Earnings Call Transcript - LSTA Q1 2021

Operator, Operator

Welcome to the Caladrius Biosciences First Quarter 2021 Financial Results and Business Update Conference Call. As a reminder, this call is being recorded today, Thursday, May 6, 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’ first 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, Finance and Treasury. Earlier today, we issued a press release announcing our first quarter 2021 financial results, which is available under the Investors and News section of our company website. 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 at jmenditto@caladrius.com. 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 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 the live broadcast, Thursday, May 6, 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. Good afternoon, everyone, and thank you for joining us on today’s call to discuss our first quarter 2021 financial results and recent business highlights. During the first quarter of 2021, we continued to advance our clinical development programs and strengthen our financial position, giving us the confidence and means to fund operations for the next several years based on our current development plans while also allowing us to explore additional pipeline expansion opportunities. Over the last several months, we delivered on a number of strategic priorities in support of our robust autologous CD34 positive cell technology-based clinical pipeline, on which I will further expand in a few moments, following the prepared remarks covering the financial results. 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, Finance and Treasury

Thanks, Dave, and good afternoon, everyone. I'm pleased to join you today and provide a review of our first quarter financial results. Starting with our operating expenses, research and development expenses for the three months ended March 31, 2021, were $5.1 million, compared to $1.5 million for the three months ended March 31, 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 the CLBS16 in the Phase 2b FREEDOM Trial, which now has multiple sites actively screening and enrolling patients, as well as 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. Additionally, there were expenses associated with the planning and preparation of an IND and proof-of-concept protocol for CLBS201 as a treatment for diabetic kidney disease. General and administrative expenses, which focus on general corporate-related activities, were $3 million for the three months ended March 31, 2021, compared to $2.6 million for the three months ended March 31, 2020, representing an increase of 18% due to a performance stock award, one-off consulting expenses, and a substantial increase in directors and officers liability insurance premiums, as experienced throughout our industry. Overall, net losses were $8.1 million and $4 million for the years ended March 31, 2021, and 2020, respectively. Turning now to our balance sheet and cash flow, in January 2021, we announced that we had closed on a $25 million capital raise through the sale of the company's common stock 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 posited a $65 million capital raise through the sale of its common stock to several institutional and accredited investors in two registered direct offerings, also priced at the market under NASDAQ rules. In recent months, many small biopharma companies are experiencing an increasingly difficult time as they compete for capital. However, despite these market hurdles, we have successfully and opportunistically secured $90 million in new capital gross proceeds year to date in 2021, providing us with the financial security to focus on the execution of our business plan. As of March 31, 2021, Caladrius had cash, cash equivalents, and marketable securities of approximately $111.5 million. Based on existing programs and projections, we remain confident that the current cash balances will fund its operations for the next several years, notably through study completion for the Phase 2b FREEDOM Trial of CLBS16, through the 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, let me turn the call back to Dave.

