Longeveron Inc. (LGVN) Q2 2022 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Longeveron 2022 Second Quarter Earnings Call. My name is Irene and I will be coordinating this event. [Operator Instructions] I would now like to turn the conference over to our host, Elsie Yau from Stern Investor Relations. Elsie, please go ahead.

Thank you, operator. Good morning, everyone and welcome to Longeveron's second quarter 2022 call. Today we will provide a business update and discuss financial results for the second quarter of 2022. Earlier this morning, we issued a press release with these results, which can be found under the Investor section of our website at www.longeveron.com. I'm joining the call today by the following members of Longeveron's Management team; Dr. Chris Min, Interim Chief Executive Officer and Chief Medical Officer; Dr. Joshua M. Hare, Co-Founder, Chief Science Officer and Chairman; and James Clavijo, Chief Financial Officer. Dr. Min will begin with a brief corporate overview, followed by a review of update from Aging Frailty Program, including Longeveron's updated strategy in Japan, and the data from the Phase 1/2 HERA trial. Then Mr. Clavijo will review our 2022 second quarter financial results. Last, we will then open the call for Q&A. As a reminder, during this call, we will be making forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statements should be considered in conjunction with cautionary statements in our press releases and risk factors discussion in our filings with the SEC, including our Annual Report on Form 10-K, and cautionary statements made during this call. We assume no obligation to update any of these forward-looking statements or information. Now, I'd like to turn the call over to Dr. Chris Min, Interim Chief Executive Officer and Chief Medical Officer of Longeveron. Chris?

