Talphera, Inc.

Welcome to the Telfaira fourth quarter and full year 2024 financial results conference call. This call is being webcast live via the events page of the investor section of Telfaira's website, www.telfaira.com. You may listen to a reply of this webcast by going to the investor section of Telfaira's website. I would now like to turn the call over to Rafia Zadorian, Telfaira's Chief Financial Officer.

Please go ahead.

Thank you for joining us on the call today. Today, we announced our fourth quarter and full year 2024 financial results and associated business updates in a press release. With me today are Vince Angotti, our Chief Executive Officer, Dr. Shaquille

Thank you. Before we begin, I want to remind listeners that during this call, we will likely make forward-looking statements of the federal securities laws. These forward-looking statements involve risks and uncertainties regarding the operations and future results Please refer to our press release in addition to the company's periodic, current, and annual reports filed with the Securities and Exchange Commission for discussion of the risks associated with such forwarding.

These documents can also be found on our website within the investor section. I'll now hand the call over to Chris.

Thanks, Rafi. Good afternoon, and thank you to everyone joining our call today. We made strong progress in 2024 and anticipate furthering that progress in 2025 with the expectation that our NEFRO CRRT study should be completed by the end of the year. We have a number of important updates to share with you today, all of which support the timely development of NIAID and the planned submission of the PMA in the first quarter of next year. I'll first provide an overview and then hand it over to Dr. Aslam to provide additional details on all the improvements being made in the study and with the clinical sites. First, as announced earlier today, I'm pleased to highlight an agreement with existing and new investors for a private placement investment of up to $14.8 million in gross proceeds should all milestones be achieved. I want to thank Nathahala Capital and Roslyn Advisors who remain committed investors supporting the company. This financing should provide us capital to a potential completion of the study by the end of the year. Rafi will provide additional details on the financing later in the call. I'll now provide key updates we've made to the nephro CRRT study. As a reminder, nifamistet has been approved and used for multiple indications in Japan and South Korea, including as an anticoagulant for the extracorporeal circuit for well over 30 years. This extensive clinical use demonstrating its safety and efficacy in those territories

as well as multiple studies performed outside the U.S., we believe will be corroborated by the data being produced from the NAFRO CRRT clinical study. approved. NIAID would become the only FDA-approved for use during continuous replacement therapy. We believe this would be impactful given the many disadvantages of the currently used products. which is systemic in nature, and citrate, which is being used off-label.

Importantly, we announced that the FDA approved our request for a reduction in the size of the nephro trial from 166 patients down to 70. And even with this significant study size reduction to 70 patients, the primary endpoint remains powered at 90%. This was a major step forward for the timely development of NIAID. We're thankful the FDA continues to meet or exceed the statutory timelines in responding to our requests. The FDA's responsiveness has been a key benefit of NIAID's breakthrough designation. During the same meeting held with the FDA in January where we discussed the study size reduction, we also requested and the FDA approved two major protocol changes to the inclusion-exclusion criteria. At a high level, one, we're now allowed to enroll patients that have been on CRRT for over 48 hours, and two, the inclusion criteria requiring documentation of heparin intolerance has been removed for institutions that do not use heparin as part of their protocol. which importantly is applicable to six of our seven current sites. All of these changes to the NEPRO study are crucial modifications that support our projected timeline to complete the study by the end of the year. Dr. Asim will provide more details on what these changes mean and how we believe they'll impact enrollment. In parallel to our work on the regulatory front, making changes to the study protocol, We've also been focused on adding new clinical study sites. Not only is the number of sites important, but also the site profile.

Specifically, again, one, the type of intensive care unit where the study will be performed. For example, medical ICU instead of surgical or cardiothoracic ICU. Two. The principal investigator, specifically a nephrologist, is a primary lead for slavery. to enroll compared to an intent . And three, the efficiency of the administration to initiate a new study at their institution. site characteristics after review and learning from assessing the existing site

At the end of 2024, we had five enrollment-ready sites, four of which were inherited relationships from our acquisition of Lowell Therapeutics. And upon Dr. Aslam's review, do not meet our ideal site profile moving forward. The fifth site, identified by Tal Farah, meets our target site profile and has enrolled five of the six patients who have completed the study. The principal investigator at this institution is a nephrologist and is enrolling patients from the medical ICU. We added three new sites in the first quarter, two of which are just now starting to screen patients for a total of eight sites that are now enrollment ready. We expect to bring five additional sites on by mid-year. Before I turn the call over to Shaquille, I want to reiterate our belief that the three critical risk elements, clinical, regulatory, and commercial, for the NEFRO program are low for a number of reasons. First, with over 30 years of use as an anticoagulant during CRRT in Japan and South Korea, We know in the FAMISTAT's track record of efficacy and safety, minimizing the clinical risk. The trial design has been agreed with the FDA, including broader inclusion criteria and a reduced number of patients, all of which help minimize execution risk. Second, we have a clear regulatory path, including breakthrough designation from the FDA, which has provided us with efficient access to the agency, leading to quick review and response times. Lastly, while we know there's always commercial risk, we believe this is mitigated given the disadvantages of the products currently being used for anticoagulation of the CRRT circuit, namely heparin and citrate. In fact, we recently attended the 30th annual AKI and CRRT meeting in

San Diego, where a number of physicians asked us if they could have access to this fantastic amistad through a compassionate UC program. neither heparin nor citrate meet their needs. And I'll turn the poll over to Dr. Aslan, who is named as Telfair's chief medical officer. In October last year, been critical to the major changes to the protocol, as well as the site selection process.

