Welcome to the Caladrius Biosciences Third Quarter 2021 Financial Results and Business Update Conference Call. Currently all participant lines are in a listen-only mode. Following management's prepared remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded today, Thursday, November 4, 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’ third 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; Dr. Kristen Buck, Executive Vice President of Research and Development and Chief Medical Officer; and James Nisco, Vice President of Finance and Treasury. Earlier today, we issued a press release announcing our third 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 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 risk 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 4, 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. As always in these continued trying times, I hope you are all in good health and remain safe. Thank you for joining us today on our third quarter business update conference call. Starting this quarter, Caladrius continued to advance and optimize its CD34+ cell technology-based clinical programs while maintaining a strong financial position that will fund operations for the next several years. All this, despite the challenging environment brought on by the COVID-19 pandemic. Notably, the company strengthened and further diversified its operations and management team with the addition of several highly qualified and experienced personnel, including the appointment of Kristen K. Buck, M.D. as Executive Vice President of Research and Development and Chief Medical Officer. Kristen's wealth of knowledge and extensive medical, regulatory and safety expertise across many therapeutic areas will prove instrumental during the company's evolution as we continue to advance and expand our clinical development programs and execute upon our vision. Kristen is particularly adept at focusing research and development on product development and already has made great impact on the execution and efficiency of our current programs. We are delighted to have someone of her caliber as part of our executive team here at Caladrius and you will have the opportunity to hear from her firsthand how she will provide an update on our clinical development programs in a few moments. Before that, I will turn the call over to James Nisco, our Vice President of Finance and Treasury to review and provide commentary on our financial results for the quarter. James?

Thanks Dave. I'm pleased to join today to present a summary of our third quarter financial results. Starting with operating expenses, research and development expenses for the three months ended September 30, 2021 were approximately $4.1 million compared to $3 million for the three months ended September 30, 2020. Research and development in both periods focused on the advancement of our ischemic repair platform and related to expenses associated with efforts to continue execution and acceleration of enrollment of the freedom trial, expenses associated with the planning and preparation of an IND and Phase 1 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 associated with maintenance of manufacturing facility and personnel qualification, as well as Contract Research Organization engagement. General and administrative expenses, which focus on general corporate related activities, were approximately $2.8 million for the three months ended September 30, 2021 compared to $2.3 million for the three months ended September 30, 2020, representing an increase of 22%. This increase was mostly due to a large increase in D&O insurance premiums as generally experienced across our industry and strategic consulting expenses. Overall net losses were $6.9 million for the three months ended September 30, 2021 compared to $5.3 million for the three months ended September 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 the $65 million capital raise through the sale of its common stock and warrants to several institutional and accredited investors in two registered direct offerings price at the market under NASDAQ rules. In addition, in May 2021 we announced that we received $1.4 million in non-dilutive funding as an approved participant of the Technology Business Tax Certificate Transfer program sponsored by the New Jersey Economic Development Authority. That program enables qualifying New Jersey-based biotechnology or technology companies to sell a percentage of the New Jersey net operating losses and research and development tax credits to unrelated qualifying corporations. Even at the tail end of the COVID-19 pandemic, while many small biopharma companies continued to experience difficulties and competed for capital, we successfully and opportunistically secured $90 million in new capital gross proceeds year-to-date in 2021. These resources have afforded us the financial security to focus on the execution of our business plan. As of September 30, 2021 we had cash, cash equivalents and marketable securities of approximately $100.1 million. Based on existing programs and projections, the company remains confident that its current cash balances will fund its operations for the next several years. That completes the financial overview. With that, I will now turn the call to Dr. Buck. Kristen?

Thank you, James and good afternoon everyone. I'm excited to join you today on my first Caladrius quarterly conference call and look forward to engaging with all of you in person in the months and years ahead. My focus throughout the first months at the company has been spent on evaluating and refining development strategies for existing programs in order to maximize the probability of clinical and commercial success, all while minimizing the capital outlay needed to achieve the next developmental milestone in each program. In addition, I've been immersed in the company's search for new assets to add to our development portfolio, both to diversify development risk and to increase development opportunity. As most of you know, Caladrius is focused on the development of autologous cellular therapies that are designed to both treat and/or reverse disease. We have clinical programs underway based on a large database of human clinical data. To date, our therapies have shown strong signs of efficacy and durability with an excellent safety profile, unlike many allogeneic therapies. Importantly, we believe that curative cell therapy products, when applied to the right indication and at the right price, can restore human health and improve quality of life with a single administration of the therapy, rather than a treatment that requires frequent re-administration. Our CD34+ cell therapy 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 administration of CD34+ cells induces 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.…

Thank you, Kristen. Overall, we are very pleased with the corporate and development achievements made in the third quarter. Throughout the remainder of the year, we expect to maintain and even build on our execution and strategic evolution with a focus as always on driving shareholder value. And with that overview operator, we're now ready to take questions.

