John Menditto - Executive Director, IR & Corporate Communications David Mazzo - President & CEO Joseph Talamo - SVP & CFO.

Steve Brozak - WBB Securities.

Welcome to the Caladrius Biosciences Third Quarter 2017 Business Update Conference Call. At this time, all participants are in a listen-only mode. Following managements prepared remarks; we will hold a Q&A session. [Operator Instructions] As a reminder, this conference is being recorded today November 9, 2017.

I will now turn the conference over to John Menditto, Executive Director, Investor Relations & Corporate Communications at Caladrius. Please go ahead, sir..

Good afternoon and thank you all for participating in today's call. Joining me today from our management team are Dr. David Mazzo, President and Chief Executive Officer; and Joseph Talamo, Chief Financial Officer. Earlier, we filed our Form 10-Q and issued a news release, announcing our financial results for the third quarter of 2017.

If you have not received this news release or if would like to be added to the Company's distribution list, please call our Investor Relations firm, LHA in New York at 212-838-3777 and speak with Carolyn Currin or e-mail update@caladrius.com.

Before we begin, I would remind you that comments made by management during this conference call will contain forward-looking statements that involve risks and uncertainties regarding the operation and future results of Caladrius.

I encourage you to review the Company's filings with the Securities and Exchange Commission including without limitation the Company's 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 on this conference call contains time sensitive information that is accurate only as of the date of live broadcast November 9, 2017. Caladrius Biosciences undertakes no obligation to revise or update any statements to reflect event or circumstances after the date of this conference call.

With that said, I will turn the call over to Dr. Mazzo.

Dave?.

Thank you, John and good afternoon, everyone and thank you all for joining us on the call. It's a pleasure to be reporting the achievements we've realized during the third quarter, our first full quarter as a pure play development company.

As you recall, at the end of the second quarter we successfully closed on Hitachi Chemicals acquisition of our remaining interest in PCT, our then contract development and manufacturing subsidiary.

This divestiture completed a transaction -- excuse me, a transition we initiated more than a year ago and allowed us to operate throughout the quarter just ended, solely focused on advancing and expanding our multiple technology platforms targeting autoimmune and select cardiovascular indications.

Towards that end we made significant progress with our clinical development programs and remain as excited as ever about the potential of our technologies to address diseases that represent large unmet medical needs.

Later in this call, I will discuss our specific achievements, as well as our plans for the future; but before I do, allow me to turn the call over to our CFO, Joe Talamo, for his review and commentary on our financial results.

Joe?.

Thanks Dave, and good afternoon everyone. As Dave just alluded, we have made significant progress during 2017 and specifically on the financial front which I'd like to highlight now.

Caladrius exited the third quarter of 2017 with nearly $16 million in cash and marketable securities, and additional $5 million of restricted cash expected to be released from escrow in the second quarter of 2018, zero long-term debt.

Our operating cash burn through the first nine months of 2017 was under $5.5 million a quarter on average which is significantly lower than the $7.6 million average quarterly operating cash burn for the first nine months of 2016.

Moreover, our committed R&D spending for our primary clinical program, the Phase II T-Reg study for CLBS 03 will drop markedly beginning in 2018 as enrollment is expected to be completed later this year. As we near the end of 2017, we look forward into 2018 with our strong balance sheet and declining committed operating cash burn.

The Company is now able to focus on other areas within our R&D platform while we are actively assessing numerous external value creating opportunities that can potentially be brought in-house. With that overview, let me now turn to the financial results from continuing operations for the three and nine months ended September 30, 2017.

Third quarter 2017 R&D expenses were $3.2 million, an 8% increase compared with the prior year quarter. For the first nine months of 2017, R&D expenses were $11.2 million, down 17% compared with the first nine months of 2016. Our current year R&D expenses are primarily related to our immune modulation platform, and specifically our T-Reg study.

Our third quarter 2017 expenses also included costs within our ischemia repair platform related to initiating our critical ischemia study in Japan. Third quarter 2017 G&A expenses relatively flat at $2.9 million compared with $2.8 million in the third quarter of 2016.

Year-to-date G&A expenses were $9.1 million compared with $10.5 million for the first nine months of 2016. Please note, however, that the first nine months of 2017 included a onetime $1.7 million equity compensation expense for the acceleration of employee stock and option award vesting triggered by the sale of PCT to Hitachi.

Excluding this onetime non-cash charge, our nine month year-over-year G&A decline would have been even greater. The net loss from continuing operations for the third quarter of 2017 was $3.5 million or $0.38 per share compared with $6.1 million a $1.09 per share a year ago.

