Longeveron Inc. Q1 FY2022 Earnings Call

Hello everyone and welcome to the Longeveron Inc. 2022 First Quarter Earnings Call. My name is Juan and I will be coordinating your call today. All participants have been placed on mute to prevent any background noise. There will be a question and answer session at the end of the presentation. I would now like to turn the call over to Elsie Yau from Stern Investor Relations. Please proceed, Elsie.

Thank you, operator. Good morning, everyone and welcome to Longeveron's first quarter 2022 call. Today we will provide a business update and discuss financial results for the first quarter of 2022. Earlier this morning, we issued a press release with these results, which can be found under the investor section of our website at www.longeveron.com. I'm joining the call today by the following members of Longeveron's Management team, Geoff Green, Chief Executive Officer; Dr. Joshua M. Hare, Co-Founder, Chief Science Officer and Chairman; Dr. Chris Min, Chief Medical Officer, and James Clavijo, Chief Financial Officer. Mr. Green will begin with a brief corporate overview, followed by Dr. Min who will provide updates to our clinical pipeline. And finally Mr. Clavijo will review our 2022 first quarter financial results. We will then open the call for Q&A. 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 statements should be considered in conjunction with cautionary statements in our press releases and risk factors discussion in our filings with the SEC, including our Annual Report and 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 Geoff Green, Chief Executive Officer of Longeveron. Geoff?

Thank you, Elsie. Good morning, everyone. It's my pleasure to welcome you to Longeveron's first quarter 2022 business update and financial results call. Longeveron is a leading clinical stage biotechnology company developing living cell therapies for chronic aging related diseases and other specific life threatening conditions. We are driven by our mission to develop safe and effective cell-based therapies for some of the most challenging disorders associated with the aging process and other medical disorders. In the first quarter of 2022, we continue to make progress advancing our lead investigational cell therapy product Lomecel-B to clinical development for multiple indications with ongoing trials in Alzheimer's disease, hypoplastic left heart syndrome or HLHS, and acute respiratory distress syndrome or ARDS. As a reminder, our lead investigational product called Lomecel-B is a living cell product made from the specialized cells isolated from the bone marrow of young healthy adult donors aged 18 to 45. These specialized multiphoton cells known in the literature as medicinal signaling cells or MSCs, reside in different concentrations within various tissues in our bodies and are our endogenous or built-in repair mechanism. MSCs are known to perform a number of complex functions, including the ability to form new tissue at the site of injury or disease and secrete bioactive factors that are immunomodulatory and regenerative. We believe that Lomecel-B may have multimodal mechanisms of action that lead to anti-inflammatory, pro-vascular or improved vascular endothelial function, and regenerative and repair responses. Through clinical testing, we hope to show that Lomecel-B can be a potential clinical therapy for a range of aging related and rare diseases. Now, before turning the call over to Dr. Min, I'd like to take a moment to address the announcement we made on Monday, May 9 regarding the CEO transition to occur on June 1. After more than six years at Longeveron in a variety of leadership positions that included Senior Vice President, President and Chief Executive Officer, I made the decision to step down as CEO in order to pursue new opportunities. My time with Longeveron has been a very rewarding experience, participating in fantastic growth and progress, including an Initial Public Offering raising nearly $50 million in 2021 and expanding Longeveron's executive management team. At the request of our Board of Directors, Dr. Chris Min, current Chief Medical Officer, has agreed to serve as Interim CEO while the company engages in a nationwide search for a permanent CEO. I have full confidence in Dr. Min and know this will be a smooth transition. I'll miss all my fantastic colleagues at Longeveron. It has been an eventful and rewarding journey for me, but it is time to let someone else take the helm. The company has dedicated and hardworking employees, a seasoned executive leadership team, a strong board, and exciting therapeutic developments, showing promising preliminary clinical data and a healthy balance sheet, and I look forward to following the company's path and progress closely. Now for specific updates regarding our clinical programs, I turn it over to Dr. Chris Min, Chief Medical Officer and future Interim CEO. Chris?

