and product development activities.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013. The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of financial position and results of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Our critical accounting policies, estimates and assumptions are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is included below in this Quarterly Report on Form 10-Q.

2. Recently Issued Accounting Standard

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 requires an entity to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the amendment provides five steps that an entity should apply when recognizing revenue. The amendment also specifies the accounting of some costs to obtain or fulfill a contract with a customer and expands the disclosure requirements around contracts with customers. An entity can either adopt this amendment retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the update recognized at the date of initial application. The amendment is effective for annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. We have not yet evaluated the impact that the adoption of ASU 2014-09 will have on our consolidated financial statements.

3. Net Loss per Share

Basic and diluted net income (loss) per share have been computed using the weighted-average number of shares of common stock outstanding during the period. The table below reconciles the net income (loss) and the number of shares used to calculate basic and diluted net income (loss) per share for the three and six month periods ended June 30, 2014 and 2013, in thousands.

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Numerator:
Net income (loss) attributable to common stockholders - Basic	$	675		$	(5,946	)	$	(10,809	)	$	(15,334	)
Less: income from change in fair value of warrants		(4,042	)		(164	)		(1,344	)		—
Net loss attributable to common stockholders used to calculate diluted net loss per share	$	(3,367	)	$	(6,110	)	$	(12,153	)	$	(15,334	)
Denominator:
Weighted-average shares outstanding - Basic		77,077			56,028			76,469			54,744
Potentially dilutive common shares outstanding:
Warrants		1,472			1,813			1,938			—
Stock-based awards		229			—			—			—
Weighted-average shares used to calculate diluted net loss per share		78,778			57,841			78,407			54,744
Basic earnings per share	$	0.01		$	(0.11	)	$	(0.14	)	$	(0.28	)
Dilutive earnings per share	$	(0.04	)	$	(0.11	)	$	(0.16	)	$	(0.28	)

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We have outstanding options, restricted stock units and warrants that are not used in the calculation of diluted net loss per share because to do so would be antidilutive. The following instruments were excluded from the calculation of diluted net loss per share because their effects would be antidilutive:

	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Stock options		6,075,165		5,133,518		6,296,165		5,133,518
Restricted stock units		7,578		2,910,093		2,451,634		2,910,093
Warrants		6,310,000		1,459,026		6,310,000		5,459,027
Total		12,392,743		9,502,637		15,057,799		13,502,638

4. Fair Value of Financial Instruments

Fair Value Measurements

We classify the inputs used to measure fair value into the following hierarchy:

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2	Adjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or significant inputs other than quoted prices that are observable for the asset or liability.
Level 3	Unobservable inputs for the asset or liability.

The following table provides a summary of the fair values of our assets and liabilities measured at fair value on a recurring basis as of June 30, 2014 (in thousands):

			Fair Value Measurements at June 30, 2014 Using
Description	Balance as of June 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Warrant liabilities	$	5,744	$	—	$	—	$	5,744

We review and reassess the fair value hierarchy classifications on a quarterly basis. Changes from one quarter to the next related to the observability of inputs in a fair value measurement may result in a reclassification between fair value hierarchy levels. There were no reclassifications for all periods presented.

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The estimated fair value of warrants accounted for as liabilities, representing a level 3 fair value measure, was determined on the issuance date and subsequently marked to market at each financial reporting date. We use the Black-Scholes valuation model to value the warrant liabilities at fair value. The fair value is estimated using the expected volatility based on our historical volatility for warrants issued after January 1, 2013, or for warrants issued prior to 2013, using the historical volatilities of comparable companies from a representative peer group selected based on industry and market capitalization. The fair value of the warrants is determined using probability weighted-average assumptions, when appropriate. The following inputs were used at June 30, 2014:

	Expected Volatility	Risk-Free Interest Rate	Expected Life
Warrants with one year or less remaining term	108.00%	0.11%	0.75 year
Warrants with greater than one year remaining term	69.42% - 76.09%	0.47% - 0.88%	1.59 - 2.71 years

A roll-forward of fair value measurements using significant unobservable inputs (Level 3) for the warrants is as follows (in thousands):

	Three months ended June 30, 2014				Six months ended June 30, 2014
Balance April 1, 2014	$	13,663		Balance January 1, 2014	$	9,823
Issuance of warrants		—		Issuance of warrants January 2014		2,012
Exercise of warrants		—		Exercise of warrants		(2,296	)
Gain included in income from change in fair value of warrants for the period		(7,919	)	Gain included in income from change in fair value of warrants for the period		(3,795	)
Balance June 30, 2014	$	5,744		Balance June 30, 2014	$	5,744

5. Collaborative Arrangements and Revenue Recognition

Pfizer

In 2009, we entered into a collaboration with Pfizer Inc. (“Pfizer”) to develop and commercialize our MultiStem^® product candidate to treat inflammatory bowel disease (“IBD”) for the worldwide market. We are eligible to receive milestone payments upon the successful achievement of certain development, regulatory and commercial milestones, for which we evaluated the nature of the events triggering these contingent payments and concluded that these events constituted substantive milestones that will be recognized as revenue in the period in which the underlying triggering event occurs. No significant milestone revenue has been recognized to date.

Pfizer pays us for manufacturing product for clinical development and commercialization purposes, which is recognized in the period that the manufacturing services are performed. Pfizer would have responsibility for development, regulatory and commercialization and would pay us tiered royalties on worldwide commercial sales of MultiStem IBD products. Alternatively, in lieu of royalties and certain commercialization milestones, we may elect to co-develop with Pfizer and the parties would share development and commercialization expenses and profits/losses on an agreed basis beginning at Phase 3 clinical development.

RTI Surgical, Inc.

In 2010, we entered into an agreement with RTI Surgical, Inc. (“RTI”) to develop and commercialize biologic implants using our technology for certain orthopedic applications in the bone graft substitutes market. We are eligible to receive cash payments upon the successful achievement of certain commercial milestones. We evaluated the nature of the events triggering these contingent payments and concluded that these events are substantive and that revenue will be recognized in the period in which each underlying triggering event occurs. In addition, we receive royalties on worldwide commercial sales of implants using our technologies. No milestone revenue has been recognized to date.

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6. Stock-based Compensation

We have two incentive plans that authorized an aggregate of 11,500,000 shares of common stock for awards to employees, directors and consultants. These equity incentive plans authorize the issuance of equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units, and other stock-based awards. As of June 30, 2014, an aggregate of 1,025,546 shares of common stock underlying stock-based awards have been issued or exercised under our equity incentive plans. In June 2014, we granted 1,178,800 stock options and 460,112 restricted stock units to our employees and directors pursuant to our annual incentive programs. In the three-month period ended June 30, 2014, we issued 232,574 shares of common stock related to restricted stock units that vested during the period.

As of June 30, 2014, a total of 1,726,655 shares were available for issuance under our equity compensation plans and stock-based awards to purchase 8,747,799 shares of common stock were outstanding. For the three-month periods ended June 30, 2014 and 2013, stock-based compensation expense was approximately $601,000 and $196,000, respectively. At June 30, 2014, total unrecognized estimated compensation cost related to unvested stock-based awards was approximately $6,882,000, which is expected to be recognized by the end of 2018 using the straight-line method.

7. Issuance of Common Stock and Warrants

In January 2014, we completed a registered direct offering generating net proceeds of approximately $18.8 million through the issuance of 5,000,000 shares of common stock and warrants to purchase 1,500,000 shares of common stock with an exercise price of $4.50 per share that expire on July 15, 2016. The securities were sold in multiples of a fixed combination of one share of common stock and a warrant to purchase 0.30 shares of common stock at an offering price of $4.10 per fixed combination.

