Caladrius Biosciences Inc

LSE:0HS8

Earnings Call Transcript 2020-Q2

[Operator]

Welcome to the Caladrius Biosciences Second Quarter 2020 Financial Results and Business Update Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, Thursday, August 13, 2020.

I will now turn the call over to John Menditto, Vice President of Investor Relations and Corporate Communications at Caladrius. Please go ahead, sir.

[John Menditto, executive]

Thank you, operator, and good afternoon, everyone. Welcome to Caladrius' second quarter 2020 conference call to discuss our financial results. Joining me today from our management team is Dr. David Mazzo, President and Chief Executive Officer.

Earlier today, we issued a press release announcing our 2020 second quarter financial results, which is available under the Investors section of our website. If you have not received this news release or if you'd like to be added to the company's e-mail distribution list, please e-mail me at [e-mail].

Before we begin, I'll 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 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, August 13, 2020. 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 said, I will now turn the call over to Dr. Mazzo. Dave?

[David Mazzo, executive]

Thank you, John, and good afternoon, everyone. I hope all of you are in good health and remain safe, and thank you for joining us for our second quarter business update.

In light of the ongoing COVID-19 pandemic, we are very pleased with our second quarter results, and I'm especially proud of the entire team at Caladrius for their ongoing efforts and dedication that has resulted in another quarter of strong operational performance. Specifically, Caladrius strengthened its cash position in conjunction with advancing and expanding on our CD34+ cell technology based clinical programs, in particular, CLBS119 for the treatment and repair of COVID-19-induced lung damage; CLBS12 as a treatment for critical limb ischemia, or CLI in Japan; and CLBS16 for the treatment of coronary microvascular dysfunction, or CMD. I will discuss each program in more detail in a few moments. But before we get into that, I will discuss a few organizational changes.

As we announced earlier this week, Joe Talamo, our Chief Financial Officer, tendered his resignation in order to explore opportunities outside Caladrius. Joe will be with us through August 21. And working closely with him, we have organized an orderly transition of roles and responsibilities until we conclude our search for a highly qualified permanent replacement. As a result of the change, however, Joe will not be joining us on today's call. On behalf of the entire company, I reiterate our gratitude to Joe for his long-time service and contributions. He played an integral role in the formation and definition of what is now Caladrius and leaves the company in excellent financial condition. We wish him all the best in his new endeavor.

As we also previously announced, we are honored to welcome Dr. Michael Davidson, most recently of Corvidia, as the newest member of our Board of Directors. We look forward to leveraging Dr. Davidson's invaluable experience, spanning research and clinical development, regulatory approval, partnering and M&A as we continue to drive the evolution of our company.

With that, I will now review and provide commentary on our second quarter financial results as well as the funding activities since the close of the quarter. As previously discussed during last quarter's call, in April, we closed on the sale of a portion of our qualified New Jersey net operating losses, netting $10.9 million of non-diluted capital pursuant to the New Jersey Economic development Authority Technology Business Tax Certificate Program. The entire $10.9 million was recorded in the second quarter of 2020 as a tax benefit, resulting in the company reporting net income of $6.6 million and $2.6 million for the 3 and 6 months ended June 30, 2020, compared with net losses of $5.1 million and $9.5 million for the 3 and 6 months ended June 30, 2019.

Turning to our operating expenses. Research and development expenses were $1.8 million and $3.3 million for the 3 and 6 months ended June 30, 2020, representing decreases of 39% and 34%, respectively, compared with the prior year periods. The lower research and development costs in the current year periods were primarily a function of us having only one enrolling trial in 2020, our ongoing registration eligible study for CLBS12 in critical limb ischemia in Japan. Nevertheless, we did advance our overall ischemic repair platform. More specifically, R&D expense comprised costs associated with the investigational new drug application and planning for commencement of a pilot study of CLBS119, along with expenses for the completion of our ESCaPE-CMD clinical study for CLBS16 in coronary microvascular dysfunction and planning for the Phase IIb follow-on study of that program.

General and administrative expenses, which focus on general corporate activities, were $2.5 million and $5 million for the 3 and 6 months ended June 30, 2020, representing minor increases compared with the prior year periods.

Turning now to our balance sheet and cash flow. As of June 30, 2020, Caladrius had cash and cash equivalents of $34.9 million and working capital of $33.1 million. Our cash and cash equivalents position at quarter end was significantly improved by the $10.9 million proceeds from the sale of our qualified New Jersey NOLs as well as 2 registered direct offerings that raised $9.3 million in gross proceeds. In July 2020, we boosted our cash and cash equivalents position even further with the closing of a $2 million private placement. It is noteworthy to mention that the 2 registered direct offerings and the July private placement were all priced at the market.

