Longeveron Inc. Q3 FY2024 Earnings Call

Ladies and gentlemen, greetings and welcome to the Longeveron Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Please be advised that today's conference is being recorded. I would now like to hand the call over to Derek Cole of Investor Relations Advisory Solutions. Please go ahead.

Thank you, Zico. Good afternoon, everyone, and thank you for joining us today to review Longeveron's third quarter 2024 financial results and business update. After the U.S. markets close today, we issued a press release with financial results for the third quarter, which can be found under the Investor section of the Longeveron website. On the call with me today are Wa'el Hashad, Chief Executive Officer, 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 questions from our analysts. With that, let me hand the call over to Wa'el Hashad, Chief Executive Officer. Wa'el?

Thank you, Derek. Good afternoon, everyone, and thank you very much for joining us today. I would be pleased to update you on our progress and accomplishments since the end of the last quarter, which I can sum up again as continued strong execution across all aspects of the organization. Today, we also want to talk a little bit about the long-term strategy. As a reminder, for those of you who are new to our story, Longeveron is a regenerative medicine company developing cutting-edge cellular therapies. Our development compound, Lomecel-B, represents a pipeline and a product opportunity that is being evaluated across three important treatment areas, addressing numerous unmet medical needs with a U.S. market potential opportunity of approximately $10 billion to $18 billion. Before we get into our recent progress, I would like to ask Dr. Joshua Hare, our Co-Founder and Chief Science Officer, to discuss an important milestone for Longeveron. Josh?

Thank you, Wa'el, and good afternoon, everyone. As Wa'el mentioned, we have just reached an important milestone for the company in our stem cell therapy research. This month marks the 10th anniversary of the founding of Longeveron. Our vision back at the time of founding was to apply stem cell research to deliver regenerative medical therapies for unmet medical needs, and that remains our vision today. As you'll hear from the team, we are making great progress advancing cellular therapy research and our product candidate, Lomecel-B. Over the past decade, stem cell therapy has seen remarkable strides, transforming from a promising field into one delivering tangible clinical outcomes. We've seen the solidification of cell therapy's role in regenerative medicine and its potential to treat a wide range of conditions, signaling an exciting future for both scientific innovation and patient care. At the core of this progress is the increased understanding of different types of stem cells, including medicinal signaling cells, or MSCs, like our development candidate, Lomecel-B, embryonic stem cells, ESCs, adult stem cells, and induced pluripotent stem cells. Key breakthroughs, including the use of stem cells to treat degenerative diseases such as Parkinson's, diabetes, Alzheimer's disease, and heart disease. In 2020, the FDA approved the first stem cell-based treatment for spinal cord injuries, marking a significant milestone for the area of development. In regenerative medicine, stem cells have been used to create lab-grown tissues and mini-organs, which we call organoids. These open the door to personalized medicine and organ repair. Stem cell therapy has made significant advances in the development of new techniques, clinical applications, and regulatory frameworks. While challenges remain, we've seen enhanced safety and precision of stem cell therapies. Governments and regulatory bodies like the FDA have begun to adapt more quickly to emerging stem cell technologies. More treatments are entering Phase 2 and 3 clinical trials, with some therapies receiving breakthrough, fast-track, or regenerative medicine advanced therapy, RMAT, designations for serious conditions. The stem cell market has expanded globally with collaborations between academia, biotech firms, and government-funded research programs. Longeveron has been at the forefront of this evolution in medicine. A decade ago, our stem cell therapy vision was an academic idea. Today, Lomecel-B, our product candidate, a proprietary, scalable, allogeneic cellular therapy, has been administered to over 540 patients, delivered positive initial results across five clinical trials and three indications. These include Phase 1 and 2 trials in Alzheimer's disease, Phase 1 and 2 trials in aging-related frailty, and a Phase I in hypoplastic left heart syndrome, or HLHS, which is also currently being evaluated in a pivotal Phase 2 clinical trial for HLHS. Lomecel-B development programs have received five distinct and important U.S. FDA designations. For the HLHS program, we received orphan drug designation, fast-track designation, and rare pediatric disease designation. And for the AD program, the regenerative medicine advanced therapy designation, or RMAT, and fast-track designation. We believe stem cell therapy has the potential to become a mainstream treatment for many conditions with significant unmet medical needs. The outlook for future breakthroughs is promising, and we will continue to work towards our mission and hopefully support patients battling a range of diseases and conditions. As we do, we look forward to continuing to share our research, clinical, and regulatory progress. Thank you. And I will turn the call back over to Wa'el.