As of June 30, 2014, we had the following outstanding warrants to purchase shares of common stock:

Number of Underlying Shares		Exercise Price		Expiration
	1,310,000	$	3.55	February 2, 2016
	3,021,077	$	1.01	March 14, 2017
	3,500,000	$	2.50	March 31, 2015
	1,500,000	$	4.50	July 15, 2016
	9,331,077

8. Warrant Liabilities

We account for common stock warrants as either liabilities or as equity instruments depending on the specific terms of the warrant agreement. Registered common stock warrants that could require cash settlement are accounted for as liabilities. We classify these warrant liabilities on the consolidated balance sheet as a non-current liability. The warrant liabilities are revalued at fair value at each balance sheet date subsequent to the initial issuance. Changes in the fair market value of the warrant are reflected in the consolidated statement of operations as income (expense) from change in fair value of warrants.

The warrants we issued in the January 2014 and December 2013 registered direct offerings contain a provision for a cash payment in the event that the shares are not delivered to the holder within two trading days. The cash payment equals $10 per day per $2,000 of warrant shares for each day late. The warrants issued in the March 2012 private placement and the February 2011 registered direct offering each contain a provision for net cash settlement in the event that there is a fundamental transaction (e.g., merger, sale of substantially all assets, tender offer, or share exchange). If a fundamental transaction occurs in which the consideration issued consists of all cash or stock in a non-public company, then the warrant holder has the option to receive cash equal to a Black Scholes value of the remaining unexercised portion of the warrant. Further, the March 2012 warrants include price protection in the event we sell stock below the exercise price, as defined, and the exercise price as reduced in February 2013 to $1.01 per share as a result of the October 2012 public offering.

The warrants have been classified as liabilities, as opposed to equity, due to the potential adjustment to the exercise price that could result upon late delivery of the shares or potential cash settlement upon the occurrence of certain events as described above, and are recorded at their fair values at each balance sheet date.

9. Income Taxes

We have net operating loss and research and development tax credit carryforwards that may be used to reduce future taxable income and tax liabilities. Our deferred tax assets have been fully offset by a valuation allowance due to our cumulative losses. As a result of our October 2012 equity offering, our net operating loss carryforwards are significantly limited for use under Section 382 of the Internal Revenue Code.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This discussion and analysis should be read in conjunction with our financial statements and notes thereto included in this Quarterly Report on Form 10-Q and the audited financial statement and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013. Operating results are not necessarily indicative of results that may occur in future periods.

Overview and Recent Developments

We are an international biopharmaceutical company that is focused primarily in the field of regenerative medicine. Our MultiStem^® cell therapy has been evaluated in two completed Phase 1 clinical trials and is currently being evaluated in two ongoing Phase 2 clinical trials, and we are preparing for another Phase 2 clinical study to begin in late 2014. Our current clinical development programs are focused on treating inflammatory and immune disorders, neurological conditions, cardiovascular disease, and other conditions. We are also applying our pharmaceutical discovery capabilities to identify and develop small molecule compounds with potential applications in indications such as obesity, related metabolic conditions and certain neurological conditions.

Current Programs

By applying our proprietary MultiStem cell therapy product, we have established therapeutic product development programs treating inflammatory and immune disorders, neurological conditions, cardiovascular disease, and other conditions. Our programs in the clinical development stage include the following:

• Ischemic Stroke: In our ongoing Phase 2 clinical study, we are evaluating the administration of MultiStem cell therapy to patients that have suffered an ischemic stroke. In contrast to treatment with thrombolytics, which must be administered within 3 to 4 hours after a stroke, we are treating patients one to two days after the stroke has occurred. In preclinical studies, administration of a single dose of MultiStem cells, even several days after a stroke, resulted in significant and durable improvements. This double blind, placebo-controlled trial is being conducted at leading stroke centers across the United States and Europe. The study is expected to enroll approximately 136 patients. Enrollment is expected to be completed in the next several months, with initial results available following analysis of the ninety-day patient data.

• Inflammatory Bowel Disease: MultiStem therapy is being evaluated in a Phase 2 clinical study involving administration of MultiStem to patients suffering from ulcerative colitis, or UC, the most common form of inflammatory bowel disease, or IBD. This double blind, placebo controlled trial being conducted with our partner, Pfizer, in UC patients that have an inadequate response or are refractory to current treatment, completed enrolling patients in December 2013. We released interim results in April 2014, and the study is expected to run through 2014 to complete the secondary evaluations.

The interim results showed that a single administration of MultiStem to a patient population with chronic advanced disease failed to show a meaningful clinical effect during the eight-week evaluation period. Despite not showing a significant improvement compared to placebo in the primary efficacy endpoints, the MultiStem therapy demonstrated favorable tolerability and safety in the eight weeks following treatment. Furthermore, at four weeks, the proportion of responders treated with MultiStem had a statistically significant improvement in their Mayo rectal bleeding score, as compared to patients treated with placebo, raising the possibility of a transient effect from a single MultiStem dose. Additional evaluations are expected over the course of 2014, including data about the impact from a second round of dosing for a subset of patients, longer-term secondary clinical endpoints at sixteen weeks and biomarker analysis.

• Acute Myocardial Infarction: We have evaluated the administration of MultiStem to patients that have suffered an acute myocardial infarction, or AMI, in a Phase 1 clinical study. In 2010, we announced preliminary results for this study, demonstrating a favorable safety profile and encouraging signs of improvement in heart function among patients that exhibited severely compromised heart function prior to treatment. This data was published in a leading peer reviewed scientific journal in 2012. One-year follow-up data suggested that the benefit observed was sustained over time. In 2013, we were awarded a grant for up to $2.8 million to support funding this clinical program, and we are preparing for a Phase 2 clinical study, which is expected to begin in late 2014.

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• Hematopoietic Stem Cell Transplant / GvHD: We completed a Phase 1 clinical study of the administration of MultiStem cells to patients suffering from leukemia or certain other blood-borne cancers in which patients undergo radiation therapy and then receive a hematopoietic stem cell, or HSC, transplant. Such patients are at significant risk for serious complications, including graft-versus-host disease, or GvHD, an imbalance of immune system function caused by transplanted immune cells that attack various tissues and organs in the patient. In 2011 and 2012, we released data from the study, which demonstrated the safety of MultiStem cells in this indication and suggested that the MultiStem therapy may have a beneficial effect in reducing the incidence and severity of GvHD, as well as providing other benefits. The MultiStem therapy has been designated an orphan drug by both the United States Food and Drug Administration, or FDA, and the European Medicines Agency, which may provide market exclusivity and other substantial potential incentives and benefits. We have had several productive interactions with the FDA regarding study design and the potential to accelerate the path to product approval. Due to the significance of the study, study initiation will depend on the progress in our other clinical trials and the achievement of certain business development and financial objectives.

In addition to our current and anticipated clinical development activities, we are engaged in preclinical development and evaluation of MultiStem therapy in other inflammatory and immune, neurological and cardiovascular disease areas, as well as certain other indications. We conduct such work both through our own internal research efforts and through a broad network of collaborations we have established with investigators at leading research institutions across the United States and in Europe.

We are in discussions with third parties about collaborating in the development of MultiStem therapy for certain programs and may enter into one or more business partnership(s) to advance these programs.

We have also collaborated with RTI on the development of products for certain orthopedic applications using our stem cell technologies in the bone graft substitutes market. We began accruing royalty revenue from product sales in 2014 and may receive other payments upon the successful achievement of certain commercial milestones.

We are also engaged in the development of novel small molecule therapies to treat obesity and other conditions, such as schizophrenia. We may elect to enter into a partnership to advance the development of our 5HT2c agonist program, either for the treatment of obesity, schizophrenia, or both indications, as well as for certain programs involving MultiStem.

Financial

In January 2014, we completed a registered direct offering generating net proceeds of approximately $18.8 million through the issuance of 5,000,000 shares of common stock and warrants to purchase 1,500,000 shares of common stock with an exercise price of $4.50 per share that expire on July 15, 2016. The securities were sold in multiples of a fixed combination of one share of common stock and a warrant to purchase 0.30 shares of common stock at an offering price of $4.10 per fixed combination.

