Welcome to the Caladrius Biosciences' Third Quarter 2020 Financial Results and Business Update Conference Call. Currently, all participants are in listen-only mode. Following management's prepared remarks, we will hold the question and answer session. [Operator Instructions] As a reminder, this call is being recorded today, Thursday, November 5, 2020. I'll now turn the call over to John Menditto, Vice President of Investor Relations and Corporate Communications at Caladrius. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. Welcome to Caladrius' third quarter 2020 conference call to discuss our financial results. Joining me today is Dr. David Mazzo, the company's President and Chief Executive Officer. Earlier today, we issued a news release announcing our third quarter financial results, which is available under the Investors section of our website. If you have not received this news release or would like to be added to the company's email distribution list, please e-mail me at jmenditto@caladrius.com. Before we begin, I'll remind you that the 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 identifies 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 the live broadcast, Thursday, November 5, 2020. Caladrius Biosciences undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. Please keep in mind that the company continues to conduct calls from different locations during the COVID-19 pandemic, so we appreciate your patience, should we have any technical difficulties. With that said, I will now turn the call over to Dr. Mazzo. Dave?

Thank you, John, and good afternoon, everyone. First of all, I hope all of you are in good health and are remaining safe. And thank you for joining us today on our third quarter business update conference call. As we entered the final stretch of what has been historically challenging year for the world due to the COVID-19 pandemic, I could not be more proud of the relentless focus, dedication and resolve shown by the Caladrius team to deliver strong operational performance during another highly productive quarter, while maintaining a strong financial position that will fund operations through the end of 2021. Despite the challenging environment brought on by the pandemic, we delivered on a number of strategic priorities in support of our robust CD34+ cell technology based clinical programs, on which I will further expand in a few moments following my review and comments on the financial results. Before that though, I will take a moment to welcome Anne Whitaker, as the newest member of our Board of Directors. Anne brings an abundance of leadership experienced notably in business development and corporate strategy that will prove invaluable as we continue to drive the evolution of our company. And with that, I will now review and provide commentary on our third quarter financial results. As you may recall from our previous quarterly update calls, we closed on the sale of a portion of our qualified New Jersey net operating losses nearly $10.9 million of non-dilutive capital pursuant to the New Jersey Economic Development Authority Technology Business Tax Certificate program. The entire $10.9 million was recorded in the second quarter of 2020 results as a tax benefit, resulting in the company reporting a net loss of $2.7 million for the nine months ended September 30, 2020, compared with a net loss…

[Operator Instructions]. Our first question comes from the line of Emanuela Branchetti.

Hello, guys and thank you for taking my questions and congratulations on the progress. I have a couple of questions. Can you please remind me the design of the study of the CLBS16 study? I don't think I remember how many patients you are planning to enroll? And how long do you expect this study to take?

Certainly, Emanuela thank you for the question. And thanks for joining the call. The FREEDOM study is actually going to consist of 105 patients, and it will be broken into a series of arms. We'll be looking at of course, an intracoronary injection of CLBS16 versus placebo in that study. And we will also be testing a retrograde injection to see if we could simplify the administration of the product, as well as looking at the possibility of administration of frozen product, or rather product that has been previously frozen. So there are multiple arms there. The endpoints for the study consist of typical endpoints in an angina program, and those specific to CMD. So there'll be - all the endpoints will be looked at six months of course we'll be monitoring at other time points, but six months will be the principal time period. And we'll look at coronary flow reserve, as well as angina frequency, exercise tolerance, and a number of other quality of life questions. The trial article is on clinicaltrials.gov as well.

Got it. Thank you very much for that. And switching on to CLBS12, I was wondering if you can give us a little bit of color on whether you're having conversation with the EMA? I remember CLBS12 getting - receiving advanced therapy medicinal product designation, by the EMA. And I was wondering out of those the conversation you are having with the EMA still going on, or you are obviously waiting for the results of the study?

