Brainstorm Cell Therapeutics Inc. Q2 FY2020 Earnings Call

Greetings everyone and welcome to the BrainStorm Cell Therapeutics Financial Results for the Second Quarter of 2020 and Corporate Update Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, today’s conference call is being recorded. It is now my pleasure to introduce your host, Michael Wood of LifeSci Advisors. Sir, you may begin.

Thank you operator and thank you all for joining the BrainStorm Cell Therapeutics call today. Before we begin the opening remarks, I would like to remind listeners that this conference call contains numerous statements, descriptions, forecasts, and projections regarding BrainStorm Cell Therapeutics, and its potential future business operations and performance, statements regarding the market potential for the treatment of neurodegenerative disorders such as ALS and MS, the sufficiency of our existing capital resources for continuing operations in 2020 and beyond, the safety and clinical effectiveness of our NurOwn technology platform, clinical trials of NurOwn and related clinical development programs, as well as the ability to develop strategic collaborations and partnerships to support our business planning efforts. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond the company’s control, including the risks and uncertainties described from time-to-time in our SEC filings. Results may differ materially from those projected on today’s call. The company undertakes no obligation to publicly update any forward-looking statements. Joining me on the call today will be Chaim Lebovits, CEO of BrainStorm; Dr. Ralph Kern, President and Chief Medical Officer; David Setboun, Dr. Revital Geffen-Aricha, VP of Research and Development; and Preetam Shah, EVP and Chief Financial Officer. They will be available to answer your questions as well as additional members of the management team during the Q&A session that follows the prepared remarks. So, I would now like to turn the call over to Mr. Lebovits, please go ahead.

Thank you, Mike. Welcome to BrainStorm’s second quarter 2020 earnings call. And thank you everyone for joining us. At the onset of this call, I’m proud to share with you that our cash on hand is by far a record for BrainStorm. We have never been in such a strong financial position. We have no debt, no convertibles or the like, we today are close to $35 million cash on hand. I will begin this morning’s call with some introductory remarks and general corporate updates at BrainStorm. Next, our President and Chief Medical Officer Dr. Ralph Kern will update you on our clinical programs including our pivotal ALS trial recently and recently announced Phase II Alzheimer’s disease program and our Phase II Progressive MS trial. Following Ralph’s comments, Dr. Revital Aricha, our VP R&D will walk you through our development program for neuron-derived exosome treatment for COVID-19. Our Chief Financial Officer, Preetam Shah will then provide updates on our financial results before turning it back to me for concluding remarks. We will, of course, address your questions in the Q&A session. We are proud of the continued dedication and focus from our team members. During these challenging times of the coronavirus pandemic, our mission at BrainStorm is to leverage our proprietary technology, neuron technology, into the clinical development of new treatments for neurodegenerative disease patients with high unmet medical needs. This is an extremely important and worthy mission during normal times. And it requires an even greater level of commitment, creativity, and collaboration. We are grateful to our community partners, which include patients, families, doctors, regulatory bodies, and many more for helping us to continue to move forward over the past few months. This morning, I would also like to recognize two new additions to our senior management team in the second quarter. Dr. David Setboun joined us in April 2020, and serves as Executive Vice President and Chief Operating Officer. Dr. Setboun has extensive experience in the biopharmaceutical industry, including key leadership roles in commercial development and product launches at Biogen. Most recently he served as VP of Corporate Development Strategy and Business at Life-bio sciences, where he was instrumental in the development of various critical commercial operating and funding milestones. We are thrilled that David has joined our team, and we expect him to play a key role in the potential commercial launch of neuron in the next couple of years. Dr. Stacey Lindbergh joined us in June 2020 in the role of Executive Vice President and Head of Global Clinical Research. Dr. Lindbergh is an experienced healthcare executive and globally recognized medical statistician with over two decades of multinational experience in R&D, regulatory strategies, development, analytics, and big data, including Biogen. Most recently, Dr. Lindbergh spent eight years at Biogen where she held several leadership positions, including Vice President of Analytics and Data Science. Stacy is a great addition to our team, and her deep experience will be highly valued in many areas of Brainstorm. I will now turn the call over to Dr. Ralph Kern, who will provide updates on our major clinical development programs.