Under our equity purchase agreement with Aspire Capital Fund LLC, or Aspire Capital, we sold 250,000 shares of common stock at an average price of $3.78 per share during the six-month period ended June 30, 2014. During the six months ended June 30, 2014, we received proceeds of approximately $938,000 from the exercise of warrants, resulting in the issuance of 928,924 shares of common stock in the aggregate.

Results of Operations

Since our inception, our revenues have consisted of license fees, contract revenues and milestone payments from our collaborators, and grant proceeds primarily from federal, state and foundation grants. We have derived no revenue from the commercial sale of therapeutic products to date, but we receive royalties on commercial sales by a licensee of products using our technologies. Research and development expenses consist primarily of external clinical and preclinical study fees, manufacturing costs, salaries and related personnel costs, legal expenses resulting from intellectual property prosecution processes, facility costs, and laboratory supply and reagent costs. We expense research and development costs as they are incurred. We expect to continue to make significant investments in research and development to enhance our technologies, advance clinical trials of our product candidates, expand our regulatory affairs and product development capabilities, conduct preclinical studies of our product and manufacture our product candidates. General and administrative expenses consist primarily of salaries and related personnel costs, professional fees and other corporate expenses. We expect to continue to incur substantial losses through at least the next several years.

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Three Months Ended June 30, 2014 and 2013

Revenues. Revenues decreased to $0.4 million for the three months ended June 30, 2014 from $0.6 million in the comparable period in 2013, reflecting a $0.2 million decrease in our contract revenues. Absent any new collaborations, we expect our contract revenues to continue at similar levels for the remainder of the year and to be comprised of RTI royalty payments and potential license and milestone payments from Bristol-Myers Squibb. Grant revenue remained consistent at $0.4 million for the three months ended June 30, 2014 and 2013. Our grant revenues may fluctuate from period to period based on the timing of grant-related activities and the award and expiration of new grants.

Research and Development Expenses. Research and development expenses increased to $5.8 million for the three months ended June 30, 2014 from $5.1 million in the comparable period in 2013. The $0.7 million increase is primarily comprised of an increase in personnel costs of $0.3 million, an increase in research supplies of $0.2 million, an increase in stock-based compensation of $0.2 million and an increase in sponsored research costs of $0.2 million. These increases were partially offset by a decrease in clinical and preclinical development costs of $0.2 million. The increase in personnel costs related to selective personnel additions and annual compensation increases. The increase in research supplies was due to an increase in internal process development activities. Stock-based compensation increased primarily due to the impact of vesting of restricted stock units granted in June 2013. Sponsored research costs increased primarily due to an increase in grant-funded programs involving collaboration with certain academic research institutions. The decrease in our clinical and preclinical costs is primarily due to decreased manufacturing costs and central processing costs, partially offset by increased clinical study costs and regulatory costs. We expect our 2014 annual research and development expenses to be higher than the 2013 expenses based on our planned clinical development and manufacturing process development activities, and such costs will vary over time based on clinical manufacturing and clinical trial activity during any given period. Other than external expenses for our clinical and preclinical programs, we do not track our research expenses by project; rather, we track such expenses by the type of cost incurred.

General and Administrative Expenses. General and administrative expenses increased to $1.8 million for the three months ended June 30, 2014 from $1.6 million in the comparable period in 2013. The increase was due primarily to an increase in personnel costs of $0.1 million and an increase in stock based compensation of $0.2 million compared to the same period in 2013, partially offset by a decrease of $0.1 million in other general and administrative costs. The increase in personnel costs related primarily to annual compensation increases, and stock-based compensation increased primarily due to the impact of vesting of restricted stock units granted in June 2013. We expect our 2014 quarterly general and administrative expenses to continue at similar levels during the remainder of the year.

Depreciation. Depreciation expense of $0.1 million remained consistent during the three-month periods ended June 30, 2014 and 2013.

Other Income, net. Other income, net, for the three-month period ended June 30, 2014 and 2013 was comprised of interest income and expense, foreign currency gains and losses and tax credits, and remained relatively consistent during the periods.

Income (Expense) from Change in Fair Value of Warrants, net. Income of $7.9 million was recognized during the three months ended June 30, 2014 for the market value change in our warrant liabilities, compared to income of $0.2 million in the comparable period in 2013. The fluctuation is related to the impact of new warrant issuances and changes in warrant value as affected by the exercise prices, our stock price and the remaining lives of the issued warrants.

Six Months Ended June 30, 2014 and 2013

Revenues. Revenues increased to $1.1 million for the six months ended June 30, 2014 from $0.9 million in the comparable period in 2013, reflecting, in part, a $0.4 million increase in our grant revenues. Our grant revenues may fluctuate from period to period based on the timing of grant-related activities and the award of new grants. This increase was partially offset by a $0.2 million decrease in our contract revenues. Absent any new collaborations, we expect our contract revenues to continue at similar levels for the remainder of the year and to be comprised of RTI royalty payments and potential license and milestone payments from Bristol-Myers Squibb.

10

Research and Development Expenses. Research and development expenses increased to $12.0 million for the six months ended June 30, 2014 from $10.7 million in the comparable period in 2013. The increase of $1.3 million related primarily to an increase in personnel costs of $0.6 million, an increase in stock-based compensation of $0.4 million, an increase in sponsored research costs of $0.3 million, an increase in research supplies of $0.2 million and an increase in legal and professional fees of $0.2 million. These increases were partially offset by a decrease in clinical and preclinical development costs of $0.4 million. Personnel costs rose due to selective personnel additions and annual compensation increases. Stock-based compensation increased primarily due to the impact of vesting of restricted stock units granted in June 2013. Sponsored research costs increased primarily due to an increase in grant-funded programs involving collaboration with certain academic research institutions. The increase in research supplies was due to an increase in internal process development activities. The increase in legal fees resulted from increased patent expenses associated with patent prosecution, national filings, and interparty proceedings and related filings. The decrease in our clinical and preclinical costs is primarily due to decreased manufacturing costs and central processing costs, partially offset by increased clinical study costs and increased process development costs. We expect our 2014 annual research and development expenses to be higher than the 2013 expenses based on our planned clinical development and manufacturing process development activities, and such costs will vary over time based on clinical manufacturing and clinical trial activity during any given period. Other than external expenses for our clinical and preclinical programs, we do not track our research expenses by project; rather, we track such expenses by the type of cost incurred.

General and Administrative Expenses. General and administrative expenses increased to $3.6 million for the six months ended June 30, 2014 from $3.1 million in the comparable period in 2013. The $0.5 million increase was due primarily to an increase in personnel costs of $0.2 million and an increase in stock based compensation of $0.5 million compared to the same period in 2013. These increases were partially offset by a decrease of $0.1 million in other general and administrative costs and a decrease of $0.1 million in legal and professional fees. The increase in personnel costs related primarily to annual compensation increases, and stock-based compensation increased primarily due to the impact of vesting of restricted stock units granted in June 2013. We expect our 2014 quarterly general and administrative expenses to continue at similar levels during the remainder of the year.

Depreciation. Depreciation expense of $0.2 million remained consistent during the six-month periods ended June 30, 2014 and 2013.

Other Income, net. Other income, net, for the six-month period ended June 30, 2014 and 2013 was comprised of interest income and expense, foreign currency gains and losses and tax credits, and remained relatively consistent during the periods.

Income (Expense) from Change in Fair Value of Warrants, net. Income of $3.8 million was recognized during the six months ended June 30, 2014 for the market value change in our warrant liabilities, and expense of $2.3 million was recognized during the six months ended June 30, 2013. The fluctuation is related to the impact of new warrant issuances and changes in warrant value as affected by the exercise prices, our stock price and the remaining lives of the issued warrants.

