Welcome to Talphera’s Second Quarter 2024 Financial Results Conference Call. This call is being webcasted live via the events page of the Investors section of Talphera's website at www.talphera.com. This call is the property of Talphera and any recording, reproduction, or transmission of this call without the express written consent of Talphera is prohibited. As a reminder, this webcast is being recorded. You may listen to a replay of this webcast by going to the investors section of Talphera's website. I would now like to turn the call over to Raffi Asadorian, Talphera's Chief Financial Officer.

Thank you for joining us on the call today. This afternoon, we announced our second quarter 2024 financial results and associated business updates in a press release. This press release can be found within the Investors section of our website. With me today are Vince Angotti, our Chief Executive Officer, and Dr. Pam Palmer, Talphera’s Founder and Chief Medical Officer. Before we begin, I want to remind listeners that during this call, we will make forward-looking statements within the meaning of the Federal Securities Laws. These forward-looking statements involve risks and uncertainties regarding the operations and future results of Talphera. Please refer to our press release in addition to the company's periodic, current, and annual reports filed with the Securities and Exchange Commission for a discussion of the risks associated with such forward-looking statements. These documents can be found on our website within the Investors section. I will now hand the call over to Vince.

Thank you, Raffi. Good afternoon, and thank you for joining us on the call. Before jumping into the updates for the quarter, I'd like to congratulate Dr. Palmer on her decision to retire this coming October. Pam was the Co-Founder and Chief Medical Officer of the company, as well as a dedicated leader for nearly two decades. Dr. Palmer is a renowned physician, pioneer, and longtime entrepreneur with a mission to improve care for patients in the medically supervised setting. Pam has made her mark in the world of pharmaceuticals and healthcare and mentored countless people along the way who will continue her legacy. While she may be retiring, Dr. Palmer will continue to advise Talphera and support Dr. Aslam until the NEPHRO study has been completed and the potential FDA approval of Niyad is received. So please join me in wishing her all the best in her retirement. I'm happy to report that we now have multiple site screening patients in the study. We had a busy quarter continuing to work through the administrative processes encountered at the academic institutions where the NEPHRO study will be conducted, and we have finalized clinical trial agreement terms now with eight large academic institutions, including our potentially highest enrolling sites. The final four site initiation visits of these initial eight institutions are scheduled to be completed this month. While each institution has had their own unique upfront administrative activities, once enrolling, we do not expect additional delays as the protocol dictates how the study is conducted. Niyad’s breakthrough designation has continued to prove valuable in our interactions with the FDA. Our ongoing real-time communications with the FDA regarding the study have been efficient and we expect this to continue as we progress the study over the coming months. For example, we recently requested and promptly received the FDA's approval to increase the number of NEPHRO study sites to a maximum of 14. We sought this approval to: one, expedite study completion by increasing the number of high-volume CRRT institutions; and, two, maintain access to a broad patient population to inform healthcare providers on the use of Niyad if approved. Dr. Aslam's nephrology expertise and established professional network has already proven invaluable in identifying this expanded base of potential clinical sites in support of the study. As communicated on the last call, Dr. Aslam joined Talphera as our new Chief Development Officer on May 20th. Dr. Aslam has over 20 years of clinical research experience specializing in nephrology. Dr. Aslam joined us from Biocuris Pharmaceuticals where he served as Vice President, clinical development, nephrology, and rare diseases. He's held development roles at Angion, Fresenius and Amgen and was an assistant professor at Georgetown University hospital for 12 years, focused on clinical care of acute and chronic kidney disease, hypertension, renal transplantation, and other nephrological diseases. Dr. Aslam's extensive experience across industry and academia as a renal expert, particularly in the design and conduct of both drug and device clinical trials is impressive and a true asset to our organization. Immediately upon joining Talphera, Dr. Aslam immersed himself in establishing and fostering Talphera’s relationships with our selected NEPHRO institutions and research personnel, including personally conducting site initiation activities and training of the institutional teams. Importantly, the balance of our eight sites, including our potentially largest enrolling sites, should be enrollment-ready in the coming weeks. And while we're not prepared to provide guidance on expected study completion and PMA filing timelines, our engagement with the principal investigators remains high. And we believe the study will enroll efficiently at the sites. Recall that the primary endpoint of activated clotting time is measured over 24 hours, with the patient completing the study after activated clotting times assessed at 72 hours, which is also a secondary endpoint. These relatively short study time points, combined with a patient study population of only 166 patients and now expansion to 14 study sites should support efficient completion of the study once fully underway. We expect to provide an updated timeline for study completion, PMA filing, and anticipated PMA approval on our next quarterly call. While the clinical study is ongoing, we've been working on pre-launch commercial activities in preparation for the commercial launch of Niyad, again, if approved. This has included further market research with a group of nephrologists, intensivists, and pharmacy directors. The participants in our research group highlighted Nafamostat’s strong safety profile over the last 30 plus years, particularly for patients with liver impairment or contraindications to heparin and citrate. Specifically, the participants commented on Nafamostat’s safety attributes, such as its ultra-short half-life, allowing it to be rapidly cleared and potentially avoiding unwanted complications seen with longer circulating agents such as heparin and citrate. In addition, our research continues to support the potential commercial uptake of Niyad at a competitive price as compared to the total cost of citrate anticoagulation, which includes the cost of calcium and the required monitoring of calcium levels. These results reinforce our belief that the peak sales estimate for Niyad in the hospital setting approximates $100 million, while a potential opportunity in outpatient dialysis settings could add at least another $100 million of peak sales. We remain focused on the hospital opportunity, as this is where our current NEPHRO CRRT study is being conducted. In addition to the progressing clinical study and commercial preparation, we continue to make positive advancements in our manufacturing and related CMC efforts for Niyad. All active ingredient and finished drug production to date have met our specifications or collecting extended stability data on our GMP-grade product to support shelf life for our potential commercial product. Our manufacturing partners have done an excellent job achieving timelines, specifications, and the cost expectations we've set for them. And before handing the call over to Raffi, it's important to know that our largest investor, Nantahala, remains supportive and with continued progress in the clinical study, committed to ensuring Talphera’s adequate funding to reach potential PMA approval of Niyad. This continued support is highly appreciated, and as a result of the extension of the original timeline, both parties agree on the need to amend the timing of the planned second close of our financing, which was originally expected to occur by September 30th of this year.