Thank you Chaim, and thank you everyone for joining us today on the earnings call. Let me start with an update on our Phase III pivotal trial of NurOwn in ALS. As a reminder, the trial is being conducted at six ALS centers of excellence in the U.S. It has enrolled approximately 200 participants, randomized one-to-one to receive three doses of NurOwn or placebo. These were administered over four months, and then participants in the trial are followed for a total of 28 weeks. As we announced on July 2nd, we’re very pleased to restate that all participants in the pivotal ALS Phase III trial have received all scheduled doses of NurOwn. We were able to achieve this important milestone as a result of the relentless dedication of trial participants, their loved ones, our investigators, and the outstanding team here at Brainstorm. On behalf of all of us at Brainstorm, I again want to thank everyone for their commitment during a very unique and challenging time. As previously announced, following completion of all study visits, data collection, and database lock, we expect Phase III top-line data by the end of November of this year. At BrainStorm, we are staffing up a highly experienced team and we are very busy on a day-to-day basis planning and executing to support data readouts on all pre-BLA activities. Our clear focus is to expedite this process. We want to be able to submit a Biologic License Application or BLA with the FDA as soon as possible after the top-line data is available. At the same time, as our clinical trial activities and data preparedness are growing and advancing, we are proceeding with all CMC activities that are needed for the preparation of a BLA. Finally, regarding BLA planning, and understanding the urgency of the ALS community, we are in full dialogue with the FDA and actively exploring opportunities to expedite information flow and the review process itself. In June, we announced that the ALS Association and IMALS awarded BrainStorm a combined grant of $500,000 to fund an ALS biomarker study. The grant will be used to draw insights from data and samples collected from patients enrolled in Brainstorm's ongoing Phase III clinical trial of NurOwn treatments and to further understand critical biomarkers associated with treatment response for people with ALS. The study involves one of the largest and most robust clinical trial collections of CSF and serum biomarkers to date. We are very excited that this will advance ALS understanding and also contribute to our understanding of how NurOwn can be of great value to the ALS population. In late June, we announced a new clinical program focused on the development of NurOwn as a treatment for prodromal to mild Alzheimer’s disease. We hosted a key opinion leader call and webcast on July 8th, which we encourage you to listen to if you have a chance. The call included professors Philip Shelton and Bruno Dubois, who provided a great overview of why we made the decision to study NurOwn in Alzheimer’s disease and why we are hopeful about its potential to address the great unmet need in Alzheimer’s disease. The study will be conducted at two leading centers of excellence in the Netherlands and France. We plan to treat the first Alzheimer’s clinical trial participant with NurOwn before the end of this year. I’m also happy to report that our progressive MS trial is now fully enrolled. Despite facing severe COVID-19 hospital restrictions in the spring, we expect all study treatments to be completed by the end of this year. Due to the rapid enrollment in the last month, the time difference between a potential interim analysis later this year and full data analysis is much shorter than anticipated. Therefore, it is most practical and informative for us to present an analysis of the full data set, which is our current plan. Additionally, we are supporting a small compassionate MSC program for COVID ARDS in Israel, as we previously announced. We have examined strategic opportunities around COVID ARDS and identified the advantages of using exosomes as a treatment platform. By leveraging our strong capabilities in exosome manufacturing and intellectual property, we have conducted a proof of biology study of NurOwn-derived exosomes in a mouse model of ARDS, which my colleague Dr. Revital Aricha will now share. Revital.

