Longeveron Inc. Q1 FY2024 Earnings Call

Thank you, Judith. Good afternoon, everyone, and thank you for joining us today to review Longeveron's first quarter 2024 financial results and business update. After the U.S. markets closed today, we issued a press release with financial results in the first quarter, which can be found under the Investors section of the Longeveron website. On the call today are Wa'el Hashad, Chief Executive Officer; Dr. Nataliya Agafonova, Chief Medical Officer; Lisa Locklear, Chief Financial Officer; and Joshua Hare, Co-Founder, Chief Science Officer and Chairman of the Board. As a reminder, during this call, we will be making forward-looking statements. These statements are subject to certain risks and uncertainties that could cause 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 the company's filings with the Securities and Exchange Commission, which we encourage you to review. Following the company's prepared remarks, we will open the call to questions from covering analysts.

Thank you, Derek. Good afternoon, everyone. We are pleased to update you on our progress and to share why we're confident in Longeveron's opportunity and its future. As a reminder, for those of you newer to our story, Longeveron is a regenerative medicine company developing cutting-edge cellular therapy. Our lead development compound, a cellular therapy candidate called Lomecel-B, represents a pipeline and a product opportunity that is being evaluated across three important treatment areas. Addressing numerous unmet medical needs with U.S. market potential opportunity of approximately USD 10 billion to USD 18 billion. There are four main reasons that give me confidence in our ability to achieve the opportunity of Lomecel-B. The first is the launch of our own foundation and strong science. Lomecel-B is a proprietary, scalable allogeneic cellular therapy that has delivered positive initial results across five clinical trials: Phase I and II trials in Alzheimer's disease, Phase I and II trials in aging-related frailty, and Phase I in hypoplastic left heart syndrome (HLHS). Second is the experience and expertise of our team's launch, which makes advancing this research possible across clinical development, regulatory and manufacturing. Third is the team's dedication and commitment to advance this research, and the fourth and most important reason is the patients. Hypoplastic left heart syndrome, Alzheimer's disease, aging frailty—these words convey a lot of information to scientists and doctors, but they cannot fully express the devastating impact these diseases and conditions have on the patients and their families. It is heartbreaking to see an infant after heart surgery so early in their lives or the lack of memory and cognition associated with Alzheimer's. What drives everyone here at Longeveron, day in and day out, is the patients and the opportunity to positively impact their lives. They are why we are working every day to hopefully develop therapeutic solutions for these unmet needs. These four reasons drive my confidence in our ability to make an impact, and that impact starts with HLHS, our strategic priority for this year. As you know, we completed Phase I study, known as ELPIS I, which produced positive results that were the basis for initiating our ongoing Phase II study, ELPIS II, which is evaluating Lomecel-B as a potential adjunct treatment for HLHS. Completing enrollment in this trial by the end of this year is our primary focus with this program. HLHS is our top priority program as we believe it is the program with the highest probability of success and the shortest path to potential regulatory approval. The ELPIS I data were also the basis for the U.S. FDA awarding the HLHS program three distinct and important designations: Orphan Drug designation, Fast Track designation, and Rare Pediatric Disease designation, which, upon approval, may lead to the granting of a priority review voucher, a very valuable additional asset, which can enable us to speed up FDA reviews of another Longeveron NDA or BLA or potentially sell the voucher to another company. The selling price of these priority review vouchers has generally been in excess of USD 100 million. My earlier point about the strength of our science is further evidenced by the positive data from the CLEAR MIND Phase IIa clinical trial in mild Alzheimer's disease. We anticipate meeting with the FDA late this year to review future clinical and regulatory strategies for continuing this important program. Our Chief Medical Officer, Dr. Nataliya Agafonova, will provide additional details on both HLHS and the Alzheimer's disease program later in this call. I want to take a moment to highlight two other areas of the company where we are optimizing our resources, as that reinforces the reasons I just mentioned for our confidence. Given our preliminary Phase II clinical data suggesting that Lomecel-B may potentially address problems associated with aging-related frailty, we are gaining additional real-world evidence from our currently enrolling investigational frailty and cognitive impairment registry trial in the Bahamas. Eligible participants may receive Lomecel-B for aging-related frailty, Alzheimer's disease, or other indications at their own expense and are followed for safety and clinical efficacy. Why this is important? First, it indicates the strength of our initial data that supports the authorization for this investigational program in the first place. Second, through this investigational registry trial, we are able to collect real-world treatment data to better understand Lomecel-B's activity, safety profile, and potential efficacy. Lomecel-B has been safely administered in over 500 patients to date across clinical trials and this registry trial. We believe this data will be important in guiding the clinical development program for Lomecel-B. Finally and importantly, we can generate this data in a cost-neutral manner as participants do so at their own expense. Building on the success of this registry trial so far, we plan to launch an investigational osteoarthritis registry trial in the Bahamas in the fourth quarter of this year. The second area is regarding Longeveron's manufacturing expertise and capabilities. We have assembled a team of experts and proprietary technology that enables us to take a systematic approach to rapidly develop improved cell therapies. Our state-of-the-art GMP facility in Miami at Life Science and Technology Park consists of 3,000 square feet of clean room space containing 8 ISO 7 clean rooms, and ancillary areas, as well as 1,150 square feet of process development, quality control and warehouse space. All products are manufactured and released based on FDA guidance. While this facility gives us the capacity to manufacture Lomecel-B for clinical trial use and potentially, if approved, for commercial scale, we do not currently need the facility's full capacity, which presents an additional opportunity for us as a company—our manufacturing expertise, capabilities and facilities are in demand from other pharmaceutical organizations. We plan to expand the contract manufacturing operation as part of our overall resource optimization strategy. We have already secured the first contract under this initiative and started preliminary work with the client. We believe this contract manufacturing has the potential to expand team experience and generate approximately $4 million to $5 million in annual revenue once it's fully operational, helping offset our clinical development costs and reduce, but not eliminate, our additional capital needs, which leads me to my final area of comments: capital allocation and spending. As I hope you can see from my prior comments, we are tightly focused on optimizing our resources and being good stewards of shareholders' capital. With a focus on expense control, our total operating expenses are down 8% year-over-year. In April, we raised $11.4 million, which combined with our existing balance sheet, will help us fund continued development of the HLHS program and regulatory discussions for the Alzheimer's disease program into the fourth quarter. The data generated to date in HLHS and Alzheimer's disease all support broad potential for Lomecel-B as a regenerative medical therapy across multiple indications. The strength of that data, our experienced and committed team, and the unwavering focus on patients give me confidence in the future of Lomecel-B and Longeveron. With that, I will turn the call over to Dr. Agafonova to provide an update on the clinical development program.

