Welcome to the Lisata Therapeutics Full Year 2023 Financial Results and Business Update Conference Call. This call is being recorded today, February 29, 2024. I will now turn the call over to John Menditto, Vice President of Investor Relations and Corporate Communications at Lisata. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. Welcome to Lisata's Full Year 2023 Conference Call to discuss our financial results and provide a business update. Joining me today from our management team are Dr. David Mazzo, President, and Chief Executive Officer; Dr. Kristen Buck, Executive Vice President of Research and Development and Chief Medical Officer; and James Nisco, Vice President of Finance and Treasury. Shortly before this call, we issued a press release announcing our Full Year 2023 financial results, which is available under the Investors and News section of the company website, along with the webcast replay of this call. If you have not received this news release or if you'd like to be added to the company's email distribution list, please email me at [email protected]. Before we begin, I remind you that comments made by management during this conference call will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of Lisata. I encourage you to review the company's filings with the Securities and Exchange Commission, including, without limitation, its Forms 10-Q, 8-K, and 10-K, which identify specific risk factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, Thursday, February 29, 2024. Lisata Therapeutics undertakes no obligation to revise or update any statements to reflect events or circumstances past the date of this conference call. With that, I will now turn the call over to Dr. Mazzo. Dave?

Thank you, John, and good afternoon, everyone. Thank you for joining us today as we provide an overview of recent business highlights and discuss our full year 2023 financial results and give an update on the progress of our various development programs. During 2023, our first full year as Lisata, we made notable progress advancing our clinical development programs, targeting several advanced solid tumors using LSTA-1, our lead product candidate, in combination with multiple anti-cancer agents of differing modalities. As we have previously reported, we have both preclinical and early clinical data in humans that we believe demonstrates the potential of LSTA-1 to become an integral part of a revised standard of care treatment regimen for many difficult-to-treat cancers. Following the review of the financial results, Lisata's Chief Medical Officer, Dr. Kristen Buck, will provide an update on our ongoing and planned clinical programs. With that, I now will turn the call over to James Nisco, our Vice President of Finance. James?

Thanks, Dave. Good afternoon, all. I am pleased to join you today to present a summary of our full year 2023 financial results. Starting with operating expenses, for the year ended December 31, 2023, operating expenses totaled $25.7 million compared to $57.6 million for the year ended December 31, 2022. Representing a decrease of $31.9 million, or 55.4%. Excluding the in-process research and development expense of $30.4 million associated with the merger of Cend Therapeutics and our predecessor company, Caladrius Biosciences, forming Lisata Therapeutics, operating expenses decreased by $1.5 million, or 5.5%, compared to the year ended December 31, 2022. Research and development expenses were approximately $12.7 million for the year ended December 31, 2023, compared to $13.1 million for the year ended December 31, 2022. Representing a decrease of approximately $300,000, or 2.5%. This decrease was primarily due to lower costs associated with our LSTA1 programs in the current year versus our legacy CD34 cell therapy technology programs in the prior year. Current year expenses were associated with study activities for LSTA1, Phase 2 type of concept, bolster trial, and various solid tumors in combination with the corresponding standards of care. Enrollment activities for the LSTA1 Phase 2b ASCEND study, chemistry manufacturing and control, or CMC activities for LSTA1, and study startup activities for the LSTA1 Phase 2a study for the treatment of glioblastoma multiforme. General and administrative expenses were approximately $13 million for the year ended December 31, 2023, compared to $14.1 million for the year ended December 31, 2022. Representing a decrease of approximately $1.2 million, or 8.3%. This was primarily due to non-recurring costs associated with the aforementioned merger in the prior year, a decrease in equity expense due to prior year performance stock unit vesting, merger option assumption expense, and departing board member restricted stock unit vesting, lower annual stockholder meeting expenses, and a decrease in directors and officers insurance premiums, partially offset by severance costs associated with the elimination of the chief business officer position on May 1, 2023. Overall, net losses were $20.8 million and $54.2 million for the years ended December 31, 2023, and 2022, respectively. Turning now to our balance sheet and cash flow. As of December 31, 2023, Lisata had cash, cash equivalents, and marketable securities of approximately $50.5 million. Based on its current expected capital needs, the company believes that its projected capital will fund its current proposed operations into early 2026, encompassing data milestones from all its ongoing and planned clinical trials. This completes my financial overview. And I will now turn the call over to our chief medical officer, Dr. Kristen Buck, for the review of our clinical development pipeline. Kristen?