Thank you, Josh. I am heartened to see the tremendous progress achieved both by the industry and specifically by Longeveron over the past decade. For Longeveron, this has been further accelerated with our recent accomplishments. As we have mentioned throughout the year, HLHS is the key strategic priority for us. We believe the HLHS program has a high probability of success and a sure path to potential regulatory approval across our pipeline. Our ongoing Phase 2b study, ELPIS II, which is evaluating Lomecel-B as a potential adjunct treatment for HLHS, has now achieved more than 80% enrollment, and we expect to complete enrollment by the end of this year or early next year. Very importantly, we recently completed a Type C meeting with the U.S. Food and Drug Administration, in which we were able to confirm that ELPIS II is a pivotal and an acceptable study for biological license application or a BLA submission for full traditional approval, as well as reaching alignment on ELPIS II primary and secondary endpoints. This significantly accelerates the potential regulatory pathway and, if supported by clinical data from ELPIS II, would allow us to initiate a rolling submission of BLA to the Food and Drug Administration in 2026. In support of that opportunity, I'm delighted to welcome Devin Blass to Longeveron as the Chief Technology Officer and the Senior Vice President of CMC. He will join us on December 2nd to lead the company's technology and manufacturing strategy and execution. Devin has over 15 years of distinguished experience in the development and manufacturing of advanced therapies. We look forward to working with him to advance Lomecel-B across all of our indications. We also continue to advance our very important Alzheimer's disease program. We understand Alzheimer's disease has been a difficult area for development, so we are only more encouraged by the results we have seen to date with Lomecel-B. Results from our CLEAR MIND Phase 2a clinical trial were presented in a featured research overall presentation at the 2024 Alzheimer's Association International Conference, AAIC. In the clinical trial, Lomecel-B treated patients showed an overall slowing or prevention of the disease worsening compared to placebo. Based on the CLEAR MIND Phase 2a clinical data and prior Phase 1, the FDA has granted Lomecel-B post-regenerative medicine advanced therapy, also known as RMAT designation, and fast-track designation for the treatment of mild Alzheimer's disease. Lomecel-B appears to be the first cellular therapy candidate to receive RMAT designation for Alzheimer's disease. With this data in hand, we anticipate meeting with the FDA in the first quarter of 2025 to discuss future clinical and regulatory strategies for continuing this important program. As we continue to focus on patients, it is absolutely important for us to be good stewards of shareholder capital. While maintaining our investment in advancing our clinical pipeline and BLA-enabling activities, we have focused on expense control and program prioritization, leading to a total operating expenses through the first nine months declining 14% year-over-year. Our existing cash and cash equivalents are expected to be sufficient to fund the company through the fourth quarter of 2025. With that, I will turn the call to Dr. Agafonova to provide updates on our clinical development program. Nataliya?

