Longeveron Inc.

Greetings and welcome to the Longevron second quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce host Mike Moyer, investor relations. Thank you, sir. You may begin.

Thank you, operator.

Good morning, everyone, and welcome to Longevaron's second quarter 2023 results conference call. Today, we will provide a business update and discuss financial results for the quarter ended June 30, 2023. Earlier this morning, we issued a press release with these results, which can be found under the investor section of our website. Joining on the call today by the following members of Longevron's management team. Mr. Weihall Ashad, Chief Executive Officer, Natalia Agafenova, Chief Medical Officer, and Lisa Locklear, Chief Financial Officer. Mr. Ashad will begin with a brief corporate overview, then Dr. Agafenova will review Longevron's recent progress in its clinical programs, and Ms. Locklear will review financial results for the 2023 second quarter. Following the company's prepared remarks, we will open the call to questions from covering analysts. As a reminder, during this call, we will be making forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statements should be considered in conjunction with cautionary statements in our press releases and risk factors discussed in our filings with the SEC, including our quarterly report on Form 10Q and annual report on Form 10K, and cautionary statements made during this call. We assume no obligation to update any of these forward-looking statements or information. Now, I'd like to turn the call over to Mr. Wael Ashad, Chief Executive Officer of Longeverone. Wael?

Thank you, Mike. And good morning, everyone. Welcome to the Longeverone Second Quarter 2023 Business Update and Financial Results Call. We are pleased to be speaking with you today and look forward to sharing our process developing regenerative medicines for unmet medical needs. Our second quarter has been productive in terms of executing on our goals at Longevero, marked by progress in our clinical programs for our lead investigational product called LOMSL-B, enhancements to our leadership team, our board of directors, and the initiation of our rights offering to raise capital. Before beginning our review of the quarter, I would like to introduce my new colleagues and new board members. First, I would like to introduce Mr. Koso Baluch, who recently joined our board of directors. He has over 36 years of experience across global geographies in the biopharmaceutical industry. He has served as an independent director for multiple biopharmaceutical publicly traded companies. Mr. Baluch served as a chief executive officer and a board member for CoreMedx Inc., a publicly traded pharmaceutical company in the U.S., He is very well known and recognized in our industry. Second, I would like to introduce Mr. Jeffrey Pepper, who recently joined our board of directors. He is a Thomas D.D. II Professor of Organizational Behavior at the Graduate School of Business, Stanford University, where he has taught since 1979. He's the author and co-author of 16 books, Mr. Pfeffer currently serves on the advisory and nonprofit boards for multiple organizations. I am also joined today by our two new executives, Dr. Natalia Akpanova, our chief medical officer. She joins us from Otsuka Pharmaceutical, where she served as the clinical development lead and the product development chair. She is experienced pharma and biotech industry clinical development leader. and we are pleased to have her lead our cellular therapy development program. I also welcome Lisa LaClaire, our Executive Vice President and Chief Financial Officer. She joined us from Avenir Pharmaceutical, a subsidiary of Otsuka, where she served as the Senior Vice President and Chief Financial Officer. Lisa is an accomplished leader with global business experience and is a respected financial professional throughout the biopharmaceutical industry. I'll be turning the call over to Natalia and Lisa in a moment, but on behalf of everyone at Longiveron, let me say how pleased I am that they have made the decision to join our Longiveron team and welcome them to our leadership team. We look forward to their guidance as we advance Lomisil-B in critical areas of unmet needs. As a reminder, Lomacil-B is a living cell product made from a specialized cell isolated from the bone marrow of young, healthy adult donor age 18 to 45. These specialized cells are known in the literature as medicinal signaling cells, or MSCs, and are essential to our endogenous or built-in biological repair mechanisms. MSCs have been shown to perform a number of complex functions in the body, including the formation of new tissues. They also have been shown to hone and respond to sites of injuries or diseases and secrete bioactive factors that are immunomodulatory and regenerative. We believe that Lomacil-B has multiple potential mechanisms of action that may lead to anti-inflammatory pro-vascular, regenerative responses, and therefore maybe have a broad application of ranges of rare and aging-related diseases. We have ongoing trials in hypoplastic left heart syndrome, known also as HLHS, Alzheimer's disease, aging-related frailty. Earlier today, We were pleased to announce that our L5-2 trial in HLHS has exceeded its 50% enrollment threshold and that we expect to complete enrollment in the trial sometime in 2024. We are also on track and anticipate to report top-line results from the ClearMind Phase 2A trial of Lamisil-B in treatment of Alzheimer's disease by October 2023. In aging-related priority, enrollment continue in our Phase II study in Japan. We are excited about the progress we're making and about the broader potential of Lomacil-B as a regenerative medicine therapy for a range of unmet needs. And with that, I will turn over the call to Dr. Akmanova to provide you more detailed overview of our clinical program and recent progress. Natalia?

