Earnings Call Transcript - LSTA Q2 2021

Operator, Operator

Welcome to the Caladrius Biosciences Second Quarter 2021 Financial Results and Business Update Conference Call. As a reminder, this call is being recorded today, Thursday, August 5, 2021. I will now turn the call over to John Menditto, Vice President of Investor Relations and Corporate Communications at Caladrius. Please go ahead, sir.

John Menditto, Vice President of Investor Relations and Corporate Communications

Thank you, operator, and good afternoon, everyone. Welcome to Caladrius’ second quarter 2021 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; and James Nisco, Vice President of Finance and Treasury. Earlier today, we issued a press release announcing our second quarter 2021 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 would like to be added to the company’s email distribution list, please email me yet at jmenditto@caladrius.com. 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 Caladrius. I encourage you to review the company’s filings with the Securities and Exchange Commission, including, without limitation, its Forms 10-K, 10-Q, and 8-K, which identify specific 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, August 5, 2021. Caladrius Biosciences undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. Please keep in mind that the company continues to conduct calls from different locations during the COVID-19 pandemic. So, we appreciate your patience should we have any technical difficulties. With that, I will now turn the call over to Dr. Mazzo. Dave?

David Mazzo, President and CEO

Thank you, John, and good afternoon, everyone. I hope that you are all well and that those who are experiencing the ebbing of the COVID-19 pandemic are doing okay. Thank you for joining us on our call today to discuss our second quarter 2021 financial results and recent business highlights. During the second quarter and first six months of 2021, we continued to advance our clinical development programs and strengthen our financial position, which we believe gives us the means to fund our operations for the next several years based on our current development plans, while also allowing us to explore additional pipeline expansion opportunities. Most notably, we delivered on several strategic priorities in support of our autologous CD34 cell technology-based clinical pipeline, about which I will further discuss following the prepared remarks covering the financial results. And with that, I will now turn the call over to James Nisco, our Vice President of Finance and Treasury, who will review and provide commentary on our quarterly financial results. James?

James Nisco, Vice President of Finance and Treasury

Thanks, Dave, and good afternoon, everyone. I am pleased to join you today and provide a review of our second quarter financial results starting with our operating expenses. Research and development expenses for the three months ended June 30, 2021 were $4.3 million compared to $1.8 million for the three months ended June 30, 2020. Research and development in the current year period focused on the advancement of our ischemic repair platform and related expenses associated with efforts to advance CLBS16 in the Phase 2b FREEDOM trial, which now has multiple sites actively screening and enrolling patients. Additionally, expenses are related to the planning and preparation of an IND and proof-of-concept protocol for CLBS201 as a treatment for diabetic kidney disease, and ongoing expenses for HONEDRA in critical limb ischemia and Buerger’s disease in Japan, for which we continue to focus spending on patient enrollment and Japanese rolling NDA preparation. General and administrative expenses, which focus on general corporate-related activities, were $2.8 million for the three months ended June 30, 2021 compared to $2.5 million for the three months ended June 30, 2020, representing an increase of 14% due to an increase in directors' and officers' insurance premiums as experienced throughout our industry and strategic consulting expenses. Overall, net losses were $5.7 million for the three months ended June 30, 2021 compared to net income of $6.6 million for the three months ended June 30, 2020. Turning now to our balance sheet and cash flow. As previously announced in January 2021, we successfully closed on the $25 million capital raise through the sale of the company’s common stock and warrants to several institutional and accredited investors in a private placement priced at the market under NASDAQ rules. Shortly thereafter in February 2021, the company announced that it closed the $65 million capital raise through the sale of common stock and warrants to several institutional and accredited investors and two registered direct offerings priced at the market under NASDAQ rules. In addition, in May 2021, we announced that we received $1.4 million in non-dilutive funding as an approved participant of the Technology Business Tax Certificate Transfer program, sponsored by the New Jersey Economic Development Authority. The program enables qualifying New Jersey-based biotechnology or technology companies to sell a percentage of their New Jersey net operating losses and research and development tax credits to unrelated qualifying corporations. Even at the tail end of the COVID-19 pandemic, while many small biopharma companies continue to experience difficulties and compete for capital, we successfully and opportunistically secured $90 million in new capital gross proceeds year to date in 2021. These resources have afforded us the financial security to focus on the execution of our business plan. As of June 30, 2021, Caladrius had cash, cash equivalents, and marketable securities of approximately $106.1 million. Based on existing programs and projections, we remain confident that the current cash balances will fund operations for the next several years, notably through study completion for the Phase 2b FREEDOM trial of CLBS16, through registration-eligible study completion for HONEDRA, and through the Phase 2 proof-of-concept study for CLBS201, while still providing capital to explore additional pipeline expansion opportunities. That completes the financial overview. With that, I will turn the call back to Dave.