Thank you, Ralph. And let me join my colleagues in thanking you all for joining us today. We recently announced that BrainStorm successfully completed its first milestone in developing an innovative exosome-based platform technology for the treatment of severe COVID-19. As you are aware, COVID-19 related ARDS has been associated with huge respiratory distress syndrome. Currently, there is no effective treatment to prevent or reverse ARDS. This condition is a type of respiratory failure associated with widespread inflammation and lung damage caused by a cytokine storm in the most severely affected patients. Presenting on samples derived from exosomes again suggests a potential treatment for ARDS due to their ability to penetrate deep tissue, effectively deliver bioactive molecules to target cells, and decrease the inflammatory response. MSC exosomes may be delivered intravenously or directly to the lungs. We have identified several practical advantages including ease of storage, stability, and low immunogenicity. BrainStorm decided to evaluate MSC and NurOwn-derived exosomes in an ARDS mouse model, which is relevant to severe acute lung injury. In this trial, the animals were treated with either NurOwn-derived exosomes or exosomes from the same donor and compared to a placebo treatment group. Treatment was given either intravenously or directly to the lungs. Analysis was conducted on lung tissue pathology, daily assessment of oxygen saturation, heart rate, and measurement of pro-inflammatory cytokines and chemokines in the bone marrow and serum. The study demonstrated several key observations. We found that animals treated with NurOwn-derived exosomes showed superior results compared to the control. The results showed statistically significant improvement with NurOwn-derived exosomes in multiple parameters including functional recovery reflected by increased oxygen saturation to normal levels, reduction in inflammatory cytokines, and most importantly, preservation of lung integrity. Secondly, we observed that direct administration of NurOwn-derived exosomes directly into the lungs provided advantages over intravenous administration. We plan to submit these significant results to a peer-reviewed medical journal and we are actively evaluating clinical trials to determine how best to proceed. Thank you, and I turn to Preetam Shah, our CFO for the Q2 financial update.

Thank you, Revital. It is my pleasure now to walk you through our second quarter 2020 financial results. Research and development expenses for the three months ended June 30, 2020, were $5.69 million compared to $3.55 million for the three months ended June 30, 2019. This increase year-over-year was primarily due to an increase in expenses due to materials and other costs, payroll and stock-based compensation, and a decrease in participation from IIA and CIRM under various grants and proceeds received under the hospital extension program. Excluding participation from IIA and CIRM under the grants and proceeds received from the hospital exemption regulatory pathway, research and development expenses decreased by $520,000 from $6.54 million in the second quarter of 2019 to $6.02 million in the second quarter of 2020. General and administrative expenses for the three months ended June 30, 2020, were $1.71 million compared to $1.3 million for the three months ended June 30, 2019. This increase year-over-year was primarily due to an increase in payroll, stock-based compensation, rent, and other costs, partially offset by a decrease in PR costs, consultants, and travel expenses. Net loss for the three months ended June 30, 2020, was $7.4 million or $0.25 per share compared to a net loss of $4.9 million or $0.23 per share for the three months ended June 30, 2019. Cash, cash equivalents, and short-term bank deposits were approximately $16.2 million as of June 30, 2020, compared to approximately $2.7 million as of June 30, 2019. In July 2020, we further strengthened our balance sheet. We raised approximately $13.6 million from our ATM facility at an average price of $14.48 per share, an additional $6.3 million to exercise a warrant from circled warrant holders, and also received a non-dilutive bonus payment of $700,000 from CIRM for treating more California patients than originally proposed in our Phase III ALS trial. With these activities, our total available funding as of July 31, 2020, which includes cash on hand of approximately $34.7 million, as well as remaining non-dilutive funding from CIRM and IIA and other grants, amounts to approximately $37.5 million. For further details on our financials, please refer to our Form 10-Q filed with the SEC today. Back to you, Chaim.

Mike from LifeSci will now read the questions we have received and after that, take additional questions as well.

Thank you, Chaim. So the first question that we have from an investor is, would you please provide a timeline for the ALS Phase III data readouts, and application for FDA approval of NurOwn? As a follow-up to that, what would the company plan to submit a BLA and expect NurOwn to get priority review?