Thank you, Wa'el, and good afternoon, everyone. As Wa'el mentioned, our HLHS program is a primary focus for us with a near-term pathway to potential approval and an area of clear unmet medical need. Our HLHS program began with the ELPIS I phase 1 clinical trial evaluating Lomecel-B in infants with HLHS, which produced positive encouraging results. Most recently, ELPIS II five-year post-treatment long-term survival data was selected for presentation at the Congenital Heart Surgeon Society, CHSS, 51st annual meeting. This data included the following. Five-year post-gland procedure Kaplan-Meier survival was 100% in patients treated with Lomecel-B in ELPIS I with no requirement for heart transplant. This compared to 83% survival in the single ventricle reconstruction trial through five-year post-gland surgery and a 5.2% heart transplantation rate. No major adverse cardiovascular events were reported during the study. No Lomecel-B related safety issues were reported. The findings support the use of Lomecel-B as a potential adjunct to HLHS reconstruction surgery to improve transplant-free survival. The ELPIS I data served as the basis for ELPIS II, our ongoing Phase 2b clinical trial evaluating 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 Institute of Health. This trial will enroll 38 pediatric patients, and we have reached more than 80% enrollment. We have 12 leading pediatric cardiothoracic institutions participating as clinical trial sites. Three of them have joined in the last quarter. We could not be more pleased with the participating group and their enthusiasm for ELPIS II and thank them for all the work they do for their patients and families. With their support, we are working towards completing enrollment of the trial by the end of this year, although patient scheduling for surgery may influence that timeline. As Wa'el mentioned, we recently completed a Type C meeting with the FDA where we discussed HLHS, our development program, and the data generated by our ongoing Phase 2 clinical trial. We reached alignment on ELPIS II primary and secondary endpoints, and importantly, we confirmed that ELPIS II is pivotal and acceptable for BLA submission. If results from ELPIS II are positive, we would be positioned to initiate a rolling submission with the FDA in 2026. Turning now to our Alzheimer's disease program, data from the CLEAR MIND Phase IIa clinical trial was selected for a future research oral presentation at the 2024 Alzheimer's Association International Conference held at the end of July. We are very excited about the trial positive results, which we have reviewed previously. I would just reiterate that the trial achieved the primary safety and secondary efficacy endpoints, and also in the clinical trial, Lomecel-B treated patients show an overall slowing and prevention of disease worsening compared to placebo. Continuing the positive data trend, Lomecel-B data in Alzheimer's disease was selected to be presented in a late-breaking poster presentation at the Clinical Trials on Alzheimer's Disease conference, CTAD 2024, in late October 2024. That data showed the following: Lomecel-B's capacity to inhibit MMP14 correlates with improved clinical and biomarker outcomes in mild Alzheimer's disease. Findings offer potential mechanistic and clinical insights into the development of cellular-based therapy for Alzheimer’s disease. 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 future clinical development. Based on data generated in our Phase 1 and Phase 2 Alzheimer's clinical trials, the FDA granted Lomecel-B both RMAT designation and fast-track designation for the treatment of mild Alzheimer's disease. We plan to meet with the FDA by the end of the first quarter of next year to review clinical trial and regulatory strategy for the Alzheimer's program. I will hand the call over to Lisa Locklear, our Chief Financial Officer, to discuss our financial results for the second quarter. Lisa?

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 touch on some highlights. Revenues for the first nine months of 2024 were $1.8 million, up $1.1 million, or 177% when compared to the same period in 2023, mainly as a result of increased participant demand for our frailty and cognitive impairment registry trial in the Bahamas and new contract manufacturing revenue. Contract manufacturing revenue for the nine months ended September 30, 2024, was $0.8 million. We believe the contract manufacturing business has the potential to expand our team's expertise and generate approximately $4 to $5 million in annual revenues once it is fully operational, helping offset our clinical development costs and reducing, but not eliminating, our additional capital needs. This year we have focused on prioritizing investments in our clinical programs and expense management, and we have successfully executed in both areas. Total operating expenses through the first nine months of the year declined 14% year-over-year, with G&A expenses for the nine-month period ending September 30, 2024, decreasing to approximately $7.4 million, compared to $8.9 million for the same period in 2023. This G&A expense decrease of approximately $1.5 million, or 16%, is primarily due to lower personnel expenses as a result of reduced severance, legal, and administrative expenses, partially offset by higher stock compensation costs in 2024. R&D expenses for the nine months ended September 30, 2024, also decreased approximately $0.8 million, or 11%, to approximately $6.1 million. The decrease was primarily due to reduced expenses associated with the completed CLEAR MIND Alzheimer's disease clinical trial and reduced costs for the aging-related frailty clinical trial following our decision to discontinue trial activities in Japan. Our net loss decreased 22% to approximately $11.9 million for the nine months ended September 30, 2024, from a net loss of $15.3 million for the same period in 2023 for the reasons I just explained. Our cash and cash equivalents as of September 30, 2024, were $22.8 million. The company believes its existing cash and cash equivalents will enable it to fund its operating expenses and capital expenditure requirements through the fourth quarter of 2025, based on our current operating budget and cash flow forecast. It is important to note, however, that with our successful Type C meeting with the FDA regarding the HLHS regulatory pathway, we have started to ramp up BLA-enabling activities as we currently anticipate initiation of a rolling submission with the FDA in 2026, if the current ELPIS II trial is successful. To the extent that our operating expenses and capital expenditure requirements accelerate in calendar 2025 as a result of these activities, which include CMC, chemistry manufacturing controls, and manufacturing readiness, there will be a need to increase our current proposed spending and further increase our capital investments. We intend to seek additional financing, capital raises, and non-dilutive funding options to support these activities, and current cash projections may be impacted by these ramped-up activities, as well as any financing transactions entered into. I will now hand the call back to Wa'el.

