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.
spk00: Good morning, ladies and gentlemen, and thank you for joining us for Satara Biopharma, Inc.' 's third quarter 2021 financial results conference call. Following the prepared remarks from the company, we will open the call for questions. I would now like to turn the call over to Satara's Executive Vice President of Investor Relations, Nicole Auschner. Ma'am, you may now begin.
spk01: Good afternoon, everyone, and thank you for joining the Satara Biopharma's 2021 third quarter financial results and corporate update call. Earlier this afternoon, Cetera Biopharma issued a press release detailing the financial results for the three and nine months ended September 30th, 2021, which we encourage listeners to read. The press release can be found in the investor section for CeteraBiopharma.com. Cetera also filed a 10-2 this afternoon, which is available on SEC.gov. Before beginning today's call, I would like to make the following statement. Today, we will be making certain forward-looking statements about operating metrics, future expectations, plans, events, and circumstances, including statements about our strategy, future operations, and the development and effectiveness of our investigational drug candidates, and our expectations regarding our capital allocation and cash resources. These statements are based on current expectations and you should not place undue reliance on these statements. Actual results may differ materially due to our risks and uncertainties, including those detailed in our most recent 10-K filing. CETERA disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise. With us on today's call is Michael K. Hanley, President and CEO of CETERA Biopharma, Inc., who will provide an update on Zotero's recent corporate and clinical achievements and the company's vision for the future. Mr. Peter Ehrenstam, Chief Financial Officer of Zotero Biopharma, who will discuss the company's financial results. And Dr. Tanya Markseka, Chief Operating Officer of Zotero, who will discuss the company's clinical program. I'd now like to turn the call over to our CEO, Michael Hanley. Michael, please go ahead.
spk04: Great. Thanks, Nicole. Thanks, everyone, for joining our conference this afternoon, including all of you joining for the first time. Today I'm speaking to you as CEO of Teterra BioPharma. Just three months ago, we were known as Cytocon. Through the reverse merger with Cleveland Biolabs and the acquisition of the drug development company MQuest Life Sciences, we emerged as a publicly traded company at the end of July, focused on developing the next generation of immune-modulating agents addressing autoimmune, infectious disease, cancer, and blood disorders. But a new company deserves a new name, reflective of the company's core focus and identity. On September 1, 2021, we formally rebranded Statera BioPharma with a new ticker symbol, STAB. Our name, Statera, is taken from the Latin word balance. And this, with our corporate tagline, Restoring Immune Health, we're chosen to reflect the strategic focus of the company and of our pipelines. Cetera is a clinical stage biopharmaceutical company at the forefront of developing the next generation of therapeutic agents focused on immune modulation and the restoration of immune homeostasis. In simple terms, we're driving the science which demonstrates that an overactive or an underactive immune system can drive disease progression. We are focused on developing drugs to restore and rebalance the immune system to address autoimmune, blood disorders, infectious disease, and cancer. With the recent merger, we have created one of the largest toll receptor platforms, and since then, we have not slowed down. Please advance to slide four. Our pipeline focus is initially targeting autoimmune disease with the STAT-201 program in pediatric Crohn's disease. We expect to expand into hematology with the STAT-600 program, or Intolamide, and oncology with the STAT-401 program in pancreatic cancer. Beyond our clinical programs, we're also working to develop new second-generation assets to further support our growth strategy and deepen our pipeline. We are already screening these first-round and second-generation immunomodulatory compounds, harnessing the tools and capabilities of our InQuest Life Science subsidiary to select those compounds most likely to succeed in preclinical and clinical trials. CITERA is also establishing new research alliances. In August, we finalized a five-year drug discovery agreement with the Hoya Institute of Immunology directed to research that will support the development of potential new immune-modulating agents targeting toll-like receptors for the treatment of cancer, infectious, autoimmune, and some chronic inflammatory diseases. The research will harness the Terra's proprietary drug discovery and development platform technology. We are pleased to add this prestigious research center to the growing list of those involved in our development and clinical programs. Included on this list is Loma Linda, University Health, and Roswell Park Comprehensive Cancer Center in Buffalo, New York. Work is also underway to integrate the former Inquest Life Sciences and Cleveland Biolab to organizations, as well as its subsidiaries and joint ventures with Deterra. We're exploring opportunities to monetize non-core assets. In the meantime, we expect to achieve several clinical and corporate milestones over the next 12 to 18 months. Our ultimate goal is to change the way people think about immunotherapy. Statera has promising technology focused on delivering immune therapies that target toll-like immune receptors, a type of protein central to the immune response that plays a key role in fighting disease and restoring immune homeostasis. We believe Statera now has one of the largest platforms of toll-like receptors in the pharmaceutical industry, with our toll-like receptor 4, toll-like receptor 9 antagonists, and our toll-like receptor 5 agonists in Tolomid and GP532. We also plan to further strengthen the balance sheet to enable the growth and expansion of our pipeline. Our CFO, Peter Ernst then, will review our quarterly numbers and financing arrangements, including a credit facility and equity line and credit agreement. The company ended the third quarter with approximately $14.4 million in cash on hand and expects to strengthen our capital position by the end of the year to further grow our initiatives, fund business development plans, and advance development of our internal pipelines. With that as an intro, I'd like now to hand our call over to CFO Pierre Ehrenstam, who will discuss the third quarter of financial results.