Very good question. We have consistently communicated that our Phase III trial readout would occur in Q4 2020. We are thrilled to confirm that this plan remains unchanged even in the presence of the COVID-19 pandemic. This is because of the hard work and attention to detail within Brainstorm that has been achieved with operational excellence in this trial, alongside the commitment of our investigators and trial participants. We are completing the remaining study visits and actively working through the data management steps to ensure high quality data, which will enable a timely database lock and readout of those results. We plan to have top-line data by the end of November. Obviously, we will be able to advise on our intentions regarding dates to file the BLA only after the database lock and unblinding of the data. We are happy to share with you that the FDA appreciates the urgency required to find effective treatments for ALS and is in close contact with Brainstorm to expedite the review process. Next question, please.

Thanks. So next question. Assuming the FDA approves NurOwn for ALS, what are the company’s manufacturing plans, and does Brainstorm intend to operate its own facility to produce NurOwn?

Another good question. So Brainstorm is actively and aggressively working with potential partners on commercial manufacturing sites. We have prepared in all facets for a positive readout for our Phase II trial, and the production of the commercial product has been meticulously planned. Throughout the NurOwn clinical development, we have streamlined the manufacturing process and consistently demonstrated our ability to deliver a high quality product efficiently. Following the BLA approval, we anticipate that we will still be producing our high-quality product to support the commercial launch and treat patients in need. Next question.

Thanks. So when do you anticipate automation of the NurOwn production process, in other words, with some kind of bioreactors?

We have automated part of the manufacturing process, and we will share feedback after we get FDA feedback on this process.

Thanks. So the next question relates to the multiple sclerosis program. When do you intend to provide an update on the Phase II progressive MS trial and as a follow-up to that, how many patients are enrolled and when do you expect the data to be shared?

I addressed that already in the opening comments, but Ralph, do you want to take this one?

Yes, absolutely. As per our press release on August 4th, following a brief pause in clinical trial enrollment due to COVID hospital restrictions, all clinical trial sites have reopened, and the Phase II progressive MS trial is now fully enrolled with a planned number of 20 patients. We expect the trial to be completed by the end of this year with all doses administered. Because of the short timeline between what would have been an interim and full data readout, we are no longer planning to do an interim analysis and will instead focus on the full data set as we described in our opening comments. Thank you.

Next question please.

The company has previously announced that it has received SME status in Europe. How do you plan to leverage this SME status in bringing NurOwn to ALS patients? What are the regulatory pathways to be considered here? And how are the hired EMA regulatory consultants helping you in this process?

Ralph, please.

Absolutely. I’m really pleased to say that engagements have begun with regulatory institutions to map out the regulatory pathways to enable NurOwn to be an available treatment option for ALS patients in the European Union. We are in close collaboration with the SME office and have engaged EMA regulatory consultants who are helping to guide our processes and next steps. This is a top priority for the company, both from a business perspective but also to address the enormous unmet need in the ALS population. Thank you.

The next question relates to the Alzheimer’s program. This program was announced on July 8th, but can you please provide an update on any new developments that have happened in the interim period?

Ralph, this is for you. Please.

Okay. No problem. So as we announced on July 8th, we have expanded our clinical pipeline to evaluate NurOwn for the treatment of Alzheimer’s disease. I think we have provided fairly convincing biological and clinical rationale for that program. I’m happy to provide an update on our efforts that are related to this. So since our press release of July 8th, we have finalized our clinical trial protocol. We have submitted this protocol along with the company documentation to the regulatory bodies in Europe. We are also interacting with local European authorities over the summer and our intent is to dose the first patient before the end of this calendar year. Thank you.

The question an investor had was to congratulate you on the preclinical work that has been conducted so far in ARDS caused by COVID-19. The question was also about the company’s plans for clinical trials with the exosome-based technology. What advantages does NurOwn bring to this now-crowded competitive landscape?

