Hello, and welcome to the Caladrius Biosciences First Quarter 2020 Financial Results and Business Update Conference Call. [Operator Instructions]. As a reminder, this call is being recorded today, Thursday, May 7, 2020. I will now turn the call over to John Menditto, Vice President of 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; Dr. Douglas Losordo, Chief Medical Officer; and Joseph Talamo, Chief Financial Officer. Earlier today, we issued a press release announcing our 2020 first quarter financial results. If you have not received this news release or if you would like to be added to the company's e-mail distribution list, please e-mail me at jaymenditto@caladrius.com. Before we begin, I will remind you that comments made by management during this conference call will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of Caladrius. I encourage you to review the company's filings with the Securities and Exchange Commission, including, without limitation, its Forms 10-K, 10-Q and 8-K, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, Thursday, May 7, 2020. Caladrius Biosciences 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 now turn the call over to Dr. Mazzo. Dave?

Thank you, John, and good afternoon, everyone, and thank you for joining us on today's call. As with many things during the COVID-19 pandemic, the organization of our quarterly call has been adjusted to accommodate to work remotely and practice social distancing rules. For the first time, the Caladrius participants to this call are not in a common location using a common phone line. We sincerely hope that there will be no technical issues, but ask for your indulgence in advance if there are any. Also, in recognition of these unprecedented times, I'll start by wishing you, your families and all your loved ones and friends, the best possible health now and in the future. Please stay patient and safe as you conduct your daily activities, and we join you in looking forward to returning to a sense of normalcy in the hopefully not-too-distant future. And now to our business. Today, I am pleased to provide a business update on our CD34+ cell technology-based clinical development programs, especially our newest program, CLBS119 for the treatment and repair of COVID-19-induced lung damage. In that regard, I've asked Dr. Doug Losordo, our Chief Medical Officer to join us to provide some more specifics on the rationale for the program and why we believe this will be a much needed treatment for patients who survived COVID-19. I will then provide an update on our portfolio of ongoing programs, including CLBS12 as a treatment for critical limb ischemia, CLI in Japan; CLBS16 for the treatment of coronary microvascular dysfunction, CMD; and CLBS14 for the treatment of no-option refractory disabling angina, NORDA. But before I go through the programs, I'll turn the call over to our CFO, Joe Talamo, for his review and commentary on our quarterly financial results as well as our recent funding activities since the close of the first quarter. Joe?

Thanks, Dave, and good afternoon, everyone. I'm pleased to provide a review of our first quarter financial results along with 2 notable funding events in April that significantly strengthen our balance sheet and extend our cash runway. Overall, our net loss for the first quarter of 2020 was $4 million or $0.38 per share compared with $4.4 million or $0.44 per share for the first quarter of 2019. Research and development expenses for the first quarter of 2020 were $1.5 million, a 26% decrease compared with $2 million for the first quarter of 2019. Research and development expenses in both periods focused on the advancement of our ischemic repair platform. More specifically, during the first quarter of 2020, our R&D expense continued to focus on our ongoing registration eligible study for CLBS12 in critical limb ischemia in Japan along with final expenses for our ESCaPE-CMD study with CLBS16 in coronary microvascular dysfunction. Dave will discuss next steps for CLBS16 shortly. General and administrative expenses, which focused on general corporate-related activities, remained flat and were approximately $2.6 million for both the first quarters of 2020 and 2019. Turning now to our balance sheet and cash flow. As of March 31, 2020, we had cash and cash equivalents of $20.7 million, working capital of $16.6 million and an operating activities cash burn of $4.2 million for the first quarter of 2020. We continue to manage operating cash burn effectively at under $5 million for the past 4 consecutive quarters even while we advance our research and development programs. In addition to cash conservation, we have taken measures to add cash to our balance sheet to provide even more financial security for our company. For example, in recent weeks, we closed on 2 noteworthy transactions that significantly strengthen our balance sheet and cash…