Thank you, Lisa. The data generated to date in HLHS and Alzheimer's disease supports a broad potential for Lomecel-B as a regenerative medical therapy across multiple and significant indications. The strength of the data, our experienced and committed team, and unwavering focus on patients give me confidence in the future of Lomecel-B and Longeveron. Operator, we would now like to open the call for questions from covering analysts.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. The first question comes from the line of Raghuram Selvaraju with H.C. Wainwright. Please go ahead.

Good afternoon. This is Dan on for Ram. Thanks for taking our questions and congratulations on your anniversary. So what would represent an appropriate benchmark from a performance standpoint in the ELPIS II trial that would catalyze the accelerated approval? And what's the current thinking with respect to the path forward for Lomecel-B and Alzheimer's disease? Is there a shorter-term clinical design paradigm that could be applicable? For example, positioning it initially as a symptomatic rather than disease-modifying therapy? Thank you.

Hello, Dan. I hope I understood the first part of your question correctly, but if not, feel free to correct me as well. Regarding the plan, as you know, we met with the FDA. We confirmed a lot of the assumptions. Essentially, the current existing Phase 2b trial will be accepted for full approval. We also confirmed the CMC plan, the potency, the primary and secondary endpoints. So we have confirmation and minutes from this conversation. We also have fast-track designation, and fast-track designation, by definition, allows you to have a rolling submission, which we intend to utilize once we finish the enrollment and receive the top-line results immediately. We actually started preparing for it, assuming that we will have positive data coming out of that trial. So I think a lot of this is not based on assumptions but actually on feedback from the agency and the current designation and what it allows you to do. I hope that answers your question. Before I move to the Alzheimer's section...

Yes, that was a great answer.

Regarding Alzheimer's disease, as Nataliya and Dr. Hare can weigh in, but I'll give you my perspective here. We believe that there might be something very helpful for patients in this development. Of course, we don't have the data to get approval today. However, over 140 programs are being developed on Alzheimer's disease, many of which are developed by small companies like ours. We recognize how significant the investment needed is to advance this program. Securing a partnership or significant support, whether from a company or government entity, would be very helpful. The question is why these groups would invest in our program and not in others. We need to provide something very useful, and we have been working on a proposed accelerated and streamlined approach to the FDA. If endorsed by them, that could fast-track our market entry in a cost-effective manner. This aligns with our strategy, and part of the RMAT designation allows a streamlined path to approval. We just want to ensure that we receive this guidance from the FDA. Additionally, we have engaged with top advisors and received positive feedback regarding our proposed plan. Nataliya and Josh, do you want to add anything?

Sure, Wa'el. Thank you for your question. I would like to mention that the CLEAR MIND study is proof-of-concept, and both Phase 1 studies were placebo-controlled and conducted on mild Alzheimer's disease patients. Given this population is considered early and symptomatic, the advice we received at the CTAD was to continue our development as a disease-modifying treatment while remaining in the mild Alzheimer's disease patient population, as we have a clear, good signal from prior development. This is where we plan to focus Lomecel-B for this patient cohort. I hope we’ve addressed your question.

Yes, thank you so much.

Good afternoon, team. Can you hear me okay?

Yes.