Thank you, Elsie. Good morning everyone. Welcome to Longeveron's second quarter 2020 business update and financial results call. Longeveron is a leading clinical-stage biotechnology company developing living cell therapies for chronic aging-related diseases and other specific life-threatening conditions. At Longeveron, our mission is to develop safe and effective cell-based therapies for some of the most challenging disorders associated with the aging process and other medical disorders. As a reminder, our lead investigational product is called Lomecel-B, and it's a living cell product made from specialized cells isolated from the bone marrow of young healthy donors, ages 18 to 45. These specialized cells are known in the literature as medicinal signaling cells or MSCs and are essential to our endogenous or built-in repair mechanism. MSCs are known to perform a number of complex functions, including the ability to form nutrition. They also home to sites of injury or disease and secrete bioactive factors that are immunomodulatory and regenerative. We believe that Lomecel-B has multiple mechanisms of action that may lead to an anti-inflammatory pro-vascular and regenerative responses and therefore, may have broad applications for a range of aging-related and rare diseases. In the second quarter of 2022, we continue to make progress advancing Lomecel-B for our suite of aging and rare disease indications. We have ongoing trials in Alzheimer's disease, Hypoplastic Left Heart Syndrome or HLHS, and acute respiratory distress syndrome, or ARDS. We are also advancing Lomecel-B for aging frailty. First, I'll start with a brief update on our program for Alzheimer's disease. Neuronal cell death caused by early and substantial neuro inflammation is a significant contributor to the pathogenesis of Alzheimer's disease. In preclinical models of Alzheimer's disease, MSCs like Lomecel-B have been shown to cross the blood brain barrier potentially with an anti-inflammatory effect, improving endothelial function and promoting neurogenesis, the process of new neuron formation in the brain. The Phase 1 study demonstrated the preliminary safety of Lomecel-B in patients with mild to moderate Alzheimer's disease. While it was a small study, the data also appeared to show a slower decline in mini mental state exam score, a tool used to assess cognitive function in patients who received a low dose of Lomecel-B compared to placebo. Based on that study and a growing body of preclinical and clinical evidence, we believe Lomecel-B may prevent slow or even reverse the clinical progression of Alzheimer's disease by reducing disease-related brain inflammation. And this morning, we are pleased to announce that we have achieved the 50% enrollment threshold in our ongoing Phase 2a trial of Lomecel-B for patients with mild Alzheimer's disease having enrolled 24 of our anticipated 48 patients. The Phase 2a trial is a 4-arm parallel design, randomized and placebo-controlled clinical trial of Lomecel-B in Alzheimer's patients. The primary endpoint of the trial is the safety of single and multiple infusions of Lomecel-B at two different dose levels, 25 million and 100 million cells. Secondary and exploratory endpoints included brain volume by MRI and biomarkers relevant to inflammation and endothelial vascular systems and measures of cognitive function, and we are on track to complete enrollment by the end of 2022. And next, I'll move to an update of our HLHS program. As a reminder, HLHS is a rare congenital heart defect that affects approximately 1,000 infants per year in the United States. Patients born with HLHS have an underdeveloped or absent left ventricle, impairing the hearts ability to pump blood, left untreated this condition is always fatal. Currently, standard-of-care is comprised of three reconstructive operations before the age of five, and extraordinary treatment burden for these young pediatric patients. Further, even with these surgical interventions, children with HLHS are at elevated risk of short-term mentality, delayed development and long-term complications, including organ failure. We have heard from physicians the tremendous unmet need for additional interventions beyond the current standard-of-care and hope that Lomecel-B with this pro-regenerative pro-vascular and anti-inflammatory properties when administered concurrently with surgical intervention can fill that gap by improving cardiac performance in patients with HLHS. Last year, the FDA recognized a high unmet need in HLHS as well as the promising preliminary clinical data from our open-label Phase 1 ELPIS trial granting orphan drug and rare pediatric designations to Lomecel-B for the indication. That trial, the ELPIS 1 trial results showed that interim myocardial injection of Lomecel-B was well tolerated with no major adverse cardiac events one year post-surgery and no treatment-related infections considered to be related to Lomecel-B. Further, secondary endpoints suggested that Lomecel-B may improve long-term patient clinical outcomes. There were no deaths and no need for heart transplant for the 12 months of the study. We also saw no statistically significant deterioration in cardiac structure or function at six and 12 months post surgery. These patients were followed subsequently for up to 3.5 years after surgery and none of the participants required a heart transplant. Building on the promising results of ELPIS I, we have advanced Lomecel-B into ELPIS II, a Phase 2a trial in which we are now actively enrolling patients. ELPIS II is a 38 patient randomized blinded and controlled trial designed to evaluate the safety and efficacy of Lomecel-B for patients with HLHS undergoing Stage II reconstructive cardiac surgery. The primary endpoint is a change in right ventricular ejection fraction, a key measure of cardiac function at 12 months post-treatment. We anticipate enrollment will continue into 2023. Finally, I'd like to cover updates on our Aging Frailty program, including an in-depth review of the data from our HERA trial that was announced this morning. Aging Frailty is an age associated decline and reversal in a function across multiple physiologic systems that leads to an inability to cope stressors. This is common among the elderly, affecting millions of individuals in the United States and up to 15% of the population over the age of 65, depending on the specific clinical definition used. Aging Frailty manifests typically as a combination of several signs and symptoms that may include Sarcopenia or involuntary loss of muscle, associated weakness, fatigue, weight loss, slowness and low activity. Unfortunately, elderly frail individuals are more vulnerable to poor clinical outcomes related to Aging Frailties such as infection, falls, fractures, hospitalizations and even death. At Longeveron, we have been evaluating the effects of Lomecel-B that it may have on the health and function of elderly frail patients, particularly on their physical and immune system function. In early stage exploratory trials, we have been measuring biomarkers of inflammation, and vascular endothelial function. First, I'll start with an overview of our new clinical development strategy in Japan. Japan is one of the oldest populations in the world. And in 2020, there were over 36 million citizens who are aged 65 years or older or nearly 29% of the population and is predicted by 2031, three citizens will be elderly. And the prevalence of frailty in that age group is approximately 8.7%. Further, the Japanese Pharmaceutical and Medical Devices Agency, or PMDA, has established a supportive regulatory framework through the act on the safety of regenerative medicine or ASRM that recognizes the tremendous therapeutic potential of cell therapies. A potential ASRM approval could enable us to enter the Japanese market based on demonstrated safety and Japanese patients with an expectation of efficacy, which can be established through the conduct of a small, well-controlled trial combined with our previous data in Aging Frailty. Such an approval would allow us to administer Lomecel-B as a treatment for Aging Frailty at select clinical sites, addressing a crucial unmet need amongst the Japanese population. As a result, we have reevaluated our regulatory strategy in Japan to capitalize on the near-term value-driving market opportunity in collaboration with our clinical partners at the National Center for Geriatrics and Gerontology in Nagoya, and Juntendo University Hospital in Tokyo, we amended our Phase II trial to change the primary objective to one examine the safety of Lomecel-B and Japanese elderly with Aging Frailty. The PMDA accepted the amendment on August 8, 2022, and we expect to dose our first patient by the end of 2020. Next, I'll move on to the results from our Phase I/II trial HERA, that was -- that were announced this morning. As a reminder, the HERA study was an exploratory trial supported by grants from the NIH and Maryland's stem cell Research Fund to explore the safety of Lomecel-B when using combination with high dose influenza vaccine in older frail individuals. A total of 40 patients were enrolled over two flu seasons over which two different formulations of the vaccine High Dose Fluzone were administered, one for each season. The trial measured biomarkers designed to assess whether Lomecel-B augmented immune responses following influence I'm sorry, influenza vaccination. This biomarker evaluation was performed with descriptive statistics and the study was not powered to make definitive conclusions. Today, we announced that the study met its primary safety endpoint with no treatment-emergent SAEs within 30 days of Lomacel-B infusion as well as an examination of various safety labs. To evaluate the immune response, we use strain-specific hemagglutination inhibition antibody titer measurement assay over the two flu seasons. Because the Colorado variant of flu was the only Australian common across the -- in the HD Fluzone formulations across those two seasons, we chose to focus our results on this strain, and there was no statistically different response in HAI antibody responses in the Lomecel-B group when compared to placebo. Interestingly, we observed a 91% increase in HAI antibody response to Phuket strain that was not a component of High Dose Fluzone in the Lomecel-B group compared to placebo, representing a possible heterotypic response. This indicates that Lomecel-B may be stimulating the immune system in a non-specific way. To further complement these findings, we will be conducting additional immunological studies of samples obtained during the study to evaluate the response of B cells and T cells, immune cells that not the antibody response to vaccination. In addition to the immune response, we also evaluated several measurements of aging frailty and found that participants receiving Lomecel-B had an increase at the one-year time point in the Patient Reported Outcomes Measurement Information System or PROMIS physical function instrument compared to a decrease in the placebo group. The PROMIS physical function instrument is designed to measure items over a wide range of function from self-care to stimulus activities. In addition, at six months, the Lomecel-B treated participants had an average change in the 6-minute walk test that was 18 meters greater than the participants receiving placebo, which was similar to magnitude to our previous studies, although they did not appear to be statistically significant. While not the primary goal of the trial, these findings support previous findings from our Phase 1 and Phase 2b trials of Lomecel-B and Aging Frailty. In summary, we are highly encouraged by these exploratory findings. First, the small study supports the safety Lomecel-B in combination with flu vaccines like High Dose Fluzone and the Aging Frailty population. Second, though the study was not sufficiently powered to evaluate immune response, we did see preliminary events that Lomecel-B may have a biologically relevant supportive impact on the immune system. And lastly, the data provided additional evidence that Lomecel-B's potential effects on improving key measures of Aging Frailty like the PROMIS Physical Function and changes 6-minute walk test are present. Based on these data, we plan to pursue additional studies of the immune system using sophisticated B and T-cell sorting to explore specific populations of sub cells outsourced trials and anticipate publishing the full study results in a peer review journal in the future. With that, I'd like now to turn the call over to James Clavijo, Chief Financial Officer, to discuss our financial results for the second quarter of 2022. James?

