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

Keay Nakae - Chardan.

Welcome to the Caladrius Biosciences Fourth Quarter and Full Year 2017 Financial Results and Business Update Conference Call. [Operator Instructions] As a reminder, this call is being recorded March 22, 2018. I will now turn the call 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.

Shortly before this call, we filed our Form 10-K and issued a news release, announcing our financial results for the 2017 fourth quarter and full year.

If you have not received this news release or if would like to be added to the Company's email 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 operations and future results of Caladrius.

I encourage you to review the Company's filings with the SEC 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 of this conference call contains time sensitive information that is accurate only as of the date of this live broadcast March 22, 2018. Caladrius Biosciences undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

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

Dave?.

Thanks John. Good afternoon, everyone and thank you for joining us on this call. During 2017, we completed execution of our strategy to transition Caladrius from a combined cell therapy service provider and clinical development company to a pure clinical development company with the sale of our PCT business in the middle of the year.

The transition is complete and we are delighted to be reporting the meaningful progress we've made both advancing and expanding our clinical development programs. Just since our last call, we acquired a very promising late stage asset that has great synergies with our current clinical pipeline and expertise.

Dose for the last patients in the Phase 2 Sanford Project, T-Rex Study, reported the results of the interim analysis of the T-Rex study and dose for the first patient in our Phase 2 clinical trial for critical limb ischemia in Japan.

During today's call, I will summarize our overall progress, provide additional insight into our ongoing and planned trials, and discuss some upcoming milestones. Before I do though, I’ll 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. We are quite pleased with the accomplishments in 2017 as Dave just noted and as we look forward, we believe we're well positioned to execute financially on the initiatives we've established for 2018 and beyond. Caladrius exited 2017 with a substantially improved balance sheet and financial position.

At the end of 2017, the company had just over $60 million in cash, restricted cash and marketable securities with zero long-term debt and an overall net working capital of $52 million. The restricted cash balance of $5 million which is tied to our PCT sale last year is expected to be released from escrow in full in the second quarter of 2018.

By contrast, at the end of 2016 the company had only $7 million in cash, $6 million of long-term debt and excluding the PCT related assets and liabilities, a working capital of negative $1 million. Clearly, the PCT sale which generated over $100 million in non-dilutive cash over a two year period was truly financially transformative for the company.

With that as an overview let me turn to our 2017 financial results. As mentioned on prior earnings calls, all PCT-related activities prior to the sale of PCT to Hitachi in the second quarter of 2017 along with the $52 million gain on the PCT sale is reported as discontinued operations.

All remaining Caladrius operating activities are reported as continuing operations. I will begin with a review of the continuing operations for the fourth quarter and year ended December 31, 2017.

Fourth quarter 2017 R&D expenses were $4.7 million, a 45% increase compared to the prior year quarter largely due to the initiation of our CLI clinical program in Japan, while expenses incurred in our Phase 2 T-Rex study were relatively unchanged.

For the full year of 2017 however, R&D expenses of $15.8 million were down 5% compared with 2016 reflecting significant restructuring costs incurred in early 2016 that reduced R&D headcount, refocused our research and development initiatives, and prioritized our T-Rex study.

Overall, 85% of our 2017 R&D expenditures were focused on our immune modulation platform and primarily the T-Rex study. Fourth quarter 2017 G&A expenses were $2.7 million compared with $2.3 million a year ago. For the year however, G&A expenses were down 8% to $11.8 million compared with $12.8 million for 2016.

Please note that the 2017 full-year results also included a onetime $1.7 million equity compensation charge for the acceleration of vesting of employee equity awards triggered by the sale of PCT. Excluding this onetime non-cash charge, the decline in G&A would have been even greater reflecting our continued focus on strong financial discipline.

The net loss from continuing operations for fourth quarter 2017 was $4 million or $0.40 per share compared with $5.7 million or $0.69 per share a year ago. The current quarter loss included a non-cash tax benefit of $3.2 million.

The net loss from continuing operations for the full year in 2017 was $16.2 million or $1.78 per share down from $31.3 million or $4.74 per share in 2016. The current year loss included a non-cash tax benefit of $11.5 million.

Please note that continuing operations tax benefits in the current year will not generate an overall tax benefit to the company since offsetting tax expenses are reported in our discontinued operations line item. Now turning to our results reported in discontinued operations.