Thank you very much, Rayel. I'm pleased to join the Longeviron team and to provide today's update on our clinical progress. I will begin with an update on our HLHS program. For those who may not know, HLHS is a rare congenital and devastating birth defect in which the left ventricle of the heart is either severely underdeveloped or missing. The condition affects approximately 1,000 babies per year in the United States. Babies born with this condition have severely diminished systemic blood flow, which requires children to undergo a complex three-stage heart reconstruction surgery process over the course of the first five years of their life. While these children can now live into adulthood with a surgical intervention, only 50 to 60% of affected individuals survive to adolescence due to right ventricle failure, which is often unable to handle the increased load required to support systemic circulation. Furthermore, even those children with successful surgical intervention are at an elevated risk of short-term mortality, delayed development, and long-term complications, including organ failure. As such, there is an important unmet medical need to improve right ventricular function in this patient to improve both short-term and long-term patient outcomes. Our LPS-2 trial is designed to assess the potential of long SLB to improve right ventricular function and long-term outcomes. The trial is a 38-patient controlled trial Phase II clinical trial evaluating the safety and efficacy of Lomacil-B as an adjunct therapeutic to standard of care HLHS surgery. The primary outcome measure is the change in right ventricular ejection fraction from baseline to 12 months. The trial is funded by a grant from a National Institute of Health, National Heart, Lung, and Blood Institute. As we announced recently, our LPS2 trial has exceeded its enrollment threshold of 50%. We also announced the activation of our eighth clinical site location, one more than the seven originally planned. As Wael mentioned earlier, the achievement of this milestone and the activation of additional trial sites put us on the track to complete enrollment in this trial around the middle of 2024. This study builds on the early LPS1 study, a phase 1 study of Lomisil-B in children with HLHS. Ten patients participated in phase 1 LPS1 trial, during which Lomisil-B was injected concurrently with a stage 2 surgery, also called as a GLEN procedure. All ten patients have been monitored for at least three and a half years after treatment. Additional long-term follow-up data from this trial was announced earlier this year, showing that 100% of the 10 patients who participated in LPS1 trials survived and remained heart transplant-free for up to five years of age. As compared to the historical clinical trial results showing that children with HLHS who undergo the GLEN procedure typically have 15 to 20% mortality by five years of age. The preliminary LPS1 data are highly encouraging and reinforce our enthusiasm for LOMIS-LB as a potential treatment to transform care for patients with HLHS. To further highlight the potential we believe LOMIS-LB may have in this indication, Next week, we will host a virtual webinar to discuss the unmet medical needs and current standard of care for patients suffering from HLHS. This event will feature Dr. Kashal from Lurie Children's Hospital and Dr. Ramkumar Sabramanyan of the University of Southern California Keck School of Medicine. The event will also feature Dr. George Harris, chairman and co-founder of Longeviron and founding director of the Interdisciplinary Stem Cell Institute in the University of Miami, Miller School of Medicine. This event will be an informative discussion about the potential of Lomicel-B in HLHS and the limitations of the current standard of care. And we encourage all interested parties to join us next Wednesday August 16th at 10 