Longeveron Inc. Q4 FY2024 Earnings Call

Good day, and welcome to the Longeveron 2024 and Full Year Financial Results Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this 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, Paul. Good afternoon, everyone, and thank you for joining us today to review Longeveron's 2024 full year financial results and our business update. After the U.S. markets closed today, we issued a press release with financial results for 2024, which can be found under the Investors 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 Dr. 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 our covering 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. We are very pleased to update you on a highly productive year in 2024 and provide an overview of what to expect in a potentially transformational 2025 for Longeveron. 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 stem cell therapy, Lomecel-B, or laromestrocel, represents a pipeline and a product opportunity that has delivered several positive initial results across five clinical trials in three indications: Phase I and II in Alzheimer's disease, Phase I and II in aging-related frailty, and Phase I in HLHS or hypoplastic left heart syndrome, a rare pediatric disease condition. The company development program for these three initial indications addresses a U.S. market opportunity of approximately $5-plus billion, approximately $4-plus billion, and up to $1 billion, respectively. Longeveron continued to make progress in 2024 with both the Lomecel-B and HLHS and Alzheimer's disease programs. Hypoplastic left heart syndrome, or HLHS, is a key strategic priority for us. We believe the HLHS program has a high probability of success and the shortest path to potential regulatory approval and commercialization across our pipeline. In 2024, we continued to advance enrollment in our ongoing Phase IIb study of ELPIS II, which is evaluating Lomecel-B as a potential adjunct treatment for HLHS. ELPIS II has now achieved more than 90% enrollment, and we expect to complete enrollment in the second quarter of this year. Also importantly, last year, we completed a meeting with the U.S. Food and Drug Administration, the FDA, which confirmed that ELPIS II is pivotal and, if positive, acceptable for biological license application or BLA submission for full traditional approval. This significantly accelerates the potential regulatory path for Lomecel-B and is supported by clinical data from ELPIS II which allows us to initiate a rolling submission of a BLA with the FDA in 2026. We also continue to advance the Alzheimer's disease program; results from our CLEAR MIND Phase IIa clinical trial were presented in a featured research oral presentation at the 2024 Alzheimer's Association International Conference (AAIC). Based on the CLEAR MIND Phase IIa clinical data and prior Phase I data, the FDA granted Lomecel-B both Regenerative Medicine Advanced Therapy designation, also known as RMAT, 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 later this quarter to review future clinical and regulatory strategy for continuing this important program. 2025 has the potential to be a transformative year for Longeveron, as we achieve clarity on the Alzheimer's development pathway and complete enrollment for the HLHS Phase II trial, which would establish a potential timeline for our first BLA submission in 2026. Starting the year off well, in February, the international non-proprietary name (INN) Experts Committee of the World Health Organization approved laromestrocel as the non-proprietary name for the company's cellular therapy, Lomecel-B. This naming approval is an important step in the development and potential commercialization of Lomecel-B. I am thoroughly excited about the opportunity for Lomecel-B, Longeveron, patients, and our stockholders. With that, I will turn the call over to Dr. Agafonova to provide an update on our clinical development program. Nataliya?

Thank you, Wa'el, and good afternoon everyone. Our stem cell therapy, Lomecel-B, has multiple models of action that include pro-vascular regenerative and anti-inflammatory mechanisms, promoting tissue repair and healing across a broad spectrum of disease areas. Based on positive initial data, Lomecel-B development programs have received five FDA designations: for the HLHS program, orphan-drug designation, fast track designation, and rare pediatric disease designation; and for the Alzheimer's disease program, regenerative medicine advanced therapy (RMAT) designation and fast track designation, each of which offers benefits for program development and regulatory processes. As Wa'el mentioned, our HLHS program is a primary focus for us, with the near-term pathway to potential approval in a rare area of clear unmet medical needs. We are currently conducting a Phase IIb clinical trial, ELPIS II, evaluating Lomecel-B's potential to improve right ventricular function and long-term outcomes in pediatric patients with HLHS. ELPIS II is being conducted in collaboration with the National Heart, Lung and Blood Institute with a grant from the National Institute of Health. We are very pleased to share that ELPIS II has now achieved over 90% enrollment. We expect to complete enrollment of this trial before the end of the second quarter, and then we will follow the patients for 12 months. If results from ELPIS II are positive, we would be positioned to initiate the rolling BLA submission with the FDA in 2026. Turning now to our Alzheimer's disease program, which is also an area of significant unmet need. Nearly 7 million Americans are living with Alzheimer's disease. It kills more people than breast cancer and prostate cancer combined. And there has not been great progress in this area. Between 2000 and 2021, deaths from heart disease decreased 2.1%, while deaths from Alzheimer's disease increased 141%. Potentially providing a new option for these patients and their families is our mission, and we are optimistic given the Lomecel-B data to date. In 2024, data from the CLEAR MIND Phase IIa clinical trial evaluating Lomecel-B in Alzheimer's disease were selected for 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's positive results, which we have reviewed previously. The trial achieved the primary safety and secondary efficacy endpoints, and the Lomecel-B treated patients showed an overall slowing prevention of disease worsening compared to placebo. 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 further clinical development. Based on the data generated in our Phase I and Phase II Alzheimer's clinical trials, in July, 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 in March to review the future clinical and regulatory strategy for the Alzheimer program to continue advancing this potentially important therapeutic option for patients living with Alzheimer's disease. I will hand the call over to Lisa Locklear, our Chief Financial Officer, to discuss our financial results for the year. Lisa?

