Welcome to the Lisata Therapeutics Full Year 2023 Financial Results and Business Update Conference Call. [Operator Instructions]. As a reminder, this call is being recorded today, February 29, 2024. 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 Full Year 2023 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 Full Year 2023 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'd like to be added to the company's email distribution list, please email me at jmenditto@lisata.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 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 this live broadcast, Thursday, February 29, 2024. Lisata Therapeutics undertakes no obligation to revise or update any statements to reflect events or circumstances past the date of this conference call. With that, I will now turn the call over to Dr. Mazza. Dave?

Thank you, John, and good afternoon, everyone. Thank you for joining us today as we provide an overview of recent business highlights and discuss our full year 2023 financial results and give an update on the progress of our various development programs. During 2023, our first full year as Lisata, we made notable progress advancing our clinical development programs, targeting several advanced solid tumors using LSTA-1, our lead product candidate, in combination with multiple anti-cancer agents of differing modalities. As we have previously reported, we have both preclinical and early clinical data in humans that we believe demonstrates the potential of LSTA-1 to become an integral part of a revised standard of care treatment regimen for many difficult to treat cancers. Following the review of the financial results, Lisata's Chief Medical Officer, Dr. Kristen Buck, will provide an update on our ongoing and planned clinical programs. With that, I now will turn the call over to James Nisco, our Vice President of Finance. James?

Thanks, Dave. Good afternoon, all. I am pleased to join you today to present a summary of our full year 2023 financial results. Starting with operating expenses, for the year ended December 31, 2023, operating expenses totaled $25.7 million compared to $57.6 million for the year ended December 31, 2022. Representing a decrease of $31.9 million, or 55.4%. Excluding the in-process research and development expense of $30.4 million associated with the merger of Cend Therapeutics and our predecessor company, Caladrius Biosciences, forming Lisata Therapeutics, operating expenses decreased by $1.5 million, or 5.5%, compared to the year ended December 31, 2022. Research and development expenses were approximately $12.7 million for the year ended December 31, 2023, compared to $13.1 million for the year ended December 31, 2022. Representing a decrease of approximately $300,000, or 2.5%. This decrease was primarily due to lower costs associated with our LSTA1 programs in the current year, versus our legacy CD34 cell therapy technology programs in the prior year. Current year expenses were associated with study activities for LSTA1, Phase 2 type of concept, bolster trial, and various solid tumors in combination with the corresponding standards of care. Enrolment activities for the LSTA1 Phase 2b ASCEND study, chemistry manufacturing and control-- or CMC activities for LSTA1, and study startup activities for the LSTA1 Phase 2a study for the treatment of glioblastoma multiforme. General and administrative expenses were approximately $13 million for the year ended December 31, 2023, compared to $14.1 million for the year ended December 31, 2022. Representing a decrease of approximately $1.2 million, or 8.3%. This was primarily due to non-recurring costs associated with the aforementioned merger in the prior year, a decrease in equity expense due to prior year performance stock unit vesting-- merger option assumption expense, and departing board member restricted stock unit vesting. Lower annual stockholder meeting expenses, and a decrease in directors and officers insurance premiums. Partially offset by severance costs associated with the elimination of the chief business officer position on May 1, 2023. Overall, net losses were $20.8 million and $54.2 million for the years ended December 31, 2023, and 2022, respectively. Turning now to our balance sheet and cash flow. As of December 31, 2023, Lisata had cash, cash equivalents, and marketable securities of approximately $50.5 million. Based on its current expected capital needs, the company believes that its projected capital will fund its current proposed operations into early 2026, encompassing data milestones from all its ongoing and planned clinical trials. This completes my financial overview. And 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. As we have previously emphasized, we have designed Lisata's rigorous clinical programs based on sound scientific rationale from a large body of published preclinical and early clinical data. Our platform technology is designed to address major impediments to the successful treatment of advanced solid tumors in an environment of increasing pharmacoeconomic pressures. Generating meaningful clinical data as efficiently as possible is critically important in this field, and I can assure you that our entire organization has this goal top of mind in everything we do. With that, I will now provide an overview of LSTA1 for the treatment of advanced solid tumors in combination with other anti-cancer agents. Despite advances in cancer therapy today, many solid tumors remain difficult to treat effectively. Cancer such as pancreatic cancer, gastric cancers, and other solid tumors are surrounded by a dense fibrotic tissue known as the stroma, which limits access of most pharmacotherapies to the tumor. Many solid tumors also present a hostile tumor microenvironment, or TME, which suppresses a patient's immune system and makes it less effective in fighting cancer. The combination of a dense stroma and a hostile TME prevent many chemotherapies and immunotherapies from being optimally effective in treating these cancers. This, coupled with the fact that most anti-cancer therapies are not efficient in targeting only cancer tissue, defines the major challenge in maximizing effectiveness and safety in the treatment of solid tumors. To combat this, Lisata's approach is to exploit the C-end Rule to activate the CendR active transport system, a naturally occurring active transport system to selectively deliver anti-cancer drugs through the stroma and into the tumor. Lisata's lead product candidate, LSTA1, is the recipient of multiple orphan drug designations, including for pancreatic cancer in both the United States and Europe,…

