Welcome to the Lisata Therapeutics Second Quarter 2024 Financial Results and Business Update Conference Call. Currently, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a question-and-answer session. As a reminder, this call is being recorded today, Monday, August 12, 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 second quarter 2024 conference call to discuss our financial results and to provide a business update. Joining me 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, Senior Vice President of Finance and Treasury and Chief Accounting Officer. Shortly before this call, we issued a press release announcing our second quarter 2024 financial results, which is available under the Investors and News section of the company website along with a 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 subscribe to email alerts on the company website or email me at [email protected] to be added. Before we begin, I will 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, Monday, August 12, 2024. Lisata Therapeutics undertakes no obligation to revise or update any statements to reflect events or circumstances after 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. I'm delighted to be with you today to provide an overview of recent business highlights, discuss our second quarter 2024 financial results and provide an update on the progress of our clinical development programs. During the second quarter of this year, Lisata maintained strong momentum in the advancement of our development pipeline centered around our novel investigational product, Certepetide, in combination with a variety of anticancer agents of different modalities for the treatment of advanced solid tumors. As we have previously reported, consistently encouraging preclinical data, as well as early clinical data in humans, continue to support our belief that Certepetide has the potential to become an integral part of a revised standard-of-care treatment for many challenging solid tumors. Dr. Kristen Buck, our Executive Vice President of Research and Development and Chief Medical Officer will provide a detailed update of our ongoing and planned clinical programs following the financial results review. With that, I will now turn the call over to James Nisco, our Senior Vice President of Finance and Treasury and Chief Accounting Officer. James?

Thanks, Dave. Good afternoon, all. I'm pleased to join you today to present a summary of our second quarter 2024 financial results. Starting with operating expenses. For the three months ended June 30, 2024, operating expenses totaled $5.5 million compared to $6.9 million for the three months ended June 30, 2023, representing a decrease of $1.4 million or 19.7%. Research and development expenses were approximately $2.6 million for the three months ended June 30, 2024, compared to $3.2 million for the three months ended June 30, 2023, representing a decrease of $0.6 million or 17.7%. This was primarily due to a reduction in expenses associated with the Phase 2b ASCEND trial, which completed enrollment in the prior year. Lower spend on chemistry, manufacturing and control or CMC-related expenses and lower equity expense, partially offset by an increase in expenses associated with enrollment activities in the current year for our BOLSTER trial. General and administrative expenses were approximately $2.9 million for the three months ended June 30, 2024, compared to $3.7 million for the three months ended June 30, 2023, representing a decrease of $0.8 million or 21.3%. This was primarily due to one-off related severance costs in the prior year associated with the elimination of the Chief Business Officer position on May 1, 2023, a reduction in equity expense and a decrease in directors and officers insurance premiums in the current year. Benefit from income taxes was zero for the three months ended June 30, 2024, compared to $2.3 million for the three months ended June 30, 2023. In April 2023, we received net proceeds of $2.2 million from the sale of tax benefits to a qualified and approved buyer pursuant to the New Jersey Economic Development Authority’s Technology Business Tax Certificate Transfer Program. Overall, net losses were $5 million for the three months ended June 30, 2024, compared to $4 million for the three months ended June 30, 2023. It is noteworthy that we continue to make progress according to our plans for our research and development and business activities while still continuing our legacy of prudent capital management and expense minimization. Turning now to our balance sheet and cash flow. As of June 30, 2024, Lisata had cash, cash equivalents and marketable securities of approximately $38.3 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 anticipated data milestones from all its ongoing and planned clinical trials. With that, I now turn the call over to Dr. Kristen Buck to provide an overview of the company's development programs. Kristen?