Thank you, Nataliya, and good afternoon, everyone. This afternoon, we issued a press release and filed our Annual Report on Form 10-K, both of which present our financial results in detail, so I will touch on some highlights. Revenues for 2024 were $2.4 million, up $1.7 million, or 237%, when compared to 2023. This was mainly 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 2024 was $1 million, consisting of $0.5 million from our manufacturing lease services and another $0.5 million from our manufacturing services contract. 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 for the year declined 13% year-over-year, with G&A expenses decreasing to approximately $10.3 million from $12.2 million in 2023. This G&A expense decrease of approximately $1.9 million or 16% was primarily due to lower personnel expenses as a result of reduced severance in 2024 and lower legal and other administrative expenses. R&D expenses for 2024 also decreased approximately $1 million or 10% to approximately $8.1 million. The decrease was primarily due to a reduction of $2.3 million in expenses related to the completed CLEAR MIND Alzheimer's disease clinical trial, reduced costs for the aging-related frailty clinical trial following our decision earlier this year to discontinue trial activities in Japan, and a $0.9 million decrease in supply costs. These reductions were partially offset by $1.7 million in higher compensation and benefit costs in R&D and another $0.3 million increase in equity-based compensation for that team. Net loss decreased 25% to approximately $16 million for 2024 from a net loss of $21.4 million for 2023. Cash and cash equivalents as of December 31, 2024, were $19.2 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 2025, based on our current operating budget and cash flow forecast. It is important to note, however, that as a result of our Type C meeting with the U.S. FDA in August 2024 with respect to the HLHS regulatory pathway, we have started to ramp up biologics license application (BLA) enabling activities, as we currently anticipate a potential filing with the FDA in 2026 if the current ELPIS II trial is successful. Our operating expenses and capital expenditure requirements are expected to accelerate in calendar 2025 as a result of these activities, including Chemistry Manufacturing Controls (CMC) and manufacturing readiness spending as we prepare for the BLA. There will be a need to increase our current proposed spending and further increase our capital investments as a result. We intend to seek additional financing and non-dilutive funding options to support these activities, and the current cash projections will be impacted by these ramped up activities and any financing transactions entered into. I will now hand the call back to Wa'el.

Thank you, Lisa. Over the past decade, stem cell therapy has made tremendous progress, transforming from a promising field into one delivering tangible clinical outcomes. We have 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. We believe Lomecel-B has the potential to be an important cellular therapy option for multiple chronic and life-threatening conditions. The data generated to date in HLHS and Alzheimer's disease support that belief. The strength of our clinical data, our experienced and committed team, and unwavering focus on patients give me confidence in the future of Lomecel-B and Longeveron. Operator, now we would like to open the call for questions from covering analysts.

Thank you. We will now be conducting a question-and-answer session. Our first question is from Boobalan Pachaiyappan with ROTH Capital Partners. Please proceed with your question.

Good afternoon team, can you hear me okay?

Yes, Boobalan. Hi.

Hi, thank you for taking our questions. I have a couple of them. First, regarding the ELPIS II enrollment delay, could you provide more details about what is causing the delay? I've been following this story for quite some time. Initially, we were hoping to see the enrollment completed in the fourth quarter of last year, and then it was pushed to the first quarter. I'm curious about the reason for the delay. I understand that you don't have control over setting the surgery date, which seems to be a significant factor. However, are there any other issues contributing to the enrollment delays?