a.m. Eastern Time. Registration details available on website. Now I'd like to move on to our Alzheimer's disease program. Based on growing body of preclinical and clinical data from various sources, we believe LOMIS-LB may prevent slow and reverse the clinical progression of Alzheimer's disease. by reducing disease-related brain inflammation. Neuronal cell death caused by early and substantial neuroinflammation is a significant contributor to the pathogenesis of Alzheimer's disease. In preclinical model of Alzheimer's disease, MSCs with characteristics similar to lonely cell B have been shown to cross the blood-brain barrier, potentially with an anti-inflammatory effect improving endothelial function, and promoting neurogenesis, the process of neuron formation in the brain. In November of 2022, we completed enrollment in our Phase 2A trial of Lomisil-B for mild Alzheimer's disease. The Phase 2A trial, called CLER-MIND trial, is a 48-patient forearm parallel design randomized clinical trial of Lomi cell B designed to evaluate the safety of single and multiple infusion of two different dose level of Lomi cell B compared to placebo in patients with mild Alzheimer's disease. Our primary endpoint is safety as measured by occurrence of serious adverse events within first 30 days after administration of Lomi cell B. Secondary and exploratory endpoints include measures of cognitive function, fluid, and radiological biomarkers relevant to inflammation and endothelial and vascular systems. In a previously completed Phase I study, we demonstrated the preliminary safety of long SELB patients with mild Alzheimer's disease. With the Phase IIa trial, we hope to build on those results and further demonstrate the potential of LONI-CLB as a treatment for Alzheimer's disease. Data analysis from this trial is ongoing, and we anticipate sharing top-line results from CLER-MIND trial around October 2023. Finally, I'd now like to cover updates on our aging-related frailty program. Aging-related frailty is an age-associated decline across multiple physiological systems, leading to the inability to cope with stressors. It is characterized by mobility impairment, weakness, fatigue, weight loss, slowness, and low activity, and puts individuals at high risk for poor clinical outcomes, such as infections, falls, fractures, hospitalization, and even deaths. At Longeviron, we've been evaluating the effect of Lumicil-B may have on health and function of elderly frail patients, particularly on their physical and immune system function. In early stage exploratory trial, we have been using biomarkers of inflammation and vascular and endothelial function to measure effect. Our clinical development strategy in aging-related frailty is currently focused on Japan, a country with one of the oldest populations in the world. As of 2021, Japan's population comprises of 36.4 million individuals aged 65 or older, representing 29.1% of the countries. The overall prevalence of aging-related frailty amongst the demographic is estimated to be 7.9%. Last quarter, we announced the dosing of the first patient in our Phase II clinical trial, evaluating LOMIS-LB in patients with aging-related frailty in Japan. The Phase II trial is a three-arm parallel design randomized, evenly split, one-to-one-to-one of placebo, as well as two different levels of Lomicel-B single infusions. Enrollment is continuing, and the trial is expected to enroll 45 patients. The primary endpoint is to evaluate safety with an overarching goal of providing support for an eventual limited approval under the Japan Act of the Safety of Regenerative Medicine, or ASRM, which recognizes the tremendous therapeutic potential of cell therapy. With that, I'd now like to turn the call over to Lisa LeClaire, our CFO, to discuss our financial results for the second quarter of 2023, and the six-month period ended June 30, 2023. Lisa?

