Lisata Therapeutics, Inc. (LSTA) Q1 2018 Earnings Report, Transcript and Summary

Welcome to the Caladrius Biosciences First Quarter 2018 Financial Results and Business Update Conference Call. At this time, all participants are in listen-only mode. Following management's prepared remarks we will hold a Q&A session. [Operator Instructions] As a reminder, this call is being recorded today, May 10, 2018. I will now turn the call over to John Menditto, Executive Director, Investor Relations and Corporate Communications at Caladrius. Please go ahead, sir.

Good afternoon and thank you all for participating in today's call. Joining me today from our management team are Dr. David Mazzo, President and Chief Executive Officer; and Joseph Talamo, Chief Financial Officer. Earlier today we filed our 10-Q and issued a news release, announcing our financial results for the first quarter of 2018. If you have not received this news release or if would like to be added to the Company's email distribution list, please call our Investor Relations firm, LHA in New York at 212-838-3777 and speak with Carolyn Currin or e-mail update@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 the Company's Forms 10-K, 10-Q and 8-K which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Furthermore, the content of this conference call contains time sensitive information that is accurate only as of the date of this live broadcast May 10, 2018. Caladrius undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. With that said, I will turn the call over to Dr. Mazzo. Dave?

Thanks John. Good afternoon, everyone and thank you for joining us. I'm pleased to be reporting on a busy and productive quarter. Since January, we reported results from the prescribed interim analysis in the Sanford Project T-Rex Study, dosed the first patient in a Phase 2 clinical trial in Japan with CLBS12 for the treatment of critical limb ischemia or CLI and enrolled the first patient in a Phase 2 study of CLBS14 in coronary microvascular dysfunction or CMD. We also acquired an exclusive worldwide license to data and regulatory filings from Shire for a late-stage CD34 cell therapy program for treating chronic myocardial ischemia targeting refractory angina for which we now have successfully reactivated the associated IND with the U.S. Food and Drug Administration. Also on the regulatory front we received recently SAKIGAKE designation from the Japan Ministry of Health, Labor, and Welfare for CLBS12 in the treatment of CLI. The combination of this designation for facilitated regular interaction and expedited review and pending a successful outcome, the consideration for early conditional approval in Japan in CLI provide us with the prospect of an exciting and potentially nearer term commercial opportunity than might otherwise be the case. Before I provide more detail on our overall progress, provide additional insight into our ongoing and planned trials and discuss some upcoming milestones, I'll turn the call over to our CFO, Joe Talamo, for his review and commentary on our financial results. Joe?

Thanks Dave and good afternoon everyone. I'm pleased to provide an update on our first quarter financial results highlighted by the advancement of our R&D platforms, our continued cost management efforts and our overall strong financial position. Please note that my commentary will only focus on our results from continuing operations compared with the prior year. As a reminder, our 2017 financial results also include the operations of PCT, our former subsidiary that was sold to Hitachi last year. These results are now reported as discontinued operations in the 2017 comparative financial statements. Now turning to our financial results, our net loss from continuing operations was $5 million or $0.52 per share for the first quarter of 2018 compared with $6.6 million or $0.78 per share a year ago. Total operating expenses of $5.2 million in the current year quarter comprised of R&D and G&A expenses, declined 20% over the prior year. Our R&D expenses were $2.3 million in the first quarter of 2018 compared with $3.7 million in the first quarter of 2017. This 39% decline in R&D was driven by a significant reduction in our CLBS03 T-Rex study related costs which were partially offset by higher costs in our ischemic repair platform. As previously disclosed, we completed enrollment and all manufacturing related activities in the CLBS03 clinical study in December 2017 and accordingly our CLBS03 study costs dropped significantly in the current quarter. We are now in the 12-month follow-up phase of the study and expect to spend less than $3 million to complete the study. Within our ischemia repair platform however we incurred higher cost due to the initiation of our Phase 2 study of CLBS12 in critical limb ischemia in Japan in late 2017 and initiation related program expenses associated with our Phase 2 study for CLBS14-CMD in coronary microvascular dysfunction. Our first quarter expenses also included a modest undisclosed upfront payment to Shire for the acquisition of the exclusive license to its late stage CD34 cell therapy program for the treatment of refractory angina as announced in March. Please note that any future transaction related payments due Shire will be milestone and royalty based and contingent on the future advancement and success of the licensed program. Dave will provide additional commentary on our next steps in the development of this program in a moment. Overall, we expect the majority of our R&D spending in 2018 will focus on the advancement of our development programs in our growing ischemia repair platform. G&A expenses were $2.9 million in the current quarter compared with $2.7 million in the prior quarter representing a minor increase over the prior year period. We continue to manage G&A expenses with the strong financial discipline we've demonstrated in recent quarters. Turning now to our balance sheet and cash flow, we ended the first quarter of 2018 with cash and cash equivalents, restricted cash, and marketable securities of $54 million, zero long-term debt and working capital of $47 million. Our restricted cash balance of $5 million relates to the PCT sale last year and we expect the entire balance will be released from escrow in the second quarter of 2018. In addition our operating cash burn in the first quarter of 2018 was $6.3 million and included several one-time nonrecurring expenses. We expect our second quarter operating cash burn to be comparable to the first quarter largely due to contractual retention payment obligations related to the PCT sale scheduled to be paid to certain former PCT employees in May 2018. These retention payment obligations were fully accrued in 2017. Excluding these retention payments our projected operating cash burn for the remainder of the year is expected to be approximately $5 million a quarter. Based on our existing programs and projections, as well as cash and marketable securities balances, we are confident that we can fund our existing clinical development programs into 2020 while we continue to pursue additional strategic value creating opportunities. Lastly, during the first quarter we entered into a common stock At The Market sales agreement or ATM with H.C. Wainwright under which we may sell shares of our common stock that have an aggregate offering value not to exceed $12 million. Any shares offered will be at market prices and we will maintain full control over the number and timing of shares to be sold if any. To be clear, we have put this ATM in place primarily to maintain the financial flexibility often required for opportunistic endeavors. The ATM facility provides us with an expedited path to raise limited funds at relatively low cost of capital if and when appropriate. To date we have not drawn down on the ATM facility. With that, let me turn the call back to Dave.

