Lisata Therapeutics, Inc. (LSTA) Q1 2022 Earnings Report, Transcript and Summary

Welcome to the Caladrius Biosciences First Quarter 2022 Financial Results and Business Update Conference Call. Currently, all participants are in origin only mode. Following management's prepared remarks, we will hold a Q&A session. [Operator Instructions] As a reminder, this call is being recorded today, Thursday, May 5, 2022. I will now turn the call over to John Menditto, Vice President of Investor Relations and Corporate Communications at Caladrius. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Caladrius' First Quarter 2022 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. Shortly before this call, we issued a press release announcing our first quarter 2022 financial results, which is available under the Investors and News section of the company's website, along with the webcast replay of this call. If you have not received this news release and you would like to be added to the company's e-mail distribution list, please e-mail me at jmandido@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-Q, 8-K and 10-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 remains time sensitive, but contains time-sensitive information that is accurate only as of the date of this broadcast, Thursday, May 5, 2022. Caladrius Bioscience undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. With that, I will now turn the call over to Dr. Mazzo. Dave?

Thank you, John, and good afternoon, everyone. Thank you once again for taking the time to join us today as we provide an overview of recent business highlights and discuss our first quarter 2022 financial results. During the first quarter, we continued to advance our CD34-positive cell therapy development pipeline with the initiation of the proof-of-concept study for CLBS201 in diabetic kidney disease. However, our most important achievement coming just after the quarter concluded, was the culmination of our efforts to diversify and expand our development portfolio, which resulted in the recently announced signing of a merger agreement with Cend Therapeutics. This transaction will be transformational for Caladrius, creating upon closing a financially sound NASDAQ-listed company with a diverse product development pipeline, strong existing partnerships and potential for future attractive partnerships. The merged company will operate under the name of Lisata Therapeutics, Lisata for short, and we'll focus on exploiting the full potential of Cend's CendR Platform technology products in a range of solid tumor oncology indications. CEND-1 the lead product candidate from the CendR Platform has the potential to be combined with Myriad chemo and immunotherapeutic agents and could become an integral part of a revised standard of care therapy for many difficult-to-treat cancers. The combination of Caladrius and Cend will allow the Caladrius team to leverage its broad development expertise and experience, specifically in oncology with the goal of rapidly progressing Lisata's product development candidates toward global registrations. As a result, Lisata anticipates achieving multiple potential value-creating milestones over the next 24 months. Simultaneously with the signing of the merger agreement last week, Caladrius also entered into collaboration and investment agreements with Cend, whereby we made a $10 million investment in Cend and created a development collaboration structure, including a joint steering committee, from which we will be providing human resources over the course of the next several months leading up to the closing in order to maintain the momentum associated with the development of the exciting products in the Cend pipeline. We will be working diligently with Cend and with you, our shareholders, to finalize the transaction and look forward to announcing the closing by our target of the end of the third quarter of this year. As I hope you can hear in my voice, we couldn't be more excited and motivated about the prospects that this merger will bring for patients and shareholders. I now will turn the call over to James Nisco, our Vice President of Finance and Treasury, to review and provide commentary on our first quarter 2022 financial results. James?

Thanks, Dave. I'm pleased to join you today to present a summary of our first quarter 2022 financial results. Starting with operating expenses; research and development expenses for the 3 months ended March 31, 2022, were $3.3 million compared to $5.1 million for the 3 months ended March 31, 2021. Research and development activities in the current year period 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 and expenses associated with the planning, preparation and initiation of the Phase Ib proof-of-concept trial 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 study closeout activities and preparation for the pre-consultation meetings with the PMDA. General and administrative expenses, which focused on general corporate-related activities were $3.3 million for the 3 months ended March 31, 2022, compared to $3 million for the 3 months ended March 31, 2021, representing an increase of 11%. This increase was primarily due to an increase in fees associated with the review of potential strategic transactions. Overall, net losses were $4.2 million and $8.1 million for the 3 months ended March 31, 2022 and March 31, 2021, respectively. Turning now to our balance sheet and cash flow. As of March 31, 2022, the company had cash, cash equivalents and marketable securities of approximately $88.5 million, which positions us well relative to the projected capital obligations for our existing development programs as well as our cash and investments balance target at the time of closing of the merger with Cend. That completes the financial overview. With that, I will now turn the call over to our Chief Medical Officer, Dr. Kristen Buck, for the review of our clinical development pipeline. Kristen?

