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spk01: Thank you for standing by, and welcome to the AtherC's Inc. Second Quarter 2022 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during that time, please press star 1. I will now hand today's call over to Ellen Gurley, Manager of Corporate Communications and Investor Relations. Please go ahead.
spk05: Good afternoon and welcome to AFRSIS' second quarter 2022 results and business update conference call. Please note that any remarks that management 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 for those indicated by the forward-looking statements as a result of various factors, including those discussed in our forms 10-Q, 10-K, and other SEC 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. All risks and uncertainties are detailed in and are qualified by the cautionary statements contained in Adversis's press releases and SEC filing. Also, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, today, August 11, 2022. AFRASIS undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, except as required by law. With that, I would like to turn the call over to Dan Camardo, Chief Executive Officer of AFRASIS. Dan, please go ahead.
spk04: Thank you, Ellen, and welcome, everyone, to Ather's second quarter 2022 business update. In the room today are Maya Hansen, our Chief Operating Officer, Casey Rosado, our Interim Chief Financial Officer, and Dr. Robert Mays, our Head of Regenerative Medicine and Neuroscience Programs. And let me start by saying I'm very proud of the hard work demonstrated by the entire athercys team to help transform the company following our recent restructuring. We believe that multi-stem has incredible potential and significant market opportunity in treating patients that suffer an ischemic stroke and potentially several other serious diseases. Under the transformed athercys, we are much more focused, we're more judicious, and we are driven. As such, I'm confident in this team's ability to capture that opportunity and deliver value back to our shareholders. While Athers has faced various challenges during the second quarter, our restructuring provides a roadmap for success that involves a heightened clinical focus on Masters II, operational expense reduction, and de-risking development for multi-step. We have already embarked on the first two, but to move forward, we need to raise capital. We have been evaluating various financing options and continue to pursue potential partnerships that would provide non-dilutive funding and potentially complementary capabilities in regulatory, clinical operations, commercial, and manufacturing. On our call today, I'll share a new vision for AFTISIS and provide a transparent picture of the decisions we've made over the last two months to put us in a position to succeed. Our long-term vision is global, but our journey to get there will be closely measured and focused. I strongly believe that unlocking the full potential of MultiSTEM as a platform is best achieved through a collaborative strategy that builds upon the groundwork of research and clinical data across a growing number of indications. MultiSTEM's unique profile as a cell therapy and proven potential is at the core of everything we do and guides the strategy we've implemented since restructuring the business earlier in the quarter. In terms of today's call, first, I'd like to provide an overview of reprioritized clinical programs, starting with our primary focus, Master's II, our pivotal phase three clinical study in ischemic stroke. Second, I'll review how the restructuring process results in a leaner, more agile actresses, and how it provides a roadmap for deploying our wealth of preclinical data to heighten multi-stems potential that could drive new opportunities through a business development strategy that delivers de-risked, accretive shareholder value. And third, I'll provide an update on our company's financial position and capital strategy. We'll then conclude with a question and answer session that will include questions we received during our annual shareholder meeting back on July 28th. Let me start with our active clinical trials. Our clinical focus is now on MASTERS II, our ongoing pivotal phase three trial in ischemic stroke. As you may recall, MASTERS II is a randomized, double-blind, placebo-controlled clinical trial enrolling up to 300 patients across leading stroke centers in the US and internationally. I'm happy to report that enrollment has picked up in the last two quarters. This is encouraging momentum that's been being driven primarily from news of the treasure study results in Japan, increased levels of engagement with participating stroke centers, and the addition of new trial sites that we've been activating since the beginning of the year, such as in Australia, Taiwan, and key stroke centers across Europe. We have increased our engagement with all sites, and we are working to better understand and address barriers that some sites have encountered with patient enrollment, cell lab collaboration, and staff training. In addition, we are happy to announce the contract manufacturer we've been working with has completed production of all investigational products necessary to complete Masters II under the current clinical protocol. We are currently in the process of discussing the release of remaining products with our contract manufacturer. And while we are encouraged by this progress, we also want to be more transparent on the expected completion window for enrollment. Previously, we stated that Q1 2023 was our target for full enrollment. We