Thanks Joe. Allow me to start our business review with the progress we've made with our CD34 technology. Heart attack, congestive heart failure, angina, critical limb ischemia, and stroke, are often caused by an acute or chronic deficit in the supply of oxygenated blood. The decrease in blood supply is typically due to disease in the large and small blood vessels that serve the target tissues. There has been an historic focus on strategies to address the problems in large vessels leading to the use of clotbusting drugs, angioplasty, and stents to treat heart attack, and percutaneous and surgical revascularization for chronic ischemic conditions. Yet to date no therapy has been designed specifically to address the defects in the small blood vessels which contribute to the overall impairment of patients with acute and chronic ischemia. One of the body's natural responses to such coronary disease is the recruitment of CD34 cells to ischemic tissues. CD34 cells are preprogrammed to repair damage to the small blood vessels or microcirculation in all tissues. CD34 cells have also been shown to induce the development of new blood vessels, thereby preventing tissue death by improving blood flow. We are currently advancing two proprietary CD34 clinical programs namely CLBS12 as a treatment for critical limb ischemia and CLBS14-CMD for the treatment of coronary microvascular dysfunction. Additionally, as we have announced during the quarter, we were delighted to expand our CD34 cell therapy platform with the recent acquisition of a late-stage CD34 cell therapy program as a treatment for refractory angina. To begin advancing this program we are pleased to report that we have reactivated the associated investigation of new drug application with the FDA for the treatment of chronic myocardial ischemia targeting refractory angina. As we disclosed at the time of the transaction, under the terms of the agreement with Shire, we acquired exclusive worldwide rights to the data set and regulatory filings for the CD34 cell therapy program for the treatment of refractory angina in exchange for an undisclosed modest upfront consideration, future milestones and a royalty on product sales. The comprehensive dataset includes preclinical as well as Phase 1, Phase 2, and Phase 3 data of CD34 cell therapy as a treatment for no option refractory angina along with the corresponding regulatory filings. We are especially pleased to have this late-stage program as Dr. Doug Losordo, our Chief Medical Officer designed and was the principal investigator for the Phase 1 and Phase 2 studies of this therapy which were conducted with the support from Baxter. When Baxter created the spin out Baxalta the program went with it and upon Baxalta's acquisition by Shire the program became deprioritized as it was not core to Shire's orphan and rare disease focus. We are very excited to have secured this promising late stage program given our intimate knowledge of the therapy and because it is complementary to our existing CD34 pipeline. Importantly, this program is supported by data from three randomized placebo-controlled trials. A recent publication in the European Heart Journal combines the data in a pooled analysis from all three studies encompassing over 300 patients and revealed statistically significant improvements in mortality, exercise capacity and chest pain frequency. It is noteworthy that all the data included in the pooled analysis was from studies in which the therapy, dose, and means of administration were identical. The program which we have denoted as CLBS14-RfA represents a large potential commercial opportunity for Caladrius as refractory angina afflicts approximately 1 million people in the United States alone with 50,000 to 100,000 new diagnoses annually. With the IND for the program now open in our name, we look forward to discussing with the FDA the most expeditious regulatory path to registration and eventually to bringing this potentially restorative therapy to patients in need. Let me now turn to CLBS12, our proprietary CD34 technology specifically formulated for intramuscular administration for the treatment of lower extremity ischemia. Critical limb ischemia is a severe obstruction of the arteries that significantly reduces blood flow to the extremities, principally the feet and legs. CLI can lead to pain, skin ulcers and dermal sores and if not successfully addressed, eventually to amputation. No-option CLI means that pharmacotherapy is no longer working, angioplasty, stenting and bypass surgery have failed or are not possible and that amputation of a limb or limbs may be the only remaining treatment for these patients. As I have previously discussed, the ongoing clinical study of CLBS12 and CLI was designed and is being executed according to consultation with the Japanese PMDA on the Phase 2 clinical program and CMC strategy such that it will qualify CLBS12 for consideration of early conditional commercial approval in Japan for this indication under that country's new regenerative medicines laws should the ongoing study yield a successful outcome. In addition, we recently received SAKIGAKE designation from the Japan Ministry of Health, Labor and Welfare for CLBS12 in the treatment of CLI. SAKIGAKE designation is similar to breakthrough therapy designation as awarded by the FDA in the United States. We see this as a significant positive contribution to the development of CLBS12 in that the SAKIGAKE designation system promotes research and development in Japan driving early practical application for innovative pharmaceutical products, medical devices and regenerative medicines. As a designated therapy under the system, CLBS12 will have prioritize consultation, dedicated review system to support the development and review process, as well as a reduced review time from the normal 12 months down to six months. As previously announced, we dosed our first patient in the 35-patient pivotal Phase 2 prospective, randomized, controlled, open label, multicenter study in no-option CLI patients in Japan. Those randomized treatments will be dosed with CLBS12 through intramuscular injection in addition to receiving standard of care pharmacotherapy. Patients randomized to the control arm will receive standard of care with drugs approved in Japan including antiplatelet agents, anticoagulants, and vasodilators, the choice of which will be made by the investigators according to the protocol. The primary objective of this study is to