Thanks, Vince. We continue to control operating expenses while prioritizing investments that will facilitate the timely filing of our Niyad PMA. This emphasis on expense containment has helped us close the second quarter with $14 million in cash and investments. Our cash operating expenses or combined R&D and SG&A expenses excluding non-cash stock-based compensation of $0.2 million in the second quarter, totaled $4 million, compared to $3.8 million last year. While we incurred certain expenses related to the NEPHRO CRRT study in the second quarter, we expect these costs will increase for the remaining quarters of the year as study enrollment accelerates. The estimated range of cash operating expenses for the year has been reduced to $19 million to $21 million from the previous range of $21 million to $23 million accordingly. As mentioned earlier, we plan on amending the date of the planned second closing from our January 2024 financing that was contingent upon achieving the pivotal trial milestone by September 30 of this year. We expect this amendment to be completed before filing our next quarter 10-Q.

Thanks, Raffi. I'd now like to open the lineup for any questions you might have. Liwei?

Thank you very much. We will now start the question-and-answer session. Our first question comes from Ed Arce of H.C. Wainwright. Your line is now open.

Hi, thanks for taking my questions and congrats on the progress. I have a couple of questions, but first, I just wanted to add my congratulations to Pam. I've been covering the company for 12 years now, worked with Pam since the very beginning, and wanted to offer my hearty congratulations to a very well-deserved retirement.

Thanks, Ed.

You're very welcome. So, I know it's coming up in the next call for the timeline update, but I wanted to get a sense for where we are now, if possible, in terms of the number of patients that have completed the study or perhaps and/or patients that have been screened to date to go into the study.

I can help answer that. This is Vince. So as it relates to screening, the screening has just begun within the last several weeks and primarily done at what I'll call our lower enrollment potential sites. These sites were selected because of the quality of the care at their particular institutions. And in particular, you might say why would you have a lower potential enrolling site vault? The quality of the PI at these sites and the diversity of patients at these sites, which makes them by nature lower enrolling potential. Dr. Palmer, maybe you can comment on the characteristics of the patients at these particular sites?

