Welcome to the Lisata Therapeutics Third Quarter 2022 Financial Results and Business Update Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, Thursday, November 10, 2022. I will now turn the call over to John Menditto, Vice President of Investor Relations and Corporate Communications at Lisata. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. Welcome to Lisata's Third 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, Chief Executive Officer; David Slack, President and Chief Business 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 third 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've not received the news release or if you'd like to be added to the company's e-mail distribution list, please e-mail me at jmenditto@lisata.com. Before we begin, I remind you that comments made by management during this conference call contain forward-looking statements that involve risks and uncertainties regarding the future operations and results of Lisata. 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 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 10, 2022. Lisata 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. It gives me great pleasure today to host this, our first quarterly conference call at Lisata Therapeutics, where we will provide an overview of recent business highlights and discuss our third quarter 2022 financial results. At Lisata, we strive to create value for our shareholders and for our stakeholders, the patients who suffer from the debilitating and often grave diseases that we have targeted and the physicians who treat them by developing and commercializing products that address important unmet medical needs. Our portfolio of product candidates contains treatments in development that are designed to be regenerative and/or to bring significant therapeutic improvement. As a development company, our focus is on the generation of meaningful data by the most expeditious and cost-effective means as evidenced by the fact that even though our merger with Cend Therapeutics occurred approximately 6 weeks ago, we are in a position today to report tangible progress advancing LSPA-1 or LSPA-1, as we call it internally. The company's lead investigational product candidates from our proprietary CendR Platform. LSPA-1 is the subject of multiple planned and ongoing clinical trials being conducted globally in a variety of solid tumor types and in combination with several chemotherapy and immunotherapy anticancer regimens. Based on favorable safety, tolerability and activity data to date, we believe LSPA-1 has the potential to become an integral part of a revised standard of care therapy for many difficult-to-treat cancers. In the past few weeks, we have received advice from the U.S. Food and Drug Administration on what would be required of us for registration. We have discussed this guidance with our development partners and we are now preparing for the implementation of protocol changes that we expect will improve the regulatory standing and scientific value of our studies. Our Chief Medical Officer, Dr. Buck, will provide more specifics on our clinical program shortly following our review of the quarter's financial results. However, before getting into that, allow me to introduce Lisata's President and Chief Business Officer, David Slack. David is a seasoned industry executive with over 25 years of experience in public and private life science companies working in a variety of senior business roles. We believe that his experience and expertise will prove instrumental to Lisata as we work to expand the applicability of LSPA-1 and the CendR Platform programs to other solid tumor targets, treatment combinations and corporate partnerships. With that, I'll turn the call over to David. And by the way, in order to avoid confusion internally, we've adopted the convention of referring to David as David and to me as Dave. David?

Thanks, Dave. It's great to be a part of today's call. It was a real pleasure working with the teams at Cend and Caladrius during the merger and now to be a part of the combined team at Lisata. What excited us at Cend the most about this merger was the expertise and experience of the team that was already in place at Caladrius, stewarded by Dave Mazzo's leadership. And the shared enthusiasm and focus to advance and develop LSPA-1 and to broaden the applications of the CendR Platform. We believe that Lisata has the potential to revolutionize the treatment of cancer, and I'm pleased to be a part of such a talented and dedicated team with a goal to not only create value for shareholders, but most importantly, to bring innovative treatments to patients in need. And with that, I now will turn over the call to James Nisco, our VP of Finance and Treasury; to review and provide commentary on our third quarter 2022 financial results. James?