Thanks, Joe. As I have done on previous calls, I will begin by providing a high level summary of what we are doing at Caladrius and why we believe our development programs are increasingly relevant and attractive investment opportunities today. Caladrius is focused on the development of cellular therapies designed to reverse, not manage, disease, and we have late-stage clinical programs underway based on a large database of human clinical data. Our therapies to date have been shown to be effective and durable with the pristine safety profile and present the possibility of substantial pharmacoeconomic benefit. Most importantly, we are working on products with the goal of providing patients with a single administration, personalized curative therapy rather than one that requires frequent chronic readministration. Our CD34+ cell technology has led to the development of therapeutic product candidates designed to address diseases and conditions caused by ischemia, a condition in which the supply of oxygenated blood to healthy tissue is restricted. Previously published preclinical and human clinical studies have demonstrated that the administration of CD34+ cells induces angiogenesis of the microvasculature, that is that these cells prompt the development of new blood capillaries thereby contributing to the prevention of tissue death by facilitating blood flow to the area of ischemic insult. We believe that several conditions caused by underlying ischemic injury can be improved through the application of our CD34+ cell technology, including, but not limited to, COVID-19-induced lung damage, critical limb ischemia, coronary microvascular dysfunction and refractory angina. We believe that thousands of patients globally who have survived COVID-19 will return home with long-term effects of this terrible disease manifested as a debilitating lung damage. Many companies are searching for treatments for the acute effects of the virus and for a vaccine that thwarts infection altogether. However, Caladrius has taken a leadership position in helping those patients who have beaten the virus that have suffered potentially permanent lung damage in the battle. I will now turn the call over to Dr. Doug Losordo, the Caladrius Chief Medical Officer and our Executive Vice President of R&D, to present the details of our CLBS119 program. Doug?

Thank you, Dave, and it's a pleasure to speak with all of you today and touch on this very exciting opportunity to utilize our technology to potentially reverse the lung damage caused by COVID-19. Initial evidence from the pandemic indicates that a large portion of the survivors of COVID-19, who required ventilatory support will suffer long-term debilitating lung damage. In the aftermath of the first SARS epidemic, it was well documented that the coronavirus target cells that express CD34. The resulting depletion of that cell population in the lung is thought to be connected to the lung's inability to repair itself. Furthermore, in the COVID-19 pandemic, emerging evidence indicates that the endothelial cells that line the microvasculature of the lung are targeted by the virus and that the destruction of the lung microcirculation may be a critical factor in the inability of the lung to repair itself even after the virus has been eliminated. Previous clinical trials and preclinical models have shown that CD34 cells act in a regenerative capacity in multiple organs, including models of severe lung damage. Moreover, there is evidence in preclinical models that restoring microvascular function can trigger and sustain a regenerative process in the lung. Therefore, we have opened an IND, agreed with FDA on a protocol and begun manufacturing preparations with the intention of initiating a clinical trial as quickly as possible to evaluate CLBS119, our autologous CD34 cell therapy, as a treatment to restore lung function, specifically in patients who experienced a severe case of COVID-19 and required ventilatory support due to respiratory failure. We look forward to reporting enrollment of the first patient very soon and providing updates on the results of what we hope is a very promising outcome for these patients who have suffered through this terrible disease. With that, I will now turn the call back over to Dave.

Thanks, Doug. I will now touch on the other exciting programs in our pipeline. Among others, our CD34 cell technology has spawned the development of our product candidate for the treatment of critical limb ischemia, CLBS12, which is currently the subject of a registration-eligible clinical study in Japan. CLI is characterized by a severe obstruction of the arteries that significantly reduces blood flow to the lower extremities, principally the feet and legs and represents the end stage of peripheral arterial disease. CLI patients often experience severe rest pain, limited mobility, nonhealing skin ulcers and, if not successfully treated, eventual amputation. Please note that it is a well-documented, but not well-known fact that CLI patients have a higher mortality rate than patients with most cancers. CLBS12 was awarded a SAKIGAKE designation from the Japan Ministry of Health, Labor and Welfare for the treatment of CLI. The SAKIGAKE designation is a regulatory designation akin to an RMAT designation in the United States and affords the recipient prioritized regulatory consultation a dedicated review system to support the development and review process, including the option of a rolling J-NDA submission as well as reduced review time of 6 months for the CLBS12 registration application once filed. CLBS12 is also eligible for early conditional approval and possibly full approval based on the compelling nature of the complete data from our ongoing prospective, randomized, controlled, open-label, multicenter study in CLI patients in Japan. In addition, the European Medicines Agency granted CLBS12 advanced therapy medicinal product or ATMP classification for the treatment of CLI. ATMPs are defined as medical treatments that are based on genes or cells and are intended as long term or permanent therapeutic solutions to acute or chronic human diseases at a genetic, cellular or tissue level. This regulatory achievement sets the stage for…

[Operator Instructions]. And your first question comes from Joseph Pantginis of H.C. Wainwright.