Yes, I will address that question, and Nataliya can provide additional insight. As you know, HLHS is a rare disease that is close to being classified as ultra-rare, making it difficult to predict with precise accuracy. The team is working diligently to complete enrollment as quickly as possible, but there can be delays related to the surgery itself and other factors. The good news is that we are making consistent progress, as evidenced by our results from one quarter to the next or from one call to another. Currently, we have over 90% enrollment, which means we have 35 patients participating, and we are really just looking at the final few patients for the trial. We are confident that we can complete the enrollment within the next couple of months.

Great. And then I have a question. Please go ahead.

I want to give Nataliya a chance to add any comments if she has them.

Thank you, Boobalan. This is a great question. And as Wa'el said, we are definitely making very, very good progress. And the nature of the disease sometimes has surprises. And as you mentioned, the Glenn surgery, sometimes the patient goes to the surgery seems promising, and during the surgery, unfortunately, some patients are not eligible based on intraoperative decision. So again, it's a very complicated indication, and we have so far been very successful. So because of that, sometimes we have promising patients, but they are not eligible at the end, it's definitely a decision. But we keep track of every single patient who is potentially eligible; we approach them, and we are making great progress on that. So hopefully, even 1, 2 months, we will be able to complete enrollment.

That's very helpful. Thanks for that. Staying on the ELPIS II lane, I understand the primary endpoint is RVEF and you are tracking this for 12 months. I am curious if the FDA might consider a composite endpoint since I'm not sure if a clinically meaningful difference can be recognized in that timeframe. In addition to RVEF, is it possible to gather data on other factors like prolonged hospitalization and major adverse cardiac events such as reoperation and percutaneous interventions, along with any other occurrences for these HLHS patients? Would that be included in your composite endpoint? That was my question.

Wa'el, would you like me to?

Yes, you can respond and I can add comments.

Thank you for the question; you're on the right track. We believe that just relying on right ventricular ejection fraction will not be adequate. We have had discussions with the FDA and, as we noted, if the ELPIS II clinical trial is accepted as pivotal, they are open to exploring additional options for the primary endpoint. We are currently analyzing our data and preparing a response to the FDA to present compelling evidence that a composite endpoint would be the best approach. We are considering the composite endpoint, various types of endpoints, hospitalization metrics, and possibly other factors as well. Our goal is to achieve alignment with the FDA this year as we assess the data using this composite endpoint.

Yes. Thank you, Nataliya. Boobalan, I will add just one thing: It's not just our thoughts. We have actually had that discussion with the FDA as you said. So the agreement is, yes, they will accept the composite endpoints. And we want to make sure that these composite endpoints happen in the frequency that allows us to detect the difference and success of the trial. The FDA was open to several suggestions from our side, including hospitalization, survival, and other endpoints, and we are in the process of preparing an SAP and sharing it back with them. They said they would be happy to discuss that further once they receive the SAP from us.

Great. Shifting focus to the Alzheimer program, I understand you'll be having discussions with the agency this quarter. I'm interested to know what specific points you want clarified from them, especially considering you have the RMAT designation. Since the Alzheimer's program is quite extensive, do you intend to suggest a plan where you would conduct a Phase IIb before moving to Phase III? Alternatively, is there a possibility to skip Phase IIb and go straight to Phase III?

So that's a great question. I will tell you that that's the reason why we're meeting. We are proposing and we'll get into the details after the meeting, but we are proposing a very accelerated path to commercialization and regulatory approval, but at the same time, providing the agency an opportunity to ensure that the safety and efficacy of the product is fully demonstrated as well. And that path for approval, if the FDA agrees with our proposal, will definitely present a great differential opportunity over the existing path, and that would be one of the values that we can. And by the way, this is part of the RMAT because the RMAT gives you an opportunity for an accelerated path for approval. So that's what we're asking for, and that's what we're hoping the FDA will agree with our plans for that as well. But we have to wait and see what happens at the meeting.

Great. I have one last question. After September 30, 2026, the agency may not award any pediatric disease priority review vouchers. This information has been known for a while, so I'm interested in the prospects for Lomecel-B in terms of receiving a PRV, assuming this agent is approved either late in 2026 or in the first half of 2027 for HLHS.

