Welcome to the Caladrius Biosciences Second Quarter 2019 Financial Results and Business Update Conference Call. Currently, all participants are in 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, Thursday, August 08, 2019.

I'll now turn the call over to John Menditto, Vice President of 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 issued a news release announcing our 2019 second quarter financial results.

If you have not received this news release or if you would like to be added to the company's email distribution list, please email me at jmenditto@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 it'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, August 08, 2019. 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'll turn the call over to Dr. Mazzo.

Dave?.

Thank you, John and good afternoon, everyone and thank you for joining us for this midsummer company update. I’m once again pleased to be reporting on a productive quarter in recent few weeks.

Over the past several months, we continue to advance our clinical initiative and are especially pleased to report that after close collaboration over the last several months, we have received clearance from the FDA for confirmatory Phase 3 trial for CLBS14, our product candidate for treatment of no-option refractory disabling angina or as we refer to it NORDA.

I will discuss the details of the study a bit in a few -- a bit further in a few moments. In our ongoing clinical programs, enrollment continues in Japan as we work toward our target of data from that study of CLBS12 for critical limb ischemia by mid-2020.

Also as recently announced, the European Medicines Agency granted the advanced therapy medicinal product classification to CLBS12 for the treatment of CLI. This classification sets the stage for us to work closely with European regulators to define the most expeditious development and regulatory plan to registration for CLBS12 in the EU.

In addition, data continues to trend positively and we remain on track with our current expectation to report results for the CLBS16 ESCaPE-CMD trial in the U.S by the end of 2020 or in early -- by the end of 2019 or in early 2020.

Before I provide more details on the overall progress of our therapeutic product candidates and offer additional insights into ongoing and planned trials as well as some upcoming milestones, I will 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'm pleased to provide an update on our 2019 second quarter and first half financial results highlighted by our two ongoing clinical study CLBS12 in critical limb ischemia and CLBS16-CMD and activities associated with the preparation and initiation of our NORDA program with CLBS14.

Overall, our net losses were $5.1 million and $9.5 million for the three and six months ended June 30, 2019 compared with $4.1 million and $9.1 million for the three and six months ended June 30, 2018.

Moving to our operating expenses, R&D expenses were $3 million and $5 million for the three and six months ended June 30, 2019, compared with $2.1 million and $4.4 million for the three and six months ended June 30, 2018. R&D expenses in all periods were primarily focused on the advancement of our ischemic repair platform.

In our ongoing study of CLBS12 in critical limb ischemia in Japan, we continue to focus spending on patient enrollment with the goal of delivering results in mid-2020. We expect to incur less than $5 million of additional spend to complete the study.

In our ESCaPE-CMD study, we completed enrollment in May and together with significant NIH grant supporting this program, we’ve funded nearly all study related costs as we target data readout in late 2019 or early 2020.

Lastly, we’ve continued to focus efforts on the preparation and initiation of the Phase 3 NORDA clinical trial for CLBS14 and with the protocol for this study now finalized, we currently project that the trial will cost approximately $70 million in external expenses over the next several years to complete.

This estimate includes our recently announced agreement with Cognate Bio Services, a leading contract development and manufacturing organization in the global cellular therapies industry to produce trial materials for the CLBS14 NORDA clinical trial as well as validation activities necessary to support the eventual filing of the BLA in the United States.

Dave will provide more information regarding this program momentarily. G&A expenses were $2.4 million and $4.9 million for the three and six months ended June 30, 2019, compared with $2.1 million and $5 million for the three and six months ended June 30 2018. G&A expenses remain generally consistent compared to the prior year period.

Turning now to our balance sheet and cash flow. As of June 30, 2019, we had cash, cash equivalents and marketable securities of $33.7 million. And then operating activities cash burn of just over $10 million for the first six months of 2019.

We believe our cash on hand is sufficient to fund our ongoing operations through the second quarter of 2020, which includes the completion of enrollment and data readouts for CLBS12 in CLI and the ESCaPE-CMD study as well as the initiation of the NORDA clinical trial.

However, with the NORDA clinical trial currently projected to enroll over the next several years and costing approximately $70 million in total. The completion of the NORDA clinical trial will be contingent upon future acquisition of additional capital.