Thank you, James, and good afternoon, everyone. As we have previously emphasized, we have designed Lisata's rigorous clinical programs based on sound scientific rationale from a large body of published preclinical and early clinical data. Our platform technology is designed to address major impediments to the successful treatment of advanced solid tumors in an environment of increasing pharmacoeconomic pressures. Generating meaningful clinical data as efficiently as possible is critically important in this field, and I can assure you that our entire organization has this goal top of mind in everything we do. With that, I will now provide an overview of LSTA1 for the treatment of advanced solid tumors in combination with other anti-cancer agents. Despite advances in cancer therapy today, many solid tumors remain difficult to treat effectively. Cancers such as pancreatic cancer, gastric cancers, and other solid tumors are surrounded by a dense fibrotic tissue known as the stroma, which limits access of most pharmacotherapies to the tumor. Many solid tumors also present a hostile tumor microenvironment, or TME, which suppresses a patient's immune system and makes it less effective in fighting cancer. The combination of a dense stroma and a hostile TME prevent many chemotherapies and immunotherapies from being optimally effective in treating these cancers. This, coupled with the fact that most anti-cancer therapies are not efficient in targeting only cancer tissue, defines the major challenge in maximizing effectiveness and safety in the treatment of solid tumors. To combat this, Lisata's approach is to exploit the C-end Rule to activate the CendR active transport system, a naturally occurring active transport system, to selectively deliver anti-cancer drugs through the stroma and into the tumor. Lisata's lead product candidate, LSTA1, is the recipient of multiple orphan drug designations, including for pancreatic cancer in both the United States and Europe, as well as for malignant glioma in the United States. LSTA1 selectively actuates the CendR active transport mechanism on tumor stroma while also having the potential to modify the TME and make it less immunosuppressive. LSTA1 targets tumor vascular endothelial cells and tumor cells based on its affinity for alpha-V, beta-3, and beta-5 integrins that are selectively upregulated on these cells in comparison to healthy tissue. LSTA1 is a nine amino acid cyclic internalizing RGD peptide that, once bound to these integrins, is cleaved by proteases expressed in the TME to release a linear peptide fragment called a CendR fragment. The CendR fragment has high affinity for and then binds to an adjacent receptor called neuropilin-1, also upregulated on tumor endothelium and tumor cells. This binding activates the C-end Rule active transport pathway, which ferries anti-cancer drugs more efficiently into solid tumors. Additionally, LSTA1 has been shown in a range of preclinical models to modify the tumor microenvironment, making it less hostile to immune cells, reducing tumor resistance to anti-cancer medications, and impeding and/or preventing the metastatic cascade. These results come from Lisata-sponsored studies and from collaborators and research groups around the world and have been the subject of more than 350 scientific publications relevant to LSTA1's mechanism of action. Along with our collaborators, we have also amassed significant non-clinical data demonstrating enhanced delivery of a range of anti-cancer therapy modalities, including immunotherapies and RNA-based therapeutics. To date, LSTA1 has demonstrated favorable safety, tolerability, and activity to enhance delivery of standard of care chemotherapy for patients with metastatic pancreatic cancer. Our development programs are designed to exploit the potential of LSTA1 to enhance a variety of anti-cancer treatments in a range of solid tumors. Currently, LSTA1 is the subject of nearly a dozen planned or active clinical trials globally for the treatment of various solid tumors. Let me touch on a few of these individually. The ASCEND trial is a 158-patient, double-blind, randomized, placebo-controlled clinical trial evaluating LSTA1 in combination with gemcitabine and nab-paclitaxel in patients with metastatic pancreatic ductal adenocarcinoma, also known as mPDAC. This trial is being conducted at 25 sites in Australia and New Zealand, led by the Australasian Gastro-Intestinal Trials Group, or AGITG, in collaboration with the NHMRC Clinical Trial Center at the University of Sydney. The study consists of two cohorts. Cohort A of the study receives a single dose of 3.2 milligrams per kilogram LSTA1, essentially simultaneously with standard of care therapy, while cohort B is identical to cohort A, but with a second dose of 3.2 milligrams per kilogram of LSTA1 given four hours after the first. As previously reported, a positive outcome from the planned interim futility analysis was announced by the study's Independent Data Safety Monitoring Committee, which recommended continuation of the study without modification. In addition, we are excited to report that full enrollment of ASCEND has been achieved, and we expect top-line data from the 98 patients