Longeveron Inc. Q2 FY2021 Earnings Call

Greetings and welcome to Longeveron's call today to discuss the results of the company's Phase 2b Aging Frailty trial and Second Quarter 2021 Financial Results. All participants are currently in a listen-only mode. Following the formal presentation, we will open the call for a question-and-answer session. I'd now like to turn the call over to Brendan Payne from Stern IR. Brendan, you may proceed.

Thank you, operator. Good morning everyone and welcome to Longeveron's call today to discuss the results of its U.S. Phase 2b trial of Lomecel-B and the Aging Frailty, and second quarter 2021 business update and financial results. Earlier this morning, Longeveron issued a press release summarizing its second quarter 2021 financial results with a corporate update that we will discuss on today's call. Concurrent with the aforementioned release, Longeveron also issued a press release this morning, announcing the top-line results from its recently completed Phase 2b clinical trial with Lomecel-B and subjects with Aging Frailty. You can access both press releases by going to the news section of Longeveron's website longeveron.com. I'm joined on the call today with the following members of Longeveron's management team. Mr. Geoff Green, Chief Executive Officer; Mr. Joshua Hare, Co-Founder, Chief Science Officer and Chairman; and James Clavijo, the Chief Financial Officer. We're going to begin the update with a detailed overview of the top-line data from the Phase 2b trial, which was announced this morning. This clinical trial results discussion will be provided by Dr. Hare. After that Mr. Green will give a brief general update and summary of recent events, and we will conclude with a recap of our financial results from the second quarter of 2021, followed by a Q&A period. As a reminder, during this call, we'll be making forward-looking statements which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statement should be considered in conjunction with cautionary statements in our press releases and risk factors discussion in our filings with the SEC, including our last Annual Report, or Form 10-K, and cautionary statements made during this call. We assume no obligation to update any of these forward-looking statements or information. Now, I'd like to turn the call over to Dr. Joshua Hare, Co-Founder, Chief Science Officer and Chairman of Longeveron. Dr. Hare?