show that CLBS12 can prevent the serious adverse consequences of no-option CLI 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 previously non-healing skin ulcers are completely healed as determined by an independent adjudication committee. CLI free is a highly clinically relevant endpoint and encompasses a broader spectrum of improvement in time to amputation or amputation free survival which are the historically used endpoints for CLI studies. Also because this is an open label study, we will be able to monitor patients and evaluate progress in real-time. Our confidence in this approach to CLI is supported by the substantial clinical data from four prior trials in CLI and claudication conducted in the United States and Japan which show CD34 cell therapy was not only safe, but also improved CLI free status and amputation free survival in those trials. We expect to incur less than $7 million of additional expense to complete this study and we continue to seek to out license this product for commercialization in Japan and with favorable clinical outcomes to advance this development into the United States. Moving on to our CD34 platform as a treatment for coronary microvascular dysfunction, CLBS14 uses a proprietary and patented formulation of CD34 cells. This treatment is administered via cell infusion into a coronary artery and is designed specifically to enhance the potency of these cells for repair and regeneration of cardiovascular tissues. CMD is a plaque-less heart disease involving damage to the inner lining of the tiny arterial blood vessels in the heart and CLBS14-CMD is designed to reduce the serious adverse consequences caused by damage to the inner walls of the heart's blood vessels through the innate ability of CD34 cells to repair small blood vessels and increase microcirculation. The Phase 2 clinical study of CLBS14 for the treatment of CMD has enrolled its first patient and we expect to announce the treatment of the first patient in the coming week. As we have previously communicated, the majority of the costs associated with this trial are covered by a grant from the National Institutes of Health. Finally, turning to our landmark Phase 2 study of CLBS03 as a potential treatment for type I diabetes. In March we reported results from the prescribed interim analysis in the Sanford Project T-Rex study. As you know, this is a prospective, randomized, placebo-controlled, double-blind, Phase 2 clinical trial of 110 patients to evaluate the safety and efficacy of CLBS03 as a treatment for recent onset type I diabetes. The prespecified analysis was triggered by the completion of six months follow-up of 50% of the targeted total number of subjects in the trial. The analysis was conducted by independent statisticians and showed that CLBS03 continues to be well-tolerated and led to the conclusion that the study was non-futile as determined by predefined criteria for therapeutic effect. This means that a positive outcome for therapeutic effect at the end of the study remained a statistical possibility and we have long expected that the analysis of the complete dataset at the end of the study will be necessary to fully understand the impact of CLBS03 on patients. As a reminder, CLBS03 is a personalized autologous cell therapy consisting of each patient's own regulatory T cells or T-Reg which have been expanded in number and functionally enhanced by our proprietary method. Caladrius has exclusive rights to an international portfolio of issued and pending patents for this technology as applied to type 1 diabetes as well as other indications. The T-Rex study exemplifies our strategy to advance our pipeline programs with collaborative support such as grants, partnerships or licensing. Our partner, Sanford Research continues to cover the operational costs at their two clinical sites in addition to having made $5 million in total equity investments Caladrius since September 2016. As we have also discussed the T Rex study enjoys substantial grant support from other organizations including the California Institute for Regenerative Medicine and the Juvenile Diabetes Research Foundation. Our CLBS03 program has several key international regulatory designations including FDA orphan drug status, EU Advanced Therapeutic Medicinal Product Classification and FDA Fast-Track designation which represents the first type 1 diabetes program ever to receive Fast-Track distinction. These regulatory designations are key as they provide certain exclusivity benefits, tax credits for certain research, a waiver of the new drug application user fee, and priority review of regulatory approval submissions. We look forward to completing the 12-month follow-up on all 110 patients and to reporting topline data in early 2019. We expect the trial will provide a bolus of data that will inform our next steps in the development of what we hope could become an important new tool in the treatment of children with recent onset type 1 diabetes. Moving forward, as Joe mentioned we expect to have less than $3 million of external spending obligations to reach the 12-month readout of data. So in closing, we are encouraged with the progress we have made this quarter which remains focused and supportive of our mission. We look forward to continued momentum in the coming months and we expect to achieve the following milestones: treatment of the first patient in the 20-patient Phase 2 clinical trial of CLBS14-CMD; advance the ongoing enrollment of our Phase 2 clinical trial of CLBS12 for CLI in Japan; gain clarity on the development plan and regulatory path forward for CLBS14-RfA, our new CD34 program for the treatment of refractory angina; complete the-12 month follow-up on all 110 patients in the Phase 2 T-Rex study; pursue additional grants for our CD34 and CLBS03 platforms in multiple indications; and pursue licensing opportunities for CLI in Japan and for other pipeline programs globally. Caladrius continues to advance its clinical programs according to plan and we are pleased that we have accomplished the goals that we had established for the past quarter. We remain committed to judiciously applying our physical resources to support these programs under the leadership of a dedicated and passionate team, one that is focused on realizing the potential of exciting and promising technologies that address large unmet market needs in autoimmune and cardiovascular diseases. And with that overview operator, we're ready to take questions.

