This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk03: to the Athers' first quarter 2021 results conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised today's conference is being recorded. If you require any further assistance, please press star 0. I would now hand the conference over to Ms. Karen Honaday. Thank you. Please go ahead.
spk01: Thank you, and good afternoon, everyone. I'm Karen Hannity, Director of Corporate Communications and Investor Relations for Athersys. Thank you for joining today's call. If you do not have a copy of the press release issued at the close of market, it is available on the Athersys website at athersys.com. I'm here with BJ Lehman, our President, Chief Operating Officer, and Interim CEO, John Harrington, Executive Vice President and our Chief Scientific Officer, and Ivor McLeod, our Chief Financial Officer. A webcast of the audio will be available starting tomorrow, Friday, May 7th, at 12 p.m. Eastern Time on our website under the Events section. The access information for the replay is also in today's press release. Any remarks that we may make about future expectations, plans, and prospects constitute forward-looking statements for purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by the forward-looking statements as a result of various important factors, including those discussed in our Forms 10-Q, 10-K, and other public IPC filings. We anticipate that subsequent events and developments may cause our outlook to change. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. For the benefit of those who may be listening to the replay, this call was held and recorded on May 6th of 2021. Since then, we may have made announcements related to the topics discussed, so please reference our most recent press releases and SEC filings. With that, I'd like to turn the call over to B.J. Lehman. B.J.?
spk07: Thanks, Karen. I am B.J. Lehman, President, COO, and Interim CEO of Atrisys. It's been just six weeks since we had our 2020 year-end earnings call. We remain on track with our priorities and look forward to important progress during the remaining course of the year. In our call today, I will provide a short update on our business operations. I will then hand it off to John Harrington, our Chief Scientific Officer, who will share some highlights of our activities associated with developing and preparing for commercial scale manufacturing. And finally, Ivor McLeod, our Chief Financial Officer, will share information about the company's financial position. This will be followed by a brief question and answer period. To get started, I would like to provide a short reminder of our priorities this year. First, we are focused on advancing our clinical programs with particular attention to our Master's II study and in supporting Helios, our partner in Japan, as it prepares for applications to the PMDA for potential approval of multi-stem therapy for ARDS and stroke, assuming successful trial readouts. Second, we are preparing for commercial product manufacturing by further developing our bioreactor-based process for commercial scale production, planning for manufacturing capacity for this purpose, and taking the first steps on the path to put this capacity in place. Third, we have underway important activities intended to prepare us for commercialization, assuming successful trial results and marketing approval applications. In a prudent and staged way, we will continue to develop and invest in commercialization-enabling capabilities. As for important 2021 milestones of particular notes, we expect to see top-line results from our Japanese partners' ischemic stroke study treasure, providing us our first look at late-stage clinical trial data for the treatment of stroke with multi-stem cell therapy, or MV-MestroCell, We are also working to refine our large-scale manufacturing process, establishing technology transfer readiness to enable us to transfer efficiently the process into the GMP manufacturing environment. In Japan, Helios recently announced the completion of enrollment of its OneBridge clinical trial, which is evaluating multi-stem treatment of pneumonia-induced and COVID-induced acute respiratory distress syndrome, or ARDS. This study, including 35 subjects, was designed as an open-label study. Though the size and design of the study may affect the weight of the findings, we hope to see results that are in line with our previous Mustard study and that could provide the foundation for conditional or full approval for this orphaned indication in Japan. Overall, in the short period from our last call, we are operating on plan and in line with expectations shared on that call. We look forward to updating you on progress in subsequent calls over the course of the year. On another note, I would like to remind you that our annual meeting of stockholders is approaching. You should be receiving our annual report and proxy statement by regular mail or email very soon. We encourage you to vote on the proposals included in the proxy statement, and our Board of Directors recommends unanimously that you vote in favor of the four proposals. I would like to bring to your attention one of the proposals in particular, the proposal to increase the number of shares of authorized common stock, which requires the approval of at least 50% of the total outstanding shares and makes your voting participation especially important. With respect to the path of our development into a commercial-stage biopharmaceutical company, 2021 is an important transition year. As we await completion and results of our own pivotal studies, such as MASTERS II, favorable results from the Japanese clinical trials and successful establishment of a large-scale manufacturing process would be expected to provide the foundation for putting in place over the next several years the capabilities and assets to enable long-term success, including commercial operations, commercial manufacturing capacity, and distribution, among other things. Ultimately, we may put these capabilities in place through partnerships, hiring, or investment. By approving the proposal and increasing the authorized number of common shares, you would be providing the company with the ability and flexibility to consider business or financial transactions involving stock, which are intended to support, when needed, the development of these important capabilities and assets essential to commercial success. It is important to keep in mind that for the company to issue shares in the context of a business or financial transaction, the approval of our board of directors is required. This authorization would enable the board to make financing decisions in the best interest of the company and our shareholders. Without approval of this proposal by our stockholders, the company may be hamstrung in its ability to invest in commercial preparations, in conjunction with favorable results, potentially delaying our impact with patients and adversely affecting our commercial opportunities. We ask you to vote and vote in favor of the four proposals recommended by the Board of Directors. Thank you. I would now like to turn it over to John Harrington to highlight our recent process development and large-scale manufacturing preparation activities and accomplishments. John?