Thanks, Natalia, and good morning, everyone. Like Natalia, I'm excited to be a part of Longevron and to speak with all of you today. Most of what I'll be covering this morning will be presented in more detail in our condensed financial statements and in our management's discussion and analysis of operations in our quarterly report on Form 10-Q, which will be filed today. Revenues for each of the three months ended June 30, 2023 and 2022 were approximately $0.2 million. and $0.5 million, respectively. Grant revenue for the three months ended June 30, 2023 and 2022 was $0 and $0.1 million, respectively. The decrease of $0.1 million was primarily due to a reduction in grant funds available due in part to the completion of the grant-funded clinical trials. Clinical trial revenue, which is derived from the Bahamas Registry trial for the three months ended June 30th, 2023 and 2022 was $0.2 million and $0.3 million respectively. Clinical trial revenue for the three months ended June 30th, 2023 was approximately $0.1 million or 36% lower when compared to the same period in 2022 as a result of a decrease in participant demand. Related cost of revenues was approximately $0.1 million and $0.3 million for the three months ended June 30th, 2023 and 2022 respectively. The decrease of $0.2 million or 59% was primarily related to the decrease in revenues earned from the Bahamas registry trial. This resulted in a gross profit of approximately $0.1 million and $0.2 million for the three months ended June 30, 2023 and 2022, respectively. General and administrative expenses for the three months ended June 30, 2023 increased to approximately $3.4 million, compared to $2.4 million for the same period in 2022. The increase of approximately $1 million, or 39%, was primarily related to an increase of $0.7 million in compensation and benefit expenses during the current year period and expenses related to professional fees. Research and development expenses for the three months ended June 30, 2023 increased to approximately $2.3 million from approximately $1.7 million for the same period in 2022. This increase of $0.6 million and 33% was primarily due to an increase of $0.5 million in research and development expenses that were not reimbursable by grant. Non-operating lawsuit expense for the three months ended June 30, 2023 and 2022 was zero and approximately $1.4 million, respectively. Net loss was approximately $5.6 million for the three-month period ended June 30, 2023 and 2022. For the six-month period ended June 30, 2023 and 2022, results were as follows. Revenues for each of the six months ended June 30, 2023 and 2022 were approximately $0.5 million and $0.8 million, respectively. Revenues for this period were approximately $0.3 million or 41% lower when compared to the same period in 2022. Grant revenue for the six months ended June 30, 2023 and 2022 was less than $0.1 million and $0.2 million, respectively. Grant revenue for this period was approximately $0.1 million, or 78% lower when compared to the same period in 2022, primarily due to a reduction in grant funds available due in part to the completion of the grant-funded clinical trial. Clinical trial revenue, which is derived from the Bahamas registry trial for the six months ended June 30, 2023 and 2022, was $0.5 million and $0.6 million, respectively. Clinical trial revenue for this period was approximately $0.1 million, or 30% lower when compared to the same period in 2022. During the six months ended June 30, 2023, clinical trial revenue decreased as a result of a decrease in participant demand. Related cost of revenues was approximately $0.3 million and $0.4 million for the six months ended June 30, 2023 and 2022, respectively. Cost of revenues for this period was $0.1 million, or 13% less when compared to the same period in 2022, primarily due to the corresponding decrease in the revenues earned from the Bahamas registry trial. This resulted in a gross profit of approximately $0.2 million and $0.5 million for the six months ended June 30, 2023 and 2022, respectively. General and administrative expenses for the six months ended June 30, 2023 increased to approximately $5.2 million compared to $4.4 million for the same period in 2022. The increase of approximately $0.8 million or 19% was primarily related to an increase of $0.8 million in compensation and benefit expenses. Research and development expenses for the six months ended June 30th, 2023 increased to approximately $5.1 million from approximately 3.1 million for the same period in 2022. The increase of $1.9 million or 61% was primarily due to an increase of $1.4 million in research and development expenses that were not reimbursable by grants, an increase of $0.3 million in supplies to manufacture LomaCell B, and an increase in equity-based compensation allocated to research and development expenses of $0.2 million. Non-operating lawsuit expense for the six months ended June 30th, 2023 and 2022 was zero and approximately $1.4 million respectively. Our net loss increased to approximately $10.3 million for the six months ended June 30th, 2023 from a net loss of $9.1 million for the same period in 2022. As of June 30, 2023, the company had cash and cash equivalents of $2.7 million, marketable securities of $5.9 million, and working capital of approximately $6.2 million. As of December 31, 2022, cash and cash equivalents were $10.5 million, marketable securities were $9.2 million, and working capital was approximately $15.4 million. Based on the company's current operating plan and financial resources, we believe that our existing cash and short-term investments will be sufficient to cover expenses and capital requirements into the first quarter of 2024. Before turning over to YL, I want to remind everyone that on June 27, 2023, the company filed a registration statement with the SEC to conduct a tradable subscription rights offering for up to $30 million of shares of Class A common stock to its shareholders and holders of warrants to purchase common stock as a future record date to be determined. The company expects to undertake and close the offering as outlined in the registration statement. We believe a rights offering allows us to balance the need to raise capital while remaining cognizant not to dilute existing shareholders. We believe this is an opportunity to participate for all shareholders and to raise needed capital. With that, thank you.

