Welcome to the Caladrius Biosciences Second Quarter 2021 Financial Results and Business Update Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, Thursday, August 5, 2021. I will 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’ second quarter 2021 conference call to discuss our financial results and provide a business update. Joining me today from our management team are Dr. David Mazzo, President and Chief Executive Officer; and James Nisco, Vice President of Finance and Treasury. Earlier today, we issued a press release announcing our second quarter 2021 financial results, which is available under the Investors and News section of the company website along with the webcast replay of this call. 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 yet at jmenditto@ caladrius.com. Before we begin, I 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, August 5, 2021. 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, I will now turn the call over to Dr. Mazzo. Dave?

Thank you, John, and good afternoon, everyone. I hope that you are all well and to who are experiencing the ebbing of the COVID-19 pandemic and any effects that it may have had on you or your family. Thank you for joining us on our call today to discuss our second quarter 2021 financial results and recent business highlights. During the second quarter and first six months of 2021, we continued to advance our clinical development programs and strengthen our financial position, which we believe gives us the means to fund our operations for the next several years based on our current development plans, while also allowing us to explore additional pipeline expansion opportunities. Most notably, we delivered on a number of strategic priorities in support of our autologous CD34 cell technology-based clinical pipeline about which I will further discuss following the prepared remarks, covering the financial results. And with that, I will now turn the call over to James Nisco, our Vice President of Finance and Treasury, who will review and provide commentary on our quarterly financial results. James?

Thanks, Dave, and good afternoon, everyone. I am pleased to join you today and provide a review of our second quarter financial results starting with our operating expenses. Research and development expenses for the three months ended June 30, 2021 were $4.3 million compared to $1.8 million for the three months ended June 30, 2020. Research and development in the current year period focused on the advancement of our ischemic repair platform and related to expenses associated with efforts to advance CLBS16 in the Phase 2b FREEDOM trial, which now has multiple sites actively screening and enrolling patients, and expenses associated with the planning and preparation of an IND and proof-of-concept protocol for CLBS201 as a treatment for diabetic kidney disease, and ongoing expenses for HONEDRA in critical limb ischemia and Buerger’s disease in Japan, for which we continue to focus spending on patient enrollment and Japanese rolling NDA preparation. General and administrative expenses, which focus on general corporate-related activities were $2.8 million for the three months ended June 30, 2021 compared to $2.5 million for the three months ended June 30, 2020, representing an increase of 14% as a result of an increase in directors and officers insurance premiums as experienced throughout our industry and strategic consulting expenses. Overall, net losses were $5.7 million for the three months ended June 30, 2021 compared to net income of $6.6 million for the three months ended June 30, 2020. Turning now to our balance sheet and cash flow. As previously announced in January, 2021, we successfully closed on the $25 million capital raise through the sale of the company’s common stock and warrants to several institutional and accredited investors in a private placement price at the market under NASDAQ rules. Shortly thereafter in February 2021, the company announced that it closed…

Thanks, James. As has been my habit on previous calls, I will begin by providing a high level summary of what we are doing at Caladrius, and then further expand on each of our clinical programs. At Caladrius, we are focused on the development of autologous cellular therapies designed to reverse disease. We have late stage clinical programs underway based on a large database of human clinical data. To date, our therapies have shown signs of effectiveness and durability with a positive safety profile, unlike many allogeneic therapies, and we believe present the possibility of substantial pharmacoeconomic benefit. Most importantly, we remain focused on the development of personalized curative cell therapy products that can restore health and improve quality of life with a single administration of the therapy rather than one that requires frequent re-administration. A CD34 cell therapy technology has led to the development of a 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 administration of CD34 positive cells induces an angiogenesis of the microvasculature that is 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 chronic conditions caused by underlying ischemic injury can be improved through the application of our CD34 cell technology, including, but not limited to coronary microvascular dysfunction or CMD, critical limb ischemia or CLI, Buerger’s disease, diabetic kidney disease or DKD and no option refractory disabling angina or NORDA. I will now speak to each of our development programs kicking off with CLBS16, our promising CD34 cell therapy product for the treatment of coronary…

[Operator Instructions] And our first question is from Joe Pantginis with H.C. Wainwright. Please go ahead, sir.

Hi, this is Sara on for Joe. Thanks for taking the question. My first question is in with regard to the freedom trial in particular, is there a protocol in place in the event that patients due to test positive for COVID-19?

Yes, there is Sara. In fact, we've had several patients who have passed screening and we’re either scheduled for treatment or further follow-up and they tested positive for COVID. And when that occurs, if it's prior to treatment, their treatment is postponed until they can test negative. And that usually takes several weeks. If it's been after they have been given the treatment, then they only get their follow-up visits when they are also able to test negative. Although some of the follow-up can be done over the phone, not all of it. The other is physiologic testing involved. But most of the patients that have been impacted prior to the administration of the treatment, and so it's just put off treatment for several weeks, the pandemic is also closed or slowed down the enrollment in a number of our sites for some period of time, as those sites experience an influx of especially Delta-variant COVID 19 patients, and they're using more of their emergency and operating room staff to help out with those seriously ill patients in the short term.