Well, two factors have impacted our continued dialogue with the EMA. The biggest factor, however, is the pandemic. It is virtually impossible to conceive of starting a CLBS12 program anywhere in Europe at this point in time, given the resurgence of the virus, the stress on the various healthcare systems, especially in those countries where we would likely wish to conduct the trial. We have had a number of conversations and as you correctly pointed out, we do have ATMP designation in Europe, but we're also somewhat capital constrained, and probably even without the pandemic wouldn't have started a study in Europe until the results of the Japanese trial were most likely available. However, as our capital situation continues to improve, and as hopefully the situation of the pandemic abates in Europe, we may reconsider that timing.

Sure, that makes sense. Thank you for that. Just a couple of questions on CLBS119, if I can, so you mentioned that screening is ongoing, do you think with the current COVID-19 infection rate, how do you think - how long do you think the enrollment is going to take? And maybe I don't know if you can share that. But then can you share how many patients have been screened already and perhaps have received the drug thus far, if any?

Yes, I usually don't give patient by patient updates on clinical trials. But I can tell you that the screening process has been ongoing for a while and we've been identifying patients as well as looking to open some additional sites. What is frustrating about this particular disease is its constant evolution? And so, when we conceived of this trial, and chose our initial sights for opening back in the late spring, and early summer, the New York metropolitan area was one of the hotspots in the country. And we expected to see quite a large number of patients, especially given the treatment paradigms that existed at the time for the acute treatment of the virus. Since then, a number of acute treatments have been introduced that have improved the care of the patients, and so there were fewer patients who may be remaining on ventilators or even being ventilated to begin with. And it seems that the Northeast has passed its initial surge and other parts of the country are in fact the places where the highest prevalence of the virus exists. And so we're looking to open some centers in those other places, while continuing to look for the appropriate patients here in the New York region. Our initial estimates are that it would take between three and four months to enroll the correct number of patients. And so we've - you can start counting now. And we'll, we'll see. But maybe by the end of the first quarter, we'll have some news on patients in and maybe even some early data, if things continue to go as we hope.

Sure. And related to the comments you just made about how the different drugs are affecting the course of the disease in COVID-19 patients. I was wondering if you can give us a sense of the extent of the population you can actually address given as you said the effect of other drugs and the introduction of other drugs. Do we know how many patients that suffers from severe lung damage? And how many patients are still suffering from to severe lung damage at this stage of the pandemic?

The simple answer to your question is, we don't know. And as you can see, if you look at the literature that's being published, I think that's the term that most people have agreed on for patients who continue to suffer chronic effects of the virus, even after the virus has been cleared. I think the term is called long haulers or long timers or something to that effect. But people who have had the disease, and then have recovered from the infection, but still suffer some sort of effects. I've seen estimates from tens of thousands to potentially millions of patients, who may be in that category, but I'm not sure anybody really knows. And part of the problem is it seems that, again, if you look at the literature that's being published, that a number of patients who fit that definition of long haulers are actually manifesting their chronic symptoms, several months after they have been cured of the disease, if you will. So just in the Wall Street Journal, two days ago, very large article about these kinds of patients, and they referenced patients who have the disease back in the summer, had a case that was treated, they seem to have recovered, and after the recovery, they were fine. And then two months later, they start to experience symptoms, not of the disease per se, but of long-term damage, chronic fatigue, loss of memory, shortness of breath, cardiovascular symptoms, like atria fibrillation, muscle cramps, all kinds of things. And I think this goes again, to what is evolving in the literature to be, I think, a consensus that this is a disease that affects the microvasculature of the body. But the effect in the lungs may be the first one that you see. So it's a long-winded answer Emanuela. But we're not exactly sure how many of these patients will be people who will have this long-term lung problem, but it seems like there will be people who will have long-term problems consistent with damage to their microvasculature, which should be susceptible to our cellular therapy treatment, independent of the organ impacted.

That's very helpful. Thank you for that. And I go back to the queue. Thank you.