Thanks, Chris. Good morning, everyone. Most of what I'll be covering this morning will be presented in more detail in our condensed financial statements and in our management's discussion and analysis of operations for the quarter ended June 30, 2022, and in our quarterly report on Form 10-Q, which will be filed today. For the second quarter ended June 30, 2022, revenues for each of the second quarters of 2022 and 2021 were approximately $0.5 million. The difference was due to an increase in clinical trial revenue and grant revenue as follows; clinical trial revenue, which derives from our Bahamas registry trial was $0.3 million in the second quarter of 2022 compared to $0.2 million in the same period in 2021, an increase of $0.1 million or 59%. While COVID-19-related travel concerns continue to negatively impact registry trial revenue, we believe this impact was lessened in the first quarter. Second quarter 2022 grant revenue was approximately $0.2 million, compared to $0.3 million in the same period in 2021, a decrease of $0.1 million or 54%. The decrease in grant revenue is primarily due to a reduction in grant funds available due to the completion of the grant funded clinical trials. Research and development expenses in the second quarter of 2022 were $1.7 million, compared to $2 million for the same period in 2021. The decrease of $0.3 million or 12% was primarily due to a decrease in equity based compensation allocated to research and development expenses, which decreased from $0.8 million for the three months ended June 30, 2021 to $0.1 million for the same period in 2022. However, this was offset by an increase of $0.5 million in research and development expenses that were not reimbursable by grants. General and administrative expenses in the second quarter of 2022 were $2.4 million compared to $3.2 million for the same period in 2021. The decrease of approximately $0.8 million or 26% was primarily related to a decrease of $0.7 million of equity based compensation expenses allocated to G&A. However, expenses related to legal and consulting services increased by $0.2 million in the three months ended June 30, 2022, compared to 2021. The company did take a non-operating lawsuit expense for the three months ended June 30, 2022, of approximately $1.4 million. Our net loss was $5.6 million in the second quarter of 2022 compared to $5 million for the same period in 2021. Cash and short-term investments was $27 million compared to $35 million as of June 30, 2022 and 2021, respectively. The decrease in cash period-over-period was a result of operating expenses and prepayments for insurance.