Thank you, James, and good afternoon, everyone. As I've mentioned many times in the past, Lisata's development programs are built upon a strong foundation of published preclinical and early clinical research. Notably, our CendR Platform technology is rooted in pioneering discoveries recognized by the Lasker Prize awarded to Dr. Erkki Ruoslahti. A product of the CendR Platform, Certepetide is designed to address the major impediments to the successful treatment of advanced solid tumors. This is especially relevant in an environment of increasing prevalence of these cancers and growing pharmacoeconomic pressures. Our clinical studies have been rigorously designed with the end in mind that is eventual product registration and are optimized to generate clinically meaningful unambiguous data. As such, unlike many studies at a similar stage of development, our studies are placebo-controlled, appropriately sized and employ primary endpoints that are preferred by regulatory authorities in support of pivotal trials. Further, our trials evaluate Certepetide in combination with current standard-of-care therapies to allow for clear discernment of treatment effect and to fit with current treatment practices at clinical sites. These strategic design choices are not always the least expensive, but they afford us the most scientifically rigorous methodology by which to generate clinically meaningful data as efficiently and rapidly as possible. This is in keeping with our development mantra of do the last experiment first to avoid time and capital consumption on work that could become unnecessary. We have also devised and implemented a regulatory strategy that optimizes Certepetide's regulatory review and future commercialization. This strategy includes obtaining special regulatory designations that afford us priority reviews and the possibility of accelerated approvals. However, before I get to the specifics of each of the clinical studies in our development portfolio, please allow me to summarize some important background information, especially for those who are listening for the first time. Despite advances in cancer therapy, including CAR-T cell therapy and immunotherapy, many solid tumors are still associated with poor outcomes for patients. Cancers such as pancreatic cancer, gastric cancers, glioblastoma multiforme and other solid tumors are surrounded by a dense fibrotic tissue known as the stroma, which limits access of most pharmacotherapies to the tumor. In addition, many subtle tumors also present a hostile tumor microenvironment, or TME, which suppresses the patient's immune system and makes it less effective in fighting cancer. The combination of a dense stroma and a hostile tumor microenvironment prevents many chemotherapy and immunotherapies from being optimally effective in treating these cancers. This coupled with the fact that most anticancer therapies are not efficient in targeting only cancer tissue defines the major challenge of maximizing effectiveness and safety in the treatment of solid tumors. To combat this, our investigational product, Certepetide leverages the naturally occurring CendR active transport system to provide an innovative approach to the selective delivery of anticancer drugs through the tumor stroma and directly into the tumor. Simultaneously, Certepetide has been shown to modify the tumor microenvironment, making it less immunosuppressive, and therefore, increasing the tumor susceptibility to immunotherapy while also inhibiting the metastatic cascade. Certepetide is a 9 amino acid cyclic peptide with high binding affinity and specificity for alpha v beta 3 and beta5 integrin receptors, which are significantly upregulated on tumor vascular endothelial cells and tumor cells themselves, but not on healthy tissue. Once bound to these integrins, Certepetide is subjected to proteolytic cleavage by enzymes naturally occurring in the tumor microenvironment to produce two linear fragments, one of which is a 5 amino acid CendR peptide fragment. Upon association of the CendR fragment from the integrin receptor, it binds to another receptor called neuropilin-1 on the same or a nearby cell. Once neuropilin-1 is activated, it actuates the CendR active transport mechanism, which is manifested by the formation of microvesicles at the surface of the cells. These microvesicles encapsulate any co-administered anticancer drugs, unbound Certepetide and CendR fragments in the circulatory system and ferry them through the stroma and vasculature into the tumor. Certepetide's mechanism of action is agnostic to the modality of the companion anticancer drugs with which it is administered and can be combined with a wide range of existing or even emerging anticancer therapies, including chemotherapies, immunotherapies and RNA-based therapies. Additionally, as I previously mentioned, Certepetide 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 anticancer 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 Certepetide's mechanism of action. Along with our collaborators, we also have amassed significant non-clinical data demonstrating enhanced delivery and augmented efficacy of a range of anticancer therapy modalities, including chemotherapies, immunotherapies, RNA-based therapeutics and even cell therapies. To date, Certepetide has also demonstrated favorable clinical safety, tolerability and activity to enhance the delivery of standard-of-care chemotherapy for patients with metastatic pancreatic cancer. In addition, our strategic focus on regulatory optimization has yielded significant results as evidenced by multiple special designations awarded to Certepetide. To date, Certepetide is the recipient of a fast track designation by the FDA, which affords us more frequent interactions with the FDA and the ability to submit NDA components early for a rolling review. Certepetide will also be eligible for accelerated approval and priority review if relevant criteria are met. Further, Certepetide has received multiple orphan drug designations, including one for pancreatic cancer, in both the United States and Europe, as well as for malignant glioma in the U.S. orphan drug designation. Orphan Drug designation affords Lisata exemption from FDA user fees and provides extended market exclusivity as well as other potential sponsor benefits. In just the first half of 2024, Certepetide has not only been granted a pediatric investigation plan waiver by the EMA for the treatment of pancreatic cancer, but has also received an orphan designation and a rare pediatric disease designation for osteosarcoma in the United States. For background, the FDA defines rare pediatric diseases as diseases with fewer than 200,000 cases in the United States that are serious or life threatening and primarily affect individuals under 18 years of age. This program is set to expire on September 30, 2024. However, our expectation and the expectation of many in the industry is that the program will be reauthorized. We will, of course, be monitoring those developments closely. A substantial benefit under the current Rare Pediatric Disease Designation program is receipt of a priority Review Voucher, often referred to as a golden ticket once the FDA approves the new drug application, or NDA for the product and indication having received the designation. Vouchers are especially valuable as they can be used to compel a priority review of an additional NDA or biologic license application for another product or indication reducing the standard review time of approximately 10 months to six months. The voucher may be used by the sponsor or sold to another sponsor for their use. Priority Review Vouchers have sold for as much as $350 million historically and more recently have sold for $75 million to $100 million. Overall, our development strategy includes the pursuit of a rapid Certepetide registration for the treatment of pancreatic cancer, alongside studies which further exploit Certepetide's ability to enhance a variety of anticancer treatments in a range of advanced solid tumors.