Thanks, David. Good afternoon, all. I'm pleased to join [indiscernible] a summary of our third quarter 2022 financial results. Starting with operating expenses. Research and development expenses were approximately $3.4 million for the 3 months ended September 30, 2022, and compared to [$4 ] million for the 3 months ended September 30, 2021, representing a decrease of $0.7 million or 18.1%. This was primarily due to a decrease in expenses associated with our XOWNA Phase IIb study, the FREEDOM trial as a result of the suspension and enrollment in the second quarter of 2022 and study closeout activities in the third quarter of 2022. A decrease in expenses associated with HONEDRA in Japan related to the [indiscernible] partially offset by the addition of chemistry, manufacturing and controls, also known as CMC, activities for LSPA-1 and enrollment activities for Australasian Gastro-Intestinal Cancer Trials Group, ASCEND study. Research and development in both periods were related to expenses associated with our XOWNA Phase IIb study, the FREEDOM trial, expensive as administration eligible study for HONEDRA in critical limb ischemia in Japan, as well as corresponding regulatory discussions and support expenses. Expenses associated with the preparation of our filing of an investigational new drug application as well as study execution expenses for the clinical study of LSPA-1 for treatment of diabetic kidney disease, a Phase Ib open label proof-of-concept trial, which includes 6 subjects in total and expenses associated with the [indiscernible] CMC activities for LSPA-1 enrollment activities for the LSPA-1 Phase IIb ASCEND study and preparatory activities associated with the design of a planned LSPA-1 , proof-of-concept profile in various solid tumors and in combination with the corresponding standards of care. General and administrative expenses which focused on general corporate-related activities were $3.9 million for the 3 months ended September 30, 2022, compared to $2.8 million for the 3 months ended September 30, 2021, representing an increase of 39%. This increase was primarily due to an increase in equity expense as a result of performance stock unit vesting, onetime merger option assumption expense and departing Board member restricted stock unit vesting, in addition to an increase in expenses associated with our annual stockholder meeting and merger. Net losses were $37.4 million for the 3 months ended September 30, 2022, compared to $6.9 million for the 3 months ended September 30, 2021. Turning now to our balance sheet and cash flow. As of September 30, 2022, the company had cash, cash equivalents and marketable securities of approximately $75.5 million. That completes the financial overview. 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. I will begin by providing a high-level summary of what we are doing at Lisata and why we believe our development programs are an increasingly relevant and attractive investment opportunity today. Before that though, I'd like to reiterate our motivation to translate our expertise and unique scientific approach into clinical trials, which could lead to treatments for patients most in need. Lisata's pipeline is built on a portfolio of proprietary and patented technology that is grounded in strong scientific rationale to identify and treat patients most likely to respond to our targeted therapies. We appreciate the critical importance of generating meaningful clinical data to validate our platform technologies and create shareholder value, and our entire team is focused on accomplishing this quickly, cost effectively, yet rigorously. With that, I will now provide a summary and status update for each of Lisata's clinical development programs, kicking off with our lead product candidate, LSPA-1, for the treatment of advanced solid tumors in combination with other anticancer agents. Despite advances in cancer therapy today, many solid tumors remain difficult to treat, many solid tumors, including pancreatic cancer, gastric cancer and other solid tumors are surrounded by dense fibrotic tissue known as stroma that limits the efficacy of current chemotherapies for the treatment of a variety of advanced solid tumors. Many tumors also exhibit an immunosuppressive tumor microenvironment, or TME, which suppresses a patient's immune system's ability to fight the cancer and therefore, can limit effectiveness of current therapies. These factors negatively impact the ability of many cytotoxic agents and immunotherapies to effectively treat these cancers. To address the tumor stroma role as a primary impediment to effective treatment, Lisata's approach is to activate the CN rule or CendR natural transport system that normally brings nutrients into…

Thanks, Kristen. As you've heard, our talented and dedicated team is working hard to maximize the value potential of our development pipeline and to drive our programs to clinical success. We have designed our studies to provide clear results as fast and inexpensively as reasonably practicable. Nevertheless, we understand and even share your inpatients in getting the quality data and ask for your indulgence in understanding as we focus on achieving this goal. We are excited by the promise of our platform technologies and pipeline of product and partnering opportunities and look forward to providing updates on our progress in the coming months. And with that overview, operator, we are now ready to take questions.

[Operator Instructions] Our first question comes from Peter Enderlin with MAZ Partners.