Thank you, Brendan. It's a pleasure to speak with you today and I'm excited to discuss the results of our lead clinical trial, Lomecel-B. To start let me review the background and various initiatives of our Aging Frailty program for the benefit of the listeners. Several years ago, we launched two clinical trials evaluating Lomecel-B in older individuals diagnosed with mild to moderate Aging Frailty. One was to study the effects of Lomecel-B primarily on endurance exercise tolerance and mobility. We referred to this trial as the Phase 2b trial. The second trial was designated to evaluate whether Lomecel-B can improve immune response in at-risk frail subjects receiving the influenza vaccine. We referred to this as the HERA trial. Both of these trials were awarded grants along the way with substantial funding received from the National Institute of Health and the National Institute of Aging for the Phase 2b and a Maryland Stem Cell Research Fund TEDCO award for the HERA trial. As announced earlier this year, we completed both of these trials and we now have the data for the Phase 2b trial. We anticipate announcing data from the HERA trial later in this third quarter. In addition to the U.S. frailty trials, our Japanese Phase 2 Aging Frailty clinical study is on track to initiate later this year, being led by our partners at the National Center for Geriatrics & Gerontology in Japan. Finally, we sponsor a registry in the Bahamas under the approval and authority of the National Stem Cell Ethics Committee. While like in the U.S. and Japan, Lomecel-B is considered investigational and not approved for commercial sale under the approval terms from the Ethics Committee. We are permitted to charge a fee to participants, which offsets the costs of sponsoring the Registry Trial. Our frailty program was based on the results of the Phase 1/2 clinical trial at the University of Miami several years ago, where we administered allogeneic bone marrow-derived MSCs into older frail subjects and evaluated the safety and efficacy for 52 weeks in a placebo-controlled design. The results of this study, which are published in the Journals of Gerontology, provided the basis for Longeveron's frailty program and the Phase 2b clinical trial. The objective of the Phase 2b trial is to evaluate whether the investigational product Lomecel-B could have a positive impact on the signs and symptoms of the condition. Aging Frailty is a clinically defined and extreme form of unsuccessful aging, which is readily recognized by a combination of hallmark clinical symptoms, including involuntary muscle loss, known as sarcopenia, weakness, slowing down, fatigue, unintentional weight loss, and low activity levels, as well as being associated with a chronic inflammatory state. The diagnosis of Aging Frailty indicates that the individual is at an elevated risk for critical clinical outcomes such as hospitalization, institutionalization, and death. Despite the pressing need for interventions, there are no FDA-approved therapies that can slow down, reverse, or prevent Aging Frailty. Frailty would be considered a new indication from a regulatory standpoint and that's where we're required to have discussions with the FDA and other health authorities concerning potential clinical and regulatory pathways for future approval. So the Phase 2b trial, which was partially funded by a prestigious Small Business Innovation Research grant from the NIH, evaluated the safety and efficacy of a single peripheral intravenous infusion of four different doses of Lomecel-B therapy compared to placebo. The study randomized and treated a total of 148 subjects as follows: 25 million cells with 37 recipients, 50 million cells with 31 recipients, 100 million cells with 34 recipients, 200 million cells with 16 recipients, and placebo with 30 recipients. The main inclusion criteria for entry into the trial was aged 70 to 85 years old, a screening six-minute walk test of between 200 and 400 meters, a Canadian Health and Safety Assessments clinical frailty score of five or six, where five is mildly frail and six is moderately frail, and a minimum serum TNF-α of greater than 2.5 micrograms per ML. TNF-α is a marker of inflammation in the blood. We selected a six-minute walk test distance as our primary endpoint. Safety and efficacy evaluations were conducted at 90, 180, and 270 days after infusion. The six-minute walk test is a validated field study, widely used to assess functional exercise capacity, treatment effectiveness, and prognosis because it is accurate, reproducible, easy to administer, and well tolerated. It has been used as the basis for FDA approval for many drugs and indications, such as pulmonary arterial hypertension, COPD, Hunter syndrome, and Morquio A syndrome, a lysosomal storage disorder. This test is particularly applicable to Aging Frailty, as it integrates assessments of cardiac, respiratory, circulatory, and muscular capacity. Age-related loss of skeletal muscle, leading to diminished strength, lack of endurance, and low tolerance of physical exertion are common core clinical presentations of Aging Frailty. The six-minute walk test can therefore be used as a meaningful reflection of a patient's ability to perform basic activities of daily living. Statistics indicate that 40% of community-dwelling adults over 75 years of age have difficulty walking even a quarter mile, which is 400 meters and is the U.S. Census Bureau Standard Measure to assess disability. The pre-specified statistical analysis plan for the primary efficacy endpoint involved a primary analysis and a secondary analysis. It's now my pleasure to give you the primary results of the study. The primary analysis compared the change from baseline in six-minute walk test distance for the four Lomecel-B cohorts to the placebo cohort at day 180. The average baseline six-minute walk test was comparable for all groups, with the entire population average being 311 meters, indicating impaired mobility. There were statistically significant increases in the highest three doses of 50 million, the 100 million, and the 200 million Lomecel-B cohorts, while there were no significant changes in the placebo for the lowest dose of Lomecel-B. However, after adjusting for multiple comparisons using the Hochberg method, the four Lomecel-B cohorts did not show a statistically significant placebo-adjusted difference compared to placebo. These changes were 0.2 meters in the 25 million cohort, p 0.9902; 27.7 meters in the 50 million cohort, p 0.1279; a change of 16.8 meters in the 100 million cohort, p equals 0.3472; and a change compared to placebo in the 200 million cohort of 41.3 meters, p 0.0635. However, the 200 million dose group did get close and unfortunately had a smaller cohort size compared to the rest. Despite not achieving the statistical significance for the peer-wide comparison to placebo at day 180, significant differences from placebo were observed at day 270 with the 50 million and 200 million Lomecel-B cohorts, which was a pre-specified exploratory endpoint. I would now like to show the slides, please, Brendan.