Please note, that the current year net loss included a tax benefit of $2.4 million, however, this tax benefit will not generate a positive overall tax benefit to the Company since an offsetting tax expense is projected to be reported in the full year consolidated financial statements in our discontinued operations line item.

Excluding this tax benefit, the net loss from continuing operations for the third quarter of 2017 was $6 million. As a reminder, our financial statements include the results of our former PCT subsidiary which was sold to Hitachi Chemical in May 2017; these current year end prior year results are reported in discontinued operations.

Returning now to our continuing operations; our net loss from continuing operations for the nine months ended September 30, 2017 was $12.2 million or $1.37 per share compared with $25.6 million or $4.23 per share for the same period in 2016.

The continuing operations net loss in 2017 also included a tax benefit which totaled $8.3 million, but again, this tax benefit will not generate a positive overall tax benefit to the Company since an offsetting tax expense is projected to be reported in the full year consolidated financial statements in discontinued operations.

Excluding this tax benefit, the net loss from continuing operations for the nine months ended September 30, 2017 was $20.5 million. As I just mentioned, our nine months ended September 30, 2017 and the prior year financial results include our former PCT operations reported as discontinued operations through the May 18, 2017 transaction date.

We reported a $40.2 million gain on the sale with PCT, net of $11.6 million in taxes in the second quarter of 2017 and Caladrius ceased reporting all PCT operating activities subsequent to this sale.

Turning to our balance sheet and cash flow; our cash and marketable securities totaled $59.4 million as of September 30, 2017, up from $7.1 million as of December 31, 2016.

As previously mentioned, we have no long-term debt and have $5.9 [ph] in restricted cash that has been placed in escrow in escrow account related to the PCT sale to cover potential indemnification claims to the second quarter of 2018. Nothing has come to our attention that would impact the future release of this payment.

Also note, that we received the final $4.4 million net cash settlement in connection with the PCT sale during the third quarter of 2017 bringing the total consideration received from Hitachi to $79.4 million.

Also during the third quarter, upon the enrollment of the 70th patient in the T-Reg study, we received a $2.4 million payment and delivered approximately 500,000 shares of Caladrius stock for the terms of the September 2016 private placement agreements.

In the fourth quarter, we also triggered the next milestone payment under our CIRM grant upon the enrollment of the 10 patients in the T-Reg study for which we expect to receive a payment from CIRM of approximately $2 million before the end of 2017.

Based on our existing programs and projections, we continue to expect to have more than $50 million in cash and marketable securities at the end of 2017 with less than $5 million of projected CLBS 03 external spending obligations after 2017 to reach the completion of the T-Reg study excluding any further CIRM funding.

We are confident our cash balances and additional current grant funding along with continued disciplined expense management will allow us to fund the CLI program in Japan and other potential opportunities within our existing platforms, well beyond 2018, and will provide the basis from which we can -- could potentially execute on any opportunity identified by our ongoing external evaluation process.

With that, let me turn the call back to Dave..

Thank you, Joe. Let me begin by providing an update on our lead clinical program, CLBS 03. As a reminder, CLBS 03 is a personalized autologous cell therapy consisting of each patient's own regulatory T-cells or T-Reg's which have been expanded in number and functionally enhanced by a proprietary method developed through a collaboration with Dr.

Jeffrey Bluestone, and renowned researchers at UCSF. Caladrius has exclusive rights to an international portfolio of issued and pending patents for this technology as applied to Type 1 Diabetes, as well as other indications.

CLBS 03 is being studied in a landmark Phase II trial called the T-Reg trial as a treatment for Type 1 Diabetes in patients with recent onset disease.

As you know, the T-Reg study is being conducted in partnership with Sanford Research, a not-for-profit research organization that is part of Sanford Health that supports an emerging translational research center focused on finding a cure for Type 1 Diabetes.

Again, as a reminder, the T-Reg study is a prospective, randomized, placebo-controlled double-blind Phase II clinical trial to evaluate the safety and efficacy of CLBS 03 as a treatment for Type 1 Diabetes in approximately 111 subjects, aged 8 to 17 with recent onset disease.

To key endpoints for the trial are the standard medical and regulatory endpoint for T1D trial and include preservation of C-peptide [ph] which is an acceptive measure for pancreatic beta cell function, as well as insulin use, severe hypoglycemic episodes, and glucose and hemoglobin A1C levels.