spk06: Thanks, BJ. Good afternoon. I'm John Harrington, Chief Scientific Officer here at Apperson. As we near key clinical readouts, first in Japan with our partner Helios, and then subsequently in the United States and Europe, we have begun building our commercial capabilities, including manufacturing. In particular, over the past several years, we've invested significantly in our process development and manufacturing of MD-Met for cells. with the objectives of increasing annual production capacity and reducing costs of goods. Historically, we've utilized a two-dimensional manufacturing process in cell factories, which has allowed us to move efficiently into clinical development to establish proof of concept. It has also facilitated discussions with key regulatory agencies, including FDA, EMA, and PMDA. With this as a foundation, we have focused on developing a commercial-scale bioreactor process capable of fully supplying NB-mester cell product to meet the commercial needs of ASICS and our partners. To this end, we've carried out thousands of small-scale experiments and scaled down bioreactor models to optimize media formulation, product yield, operating parameters, and, of course, product quality. This work has led to the development of an intermediate-scale bioreactor process that has now been transferred to our manufacturing partner, Lonza, and GMP production using this process is currently underway to support ongoing clinical studies. At the same time, we have continued our process development work in progressively larger and larger bioreactors, and we've now achieved proof of concept at the 500-liter bioreactor scale. While I'm not going to discuss the specifics on our final manufacturing process due to the proprietary nature of this work, we've now developed bioreactor-based manufacturing processes that significantly increase fat size and reduce cost of goods. These processes, when fully scaled out, will allow us to produce hundreds of thousands of doses or more than you mess yourself per year. In the coming months and quarters, we plan to continue our discussions with regulatory agencies about the implementation of these newly developed manufacturing processes and to complete the work necessary to enable us to transfer and implement these processes in a GMP manufacturing facility. For more information on our process development and manufacturing activities, I'd like to refer you to a recently uploaded video and other material on our company website, www.athersys.com. And with that, I'd like to turn it over to Ivor for a discussion of the company's financial results for the quarter. Ivor?
spk04: Thank you, John. Good afternoon, everybody, and thank you once again for joining today's call. I'm Ivan McLeod, Chief Financial Officer of ATHASIS, and it is my pleasure to give you an overview of the financial results for the first quarter of 2021. There were no revenues for the three months ended March 31st, 2021 and March 31st, 2020, respectively. Our collaboration revenues currently fluctuate from period to period based on the delivery of goods and services under our arrangement with Helios, our Japanese partner. Research and development expenses increased to $17.5 million for the three months ended March 31st, 2021, from $12.1 million from the comparable period in 2020. The $5.4 million increase is primarily associated with increases in clinical trial and manufacturing process development costs of $4.3 million. Personnel costs of $700,000. and stock compensation costs of $400,000. Our clinical development, clinical manufacturing, and manufacturing process development expenses vary over time based on the timing and stage of clinical trials underway, manufacturing campaigns for clinical trials, and manufacturing process development projects. General and administrative expenses increased to $8.8 million for the three months ended March 31st, 2021, compared to 3.5 million in the comparable period in 2020. The $5.3 million increase was primarily due to one-time charges related to the settled litigation between the company and Dr. Kagimoto, CEO of Helios and a director of the company, and also the resignation of our CEO, Dr. , including $2.3 million in accelerated stock compensation costs. Our net loss for the first quarter of 2021 was $26.5 million, compared to a net loss of $15.6 million in the first quarter of 2020. The difference primarily results from the previously mentioned variances. During the three months ended March 31st, 2021, net cash used in operating activities was $17.1 million compared to $12.1 million in the three months ended March 31st, 2020. At March 31st, 2021, we had $64.2 million in cash and cash equivalents compared to $51.5 million at December 31st, 2020. Before we open this up for some questions from those who called in, we would like to address some written questions that have been submitted. Vijay, would you like to take it from here?