Lastly, the company has opportunistically raised $8.3 million through its common stock at the market sales agreement with H.C. Wainwright & Company year-to-date, of which $6.9 million was raised in July 2020. As a result, we are pleased to report that we have cash and cash equivalents in excess of $42 million as of the end of July 2020. Our operating activities generated $263,000 of positive cash flow for the 6 months ended June 30, 2020, which was directly impacted by the $10.9 million proceeds received from the sale of our qualified New Jersey NOLs. Excluding the New Jersey NOL proceeds, we continue to manage operating cash burn effectively at approximately $5 million per quarter on average, while continuing to advance our research and development programs according to plans.

Despite the current economic challenges, Caladrius has successfully secured approximately $30 million in new capital year-to-date, 1/3 of which is non-dilutive, which will support the initiation and execution of 2 new studies in 2020, a pilot study of CLBS119 for the treatment and repair of COVID-19-induced lung damage and a Phase IIb study of CLBS16 in coronary microvascular dysfunction.

Overall, the company remains confident that its current cash balance will fund operations through 2021.

That completes the financial overview. And now let's move on to our exciting clinical development pipeline. As I have done on previous calls, I will begin by providing a high-level summary of what we are doing at Caladrius, and why we believe our development programs are an increasingly relevant and attractive investment opportunity today. Caladrius is focused on the development of cellular therapies designed to reverse, not managed disease and we have late-stage clinical programs underway based on a large database of human clinical data. Our therapies to date have been shown to be effective and durable with the pristine safety profile and present the possibility of substantial pharmacoeconomic benefit.

Most importantly, we are working on products with the goal of providing patients with a single administration, personalized curative therapy rather than one that requires frequent chronic re-administration. Our CD34+ cell 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 the administration of CD+ -- CD34+ cells induces angiogenesis of the microvasculature that is that 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 infill.

We believe that several conditions caused by underlying ischemic injury can be improved through the application of our CD34+ cell technology, including, but not limited to, COVID-19-induced lung damage, critical limb ischemia, coronary microvascular dysfunction and refractory angina.

I will now speak to the specifics of each of our development programs, kicking off with CLBS119, our autologous CD34+ cell therapy for the repair of COVID-19-induced lung damage. We believe that thousands of patients globally who survive COVID-19 suffer long-term effects of the disease manifested at debilitating lung damage. Since the rise of the pandemic, many companies have mobilized to determine effective treatments for the acute effects of the virus and/or for a vaccine that [ parts ] infection altogether. Caladrius, on the other hand, has taken the leadership position in helping those patients, who have beaten the virus that have suffered potentially permanent reduced pulmonary capacity. Initial evidence from the pandemic indicates that a large portion of the survivors of COVID-19, who require ventilatory support, will suffer long-term debilitating lung damage.

In the aftermath of the first SARS epidemic, it was well documented that the coronavirus target cells that express CD34. The resulting depletion of that cell population is thought to be connected to the lung's inability to repair itself.

Furthermore, in the COVID-19 pandemic, emerging evidence indicates that the endothelial cells that line the microvasculature of the lung are targeted by the virus and that the destruction of the lung microcirculation may be a critical factor in the inability of the lung to auto repair even after the virus has been eliminated.

Previous clinical trials and preclinical models have shown that CD34+ cells act in a regenerative capacity in multiple organs, including models of severe lung damage. Moreover, there is evidence in preclinical models that restoring microvasculature and microvascular function can trigger and sustain a regenerative process in the lung. Based on this accumulation of evidence, we have opened an IND, agreed with the FDA on a protocol and begun manufacturing preparations in support of a pilot study of CLBS119 in our autologous CD34+ cell therapy for the repair of COVID-19-induced lung damage in patients who have suffered respiratory failure. The protocol targets enrollment of 10 to 12 patients in the trial, which we plan to initiate in the coming weeks, with the first of those patients targeted to be treated during the month of September.