David Mazzo, President and CEO

Thanks, James. As has been my habit on previous calls, I will begin by providing a high-level summary of what we are doing at Caladrius, and then further expand on each of our clinical programs. At Caladrius, we are focused on the development of autologous cellular therapies designed to reverse disease. We have late-stage clinical programs underway based on a large database of human clinical data. To date, our therapies have shown signs of effectiveness and durability with a positive safety profile, unlike many allogeneic therapies, and we believe present the possibility of substantial pharmacoeconomic benefits. Most importantly, we remain focused on the development of personalized curative cell therapy products that can restore health and improve quality of life with a single administration of the therapy rather than one that requires frequent re-administration. The CD34 cell therapy technology has led to the development of therapeutic product candidates designed to address diseases and conditions caused by ischemia, a condition in which the supply of oxygenated blood to healthy tissue is restricted. Previously published preclinical and human clinical studies have demonstrated that administration of CD34 positive cells induces angiogenesis of the microvasculature; these cells prompt the development of new blood capillaries, thereby contributing to the prevention of tissue death by facilitating blood flow to the area of ischemic insult. We believe that several chronic conditions caused by underlying ischemic injury can be improved through the application of our CD34 cell technology, including, but not limited to, coronary microvascular dysfunction or CMD, critical limb ischemia or CLI, Buerger’s disease, diabetic kidney disease, and no-option refractory disabling angina or NORDA. I will now speak to each of our development programs, kicking off with CLBS16, our promising CD34 cell therapy product for the treatment of coronary microvascular dysfunction. In May of 2020, the company announced the full data results of the ESCaPE-CMD trial at the Society for Cardiovascular Angiography and Interventions 2020 Scientific Sessions virtual conference, showing a highly statistically significant improvement in coronary flow reserve correlating with symptom relief for patients with coronary microvascular dysfunction after a single intra-coronary injection of CLBS16. CMD is a disease that continues to be underdiagnosed and potentially afflicts millions annually, a vast majority of whom are female, with no current treatment options. The company is committed to raising awareness of this growing women's health crisis and finding an effective treatment. Consequently, the company recently initiated and is currently treating patients in a rigorous Phase 2b clinical trial known as the FREEDOM trial, which, to our knowledge, is the first controlled regenerative medicine trial in CMD in the United States. Investigator and subject response to the FREEDOM trial has been favorable and early enrollment has proceeded according to plan. However, the continued impact of the COVID-19 pandemic, including the resurgence of cases occurring in select areas throughout the United States, has contributed to a general slowing of enrollment. In addition, further work with investigators and prospective subject feedback has led the company to propose to the FDA amendments to the FREEDOM trial protocol to enhance the breadth and speed of subject enrollment. These changes included expanding the techniques that are acceptable for diagnosing CMD. Nevertheless, given the uncertainty that persists surrounding the future impact of the COVID-19 pandemic on potential patient recruitment and the accessibility of investigator sites, the company now projects enrollment completion for the FREEDOM trial to occur in the third quarter of 2022, with final data based on the six-month assessment of all subjects expected by the second quarter of 2023. Turning now to CLBS12, known as HONEDRA, in Japan, our product candidate for the treatment of critical limb ischemia and Buerger’s disease. HONEDRA was awarded SAKIGAKE designation from the Japanese regulatory authorities for the treatment of critical limb ischemia and Buerger’s disease, an orphan-sized subset of CLI. The SAKIGAKE designation is akin to an RMAT designation in the United States and affords the recipient prioritized regulatory consultation, a dedicated review system to support the development and review process, including the option of a rolling registration submission as well as reduced review time of six months for the registration application once filed. HONEDRA is also eligible for early conditional approval and possibly full approval in Japan based on the compelling nature of the complete data from our ongoing prospective randomized controlled open-label multicenter study in CLI and Buerger’s disease