spk07: Sure. First, thank you to all of you who have submitted questions. I'm going to address a few of these here. The first question is about the timing of data from the Japanese studies, in particular the OneBridge study for ARDS and the TREASURE study for ischemic stroke. As I noted before, Helios has announced the completion of enrollment in the OneBridge study. With respect to the top-line results, Helios controls the timing and nature of any public disclosure, which will depend on the completion of the analysis of the study data. Typically, in such ARD studies, the first 60 days following treatment represent the core window for patient data collection. With this in mind, we hope that we'll see the top-line results available relatively soon. At this point, it's difficult to be very precise about the timing of top-line data from the TREASURE study. Based on the disclosed study status and trial design, We hope to see that top-line data later in the year, though like the ARDS study, Helios controls the timing and the nature of the data availability in the public disclosures. A second question was about the status of the search for a new CEO. We thought we'd address that one here as well. First, the Board has already launched a comprehensive process to identify and attract a leader who can guide the company effectively into commercialization. As we stated in the past, our objective overall is to have the best leadership and talent available to lead us forward towards the commercial stage. At this point, we cannot provide any guidance about the timing of the process. We will provide further updates on the search when there's something to report. But in the meantime, you know, we do have in place an experienced, committed executive and leadership team with the support of the board to continue and drive our operations forward over the course of the year and achieve our priority initiatives. So with that, we'd be happy to take a few additional questions from today's participants.
spk03: As a reminder, if you'd like to ask a question, simply press star 1 on your telephone keypad. Your first question comes from the line of Greg Harrison with Bank of America.
spk02: Hey, guys. This is Olivia Breyer on for Greg. Thanks for the questions. My first one is on the Master's II trial design. Can you just talk about some of the similarities between your trial and Helios' TREASURE trial that that could be a positive indicator of success for your study down the road. And then also, you know, whether there was any level of patient enrichment beyond what was done in the Japanese study. And then I have one follow-up afterwards.
spk07: Sure. Let me talk about the design similarities. I think that will give you a pretty good idea. First off, with respect to the patients that are coming into the study, The patients are essentially very similar. These are patients that have moderate to moderate severe strokes as measured by NIHSS, which is one of the standard scales for evaluating neurological function following an event like a stroke. And that is between 8 and 20 on that scale at the time of entry into the study. It's got to be a durable stroke, so we evaluate these patients for some period of time to make sure it's not a transient stroke event. That's important for ultimately the data set and the robustness of the data set. These are also patients who are being treated within 18 to 36 hours in both cases. And they also have available to them or to the doctors who are treating them other device and a TPA technology that could help with reperfusion. So in all cases, we are including patients that could have had reperfusion therapy so long as that reperfusion therapy is doesn't fully address the stroke and they remain within you know the targeted patient criteria that i just mentioned so those are the similarities with respect to the patient population obviously it's a japanese population there i think with respect to the endpoints again very similar we are looking at a set of primary and secondary endpoints that are also covered off in the treasure study The primary endpoint for us is something called the MRS shift analysis, which is essentially an analysis of the distribution of MRS scale scores in the population comparing placebo to treatment. We have as key secondary endpoints things like excellent outcome, evaluating a patient's essential, you know, essentially their recovery to normal state. And we have, as well, evaluations at day 90 and day 365 and a series of other secondary endpoints that are similar between the studies. The TREASURE study has the same endpoints. However, their primary is the excellent outcome. uh measure and a key secondary for them is the mrs shift analysis it's a smaller study about 220 patients we do believe it will be somewhat predictive of our outcome but remember it's a different patient population and while there is a good degree of similarity in standard of care there there are some differences such as a lower rate of the reperfusion therapies and the like So we do think it's going to be very informative with respect to how we view the potential for Master's II.
spk02: Okay, great. That's helpful. And then in terms of your EU partnering strategy, you know, can you just give us an update there now that we're getting a little closer to the Japan data for both programs? And, you know, whether that's still a wait-and-see approach or whether there's more of a near-term prioritization there?
spk07: Yeah. We continue to have discussions with potential partners with respect to rights in Europe and outside of Europe. It's possible that we could do something before data or after data. At the end of the day, we want to find the right partner who brings the right capabilities to the table to help us be successful in commercialization. I think the expectation in Europe is to find a potential partner with deep commercialization experience and capabilities, preferably in the indications we're working, so the critical care indications, and who's got a demonstrated commitment to the space, the cell therapy or gene therapy space. So that's what we're looking for, and the timing's really going to be driven around finding that right deal. We are approaching the data now. You know, certainly that could have some impact on the nature of the deal. So, you know, that will be taken into consideration as we continue to have our discussions going forward.
spk03: Great. Thanks so much, guys.
spk07: Thank you.
spk03: Your next question comes from the line of Jason Colbert with Allison James.
