Caladrius Biosciences Inc

LSE:0HS8

Earnings Call Transcript 2021-Q2

[Operator]

Welcome to Caladrius Biosciences Second Quarter 2021 Financial Results and Business Update Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, Thursday, August 5, 2021.

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's Second Quarter 2021 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; and James Nisco, Vice President of Finance and Treasury.

Earlier today, we issued a press release announcing our second quarter 2021 financial results, which is available under the Investors and News section of the company website, along with a webcast replay of this call. If you have not received this news release or if you would like to be added to the company's e-mail distribution list, please e-mail me at [e-mail].

Before we begin, I remind you that the 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 5, 2021. 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, I will now turn the call over to Dr. Mazzo. Dave?

[David Mazzo, executive]

Thank you, John, and good afternoon, everyone. I hope that you are all well and are experiencing the ebbing of the COVID-19 pandemic and any effects that it may have had on you or your family. Thank you for joining us on our call today to discuss our second quarter 2021 financial results and recent business highlights.

During the second quarter and first 6 months of 2021, we continue to advance our clinical development programs and strengthened our financial position, which we believe gives us the means to fund our operations for the next several years based on our current development plans, while also allowing us to explore additional pipeline expansion opportunities. Most notably, we delivered on a number of strategic priorities in support of our autologous CD34 cell technology-based clinical pipeline, about which I will further discuss following the prepared remarks covering the financial results.

And with that, I will now turn the call over to James Nisco, our Vice President of Finance and Treasury, who will review and provide commentary on our quarterly financial results. James?

[James Nisco, executive]

Thanks, Dave, and good afternoon, everyone. I'm pleased to join you today and provide a review of our first quarter financial results.

Starting with our operating expenses. Research and development expenses for the 3 months ended June 30, 2021, and were $4.3 million compared to $1.8 million for the 3 months ended June 30, 2020. Research and development in the current year period focused on the advancement of our ischemic repair platform and related to: Expenses associated with efforts to advance CLBS16 in the Phase IIb FREEDOM trial, which now has multiple sites actively screening and enrolling patients; and expenses associated with the planning and preparation of an IND and proof-of-concept protocol for CLBS201 as a treatment for diabetic kidney disease; and ongoing expenses for HONEDRA in critical limb ischemia and Buerger's disease in Japan, for which we continue to focus spending on patient enrollment and Japanese rolling NDA preparation.

General and administrative expenses, which focused on general corporate-related activities, were $2.8 million for the 3 months ended June 30, 2021, compared to $2.5 million for the 3 months ended June 30, 2020, representing an increase of 14% as a result of an increase in directors and officers insurance premiums as experienced throughout our industry and strategic consulting expenses. Overall, net losses were $5.7 million for the 3 months ended June 30, 2021, compared to net income of $6.6 million for the 3 months ended June 30, 2020.

Turning now to our balance sheet and cash flow. As previously announced, in January 2021 we successfully closed on a $25 million capital raise through the sale of the company's common stock and warrants to several institutional and accredited investors in a private placement price at the market under NASDAQ rules. Shortly thereafter, in February 2021, the company announced that it closed a $65 million capital raise through the sale of its common stock and warrants to several institutional and accredited investors and 2 registered direct offerings priced at the market under NASDAQ rules.

In addition, in May 2021, we announced that we received the $1.4 million in nondilutive funding as an approved participant of the Technology Business Tax Certificate Transfer Program, sponsored by the New Jersey Economic Development Authority. The program enables qualifying New Jersey-based biotechnology or technology companies to sell a percentage of their New Jersey net operating losses and research and development tax credits to unrelated qualifying corporations.

Even at the tail end of the COVID-19 pandemic, while many small biopharma companies continue to experience difficulties and competed for capital, we successfully and opportunistically secured $90 million in new capital gross proceeds year-to-date in 2021. These resources have afforded us the financial security to focus on the execution of our business plan.

As of June 30, 2021, Caladrius had cash, cash equivalents and marketable securities of approximately $106.1 million. Based on existing programs and projections, we remain confident that the current cash balances will fund operations for the next several years, notably through the study -- through study completion for the Phase IIb FREEDOM trial of CLBS16, through the registration-eligible study completion for HONEDRA and through the Phase II proof-of-concept study for CLBS201, while still providing capital to explore additional pipeline expansion opportunities.

That completes the financial overview. With that, I will turn the call back to Dave.

[David Mazzo, executive]

Thanks, James. As has been my habit on previous calls, I will begin by providing a high-level summary of what we are doing at Caladrius and then further expand on each of our clinical programs.

