Longeveron Inc. Q3 FY2023 Earnings Call

Greetings, and welcome to Longeveron’s Third Quarter 2023 Earnings call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mike Moyer. Mike, please proceed.

Thank you, operator. Good morning, everyone and welcome to Longeveron’s third quarter 2023 results conference call. Today we will discuss financial results for the quarter ended September 30, 2023 and provide a business update. Earlier this morning, we issued a press release with these results, which can be found under the Investor section of Longeveron’s website. I am joined today by the following members of Longeveron’s management team. Mr. Wa’el Hashad, Chief Executive Officer; Nataliya Agafonova, Chief Medical Officer; and Lisa Locklear, Chief Financial Officer. Mr. Hashad will begin with a brief corporate overview then Dr. Agafonova will review Longeveron’s recent progress in its clinical programs; and Ms. Locklear will review financial results for the third quarter. Following the company’s prepared remarks, we will open the call to questions from covering analysts. As a reminder, during this call, we will 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 discussed in our filings with the SEC, including our quarterly report on Form 10-Q and Annual Report on 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 Mr. Wa’el Hashad, Chief Executive Officer of Longeveron. Wa’el?

Thank you Mike and good morning everyone. Welcome to the Longeveron third quarter 2023 business update and financial results call. We are pleased to be speaking with you today and look forward to sharing our progress developing regenerative medicines for unmet medical needs. Our third quarter and recent weeks have been very productive, led by top line results we announced from the Clear Mind Alzheimer Disease Trial, which affirms the safety profile of Lomecel-B and provided a clear efficacy signal. We are also presenting extended survival data from ELPIS I trial of Lomecel-B in Hypoplastic Left Heart Syndrome, also known as HLHS at the scientific session of the American Heart Association and took steps to strengthen our balance sheet securing $4 million gross proceeds before expenses from equity financing to support our continued advancement of these clinical programs. I will turn the call over to my colleague, Dr. Agafonova and Lisa Locklear in a moment to review these developments in detail but first I'll begin with a brief overview of the Lomecel-B. Our product candidate Lomecel-B is a living cell product made from specialized cells isolated from the bone marrow of young healthy adult donors aged 18 to 45. These specialized cells are known in the literature as medicinal signaling cells or MSCs and are essential to our endogenous or built-in biological repair mechanisms. MSCs have been shown to perform a number of complex functions in our body, including the formation of new tissue. They also have been shown to hone and respond to sites of injury or disease and secrete bioactive factors that are immunomodulatory and regenerative. We believe that Lomecel-B has multiple potential mechanisms of actions that may lead to anti-inflammatory and vascular regenerative responses and therefore may have broader applications across a range of rare and aging-related diseases. We have ongoing programs in Hypoplastic Left Heart Syndrome or HLHS, Alzheimer's Disease, and Aging-Related Frailty. Our ELPIS II trial in HLHS has exceeded its 50% enrollment threshold and we have activated additional clinical sites to further expedite enrollment. This is our priority program and we are focused on completing enrollment in this trial in 2024. As I mentioned, we also announced positive top line results from our Clear Mind Phase 2A trial for Lomecel-B treatment in Alzheimer's disease last month and expect full data from this trial in the coming weeks. In Aging-Related Frailty, enrollment continues to progress in our Phase 2 study in Japan. The data we have generated in HLHS and Alzheimer's all supports a broader potential for Lomecel-B as a regenerative medicine therapy for a range of unmet needs, and we are excited about the progress we are making. With that, I will turn the call over to Dr. Nataliya Agafonova to provide a more detailed overview of our clinical program and recent projects. Nataliya.