spk05: Hi, guys. Good to hear your voice. John, I understood a little bit about what you were talking about, not at first, but when I started to connect it to the numbers and what Ivor was talking about in terms of the R&D expense. So my question for you is on an ongoing basis, how should we be thinking about cost of goods? Obviously, right now it's very high. because it's in a clinical trial period, but it sounds like you're making a lot of progress towards driving that process to be more efficient, i.e. a lower COGS. So can you help put your comments in perspective in terms of the cost that's showing up now versus what the cost might be under commercialization?
spk06: Very good. Hi, Jason. Good to hear from you. As I mentioned in my comments, the initial first-generation manufacturing process was a two-dimensional cell factory-based process. It's relatively manual, relatively small batch sizes. It allowed us to move quickly into clinical development. It allowed us to work with regulatory agencies to define the key parameters around ultimately the commercial process that we utilize. Ultimately, cost of goods is driven by a number of inputs. Raw materials is a big one, labor is one, facilities, et cetera. And as you increase that size through, for example, a bioreactor process, raw materials become a larger component of cost of goods, and we optimize the cost of those raw materials through optimization processes, et cetera. And we dramatically reduced labor. We dramatically reduced facilities costs. We dramatically increased batch size, which has associated with it some economies of scale that we can capture as we scale out that bioreactor process. Moving to a bioreactor process has a substantial impact on the cost of goods. Namely, it will reduce cost of goods significantly and has already. I mentioned that we have an intermediate scale bioreactor process. We're producing GMP products with LASA and plan to use that material at clinical trials. And that is already a meaningful reduction in the cost of goods. But the more significant reduction in the cost of goods comes from the final large-scale bioreactor process that we've now developed. And we've initiated the process of transferring that final commercial-scale bioreactor process to a CMO. And we're exploring the possibility of bringing that in-house as well. And the timing of that investment will be likely around key clinical data readouts, et cetera. But overall, there will be a substantial reduction in cost of goods. Cost of goods will be, we expect, competitive in the biologic space. These are complex products. It's a living drug. There are a lot of challenges in producing at large scale a living drug. You've got very short hold times. You've got very short processing times, et cetera. And as you increase that size, you have more and more material that needs to be processed in a very finite period of time. This isn't like an antibody or a recombinant protein that can be produced upstream and then processed over days or weeks. We have hours to process the material, purify it, concentrate it, formulated and filed. And then ultimately, as you know, the product is credit-preserved. So we have a short window to do that, and that creates challenges. I think we've largely overcome the major challenges, and we've developed a process that is, at least in the hands of our process development group, quite robust. And so we expect to move that forward into commercial-scale production in the coming years. with potentially material available in a shorter timeframe than that. But ultimately, you know, it's been a major focus of the company. We've made a major investment in terms of people and processes, and we're quite happy with where we are in that process. Does that get you?
spk05: Perfect. Yeah, I understand how much is actually in there, and it'll take some time to unpack that. But what I hear you saying is on good clinical data, the justification to put money in the ground and potentially bring manufacturing even in-house to realize the economies of scale is a possibility.
spk07: Sure, yes. Yeah, we're going to look at that. That's going to be one of the options we would have going forward, yes.
spk05: And, BJ, thank you, John. One of the transitions that I get asked a lot about is, you know, Gil's departure, and you talked about commercialization and bringing in a CEO with commercial experience. I remember when Josh Boger, the founder of Vertex, stepped down, everybody was shocked, but it made a lot of sense because they brought somebody in who had commercial experience. So what are the – What does the resume have to look like for the person you're bringing in? Is it somebody with big pharma and potentially stroke experience to launch this product?
spk07: You know, I don't want to comment too much on this. I think we have a strong process in place being led by the board. But, you know, suffice it to say, we're going to cast the net broadly because we want to look at a variety of different capabilities that can help us in the commercial stage. And that could be large pharma. It could be smaller biotech. It could be experience in biologics. It might not be. So we want to bring the right set of capabilities, you know, into the company, something that complements the team here. a person who's got a set of capabilities beyond just commercialization as well, because that's going to be important, too, over the next couple of years. But other than that, I would leave it to our search team at the board level to drive it forward. I've seen the process outlined, and we've participated. I think it's a robust process. I think we're going to find some very strong candidates who can really bring value to the company. So let's let that develop, and we'll report back.
spk05: Okay. Thanks for the update, guys.
spk06: Okay.
spk07: Thank you.
spk03: Thank you all. Now I'll turn it back over to BJ Lehman for closing remarks.
spk07: Thank you. You know, in closing, I'd like to thank you all for participating today. I'd also like to thank our shareholders, especially our long-term shareholders, for your continued investment and interest in AFRASIS. That's very important to us. We probably don't say thank you enough, but thank you. Everyone have a good night. Bye.
spk03: Thank you, ladies and gentlemen. That concludes this conference call. You may now disconnect.
Disclaimer