Thank you, Geoff. I wish to sincerely thank you for the dedication, hard work, and leadership you have provided. I speak for the entire company and Board of Directors when I say we wish you the best of luck in your future endeavors. As for our program updates, I'll begin with an overview of our work in Alzheimer's disease. Neuronal cell death caused by early and substantial neuroinflammation is a significant contributor to the pathogenesis of Alzheimer's disease. We are continuing to evaluate whether Lomecel-B infusions may prevent, slow, or even reverse the clinical progression of Alzheimer's disease by reducing disease-related brain inflammation, improving the function of blood vessels in the brain and body, and thereby potentially decreasing or slowing disease-related brain damage. Our hypothesis is supported by published preclinical studies showing that in animal models of Alzheimer's, MSCs can cross the blood-brain barrier, potentially with an anti-inflammatory effect, improving endothelial function and promoting neurogenesis or the process of new neuron formation in the brain. Both the previous Phase 1 and the current Phase 2a study explore specific biomarkers related to inflammation as well as endothelial and vascular function. Last year, we announced positive data from our Phase 1 study of Lomecel-B, demonstrating the preliminary safety levels in patients with mild to moderate Alzheimer's disease. While one should exercise caution interpreting results from a small underpowered study such as this, the data did show a slower decline in mini-mental state exam score, a tool used to assess cognitive function in patients who received a low dose of Lomecel-B compared to placebo, in addition to an improvement trend in quality of life measures. This quarter, we are pleased to announce the publication of the full Phase 1 results in Alzheimer's & Dementia, the journal of the Alzheimer's Association. Building on the Phase 1 data in January of this year, we initiated a 48 patient, 4-arm parallel design randomized Phase 2a clinical trial of Lomecel-B infusion in patients with mild Alzheimer's disease. The primary endpoint of this Phase 2a study is the safety of both single and multiple infusions of Lomecel-B at two different dose levels. We also plan to evaluate secondary and exploratory endpoints, which include cognitive function, activities of daily living, specific biomarkers relevant to inflammation in endothelial and vascular systems, as well as brain volume. We have already enrolled several patients in the trial, and there are 10 of the top five clinical sites open for enrollment, including the Miami VA, and we anticipate providing updates on enrollment rates and will provide trial completion guidance at a later date. Next, I'd like to move to our Hypoplastic Left Heart Syndrome or HLHS clinical program. As a reminder, HLHS is a rare congenital heart defect that affects approximately 1,000 infants per year in the United States. People born with HLHS have an underdeveloped or absent left ventricle, impairing the heart's ability to pump blood. The current standard of care for HLHS typically consists of three reconstructive operations before the age of five. However, over the long term, patients remain at a continued risk of death from heart failure and may require a heart transplant. When used in combination with surgical intervention, we and our partners are exploring the potential for Lomecel-B to improve cardiac function in patients with HLHS. We believe Lomecel-B may have pro-regenerative, pro-vascular, and anti-inflammatory properties that have the potential to contribute to improved cardiac performance. Our uncontrolled open-label ELPIS trial results show that interim myocardial injection of Lomecel-B was well tolerated with no major adverse cardiac events or treatment-related infections related to Lomecel-B. We currently expect to submit the complete results of that trial to a peer-reviewed journal, and we anticipate acceptance and publication this year. The HLHS program has advanced into a Phase 2 trial, called ELPIS II. ELPIS II is a randomized, blinded, and controlled trial designed to evaluate the safety and efficacy of Lomecel-B for patients with HLHS undergoing stage two reconstructive cardiac surgery. The primary endpoint is a change in right ventricular ejection fraction, a key measure of cardiac function at 12 months post-treatment. All seven target centers are activated for enrollment, and we anticipate that enrollment will continue well into 2023. Finally, I'd like to cover our Aging Frailty program. Aging Frailty is an age-associated decline in reserve and function across multiple physiologic systems, leading to an inability to cope with stressors. This is common among the elderly, affecting millions of individuals in the United States, and up to 15% of the population over the age of 65, depending on the specific clinical definition used. Aging Frailty manifests typically as a combination of several signs and symptoms that may include sarcopenia, or involuntary loss of muscle associated with weakness, fatigue, weight loss, slowness, and low activity. Unfortunately, elderly frail individuals are more vulnerable to poor clinical outcomes related to Aging Frailty, such as infection, falls, factors, hospitalizations, and death. At Longeveron, we have been evaluating the effect of Lomecel-B on health and function of elderly frail patients, particularly on their physical and immune system function. In early stage exploratory trials, we have been using biomarkers of inflammation and vascular endothelial function to measure that effect. To that end, we remain on track to initiate our Japanese Aging Frailty Phase 2 trial in the first half of 2022. This is an investigator-initiated, randomized, placebo-controlled, double-blind study of a single infusion of two different dose levels of Lomecel-B compared to placebo, and is being conducted by our clinical partners at the National Center for Geriatrics and Gerontology in Nagoya, and Juntendo University Hospital in Tokyo. In conjunction with our program evaluating Lomecel-B as a treatment for Aging Frailty, we have a concurrent early-stage study exploring primarily the safety of Lomecel-B infusion as an adjuvant to high-dose influenza vaccine in older frail individuals. This study, called the HERA study, is an exploratory trial that enrolled patients over several flu seasons and was partially funded through grants from the NIH and Maryland's stem cell research fund. Though it's a small exploratory trial that is not robust enough to prove efficacy, we are analyzing an extensive panel of biomarkers to look for potential effects on the aging immune system, as well as other endpoints related to physical function and frailty. We are currently analyzing the results of the trial and we anticipate reporting top-line data in the first half of this year. In summary, we have made meaningful steps to advance our three ongoing clinical trials and look forward to providing updates to these programs throughout the year. With that, I'd now like to turn the call over to James Clavijo, our Chief Financial Officer, to discuss our financial results for the first quarter of 2022. James?