patients, which was designed in direct collaboration with the Japanese PDMA. Note that conditional approval of a SAKIGAKE product only requires the demonstration of a trend toward therapeutic effect together with acceptable safety. The company's registration-eligible study of HONEDRA in Japan for the treatment of CLI and Buerger’s disease has shown positive results to date. The initial responses observed in subjects who have reached an endpoint in this study are consistent with a therapeutic effect and safety profile reported by previously published clinical trials in Japan and the United States. The study's enrollment continues to be slowed by the COVID-19 pandemic's impact in Japan, including multiple state of emergency declarations by the Japanese government. However, the company is encouraged that less than a handful of patients are needed to reach study completion. The exact date of which is impossible to predict given the ongoing impact of the pandemic on clinical trials in Japan. While the final outcome of the trial will depend on all data from all subjects, the data to date indicates that 60% of subjects in the cohort have reached a positive CLI-free endpoint, despite a natural history of such patients that predicts continuing disease progression to amputation. Regarding commercialization, our strategy remains to license or partner HONEDRA in Japan, and to that end, our conversations continue with prospective partners, and we seek to consummate a deal in concert with the completion of the study, if not before. Earlier this year, we were pleased to report that the U.S. FDA granted orphan designation to CLBS12 as a treatment for Buerger’s disease; however, any potential developments in the U.S. will be decided after further discussions with the FDA on the requirements for registration, all expected prior to the end of this year. Moving onto our most recently proposed development program, CLBS201 for the treatment of diabetic kidney disease. The company has prepared an initial development plan for the clinical study of CLBS201, a CD34 investigational product for administration via the renal arteries to slow the deterioration, or, ideally, reverse the decline of renal function in patients with diabetic kidney disease who, although still pre-dialysis, exhibit rapidly progressing stage 3b disease. Progressive kidney failure is associated with attrition of the microcirculation of the kidney. Pre-clinical studies in kidney disease and injury models have demonstrated that protection or replenishment of the microcirculation results in improved kidney function. A Phase 2 proof-of-concept, randomized, placebo-controlled study for the stage 3b chronic kidney disease patient population is planned to initiate in the next few months. The protocol calls for a six-subject open-label treatment run-in arm in which patients will be treated sequentially, to be completed, evaluated, and cleared for continuation by the study’s data safety monitoring board prior to initiating the 40-patient randomized, placebo-controlled, double-blinded portion of the trial. The company is projecting that safety data from the six-subject run-in arm will be completed by the end of the second quarter of 2022. Lastly, for OLOGO for the treatment of no-option refractory disabling angina or NORDA, as disclosed on previous calls, Caladrius acquired the rights to data and regulatory filings for a CD34 cell therapy program for NORDA that had positive previous studies. Based on the clinical evidence from the completed studies, a single administration of OLOGO reduces mortality, improves angina, and increases exercise capacity in patients with otherwise untreatable angina. This product received Regenerative Medicine Advanced Therapy designation from the FDA, better known as RMAT. Discussions with the FDA have resulted in a rejection of the company's efforts to reduce the FDA requirement of a 400-patient Phase 3 study for registration, including an arm of 50 standard-of-care patients and an arm of 150 placebo patients, despite data showing that the NORDA population is orphan in size. Because enrollment of a study of this magnitude and design is projected to take many years, if executable at all, the company has decided not to pursue a Phase 3 program for OLOGO on its own but will continue to seek a partner to execute the study and advance the program. So in closing, we are very pleased with the corporate and development achievements made in the second quarter and first half of 2021. Throughout the balance of the year, we expect to advance our clinical development pipeline, and we will strive to execute on a number of important development milestones, more than ever. Our experienced, dedicated, and passionate team remains committed to the advancement of our programs as we work to bring innovative treatment options to patients in need. And with that, Operator, we're ready to take questions.