David Mazzo, President and CEO

Sorry, I was on mute. Everyone, I apologize for the delay. Thank you, James. As I do on all of our results calls, I’ll begin by providing a high-level summary of what we are doing at Caladrius and why we believe our development programs remain a relevant and attractive investment opportunity today. Caladrius is 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 strong signs of effectiveness and durability with a pristine safety profile, unlike many allergenic therapies, and present the possibility of substantial pharmacoeconomic benefits. Most importantly, we remain committed to the development of personalized curative cell therapy products that will restore human health and improve quality of life with a single administration of the therapy rather than one that requires frequent re-administration. Our CD34 positive 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 the 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 positive cell technology, including, but not limited to, coronary microvascular dysfunction (CMD), critical limb ischemia (CLI), Buerger disease, diabetic kidney disease (DKD), and no-option refractory disabling angina (NORDA). I will now speak to the specifics of each of our development programs, kicking off with CLB16, our promising CD34 positive cell therapy product for the treatment of coronary microvascular dysfunction. Like all of our CD34 positive cell therapy product candidates, CLB16 uses a proprietary and patented formulation of CD34 positive cells specifically designed for an injection at or near the site of ischemic insult, which in the case of CMD is an infusion into the coronary artery. CLB16 was the subject of the completed ESCaPE-CMD trial, a 20 patient proof of concept clinical trial evaluating CLBS16 as a treatment for coronary microvascular dysfunction, a disease involving damage to the microcirculation in the heart, with no accompanying discernible large vessel blockages. CMD patients have an equally poor prognosis related to major adverse cardiac events and death, as do patients who have identifiable large vessel blockages. As a result of the lack of discernible large vessel disease, CMD sufferers are often underdiagnosed, misdiagnosed, or untreated. It's especially important to know that CMD is even more prevalent in females than in males, making this a more important emerging women's health issue. We remain committed to raising awareness of this growing women's health crisis and finding an effective treatment for it. CLB16 is designed to address and reverse the underlying pathology of CMD by employing the CD34 positive cells' innate ability to increase microcirculation and thereby hopefully improve long-term outcomes and quality of life in those living with CMD. In May 2020, the company announced the full data results from the ESCaPE-CMD trial at the Society for Cardiovascular Angiography and Interventions (SCAI) 2020 Scientific Sessions virtual conference, showing a highly statistically significant improvement in coronary flow reserve correlating with symptom relief for patients with CMD after a single intra-coronary injection of CLB16. Consequently, the company recently initiated a rigorous Phase 2b clinical trial known as the FREEDOM trial, which is currently recruiting and treating patients at multiple sites in the United States. The study is targeted to complete enrollment by the end of 2021, with top-line data anticipated for the third quarter of 2022, barring any impact on enrollment due to COVID-19 or other unforeseen challenges. The 105 patient double-blind randomized placebo-controlled Phase 2b clinical trial will evaluate the efficacy and safety of delivering autologous CD34 positive cells in subjects with CMD and without obstructive coronary arterial disease. In support of the FREEDOM trial, the company is engaging with the American Heart Association for a variety of initiatives designed to raise awareness of CMD. Turning now to CLBS12 or HONEDRA in Japan, our product candidate for the treatment of critical limb ischemia and Buerger’s disease in Japan. As we have described previously, CLI is characterized by severe obstruction of the arteries that significantly reduces blood flow to the lower extremities, principally the feet and legs, and represents the end stage of peripheral arterial disease. CLI patients often experience severe wrist pain, limited mobility, non-healing skin ulcers, and if not successfully treated, eventual amputation. HONEDRA was awarded a SAKIGAKE designation from the Japanese regulatory authorities for the treatment of CLI and Buerger’s disease. The SAKIGAKE designation is akin to an orphan designation in the United States and affords the recipient prioritized regulatory consultation and 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 PMDA. Note that conditional approval of SAKIGAKE products only requires the demonstration of a trend toward therapeutic effects, along with acceptable safety. The ongoing HONEDRA study in Japan comprises subjects divided into two cohorts totaling 37 patients, a number agreed upon with the Japanese regulatory authorities. Specifically, there is a 30 subject group with traditional arteriosclerotic no-option CLI, and the seven subject group with Buerger’s disease, a subcategory of CLI that is orphaned in size, and is often associated with heavy tobacco or nicotine product use. These subjects who are allocated to treatment are dosed with HONEDRA in a single treatment involving a series of intramuscular injections, in addition to receiving standard care pharmacotherapy. Subjects randomized to the control arm only receive standard care with drugs approved in Japan, including antiplatelet agents, anticoagulants, and invasive dilators, the choice of which is made by the investigators according to the protocol. The study allows for the rescue of subjects in the control arm by indicating the crossover to treatment if their disease is deemed to be progressing. The primary objective of this study is to show that HONEDRA can prevent the serious consequences of CLI and Buerger’s disease by reverting the patients to a CLI-free condition through improved blood flow in the afflicted limb. CLI-free status is defined as two consecutive monthly visits in which rest pain is absent, and previous non-healing skin ulcers are completely healed as determined by an independent adjudication committee. As previously reported, and as you can review in our corporate presentation on our corporate website, the Buerger’s disease cohort is completely enrolled, and the results from that group are very positive and consistent with a beneficial therapeutic effect and safety profile, as reported by previously published clinical trials in Japan and the United States. For patients with Buerger’s disease, amputation and even death are likely outcomes, and no available pharmacotherapies prevent amputation. However, subjects in the Buerger’s disease cohort in our study have shown a very strong signal with four out of seven subjects meeting the primary CLI-free endpoint, which is an outstandingly positive result for these patients who normally see continued progression, leading to amputation. Of course, we are very encouraged by the study results to date and believe that they suggest a positive outcome for the overall trial, recognizing, however, that the final conclusions of the trial will be dependent on all full data results from all subjects. In addition, the company was pleased to report that the FDA recently granted orphan designation to CLBS12 as a treatment for Buerger’s disease in the United States. While other studies' enrollment continues to be significantly slowed by the COVID-19 pandemic and the repeated state of emergency declarations in Japan, we remain encouraged by the current patient pre-screening pipeline as we work diligently toward enrollment completion, noting, however, that the exact date of completing enrollment is impossible to predict due to the continuing impact of COVID-19 on clinical studies like ours in Japan. Regarding commercialization, our strategy remains to license or partner HONEDRA in Japan, and to that end, our conversations continue with prospective partners as we seek to consummate a deal in concert with the completion of the study, if not before. Moving on to CLB201 for the treatment of diabetic kidney disease. Our most recently proposed development program, CLBS201, is designed to assess the safety and efficacy of CD34 positive cell therapy as a treatment for patients with diabetes who are also suffering from chronic kidney disease but not yet requiring dialysis. We refer to these patients as having diabetic kidney disease or DKD. Based on a wealth of published preclinical and early clinical data, it appears that the innate ability of CD34 positive cells to promote the growth of new microvasculature could be a means to attenuate the progression of DKD or even reverse its course. We are currently engaging the FDA in discussions designed to finalize an initial development program for CLBS201 and continue planning to initiate a Phase 2 proof-of-concept study in the third quarter of this year. Lastly, OLOGOTM for the treatment of no-option refractory disabling angina. As disclosed on previous quarterly calls, Caladrius acquired the rights to data and regulatory filings for a CD34 positive cell therapy program for NORDA patients that had been advanced to Phase 3 by a previous sponsor. Based on the clinical evidence from the completed studies that a single administration of OLOGOTM reduces mortality, improves angina, and increases exercise capacity in patients with otherwise untreatable angina, this product received Regenerative Medicine Advanced Therapy (RMAT) designation from the FDA. Since then, we have been in discussions with the FDA regarding the size and scope of the Phase 2 trial of appropriate and practical size, which in combination with previously filed Phase 1, 2, and 3 data could be considered for the registration of OLOGOTM. Currently, the FDA maintains that a 400 patient study, including a 50 patient standard of care arm and a 150 patient placebo arm, is their requirement. Epidemiological data indicates that the available NORDA population in the United States is often small. In addition, input from KOLs has convinced us that enrollment in the study for NORDA patients, where there is a large chance of being randomized to standard of care or placebo, will seriously deter subject enthusiasm for participation and will also have a negative impact on enrollment. Consequently, our position vis-à-vis the FDA remains that a Phase 3 study requiring a large number of patients with a combined placebo and standard of care arm will take an unacceptably long time to enroll if enrollment competition would be possible at all. We will only initiate a Phase 3 study for OLOGOTM if we can reach agreement with the FDA on a study design that is practical and affordable. In closing, we are very pleased with the corporate and development achievements made during the first quarter of 2021, further attesting to our ability to successfully manage the current global volatile business environment. We expect to maintain this momentum in the coming quarters as we focus on execution to achieve our project development milestones. With that overview, operator, we are now ready to take questions.