They just happened to start operating more quickly. However, we need to evaluate Niyad's efficacy and safety across a range of patients, including those in different ICUs, surgical ICUs, medical ICUs, patients with liver failure, and younger versus older adults. These two sites were chosen for this reason, as they began the process faster than others, but we do not anticipate a large patient volume from them. Even though they have begun pre-screening and screening, the more recently initiated screening site is regarded as a significantly stronger contributor.

Yes, I think importantly to your point on that, while no one has completed the study, the third site that Dr. Palmer mentioned that just came up to become enrollment-ready and screening over the course of, I think it's the last week and a half to two weeks, the first day after started screening patients. So they immediately got on to the PI is highly involved and excited about the study. And the balance of our sites are all the highest enrolling sites, and they all should complete their site initiation visits this month as scheduled and be enrollment ready as they go by the close of this month. And then we'll start to really see the ramp in the cadence on the screening versus completions.

Okay, that's helpful. I have two more questions for Raffi. You mentioned in your remarks that operating costs for the remainder of the year are expected to increase, which is to be expected with an enrolling Phase 3. Can you provide any quantitative details regarding OpEx? Also, I missed what you mentioned about September and your plans for the refinancing. Thank you.

Yes, the new guidance for the year has been adjusted to cash operating expenses of $19 million to $21 million. We have about $8 million year-to-date, so we can anticipate approximately $11 million for the second half of the year within that range. This indicates a slight increase from the previous quarters, which had about $4 million in cash operating expenses for each of Q1 and Q2. If we project evenly, we should expect that remaining $11 million to be allocated to the second half of the year. Does that address your question?

Yes, that's helpful. Thanks.

Okay. And in terms of the Nantahala, the amendment, the focus here really is to work on amending that date. And we've already had some initial discussions, but amending that September 30th date to a new date that works for both parties in terms of the study completion and announcement to get to that pivotal trial milestone. I don't want to forecast what that date will be, but that's the real focus on our discussions with Nantahala to get that done as kind of the first priority.

I now make a comment about Nantahala just quickly. I just want to remind you, they're on our board. Avi Jain is representative of Nantahala and they're highly active with the management team and in the know on how the study is being conducted and the pace. So there's very good alignment.

Which has been very helpful to have with them.

Got it. Thanks for all the perspective. Appreciate it.

Sure.

Thank you so much. And your next question comes from the line of Naz Rahman and Maxim Group. Your line is now open.

Hi, thanks for taking my questions. First, I also want to extend my congratulations to Dr. Palmer on her work and her well-earned retirement. I just have a couple of questions if I may. So seeing how you mentioned that you're expanding the number of study sites to 14, what gives you confidence that you could initiate the new and additional sites in a timely manner? Do you think you can get that done by the end of 2024 considering what happened to the prior sites and how long do you think it would take to initiate the additional sites?

Yes, I think that's a really good question and a couple things, then I'm going to turn it over to Dr. Palmer. So I think it's important to understand why we did that with the FDA. And while we've got eight sites now that we feel are prepared to be enrollment ready by the close of this month, and again, I'll emphasize the highest enrolling sites, the highest potentially enrolling sites within that group occurring in August. We've always been sourcing sites to get up to the original 10. And so, of course, you've sourced many more sites than that. I think what we've learned along the way is that, the facilitation of the contracting process and administrative process in combination with the quality of the sites is the key element moving forward. So, Dr. Palmer, maybe you can comment that what we've learned today and how we're going to apply that to the next set of sites. And I do believe that we might not have them all up and rolling by the end of the year, and they likely won't affect the first half of enrollment. We certainly expect them to affect the second half of the 166 patient enrollment.

Yes, it's really an insurance policy. I mean, our site feasibility questionnaire is, we're focused around volume of CRRT patients, the type of CRRT patients at these different academic centers. And this new set of sites that we're evaluating is really going to be focusing not only on that, but on the rapid ability to contract and budget. That is just absolutely critical for them to be able to quickly get on board and give us an insurance policy so that the last half of the enrollment will be a lot faster than the first half.

All right. Just on that point, could you, I guess, give more color or context around the scale of these additional sites? Are they closer to, like, the high enrollment sites or closer to, I guess, the lower enrollment quantity sites?

