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

Keay Nakae - Chardan Julian Harrison - HC Wainwright Pete Enderlin - MAZ Partners.

Welcome to the Caladrius Biosciences Second Quarter 2018 Financial Results and Business Update Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a Q&A session. [Operator Instructions]. As a reminder, this call is being recorded today, August 9, 2018.

I will now turn the call over to John Menditto, Executive Director, Investor Relations and 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 today, we filed our 10-Q and issued a news release announcing our financial results for the second quarter and first six months of 2018.

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 will 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 August 9, 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?.

Thank you, John. And good afternoon, everyone. And thank you for joining us. I'm pleased to be reporting on another busy and productive quarter.

In the second quarter, we continued to advance our clinical initiatives and we’re especially pleased to report that the FDA granted regenerative medicine advanced therapy or RMAT designation to our recently acquired late stage CD34 positive cell therapy program CLBS14-RfA for the treatment of refractory angina.

This designation offers enhanced regulatory interactions and a more rapid filing review in order to facilitate the most efficient development process. We are also excited that we have initiated and are enrolling our study of CLBS14-CMD for the treatment of coronary microvascular dysfunction or CMD.

I will talk more about these programs in greater detail later in the call. In other areas, we continue to advance CLBS12 for critical limb ischemia or CLI in Japan. As we discussed on our Q1 call, we received SAKIGAKE designation for this product candidate in Japan.

We expect that this designation will assist us in providing a potentially nearer term commercial opportunity in Japan than otherwise might have been the case. On another positive note, our polyclonal T regulatory cell product CLBS03 continues inpatient follow-up moving towards the one year primary endpoint by the end of 2018.

We remain on track for the announcement of the results of the top-line data analysis of the T-Rex Study in the first half of 2019.

Before I provide more detail on our overall progress and offer additional insight into ongoing and planned trials, as well as some upcoming milestones, 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.

I am pleased to provide an update on our 2018 second quarter and first half financial results which continue to reflect focused research and development spending in our clinical programs and overall cost management efforts, the sale of a non-core asset generating $2.5 million in non-dilutive cash and our overall strong financial position with zero debt.

Please note that my commentary will only focus on our results from continuing operations compared with the prior year. As a reminder, our 2017 financial results include the operations of PCT, our former subsidiary that was sold to Hitachi Chemical last year.

These results are now reported as discontinued operations in the 2017 comparative financial statements. Now turning to our financial results.

Our net losses from continuing operations were $4.1 million or $0.42 per share and $9.1 million or $0.95 per share for the three and six months ended June 30, 2018 compared with $2 million or $0.22 per share and $8.7 million, or $0.99 per share for the three and six months ended June 30, 2017.

Please note that the prior year losses included a one-time income tax benefit in continuing operations to us as the tax expense recognized in discontinued operations on the gain on the PCT sale to Hitachi Chemical.

Excluding the 2017 income tax benefit in continuing operations, our net losses were significantly lower in the current year periods, compared with the prior year periods.

Overall, our total operating expenses were $4.3 million and $9.4 million during the three and six months ended June 30, 2018, representing declines of 45% and 33%, respectively, compared with the prior year periods.

R&D expenses were $2.1 million and $4.4 million during the three and six months ended June 30, 2018 compared with $4.3 million and $8 million in the prior year periods.

The lower 2018 expenses representing 50% and 45% declines, respectively, were driven by significantly lower CLBS03 study related costs, which were partially offset by expenses related to launch and enrollment of our CLI and CMD studies in our ischemic repair platform. We expect this shift in expenses to continue over the balance of 2018.

As previously disclosed, we completed enrollment and all manufacturing related activities in the CLBS03 clinical study in December 2017. And accordingly, our CLBS03 study costs dropped significantly in 2018. We are now in the 12 month follow-up phase of the study and expect to incur less than $2 million in external spending to complete the study.

Within our ischemic repair platform, however, we incurred higher costs due to the initiation of our Phase 2 study of CLBS12 in critical limb ischemia in Japan in late 2017, along with the initiation of our Phase 2 study for CLBS14-CMD in coronary microvascular dysfunction.

Our six month expenses also included a modest undisclosed upfront payment in the first quarter of 2018 to Shire for the acquisition of the exclusive data license to what [we've deemed] CLBS14-RfA for the treatment of refractory angina as previously announced in March.

Please note that any future transaction-related payments due Shire will be milestone and royalty-based and contingent on the future advancement and success of the licensed program. Dave will provide additional commentary on our next steps in the development of this program in a moment.

Overall, we expect the majority of our R&D spending into 2018 will focus on the advancement of our development programs in our growing ischemic repair platform. G&A expenses were $2.1 million and $5 million during the three and six months ended June 30, 2018, compared with $3.4 million and $6.1 million in the prior year periods.