Operator, Operator

Our first question is from Joe Pantginis with H.C. Wainwright.

Unidentified Analyst, Analyst

Hi. This is Sara Nick Sarnat calling in for Joe. Thank you so much for taking my question. My question is really focused on how you are speaking to the COVID impact on the FREEDOM trial? I know you touched on this a little bit, but how are you viewing site reopenings and the impact of enrolling patients into FREEDOM currently, and maybe looking out to the rest of the year?

David Mazzo, President and CEO

Well, thanks for the question. And let me be clear about a couple of things here. So far, we've had minimal impact on the FREEDOM trial, which is the Phase 2b for CLBS16 due to COVID. We have opened a number of sites and are on track according to projection with site openings, and we have a number of other sites in the process. Identifying and opening sites does not seem to have been impacted by the pandemic, and early indications are that patient recruitment is not being impacted by the pandemic. We will see as more sites get opened, and enrollment really begins to pick up. But for now, COVID-19 does not seem to be a major challenge for recruitment in the FREEDOM trial.

Unidentified Analyst, Analyst

Thank you…

David Mazzo, President and CEO

Contrarily, for HONEDRA in Japan, COVID-19 has a major impact on enrollment. We have been stalled, enrolling patients for most of 2020 and early 2021 due to the state of emergencies that have been declared in Japan due to the pandemic. We're still hopeful, though, that with only a few patients left to enroll, that once things are back to normal there, we'll be able to complete the trial in due course.

Unidentified Analyst, Analyst

All right. Thank you. Thank you for the clarification.

David Mazzo, President and CEO

Sure.

Operator, Operator

Your next question is from [indiscernible] with Brookline.

Unidentified Analyst, Analyst

Hi, I'm [indiscernible] on behalf of Kumar from Brookline. Appreciate it. I just had a question in terms of patient recruitment for the Phase 2b FREEDOM trial for CLBS16. Since we know that gender and age impact CMD and other cardiac outcomes, I was wondering if you're accounting for that during patient enrollment?

David Mazzo, President and CEO

Yes, we are. Just to be clear, the typical CMD population is characterized by patients who tend to be younger than 65, the majority of whom are female, generally somewhere between a half to two-thirds are female. Most of those females do not have any particular history of heart disease. They are scattered around the country, and based upon the available data, we've calculated there are somewhere between a half million and one and a half million patients who would be eligible to be treated by CLBS16 because of underlying coronary microvascular dysfunction, and we've taken that into account in terms of the recruitment and site projections.

Unidentified Analyst, Analyst

Thank you. Sounds great. Thanks for taking my question.

David Mazzo, President and CEO

Certainly.