It's a great question, Boobalan. First, the PRV is up for renewal next month. There is an opportunity to give children a chance for an extension of the PRV at age 5. We are optimistic about securing this extension as part of the pre-BLA process, as we have been moving quickly and thoughtfully. However, we need to reach an agreement with the agency during the pre-BLA meeting regarding this matter.

All right. Thank you team. Congrats on the progress.

Thank you. Our next question is from Ram Selvaraju with H.C. Wainwright.

Thanks so much for taking my questions and congratulations on all the recent progress. I was just wondering if you could confirm specifically how many patients remain to be enrolled in ELPIS II at this juncture.

So that trial, as you know, it is 38 patients. We have enrolled 35. So we're waiting on three more patients. But if there are 1 or 2 more patients in the hopper and things like that, we may take them, and we are not declining them. But the goal is to enroll 3, but we could end up enrolling a couple of more if they happen to be in the hopper and consented.

Okay. So just to clarify, it is possible that you could over-enroll the study by 1 or 2 patients if during the process of screening to finish enrollment you wind up having a couple extra. Is that correct?

Correct. I don't want to risk losing a patient, as Nataliya mentioned in her response. There can be unexpected surprises during randomization. Therefore, we maintain a full pool of potential patients because I want to complete the trial once and for all. During this process, we might finish with one or two additional patients, which would be beneficial. However, we are not delaying the enrollment beyond 38 patients. If we happen to enroll a few more, we will do that.

You can confirm, right, that at this juncture, you don't see any issue with reaching full enrollment in the trial based on the current complement of sites that you have up and running. In other words, you would not need to open any new sites in order to complete enrollment. Is that correct?

Absolutely correct.

Okay. Can you just remind us, let us assume that you complete the study in the second quarter or you complete enrollment in the second quarter, when approximately would you expect to report top-line results?

If I complete enrollment in May, we will need 12 months to lock the database and finalize the last patient. We will announce the data within three to four weeks after that. So, we expect to have the database locked 12 months after the last patient is enrolled.

So just to confirm, that's basically a sort of like the summer of 2026 timeframe. Is that correct?

Correct.

Okay. Switching with respect to the potential future commercial scenario for Lomecel-B in the HLHS context. Maybe you can give us some sort of frame of reference regarding how the drug might be commercialized in that indication, and what kind of commercial infrastructure would need to be put in place. Because I would expect, given the nature of the epidemiology and how these patients are triaged, you would not really need significant sales and marketing infrastructure, and this is potentially an area in which Longeveron could handle commercialization independently. Is that correct?

You are absolutely correct, Ram. I can tell you right now that there are about 50 treating physicians in the United States performing this surgery. Our treatment is an adjunct to the surgery, so the surgeons are our targets. More than 70% of these surgeries occur in the centers where we conducted our clinical trial. Therefore, we have a great opportunity to connect with all the treating physicians in the future since they participated in the trial. Additionally, the number 50 indicates that we don’t require a large sales organization. At most, we need only two or three sales individuals along with a manager. The entire commercial organization can consist of fewer than 15 people, including roles like payer and patient services. This results in very minimal infrastructure on the commercial side, which is one of the advantages of operating in an orphan disease space; you don't need to make huge investments. So you are absolutely correct in your assumption.

Okay. With respect to Alzheimer's disease, I was wondering if you had any recent interactions with non-U.S. regulatory authorities and if there appears to be any differentiated picture with respect to how regulators outside of the U.S. are thinking about potential approvability criteria for a drug like Lomecel-B, and if you are exploring the possibility of conducting any clinical exploration of Lomecel-B in Alzheimer's disease outside the U.S. at this time? And if so, what the format and scope of that might be?

Thank you for this great question. I'll address the first part regarding our intentions outside the U.S. We have not had any engagement with agencies outside the United States regarding the development pathway for Alzheimer's disease. Now, in terms of our regulatory efforts, we are in the process of hiring a full-time regulatory specialist as we approach the BLA submission next year, and we have some strong candidates in mind. One of their key responsibilities once they join will be to initiate discussions with the EMEA, the U.K. MHRA, alongside Canada, Australia, and Japan. These are the international markets we aim to prioritize. Our plan is to engage with these health authorities about filing the biological license application for Lomecel-B in HLHS, which remains our top priority. Moving forward, our focus on Alzheimer's disease will center around partnership. We are keen to ensure our efforts are not diluted and will concentrate on global partnerships, both in the U.S. and abroad.