are no longer focused on that date for a few reasons. First, we are being extremely prudent with our operational expenses and cost structure, which requires us to take a more measured approach to adding new sites and stroke center engagement. Second, we're in the process of analyzing the recent treasure data to determine whether we should make any changes to the protocol of Masters II in trial design and enhance the probability of success. Importantly, any potential changes we are contemplating will not affect patients already enrolled in Masters II. And once our analyses have been completed, we may engage in dialogue with regulators if necessary. And lastly, our long-term goal is to achieve a successful trial outcome with multi-step. And we are currently in a critical window of time to consider revising protocols, especially with the complete treasure data set in hand. These decisions aren't made hastily, so we're taking time now to conduct a deeper analysis. We look forward to providing more accurate timelines as we conclude these analyses and consider potential trial modifications with regulatory agencies. As we reprioritize our efforts on Masters II, let me address our work in acute respiratory distress syndrome, or ARDS. Based on the significance of the condition and our prior work with MUST-ARDS trial, there was interest in partnering with BARDA on a Phase 2-3 trial in response to COVID or other pathogen-induced ARDS. However, given our financial situation and prioritized focus on ischemic stroke, we plan to suspend enrollment prior to administering the new bioreactor-produced product until we can strengthen development plans through a partnership or alternative funding source. This was a difficult decision because of the results we observed with must ARDS trial and significant unmet medical needs associated with ARDS, but it was a necessary choice to prioritize spending. Since we completed the initial cohort of administering multi-stem cell factory products,
spk00: that was focused on safety and dosing.
spk04: Suspending the trial at this point made sense since the next cohort was moving to administration of multi-stem product produced using the bioreactor process. As we explore alternative options to restart this trial, we will provide timely updates. Finally, turning to our trauma program, I'd like to share an enrollment update on the matrix one study, which is a phase two study with the University of Texas Health Science Center at Houston, one of the busiest level one trauma centers in the United States. Matrix one is evaluating multi stem for the early treatment and prevention of complications after severe traumatic injury. The first cohort of the study utilizes multi stem produced from our cell factory process. And the first cohort was completed successfully, focused on demonstrating safety. The second cohort has started with the new bioreactor-produced product, and I'm happy to report we have successfully started to enroll patients with the multi-stem bioreactor product. The dosing used in this trial is similar to dosing used in our ischemic stroke trial, which is 1.2 billion cells delivered in a single dose intravenously. We believe MultiSTEM holds great potential to benefit accident victims, battlefield casualties, and others suffering from traumatic injuries by improving recovery, survival, and quality of life. As a reminder, this trial is funded by grants enabling the partnership with UT Health and Clinical Development to proceed at a minimal cost to athletes. As we advance MultiSTEM, we're making fundamental changes to how we run the business, including how we set business strategy, define and execute on priorities, and engage with investors and partners. We're being clear-eyed on what really matters for success, making sound decisions and communicating transparently while operating with a bias that favors action. While it was a very tough decision to reduce our headcount by 70%, we have completed this process in the U.S. and have notified impacted Regenesis employees in Belgium in accordance with local requirements. We also took significant steps to reshape our leadership team and board of directors in order to be more focused, agile, and effective. We're taking this opportunity to reshape our culture, bring in select skills, and create new ways for high potential leaders to step into new roles. We've engaged in current consulting group and welcomed Casey Rosado as the company's interim chief financial officer. Casey has more than 18 years of financial, operational, and leadership experience while specializing in financial and operational turnarounds. Casey has proven to be an ideal fit for our situation, has already made significant contributions to our transformation in just two short weeks. Now, since I joined Ather six months ago, learning more about MultiSTEM's unique and compelling properties, my conviction has become even stronger on the potential we have with MultiSTEP. What attracted me most to Athercys was the extensive preclinical and clinical research the company had completed to support multi-stem as a platform. Specifically, our multi-potent adult progenitor cells or MAPC therapy provides us with a highly attractive platform with significant growth potential across different inflammatory diseases as well as neurological and immune disorders. As part of our transformation efforts, we undertook a comprehensive review of preclinical and clinical research completed to date to identify the highest priority indications. For example, where we may achieve a best-in-class profile and where we believe we can effectively