Liquidity and Capital Resources

Our sources of liquidity include our cash balances and any available-for-sale securities on hand. At June 30, 2014, we had $38.8 million in cash and cash equivalents. We have primarily financed our operations through business collaborations, grant funding and equity financings. We conduct all of our operations through our subsidiary, ABT Holding Company.

We have incurred losses since inception of operations in 1995 and had an accumulated deficit of $275 million at June 30, 2014. Our losses have resulted principally from costs incurred in research and development, clinical and preclinical product development, acquisition and licensing costs, and general and administrative costs associated with our operations. We have used the financing proceeds from equity and debt offerings and other sources of capital to develop our technologies, to discover and develop therapeutic product candidates, develop business collaborations and to acquire certain technologies and assets.

In January 2014, we generated net proceeds of approximately $18.8 million in a registered direct offering. Also, in December 2013, we completed a registered direct offering generating net proceeds of approximately $18.4 million.

11

We have an equity purchase agreement with Aspire Capital, whereby Aspire Capital is committed to purchase up to an aggregate of $25.0 million of shares of our common stock over a two-year period ending in 2015, subject to our election to sell any such shares. Under the agreement, we have the right to sell shares, subject to certain volume limitations and a minimum floor price, at a modest discount to the prevailing market price.

During the quarter ended June 30, 2014, we did not sell any shares to Aspire Capital, and during the six-month period ended June 30, 2014, we sold 250,000 shares of common stock at an average price of $3.78 per share. In accordance with the equity purchase agreement, we could elect to sell to Aspire Capital up to $23.5 million of shares of common stock.

During the six months ended June 30, 2014, we received proceeds of approximately $938,000 from the exercise of warrants, resulting in the issuance of 928,924 shares of common stock in the aggregate.

Under the terms of our agreement with Pfizer, we are eligible to receive milestone payments of up to $105 million upon the successful achievement of certain development, regulatory and commercial milestones, though there can be no assurance that we will achieve any milestones. No significant milestone payments have been received as of June 30, 2014. Pfizer pays us for manufacturing product for clinical development and commercialization purposes. Pfizer has responsibility for development, regulatory and commercialization and would pay us tiered royalties on worldwide commercial sales of MultiStem IBD products. Alternatively, in lieu of royalties and certain commercialization milestones, we may elect to co-develop with Pfizer and the parties would share development and commercialization expenses and profits/losses on an agreed basis beginning at Phase 3 clinical development.

Under the terms of our RTI agreement, we are eligible to receive cash payments upon the successful achievement of certain commercial milestones, though there can be no assurance that such milestones will be achieved, and no milestone payments have been received as of June 30, 2014. In addition, we receive royalties on worldwide commercial sales of implants using our technologies, which commenced in 2014.

We remain entitled to receive license fees for targets that were delivered to Bristol-Myers Squibb under our completed 2001 collaboration, as well as milestone payments and royalties on compounds developed by Bristol-Myers Squibb using our technology, though there can be no assurance that we will achieve any such milestones or royalties.

In 2012, we entered into an arrangement with the Global Cardiovascular Innovation Center and the Cleveland Clinic Foundation in which we are entitled to proceeds of up to $500,000 in the form of a forgivable loan to fund certain remaining preclinical work using MultiStem to treat congestive heart failure and for preparing the program for an investigational new drug application, or IND, with the FDA. Interest on the loan accrues at a fixed rate of 4.25% per annum and is added to the outstanding principal. The loan is forgivable based on the achievement of a certain milestone within three to four years. As of June 30, 2014, we had drawn $166,000 of this financing, which is recorded as a current liability of $179,000 (including accrued interest) since the note is due in the first quarter of 2015 if the forgiveness conditions are not met.

In 2011, we entered into an alliance with Fast Forward, a nonprofit subsidiary of the National Multiple Sclerosis Society, pursuant to which Fast Forward is funding the development of MultiStem for the treatment of multiple sclerosis through the filing of an IND. In return, upon successful achievement of certain development and commercialization milestones, we would make certain milestone payments to Fast Forward.

When we hold investments, our available-for-sale securities typically include United States government obligations and corporate debt securities. Over the past few years, we have been investing conservatively due to the ongoing macro-economic conditions and have prioritized liquidity and the preservation of principal in lieu of potentially higher returns. As a result, we have experienced no losses on the principal of our investments and have held our investments until maturity. We had no available-for-sale securities at June 30, 2014. Our fixed assets are used for internal research and development and, therefore, are not impacted by these external factors.

We will require substantial additional funding in order to continue our research and product development programs, including preclinical evaluation and clinical trials of our product candidates and manufacturing process development. At June 30, 2014, we had available cash and cash equivalents of $38.8 million, and we intend to meet our short-term liquidity needs with available cash. Over the longer term, we will make use of available cash, but will have to continue to generate additional funding to meet our needs, through business development opportunities, as well as grant-funding opportunities. Additionally, we are raising capital from time to time through the equity purchase agreement with Aspire Capital, subject to its volume and price limitations. We also manage our cash by deferring certain discretionary costs and staging certain development costs to extend our operational runway, as needed. Over time, we may consider the sale of additional equity securities, or possibly borrowing from financing institutions.

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Our capital requirements over time depend on a number of factors, including progress in our clinical development programs, our clinical and preclinical pipeline of additional opportunities and their stage of development, additional external costs such as payments to contract research organizations and contract manufacturing organizations, additional personnel costs, and the costs in filing and prosecuting patent applications and enforcing patent claims. The availability of funds impacts our ability to advance multiple clinical programs concurrently, and any shortfall in funding could result in our having to delay or curtail research and development efforts. Further, these requirements may change at any time due to technological advances, business development activity or competition from other companies. We cannot assure you that adequate funding will be available to us or, if available, that it will be available on acceptable terms.

We expect to continue to incur substantial losses through at least the next several years and may incur losses in subsequent periods. The amount and timing of our future losses are highly uncertain. Our ability to achieve and thereafter sustain profitability will be dependent upon, among other things, successfully developing, commercializing and obtaining regulatory approval or clearances for our technologies and products resulting from these technologies.

Cash Flow Analysis

Net cash used in operating activities was $6.1 million for the three months ended June 30, 2014 and $6.4 million for the three months ended June 30, 2013, and net cash used in operating activities was $13.4 million for the six months ended June 30, 2014 and $12.5 million for the six months ended June 30, 2013, representing the use of cash to fund operations, clinical trials, and preclinical and process development activities. We expect that net cash used in operating activities will be higher in total in 2014 compared to 2013 in connection with increased clinical development activities for our MultiStem product candidates and platform. Net cash used in operating activities has fluctuated significantly on a quarter-to-quarter basis over the past few years primarily due to the receipt of collaboration fees and payment of specific clinical trial costs, such as clinical manufacturing campaigns, contract research organization costs, and manufacturing process development projects.

Net cash used in investing activities was $0.2 million and $0.3 million for the six months ended June 30, 2014 and 2013, respectively. The fluctuations from period-to-period were due to purchases of equipment supporting our operations. We anticipate that our overall capital equipment expenditures will be similar in 2014 as compared to 2013.

Financing activities provided cash of $20.4 million for the six months ended June 30, 2014 related to the January 2014 registered direct offering, the exercise of common stock warrants, and equity sales to Aspire Capital, net of treasury stock purchases. Financing activities provided cash of $6.2 million for the six months ended June 30, 2013 as a result of equity sales to Aspire Capital and the exercise of common stock warrants during the period.

Investors in certain of our equity offerings have received warrants to purchase shares of our common stock, of which warrants to purchase an aggregate of 9.3 million shares remain outstanding at June 30, 2014 with a weighted average exercise price of $2.49 per share. The exercise of warrants could provide us with cash proceeds. During the three months ended June 30, 2014, no warrants were exercised.

We have no off-balance sheet arrangements.