At Caladrius, we are focused on the development of autologous cellular therapies designed to reverse disease. We have late-stage clinical programs underway based on a large database of human clinical data. To date, our therapies have shown signs of effectiveness and durability with a positive safety profile unlike many allogeneic therapies and we believe present the possibility of substantial pharmacoeconomic benefit. Most importantly, we remain focused on the development of personalized curative cell therapy products that can restore human health and improve quality of life with a single administration of the therapy rather than one that requires frequent readministration.

Our CD34 cell therapy 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 administration of CD34+ cells induces angiogenesis of the microvasculature, that is 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 insult. We believe that several chronic conditions caused by underlying ischemic injury can be improved through the application of our CD34 cell technology including, but not limited to: Coronary microvascular dysfunction, or CMD; critical limb ischemia, or CLI; Buerger's disease; diabetic kidney disease or DKD; and no-option refractory disabling angina, or NORDA.

I will now speak to each of our development programs, kicking off with CLBS16, our promising CD34 cell therapy product for the treatment of coronary microvascular dysfunction. 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, showing a highly statistically significant improvement in coronary flow reserve correlating with symptom relief for patients with coronary microvascular dysfunction after a single intracoronary injection of CLBS16.

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. The company is committed to raising awareness of this growing women's health crisis and finding an effective treatment. And consequently, the company recently 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 United States. Investigator and subject response to the FREEDOM trial has been favorable and early enrollment proceeded according to plan. However, the continued impact of the COVID-19 pandemic, including the resurgence of cases occurring in select areas throughout the United States has contributed to a general slowing of enrollment.

In addition, further work with investigators and prospective subject feedback led the company to propose to the FDA amendment to the FREEDOM trial protocol to enhance the breadth and speed of subject enrollment. These changes include expanding the techniques that are acceptable for diagnosing CMD. Nevertheless, given the uncertainty that persists surrounding the future impact of the COVID-19 pandemic on potential patient recruitment and the accessibility of investigator sites, the company now projects enrollment completion for the FREEDOM trial to occur in the third quarter of 2020 with final data, based on the 6-month assessment of all subjects, expected by the second quarter of 2023.

Turning now to CLBS12, known as HONEDRA in Japan, our product candidate for the treatment of critical limb ischemia and Buerger's disease. Our measure was awarded the SAKIGAKE Designation from the Japanese regulatory authorities for the treatment of critical limb ischemia and Buerger's disease, an orphan size subset of CLI. The SAKIGAKE designation is akin to an RMAT designation in the United States and 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 application once filed.

HONEDRA is also 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 in Buerger's disease patients, which was designed and sized in direct collaboration with the Japanese PDMA. Note that conditional approval of a SAKIGAKE product only requires the demonstration of a trend toward therapeutic effect together with acceptable safety.

The company's registration-eligible study of HONEDRA in Japan for the treatment of CLI and Buerger's disease has shown positive results to date. The initial responses observed in subjects who have reached an endpoint in this study are consistent with the therapeutic effect and safety profile reported by previously published clinical trials in Japan and the United States. The study's enrollment continues to be slowed by the COVID-19's pandemic impact in Japan, including multiple state of emergency declarations by the Japanese government. However, the company is encouraged that less than a handful of patients are needed to reach study completion, the exact date of which is impossible to predict, given the continuing impact of the pandemic on clinical trials in Japan. While the final outcome of the trial will depend on all data from all subjects, the data to date is [indiscernible] 60% of subjects cohort having reached a positive CLI-free endpoint despite a natural history of such patients that predicts continuing disease progression to amputation.

Regarding commercialization, our strategy remains to license or partner HONEDRA 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.

Earlier this year, we were pleased to report that the U.S. FDA granted orphan designation to CLBS12 as a treatment for Buerger's disease. However, any potential development in the U.S. will be decided after further discussion with FDA on the requirements for registration, all expected prior to the end of this year.

Moving on to our most recently proposed development program, CLBS201 for the treatment of diabetic kidney disease. The company has prepared an initial development plan for the clinical study of CLBS201, the CD34 investigational product for administration via the renal arteries to show -- to slow the deterioration or ideally reverse the decline of renal functions [indiscernible] diabetic kidney disease, who, although still predialysis, exhibit rapidly progressing Stage IIIb disease.