Okay. Great. And one more for me. With respect to the manufacturing revenue that you historically booked in 2024, can you give us some sense of what the prospects are to potentially either emulate that level of business or grow it in 2025? As an example, I believe that you previously had a client called Secretome, a privately held company, which successfully raised capital. Not sure whether that is going to be a source of repeat business for you, but just wanted to get a sense of what you expect the level of manufacturing revenue to be in 2025. And if you think it could be the same or higher than what you saw in 2024? Thank you.

Yes, Ram, that's a great question. We continue to have a strong relationship with Secretome and may have some small projects for them in 2025. We're open to meeting any additional needs they have throughout the year, and I believe we will establish a good rapport and expertise between our two companies. Our development will depend on their specific needs, and it's important for them to express those needs. As for other opportunities, we remain open, but I cannot guarantee the same level of engagement. Currently, we are focused on our CMC readiness process, which requires significant work on our end. Transitioning from clinical development to full commercial CMC requirements is a substantial step. We recently brought on Devin Blass, and we are thrilled to have him join our team. He is making excellent progress on what I would describe as the CMC master plan to ensure our pre-approval and facility inspection, as well as full product characterization, will meet all regulatory requirements when filing the BLA. We are fully committed to CMC work, which will keep us busy, but we remain opportunistic in the CDMO business. If an opportunity arises, we will certainly capitalize on it and generate revenue for the company.

Thank you very much. Congrats once again on all the progress.

Thank you.

Our next question is from Michael Okunewitch with Maxim Group. Please proceed with your question.

Hi, guys. Thank you so much for taking my question today. Congrats on a lot of really good progress here.

Thank you, Michael.

I wanted to follow up on one of the earlier questions regarding the potential outcomes from the upcoming meetings. You mentioned that these outcomes are focused on designing a clearer pathway forward, possibly leading to quicker and more streamlined approval. Do you see the results of that meeting as a crucial factor for potential partnership discussions? If there is an accelerated pathway, could it significantly facilitate these discussions?

Yes, you are right about my strategy. Currently, there are over 140 clinical development programs in various stages, from Phase I to Phase II, many of which are from smaller companies. All of these programs are seeking partnerships with major players because the costs associated with moving towards Phase III can reach hundreds of millions of dollars for both clinical development and CMC. Consequently, everyone is after the same partnerships. Our strategy is straightforward. We have demonstrated solid clinical data and outcomes, which we have shared. We are also in discussions with the FDA, and we hope they will support our approach. If the FDA agrees, it will create an economic incentive for potential partners to expedite the product's development. We believe that our compelling clinical data, combined with a quicker approval process, gives us a competitive edge in securing these partnerships.

Now just EBITDA, we increase in support from the FDA for cell therapy programs, in particular around granting these more streamlined path to approval. Do you think that could potentially de-risk this outcome from these upcoming meetings?

I believe I am cautiously optimistic about your position, but I prefer not to make a definitive statement as I am not in charge of it. I would like to attend the meeting and hear the confirmation from the FDA regarding that principle.

So certainly fair. And then just one last one for me, and I'll hop back in the queue. I'd like to see if you could just touch a little bit on your current manufacturing capabilities and then what else is needed on that front to become BLA-ready. Just given the relatively small size of this market, I wouldn't imagine you would need to scale all that much.

Yes, that's a great point, Michael. I'm very pleased with our progress. In the next call, we can invite Devin to join us, and we'll be better positioned to address specific questions about CMC. Speaking on his behalf, I can share that transitioning from clinical development to commercial is a significant step, involving various stages at both the facility and product levels, including stability studies and final formulations, among other necessary tasks. We have a plan and alignment with the FDA, but a considerable amount of work remains. Additionally, a substantial part of CMC involves our quality system, which must be fully ready for commercialization. We also need to upgrade our supply chain and other areas within CMC. This is a major focus for us this year, and we believe we have a solid plan to enhance these activities. Our largest investment this year is in CMC, as noted. Although we have reached an agreement and alignment with the agency, there will be significant work ahead, and I'm looking forward to bringing Devin on board in the future to address any further specific questions related to CMC.

All right. Thank you so much for taking my questions. Lots of work ahead, but lots of exciting progress as well.

Thank you, Michael.

There are no further questions at this time. I would like to hand the floor back over to Wa'el Hashad for any closing comments.

Thank you, Paul. And thank you all for attending today's call. We greatly appreciate your interest and support and look forward to updating you on our progress soon. Thank you. Operator, you may end the call now.

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

Thank you.