Thanks, Chris. Good morning, everyone. Most of what I'll be covering this morning will be presented in more detail in our condensed financial statements and in our management's discussion and analysis of operations for the quarter ended March 31, 2022, in our quarterly report on Form 10-Q, which will be filed today. For the first quarter ended March 31, 2022, revenues for each of the first quarters of 2022 and 2021 were approximately $0.4 million. The difference was due to an increase in clinical trial revenue and grant revenue as follows. Clinical trial revenue from our Bahamas registry trial was $0.3 million in the first quarter of 2022 compared to $0.2 million in the same period in 2021, an increase of $0.1 million or 88%. While COVID-19 related travel concerns continued to negatively impact registry trial revenue, we believe this impact was lessened during the first quarter. First quarter 2022 grant revenue was less than $0.1 million compared to $0.2 million in the same period in 2021, a decrease of $0.1 million or 72%. The decrease in grant revenue is primarily due to a reduction in grant funds available due to the completion of the grant-funded clinical trials. Research and development expenses in the first quarter of 2022 were $1.4 million compared to $1.3 million for the same period in 2021. The small increase of $0.1 million or 6% was primarily due to an increase in research and development expenses that were not reimbursed by grants related to the completion of clinical trials. General and administrative expenses for the first quarter of 2022 were $2 million compared to $1.7 million for the same period in 2021. The increase of approximately $0.3 million or 16% was primarily related to the increase in compensation, insurance, and professional expenses incurred during the current period, despite a decrease in equity-based compensation reported for RSUs and stock options granted during the quarter. The net loss was $3.5 million in the first quarter of 2022, compared to $3.1 million for the same period in 2021. Cash and short-term investments were $30.6 million compared to $35 million as of March 31, 2022, and 2021, respectively. The decreasing cash period over period was a result of operating expenses and prepayments for insurance. Based on the company's current operating plan and financial resources, we believe that our existing cash and short-term investments will be sufficient to cover expenses and capital requirements into the first half of 2024. With that, thank you and I will turn the call back over to Geoff.