Thank you Wa’el. I will begin with a brief review of our Alzheimer's disease program and the top line results we recently presented from our Clear Mind Study. Based on the growing body of preclinical and clinical data from various sources, we believe Lomecel-B may prevent the clinical progression of Alzheimer's disease by reducing disease-related brain inflammation. Neuronal cell death caused by earlier and substantial neuro-inflammation is a significant contributor to the pathogenesis of Alzheimer's disease. In preclinical models of Alzheimer's disease, MSCs with characteristics similar to Lomecel-B have been shown to cross the blood-brain barrier, potentially with anti-inflammatory effects, improving endothelial function and promoting neurogenesis, the process of neuron formation in the brain. Our Phase 2A trial of Lomecel-B for mild Alzheimer disease, called the Clear Mind Trial, completed enrollment in November of 2022. Clear Mind is a 48 patient four-arm parallel design, randomized clinical trial of Lomecel-B designed to evaluate the safety of single and multiple infusions of two different dose levels of Lomecel-B compared to placebo in patients with mild Alzheimer's disease. The primary endpoint is safety as measured by the occurrence of serious adverse events within the first 30 days after administration of Lomecel-B. Secondary and exploratory endpoints include measures of cognitive function, and fluid and radiological biomarkers relevant to inflammation and the failure of vascular systems. In a previously completed Phase 1 study, we demonstrated preliminary safety of Lomecel-B in patients with mild to moderate Alzheimer's disease. Results from Clear Mind show that the primary endpoint of safety was met based on statistical and medical assessments. There was one serious adverse event reported in each Lomecel-B treatment group and none on placebo. Each SAE was reviewed and assessed by the Data and Safety Monitoring Board with no safety issues raised. The safety data were consistent with the established safety profile with no incidents of hypersensitivities, no cases of Alzheimer-related emerging abnormalities, no clinically asymptomatic microhemorrhages revealed by MRI, and no notable changes in laboratory evaluations and electrocardiograms. In the secondary endpoint of change from baseline to week 39 in CAD, which is the Composite Alzheimer Disease score, positive results were demonstrated at the pre-specified statistical level of P less than 0.12. Statistically significant improvement in week 39 in CAD was observed for Lomecel-B at a dose level of 25 million with statistical significance at 0.091 versus placebo, and the pro-Lomecel-B group consisted of 25 million dose once, 25 million dose four times, and 100 million cells four doses with statistical significance at 0.099. In terms of specific components of the CAD score, Lomecel-B dosed at 25 million once demonstrated statistically significant slowing of disease progression in left hippocampal volume with a statistical significance of 0.015 related to placebo. The ADCS ADL score, which stands for Alzheimer Disease Cooperative Study Activity of Daily Living and left hippocampal volume at week 39, was statistically significant for the Lomecel-B treatment group relative to placebo with P values of 0.047 and 0.038 respectively. Other doses demonstrated numerical slowing and prevention of disease worsening relative to placebo in composite score, cognitive score, cognition and functional scale, and activity daily living scale measured by the caregiver and left hippocampal volume at week 39. We believe these results provide important validation of both the safety and therapeutic potential of Lomecel-B in the treatment of Alzheimer's disease and provide robust support for additional clinical trials in other indications. As Wa’el mentioned, we expect the full dataset from this trial in the coming weeks. Now for an update on our HLHS program. For those who might not know, HLHS is a rare congenital and devastating birth defect in which the left ventricle of the heart is either severely underdeveloped or missing. The condition affects approximately a thousand babies per year in the United States. Babies born with this condition have severely diminished systemic blood flow, which requires children to undergo a complex three-stage heart reconstruction surgery process over the course of the first five years of their life. While these children can now live into adulthood with surgical intervention, only 50% to 60% of affected individuals survive to adolescence due to right ventricle failure, which is often unable to handle the increased load required to support systemic circulation. Furthermore, even those children who receive successful surgical intervention are at an elevated risk of short-term mortality, delayed development, and long-term complications including organ failure. As such, there is an important unmet medical need to improve right ventricle function in these patients to enhance both short-term and long-term patient outcomes. As Wa’el mentioned, we are presenting the latest long-term survival data from our ELPIS I study, a Phase 1 study of Lomecel-B in children with HLHS at the scientific session of the American Heart Association, which begins tomorrow. Ten patients participated in the ELPIS I trial during which Lomecel-B was injected concurrent with Stage II surgery, also known as a Glenn procedure. In the dataset we are presenting, ten patients have been monitored for up to five years after treatment. Earlier long-term follow-up data from this trial was announced previously showing that 100% of the ten patients who participated in the ELPIS I trial survived and remain heart transplant-free for up to five years of age as compared with the historical clinical trial results showing that children with HLHS who undergo the Glenn procedure typically have had 15% to 20% mortality by five years of age. The ELPIS I data are highly encouraging and reinforce our enthusiasm for Lomecel-B as a potential treatment to transform care for patients with HLHS. Our ELPIS II trial is designed to assess the potential of Lomecel-B to improve right ventricular function and long-term outcomes. The trial is a 38 patient controlled Phase 2 clinical trial evaluating the safety and efficacy of Lomecel-B as an adjunct to standard of care HLHS surgery. The primary outcome measure is the change in the right ventricular ejection fraction from baseline to 12 months. The trial is funded by a grant from the National Institute of Health, NATIONAL HEART, Lung, and Blood Institute. As we announced this week, our ELPIS II trial has exceeded its enrollment threshold of 50%. We also announced the activation of our eighth clinical site location, one more than the seven originally planned. Completion of ELPIS II is our priority program and our focus is on completing enrollment in this trial in 2024. I will conclude with a brief update of our Aging-Related Frailty program. Aging-Related Frailty is an age-associated decline across multiple physiological systems leading to the inability to cope with stressors. It is characterized by mobility impairment, weakness, fatigue, weight loss, slowness, and low activity, which puts individuals at high risk for poor clinical outcomes such as infections, falls, fractures, hospitalization, and even death. At Longeveron, we've been evaluating the effect Lomecel-B may have on the health and function of elderly frail patients, particularly on physical and immune system function. With our clinical development strategy in Aging-Related Frailty focused on Japan, a country with one of the oldest populations in the world, our Phase 2 clinical trial evaluating Lomecel-B in patients with Aging-Related Frailty in Japan is a three-arm parallel design, randomized, evenly split one to one to one with placebo, as well as two different Lomecel-B infusions. Enrollment is ongoing and the trial is expected to enroll 45 patients by the end of 2024. The primary endpoint is to evaluate safety with an overarching goal of providing support for an eventual limited approval under the Japan Act of the Safety and Regenerative Medicine or ASRM, which recognizes the tremendous therapeutic potential of cell therapy. With that, I'd now like to turn the call over to Lisa Locklear, our CFO, to discuss our financial results for the third quarter of 2023. Lisa.