[Operator Instructions] Our first question is from Kumar Raja with Brookline Capital.

Thanks for taking my question. So first, with regard to the HONEDRA in Japan, how does this impact the expenses near term? When do think that all the expenses in Japan will be taken care of?

Kumar, thank you very much. Thanks very much for your questions. And I think it's worthy to spend a little bit more time on HONEDRA. So specific answer to your question is, we expect to save several million dollars, or I should say, avoid about several million dollars of expense in 2022 as a result of the decisions that we've taken here. We've borne quite a large expense since February of 2020 in Japan, maintaining manufacturing facilities, personnel qualifications, CRO engagements, et cetera, and have unfortunately been able to enroll essentially no patients during that period of time because of the states of emergency. So we believe that this is a prudent action going forward from a financial perspective.

And with regard to the diabetic kidney disease, typically how much do these patients deteriorate if they're not treated?

Well, I'm going to ask Kristen to comment in a moment, but as you heard her say, what we're looking to do is to identify patients who are likely in the, roughly stage 3b section of the disease and who are rapidly progressing, so that we'll be in a position to measure a change in the rate of progression during the period of time that they'll be followed. Kristen, do you want to add anything to that?

Yes, thanks, Dave. The only thing I would add is, it's almost impossible to come up with a number that determines their rate of deterioration. As Dave said, we're looking for patients who are sort of maxed out on their medications, who have diabetes, who sort of are under control with their medications, but we think that they will be rapidly progressing in an effort to find a rate of change in such patients. But I think, to answer your question succinctly, one can't determine that and that's been the bane of a lot of clinical drug developers, problems over the years to be able to identify who and how quickly these people decline.

So the expectation is that potentially there will be stability in the disease progression or they won't progress as much?

Well, our goal here, Kumar, again, to be very clear is, we see this as a regenerative therapy if it will work. And if it does work, then it will compete in a marketplace where there are currently oral daily medications that already slow the progression of the disease. Our goal with CLBS201 is to demonstrate that we can regenerate kidneys function, so we're not looking simply to slow or stop the progression of the disease. We actually would like to see a regeneration and as manifested by an increase in eGFR, rather than a continued decrease in eGFR. So high hurdle, but we think it's one that's appropriate for what could be a regenerative therapy.

Okay. And in terms of the background diabetic levels of these patients, how are you going to control for that and how is that going to have impact on this?

Again, I'll let Kristen respond.

Yes, thank you Kumar. The eligibility criteria for the trial define the diabetic kidney disease patients that they should be on stable diabetic medications, stable kidney medications for periods of time prior to study entry. And they have studied defined lab criteria, which are akin to the other chronic kidney disease trials you'll find on clinicaltrials.gov. So they will be stable for a period of time prior to study entry.

Okay, and finally, with regard to CMD. So it looks like we will have an update soon on that. Is it mostly driven by what's happening with COVID-19 situation?

Yes, I think, generally want to classify this as a program that's been greatly impacted by COVID. Remember, the original protocol required patients to have a CFR measurement, as a screening CFR measurement at baseline and then CFR measurement at six months, all of those required visits to the cath lab, which involved visits obviously to facilities that are impacted by COVID and in many cases were restricting the access to non-COVID patients. In addition, as part of the treatment, a patient has to sit through an apheresis and that's another facility restricted procedure during the COVID times. So, we expect that a number of the protocol changes that Kristen has implemented, which will expand the types of CFR measurements that are being allowed, will actually minimize the number of invasive treatments and generally facilitate enrollment in a number of other ways, will hopefully increase enrollment. And also as the COVID pandemic becomes more and more under control. But a number of these protocol amendments have really just been implemented and it will take several months for us to be in a position to measure the impact. So we're hoping that by the end of the year we'll be able to measure the impact and on our next conference call, we'll be able to give you an update on where we stand.

Okay, great. Thank you so much.

Thank you, Kumar.

Your next question is from Emanuela Branchetti with H.C. Wainwright.

Hi, Emanuela.

Hi Emanuela.