Yes. All right. And my second question is that, how do you envision the regulatory path for CLBS201, assuming the positive outcome of your proof of concept study?

Well, there are two I guess, perhaps even three positive outcomes from this study. Going from maybe least positive to most positive, the first would be that we demonstrate that the product is well tolerated and that the patients experience a trend toward some sort of therapeutic effect, but nothing that is yet definitive which would mean we probably need to do a larger trial to get to some therapeutic efficacy or effect measurement. The next would be that we're able to to show safety again and also show that the product can slow the progression of the decline of eGFR in these patients. And that would be a very nice result, but because this is akin to what some of the more recent treatments that have been approved have been able to do, but they have to do that with multiple administrations of product. And the best case scenario would be, if we could demonstrate safety and demonstrate that we can actually reverse the decline of eGFR, essentially regenerating kidney and depending upon whether it's the first, second or third, it will determine whether there are more than one additional trial necessary, how big those trials will be and whether or not the product will be eligible for an RMAT designation and the consideration of a possible path to an early conditional approval.

Okay. Thank you.

Next week, go to the line of Shubhendu Sen Roy with Brookline. Please go ahead.

Thank you. I'm Shubhendu calling in for Kumar from Brookline. Appreciate the update. Thank you. Congratulations on the successful IND filing for CLBS201, I was just wondering if you could like some color in terms of patient recruitment for the plan Phase 2 for DKD, in terms of age, gender, et cetera.

Sure. So well, the patients will all be adults. So there all be 18 years of age or older, and I think they would have to be a less than 75 years in age. And they have to have rapidly progressing stage 3b kidney disease along with their diabetes. But other than that there are no gender or other kinds of restrictions. And for all the inclusion and exclusion criteria, the protocol is now available on clinicaltrials.gov. And so you can see all the details there if you like.

Very useful. Thank you. One more question you did touch upon the COVID situation and they riding and realizing COVID cases. I was just wondering if you could just provide some additional color on the impact of these raising cases on the HONEDRA trial in Japan. In the last year, you already informed that there were only a handful of patients and even now. So just wondering if there, I mean, what is your outlook in terms of site reopening generally, I mean look at the…

Sure, Shubhendu, I’m happy to address that. I didn't mean to overspeak you sorry about that. But no the recruitment in Japan has all been – but been shut down for about the last 18 months, when the Japanese government declared a state of emergency. One of the impacts that that state of emergency is that all major hospitals have to allocate all of their available facilities to treat COVID patients and non-COVID patients and especially the clinical trials are given extremely low priority. And so as a result because patients in our protocol in Japan require an overnight hospitalization stay after the treatment, there have been no beds available because of the ongoing state of emergency. And so we haven't been able to recruit. Our expectation is, although this is just speculation, we don't have any official word yet, but our expectation is that after the Olympics and toward the end of the summer that the Japanese government will begin to lift the states of emergency. And as they do, we have a number of people who have been screened and are in the queue waiting to be treated. And so I'm hoping that hospitals then are able to allocate resources reopen sites to clinical trials that will be able to get these people in and get them treated. And as I said, but only a handful to go, it shouldn't take us very long once we're up and running again to complete the enrollment to the trial. And then we just have to finish the one year follow-up on those finally enrolled patients.

Thank you so much. Sounds great. Thanks for taking my questions.

Next we go to the line with Pete Enderlin with MAZ Partners. Please go ahead.

Good afternoon. Thanks for taking my questions. Dave, you said that you expect to initiate diabetic kidney disease trial in the second half. Would you refine that down to either the third quarter or the fourth quarter, can’t you tell yet?

Well, it's probably going to be somewhere on the cusp of the tube. That's why we haven't been specific. So it could be September, October is our goal. But certainly before the end of the year, we expect to have our first patients enrolled in and remember, this will be initiated with the six patients running and to be a bit more specific. So everyone understands this the way that this has been set up with FDA and the DSMB, because this is the first time that we'll be making injections of our cell therapy product into the renal arteries is that the first patient has to be treated. And then that patient has to be followed for a certain amount of time to ensure that they have no adverse events. Then the DSMB will review that patient's file, agree that it's safe to proceed and give us the green light to then enroll the next patient. And we will follow that sequential approach until all six patients have been treated and evaluated by the DSMB. So we're expecting that it will take somewhere between six and maybe eight months to actually do those six patients because of the stop and start that's associated with that. And then we'll be able to move on to the 40 patient blinded randomized trial. And of course, that will be enrolling multiple people simultaneously across a variety of sites. And so we hope that that will evolve obviously much faster.