This is Emanuela calling for Joe Pantginis. I was wondering if you can give us a little bit more details about the design of the trial concerning CLBS119? Specifically, can you explain a little bit more about the target population? I guess I didn't understand, like are you targeting patients on ventilators or patients that came off ventilators? Also, like I was wondering, what's the route of administration of the therapy. And what are the end points of the trial? And how long do you think you need to see improvements for -- to be significant for the trial.

Thanks, Emanuela, and I appreciate you joining and asking that question. I'm going to turn that over to Dr. Losordo, our Chief Medical Officer. He's obviously been intimately involved in the design and can give you the answers to the questions you just asked. Doug?

Thanks, Dave, and thanks for that question. So I'll try to hit all the points that you asked about. Maybe I'll start in reverse order, route of administration. So as Dave mentioned, and as you probably know, most of the work that we've done using CD34 cells for tissue repair have been targeting the heart. And one of the challenges of delivering cells to the heart is that there's not a very simple route to get there. We initially tried in the laboratory an intravenous fruit of delivery. And we were frustrated to see that most of the cells ended up in the lung of the preclinical models. That, of course, is not a disadvantage here. And so we're able to take advantage of the fact by -- about -- take advantage of the fact that a simple IV administration of the cells will lead them directly into the lung. There's actually pretty good imaging data that's been done in the past that shows with labeled cells, obviously, in preclinical models that an intravenous route of administration is a very efficient way to target the lung. In terms of the patient population, of course, there's -- there are an array of ways that we could initially evaluate bioactivity. We've decided to start our investigation in patients, as you mentioned, who have had respiratory failure, who required ventilatory support, but who have come off the ventilator. So patients who are not still chronically ventilated. Those chronically ventilated patients, I think, will be an excellent target. But in terms of our first attempt to collect evidence for bioactivity. We thought that the patients who are still sick, but actually off the ventilator and therefore, able to do things like some pulmonary function testing and so forth, will probably have a more efficient way for us to collect information on bioactivity in this first cohort of patients. In terms of how long we expect to have to wait to see evidence for bioactivity. I can't really cite any data in the lung, but I can tell you from all of our previous studies, in cardiac applications and critical ischemia, it's pretty typical for 2 to 3 months to elapse before patients start to experience symptomatic benefit. And so that's my estimate of the time frame after the single administration when we would start to be able to register benefit in these subjects. I hope that hit all the points that you were asking.

And Emanuela. If I may, I just want to make a clarifying statement just so there's no confusion at all with some of the other listeners. The patients that we're treating were on ventilators are now off ventilators. And so we don't expect to have to wait 2 or 3 months of people on ventilators to see a result. This is all people who have been removed from ventilatory support, have been considered freed of the virus, but have a long-term debilitating lung damage, which is being treated by ourselves. I just wanted to make sure that, that's clear.

Sure. Yes. I guess just the last thing that is not clear to me are the like specific measurements you're going to use for the trial. Like lung function versus imaging?

Yes. So good question. And I would say, if there's an assessment that might give us information about the effect of the cells on the lung, you can be sure that we'll measure it. I mean, very simple things, of course, like measuring oxygenation. In patients who are still in the hospital, the oxygen level is probably the most sensitive indicator of how well the lung is functioning. And if patients are requiring supplemental oxygen then something that was repairing lung should result in a decrease in their need for supplemental oxygen. So that's a very sensitive and important indicator. But then other things like you mentioned, lung imaging. These patients -- the vast majority of patients who end up on ventilatory support have infiltrates visible in the lungs. And the very tough thing about this type of condition is that those infiltrates, which may be inflammatory in nature initially, can evolve into fibrotic infiltrates. And so one of the things that we would hope for with a successful therapy and reconstituting the microcirculation is that those inflammatory infiltrates don't mature into fibrosis, but rather return to normal lung parenchyma. And so the resolution of infiltrates is something else -- something that we'll also look at. We'll look at lung diffusion capacity, pulmonary function testing, when patients are able to perform those tests. We'll look at inflammatory biomarkers as an indication of the overall inflammatory state of the patient. These patients will -- well, many of them have -- still have elevation of inflammatory biomarkers. So pretty much anything that you can think of that would be abnormal in these patients as an indication of lung function is something that we'll follow.

And your next question comes from Pete Enderlin of MAZ Partners.