Thank you, James. So as you've heard today, I think we've made some strong progress in the first quarter and we look forward to providing additional updates throughout the year. Now I believe we'd like to open the call for questions, operator.

And the first question comes from Michael Okunewitch from Maxim Group. Please go ahead, Michael, your line is now open.

I'd like to first start off kind of broad here and see if you could find a bit more color on what differentiates Lomecel from the other MSCs being developed out there?

Sure. Good morning, Michael. Thanks for being on the call and thanks for the question. I'd like to ask our Chief Science Officer, Dr. Hare, to address the question, please.

Thank you, Geoff. I appreciate the question. MSC products can be differentiated from each other based on their production processes. The saying in the field is that the product reflects the process. Our process has been refined, the formulas we use are proprietary, and our potency assays are also confidential information. Potency assays are essential for obtaining FDA approval for cell-based therapeutics. While products from different companies might seem similar at first glance, they are evaluated uniquely by regulatory authorities based on their production methods, locations, and associated potency assays. Thank you.

Yes, thank you very much. I appreciate that. The other thing I’d like to ask about the HERA trial and more specifically, what are you using as an evaluation when you're evaluating Lomecel as an adjuvant? Are you primarily looking at how Lomecel-B will impact the immunity produced by vaccines? And then what is the underlying mechanism in this population that you're looking to leverage?

Yes, sure. So, this is Geoff. I'll give a sort of a brief overview and let Dr. Min and Dr. Hare kind of get specific on this. So this study spanned over multiple flu seasons and enrolled older frail individuals who received a flu vaccine at specific times shortly after the Lomecel-B infusions. So it's a rather complex study, generating hypotheses regarding the potential for Lomecel-B to improve immune status in older frail individuals who typically have diminished immune systems or something called immunosenescence. The primary objective was to evaluate the safety of Lomecel-B infusion in advance of receiving the flu vaccine, but also to evaluate the impact on adaptive immunity. Adaptive immunity measures included antibody production and hemagglutination inhibition, or HAI assays, as well as changes in B and T-cell production. Beyond that, this study was designed to evaluate the potential impact of Lomecel-B on various measures of frailty since we were enrolling a frail population. This would allow us to compare these results to the findings we've already announced from our completed Phase 2b Aging Frailty study. Dr. Hare, could you elaborate on that more specifically regarding Michael's question?

Yes, hi, thanks for the question. Let me address one of the issues you asked about the mechanism of action. The mechanisms of action of these types of cell-based therapies can be complex to pin down to a single event because the cells, as living cells, have pleiotropic mechanisms of action. They do at least four things that we're aware of, possibly more: they release cytokines and growth factors that are immunomodulatory, they form heterocellular coupling interactions with host cells, they release exosomes, and they form tunneling nanotubes with host cells, through which they transmit organelles such as mitochondria that can re-energize the host tissues. These four mechanisms form the basis for our studies of and our choice of indications using Lomecel-B. With regard to the immune system specifically, we know that older individuals with frailty have diminished immune responses to vaccination, which is well studied. Through a combination of those four mechanisms, we believe that Lomecel-B can enhance immune responses. The purpose of the study is exploratory, aiming to identify which specific features of the immune system are responsive to an infusion of Lomecel-B.

All right, thank you very much. I appreciate the additional color.

Thank you. Our next question comes from Maxim Group. Your line is now open.

Hi, guys, thanks for taking the question. So for Alzheimer's, I know you guys looked at TNF alpha in the Aging Frailty study. I was just wondering if you've had any discussions to look at that biomarker in Alzheimer's going forward.