Good afternoon, and thank you for taking my questions and I wanted to welcome Dr. Buck to the team. First a general question regarding the trial enrollment across the different programs and the current impact of the pandemic. This seems to be evolved, but still present. So I guess like what are you hearing more specifically from the sites? Are these issues of staff shortage or they're still related to less patients seeking treatment because of COVID, or a combination of all these factor? And also I guess, HONEDRA is a specific case, but do you find that these issues are different in different geographies?

Thanks, Emanuela. Yes, I think you've hit it right on the head here as it relates to our programs. Not to be, repetitive, but I think it's worth making sure that everyone on the call understands. When a patient wants to go through an autologous cell therapy treatment with one of our products, they have to undergo a number of office visits with a physician, they have to undergo an apheresis procedure, which usually occurs either in a dialysis unit or an apheresis unit, which is often in a hospital or clinical setting. And then they have to go through the actual administration, which takes place either in a hospital, in a catheter laboratory, an operating room, et cetera. All these facilities have been patient access restricted to one extent or another during the COVID pandemic, because patient facilities were either trying to limit the number of patients coming in without COVID, so that they wouldn't be exposed, because staff has been migrated to those units treating COVID because there has been a great increase in the number of people with COVID. Because patients, and then we had the issue, as you mentioned, a patient being reluctant to seek treatment during these times they've been staying home isolating, and facilities have lost staff, because they either move them to COVID units or staff has been relocated to work remotely if its administrative staff and coordinating staff, or simply, they become burnt out and they've left the jobs. And so, we've felt impacts from all of that across all geographies. And then in Japan, we had the added impact of the Japanese Government indicating health states of emergency almost consecutively beginning in February of 2020 until very recently, and during those states of emergencies, all major hospital facilities were restricted from treating anything other than COVID related illnesses. So clinical trials like ours, which required hospital facilities were simply stopped and we couldn't enroll any patients during that period of time. So it was a little worse from an enrollment perspective in Japan, but we have, to a great extent many of the same challenges in all geographies.

Yes, yes. Thank you for that. And regarding HONEDRA with only four patients remaining and given the persistence of the situation, I was wondering if you have talked more recently to the regulatory authorities in Japan about submitting the existing data set? And also, are there any precedents that could support a positive outcome for this possibility? And then I have another question about the rolling submission.

Okay, so, the, the idea of precedent is a little tricky, because, under the regenerative medicine law, and with the SAKIGAKE designation, the Japanese regulatory authorities essentially worked directly with us to define a trial of, I'm going to say arbitrary size, arbitrary because it's not statistically driven at all. So they decided that 30 patients, in no option CLI and five patients in Buerger’s disease would be an interesting enough population that if we were able to demonstrate safety, and a trend toward efficacy in that population, that would be sufficient for them to consider us for at least a conditional approval, if not a full approval. To date, we have 26, critical limb ischemia patients and seven Buerger’s burgers disease. We have two more than the original five, in agreement with the regulatory authorities. So we have a total of 33 patients, instead of 35. The number is not statistically driven. And so, we think that there's the opportunity for flexibility here, but it does require the Japanese regulatory authorities to agree to that. And the particular issue that we have as a non-Japanese company, is that these discussions are typically held in person with the Japanese regulatory authorities. And Americans are still not allowed to travel to Japan for anything other than essential services. So we are, we've been prohibited since February of 2020, from going to Japan and having this discussion with the Japanese authorities. And our best guess is that it won't be until early 2022, when we would be allowed to go to Japan and have that meeting. And of course, we have to request that meeting, and then have it scheduled. So it's probably going to be, well into the spring. For that reason, we think that a Japanese company would be better placed to have that conversation, because they're already there and they can go whenever they want. And that's why we're focusing on efforts on trying to secure the partnership now.

Okay, that's very helpful. Thank you. And this is like, I don't know if it is possible, but since the plan is for a rolling submission, could you potentially begin the process ahead of the completion of the study? Maybe when you have a sense of, it's going to take you to complete the study. But is that not the rolling…?

The rolling submission, in theory it could start at any point in time, but the trigger for the rolling submission is a face-to-face meeting with the PDMA. So we've been slowed from that perspective as well and that's why we're not in a position to start the rolling submission and we would need a partner to work with us on that in any case.

Okay. Got it. Okay, thank you for that, very helpful. And I guess I wanted to follow up on the what you were talking about broadening the techniques used for CMD diagnosis for the XOWNA program and maybe if you can just talk to us a little bit more about the protocols amendment you implemented to facilitate enrollment?