assigned to cohort A to be reported in the fourth quarter of 2024, followed by the complete data set of all 158 patients to be available by mid-2025. We plan to use the results of the ASCEND trial to explore possible conditional approvals in several jurisdictions and to design an optimized Phase 3 program in metastatic pancreatic ductal adenocarcinoma. The BOLSTER trial is our Phase 2a double-blind, placebo-controlled, multicenter, randomized basket trial with active and planned investigational sites in the United States, Europe, Canada, and Australia evaluating LSTA1 in combination with standards of care in advanced solid tumors, including second-line head and neck squamous cell carcinoma and first-line cholangiocarcinoma. This trial will include both cytotoxic and immunotherapy standards of care. BOLSTER continues to make steady progress, and enrollment completion is expected by the end of 2024. CENDIFOX, the Phase 1b/2a open-label trial in the United States of LSTA1 in combination with neoadjuvant FOLFIRINOX-based therapies in pancreatic, colon, and appendiceal cancers continues to make steady progress, with enrollment completion expected by the end of the second quarter of 2024. This trial will provide us with pre- and post-treatment biopsy immuno-profiling data, as well as long-term outcome data. LSTA1 is also currently being evaluated in combination with gemcitabine and nab-paclitaxel in a Phase 1b/2a open-label trial in China, led by our licensee in that territory, Qilu Pharmaceutical. During the 2023 ASCO annual meeting, Qilu Pharmaceutical presented an abstract sharing preliminary data from the study, which corroborated previously reported findings from the Phase 1b/2a trial of LSTA1 plus gemcitabine and nab-paclitaxel conducted in Australia in patients with mPDAC. According to Qilu, final data are expected by the end of the second quarter of 2024, with the initiation of a Phase 2 trial in China shortly thereafter. A collaboration with our funding partner, WARPNINE, the Lisata trial is a Phase 1b/2a randomized single-blind, single-center safety and pharmacodynamic study in Australia evaluating LSTA1 in combination with the checkpoint inhibitor durvalumab plus standard of care chemotherapy nab-paclitaxel and gemcitabine versus standard of care alone in patients with locally advanced non-resectable pancreatic ductal adenocarcinoma. Enrollment completion for Lisata is expected during the second half of 2024. iGoLSTA, a Phase 1b/2a proof of concept safety and early efficacy study evaluating LSTA1 in combination with nivolumab and FOLFIRINOX as a first-line treatment in locally advanced non-resectable gastroesophageal adenocarcinoma is pending initiation as a function of availability of funding by our partner, WARPNINE. The inspiration for this study comes from the findings recently published in Oncology and Cancer Case Reports Journal, which details a patient with metastatic gastroesophageal adenocarcinoma who achieved a complete response when given LSTA1 in combination with standard of care FOLFIRINOX and pembrolizumab. The subject initially underwent months of standard of care treatments and only achieved a partial response. Upon subsequent addition of LSTA1 to such standard of care therapeutic regimen, the subject achieved a complete response, confirmed both radiographically and surgically. We hope to have further update on timing related to the execution of the study in the coming quarters. A study of LSTA1 in combination with Temozolomide and glioblastoma multiforme or GBM has been initiated with patients already being treated. This study is designed as a Phase 2a double-blind placebo controlled randomized proof of concept study evaluating LSTA1 when added to standard of care Temozolomide versus Temozolomide and matching LSTA1 placebo in patients with newly diagnosed glioblastoma multiforme. It is being conducted across multiple sites in Estonia and Latvia and is targeted to enroll 30 patients with a randomization two to one LSTA1 plus standard of care versus placebo plus standard of care. Importantly, as recently announced, LSTA1 has been granted orphan drug designation by the U.S. Food and Drug Administration for malignant glioma. This action by the FDA not only highlights the unmet medical need but also recognizes the potential of LSTA1 to benefit patients in this indication. As a reminder, several of these studies are investigator-initiated trials, and although we have great confidence in our investigators running these studies, Lisata has limited control, and thus timelines and expectations may be subject to change. That said, we are extremely grateful to our investigators and especially to those patients participating in LSTA1 clinical trials around the world. For those who are interested, a more comprehensive description of each of our trials is available in the appendix section of the corporate presentation on our website. Additionally, in the body of the presentation, there are two milestone slides that depict the anticipated timing of key execution milestones and data readouts from our trials. As you will see, there are numerous execution and data milestones projected for our portfolio of clinical trials over the next year and beyond.

