Aethlon Medical, Inc. (AEMD) Q1 2027 Earnings Report, Transcript and Summary

Good day, and welcome to the Aethlon Medical First Quarter Fiscal 2027 Earnings and Corporate Update Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jim Frakes, CEO and CFO of Aethlon Medical. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Aethlon Medical's First Fiscal Quarter ended June 30, 2026, Earnings Conference Call. My name is Jim Frakes, and I'm the Chief Executive Officer and Chief Financial Officer of Aethlon Medical. At 4:15 p.m. Eastern Time today, Aethlon Medical released financial results for its first fiscal quarter ended June 30, 2026. If you have not seen or received Aethlon Medical's earnings release, please visit the Investors page at www.aethlonmedical.com to view it. Following this introduction and the reading of the company's forward-looking statement disclaimer, Dr. Steven LaRosa, our Chief Medical Officer, and I will provide an overview of Aethlon's strategy and recent developments. I will then make some brief remarks on Aethlon's financials. We will then open up the call for the Q&A session. Before we start the business portion of the call, please note that the news release today and this call contain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934 as amended. The company cautions you that any statement that is not a statement of historical fact is a forward-looking statement. These statements are based on expectations and assumptions as of the date of this conference call. Such forward-looking statements are subject to significant risks and uncertainties, and actual results may differ materially from the results anticipated in the forward-looking statements. Factors that could cause results to differ materially from those anticipated in forward-looking statements can be found under the caption Risk Factors in the company's annual report on Form 10-K for the fiscal year ended March 31, 2026, the company's most recent quarterly report on Form 10-Q and in the company's other filings with the Securities and Exchange Commission. Except as may be required by law, the company does not intend nor does it undertake any duty to update this information to reflect future events or circumstances. I'd like to begin by highlighting progress during the first fiscal quarter ended June 30 as we continue to execute against our strategy of advancing the Hemopurifier platform while maintaining disciplined cost control. During the period, we achieved important clinical research and intellectual property milestones. We continue to advance our oncology program while also expanding our evaluation of Hemopurifier applications into additional disease areas through preclinical research. As Steve will discuss, we are now in the final cohort of our oncology trial. We continue to generate encouraging preliminary biomarker observations, and we are expanding our research into potential applications beyond oncology. Taken together, we believe these achievements demonstrate continued execution against our key priorities of clinical development, platform expansion, intellectual property growth and disciplined resource management. And now I will turn the call over to Dr. LaRosa, who will cover updates on the Australian oncology trial and then on our R&D efforts. Steve?

Thank you, Jim. Before discussing our clinical observations, I want to emphasize that the Hemopurifier remains an investigational device. Any biomarker observations discussed today are preliminary and are based on a limited number of participants and should not be interpreted as evidence of safety or effectiveness or clinical benefit. The first participants in our third and final cohort of our Australian oncology trial have been enrolled and treated. This participant received 3 4-hour Hemopurifier treatments over the course of a 1-week period. The participant is now 2 months into the follow-up period and has not experienced any device-related serious adverse events or dose-limiting toxicity. We need to only treat 2 additional participants to complete the trial, provided that none of the future participants develop any of these safety events. The 3 investigative sites remain engaged and are actively prescreening potential participants. Our goal remains to complete all HP treatments and the 8-week follow-up central lab measurement period by the end of this year, 2026. The next steps would be analysis of the data, clinical study report completion and preregistration clinical trial discussion with regulatory authorities. Central lab measurements of extracellular vesicles, microRNAs and lymphocyte subsets have been completed by the University of Sydney on the samples from Cohort 2 of the clinical trial, where participants received 2 4-hour Hemopurifier treatments over the course of 1 week. A review of the raw data has taken place. As stated in the press release on July 13, 2026, we continue to see decreases in total extracellular vesicle counts, including tumor-derived extracellular vesicles and microRNAs linked to cancer progression following the HP treatment. Additionally, we observed increases in lymphocyte subsets as well as positive directional changes in laboratory parameter ratios that have been associated with responses to immunotherapy. The changes appeared to be more consistent across participants and persisted for longer in Cohort 2 compared with Cohort 1, where participants received a single Hemopurifier treatment. Independent formal statistical analyses, including a dose response analysis will be performed upon completion of the trial. Let segue now to preclinical R&D activities. Our prior work in Long COVID was published in the peer-reviewed journal International Journal of Molecular Sciences on the 25th of June 2026. In this publication, we present data demonstrating that both small and large EV extracellular vesicles in Long COVID patient plasma samples bind to the proprietary GNA affinity resin within our Aethlon Hemopurifier. Furthermore, following exposure of patient plasma to the resin, a decrease in microRNAs associated with immune dysregulation and inflammation was observed. This data, coupled with the data from an outside group demonstrating the presence of the COVID spike protein and proteins associated with inflammation and abnormal clotting within the EVs of long COVID patients raises the possibility of EV removal as a potential experimental therapeutic strategy in Long COVID. We plan discussions with academic institutions as well as regulatory agencies to see if there's a clinical development path forward or if additional preclinical work will be necessary. Finally, our lab continues to perform experiments exploring the ability of the Hemopurifier technology to bind to remove EVs implicated in other diseases such as lupus and heart disease in those with chronic kidney disease. With that, I'll turn the call back over to Jim for the financial discussion and the questions.

