Welcome to the Talphera Fourth Quarter 2023 Financial Results Conference Call. This call is being webcasted live via the events page of the Investors section of Talphera's website at www.talphera.com. This call is property of Talphera, and any recording, reproduction or transmission of this call without the expressed written consent of Talphera is strictly prohibited. As a reminder, this webcast is being recorded. You may listen to a replay of this webcast by going to the Investors section of Talphera's website. I would now like to turn the call over to Raffi Asadorian, Talphera Pharmaceuticals' Chief Financial Officer. Please go ahead.

Thank you for joining us on the call today. This afternoon, we announced our fourth quarter 2023 financial results and associated business updates in a press release. This press release can be found within the Investors section of our website. With me today are Vince Angotti, our Chief Executive Officer, and Dr. Pam Palmer, Talphera's Founder and Chief Medical Officer. Before we begin, I want to remind listeners that during this call, we will make forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve risks and uncertainties regarding the operations and future results of Talphera. Please refer to our press release in addition to the company's periodic current and annual reports filed with the Securities and Exchange Commission at www.sec.gov for a discussion of the risks associated with such forward-looking statements. These documents can also be found on our website within the Investors section of talphera.com. I will now hand the call over to Vince.

Thank you, Raffi. Good afternoon to everyone and welcome to the first call we're having as Talphera. Throughout 2023, we focused on our objective of repositioning the company around a new portfolio of assets with an immediate priority on Niyad and longer term strategy on the broader nafamostat pipeline and other pipeline assets. As these assets have the traits to drive our vision to support healthcare providers in optimizing patient outcomes in medically supervised settings. 2023 was a productive year in achieving this objective, culminating in our ultimate rebranding to Talphera signifying the completion of this repositioning. With this transition, we believe we've successfully capitalized Talphera to achieve our 2024 goal to advance Niyad to a pre-market application submission, or PMA. Today, we'll number one, highlight the activities completed in 2023 that have positioned Talphera for success over the next 12 to 18 months. Two, identify the important upcoming milestones in 2024, and then three, update you on the status of our Niyad registrational study. As for 2023, in April, we closed the transaction with the Alora to divest the DSUVIA to a partner with experience in manufacturing and commercializing controlled substances. This transaction allowed us to complete the reduction in our annual DSUVIA-related operating expenses by approximately $14 million and refocus these resources on the development of Niyad. With this transaction, we are in royalties of 15% on commercial sales, 75% on sales to the Department of Defense and up to $116.5 million in potential milestone payments. We're confident that Alora is the right partner, and we expect they'll begin commercializing in 2024 after they complete all their work around restructuring and insourcing the supply chain. In October, another pivotal success was achieved. After several months of working on the Niyad study protocol and discussing modifications with the FDA,…

Thank you Vince, and good afternoon to everyone. Today I'll provide a brief update on the NEPHRO study status as we've been eager to get the study started. Most of our clinical sites undergoing contracting with us are large academic institutions across the country, and we've experienced delays in administrative efforts to have our contracts and budgets in place to begin enrolling patients. We had expected to have our first patient enrolled already, but our CRO has confirmed that they are seeing similar administrative delays with institutions across many other studies as well. We do not expect to have any significant delays in enrolling patients once each site is set to start. As Vince mentioned, the feedback provided by KOLs is that they believe once they are set up to initiate the study, enrolling should be fairly rapid given the relatively short study period and broad inclusion criteria for the trial. Patients are considered completers after only 72 hours on CRRT, and all primary and secondary endpoints are assessed during this period. This said, we expect the first patient to be enrolled in the coming weeks at our first site, as we have recently completed the site initiation visit with an additional site initiation visit, another institution scheduled for next week. As a reminder, our clinical study will include 166 patients with half receiving an infusion of Niyad into the CRRT circuit, while the other half will receive an infusion of saline as a placebo into the circuit. The primary endpoint will be the CRRT post filter activated clotting time over the first 24 hours, with a key secondary endpoint including the same measurement over 72 hours. Additional secondary endpoints evaluate filter lifespan, number of transfusions and dialysis efficacy. There are a number of reasons we are confident in the…

Thank you, Pam. We've previously discussed the peak sales potential of Niyad of $200 million, which is split fairly evenly between CRRT in the hospital setting and intermittent hemodialysis use in the outpatient setting. We will initially start concentrating on CRRT in the hospital as this is the focus of the NEFRO CRRT clinical study. We're currently working on additional market research to inform potential updates to the market opportunity pricing and market penetration potential of Niyad. Our peak sales potential assumes only a 19.5% market penetration in the hospital CRRT setting. However, feedback we're receiving from our KOLs indicates we may be underestimating our market penetration potential. We'll share any updates needed to our estimated peak sales following the completion of our additional market research. Now, I'll handle the call over to Raffi to take you through the details of the financial results.