The 2018 periods included a $1.4 million gain on the sale of our rights to a non-core asset, a counter-flow centrifugation system or CFC device to Hitachi Chemical Advanced Therapeutics Solutions in May 2018. Excluding this gain, our G&A expenses were marginally higher compared with the prior year periods.

We continue to manage G&A expenses with a strong financial discipline we've demonstrated for several years. Turning now to our balance sheet and cash flow. We ended the first half of 2018 with cash and cash equivalents and marketable securities of $50.3 million and zero long-term debt.

As previously mentioned, we generated $2.5 million from the sale of our CFC device in the second quarter. In addition, our cash balance included $5 million that was previously held in escrow and classified as restricted cash in our balance sheet related to the PCT sale last year.

This $5 million was held in escrow for 12 months after the PCT transaction against any potential claims that could have arisen. In the second quarter of 2018, the escrow amount was released to us in full.

We also had minor at the market or ATM issuance activity and option exercise proceeds during the first half of 2018, principally in late June, generating approximately $600,000 for the year.

Our operating cash burn for the first six months of 2018 was $12.2 million, including the payment of contractual retention obligations to former PCT employees on the one-year anniversary of the PCT sale.

Excluding these retention payments, our operating cash burn for the first six months was approximately $10 million and we expect the remainder of the year will average approximately $5 million per quarter.

Based on our existing programs and projections, as well as cash and marketable securities balances, we are confident that we can fund our existing clinical development programs into 2020 while we continue to pursue additional strategic value creating opportunities.

Lastly, as we discussed on the first quarter call, we entered into a common stock ATM sales agreement with H.C. Wainwright in February 2018 under which we could sell shares of our common stock having an aggregate sale value not to exceed $12 million.

At the time, the company's public float was below $75 million, and accordingly, the size of our ATM facility was constrained by Baby Shelf restrictions. However, in late June 2018, our stock price appreciated significantly. And as a result, our public float rose above $75 million, thereby eliminating the company's Baby Shelf limitations.

Accordingly, earlier this month, we increased the offering value under our ATM facility with H.C. Wainwright to $25 million. All other provisions of the ATM facility, sales agreement remained unchanged. We will continue to maintain full control over the number and timing of shares to be sold if any.

As previously mentioned, to-date we have sold a de minimis number of shares under the ATM. However, having the ATM facility provides us with an expedited path to raise funds at a relatively low cost of capital, if and when appropriate. With that, let me turn the call back to Dave..

to drive enrollment in the 20 patients Phase 2 clinical study of CLBS14-CMD; to advance the ongoing enrollment of our Phase 2 clinical trial of CLBS12 for CLI in Japan; to meet with the FDA and gain clarity regarding the development plan and regulatory path forward for CLBS14-RfA for the treatment of refractory angina; to complete the 12 month follow-up on all 110 patients in the Phase 2 T-Rex Study of CLBS03; and to pursue additional grants for our CD34 and CLBS03 platforms in multiple indications; and pursue partnership opportunities for CLI in Japan and for other pipeline programs globally.

Caladrius continues to advance effectively its development programs and we are pleased to have accomplished the goals we established for the past quarter.

Our enthusiasm for our pipeline is reinforced by the fact that we believe to the best of our knowledge that we are the only company with development programs that have been awarded, respectively, the SAKIGAKE and RMAT designation.

We remain committed to judiciously applying our physical resources to support these programs under the leadership of a dedicated and passionate team, one that is focused on realizing the potential of exciting and promising technologies that address large unmet medical needs in autoimmune and cardiovascular diseases.

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

[Operator Instructions]. Your first question comes from Keay Nakae from Chardan. .

Two questions. First, for the T-Rex Study, just want to clarify some of expected timelines for reporting the top-line data.

Is your plan to release that via a press release or would you perhaps wait to present it at a scientific conference and if that was the case, will that push out the report -- expected reporting date for that?.

So regarding the CLBS03 T-Rex Study, our plan is to report the results initially through press release. I mean that’s going to be considered material information for a company like ours, and we want to get that out to into the public notification as soon as possible.

Depending upon the complexity of the data and the results, we may choose to do on the company conference call and more than likely we will follow up at scientific conferences with more detailed presentations. But our goal is to have that out in the public domain likely by the end of the first quarter..

Okay, great.

And then just second with respect to the RMAT designation for 14-RfA, you -- do you have actually a schedule date to talk with the FDA, and are you prepared with some sort of plan to see if the meta-analysis of the data today from the Phase 1, 2 and 3 is possibly sufficient to be able to file given that you now have the designation?.