Critical Accounting Policies and Management Estimates

The SEC defines critical accounting policies as those that are, in management’s view, important to the portrayal of our financial condition and results of operations and demanding of management’s judgment. Our discussion and analysis of financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates on experience and on various assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. A description of these accounting policies and estimates is included in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2013. There have been no material changes in our accounting policies and estimates as described in our Annual Report. For additional information regarding our accounting policies, see Note B to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2013.

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Cautionary Note on Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These forward-looking statements relate to, among other things, the expected timetable for development of our product candidates, our growth strategy, and our future financial performance, including our operations, economic performance, financial condition, prospects, and other future events. We have attempted to identify forward-looking statements by using such words as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “should,” “suggest,” “will,” or other similar expressions. These forward-looking statements are only predictions and are largely based on our current expectations. These forward-looking statements appear in a number of places in this Quarterly Report on Form 10-Q.

In addition, a number of known and unknown risks, uncertainties, and other factors could affect the accuracy of these statements. Some of the more significant known risks that we face are the risks and uncertainties inherent in the process of discovering, developing, and commercializing products that are safe and effective for use as human therapeutics, including the uncertainty regarding market acceptance of our product candidates and our ability to generate revenues. These risks may cause our actual results, levels of activity, performance, or achievements to differ materially from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements.

Other important factors to consider in evaluating our forward-looking statements include:

• our ability to raise capital to fund our operations;

• the timing and nature of results from our MultiStem clinical trials;

• the possibility of delays in, adverse results of, and excessive costs of the development process;

• our ability to successfully initiate and complete clinical trials of our product candidates;

• uncertainty regarding market acceptance of our product candidates and our ability to generate revenues, including MultiStem cell therapy for the prevention of GvHD and the treatment of IBD, AMI, stroke and other disease indications;

• changes in external market factors;

• changes in our industry’s overall performance;

• changes in our business strategy;

• our ability to protect and defend our intellectual property and related business operations, including the successful prosecution of our patent applications and enforcement of our patent rights, and operate our business in an environment of rapid technology and intellectual property development;

• our possible inability to realize commercially valuable discoveries in our collaborations with pharmaceutical and other biotechnology companies;

• our ability to meet milestones under our collaboration agreements;

• our collaborators’ ability to continue to fulfill their obligations under the terms of our collaboration agreement;

• the success of our efforts to enter into new strategic partnerships and advance our programs, including, without limitation, in Japan;

• our possible inability to execute our strategy due to changes in our industry or the economy generally;

• changes in productivity and reliability of suppliers; and

• the success of our competitors and the emergence of new competitors.

Although we currently believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee our future results, levels of activity or performance. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You are advised, however, to consult any further disclosures we make on related subjects in our reports on Forms 10-Q, 8-K and 10-K furnished to the SEC. You should understand that it is not possible to predict or identify all risk factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

14

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

Our exposure to interest rate risk is related to our investment portfolio and our borrowings. Fixed rate investments and borrowings may have their fair market value adversely impacted from changes in interest rates. Due in part to these factors, our future investment income may fall short of expectations. Further, we may suffer losses in investment principal if we are forced to sell securities that have declined in market value due to changes in interest rates. When appropriate based on interest rates, we invest our excess cash primarily in debt instruments of the United States government and its agencies and corporate debt securities, and as of June 30, 2014, we had no investments. Over the past several years, we have been investing conservatively due to economic conditions and have prioritized liquidity and the preservation of principal in lieu of potentially higher returns. As a result, we have experienced no losses on the principal of our investments.

We enter into loan arrangements with financial institutions when needed and when available to us. At June 30, 2014, we had no borrowings outstanding other than a potentially forgivable note payable associated with local grant funding bearing fixed, forgivable interest of 4.25% per annum.

Item 4. Controls and Procedures.

Disclosure controls and procedures

Our management, under the supervision of and with the participation of our Chief Executive Officer and our Vice President of Finance, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as of the end of the period covered by this quarterly report on Form 10-Q. Based upon this evaluation, our Chief Executive Officer and Vice President of Finance have concluded that, as of the end of the period covered by this quarterly report on Form 10-Q, our disclosure controls and procedures were effective.

Changes in internal control over financial reporting

During the second quarter of 2014, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

15

PART II. OTHER INFORMATION

Item 6. Exhibits.

Exhibit No.	Description
31.1	Certification of Gil Van Bokkelen, Chairman and Chief Executive Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Laura K. Campbell, Vice President of Finance, pursuant to SEC Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Gil Van Bokkelen, Chairman and Chief Executive Officer, and Laura Campbell, Vice President of Finance, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

16

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ATHERSYS, INC.
Date: August 11, 2014	/s/ Gil Van Bokkelen
	Gil Van Bokkelen
	Chairman and Chief Executive Officer
	(principal executive officer authorized to sign on behalf of the registrant)
	/s/ Laura K. Campbell
	Laura K. Campbell
	Vice President of Finance
	(principal financial and accounting officer authorized to sign on behalf of the registrant)

17

EXHIBIT INDEX

Exhibit No.	Description
31.1	Certification of Gil Van Bokkelen, Chairman and Chief Executive Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Laura K. Campbell, Vice President of Finance, pursuant to SEC Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Gil Van Bokkelen, Chairman and Chief Executive Officer, and Laura Campbell, Vice President of Finance, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

18

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Gil Van Bokkelen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Athersys, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 11, 2014

/s/ Gil Van Bokkelen

Gil Van Bokkelen

Chief Executive Officer and Chairman of the Board of Directors

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Laura K. Campbell, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Athersys, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 11, 2014

/s/ Laura K. Campbell

Laura K. Campbell

Vice President of Finance

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Athersys, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

Date: August 11, 2014

/s/ Gil Van Bokkelen
Name:	Gil Van Bokkelen
Title:	Chairman and Chief Executive Officer
/s/ Laura K. Campbell
Name:	Laura K. Campbell
Title:	Vice President of Finance

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

XML

Fair Value of Financial Instruments - Roll-Forward of Fair Value Measurements Using Significant Unobservable Inputs (Level 3) for Warrants (Detail) (Outstanding Warrants [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014
Outstanding Warrants [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Beginning Balance	$ 13,663	$ 9,823
Issuance of warrants	0	2,012
Exercise of warrants	0	(2,296)
Gain included in income from change in fair value of warrants for the period	(7,919)	(3,795)
Ending Balance	$ 5,744	$ 5,744

XML

Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2014

Investments All Other Investments [Abstract]

Fair Value of Financial Instruments

4. Fair Value of Financial Instruments

Fair Value Measurements

We classify the inputs used to measure fair value into the following hierarchy:

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2	Adjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or significant inputs other than quoted prices that are observable for the asset or liability.
Level 3	Unobservable inputs for the asset or liability.

The following table provides a summary of the fair values of our assets and liabilities measured at fair value on a recurring basis as of June 30, 2014 (in thousands):

			Fair Value Measurements at June 30, 2014 Using
Description	Balance as of June 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Warrant liabilities	$	5,744	$	—	$	—	$	5,744

We review and reassess the fair value hierarchy classifications on a quarterly basis. Changes from one quarter to the next related to the observability of inputs in a fair value measurement may result in a reclassification between fair value hierarchy levels. There were no reclassifications for all periods presented.