Operator, Operator

[Operator Instructions] And our first question is from Joe Pantginis with H.C. Wainwright. Please go ahead, sir.

Sara Nik, Analyst

Hi, this is Sara on for Joe. Thanks for taking the question. My first question is regarding the FREEDOM trial in particular. Is there a protocol in place in the event that patients test positive for COVID-19?

David Mazzo, President and CEO

Yes, there is Sara. In fact, we've had several patients who have passed screening and were either scheduled for treatment or further follow-up, and they tested positive for COVID. When that occurs, if it's prior to treatment, their treatment is postponed until they can test negative, which usually takes several weeks. If it's been after they have been given the treatment, then they only get their follow-up visits when they are also able to test negative. Although some of the follow-up can be done over the phone, not all of it is. The other is physiologic testing involved. Most of the patients that have been impacted were prior to the administration of the treatment, so it's just put off treatment for several weeks. The pandemic has also slowed enrollment at a number of our sites for some period of time, as those sites experience an influx of especially Delta variant COVID-19 patients, and they're using more of their emergency and operating room staff to help out with those seriously ill patients in the short term.

Sara Nik, Analyst

All right. And my second question is, how do you envision the regulatory path for CLBS201, assuming a positive outcome of your proof-of-concept study?

David Mazzo, President and CEO

Well, there are two, I guess, perhaps even three positive outcomes from this study. Going from maybe least positive to most positive, the first would be that we demonstrate the product is well-tolerated and that patients experience a trend toward some sort of therapeutic effect, but nothing that is yet definitive, which would mean we probably need to do a larger trial to get to some therapeutic efficacy or effect measurement. The next would be that we're able to show safety again, and also show that the product can slow the progression of the decline of eGFR in these patients. That would be a very nice result, but because this is akin to what some of the more recent treatments that have been approved have been able to accomplish, they have to do that with multiple administrations of the product. The best-case scenario would be if we could demonstrate safety and prove that we can actually reverse the decline of eGFR, essentially regenerating the kidney. Depending upon whether it's the first, second, or third scenario, it will determine whether more than one additional trial is necessary, how big those trials will be, and whether or not the product will be eligible for an RMAT designation and the consideration of a possible path to an early conditional approval.

Sara Nik, Analyst

Okay. Thank you.

Operator, Operator

Next, we go to the line of Shubhendu Sen Roy with Brookline. Please go ahead.

Shubhendu Sen Roy, Analyst

Thank you. I'm Shubhendu calling in for Kumar from Brookline. Appreciate the update. Thank you. Congratulations on the successful IND filing for CLBS201. I was just wondering if you could provide some color in terms of patient recruitment for the planned Phase 2 study for DKD, in terms of age, gender, etc.

David Mazzo, President and CEO

Sure. So the patients will all be adults, meaning they will all be 18 years of age or older, and they have to be less than 75 years in age. They must have rapidly progressing stage 3b kidney disease along with their diabetes. Beyond that, there are no gender or other kinds of restrictions. For all the inclusion and exclusion criteria, the protocol is now available on clinicaltrials.gov. You can see all the details there if you like.

Shubhendu Sen Roy, Analyst

Very useful. Thank you. One more question: you touched upon the COVID situation and the rising COVID cases. I was just wondering if you could provide additional color on the impact of these rising cases on the HONEDRA trial in Japan. Last year, you already informed that there were only a handful of patients left, and even now. Just wondering if you could elaborate on the outlook in terms of site reopening generally.

David Mazzo, President and CEO

Sure, Shubhendu, I’m happy to address that. The recruitment in Japan has all been shut down for about the last 18 months, since the Japanese government declared a state of emergency. One of the impacts of that state of emergency is that all major hospitals have to allocate all of their available facilities to treat COVID patients, and non-COVID patients, especially those in clinical trials, are given extremely low priority. As a result, because patients in our protocol in Japan require an overnight hospitalization stay after the treatment, there have been no beds available due to the ongoing state of emergency. Our expectation, although this is just speculation, is that after the Olympics and toward the end of the summer, the Japanese government will begin to lift the states of emergency. As they do, we have a number of people who have been screened and are in queue waiting to be treated. I hope that hospitals then are able to allocate resources and reopen sites for clinical trials, which will allow us to get these people in and get them treated. As I mentioned, only a handful of patients are left, so it shouldn't take us long once we are up and running again to complete the enrollment in the trial. We just have to finish the one-year follow-up on those finally enrolled patients.

Shubhendu Sen Roy, Analyst

Thank you so much. Sounds great. Thanks for taking my questions.

Operator, Operator

Next we go to the line with Pete Enderlin with MAZ Partners. Please go ahead.

Pete Enderlin, Analyst

Good afternoon. Thanks for taking my questions. Dave, you said that you expect to initiate the diabetic kidney disease trial in the second half. Would you refine that down to either the third quarter or the fourth quarter? Can you tell yet?

David Mazzo, President and CEO

Well, it's probably going to be somewhere on the cusp of the two. That's why we haven't been specific. So it could be September or October, that's our goal. But certainly before the end of the year, we expect to have our first patients enrolled. Remember, this will be initiated with the six patients run-in, and to be a bit more specific, everyone should understand that the way this has been set up with FDA and the DSMB is that the first patient has to be treated. Then that patient has to be followed for a certain amount of time to ensure that they have no adverse events. The DSMB will review that patient's file, agree that it's safe to proceed, and then give us the green light to enroll the next patient. We will follow that sequential approach until all six patients have been treated and evaluated by the DSMB. We expect that it will take six to eight months to actually do those six patients due to the stop-and-start associated with that. Then we will be able to move on to the 40-patient blinded randomized trial, which we hope will evolve much faster.

Pete Enderlin, Analyst

Okay. Thanks. I had a sort of general question about the FDA. They're always difficult to deal with, but do you think that their state of engagement these days is worse because they're distracted and preoccupied? Also, related to that, not being able to agree with them, was that mainly due to their operational challenges or were there more specific disagreements regarding OLOGO that you just couldn’t get them to budge on? What were those?