Thanks, Kristen. Overall, we remain optimistic about the potential of Certepetide to transform the lives of patients with cancer. The upcoming ASCEND data readout will be a seminal moment for Lisata as it will provide critical insights into the efficacy and safety profile of Certepetide in combination with standard of care chemotherapy for patients suffering from mPDAC. As we look ahead, we remain committed to advancing the Certepetide program across multiple tumor types and exploring strategic partnerships to maximize its value. We look forward to sharing further updates on our progress throughout the year. And with that, operator, we're ready to take questions.

Our first question comes from Steve Brozak of WBB Securities.

Good afternoon and thank you for the questions. I have one specifically about your quick enrollment. What type of feedback did you receive from clinicians regarding the speed of the enrollment? Additionally, since you have opened a second front for enrolling more patients, what feedback have you collected from clinicians not only about the demand but also about the needs and what patients are seeking? I have a follow-up question after that. Thank you.

Thanks, Steve. Appreciate you being on the call and thank you for the question. The feedback that we've received, and I should say that Kristen actually received directly throughout the enrollment of the first-line cholangiocarcinoma trial, was that there was a tremendous level of enthusiasm about the potential for the product and even, I would say, an assumption or speculation that the product was doing something positive. Now Kristen reminded the investigators that the study was blinded. Nobody knew including them, who was receiving treatment and who wasn't, but their typical response was, yes, we understand. But we're seeing some of our patients do things, and respond in a way that's atypical of patients with cholangiocarcinoma receiving chemotherapy. And so we really think that it must be due to the addition of Certepetide, and we're very excited about that. And by the way, because we think something is happening in first-line, there's an even greater need in second-line. Would you please consider opening up a second arm or bolstering second-line cholangiocarcinoma because we believe that we can enroll that very rapidly as well because of the large need. And so based upon that type of feedback, we did open the second-line cholangiocarcinoma study, and we hope that will enroll as quickly as they have projected.

Got it. Okay. And as a follow-up, when you analyze this response, can you remind me what the standard-of-care would currently be if, unfortunately, this trial weren't ongoing? How does that compare? I'll get back in the queue now.

Thanks, Steve. It's Kristen here. Yeah. The first-line treatment for cholangiocarcinoma or bile duct tumor is actually gemcitabine, cisplatin (ph) and durvalumab. And the reason we designed the trial as such, we wanted to include that standard-of-care currently as one of the treatment arms with placebo and add Certepetide to that baseline standard-of-care regimen. For patients, this is a pretty devastating disease. These patients in the first-line, perhaps live 11 months overall survival median. And in the second-line, unfortunately, they meet their demise between four and six months. So we’re hoping to make a meaningful impact.

Thank you. Our next question comes from the line of Joseph Pantginis of H.C. Wainwright & Company.

Hi. Good afternoon. This is Sara on for Joe. I have a question regarding the two pharmaceuticals trial. Specifically for the Phase 2 in mPDAC, I'm curious about how much insight you have into the trial's progress. Can you share any information about how enrollment is going? I understand it takes about 18 months to complete accrual, but do you have updates on how many patients have been treated so far or any other updates along the way? Thank you.

Hi, Sara. Thanks for calling in and thanks for the question. So I think, as Kristen's narrative have indicated, Qilu is an independent company. It's a private company in China. So they are not subject to the same rules of disclosure that public companies are. And as a result, they typically do not make any announcements about the progress of their clinical trials. They don't even announce first patient in, last patient out or anything they just wait until the trials were over, and they make generally announcements through the medium of scientific presentation at a big meeting like ASCO-GI or ASCO. So as it relates to the Phase 2 product, all we know is that it initiated in the second quarter because they told us, we have our joint steering committee meetings at least quarterly, and during that meeting, they told us they've initiated the Phase II trial, and that's when they projected the roughly 18 months for complete enrollment. We are waiting for our third quarter JSC meeting to occur, and they may or may not give us a hint as to what the trial enrollment is, but they would typically say things like we're on track, all right? And at this early stage, I would imagine that they wouldn’t say anything other than they’re on track to meet their projected 18-month enrollment period. So we’re a little bit blind to what’s going on there. But if things go dramatically different from the projections, they would obviously let us know.