The study is 80% powered to detect 0.2 picomole per milliliter difference and AUC means C-peptide between the active and placebo arms at 12 months post-treatment. The study is being conducted at leading clinical centers throughout the U.S.

including the Joslin Diabetes Center, and strong interest in innovative programs has allowed us to enroll and treat patients rapidly. In July, we were pleased to announce the treatment of the 56th patient in the study which marked the halfway enrollment point in the study.

The study has a pre-specified interim analysis of safety and potential early therapeutic effect that will occur after the six month post-treatment follow-up visit of this group of patients.

We expect to announce those results around the end of the first quarter of 2018 noting that the primary efficacy endpoint for the trial is planned to be evaluated after all patients have completed the one year follow-up visit of their treatment.

In September, we reported enrollment of the 70th patient in the study which triggered a $2.4 million payment under our September 2016 private placements as Joe just mentioned. Looking ahead, we remain on-track to enroll our last patient in this study before the end of the year.

The T-Reg study exemplifies our strategy to advance our pipeline programs with collaborative support such as grants, partnerships and licensing.

Our partner Sanford Research, continues to provide support to the T-Reg study by covering the operational cost at their two clinical sites in addition to having made a $5 million total equity investment in Caladrius since September of 2016. In addition to Stanford support, we have also obtained key grants to offset the cost of the T-Reg study.

The study supported by a grant of upto $12.2 million from the California Institute for Regenerative Medicine or CIRM. As Joe mentioned on our second quarter call, we received an initial $5.7 million payment from CIRM.

Under the terms of the grant, we recently triggered our first milestone payment from CIRM of approximately $2 million when we enrolled the 10th patient in California into the T-Reg study.

In addition, the Juvenile Diabetes Research Foundation granted Benaroya Research Institute at Virginia Mason in Seattle, another organization working with us on the T-Reg study a $620,000 grant to support Benaroya scientists and their collaborators in their analysis of the impact of CLBS03 on the immune system of treated patients to better understand the therapy's mechanism of action.

This grant to Benaroya directly offsets costs that we otherwise would have incurred as part of the T-Reg study. We expect the Benaroya data to contribute to understanding the clinical results of the participants, and to provide insight into various subsets of patients.

As a result of these non-dilutive subsidies, we expect to have less than $5 million of external spending obligations post 2017 to reach the 12-month period out of the T-Reg study expected around year end 2018.

Complementing the mentioned grant support, our CLBS03 program has received a number of important international regulatory designations including FDA orphan drug status, EU advanced therapeutic medicinal product classification, and FDA fast-track designation which represents the first Type 1 Diabetes program ever to receive fast-track distinction.

These regulatory designations are key as they provide certain exclusivity benefits, tax credits for certain research, and a waiver of the new drug application user fee and priority review of regulatory approval submissions.

The T-Reg study has a number of remaining key milestones including the completion of enrollment by year end and a 6-month interim analysis on the first half of patients to be reported in early 2018.

As with Phase II trials in general, the final results from this Phase II proof-of-concept study are expected to provide critical learning's that will inform the design of the next steps and development of what we hope will become an important new tool in the treatment of children, newly diagnosed with Type 1 Diabetes.

Turning now to our CD34 plus cell technology; heart attack, congestive heart failure, critical limb ischemia, and often stroke are all caused by an acute or chronic deficit in the supply of oxygenated blood. The decrease in blood supply is due to disease in the large and small blood vessels that serve the target tissues.

One of the body's natural responses to such disease is the recruitment of CD34 cells to ischemic tissues. CD34 cells are preprogramed to repair damage to the small blood vessels or micro-circulation in all tissues.

CD34 cell therapy as a medical treatment is supported by a robust body of clinical evidence published in peer reviewed journals having been investigated in multiple clinical studies in which more than 400 subjects received CD34 cell therapy exposure.

Significant opportunities for CD34 cell therapy exists across multiple under-served cardiovascular indications such as critical limb ischemia, coronary microvascular dysfunction, and refractory angina.

The potential of this cell therapy is also supported by preclinical data demonstrating improved microcirculation and by Phase II studies that consistently show benefits in safety and function. CLBS12 is our proprietary CD34 technology, specifically formulated for intramuscular administration for the treatment of lower extremity [ph] ischemia.

Critical limb ischemia known as CLI, is a severe obstruction of the arteries that markedly reduces blood flow to the extremities, principally the feet and leg. CLI can lead to pain, skin ulcers and dermal sores, and if not successfully addressed, eventually amputation.