address significant unmet medical needs. On Monday, August 29, Dr. Robert Mays and Dr. Sarah Bush will be hosting a comprehensive webinar on our preclinical and clinical research titled Rebalancing the Immune System, the Multistem Cellular Platform for Treating Disease and Injury. We encourage everyone to register for the webcast using the link in our August 8th news release. Although our primary focus is on completing the MASTERS II trial, Multistem's versatility remains an attractive platform for potential partners at all stages of development And our research review aims to shine a brighter spotlight on those potential opportunities. Now, earlier this week, we announced the results of a radiation countermeasure study conducted by the Armed Forces Radiobiology Research Institute, which is a research institute within the Department of Defense. And this research is a great example of Multi-SIMS platform potential. That study showed IV administration of multistem provided benefit in an animal model of acute radiation syndrome, or ARS. The results demonstrated increased survival in treated animals resulted in higher body weight in surviving animals and positive trends in recovery of the hematopoietic system, representing another positive step in a broader development strategy to address severe critical care injuries and diseases. In addition to working with the Armed Forces radiobiology team, we've also completed pilot work on ARS in collaboration with the National Institute of Allergy and Infectious Diseases over the past several years with an initial focus hematopoietic stem cell transplant and graft versus host disease, or GBHT. This exploratory work included a completed clinical study demonstrating that multi-stem treatment has the potential to improve survival and neutrophil and platelet recovery and reduce GBHD in stem cell transplant patients. This is just one example of how we are committed to exploring potential clinical indications for multi-stem where our therapies may achieve a best-in-class profile in health patients that suffer from serious diseases with few effective and safe treatment options. Beyond ARS and GVHD, of the many indications we've done preclinical research, there is compelling data suggesting that MultiSIM could play a role in treating Alzheimer's disease, multiple sclerosis, epilepsy, Parkinson's disease, spinal cord injury, hypoxia, and ischemia. We are continuing to seek strategic partnership opportunities that deliver the most shareholder value through advancing our MultiSIM platform and it offers the potential to provide non-dilutive funding. The focus of our business development conversations is twofold. First, regional licensing opportunities on ischemic stroke and other indications, and second, pursuing a longer-term global partnership. We continue to collaborate with our current partner Helios in Japan and have been taking steps to strengthen our relationship as both companies recognize the significant opportunity multi-STEM has in helping patients. As such, we continue to support Helios with their ongoing discussions with Japanese regulators, and as progress and or decisions are made regarding their ARDS and stroke trials, we will communicate the details. As I've mentioned, we have completed production through our third-party manufacturer for sufficient clinical products to support our current trials. We are in discussions with our contract manufacturer to release the remaining cell factory clinical products needed to complete Masters II. We've also produced enough bioreactor clinical product to support the Matrix 1 trial and any additional Phase 1 or 2 trials should we decide to pursue them independently or with a partner. Because we have sufficient supply for our current clinical priorities and in light of our commitment to be prudent with resources, we have suspended further multi-stem manufacturing with our contract manufacturer. We continue to be highly encouraged by the progress made to date and longer-term potential for commercial manufacturing based on our proprietary technologies that are patent protected, more efficient, and scalable. Our unique manufacturing processes have required substantial investment over the years, leading to significant intellectual property and valuable trade secrets that we feel put us in a position of industry leadership. We'll be sharing more information about our unique scaling and production processes going forward at industry conferences and in trade journals. We're also taking other actions to reduce or eliminate manufacturing-related costs, such as consolidating our real estate footprint. We have engaged an agency to sublet or find alternative options for our 214,000 square foot stove facility, which can be used as a distribution center for laboratories or manufacturing. Now before I turn to financial results, I'd like to summarize the key changes in our management approach. First, we substantially reduced our cost structure across multiple aspects of the company, making us more attractive to both financial and strategic investors. We've committed to reshaping the executive leadership team with the best possible talent, bringing experience in therapeutics and platform technologies from development through to commercial. Second, we are prioritizing our clinical focus on Masters II while suspending less strategic work that utilizes precious resources and distracts us from our top priority. Third, we are pursuing a business development strategy focused on securing a regional licensed partner for ischemic stroke, as well as a larger global partnership for other