Thank you, Kristen. To summarize, 2023 was a year marked by the honing of our LSTA1 development efforts in keeping with our strategic imperatives of advancing LSTA1 rapidly toward registration in mPDAC, as well as demonstrating the broad application of LSTA1 in combination with a variety of anti-cancer agents for the treatment of numerous solid tumor types. For 2024, more than ever, we are focused on efficient and timely study execution with the goal of getting to meaningful clinical data readouts as soon as possible. And with that overview, Operator, we're now ready to take questions.

Our first question comes from Joe Pantginis with H.C. Wainwright. Your line is now open.

Hi. Good afternoon. This is Sarah on for Joe. Thanks for taking the question. I just wanted to gain some insight if you had any further detail on how the BOLSTER trial is enrolling, and if you're seeing across Europe, US, and Canada, any region seeing maybe increased enrollment compared to others. Thank you.

Thanks, Sarah. I appreciate the question and please say hello to Joe for us. Regarding BOLSTER, it is on track to meet the enrollment goal by the end of 2024, and we are quite pleased with that. As many know, enrollment in clinical trials is not linear; it resembles a hockey stick, and we are finally on the upward slope of that curve and making significant progress. In terms of regional contributions, the US has been the primary contributor to enrollment so far, but this is mainly because many of our European sites will only begin operations in March. We anticipate a considerable increase in contributions from Europe starting in the second quarter of this year.

Thank you. Our next question comes from Peter Enderlin at MAZ Partners. Your line is now open.

Yeah. Can you hear me now?

Yes. Go ahead.

Okay. Sorry. Thanks for taking the questions. The first one may be a little naive in a way. Did you get a milestone for enrolling the cohorts for the ASCEND trial, and if so, by whom? I don't know who it would be.

No. That's a trial that's funded by us, so there are no milestones associated with that, no milestone payments associated with that.

And you mentioned WARPNINE as a source of funding for a couple of the programs. That's a three-year-old company or organization. Do you have any sense of what their financial resources would be? I know they get corporate funding, I think, but I'm not sure how big a company it is or how robust their financial resources are.

Well, WARPNINE is a philanthropic foundation in Australia dedicated to the improvement and the rapid accessibility of patients to novel treatments for gastrointestinal cancers of all types. So far, I mean, we don't really monitor their finances per se. So far, they've met all their commitments to us, though, as it related to financing of the trials associated with LSTA1.

Okay. Does AGITG typically take a financial interest in anything that they help you with, or the way some universities do here, or is that not the way they do it?

I don't know what they typically do, but as that relates to our associations with AGITG, for ASCEND and any other work we may do, there is no financial interest from them. They are purely clinicians executing at the site level, so we don't give up any commercial rights to them, and they don't take any commercial or financial interest in the product.

Okay. Fair enough. And then on the ASCEND cohort B, I'm just curious, from a naive perspective, what's the significance of a four-hour delay in the second dose versus, say, a 24-hour delay, which sort of seems like it would be more normal to go through a normal metabolic cycle for the patient. So, what's four hours versus a longer period of time?

I will explain the top line. If you want a more detailed discussion, you can always follow up with Dr. Buck. Generally, the choice of four hours is based on the pharmacokinetics and pharmacodynamics of LSTA1 in humans, as well as practical considerations for patients. LSTA1 has a half-life of about 90 minutes in humans, meaning that after one or two half-lives, the concentration of LSTA1 in the bloodstream is significantly reduced. We are re-initiating administration at four hours to bring the concentration back to earlier peaks to see if it affects the activity of the co-administered chemotherapeutic agents—gemcitabine and nab-paclitaxel—which have long half-lives. The reason we chose four hours instead of five or six is because most patients prefer not to spend the night in a hospital or return for treatment the next day after chemotherapy. Four hours allows patients who come in the morning to receive their chemotherapy, wait at the center, get their second dose, and then go home. So, it’s a blend of scientific reasoning and patient convenience.