Thank you, Kristen. To summarize, 2023 was a year marked by the honing of our LSTA1 development efforts in keeping with our strategic imperatives of advancing LSTA1 rapidly toward registration in mPDAC, as well as demonstrating the broad application of LSTA1 in combination with a variety of anti-cancer agents for the treatment of numerous solid tumor types. For 2024, more than ever-- we are focused on efficient and timely study execution with the goal of getting to meaningful clinical data readouts as soon as possible. And with that overview, Operator, we're now ready to take questions.

[Operator Instructions]. And our first question comes from the line of Joe Pantginis with H.C. Wainwright. Your line is now open.

Hi. Good afternoon. This is Sarah on for Joe. Thanks for taking the question. I just wanted to gain some insight if you had any further detail on how the BOLSTER trial is enrolling, and if you're seeing across Europe, US, and Canada, any region seeing maybe increased enrolment compared to others. Thank you.

Thanks, Sarah. I appreciate the question and say hello to Joe for us as well. As it relates to BOLSTER-- BOLSTER is actually on track to reach the enrollment goal of completion by the end of 2024, and we're quite pleased with that. As most people know, enrollment in clinical trials is not linear. It actually has more of the shape of a hockey stick, and we're finally on the upslope of that curve and moving things very, very nicely. As it relates to regional contributions, so far the US has been the greatest contributor to enrolment, but that's mostly because many of our European sites will only really be coming online in the month of March, and so we expect to see a significant contribution from the European theater starting in the second quarter of this year.

Thank you. [Operator Instructions]. Our next question comes from the line of Peter Enderlin MAZ Partners. Your line is now open.

Hi, Pete. Go ahead. It's Dave.

Pete, you may be muted.

Yeah. Can you hear me now?

Yes. Go ahead.

Okay. Sorry. Thanks for taking the questions. The first one may be a little naive in a way. Did you get a milestone for enrolling the cohorts for the ASCEND trial, and if so, by whom? I don't know who it would be.

No. That's a trial that's funded by us, so there are no milestones associated with that, no milestone payments associated with that.

And you mentioned WARPNINE as a source of funding for a couple of the programs. That's a three year old company or organization. Do you have any sense of what their financial resources would be? I know they get corporate funding, I think, but I'm not sure how big a company it is or how robust their financial resources are.

Well, WARPNINE is a philanthropic foundation in Australia dedicated to the improvement and the rapid accessibility of patients to novel treatments for gastrointestinal cancers of all types. So far, I mean, we don't really monitor their finances per se. So far, they've met all their commitments to us, though, as it related to financing of the trials associated with LSTA1.

Okay. Does AGITG typically take a financial interest in anything that they help you with, or the way some universities do here, or is that not the way they do it?

I don't know what they typically do, but as that relates to our associations with AGITG, for ASCEND and any other work we may do, there is no financial interest from them. They are purely-- clinicians executing at the site level, so we don't give up any commercial rights to them, and they don't take any commercial or financial interest in the product.

Okay. Fair enough. And then on the ASCEND cohort B, I'm just curious, from a naive perspective, what's the significance of a four-hour delay in the second dose versus, say, a 24-hour delay, which-- sort of seems like it would be more normal to go through a normal metabolic cycle for the patient. So, what's four hours versus a longer period of time?

Well, I'll describe the sort of sort of top line. If you want to have a more detailed conversation, you could always take that offline with Dr. Buck. But generally speaking, the choice of four hours is a combination of both knowledge of the pharmacokinetic and pharmacodynamics of LSTA1 in humans, and also simply practicality for patients. So, without getting too technical, LSTA1 has a half-life in humans of about 90 minutes. So, you know, and so after one or two half-lives, you can expect that the concentration of LSTA1 would be significantly decreased in the bloodstream. What we are doing is re-initiating administration at four hours to bring that concentration back up to the earlier peaks in order to see if the concentrations of the co-administered chemotherapeutic agents-- gemcitabine and /nab-paclitaxel, both of which have active components that have very long half-lives-- might actually see another increase of activity due to that second dose. The reason-- it's four hours and not five, six, or something else is that most patients do not want to spend an overnight in a hospital or do not want to have to return to the hospital or clinic for treatment a second day after receiving chemotherapy. So, four hours is a convenient time for patients who come in in the morning, receive their chemo, wait four hours at the center, receive their second dose, and then can go home. And so, as I said, it's a combination of scientific design and practicality for patients.