Progressive kidney failure is associated 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. A Phase II proof-of-concept randomized placebo-controlled study for the Stage IIIb chronic kidney disease patient population is planned to initiate in the next few months. The protocol calls for a 6 subject open-label treatment run-in-arm in which patients will be treated sequentially to be completed, evaluated and cleared for continuation by the study's Data Safety Monitoring Board prior to initiating the 40-patient randomized placebo-controlled double-blinded portion of the trial.

The company is projecting that safety data from the 6 subject run-in-arm will be completed by the end of the second quarter of 2022.

And lastly, OLOGO for the treatment of no-option refractory disabling angina or NORDA. As disclosed on previous [indiscernible], Caladrius acquired the rights to data and regulatory filing, for a CD34 cell therapy program for NORDA that has [indiscernible]. Based on the clinical evidence from completed studies that a single administration of OLOGO reduces mortality, improves angina and increases exercise capacity in patients with otherwise untreatable angina. This product received Regenerative Medicine Advanced Therapy designation from the FDA, better known as RMAT.

Discussions with the FDA have resulted in a rejection of the company's efforts to reduce the FDA requirement of a 400-patient Phase III study for registration, including an arm of 50 standard of care patients and an arm of 150 placebo patients, despite data showing that the NORDA population is orphan in size. Because enrollment of a study of this magnitude and design is projected to take many years, if executable at all, the company has decided not to pursue a Phase III program for OLOGO on its own, but will continue to seek a partner to execute the study in advance the program.

So in closing, we are very pleased with the corporate and development achievements made in the second quarter and first half of 2021. Throughout the balance of the year, we expect to advance our clinical development pipeline, and we will strive to execute on a number of important 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 with that, operator, we're ready to take questions.

[Operator]

[Operator Instructions] And our first question is from Joe Pantginis with H.C. Wainwright.

[Sara Nik, analyst]

This is Sara on for Joe. My first question is with regard to the FREEDOM trial, in particular, is there a protocol in place in the event that patients do test positive for COVID-19?

[David Mazzo, executive]

Yes, there is, Sara. In fact, we've had several patients who have passed screening and were either scheduled for treatment or further follow-up and they tested positive for COVID. And when that occurs, if it's prior to treatment, their treatment is postponed until they can test negative, and that usually takes several weeks.

If it's been after they have been given the treatment, then they only get their follow-up visits when they are also able to test negative, although some of the follow-up can be done over the phone, not all of it, though there is physiologic testing involved. But most of the patients that have been impacted, have been impacted prior to the administration of the treatment. And so it's just put off treatment for several weeks.

The pandemic has also closed or slowed down the enrollment in a number of our sites for some period of time as those sites experience an influx of especially Delta variant COVID-19 patients, and they're using more of their emergency and operating room staff to help out with those seriously ill patients in the short term.

[Sara Nik, analyst]

Yes. All right. And my second question is, how do you envision the regulatory path for CLBS201, assuming the positive outcome of your proof-of-concept study?

[David Mazzo, executive]

Well, there are 2, I guess, perhaps even 3 positive outcomes from this study, the -- going from maybe least positive to most positive. The first would be that we demonstrate that the product is well tolerated, and that the patients experience a trend toward some sort of therapeutic effect, but nothing that is yet definitive, which would mean we probably need to do a larger trial to get to some therapeutic efficacy or effect measurement.

The next would be that we're able to show safety again and also show that the product can slow the progression of the decline of eGFR in these patients. And that would be a very nice result because, this is akin to what some of the more recent treatments that have been approved have been able to do, but they have to do that with multiple administrations of products.

And the best case scenario would be if we could demonstrate safety and demonstrate that we can actually reverse the decline of eGFR, essentially regenerating the kidney. And depending upon whether it's the first, second or third, it will determine whether there are more than one additional trial necessary, how big those trials will be and whether or not the product will be eligible for an RMAT designation and the consideration of a possible path to an early conditional approval.

[Operator]

Next, we go to the line of Shubhendu Sen Roy with Brookline.

[Shubhendu Sen Roy, analyst]

I'm Shubhendu calling in for Kumar from Brookline. I appreciate the update. Congratulations on the successful IND filing for CLBS201. I was just wondering if you could provide some color in terms of patient recruitment for the planned Phase II for DKD in terms of age, gender, et cetera?

[David Mazzo, executive]

Sure. So the real -- well, the patients will all be adults. So they will all be 18 years of age or older. And I think they have to be less than 75 years in age. And they have to have rapidly progressing Stage IIIb kidney disease with it, along with their diabetes. But other than that, there are no gender or other kinds of restrictions.

And for all the inclusion and exclusion criteria, the protocol is now available on clinicaltrials.gov. And so you can see all the details there, if you'd like.