Thank you, Vince. 2023 was clearly a year of transformation for Talphera and we're excited about the prospects of our lead asset Niyad as well as the longer term potential within nafamostat portfolio. We are thankful for the support from our investors, including Nantahala and Rosalind who participated in the January, 2024 equity financing with the objective to ensure we have sufficient capital to reach a potential Q2 2025 PMA approval of Niyad. The company friendly structure of this equity financing, majority of which requires the investors to fund the company at the second closing, should we achieve the pivotal trial milestone regardless of the stock price at the time demonstrates the investor's conviction and belief in the company. Cash and cash equivalents were $9.4 million at the end of the quarter or $23.4 million on a pro forma basis if you include the $16 million of initial proceeds received from the January financings. We continue to remain vigilant over our cash expenditures for the year. Our combined R&D and SG&A expenses excluding non-cash stock compensation for the year were $15.8 million, slightly better than the guidance range of $16 million to $20 million we provided. For the quarter, the combined R&D and SG&A expenses excluding $0.3 million of non-cash stock compensation was $4.3 million. Our estimated full year 2024 combined R&D and SG&A expenses excluding non-cash stock related expense are expected to range from $21 million to $23 million. Revenues for the fourth quarter of $0.3 million were generated from royalties on the sales of DSUVIA, principally from sales to the Department of Defense on which we earn a 75% royalty from Alora as stated earlier. We will continue to account for these royalties and milestones as revenues. However, there will be no cash flow impact going forward until Xoma receives their specified return, and we begin sharing equally in the DoD royalties and the milestones. Given the historically variable nature of these revenues, we do not plan to provide any guidance on the expected timeframe on when these royalties and milestones will begin to generate cash flow to Talphera. I'll now turn the call back over to Vince.

Thank you, Raffi. I'd now like to open the line for any questions you may have. Operator?

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Ed Arce of H.C. Wainwright.

Good afternoon, everyone. This is Thomas Yip. Hi, everyone. This is Thomas Yip asking a couple of questions for Ed. Thank you for particular questions. So, first, good to see that PMA submission is still in target by year-end 2024. Just trying to tease out as we close to the end of first quarter, should we expect the first patient to be enrolled with by the end of the quarter. I know you said within coming weeks and also, I believe top line data is still on target, sometime in third quarter of this year.

Yeah. So I'll answer the first part of that. So again, reiterating what you mentioned, our target remains by the end of the year to have the PMA submission occurred. We've already completed an SIV or site initiation visit, with one of the sites, another one scheduled for next week, and we'll monitor the enrollment from that point moving forward. Dr. Palmer might be able to give you some additional color as it relates to discussions with the sites and the availability of patients moving forward, and really what we just heard from the site we're visiting next week.

Yeah. So the sites are really excited to move forward. They're as frustrated, I think, by these administrative delays as we've been. They've even said to me, Hey, Pam, I had two patients last week that would've qualified for the study. So, they see these patients, that they want to get in and we're just trying to get these SIVs, the site initiation visits, done so they can quickly start enrolling. It is competitive enrollment, so there is no cap on any site. That means the first up and running we will get to enroll more patients than the last. So, we're really trying to move this forward and keep it on the timeline.

Yeah. I think indirect answer to your question by the end of Q1, that's certainly our goal, Thomas, and with the feedback, hopefully that's what we'll achieve here in short order.

Got it. And then, perhaps a follow up on that for Dr. Palmer. Can you discuss the nature of these administrative delays? You mentioned, these delays in all of the sites or just some of the sites that have been chosen?