[Operator Instructions] And your first question comes from Keay Nakae with Chardan.

Yes, two questions for you guys today. For the CLI study in Japan, how many centers are involved and how many are currently in orientations?

Hey Keay, it’s nice to hear from you, thanks for your questions. As it relates to the CLI program, we're targeting to open upwards of about 10 centers in Japan and at this point we're early in the process, somewhere between 30% and 50% of them are actually open and enrolling.

Okay, and to get the remainder up and running is that sort of a near term accomplishment or will it take longer than that?

No, I think it's the focus of us that we'll expect to have accomplished in the near term.

Okay and for the CLBS14-CMD study can you tell us what the primary endpoint in that study is?

Well, there will be a number of endpoints of the study, but among them will be the typical endpoint in an angina study which will include things like the exercise tolerance and the six-minute walk test, frequency of angina episodes, severity of angina and quality of life questionnaires and a number of other things. I think we will provide some more detail on the specifics of the protocol and the endpoints in upcoming calls.

And measured at what point of follow-up time?

Well, I think the primary endpoint is a six-month follow up endpoint.

Okay, that's all I have.

All right, thanks Keay.

And your next question comes from Pete Adeline [ph] from Miz [ph] Partners.

Good afternoon and thanks for taking my question. Hi Dave?

Hi Pete, how are you?

Good and looking at the stock, the long term question becomes, what would be the size of these potential markets for you guys? In general, can you sort of give us some sense of how the company tries to assess the ultimate size of these potential new products for each of your four programs? I mean, I guess you need to start with the size of the patient population, but then how does the company plan strategically as far as the, what market share you might achieve with the pricing of those products and all those kind of things? I realize this is in some sort a very premature set of questions, but I'm just trying to get a sort of a general impression of how you guys look at those things.