We intent to acquire additional funding before the end of 2019 or early in 2020 to extend our cash runway and to fund our near-term operating plans and we will pursue both dilutive and non-dilutive sources of funding. With that, let me turn the call back to Dave..

Thanks, Joe. Let me begin by providing a summary of the basis of our CD34 positive cell therapy platform. To repeat my comment from previous quarterly call, our CD34 positive cell technology has led to the development of therapeutic product candidates designed to address diseases and conditions caused by ischemia.

The condition in which the supply of oxygenated blood to healthy tissue is restricted.

Previously published animal and human studies have demonstrated that the administration of CD34 positive cells induces angiogenesis of the microvasculature that is that these cells prompt the development of new blood capillaries thereby contributing to the prevention of tissue death by facilitating blood flow to the area of ischemic insult.

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

Now to the specifics of our three CD34 development programs, beginning with our most clinically advanced CD34 positive cell therapy product candidate in the U.S., CLBS14.

CLBS14 is being developed to address no option refractory disabling angina by stimulating the growth of new microvasculature in an oxygen deprived heart in those patients who have had large vessel disease treated with all available therapies, but still have debilitating angina.

Our confidence in this program is based on a series of published Phase 1, 2 and 3 study results that indicate a consistency of therapeutic effect of CD34 positive cells to increase exercise tolerance, reduce incidence of angina and decrease long-term mortality associated with the condition.

Since acquiring the rights to the data and regulatory filings for CLBS14, we have successfully reactivated the IND and received Regenerative Medicine Advanced Therapy or RMAT designation from the FDA.

The RMAT designation affords us the opportunity to work with FDA to advance more rapidly and efficiently the development of this therapeutic candidate in an indication that currently has high morbidity and no effective treatment options.

Additionally, as I mentioned at the outset of this call, we have now finalized the protocol design for confirmatory Phase 3 trial to support the registration of CLBS14 for NORDA in the United States.

CLBS14 is to be studied in a prospective randomized double-blind placebo-controlled clinical trial with an un-blinded 6-month open-label standard of care arm to determine the efficacy and safety intramyocardial delivery of autologous CD34 positive cells for increasing exercise capacity in subjects with NORDA.

The study will enroll three arms and approximately 400 subjects. There are about 200 subjects targeted in the active arm, about 150 subjects in the placebo arm and another approximately 50 subjects in the standard of care arm.

Subjects randomized to standard of care will have the option to crossover to open-label treatment following their 6-month follow-up visit. The primary endpoint of this study is improvement in total exercise time at 6 months with several secondary endpoints identified, including reduction in angina frequency.

Our current plans target initiation of enrollment in the Phase 3 study in the United States in early 2020, we expect the study to take about 2.5 years to fully enroll utilizing about 35 sites in the U.S and perhaps Canada. With a 6-month follow-up primary endpoint, top line data is projected about 3 years from first object treatment.

As Joe just mentioned, we project that external cost for the study will be approximately $70 million over a 3 to 4 year period, including the preparation and initiation costs that we are currently incurring. Moving to our CD34 positive cell therapy product nearest to commercialization, CLBS12 in Japan.

Among others our CD34 positive cell technology has spawned the development of CLBS12, a product candidate for the treatment of critical limb ischemia or CLI, which is currently in an ongoing registration eligible clinical study in Japan.

CLI is a severe obstruction of the arteries that significantly reduces blood flow to the lower extremities principally the feet and legs and represents the end-stage of peripheral arterial disease. CLI patients often experience severe rest pain, limited mobility, non-healing skin ulcers, and if not successfully treated, eventual amputation.

As I highlighted earlier, the European Medicines Agency recently granted advanced therapy medicinal product classification to CLBS12 for the treatment of CLI.

Advanced therapy medicinal products are defined as medical treatments that are based on genes or cells and are intended as long-term or permanent therapeutic solutions to acute or chronic human diseases, add a genetic cellular or tissue level.

This regulatory achievement sets the stage for us to work closely with European regulators to define the most expeditious development and regulatory plan to registration for CLBS12 in the EU. As a reminder, CLBS12 was previously awarded a Sakigake designation from the Japan Ministry of Health, Labor and Welfare for the treatment of CLI.

Importantly, 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, as well as reduced review time from the typical 12 months down to six months for the CLBS12 registration application once filed.