Thank you, Wa'el, and good afternoon, everyone. As Wa'el mentioned, our HLHS program is a primary focus for us as we believe it is the program with the highest probability of success and the least complex pathway to potential approval. As a reminder, for those who might not know, HLHS, or hypoplastic left heart syndrome, is a rare pediatric congenital heart birth defect in which the left ventricle of the heart is either severely underdeveloped or missing. The current treatment requires infants to undergo a complex three-stage heart reconstruction surgery process over the first five years of their life. Even with the comprehensive treatment, only 50% to 60% of infants survive to adolescence due to right ventricular failure. There is clearly an important unmet medical need to improve the right ventricular function of these infants to positively impact both short- and long-term patient outcomes. Our ELPIS I Phase I study of Lomecel-B in infants with HLHS demonstrated that infants in the trial experienced 100% transplant-free survival up to five years of age after receiving Lomecel-B during the Stage 2 surgery, compared to approximately a 20% mortality rate observed from historical control data. The ELPIS I data were highly encouraging and served as the basis for ELPIS II, our ongoing Phase IIb clinical trial designed to assess the potential of Lomecel-B to improve right ventricular function and long-term outcomes. ELPIS II is being conducted in collaboration with the National Heart, Lung and Blood Institute through grants from the National Institutes of Health. ELPIS II remains on track to complete enrollment by the end of this year. We intend to request a Type B meeting with the FDA to discuss the development strategy for HLHS and expectations for the potential biologics license application or BLA approval. Moving on to our Alzheimer's disease program. As we mentioned on our last call, in our Phase IIa clinical trial, CLEAR MIND, patients treated with Lomecel-B showed an overall slowing in the progression of disease compared to placebo. The trial achieved the primary safety and secondary efficacy endpoints and showed statistically significant improvements in prespecified clinical and biomarker endpoints in specific Lomecel-B groups compared to placebo. Full results from the CLEAR MIND study have been selected for future research presentations at the 2024 Alzheimer's Association International Conference, and Longeveron has been invited to chair this session. We believe the results from CLEAR MIND support the therapeutic potential of Lomecel-B in the treatment of mild Alzheimer's disease and provide evidence-based support for the clinical development. We plan to meet with the FDA to review future clinical and regulatory strategy for the Alzheimer's program. We are also seeking partnerships and non-dilutive funding to support further development of Lomecel-B in Alzheimer's disease. Finally, as previously announced, as part of our strategic focus on HLHS in the first quarter, we discontinued our aging-related frailty clinical trial in Japan. Cost savings from the discontinuation will support HLHS development and reduce, but not eliminate, our additional capital needs. We continue to believe in the potential of Lomecel-B in this disease state, and we will evaluate options for continued development at a future date. I will hand the call over to Lisa Locklear, our Chief Financial Officer, to discuss our financial results for the first quarter.