Sorry, James, did we lose you? James, are you there? So I think we're having some kind of technical difficulty, Elsie.

I think we're trying to dial James in.

Okay.

Ladies and gentlemen, James is back on the line with us. We apologize for the inconvenience.

I believe I left off on -- based on the company's current operating plan and financial resources, we believe that our existing cash and short-term investments will be sufficient to cover expenses and capital requirements into the first half of 2024. With that, thank you. And I will turn the call back to Chris.

Thank you, James. As you've heard today, we've made strong progress in the second quarter across our pipeline. I look forward to additional key updates later this year. I would now like to open the call for questions. Irene?

Thank you. [Operator Instructions] Our first question comes from Michael Okunewitch from Maxim Group. Michael, your line is open.

Hey, guys. Thank you for taking my questions. So, I guess, I'd like to see, if you could help contextualize the data from the HERA study. Mechanistically, how would Lomecel increase the titles to a non-vaccinated strain? Does this suggest that you're having a broader impact on immunosenescence?

I'm going to ask Dr. Joshua Hare, whether he prefer I answer or whether he'd like to answer that question.

Chris, why don't we both make comments that I can lead out. This is –

Sure. Great.

Joshua here. Yeah, we believe that a key component of immunosenescence is what can be referred to as exhaustion of the B-cells. The B-cells are the cells that are – of the immune system that make new antibodies to new viruses or vaccines. And we can see clearly that they're depressed in older people, because we could – we all saw that from the COVID pandemic that the people most adversely affected with illness were older people, and that's because of this concept of immunosenescence and depressed B-cells. In this study, we elected to look at vaccination to influenza, which is something that people typically get every year and the screens change every year. So we were encouraged to see that the Phuket strain responded, which was a strain not included in the vaccine for those two years. And that's what's called the heterotypic response, meaning that the immune system is responding more broadly. What we will do to follow-up on that is to specifically measure the B-cells, along with T-cells. And those results, which we should have in the future, will be included in our publication on topic. Chris, if you have anything to supplement that. Please go ahead.