Okay. Thanks. And I had a sort of a general question about the FDA. I mean, they’re always difficult to deal with. But do you think that their state of engagement these days is worse because they’re distracted and preoccupied. And relating to that, not being able to agree with them was that mainly just where they are operationally or were there more specific disagreements regarding OLOGO that you just couldn’t get them to budge on? And what were those?

So let me be very clear when I provide this answer. I do not speak for the FDA. So only the FDA can speak for themselves, I do not speak. I can only comment on our experiences in dealing with them. So first it goes without saying that FDA is overwhelmed with work at the moment. Like many employers, they’re understaffed, they’ve experienced staff shortages because of COVID on two fronts because lots of treatments, including the vaccines need to be reviewed and a number of their employees have also been sick and have missed work. So they’re having a tough go of it, like everybody else and trying to keep up with workload. So that’s part it. I think – and that’s reflected in the fact that when our experience and I won’t be too specific here, because I don’t want to seem like I’m criticizing the agency, but just to say that typically when you request a meeting, the meetings are scheduled in a 90 day window. Now meetings are for us, at least they’re being scheduled in 180 day window. So, they’re obviously backlogged and that’s a bit of the issue. As it relates specifically to OLOGO, I think our issue comes down to as I pointed out here that they’re requiring us to perform a large Phase 3 trial, 400 patients that in and of itself is a challenge given that the patient population for NORDA in the United States is orphaned in size, which means there’s less than 200,000 patients, our best guess is that there’s somewhere on the order of 30,000 to 50,000 patients, NORDA patients here in the United States, so to try to do a trial of that size in that patient population is already challenging. Then what makes it more challenging…

Yes. Well, given the efficacy though, I mean, it seems kind of amazing that they couldn’t just see the value of the program and try to work with you more.

Why don’t you get a job at FDA, Pete?

Okay.

And we’ll send you our application. We agree with you. We were hoping that they would see it our way. But let’s just remember that. I think when push comes to shove, all of us would much prefer to work in a country where there’s an FDA rather than one where there wasn’t. So most of the time we come to very good, very reasonable agreements with them and they base their decisions on the science that they see, so that’s important.

Yes. Fair enough. On HONEDRA, there are only a handful of patients left in the 30% cohort, and it’s an open label trial. Can you give us some idea what the results look like? I mean, you said in the Buerger’s piece it’s roughly 60%. So how does it look for the 25% or so, whatever it is in the other part of the trial?

Well, remember this is a controlled trial. So in the Buerger’s cohort it was all Buerger’s patients. In the standard CLI cohort, there’s a randomization between treatment and standard of care.

Okay, so it’s open label, right?

Yes, it’s open label, but what I’m saying is that at any point during the 12 year follow-up a patient could convert from having CLI to being CLI-free. And then after becoming CLI-free, they could also convert back before the follow-up period is over. That’s why we’re reluctant to provide any data on that cohort, even though it’s open label until the whole patient population is done, because it could change. And it’s very confusing for investors and others to hear a changing data set. With Buerger’s that is done, so I have no problem telling you what the results are with that.

Okay. Now of course, Buerger’s got the orphan designation in the U.S., which means well under 200,000, which we know.

Yes.

But what can you say, if anything about the potential patient population for CLI as a whole in the U.S. if you ever get to that point?

I mean, the patient population for CLI is reasonably large. I don’t have the exact numbers at my fingertips because we haven’t candidly been looking to do anything with CLI in the United States just now. But the number is pretty big. Buerger’s however, is a small population, but it’s the one with a very high unmet medical need. And so we’re hoping that working with the FDA will come up with a reasonably sized trial for a Phase 3 commitment for that particular indication.

Okay. And Dave, you’ve talked generally about how it’s strategically important to expand the pipeline. And you can do that in a couple of different ways. Can you sort of give us a sense of your feeling on which way you can go? I mean, obviously one is acquisitions and other one is partnerships and just looking yourself at other indications. How do you see that playing out?

So I think [Technical Difficulty] but generally speaking, [Technical Difficulty]

I think you’re breaking up a little bit.

Your existing technologies into other indications or [Audio Dip] to acquire or partner on other products. I think, we will – we now have launched the program in a new indication that’s CLBS201 in diabetic kidney disease. I doubt that we will launch yet another CD34 technology indication until we get the data from FREEDOM or the 201 trial or HONEDRA in Japan. So we’re focusing our efforts on looking at what might be an avenue toward inorganic growth, which would be acquisition of assets for the pipeline or partnering on development for products of the pipeline.

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

So 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. We remain grateful for your continued interest in and support of Caladrius Biosciences. Stay well and have a good evening.

This concludes today’s teleconference. We thank you for your participation. You may disconnect your lines at this time. Have a great day.