We recognized $38.4 million of income from discontinued operations in 2017 which includes a $41.2 million gain on the sale of PCT net of $10.5 million in taxes. During the fourth quarter of 2017 we recognized an additional $1.1 million of income from discontinued operations representing an additional tax adjustment on the sale of PCT.

The losses from discontinued operations for the prior-year fourth quarter and full year were $423,000 and $2.1 million respectively. Turning to our balance sheet and cash flow. As previously mentioned, cash, restricted cash and marketable securities totaled $60.1 million as of December 31, 2017 with zero long-term debt.

Our 2017 operating cash burn from continuing operations was $20.2 million representing a 28% decline compared to 2016. As we move forward in 2018, our R&D spend for the T-Rex study will drop significantly now that enrollment has been completed and this will allow us to focus investments on other areas within our R&D platform.

In 2018, we expect to receive additional non-dilutive funding from the California Institute for Regenerative Medicine or CIRM to further subsidize our T-Rex study. In 2017 CIRM provided $7.6 million of non-dilutive cash to subsidize the T-Rex study.

In addition, we expect grant funding from the NIH to substantially fund the majority of our coronary microvascular dysfunction study plan to initiate enrollment in the second quarter of 2018.

With these ongoing studies along with our recently initiated CLI study in Japan, we expect total R&D expenses to be under $10 million in 2018 excluding any potential major expenditures associated with the recently acquired CD34 cell therapy program for the treatment of refractory angina from Shire, as our development plan remains to be finalized based on discussions plan with the FDA.

Dave will provide further details regarding this program momentarily. Based on our current business plan and cash balances, we are confident that we can fund our operations well into 2020.

We will also continue to pursue additional external opportunities that align with our initiative to supplement our current R&D platform or to identify other compelling value creating opportunities. With that, let me turn the call back to Dave..

Thank you, Joe. Let's start with the progress we've made with our landmark Phase 2 study of CLBS03 as a potential treatment for type 1 diabetes.

We were delighted to complete enrollment of the Sanford Project T-Rex study, a perspective randomized placebo control double-blind Phase 2 clinical trial of 110 patients to evaluate the safety and efficacy of a single administration of CLBS03 as a treatment for recent onset type 1 diabetes.

The trial was studying two doses of CLBS03 and the key endpoints are the standard medical and regulatory endpoints for T1D trial and include preservation of C-Peptide which is an accepted 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 the 0.2 picomole per milliliter difference in AUC means C-Peptide between the active and placebo arms at 12 month post-treatment.

Earlier this month we reported the outcome of the predetermined interim analysis of the T-Rex study which was triggered by 50% of the targeted total number of patients in the trial completing six months of follow-up. The interim analysis was conducted by independent statisticians and found that CLBS03 continues to be well-tolerated.

The analysis also led to the conclusion that the study was non-futile as determined by predefined futility criteria for therapeutic effect meaning that a positive outcome for therapeutic effect at the end of the trial remains a statistical possibility.

Of course, we have long expected that the analysis of the complete data set at the end of the trial will be necessary to fully understand the impact of CLBS03 on patients and to provide insight into the appropriate parameters to be studied in future trials.

As a reminder, CLBS03 is a personalized autologous cell therapy consisting of each patient's own regulatory T cells or T-Reg which have been expanded in number and functionally enhanced by proprietary methodology.

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

Our partner Sanford Research continues to cover the operational cost at their two clinical sites in addition to having made $5 million in total equity investment in Caladrius since September 2016. We also obtained key grants to offset the cost of the T-Rex study.

The California Institute for Regenerative Medicine has committed up to $12.2 million to support the study.

In addition, the Juvenile Diabetes Research Foundation granted Benaroya Research Institute at Virginia, Mason and Seattle another organization working with us on the T-Rex 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 participants to better understand the therapies mechanism of action.

This grant to Benaroya directly offsets costs that we would otherwise have incurred as part of the T-Rex 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.

In addition to grant support, our CLBS03 program has several key international regulatory designations including FDA orphan drug status, EU, advanced therapeutic medicinal product classification, and FDA fast-track designation the latter representing the first type 1 diabetes program to ever receive fast-track distinction.