Thank you, James, and good afternoon, everyone. Caladrius is currently developing a set of autologous cellular therapies designed to treat or reverse disease. Based on human clinical trial data generated 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 potentially improve quality of life with a single administration as compared to a treatment that requires frequent re-administration. With that said, we have long recognized that the medical promise that we see does not correlate with the value ascribed to our pipeline as indicated in our share price. This dichotomy was the basis for our quest to identify and secure additional development candidates with the strongest affinity ascribed to products that we believe hold great medical potential are in indications of high unmet medical need and where they can be positioned advantageously can be materially advanced in their development with mostly our existing capital and represent therapeutic areas that have been historically attractive to investors. Our merger with Cend allows us to tick all our requirement boxes, and I am personally thrilled to become involved in the development of the Cend product pipeline. With that as a general introduction, I will now expand on each of the Caladrius clinical programs in numerical order. Kicking off with CLBS12 Honedra in Japan, our product candidate for the treatment of critical limb ischemia and Buerger's disease. HONEDRA was awarded a SAKIGAKE designation from the Japanese regulatory authorities for the treatment of critical limb ischemia and Buerger's disease, which is an orphan-sized subset of critical limb ischemia. The SAKIGAKE designation is akin to the regenerative medicine advanced therapy designation or an RMAT designation in the United States. SAKIGAKE designation affords the recipient prioritized regulatory consultation, a dedicated review system to support the development and review process, including the option of a rolling registration submission as well as reduced review time of 6 months for the registration effort once filed. Additionally, under Japan's Regenerative Medicine legislation, products such as HONEDRA are eligible for conditional approval and possibly full approval in Japan based on the assessment of the data from the trial or trials designed in direct collaboration with the Japanese Pharmaceutical and Medical Devices Agency, known as PMDA. Note that conditional approval of a regenerative medicine product only requires a demonstration of a trend toward therapeutic effect together with acceptable safety. Further, the SAKIGAKE designation is a highly sought regulatory classification in Japan. And we hope that this, coupled with positively trending data from our trial will make HONEDRA an attractive product for partnering to a Japanese pharmaceutical company. The company study of HONEDRA in Japan for the treatment of critical limb ischemia and Buerger’s disease has shown positive results to date. The initial response is observed in the subjects who have reached an endpoint in this study are consistent with our expectations of therapeutic effect and safety based on previously published clinical trials in Japan and the United States. However, as discussed in prior quarters, we have suspended our enrollment efforts to minimize the operational and financial burden that we have incurred and continue to incur due to enrollment delays and the lack of visibility on the time to completion. The company has turned its focus to securing a partner in Japan to complete the study by enrolling the 4 remaining no-option critical limb ischemia subjects, if deemed necessary and/or to explore the possibility of submitting this existing data to the Japanese regulatory authorities. In an upcoming clinical pre-consultation meeting with the PMDA, top line results from the study will be presented and discussed, and we expect that they will provide important perspective to be considered in preparation for the formal consultation meetings, which precede the Japanese new drug application. Turning now to XOWNA where CLBS16 for the treatment of coronary microvascular dysfunction, or CMD. CMD is a disease that continues to be underdiagnosed and potentially afflicts millions annually, a vast majority of whom are female with no current treatment options. In May of 2020, Caladrius announced the full data results from the Phase IIa ESCaPE-CMD trial, showing a highly statistically significant improvement in coronary flow reserve correlating with symptom relief for patients with CMD after a single intracoronary injection of XOWNA. Subsequently, the company initiated and is currently treating patients in a rigorous Phase IIb clinical trial known as the FREEDOM trial, which, to our knowledge, is the first controlled regenerative medicine trial in CMD in the United States. The FREEDOM trial is a double-blind, randomized, placebo-controlled trial designed to corroborate the results of the ESCaPE-CMD trial, while assessing the efficacy and safety of delivering autologous CD34+ cells, our XOWNA product is subjects with CMD and without constructive coronary artery disease. Initially, investigator and potential subject response to the FREEDOM trial was favorable and early enrollment in the trial proceeded as planned with the first patient treated in January of 2021. However, since the inception of the trial, the impact of the COVID-19 pandemic in the United States, coupled with supply chain issues associated with the catheters used for the diagnosis of CMD and/or administration of XOWNA, have made and continue to make enrollment much slower than originally predicted and challenging to accelerate. Caladrius has taken steps to accelerate enrollment by expanding the number of participating investigational sites as well as modifying the study protocol to make study including criteria more flexible. We are continually monitoring study progress, and we will consider additional future protocol and/or executional changes as appropriate. Lastly, our most recently proposed development program, CLBS201 for the treatment of diabetic kidney disease, or DKD. The company initiated a Phase I open-label proof-of-concept trial evaluating CLBS201, a CD34-positive regenerative cell therapy investigational product for intrarenal artery administration in patients with diabetic kidney disease. The development program focuses on patients that exhibit rapidly progressing Stage 3b/4 disease. The scientific rationale for the program is based on the association of progressive kidney disease with attrition of the microcirculation of the kidney. Preclinical studies in kidney disease and injury models have demonstrated that protection or replenishment of the microcirculation results in improved kidney function. Our proof-of-concept protocol provides for a staggered sequentially dosed cohort of 6 patients overseen by an independent data safety monitoring board with the objective of determining the tolerance of intrarenal cell therapy injection in diabetic kidney disease patients as well as the ability of CLBS201 to regenerate kidney function. A key readout of the data will occur at the 6-month follow-up visit for all patients. And as previously announced, the first patient was treated in this study of CLBS201 in April of 2022, leading to top line data from all subjects expected by the first quarter of 2023. With that, I will now turn the call back to Dr. Mazzo. Dave?