Sure, so I mean, we employ a methodology for that, that is I would say standard throughout the pharmaceutical industry and somewhat independent of the therapeutic focus, the kind of technology or even the size of the company. You're absolutely right, you start first with the prevalence of the disease and the territories in which you're looking and then you work from that down to patients who are actually diagnosed and then to the attraction of patients who are treated you then use an assumption that's often based upon market research that involves questioning, key opinion leaders, payers and other experts in the field to get a sense for based upon your target product profile which often includes sort of an estimate of the magnitude of the therapeutic effect as well as the safety of the product, how often physicians might choose to use your therapy in comparison to other comparative therapies that might be there or might actually be in competitive development. And from that you can then focus down to what you believe is a treatable population for your drug in the context of the prevalence and the competitive environment and then using an estimate of pricing, which often is derived from a combination of cost of goods and comparison to analogues in the field and also whether a premium to pricing can be applied because you have a premium effect on the disease that you're after that you can then create a model for how much each patient is worth so to speak, and then using typical, statistical uptake algorithms, you then calculate an NPV for the product and the peak sales for the product based upon how long it typically takes for new products to be adopted in a given field and that becomes the model. And so we typically look at these things and obviously they get refined with time, the closer you get to registration, the closer you get to your final data, the more accurate those estimates are. But they're technically fairly accurate at least from an order of magnitude perspective right from the beginning and you're in a position then to estimate whether or not the money that you expect to spend to get to a registration will actually yield a reasonable and reasonable to find in the context of other pharmaceutical products return on investment. And if it is something that looks like you will get a nice return, then we typically would continue these development and pursue it. If at some point it looks like for whatever reason the expenditures are going to eclipse the return on investment, then you typically move away from that program for strategic reasons.

That's very helpful. Given that all of that, how would you rank the potential of the four programs that you have at this time in terms of your strategic planning?

Well, the one that has the largest potential market in the long run is the newest program we’ve acquired which is CLBS14-RfA, refractory angina affects a large number of people and that represents a multi-$100 million and maybe even a multi-billion dollar market globally. So that is something that is the biggest of them. Following that the CLBS14-CMD in coronary micro-vascular dysfunction is a program that also has a large market potential because currently there are no products approved for the treatment of that disease and so you would expect that successful therapy would have a very large dominant market share in that particular situation. The CLI program also has a large worldwide opportunity. The market size in Japan is somewhat restricted given that the population in Japan is seen as being smaller than obviously many other countries of the world, but the fact is that Japan represents still the third largest overall pharmaceutical market and it’s an area where we believe that we still have a multi-$100 million market opportunity for that product in that indication and especially with the help eventually on the ground Japanese commercial partner. And then the diabetes program ultimately is one that has also a fairly large potential that is an orphan drug and so the size of the market potential will ultimately be determined by the durability and the magnitude of the therapeutic effect. So that one remains to be qualified a little bit further once we get better data out of the ongoing T-Rex trial.

I’m not a real biotech expert in any sense and I understand that you call the CLBS03 your lead drug so to speak, but in terms of the market sizes that you just roughly sketched out, why would that be designated that way?

Well if you notice in the current Q and unless you are a speed reader, you obviously haven’t read it yet, but even in our press releases and our commentary, we no longer refer to the CLBS03 program as the lead clinical development program. And that designation, I want to be very clear, I don't want people to think that we're backing away from program. It is just simply lead in our minds meant that it was most advanced clinically and so when in the past this CLBS03 has completed enrollment and is in the follow-up stage of a Phase 2 program, so that was the most clinically advanced because the CLI program even though it is Phase 2 is just beginning enrollment as is the CMD program. I think in the context of that definition, the refractory angina program is actually the most advanced clinically and may become the lead clinical program because it's already been studied in a Phase 3 program by its original sponsor and as you pointed out it does also have the largest market potential. So I think in that categorization you'll ultimately hear us talking about the ischemic repair program and specifically refractory angina as the lead program, but that in no way diminishes the importance or the value of the other programs in our pipeline.

Okay great, thanks for the clarification Dave.

Thanks Pete.

[Operator Instructions] This concludes the question-and-answer portion of today's presentation and I'll now turn the call back over to Dr. Mazzo for closing remarks.

Thank you, and again I'd like to thank all of you on the line for participating on today's call. We look forward to speaking with your again our second quarter conference call and continuing to bring you news of our treatments in progress. We remain grateful for interest in and support of Caladrius Biosciences and we wish you all a good evening.

Thank you. This does conclude today's conference call, you may now disconnect.