Thanks, Steve, and good afternoon again, everyone. Let me turn briefly to our financial position and our focus on disciplined spending. At June 30, 2026, we had approximately $4.9 million in cash and cash equivalents, providing resources to support ongoing clinical and research activities. Subsequent to quarter end, we further strengthened our balance sheet by raising approximately $4 million in gross proceeds through a public offering of common stock. Based on current plans, we believe our cash resources are sufficient to fund operations for at least the next 12 months. Our consolidated operating expenses for the quarter decreased 11.9% to approximately $1.6 million compared with $1.8 million in the prior year quarter. That decrease was driven by lower professional fees and reduced general and administrative and preclinical research costs, and our operating loss declined accordingly. You will find additional detail on these expense changes in our 10-Q, which breaks down specific drivers by category. We included these earnings results and related commentary in our press release issued this afternoon. The release also included the balance sheet for June 30, 2026, and March 31, 2026, and the consolidated statements of operations for the fiscal quarters ended June 30, 2026 and 2025. We will file our quarterly report on Form 10-Q following this call. Our next earnings call for the fiscal second quarter ending September 30, 2026, will coincide with the filing of our quarterly report on Form 10-Q in November 2026. And now we would be happy to answer any questions that you may have. Operator, please open the call for questions.

The first question today comes from Marla Marin with Zacks.

So I want to go back to something, Steve, that you said in your prepared remarks. I want to make sure that I understood. So the 3 different cohorts of the Australian study, increased dosage, increase treatments with the Hemopurifier. And I think what you said was currently, even though it's early in terms of the full data set, you're thinking that Phase II participants exhibit a longer benefit than those who participated in Phase I. Is that the right way to think about what your comments were?

Right. So Marla, in Cohort 1, the participants received only a single 4-hour HP treatment. In Cohort 2, they received 4-hour treatment. So Cohort 1 would be like on Friday, 4 hours, whereas Cohort 2 would be Monday and Friday for 4 hours. All cohorts were then had samples done before and after the Hemopurifier treatments and then weekly in the follow-up period for 4 weeks, so week 1, 2, 3 and 4 and 8. And we looked at EVs, T cells as well as microRNAs over the course of all those time points. When you look at the raw data, and again, this is based purely on observations of the raw data. This is not looking at change from baseline percent change from baseline or a formal statistical analysis. If you look purely at the raw data. Typically, in Cohort 1, we were seeing changes in 2 out of 3 participants, where in Cohort 2, we tended to see it more consistent across the 3 participants. And then if you look at the positive directional change in those parameters, where in Cohort 1, you can see those changes go out, say, 2, 3 weeks. We're seeing more times in Cohort 2 where we're seeing the positive directional change go out as far as the 8-week time period. So at least what I can say is it looks like the biologic signal is more consistent across 3 participants in Cohort 2. And then it seems the positive directional change seems to last longer. So really Cohort 3 will tell the tale if we continue to see that kind of increased magnitude and change as well as duration of change that will tell us that what we've seen to date is real. But encouraged, nonetheless, by at least the signal in the raw data that we're seeing.

Got it. Got it. And you can't really comment yet on Cohort 3 because it's so early, correct?