Thanks, Kristen. Before we move on to Q&A, I'd like to revisit our announcement and conference call of last week, specific to our merger with Cend Therapeutics and the creation of Lisata Therapeutics, a new diversified therapeutics company that we believe will be well positioned for future growth and the generation of great value for patients as well as for shareholders. I believe it's worthwhile to take a moment to put this transaction into perspective in the current financial environment of high inflation, disappointing earnings by tech companies tightening availability of capital and sociopolitical chaos. According to Barron's, the S&P 500 had its worst start to the year since 1939. Additionally, the XBI, a widely accepted measure of the biotech markets performance has mirrored that poor performance and is down approximately 35% year-to-date and the aggregate enterprise value of the world's biotech sector is down approximately 70% since it peaked in February of 2021. IPO and follow-on offerings are also down almost 100% on a year-over-year volume basis. pipe transactions are exceedingly difficult, if not impossible, to consummate at this time. And as of last week, there were 194 life science companies with a negative enterprise value, meaning that they were trading with a market value of less than their cash holdings. Finally, those microcap issuers that have been able to raise capital in the quarter are mostly doing so under the most painful of financial terms with warrant coverage on deals often exceeding 100% and many deals carrying 200% warrant coverage. Without a doubt, these are challenging times, and we believe that the companies that will survive and ultimately thrive are those that control their own destiny by being proactive in addressing the headwinds that they face. This was the spirit that Caladrius has been seeking to diversify and derisk our development pipeline outside of cardiovascular autologous cell therapy. Our merger with Cend Therapeutics will accomplish this goal. We are truly excited about the prospects for success of the CendR Platform's technology in difficult-to-treat cancers and look forward to working with our Cend colleagues to rapidly advance treatments based on this platform to the market to benefit cancer patients and our shareholders. And with that, operator, we're ready to take questions.

Thank you. [Operator Instructions] Your first question comes from the line of Kumar Raja from Brookline Capital. Your line is open.

Thanks for taking my questions and also for providing the update. So with regard to HONEDRA, the pre-consultation meeting looks like that's going to happen very soon. And my question was like with regard to the PMDA guidance, will that be based on the interactions you will be having at this pre-consultation meeting?

Kumar, thanks for joining the call and for the questions. I appreciate it. And you're actually right. First, the pre-consultation meeting is expected to occur in the next several months. It's obviously dependent upon the scheduling as controlled by the PMDA. And the pre-consultation meeting is part of the process that's associated with the SAKIGAKE-designated in which the regulatory authorities can get a preliminary look at data and provide us with direct guidance on how to present it, amend it, and potentially refashion it such that the official consultation meeting when it occurs, could proceed more smoothly and with a higher probability of a positive result. So yes, we should come out of that meeting with clear guidance on how to proceed into the next steps of the process, which would include ultimately consultation meetings with the PMDA, but also some additional pre-consultation meetings on the other parts of the Japanese new drug application, including the preclinical section as well as the CMC sections.

Okay. And in terms of finding a partner in Japan, what can you share with regard to that?

Well, I can repeat what I've said multiple times, frankly, over the last year, we have had and have more than a half dozen companies who remain in diligence and have expressed serious interest in the product, assuming that their decisions will be finalized once we get further guidance from the PMDA. So I expect that after the guidance from the pre-consultation and then potentially as we move into the consultation phase, as the regulatory authorities express continued support for the program, I think the chances of closing a transaction with a Japanese pharmaceutical company for HONEDRA increase over time.

And in terms of CLBS201 in DKD, what's happening in the screening front there? And -- is the expectation that once you are satisfied with the first dose, you will have the second patient ready to be dosed. And say...