multi-STEM indications. These partnerships will bring non-dilutive funding and complementary capabilities across our clinical, regulatory, commercial, and manufacturing functions. And fourth, we're focused on transparency in communicating our priorities, goals, and progress, and expect to be held accountable for performance. We're going to be upfront about choices and decisions with our partners and investors. Now, through the restructuring process, we've come out much leaner. but we require capital to continue operating, and we're looking at multiple opportunities. We are actively expanding our options to raise capital and are looking at thoughtful, equity-driven approaches in parallel with our pursuit of non-dilutive options, all with an eye on shareholder value and our strategic vision. Now let me turn to our financial results. Revenues for the second quarter were negative $1.5 million related to our performance obligation to Helios, compared with no revenues in the second quarter of 2021. Research and development expenses increased to $20.9 million for the second quarter of 2022 from $17.7 million for the same period in 2021, due primarily to higher development, manufacturing, and restructuring costs. General and administrative expenses were $5.2 million for the second quarter of 2022, up from $4.2 million for the comparable period in 2021. Our cash balance at the end of June was $13.4 million, and accounts payable was $23.8 million. In less than two months, we've made substantial progress in reducing our operating burn rate while working with suppliers on payables and other obligations. But as stated previously, we will need to raise cash to support ongoing operations. I want to thank you for your attention, and with that overview, I'm now going to answer several questions that we received during the annual shareholder meeting conducted back on July 28th. One of the questions we received was related to Master's II trial. We received numerous questions on the progress of the trial, how we're moving forward, and in relation to treasure potential trial design changes. I'd like to ask Dr. Mays to provide some additional color on how this study has been progressing.
spk02: Yeah, thanks, Dan. I appreciate it and appreciate everybody for calling in. As Dan mentioned earlier, the MASTERS II trial is our primary clinical priority, and we continue to be excited about the positive response from the medical community all of our principal investigators in the masters 2 trial following the release of the treasure study readout and the subsequent key opinion leader stroke neurology panel that we hosted that in engendered a lot of excitement throughout our principal investigators and the trial sites and i've been participating and continue to participate in Grand Rounds at several of the sites. They've asked me to come out to continue the momentum at the clinical sites as a function of the enthusiasm. As a matter of fact, one of the clinical sites that has enrolled a lot of patients hosted a master's to best practices call where over 40 participants across the Master's II investigator network called in to learn how to enroll as many patients as possible based on the success of the site that hosted the call. We've continued to expand the network of active trial sites, including key stroke centers in multiple geographies throughout the world, including Germany, the United Kingdom, Taiwan, and Australia. And as we bring more sites on and we have the increased enthusiasm, we recognize we've doubled the average number of patients enrolled on a monthly basis in 2022 compared to the other years the trial has been open. And we've also enrolled more subjects in the second quarter of 2022 than during any other quarter that the trial has been running. So we see the momentum, we see the enthusiasm, and right now, Our focus in the clinical ops team is to continue to drive that enthusiasm at all clinical sites. Dan also mentioned we're in the process of analyzing the treasure data and working with our team of statisticians and the scientists here to look at the treasure data, go back to the Master's I data, and evaluate whether we should make any changes to the Master's II trial design to enhance the probability of success. So again, I just want to state that there's a significant opportunity for patients here. And what we want to do is we want to make sure that if we have a powerful therapeutic like multi-stem for treatment of a serious unmet medical need like stroke, we want to ensure that we're running a trial that is set up for long-term success and eventual regulatory approval. So after we're done doing our analysis, we may engage the regulators with protocol amendments that we believe would help us reach this endpoint. And finally, I just want to comment about there's been a lot of people that have asked questions relating to when can we share the full treasured data set. And the way this happens when you're a publicly traded company is you have to count on the academic researchers, the academic neurologists in this case, to present the data at a scientific meeting and at which point then there is a follow up where you have a publication that is published in a medical journal. So Helios has recently announced that they will be giving or presenting a more complete data set. at the World Stroke Conference in Singapore in late October. And so that'll be the next time I believe there'll be a full data dump. Just as an aside, we've been asked to present at that conference as well. So we'll see what happens here in October. So I believe that will be all for me right now.