Operator, Operator

Your next question is from Pete Enderlin with MAZ Partners.

Pete Enderlin, Analyst

Hi, thank you. Hi, Dave, James, and John. First question, I'll try to sort of combine two questions into one to abide by your protocol. $112 million, and the statement is, it's enough for several years. Now, I remember from English class that 'several' typically means three or more. You burned $8 million in the last quarter just reported. If you annualize that, that would be basically about three years worth. Excluding all that, is that the way you see the burn rate going? How would you see it progressing over the next two years, let's say? I know it will be somewhat volatile, depending on when things start and the pace of enrollment and all, but are we looking at roughly $8 million a quarter on average going forward?

David Mazzo, President and CEO

Well, first of all, thanks for your question, Pete. The reason that we used a qualitative term like several rather than being specific is that all we can do is accurately predict the cost associated with the things that we are currently doing. The results of those things will dictate whether there is a following step and what that following step might be. Right now, if we take the total assumed costs of the FREEDOM trial, of completing the HONEDRA trial in Japan, and of initiating and completing the CLBS201 proof-of-concept trial, we cannot predict any further clinical studies. Those costs alone take us through the end of next year. We have quite a bit of capital leftover, and if there were no studies going on, that capital would last us a lot more than several years. However, we're a development company, and the goal is to develop products. That capital will be spent, but we cannot say what the rate of spending will be right now because we don't know what the next studies look like. Given what we have right now, we clearly have three-plus years' worth of burn. It will not be linearly spent. We will probably continue at or around $8 million a quarter for the next few quarters as we ramp up and complete enrollment in FREEDOM and then sequentially ramp up and complete enrollment in the FREEDOM 201 proof-of-concept trial.

Pete Enderlin, Analyst

Okay, that helps a lot. And related to that in the press release, you’ve stated that you have capital for additional pipeline expansion opportunities. Can you elaborate on that? Are we talking about things basically close to your ischemic technology, CD34 plus, or would it be a little further afield? How far afield do you think you can go with your technology base?

David Mazzo, President and CEO

Well, there are a bunch of questions, but I'll do my best to answer, Pete. The fact is that we're fortunate that my personal background, as well as the background of most of the people on my team, includes experience and expertise working across multiple therapeutic areas. Of course, we've been focused on cardiovascular disease, but we are venturing now into renal disease as well with 201 because that’s where the angiogenic properties of CD34 seem to be most obviously placed. From a company perspective, we could easily manage programs in almost any other therapeutic category, and with almost any other modality of therapy, such as small molecules, therapeutic proteins, antibodies, etc. Right now, our pipeline expansion explorations are opportunistic; we are looking at everything that would meet the criteria of being affordable, having a high probability of clinical success, and addressing a highly unmet medical need in a competitive way. We give preference to things closer to the therapeutic area in which we're currently working, but that doesn't mean that we'll discount other technologies because we can manage them from the perspective of capacity and expertise.

Pete Enderlin, Analyst

Thanks, I'll get back in the queue.

David Mazzo, President and CEO

Thank you, Pete.

Operator, Operator

We do have an additional question from Joe Pantginis with H.C. Wainwright.

Unidentified Analyst, Analyst

Hi again. It's Sara on for Joe. I just had one more follow-up question. I know you had touched upon your discussions with the FDA regarding NORDA. Are there any other key outstanding discussion points aside from the patient population size for enrollment that you guys have yet to agree on in regard to advancement to a pivotal study?

David Mazzo, President and CEO

No. I mean, Sara, that's the frustrating situation. We have, I would say, tacit agreement with FDA, and certainly a strong database that indicates that NORDA is an orphan in size. It doesn't have an orphan designation, but there are somewhere between 30,000 and 100,000 available patients in the United States. For something of that size, conducting a 400 patient clinical trial is enormous. When you make that study design essentially give the patients a 50% chance of being randomized to a non-treatment arm, these are patients who are having seven plus angina episodes a day. Given that they are no option patients, they are not going to tolerate being randomized to standard care, which is nothing, or to placebo, they will drop out. So there is no point in us initiating a trial which, as suggested by the FDA, would cost over $70 million but have a very low probability of ever complete enrollment. We are working with them at CBER to see if we can reach an agreement on a study size that is much smaller and a design that is more attractive to get people to join the trial. If we can't get there for whatever reason, it would simply be bad business to run that trial. We're still in discussion; we haven't given up. But it's been slow going, mostly because the FDA has been preoccupied with lots of other things this last year. We'll keep at it, and hopefully one day we'll reach an agreement on the pivotal trial design that we can actually execute.

Unidentified Analyst, Analyst

All right. Thank you. Good luck.

David Mazzo, President and CEO

Thanks a lot.

Operator, Operator

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

David Mazzo, President and CEO

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, and we ask that you stay well and have a good evening. Good-bye.