Yes. We don't have any -- the first patient is, like I said, just finished their 2-month or their 8-week follow-up period. So we don't have any data back yet on that patient in terms of the T cell microRNA.

But let's say that the trajectory continues along the same lines as you just described and Cohort 3 participants show an even longer duration of improvement and more consistent across the participants. Would there be a reason to think that you should -- when you -- if and when you move forward and design the next set of research parameters, would there make any sense to design a cohort that gets 4 treatments weekly? Or do you think that treatment?

No, I think it's an excellent question. The thing you start running up against is tolerability and feasibility. So what we thought based on clinical medicine, and then we're drawing on the experience in hemodialysis mostly that anything more than 4 hours of treatment 3 times a week, say, a Monday, Wednesday, Friday schedule just will not be tolerable to patients. That's about as much as people will tolerate. And so no, we're not considering going to 4 treatments in a week.

Okay. And that is not a function of the way the Hemopurifier treatment is currently administered that could possibly change if you do move to a simplified treatment -- streamlined treatment system. Is that correct? It's not -- it has nothing to do with the way you're treating people. It really is just having that treatment in and of itself probably cannot be tolerated more than 3 times a week.

Yes. Well tolerated both in terms of logistics and with patients themselves. I mean, you talk about 4 hours, but there's also time in terms of hooking the patient up, priming the system, taking them off. So it ends up being a complete day. It's not just 4 hours. So yes, anything more than 3 days. And again, and if we see in Cohort 3, what we're seeing in Cohort 2, where we're seeing the directional changes we want, hopefully, of even greater magnitude with 3 treatment, then we would take that 3 treatment in a week strategy forward for an efficacy trial. But we're kind of getting a little bit of ahead of ourselves. We have to see the data first.

Okay. One last question. So you mentioned also that there are many other conditions and diseases where EVs are indicated. So you've been really good in the past. And Jim, I think that this is more of a question for you probably. You've been very good in the past at maintaining certain -- maintaining research on the Hemopurifier without incurring significant costs, not actual clinical testing, but publishing papers speaking at medical conventions and other ways of trying to test the hypothesis that the Hemopurifier can be beneficial across the spectrum of different indications. Are there other opportunities, do you think, for doing more and broader work about the Hemopurifier in an extremely cost-effective way?

Well, we continue to do what we're doing, which is exactly as you described, Marla, using our in-house scientists, our in-house equipment, buying reagents and things, but that's not expensive and trying to get samples either given to us or inexpensively purchased. And we can continue to do that, continue to write articles. But to really move forward, eventually, we would need to either bring in more capital to finance a clinical trial in one of these -- one or more of these diseases or partner up with somebody, get a government grant or 2, there are options out there. And -- but I think we would need support in one of those ways to actually conduct a clinical trial in one of these things. So we will continue to do what we're doing and try to find the right opportunities to move forward.

Okay. That makes sense. But is it also fair to say that what you're doing, even though it's clear that you need to proceed to more structured clinical research, is it fair to think that what you are doing gives you much more optionality in terms of finding a potential partner for certain or a variety of indications?

It's possible. We are talking to people. If another option is in future discussions with the FDA, if they chose to broaden or add to our breakthrough device designation in viruses. Right now, it's just for life-threatening viruses, which Long COVID is not considered a life-threatening virus. But if they were to expand it to include that, then we could do potential emergency use one-off treatments, actually get some human data. But again, that's just a possibility. I'm not promising anything, but those options could happen.

This concludes our question-and-answer session. I would like to turn the conference back over to Jim Frakes for any closing remarks.

Thank you. In closing, I'd like to recap some items to keep on your radar screens. First, we are now in the final cohort of our Australian oncology trial with the goal of completing treatment and related follow-up by the end of calendar 2026 or early 2027. Second, the preliminary Cohort 2 biomarker observations provide additional data for us to analyze as we complete the trial and move toward our next regulatory discussions. And third, as just discussed, we continue to explore the broader potential of the Hemopurifier platform, including in Long COVID and in other diseases in which extracellular vesicles may play a role. We remain focused on advancing the Hemopurifier platform through disciplined clinical execution, rigorous analysis of our data and careful capital management. We appreciate your continued interest and support. Thank you for attending our call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.