Moving on now to CLBS12, our product candidate for the treatment of critical limb ischemia, or CLI. CLI is characterized by a severe obstruction of the arteries that significantly reduces blood flow to the lower extremities, principally the feet and legs, and represents the end-stage of peripheral arterial disease. CLI patients often experience severe rest pain, limited mobility, non-healing skin ulcers and, if not successfully treated, eventual amputation. Please note that it is a well-documented, but not well-known, fact that CLI patients have a higher mortality rate than patients with all cancers, except lung cancer. CLBS12 was awarded a SAKIGAKE designation from the Japanese Regulatory Authorities for the treatment of CLI. The SAKIGAKE designation is akin to an RMAT designation in the United States and awards the recipient prioritized regulatory consultation, a dedicated review system to support the development and review process, including the option of a rolling JNDA submission as well as reduced review time of 6 months for the CLBS12 registration application once filed. CLBS12 also is eligible for early conditional approval and possibly full approval in Japan based on the compelling nature of the complete data from our ongoing prospective, randomized, controlled, open-label, multicenter study in CLI patients.

In addition, the European Medicines Agency granted CLBS12 advanced therapy medicinal product, or ATMP, classification for the treatment of CLI. ATMPs are defined as medical treatments that are based on genes or cells and are intended as long term or permanent therapeutic solutions to acute or chronic human diseases at a genetic cellular or tissue level. This regulatory achievement sets the stage for us to work closely with European regulators to define the most expeditious development and regulatory plan to registration of CLBS12 in the EU.

The ongoing study in Japan comprises subjects divided into 2 cohorts, a 30-subject group with traditional arterial sclerotic CLI and a 7 subject group with Buerger's disease, a type of CLI often associated with heavy smoking. Those subjects were allocated to treatment are dosed with CLBS12 in a single treatment through a series of intramuscular injections in addition to receiving standard-of-care pharmacotherapy. Subjects randomized to the control arm only received standard of care with drugs approved in Japan, including antiplatelet agents, anticoagulants and vasodilators, the choice of which is made by the investigators according to the protocol. The study allows for the rescue of subjects in the control arm by indicating the crossover to treatment if their CLI is deemed to be progressing.

The primary objective of this study is to show that CLBS12 can prevent the serious consequences of CLI by reverting the patients to a CLI-free condition through improved blood flow in the affected limb. CLI-free status is defined as 2 consecutive monthly visits in which rest pain is absent and previous non-healing skin ulcers are completely healed, as determined by an Independent Adjudication Committee.

As previously reported, and as you can review in our corporate presentation on our company website, the Buerger's disease cohort is completely enrolled, and the results from that group are very positive and consistent with the beneficial therapeutic effect and safety profile, as reported by previously published clinical trials in Japan and the United States. For patients with Buerger's disease, amputation and even death are likely outcomes, and no available pharmacotherapies prevent amputation. However, subject in the Buerger's disease cohort in our study have achieved a remarkable remission rate of 57%, meaning that 4 of the 7 subjects have now met the primary endpoint and are CLI-free.

It's worth repeating that the natural history of Buerger's disease patients has continued disease progression, often leading to amputation. So our data are extraordinarily positive. We are very encouraged by the study results to date and believe that they suggest a positive outcome for the overall trial, recognizing, however, that the final conclusions of the trial will be dependent on all data from all subjects.

Despite the continued impact of the COVID-19 pandemic, enrollment in our trial is solely returning, though, like most companies executing clinical trials around the world, enrollment remains unpredictable in its rate and duration. Notwithstanding impact of COVID-19, the company remains encouraged by the patient pre-scheming pipeline that has recently been identified and targets completion of enrollment by the end of 2020 with top-line data for the full study available in late 2021 or early 2022, leading to an earliest possible approval in Japan in mid-2022.

Regarding commercialization, our strategy remains to license or partner CLBS12 in Japan. And to that end, our conversations continue with prospective partners. And we continue to seek to consummate a deal in concert with the completion of the study, if not before.

Turning now to CLBS16, our promising CD34 product candidate for the treatment of coronary microvascular dysfunction. Like all our CD34+ cell therapy product candidates, CLBS16 uses a proprietary and patented formulation of CD34+ cells, specifically designed for an injection at or near the site of ischemic infill, which, in the case of CMD, is an infusion into a coronary artery. CLBS16 is the subject of the recently completed ESCaPE-CMD trial, a 20-patient, proof-of-concept clinical trial evaluating CLBS16 as a treatment for coronary microvascular dysfunction, a disease involving damage to the tiny arterial blood vessels, the microcirculation in the heart, with no accompanying discernible large vessel blockages.