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

We look forward to completing 12 month follow-up into reporting the topline data on all 110 patients in the T-Rex trial in early 2019. We expect the results will provide a bolus of data that will inform us our next steps in the development of what we hope to become an important new tool in the treatment of children with recent onset type 1 diabetes.

Moving forward we expect to have less than $3 million of external spending obligations to complete all activities associated with the T-Rex trial. Turning now to our CD34 technology. Heart attack, congestive heart failure, critical limb ischemia and stroke are often 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.

There's been a tremendous focus on strategies to address the problems in large vessels leading to the use of clotbusting drugs, angioplasty and stent to treat heart attack and percutaneous and surgical revascularization for chronic ischemic condition.

Yet to date, no therapy has been designed to address the defect in the small blood vessels which contributes to the overall impairment of patient with acute and chronic ischemia. One of the body's natural responses to such coronary disease is the recruitment of CD34 cells to ischemic tissues.

CD34 cells are preprogrammed to repair damage to the small blood vessels or microcirculation in all tissues. CD34 cells have been shown to induce the development of new blood vessels preventing tissue death by improving blood flow.

We are currently advancing two proprietary CD34 programs mainly CLBS12 as a treatment for critical limb ischemia and CLBS14 CMD for the treatment of coronary microvascular dysfunction.

Recently, we were delighted to expand our CD34 cell therapy platform with the acquisition of a license from Shire of a late stage CD34 cell therapy program as a treatment for refractory angina CLBS14 RfA.

Under the terms of the agreement with Shire, we acquired exclusive worldwide rights to all development information for the CD34 cell therapy program for the treatment of refractory angina in exchange for an undisclosed upfront consideration future milestones, and a royalty on product sales.

The comprehensive dataset includes preclinical, as well as Phase 1, Phase 2 and Phase 3 clinical study data that CD34 cell therapy has a treatment for no option refractory angina along with the corresponding regulatory filings. We are especially pleased to have this late stage program as Dr.

Douglas Losordo, our Chief Medical Officer while a full-time professor at Northwestern University designed and was the principal investigator for the Phase 1 and Phase 2 studies of this therapy which were conducted under the sponsorship of Baxter. When Baxter created the spin out Baxalta, the program went with it.

Upon Baxalta's merger with Shire, the program became deprioritized as it was not core to Shire strategic direction and consequently it became available for our acquisition. Needless to say we are very excited to be moving forward with this promising and complementary late stage program given our intimate knowledge of the therapy.

Importantly this program is supported by data from three randomized placebo-controlled trials including data from a partially completed Phase 3 study run under the [offices] of Baxter.

It is important to note that Baxter's Phase 3 study was terminated prematurely not for any technical or safety reasons but as a strategic decision that preempted the creation of Baxalta and the eventual sale to Shire.

Our recent publication in the European heart Journal combines the data from all three studies in a meta-analysis encompassing over 300 patient and revealed statistically positive improvements in mortality, exercise capacity and chest pain frequency critical elements in measuring treatment efficacy and angina.

This program represents a potentially large commercial opportunity for Caladrius as refractory angina afflicts approximately 1 million people in the United States alone with 50,000 to 100,000 new diagnoses each year.

We look forward to holding discussions with the FDA in the coming months to determine the most expeditious regulatory path to registration for the CD34 cell therapy program and to bringing this potentially restrictive therapy to patients in need.

Let me now turn to CLBS12, our proprietary CD34 technology specifically formulated for intramuscular administration for the treatment of lower extremities ischemia. Critical limb ischemia is a severe obstruction of the arteries that significantly reduces blood flow to the extremities principally the feet and legs.

CLI can lead to pain, skin ulcers and dermal sores and if not successfully addressed eventually amputation. No option CLI means that pharmacotherapy is no longer working and that amputation of a limb or limbs is the next step in treatment for these patients.

We recently dosed the first patient and a 35 patient Phase 2 perspective randomized controlled open label multicenter study in no option CLI patients in Japan. Those randomized to treatment will be dosed with CLBS12 to intramuscular injection 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, anticoagulants and vasodilators the choice of which will be made by the investigators according to the protocol.

The primary objective of this 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 afflicted limb.

CLI free status is defined as two consecutive monthly visits without disease progression as determined by an independent adjudication committee. This is a highly clinically relevant endpoint and encompasses a broader spectrum of improvement than time to amputation or amputation free survival which are the historically used endpoints in these studies.