Thanks, Nataliya, and good morning, everyone. What I'm covering this morning will be presented in more detail in our condensed financial statements and in our management's discussion and analysis of operations in our quarterly report on Form 10-Q, which we filed yesterday. Revenues for the three months ended September 30, 2023 and 2022 were approximately $0.2 million and $0.3 million, respectively. Grant revenue for the three months ended September 30, 2023 and 2022 was zero and $0.1 million, respectively. The decrease was primarily due to a reduction in grant funds available due to the completion of the grant-funded clinical trial. Clinical trial revenue, which is derived from the Bahamas registry trial for the three-month periods ended September 30, 2023 and 2022 was $0.2 million. Clinical trial revenue for the three months ended September 30, 2023, decreased by less than $0.1 million compared to the same period in 2022 as a result of a decrease in participant demand. Related cost of revenues was approximately $0.1 million and $0.2 million for the three months ended September 30, 2023 and 2022, respectively. The decrease of $0.1 million or 45% was primarily due to the decrease in revenues earned from the Bahamas registry trial. This resulted in a gross profit of approximately $0.1 million for both of the three-month periods ended September 30, 2023 and 2022. General and administrative expenses for the three months ended September 30, 2023, increased to approximately $3.1 million compared to $2.1 million for the same period in 2022. The increase of approximately $1 million was primarily related to increases including $0.3 million in compensation and benefit expenses, $0.4 million of expenses related to legal and professional fees, and $0.4 million of expenses related to the subscription rights offering. These increases were partially offset by a decrease of $0.1 million in stock-based compensation expense. Research and development expenses for the three months ended September 30, 2023, decreased to approximately $1.8 million from approximately $3 million for the same period in 2022. The decrease of $1.1 million was primarily due to a decrease of $1 million in research and development expenses driven by lower spend on clinical trials and supplies. Selling and marketing expenses for the three months ended September 30, 2023 and 2022 were approximately $0.3 million and $0.2 million, respectively. Selling and marketing expenses consist primarily of investor and public relations expenses. Other income for the three months ended September 30, 2023, was $0.1 million, which consisted of interest income. Other expenses for the three months ended September 30, 2022 was less than $0.1 million. Our net loss was approximately $5.1 million and $5.2 million for the three-month periods ended September 30, 2023 and 2022, respectively. As of September 30, 2023, the company had cash and cash equivalents of $2 million, marketable securities of $2 million, and working capital of approximately $1.7 million. As of December 31, 2022, cash and cash equivalents were $10.5 million, marketable securities were $9.2 million, and working capital was approximately $15.4 million. Subsequent to the end of the quarter, on October 30, 2023, the company closed a registered direct equity offering priced at the market under NASDAQ rules and a concurrent private placement with gross proceeds of approximately $4 million before deducting the placement agent fees and other offering expenses payable by Longeveron. Longeveron currently intends to use the net proceeds from the offering to fund the ongoing clinical and regulatory development of Lomecel-B and for capital expenditures, working capital, and general corporate purposes. 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 quarter of 2024. With that, thank you and I'll turn the call over to Wa'el. Wa’el?