Additionally, CLBS12 is eligible for early conditional approval and possibly full approval based on the compelling nature of the complete data from our ongoing prospective randomized controlled open-label multicenter study in CLI patients in Japan.

The ongoing study comprises subjects divided into two cohorts, a 30 subject group with traditional arteriosclerotic CLI and a 6 subject group with Buerger's disease, a specific type of CLI often associated with heavy smoking.

Those subjects who are randomized to treatment are dosed with CLBS12 through intramuscular injection in addition to receiving standard of care pharmacotherapy. Subjects randomized to the control arm only receive standard of care with drugs approved in Japan, including antiplatelet agents, anticoagulants and vasodilators.

The choice of which is made by the investigators according to the protocol. The study allows for the rescue of subjects in the control arm by indicating the crossover to treatment if the CLI is deemed to be progressing.

The primary objective of this study is to show that CLBS12 can prevent the serious consequences of CLI by reverting the patients to a CLI free condition through improved blood flow in the affected limb.

CLI-free status is defined as two consecutive monthly visits, in which rest pain is absent and previous non-healing skin ulcers are completely healed as determined by independent adjudication committee.

As previously reported, and as you can review in our corporate presentation on our company website, the initial responses observed in the fully enrolled Buerger's disease cohort are very positive and consistent with the positive therapeutic effect and safety profile as reported by previously published clinical trials in Japan and the U.S.

In Buerger's disease where amputation and often death are likely outcomes and where no available pharmaco therapies prevent amputation, we are thus far observing a remission rate that is extremely encouraging with several patients still in follow-up.

It is worth repeating that the natural history of Buerger's disease patients is continued disease progression leading to likely amputation.

We are very encouraged by these early results and believe that if maintained they suggest a positive outcome for the overall trial recognizing, however, that the final conclusions of the trial will be dependent on all data from all subjects. We expect to report data from the completed study in mid-2020.

As to cost, we project that we will incur less than $5 million of additional expenses to finish this study and these expenses are included in our budget projections. Regarding commercialization, our strategy remains to license CLBS12 for sale in Japan.

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.

Finally, previously published work including a study in the United States showing an improvement in amputation free survival and our progress in Japan combined with a high degree of interest and enthusiasm from U.S and European CLI experts, has prompted us to consider the initiation of CLBS12 development in the U.S and Europe prior to the completion of the study in Japan, dependent upon the identification of the corresponding capital necessary to fund such a study.

Turning now to our CD34 product candidate as a treatment for coronary microvascular dysfunction or CMD.

Like all our CD34 positive cell therapy development candidates, CLBS16 uses a proprietary and patented formulation of CD34 positive cells, specifically designed for an injection at or near the site of ischemic insult, which in the case of CMD, is an infusion into the coronary artery.

CLBS16 is currently being studied in the ESCaPE-CMD trial, a 20 patient proof-of-concept clinical trial evaluating CLBS16 as a treatment for coronary microvascular dysfunction and ischemic heart disease without discernible large vessel blockages.

It should be noted that CMD is more frequently encountered in females making this a women's health issue of emerging notoriety and significance. CLBS16 is designed to address the symptoms and physiology of CMD by employing the CD34 positive cells innate ability to increase microcirculation.

As we communicated on previous calls, most of the costs associated with the ESCaPE-CMD trial are covered by a grant from the NIH. And as such, the funding of this trial to completion is included in our budget projections.

Similar to the results of our CLI study in Japan, the preliminary data observed in the ESCaPE-CMD open-label study comprising those subjects who have reached the 6-month follow-up visit are extremely encouraging.

With results from about one-third of the patients reported, we are observing a statistically significant improvement in coronary flow reserve, a direct measure of cardiac muscle perfusion along with the corresponding improvement in clinical symptoms. Of course, the final outcomes of the trial will be dependent on the 6-month data from all subjects.

The results from this trial are not only important for defining the next step in development for CLBS16, but they provide the first direct quantitative evidence in humans corroborating the mechanism of action of CD34 positive cells, something which is supportive of all of our program, but especially of CLBS14.

We are looking forward to reporting data from the completed study at the end of 2019 or in early 2020. In closing, we are pleased to share our progress this quarter and to demonstrate continued execution against our stated objectives. Our financial position remain stable.