A couple of follow-ups on 119. You mentioned somewhere that there's some indication that deficiency of CD34 cells makes people more susceptible to the effects -- the severe effects of coronavirus. So does that suggest the potential for some kind of a preventive regimen with this kind of a technology for the coronavirus or some similar virus?

Pete, it's Dave. Thanks for your question. And I think we will not be exploring prophylactic treatment using a cell therapy at this time. I don't know that, that would actually be an appropriate thing to do, not knowing which patients are going to be getting the disease and which of those patients who do get it, are going to end up with severe lung damage. So I think our initial experiments will be focused on those patients who clearly have had lung damage due to COVID-19 induced and ventilatory support. And we'll follow-up from there.

Okay. And would you characterize this trial that you're envisioning as a Phase IIa?

Well, it's hard to -- the phase here is a little bit of a technicality, I guess. I mean, it's not going to be in healthy volunteers. It'll be done in patients. So I guess it's clearly not a Phase I trial in the traditional sense. But it is a proof-of-concept trial, but it's going to be designed specifically to look at a small number of patients initially, probably without a control, but we'll see. And so that may make it a IIa trial or in some cases, if we have a variety of doses of cells that are given to each of the different patients by virtue of the number of cells that they actually produce, it may end up being considered a small dose-ranging study. So I think you can view it as a proof-of-concept trial in patients.

What do you see, Dave, as a potential for nondilutive funding for that trial?

I think there's a fair amount of potential. I mean, since the pandemic has become widespread and taken over our daily lives, the U.S. government, international governments and a number of scientific and professional organizations have either diverted existing funds or designated new funds to be available to support research in these areas through grants and a number of other types of activities, whether it be participation from sites for free, et cetera. So we're exploring all of those things. As you can imagine, the list of companies looking to capitalize on the availability of that nondilutive funding is quite long. And I think initially, a lot of the attention has gone to folks working on vaccines, as you might expect, and those trying to treat the people with acute effects to keep them alive. But as time goes on, I think there'll be a broadening of opportunities. And I hope that we'll be able to take advantage of that. Doug and our R&D team have a really stellar record of being able to gain awards of nondilutive funding from a wide variety of sources, and we hope that we'll be able to do the same thing here.

Some financial questions, if I can. Joe, can you say who participated in the registered direct?

So we had Lincoln Park participate there with our equity line of credit. So they were a participant in [indiscernible]. So they made out the investors.

And are there restrictions on when they can sell the stock?

No, this was a registered direct. So they have -- they can sell the stock when issued. The warrants that were issued in this transaction are unregistered. So they will have to be registered in order for those to be exercised.

Is there anything you can say about the specific timing of this. I mean, you just had -- raised a nice slug of other money through the New Jersey sale. And the stock popped up a little bit and then you took advantage of that, but it was still a fairly depressed price when you consider the value of the warrants, it's probably an all-in effective financing at about $2 a share.

Well, we were pleased with the at-the-market terms that we were able to get. We think, relative to what's in the market and the amount of cash we can bring in at this time, it was a very good deal for us and one we wanted to take advantage of right now. So we feel it positions us quite well. It brings in additional shareholders into the stock. And as we look to expand our pipeline, it will help us fund and continue moving forward and expand the pipeline.

And then one more on...

Pete, let me add to that as well. Hold on, just let me -- just add a little bit to that as well because I think it's an important point. After we announced the NOLs, our major banking collaborator, H.C. Wainwright, actually contacted us with this deal. And they suggested that an intraday deal was possible with these folks. There were actually several deals presented, some of which had less attractive terms, but there was interest in accumulating Caladrius stock based upon the announcements that were made. And given the uncertainty in the financial markets, I think we had no choice but to execute on that deal. And in fact, we're very pleased that we did. Many companies are having very difficult times finding existing capital right now. And so to do a deal essentially at the market with the 50% warrant coverage, which is well below market terms for micro-cap companies right now who are often doing things with severe discounts and sometimes 100% in some recent deals, 200% more coverage. This was a good deal and to pick up an additional $5 million in working capital made a lot of sense for the company to extend our runway and to give us the opportunity to continue to generate data, which will be value creating for the company.

Okay. And can you say about what proportion of the New Jersey NOLs that you had were actually involved in that transaction? The sale of...

No, no, there -- none of them. They're separate transactions.

No, I know. But so that -- the $10.9 million or whatever it was. What...

That's all NJ NOLs.

Right? But it wasn't all of your NOLs, and you have -- there's a lifetime limit of $15 million of...

So we have -- Go ahead, Joe.