spk04: Thanks, Dan. Thank you, Willie. Appreciate that. We received another question on restructuring and financing plans. Can you provide more detail on Atheris's near-term financing strategy? What avenues of capital raising are you considering? And how long does the current cash runway take us? So this is obviously been something that we've been talking about and have now disclosed our cash balance. We've been focusing most of our effort on evaluating the different capital raising options that would be most attractive to our situation, while at the same time working hard on reducing our expenses. And that has been kind of the balance that we've been walking. Obviously, we wanted to get to this point of our second quarter earnings disclosure. And so all of those options we feel are still in front of us. and we'll be looking to try to address our cash balance to get us out at least through the near term. One of the things that I'm looking at is timing and potential for other options of non-diluted funding. And so it has been a bit of a balancing act before taking any action. But rest assured that we are considering every avenue to address our lower cash balance. And keep in mind that ASPIRE terminated the equity line that we had in place back in July, I believe it was. And so you'll be looking at more traditional capital raising options in the near future. And let me also, too, invite Casey Rosado to comment, since we specifically went out and found somebody to step in in an interim CFO role, and Casey has been a much needed and appreciated member of the leadership team in the two weeks that she's been on board. Casey?
spk07: Thank you, Dan. As Stantis mentioned, it's been just a little over a week since joining the team, so I'm still trying to get my arms around everything. But what I can say is that the organization has quickly implemented their restructuring plan and the initiatives that are behind it. that they launched in June, and that we are evaluating every operating cost out there, making sure that we are really looking at everything with a keen eye. And as part of that, we have been in communications with our suppliers that are key to our success as we look forward into our businesses. So as Dan also described, as part of that, it's essential that we explore all our financing options that are going to be available to us. So thank you. It's been nice and wonderful getting to know this team in short order, and I look forward to working with you guys.
spk04: Thank you, Casey. Let me ask you a third question around following the financial strategy. If funding were to be secured this quarter, do you expect to resume the suspended McCovey trial or manufacturing of additional multi-STEM products? Would the company's focus be on restarting programs or finding new avenues for building that value?" So, first of all, on Macobia, we feel like we made an appropriate decision based upon where the Macobia trial was, and we'll be looking for partners to advance that trial into the next phase or next cohort, whether that's through partnership or exploring what type of partnership we might be able to achieve with the government or any other potential financial options but without that funding right now is not something that we would be putting money behind because our focus will be on masters to for ischemic stroke as it relates to manufacturing this is probably one of the most meaningful changes to our business that we've made And I will say we're extremely happy with the partnerships that we have with our third-party contract manufacturer.
spk00: They've been excellent to work with.