Yeah. Just to echo Dr. Hare, you do see in vaccine trials when that's been looked at that even – it seems to be that in some cases, you can see increases insider to strength that are not in a vaccine and that is not just in the case of Lomecel-B, although in this trial what we saw was this increase to in tires to this petechial [ph] specifically in the Lomecel-B patients. And it's thought to be an indication of, in some cases let's say, in a true vaccine study it might indicate that there's just a generalized immune response to the simulation of vaccination. In our case because this seems to be specific to Lomecel-B, it would be thought to be some kind of indication that Lomecel-B is supplementing the generalized endothelial function and stimulating the immune function and perhaps awakening cells at cross react with Petechiae [ph] strain of the influenza virus. I hope that answers your question, Michael.

Yes. Thank you. I appreciate the additional color. Do you have any idea on when we could expect to see some more detailed analysis from the HARRIS study? Is that a 2020 event or should we expect that after the end of the year?

Well, it turns out that the detailed analysis that we're conducting in collaboration with Dr. Sean Lang is quite involved. And there are many, many samples to look at. So this was quite a complicated. So even though it was relatively small in terms of number of patients having been conducted across two flu seasons and with the number of samples and different timepoints, we're anticipating internally that it will take a few months to analyze those results. And then it's hard to predict when a manuscript will be accepted for publication. I would like to think that we will submit in this calendar year, but as to when they will appear in a published pure review journal is hard for me to predict.

All right. Thank you. And then I'd like to switch here and just talk about your plans for Japan and whether it's potentially easier to go for something like Japan first strategy in Aging Frailty and kind of work with the PMDA to define some of those regulatory endpoints and pathways and then take that additional insight over to the FDA, just given their PMDA is typically more progressive step in cell therapy and the real significant unmet need in Aging Frailty in Japan?

So I have to say, you're getting into a very detailed corporate strategy and it is something that we are actively thinking about. Our work, as you know, in Aging Frailty has largely been in the US, and we are going to try to work with the FDA in terms of their understanding of Aging Frailty. We also note that not only is Japan more open in terms of cell therapies and in general, the concept of Aging Frailty, but in fact, in Europe, the already -- the EMA even has a guidance for the development of treatments for Aging Frailty, which is quite different from the US situation. So what we are hoping to do is, at the moment is to work with the FDA and see where we are with their understanding of Aging Frailty and whether there's a path forward, but we're always actively thinking about other potential tactical approaches. But current -- our current approach is to focus on US with Japan supplement. But we recognize that one could consider other strategies, and we will evaluate our options as we go forward.

Chris, could I add to that?

I appreciate you taking the question.

I'm sorry, Josh, Dr. Hare -- sorry Dr. Hare wants to answer that, sorry.

Yes. Thanks, Chris. I also just want to respond to Michael to say that, having said what you've said, Chris, about our ongoing focus in the US. It should be noted that we are poised to start our trial in Japan this year. We've recently -- an important amendment accepted by the PMDA to the trial, that will allow us to proceed at this time. And so, the -- we certainly have Japan on our radar screen in the next cohort of patients to be randomize Lomecel-B will be subject in Japan.

Thanks, Dr. Hare.

Thank you very much. I appreciate you providing the additional color.

Thank you. Ladies and gentlemen, currently, we have no further questions. Therefore, I would like to hand back to Dr. Chris Min, Interim Chief Executive Officer and Chief Medical Officer for any closing remarks. Dr. Min, please go ahead.

Thank you, Irene. On behalf of the company, we'd like to thank everyone for their continued interest and support. We think we've had a successful second quarter and thank you for your attention and listening to our results. And we wish everyone a great day.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for being with us today. Have a lovely day ahead. You may disconnect your lines.