So I'm sorry, just to make sure I understood the question is, are we continuing to measure TNF alpha in subsequent studies in Alzheimer's? This is Chris Min, by the way, CMO.

Yes, hey Chris. Correct?

Yes, we are continuing to do this in our currently enrolling Phase 2 study. There are challenges with TNF alpha, so we haven't decided to tie everything in development to that specific biomarker, but we are continuing to use it as a measure.

Okay, great. Thank you. And Aging Frailty study in Japan. Will the dosing be similar, more or less the same as the U.S. study?

Yes, so this is Geoff. The doses are going to be 50 million and 100 million, so they're similar. These are doses that were tested in our U.S. trial. In collaboration and discussion with the partners in Japan, we made the decision not to go as high in the upper range as we did in the U.S., and this was based mainly on the differences in body mass and physiology of the subjects in Japan versus those in the United States. So, the same dose range, but not quite as we're not going quite as high.

Thanks. Makes a lot of sense.

The next question comes from Constantine Davides at EF Hutton. Constantine, your line is now open.

Hey, guys, good morning. Just a quick one, I apologize if I missed this, but for HLHS for ELPIS II, can you just talk about the enrollment expectations there? I think I caught something about that extending into 2023, but just expand upon that a little bit in terms of how the enrollment experience is comparing to ELPIS I. And then when we could expect the readout from that program?

Hey, Constantine, thanks for the call. Thanks for the question as well. We are conducting this trial in collaboration with partners at the NHLBI, Cancer Center at Lurie Children's Hospital in Chicago, and the University of Texas Health Center. They have seven tertiary hospitals that are part of the consortium responsible for the enrollment of these patients, the care of the patients, and the conducting of the trial. All seven centers have been activated for enrollment. The target for enrollment for that trial, as provided by the coordinating centers and the PI, is into 2023, well into 2023. We are monitoring the speed at which it's enrolling based on all seven centers. We’d like to see a few quarters' worth of enrollment to really understand how quickly they are able to get all 38 of these infants enrolled. At this stage, we understand that we should expect enrollment to continue well into 2023. Each infant therefore has a year of observation. Depending on when that last infant is enrolled, you can expect another year of observation, and then hopefully shortly thereafter the data. So we'll stop short of predicting when you would see a readout, but that is what we understand right now in terms of the guidance for this trial's enrollment.

But it's a 2024 event.

Basically.

I think that's a reasonable assumption at this point.

Okay. Thanks for the color there. And then Chris, maybe this is a similar question to one that was asked previously, but I'm just wondering, what specifically attracted you to Longeveron? Is it something about particular programs or something you saw in the technology? I'm just curious if you can articulate that a little bit.

Yes, sure. Happy to. The fact is that I have seen a history; I'm sure you're aware that there have been a number of MSC companies that have come and gone already. When I was first approached to Longeveron, I was kind of curious about that. As I got to know Dr. Hare’s work, I was really impressed by the careful way in which the investigations have been conducted and the way that he has built a clinical platform. Specifically, I thought the adult frailty study that was reported last year was impressive, although the pre-specified endpoint may not have achieved statistical significance that was generated as a pre-study hypothesis. The ad hoc analysis of the differences in six-minute walk time at nine months I thought was really impressive, and the dose response. While we all know that therapeutic development is very difficult, and despite the best efforts, one can end up not getting the efficacy results needed for final approval, I thought the early clinical results demonstrated with Lomecel-B were really quite promising, and that is something I wanted to be a part of. I hope that answers your question.

That's great. Thank you.

Thank you. We currently have no further questions. So I will hand back to Geoff Green for any final remarks.

Great. Just wanted to say thank you, and on behalf of the company, we'd like to thank everyone for their continued interest and support in Longeveron. I'd like to wish everyone a great day and a great weekend.

This concludes today's conference call. Thank you so much for joining. You may now disconnect your lines.