spk04: We've been successful together at producing multi-stem in the cell factory process, as well as now a bioreactor process that is 4 by 40 liter, which is the clinical product that was approved by the FDA to be used in the Macobia trial, as well as the Matrix trial. So we have been very pleased with the relationship that we have with our third party manufacturer. And for that reason, it does not make sense for us to invest at this point in our own manufacturing capabilities. And that's one of the reasons that we announced the process of looking for a sublet of the stove facility. Because that is an expensive, to build out toward a commercial level of production, is an expensive journey, and we would not want to do that until we had either secured long-term financing or found a global strategic partner. So hopefully that's clear as a change for AtherCIS going forward. And I think on some of the other programs, our position will be not necessarily funding it ourselves. But as we've stated, that would be looking for partnerships, particularly in some of the other disease areas that Dr. Mays and Dr. Bush are going to be reviewing on August 28th. So hopefully that answers the question related to Macovia manufacturing and potential to restart other programs. So one last question that we received, and then we can open it up to our analysts for Q&A. I did get several questions about reaching out to Dan Gilbert, who is the owner of the Cleveland Cavaliers. And we understand Mr. Gilbert had a stroke and is recovering from a stroke. And we have made attempts to reach out to him, and we'll continue to try to make contact with him. As of tonight, we have not spoken and we have not made contact, but it is something that we are looking to try to reach out, talk to Mr. Gilbert, and see what opportunities there might be to either have him involved in what we're doing for ischemic stroke with atlases, or even just to understand his story and the challenges that he's been overcoming since he suffered a stroke. So I wanted to answer that question as well. Okay, so I want to thank Really all shareholders that submitted those questions during our annual shareholder meeting. And now I'll turn the call back to our operator for additional Q&A.
spk01: As a reminder, if you'd like to ask a question, press star 1 on your telephone keypad. Again, to ask a question, press star 1. We'll pause for just a moment to compile the Q&A roster.
spk03: Your first question is from the line of Greg Harrison, Bank of America.
spk06: Good afternoon. This is Mary Keaton for Greg. Thanks for taking our question. Maybe when deciding on how to prioritize resources, what necessarily tips the scales in favor of stroke, which has missed the primary endpoint in two studies versus ARDS where there are two positive studies?
spk04: Thank you. I appreciate the question. What I would say is that we feel like we have significant data on stroke. right, between Masters 1, between TREASURE, the size of the trials, and really the totality of the data, which is what we've been trying to communicate since the TREASURE data results were announced. And it did not meet its primary endpoint of X1 outcome at 90 days. However, there is significant data that we feel demonstrates multi-stem benefit compared to placebo across a series of other measures that were all pre-specified and would be very valuable for stroke patients. And so that's really one of the main reasons why we've decided that focusing on masters to as a phase three trial and based on where we were in our progress with masters to as well as on the cobia. For instance, there was just a natural suspension point. that made sense before we transitioned into the newer bioreactor products. So hopefully that makes sense. And trust me, these are difficult decisions. We would like to be supporting a lot of trials for multi-stem and different diseases. But I think that's one of the biggest changes that we're making is we're really going to be smart with how we're using our resources.
spk03: And these are the type of decisions that we have to make. Thank you. You're welcome.
spk01: At this time, there are no further questions. I will now hand the call back over to the presenters for any closing remarks.
spk04: Okay. Thank you very much for those questions and the ones we received from the shareholder meeting. I trust we've shared our enthusiasm for the future of Atrisys, the Multi-STEM platform, and our roadmap for success, which is a bit different. than maybe what was happening prior to the last two months. We look forward to speaking with everyone again on August 29th for our research review webinar. And again, we'll report third quarter results. And as we continue to execute on our plan, we will obviously keep everyone informed of our progress. I want to thank everyone for their loyal support of AtherSys as we've gone through these changes. I feel we're heading in the right direction. We have some immediate challenges in front of us as we try to square up our balance sheet and look to conduct some type of financing or identify partners.
spk00: But we are working hard and we will share progress as we achieve our goals.
spk04: So thank you very much for listening to the call and I hope everyone has a nice evening.
spk01: This concludes today's call. Thank you for joining. You may now disconnect your lines.
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