Despite the absence of large vessel disease, CMD patients have an equally poor prognosis related to major adverse cardiac events and death as to patients, who have identifiable large vessel blockages. But because there are no large artery blockages to visualize, CMD is often underdiagnosed, misdiagnosed and/or untreated. It is especially important to note that CMD is more frequently encountered in females, making this an important emerging women's health care issue. CLBS16 is designed to address and reverse the underlying pathology of CMD by employing the CD34+ cells' innate ability to increase microcirculation and, thereby, improve symptoms and hopefully improve the long-term outcomes in the patient with CMD.

In May of 2020, the company announced the full data results from the ESCaPE-CMD trial at the Society for Cardiovascular Angiography and Interventions or SCAI 2020 Scientific Sessions Virtual Conference. As predicted by preliminary results announced in November of 2019, data showed highly statistically significant improvement in coronary flow reserve correlating with symptom relief for patients with CMD after a single intracoronary injection of CLBS16. The results of the CMD -- the results of the ESCaPE-CMD trial are not only important for defining the next development step for CLBS16, but they provide the first direct quantitative evidence in humans corroborating the mechanism of action of CD34+ cells, something which is supportive of all of our development programs.

We are now focused on raising awareness of this growth in women's health crisis as we complete preparations for the initiation of a rigorous Phase IIb clinical trial of CLBS16 with the first patient expected to be enrolled in the fourth quarter of 2020. The planned, double-blind, randomized, placebo-controlled trial will evaluate the efficacy and safety of delivering autologous CD34+ cells as CLBS16 in subjects with coronary microvascular dysfunction.

And now moving on to our Phase III-ready CD34+ cell therapy product candidate in the United States, CLBS14. CLBS14 is being developed to address no-option refractory disabling angina or NORDA by stimulating the growth of new microvasculature in an oxygen-deprived heart in those patients, who have had large vessel disease treated with all available therapies, but still have debilitating angina likely due to a microvasculature deficiency. Our confidence in this program is based on a series of published Phase I, II and III study results that indicate a consistency of therapeutic effect of CD34+ cells to increase exercise tolerance, reduce angina frequency and severity and decrease long-term mortality associated with the condition.

As discussed on our previous quarterly update, we finalized with FDA, to protocol design for a confirmatory Phase III trial to support the registration of CLBS14 for NORDA in the United States. Due to the projected cost of the study, however, we have deferred its initiation in the U.S. pending confidence that we have acquired sufficient capital to fund the study to completion. Among the possible sources of capital are non-dilutive grants and/or partnerships, both of which we are pursuing vigorously. And so in closing, we are very pleased with the corporate and development achievements made in the second quarter. It is especially noteworthy that during these uncertain times, we managed to significantly increase our cash position and launch a clinical program directly relevant to the medical challenges presented by the COVID-19 pandemic. Throughout the balance of the year, we expect to advance our clinical development pipeline and strive to achieve a number of important additional development milestones. More than ever, our experienced, dedicated and passionate team remains committed to the advancement of our programs as we work to bring innovative treatment options to patients in need and restore human health.

And with that overview, operator, we are now ready to take questions.

[Operator]

[Operator Instructions] Your first question comes from the line of Kumaraguru Raja from Brookline Capital Management.

[Kumaraguru Raja, analyst]

Congratulations on all the progress. With regard to the lung repair trial, there's data available in literature that the COVID-19 virus, it targets CD34 as well as Oct4 [ expressing ] cells. So in terms of treatment, what kind of markers do you think you'll be selecting for in this trial? And also what kind of lung damage do you expect to have patients in this trial? Like what state of lung damage?

[David Mazzo, executive]

Okay. Well, Kumar, thank you very much for your kind words, and for your questions, and for being on the call today. We will be looking to enroll patients in the CLBS119 pilot program, who have suffered debilitating respiratory failure as a result of COVID-19. So these will be patients who have been on ventilators and have been successfully extubated, but still have lung deficiencies, or they could be patients who are on ventilators, who have cleared the virus and are otherwise, I'll use the term, healthy, but cannot be successfully extubated because they are not capable of properly oxygenating on their own. And so this is a sort of a dual set of patients, and this will be the target of the trial.

When we are looking at the trial, we'll be looking, of course, at efficacy endpoints that include clinical measures, such as oxygen saturation, supplemental oxygen requirement, pulmonary function testing, and also the resolution of pulmonary infiltrates. And of course, we'll follow that with safety endpoints as well, although like with all of our other CD34 trials, we do not expect to see any serious adverse events because we've never reported a SOL-related adverse event in any of our trials.