Yes. So, Pete, what I would say is it wasn't all of our NOLs. We have, as I mentioned, the lifetime cap of participation of $15 million. We've gotten more than 2/3 of the way there. We're hopeful that we can continue to participate in future years. We do have additional NOLs available. And certainly, in 2019, the NOLs that we generate there would also be eligible for sale. So within the next 1 or 2 years, we have enough NOLs that could reach that cap. But again, that's subject to our continued eligibility in the program. And the way New Jersey, the NOL program is worked there, it's a portion based on how many companies apply. So we feel pretty confident that we'll be able to continue to participate in future years and reach that cap.

On the Phase IIb, I guess, that you want to start in the fall for CLBS16, can you give us any sense of the size of the cost of that thing?

Yes. I'll give some general parameters. I mean, we will be announcing the exact details of the study once we're ready to get started. And that will be published on clinicaltrials.gov. But we're looking at a trial that will probably encompass somewhere around 100 patients overall. It'll be randomized and double-blinded controlled trial. And the total cost is going to be somewhere in the range of $12 million to $18 million. So the range I'm giving you is purposely broad because we're still in negotiations with our CROs and also because there are a number of potential collaborations that could help offset some of the costs, but that gives you at least an order of magnitude.

Yes, that's very helpful. And congratulations on everything you've been able to accomplish, especially without spending any more money. It seems like you're doing a great job.

Thank you, Pete.

[Operator Instructions]. And your next question comes from Jason Kolbert.

My name is Benjamin, and I'm asking questions on behalf of Jason Kolbert. I have two questions, one on the science side and one on the financial side. My first question is for Dr. Losordo. Please help me understand why the CD34+ cell is going to be successful in the cytokine immunological storm of COVID? And put this into perspective with the other three companies.

Sure. Thanks for that question. I can't speak to what the other companies are doing, but I can tell you, in great detail, about the rationale for this -- the use of the CD34 cell. As you probably know, the CD34 cell is a naturally occurring vascular repair progenitor cell. So it's in our bodies to repair, restore and maintain the microcirculation throughout the body, which explains why we're targeting different diseases in different tissues. The approach to patients with COVID lung damage is really an outgrowth of that well-established repair capability. One of the aspects of the CD34 is biology is that it is also an anti-inflammatory cell and attenuates hyperimmune situation that's been well shown in preclinical models as well. So you have a combination of the cell that is both capable of attenuating hyper immunity in inflamed tissues. And also capable with a very well documented track record of human studies of improving microcirculatory function and replenishing damage microcirculation. You may know from embryology that when organs are formed initially, the vasculature is often the first thing that has created and the parenchyma of the tissue, the functioning part of the tissue, forms around the nascent vasculature. There is data from preclinical models that, that same process that is a -- the formation of a vasculature can stimulate and maintain the regeneration of damaged tissue has been shown. And it's been shown specifically in the lung. So there are several lines of evidence that would support the rationale of using CD34 cells to repair the damage after a severe bout of COVID-19.

And my second question is for Mr. Talamo. I understand that you guys have cash and $10 million in tax credit. Help me understand your decision to raise $5 million in capital by selling warrants and stock to fast money institutions? What message does that send to people?

Right. So before Joe answers that question, I want to jump in here and say something. The characterization of the new investors as fast money institutions is your characterization, not ours. So I don't know if that's an appropriate use or appropriate adjective for our new shareholders, but that's your opinion, not ours. And secondly, I think I've already addressed very specifically why we think it was actually a very smart thing to collect new capital when it was offered in an environment where capital is very sparse and where most of the pandits are predicting that the capital markets are going to become more restricted, and it's going to become more difficult, not easier to find capital. So that's my statement to that, but I appreciate if we could avoid the purgative comments about some of our new shareholders. And then, Joe, if you could go ahead and respond, if you'd like to as well.

Yes. Dave, I think you covered it. We addressed it earlier. We think the additional $5 million that we brought in were in -- brought in favorable terms and it brought in additional shareholders to Caladrius. So all in all, we think it was a wise move to execute that transaction.

And this concludes the question-and-answer portion of the presentation. And now I will turn the call back to Dr. Mazzo for closing remarks.

Again, thank you all for participating on today's call. We look forward to speaking with you again during our next quarterly conference call and to continuing to bring you news of our achievements and progress. We remain grateful for your continued interest in and support of Caladrius Biosciences and please stay well, and have a good evening. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.