Yes.

The secondary analysis for the primary endpoint was to determine whether a dose-response relationship exists using the multiple comparisons and modeling approach described by Bretz et al. We were extremely pleased to see a clear statistically significant dose response curve at day 180 among the various dose response curves evaluated, which used statistical modeling techniques, Emax, Linear, Exponential, Quadratic, and Sigmoid Emax, with all having a p-value of less than 0.05. Notably, the Sigmoid Emax model exhibited the most significant dose-response relationship at p equals 0.017. This was one of the primary objectives of the study, and we believe that this may be one of the very first MSC studies to show a dose response based on current reviews of previously published studies in the public domain. The study's key secondary endpoints included the day 180 change in the patient-reported outcome questionnaire, PROMIS Physical Function Short Form 20a (SF-20a) total score and the day 180 change in serum levels of tumor necrosis factor alpha, an inflammatory cytokine. The Lomecel-B cohorts did not show a statistically significant difference compared to the placebo cohort in the SF-20a score, and the TNF-α analysis is still pending as are the rest of the biomarkers. The remainder of the efficacy endpoints, which included assessments of physical function, sexual function, fear and risk of falling, depression, cognition, frailty status, pulmonary function, and clinical outcomes, were considered exploratory, and Lomecel-B-treated groups did not show significant differences versus placebo at most of the time points for any of these endpoints. Based on the results observed at 270 days, we believe that a larger and/or extended trial would have a greater likelihood of achieving statistical significance and that there is strong evidence to support a continued dose-dependence response. Baseline demographics in the trial were balanced between the treatment groups, and analysis of adverse events, laboratory tests, vital signs, and body weights showed that patients on active Lomecel-B dose groups were generally comparable to the placebo group concerning safety. There were no serious adverse events reported that were considered related to Lomecel-B infusion. The full body of results from the study will be exceptionally valuable to inform the continued advancement of Lomecel-B for the treatment of Aging Frailty, in addition to the other disease indications that we are investigating as we engage in further discussions with the FDA and other international regulatory bodies. Based on these results, Longeveron is committed and determined to continue pursuing Lomecel-B as a pioneering treatment to ameliorate the detrimental symptoms and address the critical unmet medical need in Aging Frailty. We look forward to presenting the full results of this trial next month at the 2021 International Conference of Frailty & Sarcopenia Research on September 29th. I thank you for your attention, and at this point, I would like to turn the call over to Geoff Green, CEO of Longeveron for a general business update. Geoff?