Thank you, Nataliya, and good afternoon, everyone. This afternoon, we issued a press release and filed our quarterly report on Form 10-Q, both of which present our financial results in detail. So I will now touch on some highlights. Revenues for the first quarter of 2024 were $0.5 million, up $0.2 million or 96% when compared to the first quarter of 2023, mainly due to increased participant demand for our frailty and cognitive impairment registry trial in the Bahamas. Contract manufacturing revenue for the three months ended March 31, 2024, was less than $0.1 million. However, as Wa'el indicated, we believe there is an opportunity to expand this area of business to utilize our team's significant expertise and our state-of-the-art GMP manufacturing facility. Total operating expenses for the first quarter declined 8% year-over-year. General and administrative expenses for the quarter increased $0.2 million to $2.2 million, while R&D expenses decreased approximately $0.6 million to approximately $2.2 million, both amounts as compared to the same period in 2023. The decrease in R&D expenses was primarily due to reduced expenses related to Alzheimer's disease clinical trials, including the discontinuation of the aging-related frailty clinical trial in Japan. Our net loss decreased to approximately $4.1 million for the three months ended March 31, 2024, from a net loss of $4.6 million for the same period in 2023. Cash and cash equivalents and marketable securities as of March 31, 2024, were $2.3 million. In April 2024, the company completed two capital raises, which resulted in gross proceeds of $11.4 million. The company believes that existing cash and cash equivalents will enable it to fund its operating expenses and capital expenditure requirements into the fourth quarter of 2024. I will now hand the call over to Dr. Joshua Hare, our Chief Science Officer and Chairman of the Board, to update you on several exciting changes to our Board of Directors.

Thank you, Lisa, and good afternoon, everyone. Since the founding of this company, we have made tremendous clinical progress with Lomecel-B. That success in the clinic has not been without corporate challenges, challenges that we've been able to navigate with the assistance and guidance of a terrific Board of Directors. Recognizing Longeveron's continued growth and evolution, we've implemented a planned board refreshment process with a focus on bringing in new, relevant, experienced leaders over time to add to the knowledge base and experience provided by current and departing board members. As part of this process, Jeffrey Pfeffer and Cathy Ross departed the Board, and Dr. Doug Losordo will not run for reelection at the end of his term at the upcoming Annual Shareholder Meeting next month. On behalf of the Board and company, I want to recognize and thank them for their leadership and many contributions. Their guidance and insights were instrumental in Longeveron's success to this point and we will miss their collaboration. We are delighted to have attracted several new experienced industry veterans that are interested in joining the Longeveron board. Richard Kender has been appointed to the Board filling the seat vacated by Jeffrey Pfeffer. Dr. Roger Hajjar and Neha Motwani have been nominated as candidates for the Board to replace Dr. Losordo and Cathy Ross, subject to their election at our upcoming Annual Meeting of Stockholders next month. I believe all three of these individuals will add tremendous value to the Board and to Longeveron. Rich Kender is a retired Senior Vice President of Business Development and Corporate Licensing at Merck & Co., Inc. He spent his entire professional career at Merck in various corporate roles of increasing responsibility and was involved in more than 100 business development and licensing transactions. Dr. Roger Hajjar brings incredible experience as a scientist, academic, and operational executive. He is an internationally recognized scientist whose cardiac gene therapy discoveries have spurred clinical trials for heart failure and whose methodologies for cardiac directed gene transfer are currently utilized by investigators around the world. He was recently Head of R&D at Ring Therapeutics and was appointed as the inaugural Director of the Gene and Cell Therapy Institute at Mass General Brigham. Finally, the third board candidate, Neha Motwani, has over 25 years of healthcare investment banking experience, most recently having served as Managing Director of Healthcare Investment Banking at William Blair. She previously held investment banking roles of increasing responsibility with Truist Securities, Oppenheimer & Company, Stifel Financial, and Cowen and Company, where collectively she completed transactions raising over $6.8 billion. I'm delighted Rich has joined the Board and enthusiastically support the election of Roger and Neha at the upcoming Annual Meeting of Stockholders. I believe their experience, expertise, and insights will help guide Longeveron through its next stages of growth and opportunity. Thank you all very much, and I will now turn the call back to Wa'el.