And I will turn the call over to YL. Thank you, Lisa.

As you have heard today, we are making steady progress in advancing long-term across three indications. We are looking forward to highlighting the potential of these assets in the HLHS on our key opinion leader webinar next week. Natalia has mentioned it's August 16th, Wednesday. I would like to open the call now for questions.

Operator, please open the line for our covering analyst.

At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Our first question comes from Michael Aquanich with Maxim Group. Please proceed with your question.

Hey, guys. Thank you for taking my question here.

So, I guess, first off, I'd like to just get your take on the FDA's decision for mesoblast CLA. Obviously, this was a disappointment for the space, but given that you're both in rare pediatric disease, does this do anything to inform your future development for Loma cell B in HLHS? And does it give you additional confidence in the design of ELPAS-2 as a placebo-controlled study?

So, Michael, I will take the first tab in answering that question, and then I will have Natalia add any additional comments, or also I have Josh on the line. He can also add any additional comments. But I would say that from the beginning, we are trying to conduct our HLHS program as a pivotal trial. We are doing everything to make sure that this trial meet the FDA requirements and hopefully provide the necessary balance between benefit-risk ratio to accept it for filing. Having said that, there is definitely no guarantee that this is gonna happen. As you know, it's always a matter of review and the FDA typically weigh in the significant unmet medical need of the disease itself, as well as the body of evidence of the data, not just in the study that was conducted for that disease, but also for the overall body of evidence. So while we were really hoping that Mesoblast gets their approval on their products, You know, I cannot draw 100% parallel to the HLHS due to, one, we are conducting our trials maybe in a different way, and second, it's a different disease state. So, with that, I will let Natalia and or Josh to add any further comments to my comments.

Thank you very much. Okay.

Sorry, Josh.

Yes, I wanted to make a comment, and then I'll turn it over to you, Natalia. Thank you. I think one of the critical aspects that needs to be recognized about our ongoing HLHS trial is that it is a controlled trial, so that there is an active and best conventional care arm, which is conducted in a rigorous blinded fashion. And I think that's one of the critical aspects that the FDA has commented on that is crucial for this field. So we are, I do want to emphasize that the ELPAS-2 trial has that key control group. Thank you. Natalia, please take it from here.

Thank you so much, Josh. it's always good practice to um use precedence and uh definitely it as a yl indicated it's a completely different indication but um we are learning from uh communication between fda mesoblast thank you all right thank you yeah thank you very much for the additional clarity and then

I'd just like to see if you have any additional insights here on what kind of a result that you would need to demonstrate for ALPIS-2 to serve as a pivotal study.

So, Michael, our primary endpoint is the right ventricular ejection fraction. Again, we believe that's as small as 5% improvement. Remember, at the end of the day, it's all about benefit-risk ratio. So it's not really one specific measure. If we hit, then it's a home run, but I think it's the overall body. Survival rate could be also an added benefit, which we were encouraged from the results that we have seen from the follow-up on ALPSIS-1. So, both the right ventricular ejection fraction and survival rate, in addition, of course, to the safety profile of the product, will be important consideration for the agency to weigh in on that indication. But again, I'll leave it up to Natalia to add any comments.

Thank you. I have no comments.

Well, may I make a quick comment? Sure, Josh. Go ahead.

One of the key things to understand about hypoplastic left heart that's unique from adult forms of heart failure disease is that there's a very, very clear association between right ventricular function and clinical outcome. It's been well shown in studies going back over 25 years now. So the decline in ejection fraction after the stage 2 surgery is very closely correlated with a clinical outcome and therefore poses a very valuable surrogate. Our trial is designed to look to see whether Lomus LB increases ejection fraction relative to placebo and not placebo per se, but best conventional therapy. Both patient groups receiving surgery And so we think that the finding could be of great clinical value in interpreting the efficacy of Lomacil-B in this condition.

All right. Thank you very much. One more for me, and I'll hop back into the queue. I'd just like to see it for ELPAS-2. If you could remind us of the expected timelines between completion of enrollment and data as we're approaching that enrollment completion sometime in 2024.

Michael, is that Michael? Yes.

As we announced, we expect to finish the enrollment. We're targeting hopefully mid-next year. Of course, with the start of a new site, there is a lot of plans to try to expedite our enrollment in the program. But as you know, with rare diseases, it's hard to predict exactly when. Once we finish the enrollment, it will take one year after that. to measure the endpoints and then close the trial and provide the results from it. This should happen within a couple of months after the trial finish enrollment, one year after the trial finish enrollment.

All right.

Thank you very much. And I'm looking forward to that KOL event. Thank you.

There are no further questions at this time. I would now like to turn the floor back over to Wael for closing comments.

All right. Thank you. All right. Well, thanks, everyone, for attending today's call. On behalf of the company and the Longevron team, I would like to thank you for all of your continued interest and support and wish you a good day today. Ladies and gentlemen, thank you so much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.