Thank you. Thank you.

Our next question comes from the line of Kumar Raja.

Hi. Thanks for taking my question and I would like also to continue in terms of COVID-19. So, looks like side line [ph] hypoxia is a big issue with COVID-19. So, by the time these patients end up in the hospital, probably they are having some extent of lung damage. So, in that context, what are you guys thinking in terms of, how much lung damage, what levels of lung damage do you think would be optimal, before you can start the treatment with CLBS119?

Well, that's a great question Kumar, and for the specifics of the inclusion criteria on the trial, I'll refer you and everyone else to clinicaltrials.gov again, because it's, it's all there. But in the beginning, we just had to bake, basically, also make an estimate of what we thought would be a level of damage that would be measurable, and would require patients to remain on supplemental oxygen. But that would be not so I would say grave that it would be impossible to see any therapeutic effect from our drugs. And so, we define that by levels of drug oxygenation and some other criteria for the inclusion in the trial. But basically, we're looking for people who seem to have cleared the disease, who do not necessarily, hope that to do not require continued ventilatory support, but do require supplemental oxygen in order to oxygenate appropriately. And that's the class of people that we are recruiting into this particular trial.

And in terms of HONEDRA, in terms of prescreening, what are you guys able to do there, maybe any update on that, like, how that is going to impact the enrollment?

Yeah, for about six months from, say, February, or there about to the end of the summer. Our trial, as well as most other trials in Japan was effectively stalled. Patients were quarantining, they were not leaving their homes, they were not going to see a physician, or to the hospital or clinic for anything other than COVID related problems. And so, we lost a fair amount of time there. Starting at the end of the summer and into the early fall, the September months, the clinics and the physician's offices began to slowly reopen, with patients becoming more willing to venture out and go to these doctors. But the thing that is a particular frustration for us is that many of the patients who are CLI patients are also patients who have the same level of co-morbidities that would make them the most susceptible to dangerous reactions to COVID-19. So, these are the patients who are being extra careful about staying sequestered in quarantine. And so, they're taking an even longer time to venture back out. And think about joining clinical trials, we do have a good number of patients who have been identified by physicians and who are now in the prescreening process to make sure that they in fact, do qualify, and will be able to meet the requirements of all of the follow-on visits. And we hope that we'll be able to convert the requisite number of them to into actually treated patients and complete the trial. We've made some progress, we have enrolled a few more patients. In September and October, we have a handful. Again, I don't give specifics, but we have a handful of patients to go. And we are coming into the holiday - end of your holiday period. So to be conservative and also with a bit of a resurgence in other countries and perhaps in Japan as well. We're predicting that we'll complete enrollment in the first quarter of next year. And from that point forward will be just in follow up and look to report, complete data by the end of the year, early '22.

Okay, great, thanks. Thanks, Kumar.

Our next question comes from the line of Pete Enderlin.

Hello, Pete.

Yes, hi, Dave. Thanks for taking the questions. On the 119 trial, just to clarify that were those people mostly be outpatients or were those be some that are still in and while you like going on any other site that you open up?

It can be either. It can be either. The point is that they at one point had to have been on a ventilator, they required ventilator support. And then they got off the ventilator. And they now require supplemental oxygen. Some, they remain in the hospital, and some maybe outpatients. But, it's really the question of requiring supplemental oxygen that is the principal criteria for enrollment.

Right. And then, separate subject entirely. Where do you stand on the new CFO?

We're actually recruiting. We've actually - We've had in-house, a highly qualified public company CFO consultant, who's kind of helping work with us on a number of items. But I will say that our internal accounting team, and including our Vice President of Financial Operations and Treasury, James Nisco is extraordinarily competent. And he has all of the accounting, reporting and financial aspects of the business well at hand. We are recruiting for a new CFO. This is a difficult time of year to recruit, because as we get into the holidays, people are less available. And also, I'll be candid with everyone on the phone. I'm still not entirely comfortable with hiring an executive into the company based solely on video interviews, which is all we can do right now. So I'd like to meet people and spend some time with them and get to know them. And it's a little hard for me to do that in two dimensions. So, we are well covered and it may take a little bit more time to find just the right person to take that role.