The estimated fair value of warrants accounted for as liabilities, representing a level 3 fair value measure, was determined on the issuance date and subsequently marked to market at each financial reporting date. We use the Black-Scholes valuation model to value the warrant liabilities at fair value. The fair value is estimated using the expected volatility based on our historical volatility for warrants issued after January 1, 2013, or for warrants issued prior to 2013, using the historical volatilities of comparable companies from a representative peer group selected based on industry and market capitalization. The fair value of the warrants is determined using probability weighted-average assumptions, when appropriate. The following inputs were used at June 30, 2014:

	Expected Volatility	Risk-Free Interest Rate	Expected Life
Warrants with one year or less remaining term	108.00%	0.11%	0.75 year
Warrants with greater than one year remaining term	69.42% - 76.09%	0.47% - 0.88%	1.59 - 2.71 years

A roll-forward of fair value measurements using significant unobservable inputs (Level 3) for the warrants is as follows (in thousands):

	Three months ended June 30, 2014				Six months ended June 30, 2014
Balance April 1, 2014	$	13,663		Balance January 1, 2014	$	9,823
Issuance of warrants		—		Issuance of warrants January 2014		2,012
Exercise of warrants		—		Exercise of warrants		(2,296	)
Gain included in income from change in fair value of warrants for the period		(7,919	)	Gain included in income from change in fair value of warrants for the period		(3,795	)
Balance June 30, 2014	$	5,744		Balance June 30, 2014	$	5,744

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Issuance of Common Stock and Warrants - Outstanding Warrants to Purchase Shares of Common Stock (Detail) (USD $)				6 Months Ended
	Jun. 30, 2014	Jan. 31, 2014	Feb. 28, 2013	Jun. 30, 2014 February 2, 2016 [Member]	Jun. 30, 2014 March 14, 2017 [Member]	Jun. 30, 2014 March 31, 2015 [Member]	Jun. 30, 2014 July 15, 2016 [Member]
Class of Warrant or Right [Line Items]
Number of Underlying Shares	9,331,077			1,310,000	3,021,077	3,500,000	1,500,000
Exercise Price		$ 4.50	$ 1.01	$ 3.55	$ 1.01	$ 2.50	$ 4.50
Expiration				Feb. 02, 2016	Mar. 14, 2017	Mar. 31, 2015	Jul. 15, 2016

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Issuance of Common Stock and Warrants - Additional Information (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended	6 Months Ended
	Jan. 31, 2014	Jun. 30, 2014	Jun. 30, 2013	Feb. 28, 2013
Equity [Abstract]
Proceeds from issuance of common stock, net	$ 18,800	$ 19,756	$ 5,834
Issuance of common stock, new issues	5,000,000
Warrants issued to purchase common stock	1,500,000	3,500,000
Warrant exercise price per share	$ 4.50			$ 1.01
Warrants exercise expiration date	Jul. 15, 2016
Common stock per warrant conversion ratio	0.30
Common stock and warrant combined offering price	$ 4.10

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Warrant Liability - Additional Information (Detail) (USD $)	6 Months Ended
	Jun. 30, 2014	Jan. 31, 2014	Feb. 28, 2013
Equity [Abstract]
Terms of issuance of warrant demanding cash payments	The warrants we issued in the January 2014 and December 2013 registered direct offerings contain a provision for a cash payment in the event that the shares are not delivered to the holder within two trading days. The cash payment equals $10 per day per $2,000 of warrant shares for each day late.
Number of trading days to deliver shares under warrants provision	2 days
Value of warrants considered for cash payment for late delivery of shares	$ 2,000
Cash payment per day for warrants shares not delivered as per provision	$ 10
Exercise Price		$ 4.50	$ 1.01

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Net Loss per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Net Loss per Share

3. Net Loss per Share

Basic and diluted net income (loss) per share have been computed using the weighted-average number of shares of common stock outstanding during the period. The table below reconciles the net income (loss) and the number of shares used to calculate basic and diluted net income (loss) per share for the three and six month periods ended June 30, 2014 and 2013, in thousands.

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Numerator:
Net income (loss) attributable to common stockholders - Basic	$	675		$	(5,946	)	$	(10,809	)	$	(15,334	)
Less: income from change in fair value of warrants		(4,042	)		(164	)		(1,344	)		—
Net loss attributable to common stockholders used to calculate diluted net loss per share	$	(3,367	)	$	(6,110	)	$	(12,153	)	$	(15,334	)
Denominator:
Weighted-average shares outstanding - Basic		77,077			56,028			76,469			54,744
Potentially dilutive common shares outstanding:
Warrants		1,472			1,813			1,938			—
Stock-based awards		229			—			—			—
Weighted-average shares used to calculate diluted net loss per share		78,778			57,841			78,407			54,744
Basic earnings per share	$	0.01		$	(0.11	)	$	(0.14	)	$	(0.28	)
Dilutive earnings per share	$	(0.04	)	$	(0.11	)	$	(0.16	)	$	(0.28	)

We have outstanding options, restricted stock units and warrants that are not used in the calculation of diluted net loss per share because to do so would be antidilutive. The following instruments were excluded from the calculation of diluted net loss per share because their effects would be antidilutive:

	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Stock options		6,075,165		5,133,518		6,296,165		5,133,518
Restricted stock units		7,578		2,910,093		2,451,634		2,910,093
Warrants		6,310,000		1,459,026		6,310,000		5,459,027
Total		12,392,743		9,502,637		15,057,799		13,502,638

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 38,750	$ 31,948
Accounts receivable	715	520
Prepaid expenses and other	310	387
Total current assets	39,775	32,855
Equipment, net	1,343	1,333
Total assets	41,118	34,188
Current liabilities:
Accounts payable	2,817	2,243
Accrued compensation and related benefits	731	1,067
Accrued clinical trial costs	104	88
Accrued expenses	641	884
Deferred revenue	24	86
Note payable	179
Total current liabilities	4,496	4,368
Note payable		176
Warrant liabilities	5,744	9,823
Stockholders' equity:
Preferred stock, at stated value; 10,000,000 shares authorized, and no shares issued and outstanding at June 30, 2014 and December 31, 2013	0	0
Common stock, $0.001 par value; 150,000,000 shares authorized, and 77,247,412 and 70,749,212 shares issued at June 30, 2014 and December 31, 2013, respectively, and 77,247,412 and 70,683,480 shares outstanding at June 30, 2014 and December 31, 2013, respectively	77	71
Additional paid-in capital	306,048	284,323
Treasury stock, at cost; 65,732 shares at December 31, 2013		(135)
Accumulated deficit	(275,247)	(264,438)
Total stockholders' equity	30,878	19,821
Total liabilities and stockholders' equity	$ 41,118	$ 34,188

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Background and Basis of Presentation

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Background and Basis of Presentation

1. Background and Basis of Presentation

We are an international biopharmaceutical company that is focused primarily on the field of regenerative medicine and operate in one business segment. Our operations consist primarily of research and product development activities.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013. The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of financial position and results of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Our critical accounting policies, estimates and assumptions are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is included below in this Quarterly Report on Form 10-Q.

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Fair Value of Financial Instruments - Summary of Fair Values of Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant liabilities	$ 5,744	$ 9,823
Fair Value Measurements, Recurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant liabilities	5,744
Fair Value Measurements, Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant liabilities
Fair Value Measurements, Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant liabilities
Fair Value Measurements, Recurring Basis [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant liabilities	$ 5,744

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Fair Value of Financial Instruments - Fair Value of Warrants Based on Historical Volatilities (Detail)	6 Months Ended
	Jun. 30, 2014
Warrants With One Year or Less Remaining Term [Member]
Class of Warrant or Right [Line Items]
Expected Volatility	108.00%
Risk-free interest rate	0.11%
Expected Life	9 months
Warrants With Greater Than One Year Remaining Term [Member] | Minimum [Member]
Class of Warrant or Right [Line Items]
Expected Volatility	69.42%
Risk-free interest rate	0.47%
Expected Life	1 year 7 months 2 days
Warrants With Greater Than One Year Remaining Term [Member] | Maximum [Member]
Class of Warrant or Right [Line Items]
Expected Volatility	76.09%
Risk-free interest rate	0.88%
Expected Life	2 years 8 months 16 days

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Recently Issued Accounting Standard

6 Months Ended

Jun. 30, 2014

Accounting Changes And Error Corrections [Abstract]