David Mazzo, President and CEO

Let me be very clear when I provide this answer. I do not speak for the FDA. I can only comment on our experiences in dealing with them. First, it goes without saying the FDA is overwhelmed with work at the moment. Like many employers, they are understaffed and have experienced staff shortages because of COVID on two fronts: because lots of treatments, including the vaccines, need to be reviewed, and a number of their employees have also been sick and missed work. So they’re having a tough go of it, like everybody else, trying to keep up with their workload. That’s part of it. And that is reflected in the fact that when we request a meeting, the meetings are usually scheduled in a 90-day window, but now they're being scheduled in a 180-day window for us. They're obviously backlogged, and that’s a bit of the issue. As it relates specifically to OLOGO, I think our issue boils down to, as I pointed out here, that they’re requiring us to perform a large Phase 3 trial with 400 patients, which in and of itself is a challenge given that the patient population for NORDA in the United States is orphaned in size. Our best guess is that there are somewhere on the order of 30,000 to 50,000 NORDA patients here in the United States, so trying to do a trial of that size in that patient population is already challenging. What makes it even more challenging is the requirement that we have a 50 patient standard of care arm, meaning patients basically don’t get any treatment that is working, otherwise they wouldn’t be interested in the trial, or they get randomized to placebo. There’s a 50-50 chance that someone with NORDA could be randomized to placebo. If they follow the protocol rules, then they’re expected to stay in the trial until the end, which just could take a year or more for follow-up. Patients are just not willing to do that; they’re saying, ‘I’m not going to get into a placebo-controlled trial here for my disease unless I’m certain that I’m going to get treatment.’ We’ve been trying to convince the FDA that there might be a better way to prove efficacy and safety. They’ve already conceded that they see the product is safe but we just haven’t been able to get them to agree to a smaller protocol. Honestly, our estimates suggest it could take eight to ten years to enroll that protocol and that’s just not something that we can do.

Pete Enderlin, Analyst

Yes. Well, given the efficacy, it seems kind of amazing that they couldn’t just see the value of the program and try to work with you more.

David Mazzo, President and CEO

Why don’t you get a job at the FDA, Pete? And we’ll send you our application. We agree with you; we were hoping that they would see it our way. But let’s just remember that when push comes to shove, all of us would much prefer to work in a country where there’s an FDA rather than one where there isn’t. Most of the time, we come to reasonable agreements with them, and they base their decisions on the science they see, so that’s important.

Pete Enderlin, Analyst

Yes. Fair enough. On HONEDRA, there are only a handful of patients left in the 30% cohort, and it’s an open-label trial. Can you give us some idea of what the results look like? You said in the Buerger’s piece it’s roughly 60%. So how does it look for the 25% or so, whatever it is in the other part of the trial?

David Mazzo, President and CEO

Remember, this is a controlled trial. So in the Buerger’s cohort it was all Buerger’s patients. In the standard CLI cohort, there’s a randomization between treatment and standard of care. Yes, it’s open-label, but what I’m saying is that at any point during the 12-year follow-up, a patient could convert from having CLI to being CLI-free. After becoming CLI-free, they could also convert back before the follow-up period is over. That’s why we’re reluctant to provide any data on that cohort, even though it’s open-label, until the entire patient population is completed, because the data could change. It’s confusing for investors and others to hear a changing data set. With Buerger’s, that data is complete, so I have no problem sharing those results.

Pete Enderlin, Analyst

Okay. Of course, Buerger’s received orphan designation in the U.S., which means well under 200,000, which we know.

David Mazzo, President and CEO

Yes.

Pete Enderlin, Analyst

But what can you say, if anything, about the potential patient population for CLI as a whole in the U.S. if you ever get to that point?

David Mazzo, President and CEO

The patient population for CLI is reasonably large. I don’t have the exact numbers at my fingertips because we haven’t been looking to do anything with CLI in the United States just now. But the number is pretty big. Buerger’s, however, is a small population, but it has a very high unmet medical need, and we’re hoping that working with the FDA will let us come up with a reasonably sized trial for a Phase 3 commitment for that particular indication. So I think we’re focusing our efforts on looking at what might be an avenue toward inorganic growth, which would involve acquiring assets for the pipeline or partnering on the development of products for the pipeline.

Operator, Operator

This concludes the question-and-answer portion of the presentation. Now I will turn the call back to Dr. Mazzo for closing remarks.

David Mazzo, President and CEO

So 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 in and support of Caladrius Biosciences. Stay well and have a good evening.

Operator, Operator

This concludes today’s teleconference. We thank you for your participation. You may disconnect your lines at this time. Have a great day.