No, definitely the higher, but it's not just their CRRT volume and their ability to enroll. We're also going to be selecting universities and sites that can streamline rapid paperwork processing.

We've already started our initial contact with an additional 20 sites. So we're going out pretty large to funnel it down to get to the ultimate 14 number. And again, early assessment is, they know fairly quickly and respond fairly quickly where the contracting process can be facilitated in an expedited manner or not.

Got it. Thanks for taking my questions. And once again, congrats on your retirement, Dr. Palmer.

Thank you.

Thank you so much. And our next question comes from the line of James Molloy of Alliance Global Partners. Your line is now open.

Hey guys, thank you for taking my questions. Congratulations Dr. Palmer on your retirement as well. Can you walk through a little bit, I don't know if Dr. Aslam is on the call. I'd love to get his thoughts on the changes that were instituted on coming in to sort of get this thing going, hopefully in the near term. And then I think you highlighted the eight sites being the highest enrolling sites. What does that mean since no one's been enrolled yet?

Yes, so I can comment on the last part. So it's a total of eight sites. The final four site initiation visits are occurring this month, meaning, August. So then there'll be enrollment ready. All of these final sites, they are the highest enrolling sites. So there'll be enrollment ready by the close. Our goal is by the close of August. The first initial sites that are now.

What do highest enrolling sites mean in a trial that hasn't enrolled anybody? I don't mean to pick on it. But what do you mean highest enrolling sites? You think they'll be the highest enrolling?

Yes. Well, these are the non-specialty sites. So as we mentioned earlier, the initial two of the three are specialty sites that are focused on maybe cardiothoracic surgery, maybe younger patients where the patient flow is going to be much lower and the screening process in volumes can be much lower. The balance of these sites are unlike those two original sites, where the volumes in both screening and enrollment will be higher just based off of the pure patient population that they have that fits our criteria. Also based off of the feasibility of the study parameters that they filled out in order to be included within the study. So that's according to them and our assessment of them. Beyond that, I think your question Jim was, what are some of the changes or modifications that might have been occurred since Dr. Aslam has joined the company. Dr. Palmer?

He's not on the call.

Yes, and he's not on the call.

He isn't on the call this time. However, he is familiar with many of these individuals and comes from this field. I am a pain specialist anesthesiologist, while he is a nephrologist with extensive knowledge of CRRT and many connections in this area. He is actively guiding numerous sites through the contracting and budgeting phase to transition us into the more engaging enrollment phase. Building relationships and his deep expertise in this field are crucial to this process.

Jim, did that clarify your initial inquiry? I want to ensure we address the aspect regarding the highest enrolling sites, as those have not yet begun screening. That will start at the end of this month. I just want to confirm that we're responding to that question.

Yes, I guess the highest enrolling is sort of an aspirational name for them. I get to think they will be the highest enrolling once you start enrolling.

Well, I can give you an idea. Based on the feasibility study, these particular institutions feel they have the ability at 400% times what I'll call the low enrolling sites would be?

Yes, there is site questionnaire, yes. I mean all the sites had to fill out their feasibility questionnaires at the beginning of the study and these were the ones that we asked, how many CRRT patients are you seeing per week that would fit the inclusion-exclusion criteria of the protocol. So we already knew ahead of time, again, just a little bit unlucky, that the two sites that we knew would be low-enrolling happened just to be the ones that got up and running first.

So it's not our guess, Jim. This is based on their feedback to us and the questionnaires that we sent to them when we get this process started with an institution. Does that make sense?

Yes, yes. I guess in that respect it does. I appreciate very much the clarification, gentlemen and lady.

Thank you, Jim.

Thank you so much. And there are no further questions at this time. I would like to turn it over to Vince Angotti for closing remarks.

Yes. Thank you, Liwei. And again, thanks to all of you who are joining us today and for your continued support. We remain absolutely focused on controlling our spend and driving shareholder value through the execution of the NEPHRO study and to make Niyad available to healthcare providers and their patients, again, if approved. Please feel free to contact us after the call if you have any additional questions and we look forward to sharing our future developments. We have high expectations moving forward. Thank you.

Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participation. You may now disconnect. Have a good day.