Yeah. Well, no, it's actually kind of across the board and what we've been hearing is these large academic centers really had an exodus of administrative personnel in the past few years. A lot are working from home. They've been -- the numbers have been cut such that we are dealing with fewer folks in the contracting office, in the budgeting office. And so, when you put in your contracts and budgets, you're sort of queuing up for their attention. And so we are banging the drum and making phone calls and emailing and pestering as much as we can, but things are slowly starting to move, so we're excited. But no, they're almost all on the same timeline. So now we are starting to see theses SIVs being scheduled and we're super excited. Because once we do meet with the team and we're doing these SIVs, the caliber of researchers that we're dealing with is very high. Their patient populations qualify. They're seeing these patients every single day in their ICUs. And so, we just really feel like once we can get these sites kicked off, it'll be a nice rapid enrollment.

Pam, can you comment quickly, we used the words or shortening of SIVs, site initiation visits, so we just started completing them, have more now scheduled. What is the site initiation?

Yeah. So, the site initiation visit is sort the last thing you do. You have to originally do confidentiality agreements. You have to do site feasibility questionnaires. You have to then negotiate a contract, you've got to negotiate a budget. All of that is what's taken a while. The very last thing you do before enrollment is a site initiation visit, where you're actually on site, looking at the pharmacy, looking at their data entry and things like that. So, it really shows you -- there's a lot of paperwork and it just takes time to get through it. But once you get through it and get up and running, we're excited what we're hearing from the sites. I think they'll be able to enroll this fairly quickly.

And just to add a little additional color on their site initiation visits, we've already started completing. Some have the additional ones really in the process of scheduling. They happen within a day. These aren't extended visits. It's less than a day visit at site by the CRO. Just finishing up the final details. Hope that gives you some insight, Thomas on that.

Yeah. Definitely. Thank you both for the other details. And then, I believe Dr. Pam, you mentioned on the call or maybe Vince, that there will be an interim analysis from NEFRO after patients have been those, will this be a blinded safety analysis and what can they expect from -- after this analysis?

Yeah. It's a DSMB, data safety management board. And what they do is they're evaluating. Yes, it is actually unblinded because they're selected to look at the data to make sure there's no safety signals. That's very typical for a new chemical entity that's not been approved yet in the U.S. before. Although, it's got great 30 years of great history in Japan and South Korea, it's coming over here for the first time. So the first 32 patients, which will be 16 active, 16 placebo in general are going to be evaluated by this unblinded committee, and they give thumbs up or thumbs down to continue the study.

Okay. Got it. Understood. Thanks for clarity. And perhaps one question for Raffi. So, cash runway up to second quarter next year, I believe so that includes the $16 million pro forma cash influx during the first quarter of 2024. Is that right?

Yeah. Just I need to correct my -- what I said in the prepared remarks. Actually $14 million on that first closing plus the royalty financing, not $16 million. So, correct that there. So yes, that includes that plus the additional $12 million that we're expecting once we announce the pivotal trial milestone or the top line data, which we're planning for in the third quarter. It does not include -- I mean, obviously, as we mentioned in the prepared remarks on top of that, should those July, 2023 warrants be exercised, there's additional capital that comes into the company.

Got it. Okay. Thank you. Thank you everyone for taking the questions and looking forward to the first patient's enrollment in the study.

Yeah. Well, operator, additional questions.

Thanks Thomas.

There are no further questions at this time. I would hand over the call to Vince Angotti for closing comments. Please go ahead. End of Q&A:

Thank you, operator. Before I give final comments, there's clearly a high interest in the study and execution thereof, and Dr. Palmer mentioned a component of the called a competitive enrollment. Dr. Palmer, can you just give a quick elaboration on competitive enrollment?

Yeah. Basically it's -- no site is capped and so the first site that gets the SIV and gets the first patient in then has a much longer period of time to enroll patients. And so, it's an incentive for all the sites to get up and running as quickly as they can. Otherwise they will be limited in the number of patients they can enroll if there are.

I think a pretty important feature of the study design and contracts that we have with the sites. So with that as the final Q&A, I want to thank everyone for joining us today, as the new Talphera and also for your continued support. We certainly remain focused on driving long-term shareholder value as a newly positioned company with a focus on executing this NEPHRO study to make Niyad available to the healthcare providers moving forward. We look forward to sharing future developments with you, and thank you again for your continued interest in supporting our company. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.