Our pipeline programs are progressing well and with three CD34 positive cell therapy product candidates, we’ve a development pipeline comprising multiple mid and late stage projects. Caladrius continues to make measurable progress advancing its development programs and we are pleased to have accomplished the goals we established for the past quarter.

Our experienced and expert team remains committed to the efficient and effective advancement of our program, as we work to bring innovative treatment options to patients in need and restore human health. And with that overview, operator, we are now already to take questions..

[Operator Instructions] Our first question comes from Jason Kolbert with Dawson Securities. Your line is open..

Hello. This is Alex for Jason. Congratulations on finalizing the NORDA protocol. It's a large trial and equals 400.

Can review with me on how that number was calculated?.

Sure. Thanks, Alex, for the question and our regards to Jason as well.

So the number is based upon a statistical analysis of previous data including the reported Phase 1 and especially the randomized Phase 2 trial, which then yielded an effect size and based upon that effect size we have calculated statistical power that would -- which yields the number of patients necessary to study.

And so that's how we've included those numbers. The 50 patient in the standard of care arm is not really based upon a statistical analysis, but more on a agreement with the FDA..

What is the power in equal 400 that you mentioned?.

Off the top of my head I don't have that right now. But I believe we're calculated to have 90% power, but we can confirm that in the future call..

Awesome.

Also on good data, would you need to run a second trial?.

It is our understanding at this point in time that good data as you have characterized in combination with the previously filed Phase 1, 2 and partially completed three data, will be sufficient for the filing and review of the BLA..

Perfect..

Your next question comes from Pete Enderlin with MAZ Partners. Your line is open..

Hi, Pete..

Thank you. Good afternoon, Dave and Joe. Maybe this first question is for Joe, actually. R&D in the quarter was up about a $1 million from the first quarter.

So can we infer that was primarily all due to the preparations for NORDA for getting ready for this upcoming trial?.

That’s correct. A lot of -- yes, the shift has clearly been focused over to the NORDA program as we did complete the enrollment on the CMD program in May. So our efforts have shifted to NORDA..

And if its 400 patients and $70 million, [indiscernible] is a $175,000 per patient. I mean, I know there's a lot covers into that.

But what if anything -- does that indicate about the potential long-term pricing structure of this product?.

Actually it indicates nothing, Pete..

Okay. Good..

That cost is -- it involve the cost of tech transfer, validation at the commercial site, preparation for BLA filing at the commercial site, as well it also includes a number of other development activities and all of these things are being done at the research level and research scale.

So it is really no direct correlation to future pricing or future cost of goods from this particular study. And that’s the case for most clinical studies, the cost per patient is always much higher in the clinic when it is for the ultimate treatment in the commercial marketplace..

I mean, even just the manufacturing costs, obviously, from Cognate would -- probably would be a lot harder than with the [indiscernible], if I guess right?.

Typically, yes. Typically clinical trial manufacturing costs are much higher than commercial manufacturing costs..

And then just to confirm the cash sufficiency through the middle of 2020, that includes the NORDA program that’s -- up to that point ….

Correct..

… that’s already in there -- okay..

Yes..

How -- can you -- what can you tell us about the enrollment of CLBS12 in Japan right now? I mean, I know you're still expecting it to be [multiple speakers]..

Right. We are on track for our target completing enrollment no later than the end of this year or early in 2020, and then having results to report in mid-2020. So that remains our consistent projection..

Okay. Thank you.

And then CLBS12, what’s the status of the RMAT application in this country?.

We are in communication with FDA and we are in the -- what I would call the question-and-answer phase relative to that application. So I would expect that if FDA is able to adhere to their typical timelines that sometime in the fall, we should have the final -- a final response on that..

Okay. On CLI, you mentioned that the endpoints, I guess, you said freedom from pain and ulcers healing and all that. Just sort of a curiosity question, why wouldn't an endpoint be the one that you show in your slide deck, not as an endpoint, but just as a real indication of the efficacy, which is the laser Doppler imaging.

Is there some reason why that wouldn’t be included as an endpoint?.

Well, for a number of reasons. First of all, as far as patients and clinicians are concerned, if there's increased perfusion, but no improvement in clinical symptoms and nobody cares, so it's more about the patient's reaction to that. So the laser Doppler imagery is considered secondary.