Recently Issued Accounting Standard

2. Recently Issued Accounting Standard

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 requires an entity to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the amendment provides five steps that an entity should apply when recognizing revenue. The amendment also specifies the accounting of some costs to obtain or fulfill a contract with a customer and expands the disclosure requirements around contracts with customers. An entity can either adopt this amendment retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the update recognized at the date of initial application. The amendment is effective for annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. We have not yet evaluated the impact that the adoption of ASU 2014-09 will have on our consolidated financial statements.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Statement Of Financial Position [Abstract]
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	77,247,412	70,749,212
Common stock, shares outstanding	77,247,412	70,683,480
Treasury stock, shares outstanding		65,732

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Investments All Other Investments [Abstract]

Summary of Fair Values of Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table provides a summary of the fair values of our assets and liabilities measured at fair value on a recurring basis as of June 30, 2014 (in thousands):

			Fair Value Measurements at June 30, 2014 Using
Description	Balance as of June 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Warrant liabilities	$	5,744	$	—	$	—	$	5,744

Fair Value of Warrants Based on Historical Volatilities

The following inputs were used at June 30, 2014:

	Expected Volatility	Risk-Free Interest Rate	Expected Life
Warrants with one year or less remaining term	108.00%	0.11%	0.75 year
Warrants with greater than one year remaining term	69.42% - 76.09%	0.47% - 0.88%	1.59 - 2.71 years

Roll-Forward of Fair Value Measurements Using Significant Unobservable Inputs (Level 3) for Warrants

A roll-forward of fair value measurements using significant unobservable inputs (Level 3) for the warrants is as follows (in thousands):

	Three months ended June 30, 2014				Six months ended June 30, 2014
Balance April 1, 2014	$	13,663		Balance January 1, 2014	$	9,823
Issuance of warrants		—		Issuance of warrants January 2014		2,012
Exercise of warrants		—		Exercise of warrants		(2,296	)
Gain included in income from change in fair value of warrants for the period		(7,919	)	Gain included in income from change in fair value of warrants for the period		(3,795	)
Balance June 30, 2014	$	5,744		Balance June 30, 2014	$	5,744

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 01, 2014
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Entity Registrant Name	ATHERSYS, INC / NEW
Entity Central Index Key	0001368148
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		77,282,158

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Issuance of Common Stock and Warrants (Tables)

6 Months Ended

Jun. 30, 2014

Equity [Abstract]

Outstanding Warrants to Purchase Shares of Common Stock

As of June 30, 2014, we had the following outstanding warrants to purchase shares of common stock:

Number of Underlying Shares		Exercise Price		Expiration
	1,310,000	$	3.55	February 2, 2016
	3,021,077	$	1.01	March 14, 2017
	3,500,000	$	2.50	March 31, 2015
	1,500,000	$	4.50	July 15, 2016
	9,331,077

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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues
Contract revenue	$ 36	$ 194	$ 80	$ 278
Grant revenue	352	377	1,015	619
Total revenues	388	571	1,095	897
Costs and expenses
Research and development	5,754	5,107	11,981	10,683
General and administrative	1,827	1,555	3,607	3,062
Depreciation	93	86	182	171
Total costs and expenses	7,674	6,748	15,770	13,916
Loss from operations	(7,286)	(6,177)	(14,675)	(13,019)
Other income, net	42	15	71	32
Income (expense) from change in fair value of warrants, net	7,919	216	3,795	(2,347)
Net income (loss) and comprehensive income (loss)	$ 675	$ (5,946)	$ (10,809)	$ (15,334)
Net income (loss) per share - Basic	$ 0.01	$ (0.11)	$ (0.14)	$ (0.28)
Weighted average shares outstanding, basic	77,077,492	56,028,461	76,468,506	54,744,254
Net loss per share - Diluted	$ (0.04)	$ (0.11)	$ (0.16)	$ (0.28)
Weighted average shares outstanding, diluted	78,778,181	57,841,167	78,407,380	54,744,254

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Issuance of Common Stock and Warrants

6 Months Ended

Jun. 30, 2014

Equity [Abstract]

Issuance of Common Stock and Warrants

7. Issuance of Common Stock and Warrants

In January 2014, we completed a registered direct offering generating net proceeds of approximately $18.8 million through the issuance of 5,000,000 shares of common stock and warrants to purchase 1,500,000 shares of common stock with an exercise price of $4.50 per share that expire on July 15, 2016. The securities were sold in multiples of a fixed combination of one share of common stock and a warrant to purchase 0.30 shares of common stock at an offering price of $4.10 per fixed combination.

As of June 30, 2014, we had the following outstanding warrants to purchase shares of common stock:

Number of Underlying Shares		Exercise Price		Expiration
	1,310,000	$	3.55	February 2, 2016
	3,021,077	$	1.01	March 14, 2017
	3,500,000	$	2.50	March 31, 2015
	1,500,000	$	4.50	July 15, 2016
	9,331,077

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Stock-based Compensation

6 Months Ended

Jun. 30, 2014

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-based Compensation

6. Stock-based Compensation

We have two incentive plans that authorized an aggregate of 11,500,000 shares of common stock for awards to employees, directors and consultants. These equity incentive plans authorize the issuance of equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units, and other stock-based awards. As of June 30, 2014, an aggregate of 1,025,546 shares of common stock underlying stock-based awards have been issued or exercised under our equity incentive plans. In June 2014, we granted 1,178,800 stock options and 460,112 restricted stock units to our employees and directors pursuant to our annual incentive programs. In the three-month period ended June 30, 2014, we issued 232,574 shares of common stock related to restricted stock units that vested during the period.

As of June 30, 2014, a total of 1,726,655 shares were available for issuance under our equity compensation plans and stock-based awards to purchase 8,747,799 shares of common stock were outstanding. For the three-month periods ended June 30, 2014 and 2013, stock-based compensation expense was approximately $601,000 and $196,000, respectively. At June 30, 2014, total unrecognized estimated compensation cost related to unvested stock-based awards was approximately $6,882,000, which is expected to be recognized by the end of 2018 using the straight-line method.

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Fair Value of Financial Instruments - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2014	Jan. 31, 2014
Fair Value Disclosures [Abstract]
Number of warrants issued in two series to purchase common stock	3,500,000	1,500,000
Number of warrants not exercisable until specified date	1,401,218
Date warrants became exercisable	Jun. 03, 2014

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Background and Basis of Presentation - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2014 Segment
Accounting Policies [Abstract]
Number of business segments	1

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Recently Issued Accounting Standard (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Changes And Error Corrections [Abstract]

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 requires an entity to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the amendment provides five steps that an entity should apply when recognizing revenue. The amendment also specifies the accounting of some costs to obtain or fulfill a contract with a customer and expands the disclosure requirements around contracts with customers. An entity can either adopt this amendment retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the update recognized at the date of initial application. The amendment is effective for annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. We have not yet evaluated the impact that the adoption of ASU 2014-09 will have on our consolidated financial statements.

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Warrant Liabilities

6 Months Ended

Jun. 30, 2014

Text Block [Abstract]

Warrant Liabilities

8. Warrant Liabilities

We account for common stock warrants as either liabilities or as equity instruments depending on the specific terms of the warrant agreement. Registered common stock warrants that could require cash settlement are accounted for as liabilities. We classify these warrant liabilities on the consolidated balance sheet as a non-current liability. The warrant liabilities are revalued at fair value at each balance sheet date subsequent to the initial issuance. Changes in the fair market value of the warrant are reflected in the consolidated statement of operations as income (expense) from change in fair value of warrants.

The warrants we issued in the January 2014 and December 2013 registered direct offerings contain a provision for a cash payment in the event that the shares are not delivered to the holder within two trading days. The cash payment equals $10 per day per $2,000 of warrant shares for each day late. The warrants issued in the March 2012 private placement and the February 2011 registered direct offering each contain a provision for net cash settlement in the event that there is a fundamental transaction (e.g., merger, sale of substantially all assets, tender offer, or share exchange). If a fundamental transaction occurs in which the consideration issued consists of all cash or stock in a non-public company, then the warrant holder has the option to receive cash equal to a Black Scholes value of the remaining unexercised portion of the warrant. Further, the March 2012 warrants include price protection in the event we sell stock below the exercise price, as defined, and the exercise price as reduced in February 2013 to $1.01 per share as a result of the October 2012 public offering.