Okay, and then maybe tangentially related to that. What can you tell us about the funding status for CLBS14, other than that you won't do anything until you get it?

Right well, thank you for reminding us because that is, in fact, the situation I mean, what I will say is this, that this is not just a program that's just stalled, and we're waiting for somebody to pistol a grant on us or more for us to win the lottery. In fact, we have a very active dialogue ongoing with FDA at a variety of levels that we believe, once concluded, could have a material impact on the size and the scope, and therefore the cost and timing of the Phase 3 trial. So while the current agreement, if you will, based on FDA's last position, is such that we would probably need about $70 million, and about 39 months from first patient in to top line data. We think that there's an opportunity to reduce that, perhaps significantly. And we're going to complete those discussions with FDA before we go back to active and I would say focused fundraising for that program, because it certainly will be a lot easier to raise money that would be smaller in size. And for a study that will be shorter in duration. And that's what we hope to be able to achieve. Stay tuned as we continue our dialogue.

Okay, and very interesting, but can you give us any idea of how soon you may complete those discussions with the FDA?

I have absolutely no idea. And that is simply because CBER, if you've had the opportunity, I suggest, you can do a quick search on the search engine of your choice for Peter Marks, who is one of the Division Directors at CBER, the Center for Biologics, which is the center that reviews all of our application. At almost every conference presentation he's given lately, he's been very clear in reiterating the shortage of help that they have, the lack of resources and so on at CBER. So everything is taking much, much longer. And of course COVID-19 hasn't helped. They've had to give priority to a lot of things associated with COVID-19. So as a result, things that might have taken only a month or two under normal times are taking extended periods without any real ability to predict how long they will go. I will say this, we've been having these discussions for the better part of the year. And we're encouraged that we've had some recent feedback. So it means that at least somebody is looking at our stuff and hopefully we can drive with the inclusion. But I'd be deceiving everyone if I gave an estimate of when I thought this would all be done.

Okay. And then just one last one, $40 million in cash right now, good for five quarters, or obviously $8 million per quarter. But you're running about $5 million, so can you give any sort of like a shape of how that increases and due to which specific trials ramping up?

Sure, I mean, it's the FREEDOM trial, that's the name now that's been assigned to the CLBS16 Phase 2 trial, that's 105 patients trial. We're averaging less than $5 million a quarter right now, but the only active clinical trials are 119, which just started and we're finishing up the HONEDRA trial in Japan. We'll be enrolling patients at a very active clip in that 16 FREEDOM trial, starting very soon and, by the first and second quarter of next year, that'll be at, full pace, enrolling patients. And so, that's when the R&D budget will increase directly in line with the fact that we'll have many centers open and many patients being enrolled in order to complete that trial so going course of the next year or so.

So that would be running at that point and close to $10 million per quarter in total?

I don't have those numbers directly in front of me. I mean, what you can imagine though is that, there'll be a ramp up, there might be a slight ramp up in the fourth quarter of 2020. Because we do have some sites open already. And we'll be treating patients shortly. And then that will increase substantially for the first, second, or third quarters. And then finally, as we get toward the end of the year, most of the treatment we hope as long as COVID-19 does impact enrollment estimates will have been completed. And the study will be transitioning into the follow-up and endpoint section of this trial, which is less expensive. So I guess you can expect to no significant increase in quarterly expense for a second, perhaps third quarters of next year.

Okay. That's very helpful. Thanks a lot, Dave.

All right. Thanks, Pete.

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

Thank you, operator. 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 provide updates on our achievements and progress and we remain grateful for your continued interest in and support of Caladrius Biosciences. Please stay safe. Stay well, and have a good evening. Thank you and goodbye.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may now disconnect.