spk03: Peter? Thanks very much, Mike. As Mike just pointed out, this is the first time we're speaking to the investors and analysts from Statera, the newly merged company. So before I go into more detail about the numbers that we filed in the 10Q today, let me briefly describe how the rules for accounting for the mergers requires us to present those numbers. You'll read in the 10-K, for example, that the accounting survivor under the mergers was old CIDACOM. You'll also read that the surviving legal entity was old CBLI, even though, as Mike has mentioned, it changed its name back to CIDACOM immediately after the merger, and then later on changed the name to CITERA. So what do those accounting terms mean when we speak about accounting or legal survivor? And what do they mean to us for the results that we presented in the 10Q today? I'd like you, as I go through these numbers then, to keep in mind three things. First, when you look at the income statement or the P&L, that's the statement of the accounting survivor. So you're looking in the P&L at old FIDACOMP. And what you're seeing there in the P&L is the results for all of 2020 and 2021 through to the end of June for old PhytoCom only. So there's no revenues or expenses included in those periods for Inquest or old CDLI. Keep in mind that the merger with Inquest only closed at the end of June this year. And as Mike also mentioned, the merger with CDLI only closed at the end of July. So for the three-month end of September 30, 2021, the P&L combines the results for Old SagaCom with the results for those other companies only from the closing dates of each merger to the end of September. So for those of you who like to perform comparisons in relation to prior periods, just please keep in mind that those comparisons will really only become meaningful when we get to and we report the third quarter of 2022. Your office can attend to the term accounting survivor. What that means from a balance sheet perspective is the assets and liabilities presented up to the merger date for those of old SIDACOM only. So that's the assets and liabilities only, not the equity accounts. Assets and liabilities of old CBLI and old MQuest were only added to the balance sheet from their respective merger date. And then the third thing to keep in mind is that because CBLI is a surviving legal entity, its bylaws and its articles is registered with the state of Delaware to provide the merger. So that means for reporting that the statement of equity shown in the balance sheet, the authorized and issued common stock, the authorized and issued preferred stock, is that of both CBLI and old SIDACOM fully merged only. for all periods in the report. So that's why, for example, if you were an old FIDACOM investor, you don't see any references in the equity section to the preferred shares issued by old FIDACOM in 2020 and 2021. All of those old FIDACOM shares were exchanged in the merger for common shares in old CBLI, and you now see them reported in the equity section as FITERA common shares. If there's any questions about this merger accounting, we'll be happy to take them at the end of the formal presentation. Turning now to the next slide, slide number six in the presentation, let me just talk very briefly about the results reported for the nine months and the three months in the 10Q. The company reported revenues of $236,000 in the quarter ended September 30, 2021. All of those revenues were derived from the SERP services provided by Inquest to its customers. Their cost of revenues was approximately $116,000, which means that they made a gross profit of $120,000 or approximately 51%. And as I just mentioned a few minutes ago, we reported no revenues in the same period of 2020 because the moja with Inquest only became effective at the end of June 2021. I just want to point out as an aside also that the inquest recognizes revenues when it delivers its final research reports to its customers, even if it has collected cash in advance of the delivery of the report. The cash received before delivery is shown on the balance sheet as deferred revenue. And if you look at our September 30th, 2021 balance sheet, you'll see that we reported deferred revenue of approximately $506,000 in this manner. And that indicates to you that since the beginning of July, in total, InQuest has collected approximately three quarters of a million dollars from its clients. So just keep in mind that the sum of the revenues plus the deferred revenues, almost three quarters of a million dollars, is indicative of InQuest's current quarterly revenue run rate. As I explained earlier, when you compare expenses for research and development and GMA in the third quarter of 2021 against the same quarter of 2020, please keep in mind that the 2020 numbers reflect spending only for old site accounts. The 2021 third quarter includes inquest for the full three months. All CBLI expenses are included only since August the 28th, 2021. Returning now to research and development expenses, you'll see that they decreased from $4.4 million for the three months ended September 30, 2020, to $3.4 million for the three months ended September 30, 2021, a decrease of just under $1 million, or 21.6%. And the decrease was primarily attributable to one-time patent expenses totaling approximately $3.8 million that were incurred in 2020 arising from the transfer of intellectual property to Old Sidercom by its previous parent company, Immune Therapeutic. Those expense, or that reduction in expenses was offset by increased spending on R&D programs for the three months ended September 30, 2021. And that increase was 