So the answer to your question is specific in one respect and a little bit more vague as it relates to the actual plan going into the FDA, simply because we don’t like to preempt the discussion with FDA by stating publicly what we might request since we don't want to put in a difficult position.

But to answer your question about timing, we do not have a date yet. We expect to have a date that will likely have the meeting occur in the early to mid fall and we are in the process of wrapping up the pretty extensive development of briefing document that has to go with the company in the meeting.

That meeting document will stay in a position from our perspective that will request an expedited path to registration and we hope that FDA will agree with that approach, whether that includes additional clinical work or not, pre-registration will be seen as a result of the discussions and we will report on that after the meeting. .

Your next question comes from Yi Chen with H.C. Wainwright. .

Hi,there. This is Julian on for Yi. Congrats on the quarter.

First, assuming positive top-line date from your T-Rex trial, would you still plan on transitioning your manufacturing process to a closed cell processing system for the pivotal program?.

I'm sorry Julian -- first of all thanks for your question, but I -- you broke up there just in the middle of your question.

Would you mind repeating it please?.

Yes, sure.

My question is assuming positive top-line data from the T-Rex trial, would you still plan on transitioning your manufacturing process to a closed cell processing system for the pivotal program?.

So our processing system right now is a majority of closed system process. But depending on the top-line data and also the extent of changes necessary to move to a fully closed system and the availability of the manufacturing instrumentation to do so, we may or may not do that for the next studies.

It also depends on whether the next studies are going to be considered pivotal registration studies because as you know, you would want to do your pivotal registration studies with whatever you planned to launch commercially. And so, we would probably want to make minimal changes going forward.

But clearly, any advantageous changes that could be made to improve manufacturing and simplify it into a closed system, I think that we would consider..

And my last two questions are just housekeeping timing ones and I apologize if I missed these in the prepared remarks.

When do you expect to report top-line data from the CLBS12 study in Japan? And when do you expect to complete enrollment in the CLBS14-CMD study?.

So our goal is to have a top-line data available from CLBS12 in early 2020 and for the CMD trial -- CLBS14-CMD in late 2019..

Your next question comes from [Barry Reuben] from [Bellmore Investment]. .

Before I ask my quick question I just want to give a shout out to Mr. Menditto in Investor Relations. He is always very sharp and prompt in returning calls and I really appreciate himself very much.

My question is regarding the diabetes program, would you plan on partnering that with anyone or are you going to be establishing the sales force and doing it alone?.

But as it relates to the 03 program, I think we stated several times in the past that our strategy is to look to seek and establish a partnership with likely a larger company that has an established presence in diabetes treatment for continued development and eventual commercialization.

I think it would be unlikely that we would commercialize that product on our own..

Our next question comes from Pete Enderlin from MAZ Partners..

First of all, just a compliment on cost control, the operating expense controls that you showed in the quarter, those are very creditable. Second, I just have a sort of a broad question about the RMAT designation.

How closely did the FDA review all the Phase 1, 2, 3 trial data before they gave it that designation? I mean I know you submitted all the data, what's your sense of how closely they really analyzed it and came to a conclusion about the value of the program?.

Thanks for the compliment and thank you for your question. Obviously, I can't speak for FDA, but I can tell you what our anticipation is. Given that one of the requirements to obtain RMAT designation is a demonstrated ability of the product in clinical trial already to show a great promise in a therapeutic effect in an area of high unmet medical need.

My expectation is that they reviewed those data extremely thoroughly because that's one of the main criteria for granting RMAT.

So I think that they would have looked through that data and reviewed those publications and even judged the quality of the investigators and the source of the publications as well as part of the consideration in the RMAT award. .

Okay, great.

And I don’t know if you want to or can really talk about the progress enrolling patients in the CLI trial and the CMD trial, I mean I know you've done at least one in both cases I guess, correct? But how far along are you?.

Yes. It’s not unusual for I think most companies to not give specifics on enrollment, and especially given that enrollment in clinical studies is decidedly non-linear. You have ups and downs, and good months and bad months. But I can say that at this point in time, we have treated more than one patient in both of those trials.

You know one because we announced when we treated the first one. And we are not in a position to change our projections. So at this point, we still predict to get the top-line data according to timeline I just announced a few minutes ago..

[Operator Instructions]. This concludes the question-and-answer portion of the presentation. And I'll now turn the call back over to Dr. Mazzo for closing remarks..

Again, I'd like to thank you all for participating on today's call. We look forward to speaking to you again on our third quarter conference call and continuing to bring new news of our achievements and progress. We remain grateful for your interest in and support of Caladrius Biosciences and we wish you a good evening. Thank you and good bye.

Thank you. And this does conclude today's conference call. You may now disconnect..