That's exactly right. So the protocol is designed with 2 sentinel patients, the first one, which has already been treated and actually has -- the DMC has met for that patient and actually has approved us moving on to the next patient. The second patient will be receiving bilateral injections. And in fact, the second patient was dosed today. And now we will wait 2 weeks after that patient for the DMC review. And if that patient does well and the DMC is satisfied, then we will move on to patients 4 through 6 but there will not be a required observation period of 2 weeks between each of them. So the remaining 4 patients will be dosed as quickly as they can be identified, past screening and go through the process to have manufacturing scheduled.

Okay, great. Thanks so much.

Thanks, Kumar.

And your next question comes from the line of Emanuela Branchetti from H.C. Wainwright. Your line is open.

Good afternoon, everyone. And thank you for taking the question. One question around HONEDRA for me as well. So you just mentioned the strategy there. But I was wondering, you're going to be disclosing the top line data with the PMDA. I was wondering what is the strategy for the data release to the public. Are you waiting to disclose the data with the PMDA, see what their guidance is and perhaps you can evaluate whether you can disclose this data?

Hi, Emanuela, it's nice to have you on the call as well. Thank you for the question. I think you've answered your own question to some extent. This is an open-label trial. So we have been providing, I would say, top line descriptive data all along, not patient-by-patient data. And we've announced that the trial is demonstrating the requisite trends toward efficacy and the safety profile that we think satisfies the requirements for conditional approval for a regenerative medicine product. But we've been very careful about releasing the completed data sets to the public until we have a conversation with the Japanese regulatory authorities. We don't want them to feel that our release of the information to the public is in any way intended to force their hand one way or the other. So it's a judgment call, but we will only release the full analysis after we've spoken with the regulatory authorities and have their agreement that doing so would not jeopardize the review of the product for registration.

Understood. And with regard to XOWNA, you just mentioned about the enrollment activities. I just want to have a sense of whether you are seeing the effects of your protocol adjustments, have you been able to add more sites at this point for this trial?

So when we -- I think it was at our last conference call, in fact, when we said we were going to be working to add additional sites. We have, in fact, added some sites. This is a program that has been fraught with obstacles. It's really frustrating for us and for the sites and for the patients that want to participate. And we've alluded to this in our press release as well as in our comments today. So initially, we had the issue with COVID and lack of available personnel and openings at sites and then the difficulty of patients to move around and the ability of patients to test the screening and have a negative COVID test. And then just as we started to add more sites and had made some arrangements, we found that the catheter is at least one of the major catheters from Philips that was used in the coronary flow by Doppler technique, it was discontinued, and so we had to amend the protocol to allow for other means of measuring and diagnosing CMD. And more recently, we've had at least one it may even be 2 of the catheters that are qualified to use for administration of the product, suffered supply chain issues and can't be found. And so we're having to struggle with either requalifying additional catheters if we can actually find them and have an adequate supply chain or scramble to move products catheters from one site to another, which is not always within our purview. So it's been a difficult time. And to answer your question directly, we have added 2 sites, but the addition of sites alone isn't going to solve our problems right now.

Got it, thank you very much.

Thank you, Emanuela.

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

Hi, thanks for taking the questions. Dave, when will the proxy statement be filed with the SEC for the deal?

Hi, Pete. Nice to have you on the call again. Our goal is to have the proxy statement filed sometime by the end of May or early June. The rate limiting step in that is completion of some of the financial audits and also the management discussion and analysis and the compensation discussion analysis that has to be contributed by Cend. So they're on the critical path for getting those things to us and the current time line targets at the end of this month or early June for the.

A little more color on who the Cend stockholders are? I mean, how many of them are there? Is there some way to characterize them generally?

I can say that's -- so I'm not at liberty to give specifics because they're a private company, and so that's not my prerogative to give the information that I've received under confidentiality. But I can say that there are like many private companies, they are closely held, private company. There are less than 10 major shareholders with a half dozen or so holding the majority of the shares. And that's divided among some founder shares, some high net worth individuals and some health care funds.

And what's the method for determining the exact ratio of ownership. I don't mean how it will turn out, but what are the parameters that will go into that.

Well, the parameter is that will be described in detail in the S-4 in the proxy. And the -- first of all, they're based upon the valuations assigned to each company based upon the potential seen from a market perspective, appropriately discounted for a stage of development. They're looking at other assets that the company have, including existing deals, milestones that are expected, cash on hand, competitive positioning in the marketplace as well as any liabilities that would be there that might detract from that. And then once those calculations are done with all of those factors included, it becomes simple math. It's just a ratio of outstanding shares of Caladrius versus outstanding shares of Cend appropriately valued based upon the final value of each company. But you can assume that it's going to be essentially a merger of equals from a valuation perspective.