3.4 million compared to a half a million for the same period in 2020. Please refer to the 10Q that we filed earlier today. After looking for specific page references, look at pages 24 to 27, where you'll find more detail about the 2021 R&D spending by indication or by disease. You'll see that most of the 2021 spending was on Crohn's research, followed by post-acute COVID, and then pancreatic cancer. Turning quickly to our GMA expenses, They increased from $1.8 million in the three months ended September 30, 2020, to $6.3 million for the three months ended September 30, 2021. And that was an increase of $4.5 million, or 253% year-over-year. Most of the increase is attributable to growth in headcount. Also in 2020, Olsatacom was a private company, and the cost of going public and being public through the merger added significantly to our G&A expenses in 2021. So that the three-month period ended September 30, 2021, the Terra posted a net loss from operations of $12.7 million, or 47 cents per share, compared to a net loss of $5.7 million, or $1.84 per share for the same period last year. And that loss also included accrual for legal settlement. We accrued $1.8 million for that. And interest and other share-related expenses of $707,000. If you could just flip to slide 7. Continuing on slide 7, when we reported old CBLI's June 30, 2021 financial position back in August, We referenced the fact that Guterra had become penalty to two financing arrangements entered into by old Cytocon before the merger. So the first financing arrangement was a loan agreement we closed in April 2021 with Avenue Ventures Opportunity Fund. And we described all of the loan terms in detail in an August filing, and we've repeated some of them in this 10Q. In May 2021, we drew down the full $15 million of the loan from Avenue. We were required to put $5 million of the proceeds in an escrow account, and the $10 million became available to us immediately for general operation. The $5 million that's still in escrow will be released to us when we meet the conditions of the agreement, and particularly the issuance of an additional equity in excess of $20 million. The second financing arrangement that we have announced previously was an equity line of credit, which we entered into in May of 2021 with GEM Global Yield, LLC. Under the GEM deal, the company may sell from time to time up to $75 million in shares of its common stock at a price equal to 90% of the recent trading price of the company's common stock. I just want you all to be aware that the availability of the full $75 million is subject to certain conditions, including being subject to a NASDAQ rule that no single shareholder may own or control more than 19.99% of the company's stock. And at the time we reported and filed the 10K today, we have not yet used the GEM facility. So, as Mike mentioned earlier, at September 30, 2021, we had cash, cash equivalents, and restricted cash on hand of $14.4 million. And that represents an increase of $13.8 million since the end of our last fiscal year, December 31, 2020. The increase in cash was caused partly through the cash contributed of the Merge Company by CBLI and Inquest, plus the cash we raised from Avenue Ventures last May. And then it was offset by the net cash we used in operations. And as you'll see from the 10Q, we used $20.1 million in operations for the first nine months in September 30, 2021. So at the time we're speaking to you this evening, we're presenting, or sorry, we're finalizing our budget for 2022. Budget spending is not absolutely committed, and we can modulate it under current conditions to execute only on our key objectives and potentially to acquire assets opportunistically. Given, however, that we would prefer to achieve all of the budget objectives and that our ability to cover budget spending for the next year only from our existing equity lines would be dependent on our stock performance over the next couple of quarters. We've determined that it would be prudent to have in place by year-end additional binding commitments to give us more capital. And to that end, we have engaged in discussions with three new investors and two existing investors to obtain new debt and equity commitments, aggregating up to $60 million. We're also currently in discussions for the potential sale, or outlicensing of drug candidates, or entering into other strategic transactions to raise capital to fund the final budget. We'll announce specifics of these transactions as soon as we have binding commitments from the other parties. So with that description of the income statement, the balance sheet, and the cash flow position for the company at the end of September, I'd like to return the call to Michael Hansen.
spk04: Great. Thank you, Peter. As I stated earlier, CITERA is well positioned to become the leader in the field of immune modulation. Last month, we received Institutional Review Board, or IRB, approval to conduct a Phase I pilot study at Loma Linda University Health Center to evaluate one of our drugs, STAT-205, as a potential treatment for acute COVID-19. Loma Linda has started screening patients for the study, and the first patient is expected to be treated this month. and we expect to have preliminary data readouts in mid 2022. In the meantime, we are aggressively advancing our clinical program in pediatric Crohn's disease and anticipate site activation by the end of the year and enrollment in this pivotal phase three trial to start next year. To discuss these and our other clinical programs, I'd like to turn the call over to Dr. Tanya Markvicka, our chief operating officer. Tanya.