Thank you, Dr. Hare. Good morning everyone and thanks again for attending Longeveron's second quarter 2021 business update and earnings call. I'm excited about the Phase 2b results and to share the tremendous progress we have made this quarter and this year. It's been a busy and productive quarter. I'm going to start with an update on our various research programs, provide progress updates, and then anticipated near-term catalysts for 2021. Following this, James Clavijo will give us the financial performance for the quarter. Since we're still a relatively new public company, there may be first-time listeners on the call, so I'm going to spend a minute reintroducing the company and our lead therapeutic product to the audience. Longeveron is a leading clinical-stage biotechnology company that's developing cell therapies for chronic aging-related diseases and other life-threatening conditions for which there are no approved treatments. Aging is the number one risk factor for chronic diseases, while stem cell exhaustion, cellular senescence, and chronic inflammation, together referred to as inflammaging, compromise our ability to repair and regenerate damaged tissues and organs. Inflammaging is linked to the rise of progressive chronic diseases such as Alzheimer's disease and Aging Frailty. Our focus since day one has been to develop safe and effective allogeneic cell therapy solutions for the treatment and prevention of these diseases. Our lead therapeutic investigational product, Lomecel-B, is a living cell biologic made from specialized cells isolated from the bone marrow of young healthy adult donors. These cells, known as medicinal signaling cells, or MSCs, reside within various tissues in our bodies and act as the body's endogenous repair mechanism that promotes regeneration of damaged tissues and organs. When we're young, we maintain an adequate supply of these cells, and they function as intended. Unfortunately, in both humans and animals, there is a clear age-related decline in both the number and potency of these cells, which is believed to be one of the primary reasons for the age-associated increase in chronic diseases. Now I'll provide an update on our Lomecel-B clinical research programs aside from the Aging Frailty program that Dr. Hare mentioned. Let's begin with the Alzheimer's disease program. This past April, we announced additional results from our Phase 1 Alzheimer's disease clinical study. Safety data showed that Lomecel-B was safe and well-tolerated in this population, with no serious adverse events reported related to the investigational product, nor any evidence of Amyloid Related Imaging Abnormalities, or ARIA, which is a brain swelling issue assessed by MRI. While this was a small study intended to demonstrate safety and tolerability, exploratory results indicated that the low-dose Lomecel-B treated subjects had a slower decline in cognitive function compared to placebo treated subjects over 52 weeks, as measured by the Mini Mental State Exam. The difference compared to placebo reached statistical significance at 13 and 39 weeks post-treatment. The high-dose did not show statistical significance versus placebo. We view these results with cautious optimism due to the fact that it is a Phase 1 trial with a small sample size. That said, we have a manuscript with the results currently under review for a peer-reviewed publication and we look forward to initiating the larger Phase 2 study in Alzheimer's disease subjects later this year. Turning now to our Hypoplastic Left Heart Syndrome, or HLHS program. HLHS is a rare congenital heart defect that affects approximately 1,000 babies per year in the U.S. Babies with HLHS are born with an underdeveloped left ventricle, which impairs the heart's ability to pump blood throughout the body. The condition is fatal without surgical intervention and even with surgery, HLHS is unfortunately associated with a very high mortality rate and a need for heart transplantation. We completed a Phase 1 study that showed that intramyocardial injection of Lomecel-B during the second stage surgery known as the Glenn procedure was safe and well tolerated, achieving our primary safety endpoint of no major adverse cardiac events and no infections within the first 30 days related to the investigational treatment. Because of the achievement of completing the Phase 1 study, we are pleased that the program has now transitioned to Phase 2, with the first baby randomized and treated on June 30th of this year as previously disclosed. The trial is being funded by a grant from the NIH's National Heart, Lung & Blood Institute in collaboration with Longeveron and is led by principal investigator Dr. Sanjay Kaushal, a Pediatric Cardiothoracic Surgeon at Lurie Children's Hospital in Chicago. The trial targets enrollment of 38 infants and will enroll in seven hospitals in major metropolitan centers across the U.S. Now let's discuss our Acute Respiratory Distress Syndrome, or ARDS program. We have an actively enrolling randomized double-blind multi-center study of 35 subjects evaluating Lomecel-B infusion in COVID-19 patients with ARDS. We anticipate that enrollment in the trial will continue into 2022 with data available either late 2022 or in 2023. This trial is funded in part by a Maryland Stem Cell Research Fund TEDCO grant. As a general note, we have historically been successful in applying for and receiving grant awards to help fund our research, with over $15 million awarded to our programs to date. With the new data coming out of our various trials and our track record in achieving our stated aims in our grant programs and successful execution of our clinical trials, we will continue to apply for grants that we believe will help further our goal of commercializing Lomecel-B. Finally, another important highlight from the last quarter is the continued expansion of our executive advisory team. In May, we announced the appointment of Judge Ursula Ungaro to our Board of Directors and Dr. Dan Gainesville to our Executive Team as Senior Vice President of Strategic Collaborations and Scientific Affairs. Both individuals add breadth and depth of expertise and experience to Longeveron, and their commitment to our mission is a testament to both the quality of our science and the profound potential of Lomecel-B as a potential treatment for cardiac disease. We are proud and excited to have them on board. I'd now like to turn the call over to James Clavijo, CFO, to discuss the financial results for the second quarter of 2021. James?