Thank you, Lisa. And yes, everyone is happier today with the announcement of positive trial results from our Clear Mind Study and the full data expected in the coming weeks, results from ELPIS I trial and HLHS being presented at the American Heart Association and ELPIS II continuing its enrollment and our Phase II program in Aging-Related Frailty progressing in Japan as well. We are looking forward to meaningful milestones in the near term. We are making steady progress in advancing Lomecel-B across these three indications and fully realizing the therapeutic potential of Lomecel-B. I would now like to open the call for questions. Operator, please open the lines to our covering analysts.

Thank you. Our first question comes from Michael Okunewitch. Please proceed.

Hey Wa’el. Thank you for taking the questions today. I guess to kick things off, I just want to ask something about your strategy regarding HLHS given that you have this strong data from ELPIS I. What sort of community outreach and awareness building are you doing or given the rare nature of the disease, the unmet need is there not really a need to do all that much more than presenting data at conferences and strategically selecting sites for the ELPIS II study?

Hi Michael, good morning and thank you for the question. I think it's a great question and I will pass it on to Nataliya, who has been, since she came, reaching out to advocacy groups and other communities within the Hypoplastic Left Heart Syndrome. As you know, HLHS is a rare, ultra-rare actually, disease. So there are not too many communities, but there are some communities, and I will have Nataliya give you a little bit of some of the examples that we are working on. Nataliya?

Thank you so much, Wa'el and thank you so much, Michael, for your question. And you're absolutely right, because it's a rare disease, my first action when I came to the company was to evaluate how we can increase awareness. There are a few steps we are currently taking. The largest advocacy group for this particular indication, not just for rare diseases but even for HLHS, is called Sisters by Heart. We reached out to Sisters by Heart, and we are collaborating right now to engage with parents and physicians who are treating this disease just to increase awareness that our trial exists and do everything possible for patients, for parents, for the community to be aware. In addition to that, we are very actively engaged with our sites. We are visiting them, we understand more about this patient care and about the disease, and we are reaching out to other potential programs which exist as a network for parents to be aware about HLHS, and this is in progress.

Yes. And of course, Michael, we did also host one key opinion leader event that was led by three top key opinion leaders to educate everyone on the Hypoplastic Left Heart Syndrome. It was conducted by Dr. Sanjay Kaushal, Dr. Ram Subramanian, and Dr. Josh Hare, and it's available as enduring material on both our website and LifeSci, our Investor Relations portal as well.

Alright, yes. Thank you for that. And then one more for me and I'll hop back into the queue. I just want to see with the full Clear Mind data coming up in the next few weeks, are there any particular additional analyses that you think we should be keeping our eye on?

Yes, of course. This will be a complete study report, so it will include the data that we disclosed. But as Nataliya has mentioned, we are going to also announce additional analyses from other scales that we have not presented, cognitive scales such as MMSC, and we’re also going to be presenting more detailed MRI data. And of course, all the biomarker data, which is a significant dataset, is why it's taking a lot of time to do the analysis. So there will be a lot of additional analyses coming, but those are the three: the cognitive scales, the MRI data, and the biomarker data are the three things that people have not seen before. I think they will all be interesting.

Alright, thank you. We're looking forward to it.

Thank you.

This concludes our question-and-answer session. I would like to turn the floor back over to Wa'el Hashad for closing comments.

Alright, thank you, operator. Well, thanks everyone for attending the call today. On behalf of Longeveron, I would like to thank you for your continued interest and support and wish you a good day today. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.