Sure, I'll make a brief comment, and then I'll turn it over to Kristen to give you some more details. But just recall that at the beginning of the trial, we had stipulated that CFR was to be measured using the Doppler technique using a specific catheter that was made by Philips. And since the start of the trial, Philips has decided to discontinue that trial. So it's only got very limited availability. That was a particular issue. And then only using an invasive Doppler technique also posed some challenges relative to patient enrollments. So we've opened it up to a variety of additional invasive and non-invasive techniques. And I'll now let Kristen give you some of the specifics about those.

Yes, hi, and thank you for the warm welcome. As Dave said, We've open it to both invasive and non-invasive, and what we're looking for is things like coronary blood flow, response we see to choline, myocardial perfusion reserve, myocardial flow reserve, or index of microvascular resistance. And we're looking at different methods without getting into too much granular detail as thermo dilution techniques, MRI and cardiac PET scans. And so what this allows our investigators to do is to use whatever their site typically uses for coronary reactivity and functional coronary activity tests. So it has allowed us to open up our enrollment quite significantly, and hopefully we'll see those results in the coming quarter.

Got it. That makes sense. Thank you very much.

Thanks, Emanuela.

Your next question is from Pete Enderlin with MAZ Partners.

Hello, Pete. How are you?

Good. Thank you. You've given us a lot of specific information. I just have a couple of sort of broader questions left at this point. One is, looking at the fact I guess you'd say that you really haven't had any recent success in obtaining non-dilutive funding, from foundations or patient interest groups or whatever. Are there differences in the availability of funding? The amount of money that these different organizations would have available for the three main disease areas that you're dealing with, cardio and vascular and, and kidney? So that there's something a more opportunistic targets than others without regard or thkbasically in ty that are more opportunistic targets than others without regard or they're basically not a whole lot of money is available for any for non-dilutive funding?

Well, thanks Chris and Pete for that question. And I'll just remind you that we did get about $3 million of non-dilutive funding from the state of New Jersey from the sale of our net operating losses.

You already had that. It was just a matter of monetizing it, so I'm not counting that. I'm talking about, getting money from…

Okay, so from the grants perspective, there are a number of sources, but the principal sources for non-dilutive grants come from either the federal government through a variety of its agencies, or specific disease related foundations like the American Diabetes Association, or the American Heart Association. Most of those organizations have a cycle for grant application and review that runs on the calendar year. So that you typically put in the proposals in the early part of the year, the reviews take place, and by midyear, if you're funded, you find out and you often get the funding by the end of the year, and then that funding, depending on its magnitude, can be spread out over one or multiple years. The types of fundings available from a lot of the alcoholic disease related foundations is often specifically directed to new clinical investigators, to clinical sites. And often to academic institutions, it's very unusual for those organizations to provide financial support to public companies for research and development. They may help by working with patient groups to help with recruitment, et cetera, but they often just simply don't give money. Now, in the case of the NIH, and in other government organizations, every year, they have a stated focus on the types of diseases that they would like to see treated. And so they put out a request for proposals in those areas. And we typically apply for every single grant that for which we have even a small chance of being able to achieve them, and we've made those applications. But the number of applicants far exceeds the amount of money that's being distributed and so that's where we stand, but we continue to make application whenever there's something for which we're eligible, and we hope that we will eventually get some additional grants. And notwithstanding the fact that you don't count it, $3 million of real cash in our pockets is real money. And I think it's important to not discount that and there'll be more New Jersey NOLs in the future.

Okay. Well, thanks for that clarification. I just have one more which also relates to funding I guess, in a way and that is, when you consider opportunities for strategic funding or partnerships does the fact that all of your programs and you've emphasized that on this call for one-time therapies, does that in a way limit the appeal to some of these larger companies, because -- and big biotech companies is referring treatments. And, I think one-time treatments are a great thing, but maybe that's not as appealing to some of the potential strategic partners?

Well, and I can't speak for them specifically, we've not received feedback, as with that being the reason why they wouldn't be interested, I think, what most people would assume is that for a curative treatment, or a treatment that has a very infrequent dosing, spread out by years, for example, that the pricings would be commensurate and so that they would still be able to, make a profit, an appropriate profit over time. So I don't think that that's really been the biggest issue. I think the bigger issue is simply that they are understanding that, the pandemic has had an influence on the kinds of things that can be advanced during the clinical developments, trials and anthem, just waiting to see when we're able to generate some additional data and we're hoping that that's something that certainly in 2022 is something that we're looking forward to doing.

Okay, well, thanks. That's very helpful. Thank you.

Thanks, Pete.

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

Well 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 for continuing to provide updates on the company's achievements in progress. We remain grateful for your continued interest in and the support of Caladrius Biosciences. Stay well and have a good evening. Goodbye.

This does conclude today's presentation. You may now disconnect.