All right, great. So we have some questions, and thanks so much for taking our questions. Firstly, with respect to the ELPIS I trial, long-term follow-up, I see that you have 100% survival, which is really fantastic. So I was wondering whether you were able to measure additional cardiac parameters, such as RVEF or tricuspid regurgitation, at the end of five years that would have given you any indication that the ongoing ELPIS II trial might read out positively, similar to ELPIS I? Or is this merely a five-year safety follow-up?

Wa'el, do you want me to take this one?

Yes, Nataliya or Josh can take that question.

Thank you, Boobalan, for your question. It's very important and aligns with our thinking. Initially, the ELPIS I protocol as a Phase 1 trial was open-label, and we set it up to only collect passive follow-up data after one year's post-gland procedure. The sites called the patients with two questions: Is the patient alive? Yes or no? And if the patient required a heart transplant. However, you're absolutely right, beyond that, we currently have no additional data. However, we understand that collecting more detailed data on ejection fraction and tricuspid regurgitation through retrospective data collection could help support our BLA submission. This is an ongoing effort we are currently entertaining. But to answer your question, we only currently have survival and transplant-free survival data.

So if you wanted to get the data retrospectively, do you have to go back to the agency for approval, or do you need to get additional approval from the participating clinical trials?

Absolutely. We don't need to go back to the agency; we just need to revise our contract with our sites. We are currently collaborating with a specific investigator who is enthusiastic in this indication, and they are providing guidance on relevant data we should collect for enriching our ELPIS II trial data. However, we do not need to go back to the agency for that.

Okay, that's very helpful. Go ahead, Wa'el.

Yes, just for historical context, we haven't talked about ELPIS I for a long time. The good aspect of ELPIS I is that it was conducted only at three sites, with one site having nearly half of the patients. So it's not a mistake to work with these sites, which are not as numerous as in ELPIS II. We are hopeful we can gather the data as Nataliya mentioned.

Fantastic. All right, and then focusing on ELPIS II, which is your pivotal trial. Regarding the endpoint, RVEF (right ventricular ejection fraction), can you provide some context in terms of the efficacy benchmark that would make you more comfortable, given this is a pivotal trial?

Yes, Wa'el, do you want me to take this one?

Yes, Nataliya, go ahead, and Josh can add as well.

Great question. We did have meaningful conversations with the FDA, and they agree in principle that right ventricular ejection fraction would not suffice for year one after the gland procedure evaluation of the clinical response. Therefore, we are adding clinical endpoints as well to the composite endpoint while we finalize our simulations and preparation to present to the agency. They agreed to the addition of clinical outcome measures as primary endpoints in addition to right ventricular ejection fraction. Josh, would you like to elaborate on right ventricular ejection fraction?

Yes, right ventricular ejection fraction is a well-established surrogate for outcome in HLHS patients. The key difference here will be between treated and standard of care patients. If the number is significantly higher in treated patients than in standard care, that would be a noteworthy finding. Importantly, the agency remains supportive of combining right ventricular ejection fraction with additional clinical endpoints such as survival. The survival difference seen in ELPIS I offers encouragement for what we anticipate observing in ELPIS II.

Okay, great. And then maybe one more question, if I may. I want to understand whether you think the HLHS competitive landscape has changed meaningfully in recent times.

If I'm correct, VentriGel is essentially an inert substance. It prevents remodeling and the heart from enlarging. I'm not aware if they even have Phase 1 data yet for VentriGel, but I believe a trial is planned. The primary distinction between VentriGel and our strategy is that while VentriGel is an inert substance affecting structural components of the ventricle, Lomecel-B possesses multifactorial actions, including anti-inflammatory, pro-vascular, anti-fibrotic, and potentially pro-regenerative effects, stimulating endogenous myocyte replication. Thus, I believe the mechanism of action between the two strategies is very different. Consequently, I do not believe it would be a serious competitor. However, as we enter these novel strategies, data is key. We'll see what the data indicates, and we are obviously very excited about our data, especially the new survival data from ELPIS I.

That's it from us. Thanks so much for taking our questions.

Thank you. As there are no further questions, I would now like to hand the conference over to Wa'el Hashad for closing comments.

Thank you. Thanks to all who attended our call today. We greatly appreciate your interest and support, and we look forward to updating you on our progress as we continue. Thank you, operator, and you may end the call now.

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