Thank you, Josh. We believe there are tremendous opportunities in our cellular therapy research and with Lomecel-B. The trend of initial clinical data from ELPIS I and CLEAR MIND reinforces that belief. Our clinical development program in HLHS and Alzheimer's disease is designed to evaluate Lomecel-B's potential in these indications in order to potentially provide new therapeutic options to patients impacted by these devastating diseases. With multiple upcoming important catalysts, we believe 2024 has the potential to be a transformational year for Longeveron. Operator, we would now like to open the call for questions from covering analysts.

Two regulatory items, please. Firstly, with respect to the applicability of Lomecel-B in HLHS. If we look at the hypothetical scenario in which the ongoing study replicates the earlier clinical data, what perspective can you provide to us regarding the regulatory receptivity to such a result and the potential for the drug to be the subject of accelerated approval? And what other parameters, if any, might be taken into consideration here?

Well, Raghuram, thank you so much for that question. I will tell you that our intention right now is to finalize submitting the briefing book and request a timely meeting. Our goal is actually to seek the potential for full approval, not just accelerated approval, and our backup plan is accelerated approval. But our primary target is full approval for Lomecel-B and HLHS. The second point, I will have Nataliya probably take this one. But I want to remind you that the Phase I program was not conducted as a head-to-head trial; there were only 10 patients, all of whom received Lomecel-B. The Phase II program is conducted as a head-to-head program with 19 patients in each arm: the standard of care and the other 19 patients receiving adjunct therapy with Lomecel-B.

Absolutely. I would like to echo the same comment as Wa'el that the current clinical trial, ELPIS II, is a standard of care controlled trial, which, as you know, in rare disease indications is a big benefit for seeing results in a controlled fashion. Secondly, we are exploring all kinds of opportunities to design a strong statistical methodology to increase the probability of success. As you know, this trial is a 12-month trial, and based on the physiological changes and the condition of these children, we will need a longer time. However, there are parameters, cardiac parameters, and extra cardiac parameters, which can be seen within 12 months after the injection of Lomecel directly into the myocardium, and they will definitely have conversations about it with the FDA to ensure that the probability of success is there.

That's very helpful. With respect to the potential future development of Lomecel-B in Alzheimer's disease, could you comment on the regulatory guidance indicating that impact on a single clinical efficacy endpoint, notably the ADAS-Cog scale, would be considered sufficient to entertain the possibility of approval of an investigational drug product in early Alzheimer's disease patients? What implications might this guidance have for the future development of Lomecel-B in the Alzheimer's disease context, along with information indicating that Lomecel-B may have safety advantages versus existing approved anti-Alzheimer's drugs, particularly with respect to the absence of ARIA seen so far in clinical development?

I will add a couple of things, and then I will have Nataliya give you more details as well. There is a draft document circulated by the FDA seeking input from all parties, including the industry, on potential surrogate endpoints related to Alzheimer's disease. I think the agency has recognized that the current available endpoints for the industry are not enough, and there is room to change or modify some of these to help companies bring more therapies to the marketplace in a much more streamlined fashion. We plan to provide our input as part of that process. I will have Nataliya give you a little more context on why we remain very optimistic about our plan and want to move forward.

Absolutely. Raghuram, you mentioned the FDA guidelines, which is a really good and positive message for all of us as well as for the Alzheimer's disease community. In our proof-of-concept Phase IIa study, probably the strongest result, besides showing improvement and stabilization in cognitive function, we've seen a lot of data points indicating the slowing of brain volume decrease and deterioration. We also conducted several post-hoc analyses that show a connection between the slowing of brain volume and the cognitive and functional improvements, which is a great positive finding. The knowledge of these guidelines has provided us more opportunities for dialogue with the FDA and experts in this field to design clinical trials, keeping in mind that imaging biomarkers, such as brain volume, may offer a different approach for Alzheimer's disease treatment. We are targeting early Alzheimer’s disease, MCI patients, and those with mild dementia, where we can prevent not only cognitive function decline but also brain volume changes by demonstrating and designing a combination of imaging biomarkers and clinical outcomes. I believe we have great potential for our next Phase IIb study to integrate these brain imaging biomarkers into the design. We will be very mindful of validated clinical scales and hope to include cognitive and functional measures. There is significant literature indicating that it's possible to design Alzheimer's disease studies with imaging biomarkers while maintaining a lower financial burden and smaller sample sizes. We aim to be creative yet scientifically sound in exploring that opportunity as well.

Ladies and gentlemen, we have reached the end of our question-and-answer session. I will now hand over to Wa'el Hashad for closing remarks.

Thank you. I wanted to thank you all for attending today's call. We greatly appreciate your interest and support, and we look forward to updating you on our progress throughout the year. Thank you.

Thank you. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your lines.