Dave, this is kind of a broad question, but I'll categorize it as one question, and that is you're going to engage in potentially a very large number of trials and development activities with major pharmas in many cases. So can you kind of talk around the framework of how are you going to structure those, generally speaking, I mean, in terms of cost sharing and protecting respective IP rights and resolving potential conflicts between different partners and between the partners and your company itself. Just a lot of sort of general possible variability in the way all those agreements will work, but maybe there's some common ground underneath them all.

Sure, Pete, and thanks for the question. Actually, there's quite a bit of common ground in our strategy. Although you're right, different agreements with different companies will have different terms. But generally speaking, our goal is to find mechanisms by which we can broadly explore the potential for LSPA-1 to augment or enhance the activity of a variety of combination of cytotoxic and immunotherapies, so without the one big pharma agreement that has been announced already is that with Roche Genentech and we're not going to be able to give all the specifics in public. But generally speaking, this is a shared program. So we are testing LSPA-1 in combination with standard of care in mPDAC, along with Roche's immunotherapy atezolizumab. And the general structure of this deal is that each company owns their own that if there's any new IP generated during the course of the work, and 1 would expect that, that would not occur. But if there was, we would share it. And that the cost of the trial are generally being split equally. Each company provides their own drug for the trial use and we've each put in a certain amount of money. Roche, however, is actually executing the trial as part of their Morpheus platform. So they have probably dedicated more resources to the program than we have in our entire company, in fact. So -- but it's basically a shared arrangement. Now going forward, similar arrangements will be looked to be established with other companies, the idea being that LSPA-1 has a promiscuous mechanism of action, meaning that it is agnostic to the chemo or immunotherapies with which it is administered, and we believe its mechanism of action has the ability to enhance the delivery of all of these things to the targeted areas of solid tumors. And so we expect that we'll be in a position to have a variety of deals where we always either share the cost or have the partner bear the cost and where we retain complete product rights to LSPA-1. And so that's the general approach.

Well, just a quick follow-up to that, and that is if, for example, Roche does a lot of their own work and actually implementing the trial. Would they allocate any of that back to you? Or would that just be on their time, so to speak?

No, no. The resource distribution and cost distribution is defined in the contract, and there's no way that either party is going to be able to back charge the other surprise charges.

Our next question comes from Shubhendu Roy with Brooklyn Capital Markets.

Thanks for the update. With regards to the Phase II basket trial for LSPA-1 next year, what kind of tumors are you planning to include there? Would you also -- are you thinking of evaluating brain cancers as well where listen is required to cross the blood brain barrier?

So I'll let Kristen, our Chief Medical Officer, jump in here and give you the latest on our plans for tumor types in the basket trial as well as some other arrangements that we're making to look at different tumor types, including potentially glioblastoma. Kristen?

Great. Thanks for the question. The basket trial is looking at head and neck squamous cell carcinoma, esophageal squamous cell carcinoma and cholangiocarcinoma. The first 2 being second line therapy, the latter being first-line therapy. As Dave alluded, we are also looking for explorations in joint development in tumors such as first-line glioblastoma, potential collaborations in locally advanced pancreatic ductal adenocarcinoma and potentially locally advanced resectable gastroesophageal adenocarcinoma. So we are truly looking across solid tumor types as we believe this asset is tumor tissue agnostic. Dave?

[Operator Instructions] Our next question comes from Peter Enderlin with MAZ Partners.

I just remembered that I had a question about stock options at Cend before the deal closed. Were there any? And -- because I thought there was a provision for them, but then I think I read that there actually was 1 that actually transferred over. So what's the story about that?

James, would you like to take that, just describe briefly the treatment of the stock options?

Yes. Pete, through the merger, the company acquired about 1.3 million shares, stock option from the Cend so we assumed them over an at the same exchange ratio that we did for any shares that we acquired through the merger.

This concludes the question-and-answer session. I will now 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 to continuing to provide updates on our achievements and progress. We remain grateful for your continued interest and support. Stay well, and have a good evening.

This concludes today's conference call. Thank you for participating. You may now disconnect.