Thank you, Mike, and very good question again. So there is a strong rationale in the scientific literature for cell-based clinical trials in ARDS, and many cell therapy companies are pursuing such trials. Our clinical team remains highly focused on our lead indications of ALS and other CNS diseases, ensuring that our key clinical milestones will continue to be met. However, through our preclinical discovery team, we were able to demonstrate the potential benefits of neuron-derived exosomes in a preclinical trial. Based on our proven manufacturing capabilities, we have demonstrated the efficacy of NurOwn-derived exosomes, providing the opportunity to explore this preclinical study. Our CMC team is able to manufacture exosomes efficiently. The Ministry of Health has already granted approval for a compassionate study of generic MSC in COVID ARDS at the Shneur Medical Center in Tel Aviv. Based on the positive results from the preclinical study, we will also seek approval for a compassionate use of NurOwn-derived exosomes in COVID ARDS patients. But to summarize, while we are following the data, our commitment to the ALS community is to continue to prioritize our efforts, focus, and energy for the ALS trial. This concludes the pre-submitted questions. Operator, I would like to ask if you can open the lines for additional questions.

Thank you. Our first question today comes from Jason McCarthy from Maxim Group. Please go ahead with your question.

Hi everyone. This is on the line for Jason. Thank you for taking my question. Regarding the Phase II Alzheimer’s study, I wanted to know if you plan to open any sites in the U.S., and if you could share when you expect to complete enrollment. Thank you.

Ralph, this is for you. Please.

At the present time, we don’t have plans to expand our particular study into the U.S. We will start treating participants at the end of this year and we expect somewhere in the order of a six-month to nine-month enrollment period. The study is a one-year trial from beginning to end, so you can do the math, and we would end up completing the last patient and last visits, probably in the first half of 2022. That would be our timeline at this point.

Alright, great! Thanks for the color.

Jamie, next question.

Our next question comes from David Bautz from Zach Small-Cap Research. Please go ahead with your question.

Hey, good morning, everybody. So I’m curious if you report positive ALS data, how quickly can the treatments be made available, as I imagine that could be an issue for some ALS patients?

Very good question. Well, we have a plan, but we are not ready to lay it out yet. We are seriously planning for this and already having discussions with innovators.

Could those discussions also include maybe ALS advocacy groups?

We are in direct discussions with ALS advocacy groups about this matter already. Thank you. It was a very good question, and very thoughtful for you to consider how patients can receive treatment after approval immediately. That is our aim. We want to make sure that when we get an approval, we can do this as efficiently as possible. Ralph, if you want to add something, please?

No, I think we are very focused on everything leading up to database lock, and then top-line data. We will work in parallel; these are not done sequentially. As Chaim mentioned, we are already having interactions both internally and externally to address the question you have.

Okay, great! And then for the MS trial, do you anticipate that positive results could allow you to move directly into a Phase III trial?

Well, we would love to anticipate results. It is difficult to predict. What I’d like to say is that there are two components of the study that we will closely examine. One are the clinical outcomes that are quite reproducible and validated. In partnership with these clinical outcomes, we have a very ambitious biomarker program. As you recall, we have received a grant from the National MS Society to advance those analyses. We believe that a combination of clinical and biomarker outcomes will inform any subsequent Phase III trial, but we want to analyze the data first to determine the necessary next steps.

Alright, great! Thanks for taking the questions.

Thanks, David. Next question please.

Next question comes from Jason Kolbert from Dawson James. Please go ahead with your question.

Congratulations, everybody! Really fantastic progress from the amount of cash on the balance sheet to the clinical timeline. I’d like to ask a couple of quick questions. In terms of ALS, we are at a point now where we really have to think carefully about the probabilities of success. How much data have you seen from the current trial, and how well that data aligns with the Phase II data you have seen previously? Could you provide any insights that would help us gauge the probability of success and outcome?

Thanks for the question. Obviously, we are blinded to the current Phase III trials, so we don’t have visibility to the results. What I can tell you is that we have designed the Phase III trial to optimize our probability of success. A few things we’ve done include using repeated dosing compared to a single dose in the Phase II randomized trial, and we have enriched the trial population to select a group of ALS participants who have a more predictable rate of decline in the run-in period. I think that goes a long way to increasing the odds of success. Additionally, the lessons learned from Phase II have been applied to Phase III in terms of the biomarkers to monitor and how to proceed with analyses. One significant difference between Phase II and Phase III is that we have seven serial CSF samples, which represent a unique collection of biomarkers. We believe that the confirmation of clinical results through biomarker-related changes will be important for both regulatory review and subsequent interactions with payers. We aim to approach this with neurology while applying oncology models where we have not just clinical outcomes but verifiable biological effects. All these elements suggest our Phase III trial has the right ingredients for success, and we are very anxious to obtain the top-line data, which we hope to have at the end of November.