The endpoint employed in our study has the added benefit of potentially allowing an endpoint to be reached for a given patient in a shorter time frame.

This study be conducted following extensive consultation an agreement with the Japanese Pharmaceuticals and Medical Devices Agency or PMDA on a Phase 2 clinical protocol and CMC and quality strategies such that it should qualify CLBS12 for consideration of early conditional commercial approval in Japan for this indication under that country's new regenerative medicine laws.

Our confidence in this approach to CLI is supported by the substantial clinical data from four prior trials in CLI and claudication conducted in the United States and Japan which show CD34 cell therapy is not only safe but also improved CLI free status and amputation free survival.

Over the next three years, we expect to invest approximately 9 million to support this program. We continue to seek to out license this product for commercialization in Japan and with favorable outcomes to advance its clinical development in the United States.

Review this CLBS12 study in Japan is a potentially rapid entry point to the market and the basis to explore the broader applicability of CD34 therapy which could offer a significant opportunities across multiple underserved cardiovascular indications. Moving on to our CD34 program as a treatment for CMD.

CLBS14 uses a proprietary and patented formulation of CD34 cells. This treatment is administered via infusion into a coronary artery and is designed specifically to enhance the potency of the cells for repair and regeneration of cardiovascular tissue.

We expect soon to initiate a Phase 2 clinical trial of CLBS14 for the treatment of coronary microvascular dysfunction or CMD which is a plaque with heart disease involving damage to the inner lining of the tiny arterial blood vessels in the heart.

CLBS14 CMD is designed to reduce the serious adverse consequences caused by damage to the inner walls of the heart's blood vessels through CD34 cell innate ability to increase microcirculation. The Phase 2 study is a plant 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 major adverse cardiac events.

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

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

As previously announced, the study will be conducted with an approximately $2 million SBIR grant from The National Heart Lung and Blood Institute of the National Institutes of Health, which will cover the majority of study costs.

This grant underscores acknowledgment by the NIH of the urgent need to develop effective an innovative therapies to treat CMD and support our strategy to advance our clinical pipeline and generate more opportunities within our product portfolio through the use of such nondilutive funding.

We are very excited to be advancing our CD34 cell therapy as a medical treatment across these three important cardiovascular indications. Dr. Losordo is a leader in the field giving Caladrius extensive and likely unique experience and expertise with CD34 cell therapy in cardiovascular disease.

We look forward to updating you on our progress with these very promise programs in the future. In closing, we continue to be encouraged by the notable progress we’ve made to-date and in the future expect to report clinical data and development program advancement that we believe will provide near and long-term value.

Moving forward over the next 12 months, we expect to initiate the 20 patient Phase 2 clinical study of CLBS14 to treat CMD, advance the ongoing enrollment of our Phase 2 clinical trial of CLBS12 for CLI in Japan, gain clarity on the regulatory path forward with our new CD34 program for the treatment of chronic myocardial ischemia targeting refractory angina, complete the 12-month follow-up on all 110 patients in the Phase 2 T-Rex study, pursue additional grants to support application of our technology platform in multiple indications, and pursue licensing opportunities for CLI in Japan and for other pipeline programs globally.

Caladrius entered 2018 in a stronger position than ever to advance our strategy and achieve multiple milestones. We have a robust clinical development pipeline advancing with what we believe to be our exciting and promising technologies that address unmet medical needs in autoimmune and cardiovascular disease.

We have a strong balance sheet to support these programs and importantly we have an experience, dedicated and passionate team to advance these programs efficiently and effectively as we work to bring innovative treatment option to patients in need. And with that overview operator, we're ready to entertain questions..

[Operator Instructions] Our first question is from the line of Keay Nakae with Chardan..

With respect to the interim analysis and T-Rex, was the futility baked only on measurement of preservation of C-Peptide or was it the other characteristics also with that?.

We looked at for the interim analysis not only C-Peptide levels but also insulin used in a few of the other parameters as well. It was an algorithm that had been developed by the statisticians in consultation with our clinical team at the beginning of the study. And then they applied the analysis and transmitted to us the result..

And then with respect to CIRM funding for the study how much do you expect or how much should we model you might receive in 2018?.