spk02: Thank you, Mike. So turning to slide nine, can see that Cetera is well positioned to further the development of our clinical stage pipeline and continues to expand our capabilities to support the breadth of our toll receptor pipeline. As Mike mentioned, we've initiated a phase one pilot program at Loma Linda to evaluate the safety, tolerability, and pharmacokinetics of STAT205 in patients with acute COVID-19 infection. STAT205 is an immune modulator designed to decrease elevated inflammatory responses associated with viral infection and inhibit viral replication. The study is targeted for PK, biomarker, and safety analysis in rolling up to 24 patients. It represents an important step for Statera and potentially also millions of people who have become infected with COVID-19 and highly contagious variants as well as those struggling with post-acute COVID syndrome, or PACS. Statera is considering a study under the existing IND to evaluate STAT205 safety and its ability to improve disease progression or resolve long-term symptoms. Now turning to slide 10, during 2022, we see several more clinical trials getting underway. Following a productive INDA Phase II meeting with FDA earlier this year, we anticipate enrolling patients in a Phase III clinical trial for our lead drug candidate, STAT201, for the treatment of pediatric patients with Crohn's disease. Studies show that because the signs and symptoms of the disease are unpredictable and patients living with Crohn's endure significant burdens, not only physically but also emotionally and economically, and this can be even more challenging for children and their parents. Satara continues to evaluate Cleveland Biolab's development pipeline, and we see a tremendous opportunity for intolerance in the next generation GP532 based on the potential that toll-like receptor 5 agonists have shown in hematology, specifically for the treatment of neutropenia and anemia in cancer patients. These are common and sometimes life-threatening conditions facing cancer patients when chemotherapy and radiation treatments disrupt the body's production of white blood cells or red blood cells. As many as 50% of cancer patients will develop anemia or reduction in their red blood cells at some point, and as many as 60,000 patients are hospitalized with neutropenia every year. We believe Entelomig could become a critical component of the treatment regimen for cancer patients. We have reinitiated discussions with the FDA in order to establish the development program in oncology and hematology, and discussions are underway with the leading academic institution, or PI, to investigate a study with Entelomig. We will provide more information at a later date as things become more firmed up. And then, of course, there's the pancreatic cancer program. Pancreatic cancer is a devastating disease, now counted as the third leading cause of cancer death behind lung and colon cancer. We're developing STAT 401 as an adjunct to the standard of care therapy to extend the duration of disease remission in patients with pancreatic cancer. The FDA granted previously STAT 401 orphan drug designation. In August this year, the company received feedback following a Type C meeting with U.S. regulators regarding STAT 401 and our plans for clinical development. We have established an advisory panel of oncology experts and are establishing drug supply for clinical studies, and we now expect to be able to initiate a clinical program a phase 1B2 clinical trial during the first half of 2022. With that, I'd like to hand the call back to Mike.
spk04: Great. Thank you, Tonya. As I said earlier, these are exciting times for Statera, and we look forward to building upon the current momentum throughout the remainder of 2021 and into 2022. I would now like to take any questions, and joining me for the Q&A portion of this call is our Chief Financial Officer, Peter Ernstam. our Chief Operating Officer, Dr. Tanya Makbika, and our VP of Finance, Chris Sosh. With that, I'll now open the call to any of your questions.
spk00: Participants, we will now begin the question and answer session. To ask a question over the phone, you may press the star key followed by the number one from your telephone keypads. To withdraw your request, you may press the pound key. Again, that's star one to ask the question or the pound key to withdraw your request. Since there are no further questions at this time, I'll now turn the call back over to Michael Handley for closing remarks.
spk04: Michael Handley Great. Thank you. As we discussed today, Centera is gearing up to hit on all cylinders. We've achieved a great deal during the past year, which we are very proud of, and we're working hard to maintain that momentum. In the coming months, we expect to achieve multiple milestones, generating value for our shareholders as we intend to advance our clinical stage programs and pursue further research alliances. By this time next year, we can be treating patients in clinical trials exploring three investigative immune-modulating programs across multiple indications, including a Phase III pivotal trial. We will continue to execute our growth strategy, and we look forward to providing periodic updates. I'd like to thank all of our employees for their dedication and loyalty and hard work, and as always, I want to thank our stakeholders and shareholders for their continued support. I appreciate your time and attention today, and I'd like to extend my sincerest wishes and good health to all. Thank you.
spk00: this concludes today's conference call thank you all for joining you may now disconnect
Disclaimer