That's very interesting and it makes a lot of sense. Thanks. I have one more question, which might be a bit premature, but what would be the ideal business model once these drugs are approved and you have different co-administrations of other treatments? What would the typical business model look like for a program like that in terms of payment and funding distribution?

Typically, insurance companies and sometimes government entities are the ones who pay. The division of payment is actually quite straightforward. While these products may be co-administered, they aren't necessarily sold as a bundled package. For example, one party will sell LSTA1 and receive payment for that, while another will sell gemcitabine and nab-paclitaxel and be compensated accordingly. There may be arrangements for bundling in the future, allowing for a single package for convenience or a combination product that could be developed, which would require new regulatory pathways. If you're looking for a relatable example, consider the case of Zetia, a cholesterol absorption inhibitor from Schering-Plough. It was approved and subsequently used in combination with nearly all statins at that time. Eventually, a new product called Vytorin was created, combining simvastatin with ezetimibe into a single product, which played a role in Merck's acquisition of Schering-Plough. This illustrates how a product that can be used alongside various others can be marketed in multiple ways and achieve significant commercial success.

Thank you. Our next question comes from Kemp Dolliver with Brookline Capital Markets. Your line is now open.

Hi, Kemp.

Thanks. And good afternoon. I have two or three questions. Just to close the loop on with WARPNINE, how long do they have to raise the adequate amount of money to run the trials before you can just contractually walk away and find another entity?

There's nothing in the contract regarding a timeline. We take a pragmatic approach to this. As far as we know, they are very close to securing all the funding required for iGoLSTA, and they have fully funded iGoLSTA individually. They have been quite efficient in achieving full funding because they rely on a network of philanthropic organizations and individuals primarily from Australia and New Zealand who are eager to support this cause.

Okay, that's helpful. Thank you. And when do you expect you will get your rebates for your Australian activity for this year? It looks like you were paid about $2 million last year in the second quarter. Is that a good ballpark, number one? And then number two, are these R&D credits included in the runway guidance?

So the R&D credits are included in the runway guidance. James, if you're still available and your connection is working, could you just jump in, please?

Yep. So in September, we received $600,000 from the Australian Taxation Office. That was related to the 2022 tax year. And at the end of this year, we did have $1 million recorded as an income tax receivable. So we typically file our returns in the June, July timeframe and then receive the refund around the September timeframe. And that'll be the expectation of about $1 million in 2024, based on the 2023 tax year. And yes, that is included in our projected capital runway.

That's great. Thank you. And then with regard to Qilu, it looks like you've had some recent communication with them because there was some verbiage added versus last quarter regarding the timing of them advancing the program once they have data. And so I think in the past, you've said the next milestone from them would be in 2025. Is that still the case? And I think the estimate could be that it would be as much as $10 million.

So the estimate is correct. Actually, it's not an estimate, it's contractual. At the beginning of Phase, when they dose the first patient in Phase 3 or in a registration trial, which is typically a Phase 3 trial, in the region, they are contractually obliged to pass a milestone of USD 10 million. And to the best of our knowledge, they'll be starting Phase 2 at the end of this quarter or early next quarter. And while we don't know the projection of a Phase 2 timeline in China, but one could guesstimate that a typical Phase 2 program takes between 18 and 24 months. So if we're starting now, roughly two years from now, one might expect that the milestone might become due. But it's all dependent on enrollment rate and progression of the development program by Qilu in China.

Okay, thank you. And I'll just press on this a little more in case they've indicated anything. But the CFDA has done a pretty good job of replicating many of the accelerated pathways of US, FDA. And so, have you heard from Qilu whether or not CFDA has indicated some eligibility for an accelerated pathway if the data holds up?

To our knowledge, Qilu has had discussions with the Chinese regulatory authorities. I believe their program is designed to fully utilize the potential for an accelerated approval pathway. However, we have not seen any written communications between them, nor do we understand Chinese, but we have been informed that they are developing their approach with the goal of achieving accelerated approval in mind.

Thank you. This concludes the Q&A portion. I will now turn the call back to Dr. Mazzo for closing remarks.

Thank you, operator. And again, thank you all for participating in today's call. We look forward to speaking with you again during our next quarterly conference call and to continuing to provide updates on our achievements and progress. We remain grateful for your continued interest and support. Stay well and have a good evening.

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.