Okay. That’s helpful. Thank you.

Thank you. Our next question comes from the line of Will Hidell of Brookline Capital Markets.

Hi. Thank you for the opportunity to ask questions. I have a quick clarification regarding the trial of Certepetide and GBM. As of last quarter, I believe there were three patients enrolled, and I might have missed any updates on enrollment. Are there any?

Yeah. No, actually – thanks, Will, for calling in on the question. We don’t really have any updates. As you know, that trial is running in Estonia. Typically, this time of year in that part of Europe is a very – I would say, common vacation time. And so our investigator lead investigator has been away for the last 10 days, and we probably wouldn’t have a chance to touch base with them for another week or so. And hopefully, during our next call, we’ll have an update on enrollment from Estonia and Latvia. But we do know that the sites in Latvia are open, and we do hope that we’ll see an improvement to – or rather an increase in enrollment over the originally announced three the next time we have a chance to chat.

Thank you. Our next question comes from the line of Pete Enderlin of MAZ Partners.

Thank you. Hi, everybody.

Hi, Pete.

Congratulations on the strong progress in the enrollment, especially in conjunction with controlling expenses very effectively. My first question is a quick one, so I’ll maybe count it as a half a question. And that is, do you have any estimate of the size of the pediatric patient population in pancreatic cancer? I mean we know orphan is less than 200,000, but I would think it's a lot less than that in the United States and in Europe both? So do we have a specific number?

Yeah. The answer is, it's not significantly different from zero.

Right. Okay. Looking ahead, the investment community often tries to predict future developments, which can be challenging. The question is whether there are other drugs currently in clinical trials—not the existing standard of care—that could conceptually or potentially connect with the Certepetide, possibly influencing the approval of those drugs in their clinical trials. Are you engaged in any discussions with other pharmaceutical companies regarding such scenarios? I'm not asking about known collaborations, like with nab-paclitaxel and similar standards of care, but rather about new drugs. What is the outlook for that?

So the simple answer to your two questions are yes and yes. As I said, as Kristen actually said, the mechanism of action of Certepetide is agnostic to the modality of the companion anticancer agent. That's fairly fancy speak for saying that it doesn't matter what type of anticancer drug you use if you mix it with Certepetide, you should expect an improvement. And so we actually would expect that it could help for products that are currently approved as well as products that are under investigation. And we have, in fact, spoken to a number of companies who are studying their products for pancreatic cancer and other solid tumors and have an ongoing dialogue to see if we can find a way to collaborate that gives both products, Certepetide and theirs another shot on goal, but still falls within our strategic remit here of making sure that we can afford whatever we do.

Yeah. And so, Dave, does that mean that some of these companies have actually approached you because you don't necessarily know everything that's going on in these different cancer trials and maybe have a drug that they're not that confident about, but they know that if it gets improved efficacy, thanks to your drug that, that would make the difference. Is there some of that kind of dialogue going on?

Yes. That is some of that. And some of it is, of course, we scour the clinical trial rolls constantly looking for products that, for one reason or another, are not behaving as positively as everyone hopes, but that could benefit from a combination of Certepetide so it kinda goes both ways.

Thank you. Our next question comes from the line of Robert Sassoon of Water Tower Research.

I wonder whether you could give us sort of a rundown picture of your state of your intellectual property real estate.

Sure. So we have a broad intellectual property portfolio that covers Certepetide from composition of matter through method of use through indication and even some formulation type patents. They protect the product into the 2030s, and we have several applications in that are looking that are actually currently being prosecuted that if granted could extend that into the early 2040s. We also would be subject to patent term extension because of the length of time that Certepetide has been in development, and that could also increase the patent life by after five years, as you know, under those laws. And then finally, under the market exclusivity benefits of orphan designations and those indications could get market exclusivity independent of the patent situation that extends seven to 10 years depending on the geography.

Okay. Thanks. That’s very useful.

Thank you.

This concludes the question-and-answer session. I will now turn the call back to Dr. Mazzo for closing remarks.

Well, thank you for all for participating today and for joining us on the call. We look forward to speaking with you again during our next quarterly conference call and to continuing to provide updates on the achievements and progress of Lisata Therapeutics. We remain grateful for your continued interest and support. We wish you a very nice evening.

This concludes today's conference call. Thank you for participating. You may now disconnect.