Well we're still figuring that out. Part of the CIRM grant was a contingent upon enrolling a certain number of patients or rather I should say treating a certain number of patients in the state of California. And other parts of the grant had to do with manufacturing and advancement on timelines et cetera.

At this point, I can tell you that the grant anticipated that we were to incur a certain number of patients for treatment in California and we did not reach that milestone and we did that consciously because some of our California sites were taking a very long time to come up and be open for enrollment for a variety of reasons and many of our other sites were over performing.

And so we had the choice of either slowing down the trial to try to gather every last penny from CIRM or to complete the trial either ahead of schedule or certainly at least on schedule and forgo a little bit of the support and we chose the latter. So the exact calculation is still being done internally.

But I could say we’ll be maybe you know 1 million or up to 2 million maximum off of the CIRM target over the course of whole study..

Our next question is from the line of your Yi Chen with H.C. Wainwright. Please go ahead..

This is Julian on for Yi.

Regarding 2018 guidance, can you just confirm less than 10 million for R&D, did I hear that correctly?.

Yes. So in laying out our current platform, we will spend under $10 million to cover the remainder of our CLBS03 study in 2018, as well as what we're doing for the CLI program and the initiation of the CMD program for coronary microvascular dysfunction.

That does not include anything we would do on the refractory angina front and that's going to be pending the discussion with the FDA over the course of the year. So anything that would impact that $10 million number we would provide updates to in future quarters..

And how about general and administrative guidance for this year, do you have any figures?.

So we haven't provided specific guidance on that. We're pleased with ending the current year at about, just under $12 million, but from a cash standpoint less than that. We're expecting to trend similarly as we move forward into 2018 as we've stabilized our G&A infrastructure..

And we do have a follow up question from the line of Keay..

So with respect to CMD study, can you tell us in maybe more detail how you're going to assess - who's eligible to participate in that study?.

Well in general terms Keay the participants that will be enrolled will have to be people who are diagnosed with CMD. And I think the rest of the enrollment criteria have been worked out but I'm not sure that I've communicated them publically. So I think we could probably take that off line.

But generally speaking, these are people who have been diagnosed with coronary microvascular dysfunction that have experienced continuing symptoms and probably you are looking for improvement in their quality of life. The trial will be done principally at two centers Cedars-Sinai in Los Angeles and the Mayo Clinic in Minnesota.

So two very, very well-known and reputable cardiovascular centers and I believe that both centers have – I'll call it a registry, but certainly a group of patients that are queued up to try this treatment because they've not been able to find relief in anything else.

And I think I may have said in my remarks, this is a disease for which there is no approved treatment at this point in time..

Is there some sort of cutoff in terms of the amount of plaque burden they may have?.

Well this is a plaque-less disease. So I don't think so I'm happy to have you speak in greater detail with our Chief Medical Officer who's not here at the moment, but we can arrange for that call. But this is a plaque-less disease.

So in principle with the CMD using angiography you can't identify a blockage in the large arteries that is the principle culprit in the cause of the angina. So then assumes that it's the damage to the small arterial structure or architecture in the heart..

Okay. Yes, that's what I'm getting at.

Just you know as a complete option and how would you determine that versus some minimal amount that's acceptable to be included in the study?.

Again the exact details are probably best discussed with our CMO and I have to see all of the criteria. But generally speaking, these will be patients who will not have an identifiable large vessel plaque but still have the angina..

And we do have a follow up from the line of Yi..

This is Julian again. Just a quick follow up, regarding the T-Rex trial. Is it utilizing a closed system for [ex fewer] [ph] cell processing? If not, would there be any logistical differences in cell manufacturing if you were to move into pivotal testing? Thank you..

Right now the manufacturing for the T regulatory cells and the T-Rex trial is not in a completely enclosed system. I would say it’s a majority in closed system and one of the next steps in development would be to move toward that.

Clearly whatever we would use in a pivotal trial will have been or would have been by us vetted to ensure that it was commercially viable both from an operational perspective, as well as the cost of goods perspective. But we are not currently in a fully [indiscernible] system. That's why the processing is done in a clean room..

[Operator Instructions] And that is all the questions we have in the queue. This concludes the Q&A portion. Would you like to have any closing remarks Dr. Mazzo? I'd like to turn it back over to you Dr. Mazzo. And this concludes today's call. You may now disconnect..