[Shubhendu Sen Roy, analyst]

That was useful. One more question. You did touch upon the COVID situation and the rising COVID cases. I was just wondering if you could just provide some additional color on the impact of these rising cases on the HONEDRA trial in Japan? In the last year, you had informed that there were only a handful of patients even now. So I was just wondering if there -- I mean, what is your outlook in terms of site reopenings, generally, if you look at the...

[David Mazzo, executive]

Sure, Shubhendu, happy to address that. No, I didn't need to over speak you, sorry about that. But no, the recruitment in Japan has all been shut down for about the last 18 months. When the Japanese government declared a state of emergency, one of the impacts of that state of emergency is that all major hospitals have to allocate all of their available facilities to treat COVID patients. And non-COVID patients and especially clinical trials are given extremely low priority.

And so as a result, because patients in our protocol in Japan require an overnight hospitalization stay after the treatment, they -- there have been no beds available because of the ongoing state of emergency. And so we haven't been able to recruit.

Our expectation is, although this is just speculation, we don't have any official word yet, but our expectation is that after the Olympics and toward the end of the summer, that the Japanese government will begin to lift the state of emergency. And as they do, we have a number of people who have been screened in the queue waiting to be treated. And so I'm hoping that as hospitals then are able to allocate resources, reopen sites to clinical trials, that we'll be able to get these people in and get them treated.

And as I said, with only a handful to go, it shouldn't take us very long once we're up and running again to complete the enrollment of the trial. And then we just have to finish the 1-year follow-up on those finally enrolled patients.

[Operator]

Next, we go to the line of Pete Enderlin with MAZ Partners.

[Peter Enderlin, analyst]

Dave, you said that you expect to initiate diabetic kidney disease trial in the second half. Would you refine that down to either the third quarter or the fourth quarter? Or can't you tell yet?

[David Mazzo, executive]

Well, it's probably going to be somewhere on the cusp of the two, that's why we haven't been specific. So it could be -- September, October is our goal. But certainly, before the end of the year, we expect to have our first patients enrolled.

And remember, this will be initiated with the 6 patients run-in. And to be a bit more specific, so everyone understands this, the way that this has been set up with FDA and the DSMB, because this is the first time that we'll be making injections of our cell therapy product into the renal arteries, is that the first patient has to be treated. And then that patient has to be followed for a certain amount of time to ensure that they have no adverse events.

Then the DSMB will review that patient's file, agree that it's safe to proceed and give us the green light to then enroll the next patient. And we will follow that sequential approach until all 6 patients have been treated and evaluated by the DSMB.

So we're expecting that it will take somewhere between 6 and maybe 8 months to actually do those 6 patients because all of the stop and start that's associated with that. And then we'll be able to move on to the 40-patient blinded randomized trial. Of course, that will be enrolling multiple people simultaneously across a variety of sites. And so we hope that, that will roll obviously much faster.

[Peter Enderlin, analyst]

Okay. And I had a sort of a general question about the FDA. I mean they're always difficult to deal with. But do you think that their state of engagement these days is worse because they're distracted and preoccupied?

And relating to that, not being able to agree with them, was that mainly just where they are operationally? Or were there more specific disagreements regarding OLOGO that you just couldn't get them to budge on? And what were those basically?

[David Mazzo, executive]

So let me be very clear when I provide this answer. I do not speak for the FDA. Only the FDA can speak for themselves. I do not speak -- I can only comment on our experiences in dealing with them.

So first, it goes without saying that FDA is overwhelmed with work at the moment. Like many employers, they are understaffed. They've experienced staff shortages because of COVID on 2 fronts because lots of treatments, including the vaccines, need to be reviewed. And a number of their employees have also been sick and have missed work. So they're having a tough go of it, like everybody else in trying to keep up with workload. So that's part of it.

I think -- and that's reflected in the fact that when our experience, and I won't be too specific here because I don't want to seem like I'm criticizing the agency, but just to say that typically, when you request the meeting, the meetings are scheduled in a 90-day window. Now meetings are, for us, at least, are being scheduled in 180-day window. So they're obviously backlogged, and that's a bit of the issue.

As it relates specifically to OLOGO, I think our issue comes down to, as I pointed out here, that they're requiring us to perform a large Phase III trial, 400 patients. That in and of itself is a challenge given that the patient population for NORDA in the United States is orphan in size, which means there's less than 200,000 patients. Our best guess is that they're somewhere on the order of 30,000 to 50,000 patients, NORDA patients here in the United States.