The warrants have been classified as liabilities, as opposed to equity, due to the potential adjustment to the exercise price that could result upon late delivery of the shares or potential cash settlement upon the occurrence of certain events as described above, and are recorded at their fair values at each balance sheet date.

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Income Taxes

6 Months Ended

Jun. 30, 2014

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

We have net operating loss and research and development tax credit carryforwards that may be used to reduce future taxable income and tax liabilities. Our deferred tax assets have been fully offset by a valuation allowance due to our cumulative losses. As a result of our October 2012 equity offering, our net operating loss carryforwards are significantly limited for use under Section 382 of the Internal Revenue Code.

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Net Loss per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Net Loss and Number of Shares Used to Calculate Basic and Diluted Net Loss Per Share

The table below reconciles the net income (loss) and the number of shares used to calculate basic and diluted net income (loss) per share for the three and six month periods ended June 30, 2014 and 2013, in thousands.

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Numerator:
Net income (loss) attributable to common stockholders - Basic	$	675		$	(5,946	)	$	(10,809	)	$	(15,334	)
Less: income from change in fair value of warrants		(4,042	)		(164	)		(1,344	)		—
Net loss attributable to common stockholders used to calculate diluted net loss per share	$	(3,367	)	$	(6,110	)	$	(12,153	)	$	(15,334	)
Denominator:
Weighted-average shares outstanding - Basic		77,077			56,028			76,469			54,744
Potentially dilutive common shares outstanding:
Warrants		1,472			1,813			1,938			—
Stock-based awards		229			—			—			—
Weighted-average shares used to calculate diluted net loss per share		78,778			57,841			78,407			54,744
Basic earnings per share	$	0.01		$	(0.11	)	$	(0.14	)	$	(0.28	)
Dilutive earnings per share	$	(0.04	)	$	(0.11	)	$	(0.16	)	$	(0.28	)

Instruments Excluded from Calculation of Diluted Net Loss Per Share

The following instruments were excluded from the calculation of diluted net loss per share because their effects would be antidilutive:

	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Stock options		6,075,165		5,133,518		6,296,165		5,133,518
Restricted stock units		7,578		2,910,093		2,451,634		2,910,093
Warrants		6,310,000		1,459,026		6,310,000		5,459,027
Total		12,392,743		9,502,637		15,057,799		13,502,638

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Net Loss per Share - Instruments Excluded from the Calculation of Diluted Net Loss Per Share (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	12,392,743	9,502,637	15,057,799	13,502,638
Stock options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	6,075,165	5,133,518	6,296,165	5,133,518
Restricted stock units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	7,578	2,910,093	2,451,634	2,910,093
Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	6,310,000	1,459,026	6,310,000	5,459,027

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Collaborative Arrangements and Revenue Recognition - Additional Information (Detail) (USD $)	6 Months Ended
	Jun. 30, 2014
Pfizer [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Commercial milestone revenue	$ 0
RTI Surgical Inc [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Commercial milestone revenue	$ 0

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Operating activities
Net loss	$ (10,809)	$ (15,334)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	182	171
Stock-based compensation	1,180	313
Change in fair value of warrant liabilities	(3,795)	2,347
Changes in operating assets and liabilities:
Accounts receivable	(195)	(86)
Prepaid expenses and other assets	80	(41)
Accounts payable and accrued expenses	11	30
Deferred revenue	(62)	51
Net cash used in operating activities	(13,408)	(12,549)
Investing activities
Purchases of equipment	(192)	(273)
Net cash used in investing activities	(192)	(273)
Financing activities
Proceeds from issuance of common stock and warrants, net	19,756	5,834
Purchase of treasury stock	(292)
Proceeds from exercise of warrants	938	352
Net cash provided by financing activities	20,402	6,186
Increase (decrease) in cash and cash equivalents	6,802	(6,636)
Cash and cash equivalents at beginning of the period	31,948	25,533
Cash and cash equivalents at end of the period	$ 38,750	$ 18,897

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Collaborative Arrangements and Revenue Recognition

6 Months Ended

Jun. 30, 2014

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Collaborative Arrangements and Revenue Recognition

5. Collaborative Arrangements and Revenue Recognition

Pfizer

In 2009, we entered into a collaboration with Pfizer Inc. (“Pfizer”) to develop and commercialize our MultiStem^® product candidate to treat inflammatory bowel disease (“IBD”) for the worldwide market. We are eligible to receive milestone payments upon the successful achievement of certain development, regulatory and commercial milestones, for which we evaluated the nature of the events triggering these contingent payments and concluded that these events constituted substantive milestones that will be recognized as revenue in the period in which the underlying triggering event occurs. No significant milestone revenue has been recognized to date.

Pfizer pays us for manufacturing product for clinical development and commercialization purposes, which is recognized in the period that the manufacturing services are performed. Pfizer would have responsibility for development, regulatory and commercialization and would pay us tiered royalties on worldwide commercial sales of MultiStem IBD products. Alternatively, in lieu of royalties and certain commercialization milestones, we may elect to co-develop with Pfizer and the parties would share development and commercialization expenses and profits/losses on an agreed basis beginning at Phase 3 clinical development.

RTI Surgical, Inc.

In 2010, we entered into an agreement with RTI Surgical, Inc. (“RTI”) to develop and commercialize biologic implants using our technology for certain orthopedic applications in the bone graft substitutes market. We are eligible to receive cash payments upon the successful achievement of certain commercial milestones. We evaluated the nature of the events triggering these contingent payments and concluded that these events are substantive and that revenue will be recognized in the period in which each underlying triggering event occurs. In addition, we receive royalties on worldwide commercial sales of implants using our technologies. No milestone revenue has been recognized to date.

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Stock-based Compensation - Additional Information (Detail) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 Plans	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of incentive plans				2
Common stock authorized for equity incentive plans	11,500,000	11,500,000		11,500,000
Common stock issued related to restricted stock units				1,025,546
Stock options granted	1,178,800
Shares of common stock outstanding	8,747,799	8,747,799		8,747,799
Stock-based compensation expense		$ 601,000	$ 196,000	$ 1,180,000	$ 313,000
Total unrecognized estimated compensation cost	$ 6,882,000	$ 6,882,000		$ 6,882,000
Compensation cost related to unvested stock-based awards not yet recognized, expected year for recognition				2018
Equity compensation plans & stock-based awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for issuance	1,726,655	1,726,655		1,726,655
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock issued related to restricted stock units		232,574
Restricted stock units granted	460,112

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Net Loss per Share - Net Loss and Number of Shares Used to Calculate Basic and Diluted Net Loss Per Share (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Numerator:
Net income (loss) attributable to common stockholders - Basic	$ 675	$ (5,946)	$ (10,809)	$ (15,334)
Less: income from change in fair value of warrants	(4,042)	(164)	(1,344)
Net loss attributable to common stockholders used to calculate diluted net loss per share	$ (3,367)	$ (6,110)	$ (12,153)	$ (15,334)
Denominator:
Weighted-average shares outstanding - Basic	77,077,492	56,028,461	76,468,506	54,744,254
Potentially dilutive common shares outstanding:
Warrants	1,472,000	1,813,000	1,938,000
Stock-based awards	229,000
Weighted-average shares used to calculate diluted net loss per share	78,778,181	57,841,167	78,407,380	54,744,254
Basic earnings per share	$ 0.01	$ (0.11)	$ (0.14)	$ (0.28)
Dilutive earnings per share	$ (0.04)	$ (0.11)	$ (0.16)	$ (0.28)