Thank you, Geoff. Good morning, everyone. Most of what I'll be covering this morning has been presented in more detail in our consolidated financial statements and our management's discussion and analysis operations for the three months ended June 30th, 2021, which has been filed today. Revenues for the three months ended June 30, 2021 and 2020 were $0.5 million and $0.9 million, respectively. The $0.4 million or 44% decrease when compared to the same period in 2020 was primarily due to a decrease in grant revenue year-over-year compared to the same period of 2020. Grant revenue for the three months ended June 30, 2021 and 2020 was $0.3 million and $0.9 million, respectively. The $0.6 million or 68% decrease when compared to the same period in 2020 was primarily due to a reduction in grant funds available upon completion of the grant-funded clinical trials. Clinical trial revenue, which comes from The Bahamas Registry Trial for the three months ended June 30, 2021 and 2020, was $0.2 million and zero dollars, respectively. Clinical trial revenue for the three months ended June 30, 2021 was $0.2 million, or 100% higher when compared to the same period in 2020. During the second quarter of 2020, clinical trial revenue was negatively impacted by COVID-19 travel restrictions, as participants faced travel restrictions as well as concerns regarding international travel. Related cost of revenue was $0.3 million and $0.8 million for the three months ended June 30, 2021 and 2020, respectively. The $0.5 million or 63% decrease when compared to the same period in 2020 was primarily due to lower costs of revenues related to grants incurred in 2021. This resulted in a gross profit of $0.2 million for the three months ended June 30, 2021, an increase of $0.1 million, or 86% when compared to a gross profit of $0.1 million for the same period in 2020. Research and development expenses for the three months ended June 30, 2021 increased to $2 million from $0.7 million for the same period of 2020. The increase of $1.3 million, or 205%, was primarily due to an increase in research and development expenses that were not reimbursable by our grants, as well as a $0.8 million increase in our equity-based compensation. General and administrative expenses for the three months ended June 30, 2021 increased to $3.2 million compared to $0.6 million for the same period in 2020. The increase of $2.6 million, or 400%, was primarily related to an increase for compensation, insurance, and professional expenses incurred during the current period, including $1.4 million of equity-based compensation recorded for our RSU stock options for 2021. General administrative expenses consist primarily of rent, professional fees, insurance, and paid and accrued compensation. The net loss increased approximately $5 million for the three months ended June 30, 2021 from a net loss of $1.2 million for the same period in 2020. Our cash and short-term investments as of June 30, 2021 were $21.4 million compared to $0.8 million as of December 31, 2020. The increase in cash and our short-term investments, period-over-period, was a result of our completion of our initial public offering in February 2021. Our cash in the six months ended June 30, 2021 increased by $29.1 million from funds received from our IPO. As of June 30, as mentioned, our cash position, which includes short-term investments, was $21.4 million. We believe based on the current operating plan and financial resources that our existing cash on hand will be sufficient to cover expenses and capital requirements through at least the fourth quarter of 2022. With that, I will turn the call back to Geoff for closing remarks. Geoff?

Thank you, James. As Dr. Hare explained in detail, we have a wealth of data from our now completed Phase 2b trial, and we are eager to move to the next step of clinical development for Lomecel-B for the treatment of Aging Frailty. We'll also be receiving more data shortly related to the biomarkers from that trial as well as the data from the HERA trial expected later this quarter. We would like to thank the clinical investigators, patients, and our research partners who participated in the Phase 2 trial. Our dedicated employees for their diligent efforts, the NIA for their funding and support, and our committed shareholders for their ongoing support. We're excited to be underway on the Phase 2 HLHS trial and look forward to initiating both the Phase 2 Alzheimer’s disease and Japanese Aging Frailty trials later this year. We will continue to provide updates as progress is made. We are well-positioned in terms of capital to advance these programs forward and hit the milestones and catalysts that I've outlined during this update. At this point, I'd like to open the call for questions. Operator?

Thank you. So I think we've done the concluding remarks, and at this point I'd like to thank everybody for attending the call. I look forward to further updates.