So to try to do a trial of that size in that patient population is already challenging. Then what makes it more challenging is their requirement that we have a 50-patient standard of care arm, which means the patients basically don't get -- they get the treatment that they have now, which is already not working. Otherwise, they wouldn't be interested in the trial, or they get randomized to placebo.

And -- so there's a 50-50 chance that somebody with NORDA, and these people could be having as many as 7 debilitating angina episodes per day, they could be randomized to placebo. And if they follow the rules of the protocol then, they're supposed to stay in the trial until the end, which is -- could take a year or more for a follow-up.

So patients are just not willing to do that. They're just saying, I'm not going to get into a placebo-controlled trial here for my disease unless I'm certain that I'm going to get treatment. So we've been trying to convince FDA that there might be a better way to prove efficacy and safety. They've already conceded that they see the product as being safe. But we just simply haven't been able to get them to agree to a smaller protocol. And as I said, it could take -- honestly, our estimates 8 to 10 years to enroll that protocol. And that's just not something that we can do.

[Peter Enderlin, analyst]

Yes. Well, given the efficacy, though, I mean, it seems kind of amazing that they couldn't just see the value of the program and try to work with you more.

[David Mazzo, executive]

Why don't you get a job at FDA, Pete? And we'll send you our application. We agree with you. We were hoping that they would see it our way.

But let's just remember that I think when push comes to shove, all of us would much prefer to work in a country where there's an FDA rather than one where there wasn't. So most of the time, we come to very good, very reasonable agreements with them. And they base their decisions on the science that they see, so that's important.

[Peter Enderlin, analyst]

Fair enough. On HONEDRA, there are only a handful of patients left in the 30-person cohort, and it's an open-label trial. Can you give us some idea what the results look like? I mean you said in the Buerger's piece, it's roughly 60%. So how does it look for the 25 or so, whatever it is in the other part of the trial?

[David Mazzo, executive]

Well, remember, this is a controlled trial. So in the Buerger's cohort, it was all Buerger's patients. In the standard CLI cohort, there's a randomization between treatment and standard of care.

[Peter Enderlin, analyst]

But it's open label, right?

[David Mazzo, executive]

Yes, it's open label. But what I'm saying is that at any point during the 12-year follow-up of patients could convert from having CLI to being CLI-free. And then after becoming CLI-free, they could also convert back before the follow-up period is over.

That's why we're reluctant to provide any data on that cohort, even though it's open label until the whole patient population is done, because it could change. And it's very confusing for investors and others to hear a changing data set. With Buerger's, that is done. So I have no problem telling you what the results are with that.

[Peter Enderlin, analyst]

Okay. Now,of course, Buerger's got the orphan designation in the U.S., which means well under 200,000, which we know. But what can you say, if anything, about the potential patient population for CLI as a whole in the U.S., if you ever get to that point?

[David Mazzo, executive]

I mean the patient population for CLI is reasonably large. I don't have the exact numbers at my fingertips because we haven't candidly been looking to do anything with CLI in the United States just now. But the number is pretty big.

Buerger's, however, is a small population, but it's the one with a very high unmet medical need. And so we were hoping that working with the FDA will come up with a reasonably sized trial for a Phase III commitment for that particular indication.

[Peter Enderlin, analyst]

Okay. And Dave, you've talked generally about how it's strategically important to expand the pipeline, and you can do that in a couple of different ways. Can you, sort of, give us a sense of your feeling on which way you can go? I mean, obviously, one is acquisitions, another one is partnerships. And just looking yourself at other indications, how do you see that playing out?

[David Mazzo, executive]

So I think you [indiscernible] Pete, but generally speaking, [Technical Difficulty]

[Peter Enderlin, analyst]

I think you're breaking up a little bit.

[David Mazzo, executive]

Your existing technologies into other indications or you could [indiscernible] out to acquire or partner on other products.

I think we will [indiscernible] we now have launched a program in a new indication that's CLBS201 in diabetic kidney disease. I doubt that we will launch yet another CD34 technology indication until we get the data from FREEDOM or the 201 trial or HONEDRA in Japan.

So we're focusing our efforts on looking at what might be an avenue towards inorganic growth, which would be acquisition of assets for the pipeline or partnering on development for products of the pipeline.

[Operator]

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

[David Mazzo, executive]

So 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 and support of Caladrius Biosciences. Stay well, and have a good evening.

[Operator]

This concludes today's teleconference. We thank you for your participation. You may disconnect your lines at this time. Have a great day.