Understood. Now, shifting gears to Alzheimer’s, when I think about ALS which seems to be an inflammatory condition, Alzheimer’s presents with multiple comorbidities. How can you help me understand the mechanistic link between your treatment's impact on ALS patients versus the hoped-for impact on Alzheimer’s patients?

Yes, I will be brief so I don’t extend this too long. But my view is that we believe the mechanisms of NurOwn are applicable as a technology platform across different diseases. In ALS, we delivered repair molecules which help stabilize and restore neuron integrity. We observed very interesting results in inflammatory changes, including a 40% reduction in key inflammatory markers. In Alzheimer’s disease, we found that the same markers show even stronger correlations with the rate of cognitive decline. Most neurodegenerative diseases exhibit an inflection point at which nerve degeneration accelerates alongside the inflammatory component. Biomarkers like MCP1, amyloid, and tau interact in such a way that their presence significantly influences disease progression. Therefore, we see this as a substantial opportunity to test the potential of NurOwn in Alzheimer’s, and we expect the inflammatory impact would not be disease-specific but a platform attribute of NurOwn.

That makes sense given our rationale to target this population. Thank you.

Thank you very much. One last question on exosomes. I understand why I would use an exosome to target the lungs to mitigate the cytokine cascade and reduce inflammation. However, how does the homing capability work with a focus on localized environments? Where does the homing capability fit in your COVID project?

Yes, sure. Thanks, you pose excellent questions. A number of attributes of NurOwn are mediated through exosomes, as they can deliver cargo and produce immunomodulation as well as micro-RNA. We know exosomes are very effectively absorbed into tissues, and local administration provides a very unique opportunity. In our preclinical studies, we have demonstrated that neuron delivery leads to better outcomes. Direct administration of exosomes yields superior results compared to intravenous delivery. Additionally, exosomes can home to inflammatory signals; we have shown in previous studies that neuron administration wraps to injury sites. There is increasing evidence indicating that this property applies well to exosomes, and we are continuing our preclinical studies to confirm these claims before finalizing decisions.

Thanks, guys. Your hard work is truly appreciated. Thank you!

Thanks, Jason. Next question please.

Next question comes from John Evans from Raymond James. Please go ahead with your question.

Good morning, everybody. A couple of items. First of all, I would like to know if you have decided on plans to build a sales force in the U.S. or Europe, or are you currently planning to partner with a larger pharmaceutical firm to handle sales? Additionally, could you provide updates on what’s happening in Congress regarding the ALS bills presented by the rapidly growing ALS caucus? Thank you.

Thank you very much. We are considering both options for the sales force—either internal or external—and can assure you that if and when we receive approval, we will be prepared to provide treatments to patients in need. Regarding the bills in Congress, this initiative is not led by BrainStorm; it’s being driven by advocacy groups. We commend the ALS groups’ efforts to raise awareness and promote these legislative initiatives, but we are not actively participating in these efforts. Therefore, I can't provide any additional comments on that. Any other questions?

Thank you. I appreciate it.

You’re very welcome. Jamie, any other questions?

Ladies and gentlemen, at this time I’m showing no additional questions.

Would you like to check one more time? If anyone wants to ask a question, we’re happy to answer.

We do have an additional question from Robert McCann. Please go ahead with your question.

Hi. I’m just curious if you have any updated guidance given all the positive news surrounding your company?

I’m sorry, guidance on specific earnings?

Yes, earnings.

I thought you meant guidance for FDA timelines regarding ALS. Regarding earnings, you can review our financial position; I started this call with a comment that this is our best financial position yet with around $35 million cash on hand. We are entering the last two quarters of the year in a very strong position.

Ladies and gentlemen, with that, we will conclude today’s conference call. We thank you for joining. You may now disconnect your lines.

Thank you, thanks Jamie, and Mike for handling this call for us.