No option CLI means the pharmacotherapy is no longer working and that amputation of a limb or limbs is the next step in treatment for these patients. We continue to advance CLBS12 as a treatment for no option CLI in Japan where there is earlier supportive data for this indication.

Based on the substantial clinical data from four prior trials in CLI and qualification [ph], we believe that CD34 cell therapy is not only safe but can help improve quality of life, and potentially treat patients with this life-threatening condition.

We have already reached an agreement with the Japanese PMDA on a Phase II clinical protocol and CMC strategy that will qualify CLBS12 for consideration as early conditional commercial approval in Japan for this indication under that country's new regenerative medicine floor [ph].

The agreed Japanese trial is a 35-patient pivotal Phase II perspective, randomized, controlled open-label multi-center study in no option CLI. Those randomized to treatment will be dosed with CLBS12 to intra-muscular injections in addition to receiving standard-of-care pharmacotherapy.

Patients randomized to the control arm will receive standard-of-care pharmacotherapy with drugs approved in Japan, including anti-platelet agents, anti-coagulants and vasodilators, the choice of which will be made by the investigators according to the protocol.

The primary objective of the study is to show that CLBS12 can prevent the serious adverse consequences of no option CLI by extending the time of continuous CLI free status to improved blood flow to the affected limb.

CLI free status is defined as two consecutive monthly visits without disease progression; this is a highly clinically relevant endpoint and encompasses a broader spectrum of improvement than time to amputation or amputation-free survival to typical endpoints in these studies.

Also because this is an open-label study, we will be able to monitor patients and evaluate progress in real-time. The study is expected to cost about $9 million over approximately three years. With favorable outcomes, we would seek to out-license this product in Japan.

Moving on to our CD34 platform as a treatment for coronary microvascular dysfunction or CMD. CLBS14 is Caladrius's companion product CLBS12 using a proprietary and patented formulation of CD34 cells.

This treatment is administered via cell infusion into a coronary artery and designed specifically to enhance the potency of the D-cells for repair and regeneration of cardiovascular tissue.

We are developing CLBS14 for the treatment of coronary microvascular dysfunction using the patient's own cells to repair and regenerate the damaged cardiovascular tissue in their coronary arteries. Coronary microvascular dysfunction is also commonly called Cardiac Syndrome X or non-obstructive coronary heart disease, CMD for short.

It is [indiscernible] heart disease involving damage to the inner lining of the tiny arterial blood vessels in the heart. CLBS14 is designed to reduce the serious adverse consequences caused by damage to the inner walls of the heart's blood vessels to CD34 cells innate ability to repair small blood vessels and increase micro-circulation.

We will be conducting a Phase II study which will be an interventional, open label, exploratory trial of infused CLBS14 in approximately 20 patients with CMD.

The primary endpoint will be safety and the evaluation of adverse events including serious adverse events as measured by laboratory investigations, physical exams and MACE or major adverse cardiac events.

Other efficacy endpoints we plan to assess are change from baseline to 6-months in coronary flow reserve, endothelial-dependent microvascular function, peripheral arterial tonometry measurements, time to angina, total exercise time, time to ST depression, and activity recorded by Fitbit devices during the one-week period.

We will also evaluate the change from baseline to 3 and 6-months in angina frequency, nitroglycerin use and health-related quality of life. All of the defined end points are commonly accepted clinical and regulatory endpoints for study of this type.

As we previously announced, this study will be supported by an approximately $2 million SBIR grants from The National Heart Lung and Blood Institute of the National Institutes of Health, which will cover the majority of the costs for the trial.

In addition to providing non-dilutive funding, this grant highlights the NIH's strong interest in the development of therapies to treat CMD and support our strategy to advance our clinical pipeline and generate more opportunities within our product portfolio through such grants and collaboration.

Now as to the management of our development portfolio; our clear strategy as a purely biopharmaceutical development company is to advance, expand and diversify our clinical pipeline in order to provide both, near and long-term value creating opportunities.

To that end, we continue carefully and rigorously to evaluate additional clinical development indications for our T-Regulatory cell and CD34 cell platforms.

Our consideration of new indications in autoimmune disease and to our cardiovascular disease based on these existing technology platform will continue to be strongly influenced by the availability of funding grants, work collaborations to support the proposed work as exemplified by the CLBS14 and CMD.

In parallel, we are evaluating a variety of compelling external therapeutic prospects that could create significant value while diversifying our clinical pipeline and development risk.

As with all of our program activities, such considerations will be objective, practical and data driven with primary consideration given to the scientific rationale for such potential acquisitions, the time and cost for the next development milestone, the potential commercial opportunity, and the likelihood of a favorable competitive position in the corresponding market.