Are you using any investment bankers to do that?

Well, yes, there -- we had on our side, Back Bay Life Science Advisors, which was part of the process and the valuation process, and they will also be providing the fairness opinion, which is required for a public company. And on the Cend side, there is Evercore, which is a similar boutique investment bank M&A adviser, which is working with Cend and they've collaborated with our attorneys as well as the legal advisers for Cend to come up with an acceptable set of definitions, the factors that go into the calculation of the valuation ratio, the math, the formula, if you will, as well as any adjustment factors that would be considered at the time of closing.

Thanks, and can you give a little better sense of the broad applicability of the send AR technology? I mean I sort of get the gist that it's something that could be used in conjunction with a lot of different cancer therapies, immunotherapies and other kinds of chemotherapies and stuff, but how broadly could it be applied?

Well, I think you've kind of answered your own question to some extent, Pete. But our expectation is that it will be applicable extremely broadly. I mean one of the things that's so exciting about this technology is that it gives us the opportunity. So think of CEND-1 as the facilitator to existing standards of care in really difficult solid to treat tumors. And if you talk about pancreatic cancer, hepatocellular cancer, gastric cancer, colorectal cancer, a variety of breast cancers, head and neck cancer, some brain cancers. I mean the list is quite long. These are cancers where the current state of the art, the current standard of care has relatively low response rates and the prognosis for patients is pretty dire. There lifespan after diagnosis is relatively short. If you can improve that in all of these different cancers with these standards of care, then you have the potential here for a really lucrative product. And CEND-1 promises to be able to do that because, as I said, it facilitates the delivery of all of these different chemotherapeutics, immunotherapeutics, sRNA therapeutics, potentially cellular therapeutics. It facilitates that by opening up a conduit, a transport pathway, which is naturally existing in the cells which typically is used for nutrient transport, but we basically hijack that to open it up to allow other products to be moved and directed and done in a precision way directly to the tumor cells themselves. And so we're looking to see this technology applied across a variety of cancers and in combination with a variety of different cancer therapeutics and modalities of cancer treatment.

And would you say that, that technology is a high level of IP protection at this point?

Yes, absolutely.

Okay. And then Kristen said something in her comments about effective treatments at the right price. And if I can make a little bit of an editorial comment, the strategic partners and patient advocacy groups were not exactly beating down the door to get to your CD34 programs. So to what extent do you think that's a function of the pricing -- on the potential price of those products? And could there be a significant effort to substantially cut the price and thereby open up much wider potential markets.

No, no. Actually, I don't disagree to some extent, the autologous cell therapies in general, not just ours, but in general, suffer from the presupposition that they are extremely expensive and extremely difficult from a logistics perspective to distribute and administer. That's not a fair assessment across the board. But it is something that many people assume out of the box. Now in the case of our CD34 autologous cell therapies, we've said many times that our process is simpler, faster and more economical than one might expect for other types of autologous cell therapy. So if you compared the preparation of XOWNA or HONEDRA, in terms of cost and time to the preparation of some of the autologous immunocellular therapies, where an order of magnitude less expensive. And what's going to be, I think, the key to the success of these products is the demonstration to the satisfaction of the ultimate payers that the cost to benefit ratio, which not only includes the therapeutic benefit, but the duration of benefit is something that supersedes the cost-to-benefit ratio of existing therapies. And that only comes from getting to the later-stage trials, which in and of themselves are costly to execute. But it's all going to be decided naturally as these products evolve into later-stage clinical development. And I think part of the reason that we haven't seen certain partnerships occur yet is simply because we're waiting for definitive controlled data that will give those potential partners the confidence that moving forward where the technology such as this would make sense for them commercially.

Yes. Thanks. That's very interesting.

Thanks, Pete.

[Operator Instructions] I think this concludes the question-and-answer portion of the presentation. And now I will turn the call back to Dr. Mazzo for closing remarks. Sir?

Thank you, Grace. And again, thank you all for participating on today's call. We look forward to speaking to you again during our next quarterly conference call and to continuing to provide updates on our achievements and our progress, especially as it relates to the merger with Cend Therapeutics. We remain grateful for your continued interest in and support of Caladrius Biosciences. We wish you well and have a pleasant evening. Thank you very much.

Thank you so much, presenters. Ladies and gentlemen, this concludes today's conference. Thank you all for joining. You may all disconnect.