[Kumaraguru Raja, analyst]

And in terms of targeting sales to the lung, do you think intravenous dosing will lead to that? Or what are your thoughts in terms of targeting the sales to the lung?

[David Mazzo, executive]

Our data from previous study shows that an intravenous injection of the cells will allow them to enter the circulation system. And the cells have a honing mechanism due to CXCR4 surface proteins that allows them to hone -- to move to the areas of ischemic infill. And so they clearly will be based on models that we've seen, that clearly will also migrate to the lung as part of an intravenous infusion.

[Kumaraguru Raja, analyst]

And in terms of expectation of number of sales that would be needed?

[David Mazzo, executive]

That's part of the exploratory nature of this pilot study. We don't really know because we don't know enough about the disease and the extent of the damage it's caused. There also could be a spectrum of damages based on the patient population. So we'll be using dosing that's similar in size to the number of cells that we've used in our previous studies, but it will be hopefully millions of cells per kilogram of body weight.

[Operator]

[Operator Instructions] Your next question comes from the line of Joe Pantginis from H.C. Wainwright.

[Joseph Pantginis, analyst]

Hope you're all doing well. Dave, my 2 questions are focused on clinical trial conduct now. Now that more studies are coming up and we can get a little more into the weeds for the upcoming studies. So first, on COVID, I guess, even though it's only 10 to 12 patients, and it should be able to identify patients, just curious on any particular site restrictions with regard to knowledge around cell therapy delivery and also potential competition around other cell therapies that are being used for COVID right now as well.

[David Mazzo, executive]

Joe, thank you very much again for your well wishes. Same to you and yours, and thanks for being on the call. As it relates to the clinical trial for CLBS119, we -- obviously, there are a lot of companies working on a variety of treatments. And as I said in my prepared remarks, though, a majority of the company seems to be focused on the acute stage of treatment or on the infection prevention with vaccines. And they are a smaller group of people, who are working on the long-term or chronic effect. Given that, coupled with what, unfortunately, now is the myriad number of cases of COVID-19 that exist in the United States, and the fact that those numbers are growing and are predicted to explode again as we get into the fall, we don't expect that there's going to be any shortage of patients here to enroll in our trials. We don't believe that the sites will have to have any specific knowledge of handling the cellular therapies. Remember, our cell therapies involve, in this particular case, a single day of mobilization using a pharmacotherapy. So it's just an administration of an available drug, which will mobilize cells to the peripheral drug -- to the peripheral blood stream, the ability to conduct an apheresis to collect a sample of monocytes, and then the ability to provide an intravenous infusion for the treatment. So it's really not anything that any competent clinic or hospital couldn't do. And we'll be looking to enroll the trial as quickly as possible, so that will likely take us to those places that either have been previous hotspots or are becoming hotspots with patients with pulmonary debilitation.

[Joseph Pantginis, analyst]

That's perfect. I appreciate that. And then the other clinical protocol question that I have is for the upcoming CMD study with 16. And I guess I want to talk to the placebo-controlled aspect of that, what specifically you're going to be using to the control and -- for the control. And then, I guess, the -- in-the-weeds question has to do with are there any sort of factors of comparing the cells part versus the control part that physicians or nurses might be able to tell the difference based on viscosity levels? And again, sorry, I'm getting in too much into the weeds there.

[David Mazzo, executive]

Yes. No, no problem, no. But we believe that it's important to provide controlled -- placebo-controlled randomized data as we move into Phase IIb. And so we'll be doing a true placebo. So the patients, who are randomized to placebo, will go through the -- our G-CSF pretreatment and the apheresis, they will have a sample of their cells, their monocytes shipped off for preparation. But what was returned to them will be just cell-diluent without any of the cells, and they'll get the same intracoronary injection in the same way as the treatment arm will. So I doubt that it would be possible for nurses or the interventionalists to determine who is getting cells and who isn't based upon the appearance or the method of administration. I think with time, in fact, we kind of hope with time that they'll have to -- they'll get some idea because based on the ESCaPE-CMD trial, we started to see those people who are treated showing positive results in terms of improved exercise tolerance, reduced angina, general health improvement overall in as few as 3 months. And so they may see patients getting better and they may attribute that to the fact that they think those patients had treatments. But there should be no way to break the blind by visual means until the study is completed, and we actually make an announcement of the results.

[Operator]

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

[David Mazzo, executive]

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. And we remain grateful for your continued interest in our company and the support you provide to Caladrius Biosciences. Stay well, and have a good evening.

[Operator]

That concludes today's conference call. You may all disconnect.