But if -- and so far it correlates well with decrease in pain and improvement in healing of ulcers as you might expect, because the blood flow is one of the critical factors. But in and of itself, it's not an endpoint..

Okay. And then just one last one for me.

When does the stock purchase window reopen for you guys?.

So, typically its four days after the filing of our quarterly filing. So it would open up next week..

Okay.

So that means at this point there's nothing that’s [indiscernible] waiting to happen in terms of regulatory actions or anything like that, that would keep that window closed?.

We -- no, we just filed the filing of the Q today that [indiscernible] all pertinent information..

Okay. Thank you very much..

Okay. Thanks, Pete..

Your next question comes from Joseph Pantginis with H.C. Wainwright. Your line is open..

Hello and thank you for taking the questions. This is Emmanuelle [ph] for Joe Pantginis. I was wondering going back to the CLBS14 NORDA study, you mentioned you only need one, like -- very likely you are going to need only one [indiscernible] upon delivery of good data.

Would good data mean primary endpoints match or are secondary endpoints and specific secondary endpoints important for approval..

Thank you for calling and please send our regards to Joe, Emmanuelle [ph]. We -- our understanding is that the -- that it's really only about the primary endpoint as long as all of the secondary endpoints move in the correct direction, of course.

But it will be the analysis with the primary endpoint as far as we understand that will be the deciding factor..

Okay. Thank you for that.

And also going to 2D, CLBS12 trial, what would make you happy in terms of results?.

What would make us happy would be a continuation of remission rate that we're seeing here.

So, in these studies, previously we've seen response rates that that average around 80% of all patients treated at about 1-year, but I think anything above 50% would be considered a major step forward in treatment options for these patients, especially in the Buerger's cohort.

So -- so far what we've seen to date and what we reported publicly is trending clearly in that direction and that’s we’ve got all the such smiles on our face as a result at this point..

Sure.

And, I guess, related to that, what do you think the -- to what extend do you think the result of this study would be informative for designing [indiscernible] for U.S tabulators?.

Actually quite informative. We’ve already begun discussions with U.S regulators about study design and really the discussion there is going to be around endpoints. Historically, the FDA has preferred amputation free survival as an endpoint.

We’ve actually done studies and reported them where our product has met that endpoint in a statistically significant matter in a Phase 2 trial. But the result out of Japan, I think will be clearly informative in that regard..

Great. Thank you very much and congratulations on the progress..

Thanks so much..

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

Hi, Steve..

Hey, Dave. Thanks for taking the call, of course. Dave, can you just iterate given the fact that you’re proceeding as you’ve been intending to do.

What potentially you might have for collaboration in -- at any stage going forward? And you can be as specific or as 40,000 feet as you like on that, because I’m really curious about that right now?.

All right. Well, thank you. So, we have -- collaboration can come at a variety of levels. So we do have a research partner, Sanford Research Foundation, which was previously principally involved in our T regulatory cell program, but remains a strong supporter of the company, and will likely remain involved going forward in all of our CD34 platforms.

We also are in, I would say -- will use the word advanced late stage discussions with potential partners in Japan relative to a commercial agreement for the sale of CLBS12. And of course, consummating those deals is probably going to be contingent upon completing this study and getting an approval, but those conversations are going as we expect.

We are also in, I would say, earlier stage discussions which are becoming more focused from our perspective on development partners for CLBS14 for NORDA.

$70 million is a big price tag for a company of our size and while we see that there are a number of ways that we could fund this study, doing the study with a partner, or having a partner fund most of it would be the ideal way. And so we’re looking in that regard.

And then on CLBS16, there are also a number of other foundations who are interested, including those that are dedicated to women's health. So we’ve a variety as Joe pointed out of partnering up -- possibilities that could result in dilutive or non-dilutive tight arrangements relative to our funding..

Again, thanks for taking the question, and of course thanks for the update on that..

Okay. Take care. Thank you..

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

Okay. Thanks everyone. Thank you for participating on today’s call and we look forward to speaking with you again on our third quarter conference call in a few months, and to continuing to bring you news of our achievements and progress. We remain grateful for your continued interest and support of Caladrius Biosciences.

We wish you a pleasant rest of summer, and a good evening. Thank you and good bye..

This conclude today’s conference call. You may now disconnect..