That's very interesting and it makes a lot of sense. Thanks. And then one more, if I might, and this is sort of a premature question, which a lot of them typically are from people like me, but what would be the optimum business model-- once these drugs are approved and you have different co-administrations of other modalities and so on, what would be the typical business model for that kind of a co-administered program in terms of-- who pays and how it divides the funding and all that?

Well, who pays it typically, you know, insurance companies and sometimes government entities, that's standard. How it's divided up is actually quite simple. Even though these products are co-administered, they're not sold as a bundled product necessarily. So, you know, we will sell, or somebody will sell LSTA1, and they'll get paid for that. And somebody will sell gemcitabine and nab-paclitaxel and they'll get paid for that. Now, at some point-- there could be arrangements that allow for bundling. So, you buy a single package for convenience or even, you know, some sort of combination product that could be ultimately developed, which would involve-- a new product and new regulatory pathways, et cetera. And all of those things are possible. I would suggest that, if someone is looking for a metaphor, an analog here on something like this, I would suggest that you go back and look at the case. It's not an oncology, but the business case would be similar. Look at the business case for , which was Schering-Plough cholesterol absorption inhibitor, which was approved as Zetia. And how that product was used in combination with almost all of the then approved statins. And then ultimately, a new product was developed, which is now called Vytorin, which is actually the combination of simvastatin, Merck second generation statin, plus ezetimibe in a single product sold as Vytorin and ultimately became one of the reasons why Merck purchased Schering-Plough. But you can see the model there of how a product that can be used in combination with a variety of other products can be marketed in a variety of different ways and can achieve great commercial success.

Thank you. [Operator Instructions]. Our next question comes from the line of Kemp Dolliver with Brookline Capital Markets. Your line is now open.

Hi, Kemp.

Thanks. And good afternoon. I have two or three questions. Just to close the loop on with WARPNINE, how long do they have to raise the adequate amount of money to run the trials before you can just contractually walk away and find another entity?

There's really--there's nothing contractually in that about a timeline. So it's really something again, we approach pragmatically. To the best of our knowledge, they are very close to having all the funding necessary to supply for iGoLSTA. And they've already, of course, fully funded iGoLSTA alone. So they're actually pretty efficient at getting to full funding, and it's because they tap a network of philanthropic organizations and individuals within their region of the world, mostly Australia and New Zealand, who are very interested in supporting the cause.

Okay, that's helpful. Thank you. And when do you expect you will get your rebates for your Australian activity for this year? It looks like you were paid about $2 million last year in the second quarter. Is that a good ballpark, number one? And then number two, are these R&D credits included in the runway guidance?

So the R&D credits are included in the runway guidance. James, if you're still available and your connection is working, could you just jump in, please?

Yep. So in September, we received $600,000 from the Australian Taxation Office. That was related to the 2022 tax year. And at the end of this year, we did have $1 million recorded as an income tax receivable. So we typically file our returns in the June, July timeframe and then receive the refund around the September timeframe. And that'll be the expectation of about $1 million in 2024, based on the 2023 tax year. And yes, that is included in our projected capital runway.

That's great. Thank you. And then with regard to Qilu, it looks like you've had some recent communication with them because there was some verbiage added versus last quarter regarding the timing of them advancing the program once they have data. And so I think in the past, you've said the next milestone from them would be in 2025. Is that still the case? And I think the estimate could be that it would be as much as $10 million.

So the estimate is correct. Actually, it's not an estimate, it's contractual. At the beginning of Phase, when they dose the first patient in Phase 3 or in a registration trial, which is typically a Phase 3 trial, in the region, they are contractually obliged to pass a milestone of USD10 million. And to the best of our knowledge, they'll be starting Phase 2 at the end of this quarter or early next quarter. And while we don't know the projection of a Phase 2 timeline in China, but one could guesstimate that a typical Phase 2 program takes between 18 and 24 months. So if we're starting now, roughly two years from now, one might expect that the milestone might become due. But it's all dependent on enrollment rate and progression of the development program by Qilu in China.

Okay, thank you. And I'll just press on this a little more in case they've indicated anything. But the CFDA has done a pretty good job of replicating many of the accelerated pathways of US, FDA. And so, have you heard from Qilu whether or not CFDA has indicated some eligibility for an accelerated pathway if the data pulled up?

To our knowledge, they have, that is Qilu, has had discussions with the Chinese regulatory authorities. And I believe that their program is designed to take maximum advantage of the possibility of an accelerated approval pathway. But we have not been privy to any written. Well, we don't read Chinese anyway, but any translated of the written communications between them that might actually codify that. But that's what we've been told that they're developing with achieving accelerated approval in mind.

Thank you. This concludes the Q&A portion. I will now turn the call back to Dr. Mazzo for closing remarks.

Thank you, operator. And again, thank you all for participating in 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 your participation. You may now disconnect. Everyone have a wonderful day.