As we wind down the year and look ahead, we expect to achieve several value creating milestones that position us favorably for renewed growth in the future.

These milestones include recording the last patient dose to the T-Reg study by the end of this year, reporting the results of the interim analysis of the T-Reg study in early 2018, initiating the planned 35-patient Phase II trial in Japan for critical limb ischemia by the end of the year, initiating a 20-patient Phase II clinical trial of CLBS14 to treat CMD in the early 2018, pursuing additional grants for our T-Regulatory and CD34 cell therapy platforms in multiple indications and pursuing licensing opportunities for CLI in Japan and for other pipeline programs globally.

So in closing, after emerging as a redefined, stronger and more focused company following the transaction with Hitachi, our team has rededicated itself to executing our strategy exactly as publicly described and promised.

We believe we have exceptionally exciting technology platforms that address diseases in a number of medical indications with unmet medical needs.

Our programs are based on primary research out of academic and medical centers renowned for their quality and innovation, and our clinical studies are being conducted in collaboration with and under the oversight of recognized key opinion leaders at prominent clinical and medical sites.

On top of that, our financial situation is stable, we are debt-free with a strong balance sheet and our Company profile is now simplified as a pure play development company making us more understandable, more easily characterized, and we expect more attractive to new investors.

As a development company we are acutely aware that our business plans depend on creating value based on an exciting and expanding pipeline, as well as clinical data and development program advancement. All that we accomplished in the past year has been with the singular goal of putting us in the position to capitalize on this strategy.

Our company evolved dramatically since we became Caladrius and we are now entering the next phase in our corporate development, a phase in which we'll be reporting data and will have multiple development programs and pipeline opportunities to describe and discuss or backed by a solid financial situation.

As a company, our fundamentals have never been stronger, our focus never more well-defined, and our team never more coherent.

We are excited about both, the near and long-term prospects of our company and we look forward to seeing that excitement shared by the investment community as a whole in the same way it is shared by our team and the recognized experts with whom we collaborate. Operator, we're now available to take questions..

[Operator Instructions] Your first question comes from the line of Jonathan [ph] from H.C. Wainwright. Your line is open..

Thank you for taking my question. I'm on the phone for Yi Chen.

Do you have any plans to use the $50 million cash in 2018 besides on the T-Reg study?.

Thanks for the question and please send our regards to Yi.

As I mentioned during the script, the 2018 budget encompasses now three clinical programs that use this to complete the T-Rex trial, it will also devote some funding to both, the CLI program for CLBS12 and the CMD program for CLBS14, although a majority of the funding for all those programs is coming from external grants support also as described.

So that will be the majority of the use for the programs as they are currently defined in 2018..

All right. Thank you for taking my question. I appreciate that..

Your next question comes from Steve Brozak from WBB. Your line is open..

Good afternoon.

Quick question; looking at the Sanford collaboration that you've got, and looking at the fact that you're looking to do additional transactions and expand your different opportunities; can we look at that as a model for future transactions where you would do collaborations -- open collaborations where there might also be the ability to leverage your balance sheet to leverage your technology? Can you give any feedback on that?.

Well, certainly Steve, we are very happy with the Sanford collaboration and the structure that is based on. I think that could be one approach going forward in the future, and it's certainly a model that's been successful for us today and so we have no reason to discount that going forward.

So if not the only thing that we might do, but it's certainly one possibility..

Well, actually that's the follow-up then.

If you consider that to be a conservative and reasonable approach where you're talking about very little hit to your balance sheet; would you also be then looking to -- as you mentioned earlier, make acquisitions that might be actually far more reaching in terms of even products that are currently in the market or any thoughts about that?.

We have actually a defined program of evaluation in-house that has fixed specific criteria I listed in the script but yes, we would be and continue to be looking at a variety of external opportunities that would be a bit more far reaching than just a simple collaboration with another research organization..

Okay.

Obviously, given the fact that you've executed on everything you said you're going to do; something that we should all take seriously, I guess that's a good way of ending it, right?.

I'd appreciate that. Thank you very much..

Thank you..

[Operator Instructions].

It appears that there are now no further questions. I know there are a lot of other conference calls going on today, so there is quite a bit of competition for airtime. So I'll stop and again, thank all those who have listened for participating on today's call.

We look forward to speaking to you again on our next conference call and continuing to bring you news on the achievements and programs progress at Caladrius. We remain grateful for your continued interest and support of our company. And we wish you a good evening. Good night..