We have been busy making changes to the study protocol as well as evaluating the characteristics of clinical sites to improve the study enrollment. I'm happy to say, as Vince highlighted, we have had success on both fronts as the FDA has approved the changes we requested. We now better understand the profile of an ideal clinical site for our registration trial. The three newest sites have our target profile with the highest CRRT volumes, and two of these sites are just beginning to screen patients. This brings our current total enrollment-ready sites to eight, seven of which are screening today. Before providing more information on the study sites, I would like to elaborate on the reasons we believe the FDA agreed with our request to significantly reduce the study size from 166 patients to 70. With 166 patients, the study was overpowered with over 99% power to meet the primary endpoint. Despite a significant size reduction, it's important to note that even with 70 patients, the study has at least 90% power to meet the primary endpoint. You are probably wondering why this study was so overpowered in the first place. It is our understanding that Lowell Therapeutics proposed a study size of 166 patients to assure the FDA that a sufficient number of patients would be exposed to NIAID from a safety perspective. In our meeting with the FDA in January, we presented the safety data from the existing large safety data sets and the published literature on the real-world use of nifamostat across multiple indications in Japan and South Korea for over 30 years. We were able to assure the FDA that Nifamistat had a well-characterized safety and a favorable benefit-risk profile based on over three decades of use across multiple indications, including CRR.

from our active study sites and input from our PIs, we identified two eligibility criteria. for several and could be modified without affecting the study outcome. and excluded patients from the study if they had been on CRT for more than 48 hours. The site informed us that many patients who were started on CRRT late Friday or over the weekend were no longer by the time the study team returned on Monday.

The FDA allowed us to remove this exclusion criterion, agreeing with our rationale that time on CRRT before study enrollment had no impact on the primary endpoint. 15 patients were excluded from the study because of this criterion. We believe this protocol change will be impactful to the enrollment speed going forward. The second change we requested was the inclusion criterion that required the site to document either intolerance or contraindication to heparin. We found this requirement irrelevant and restrictive because many institutions, including most of our study sites, do not use heparin during CRRT. The FDA agreed to remove this requirement for these sites. Ten patients were excluded from the study because of this criterion. As a note, only one of our current sites uses heparin for anticoagulation during CRRT, and this dissatisfaction with heparin is universal amongst the physicians we speak with. In addition to these protocol changes, we analyzed the screening data to understand the study site profile that would predict better patient enrollment. We identified an ideal site profile based on the type of ICU, the specialty of the principal investigator, and the time to complete the startup paperwork. The startup activities were the main bottleneck in site activation previously. As part of our strategic review, we identified that nephrologists-led sites were an important differentiator, since nephrologists effectively decide on CRRT use and study enrollment. The other key factor was the type of ICUs. we determined that medical ICUs were the most appropriate type of ICU for study enrollment. In contrast, our initial less productive sites relied on the cardiothoracic and general surgical ICUs, where most patients on CRRP received systemic cancer.

for NAPRO enrollment. The one initial site that has been The most productive has been the process that the PGI with all enrolled patients coming from medical school. As a result, our new and future sites target nephrologists as a PI and draw patients primarily from the medical ICU. This includes the two new sites, that just began screening. And the six additional sites expected to be activated in the first half of 2025. all of which are similar in profile to our current ISN rolling. But with high CRRC volumes.

Our most productive current site has about 20 CRRT patients per month, while the three new enrollment-ready sites range historically between 90 and 100 CRRT patients per month, with many of the additional sites planned by mid-year having even higher monthly CRRT volumes. Because of our selection of sites, With a quick administrative timeline, we have experienced a much shorter time for that activation. For example, our most recent site took us less than four months to activate, compared to over a year for some of the initial sites. In summary, we expect to have 13 sites enrollment-ready for mid-year, and we continue to pursue additional sites up to the limit of 14.

And with that, I'll turn the call over to Vince.

Thank you, Dr. Aslam. I'd like to highlight Dr. Aslam's expertise in CRRT and experience both drug and device trials during his accomplished career that have facilitated these enhancements to the program. And I'll hand the call over to Rafi for a financial update.

Thanks, Vince. As mentioned, we have been highly focused on delivering a completed nephro study by the end of this year. Accordingly, we have reduced our operating expenses to reflect this objective. Also, as announced earlier today, we signed agreements with investors regarding a private placement financing with existing and new fundamental investors led by Nantahala Capital and Rosalind Advisors who remain committed and supportive shareholders. The amount of the financing is expected to provide capital to support the targeted completion of the study by the end of 2025. The financing was structured in three equal tranches of $4.925 million, with the first tranche received at the initial closing, expected shortly here in April, and the two additional tranches based on achieving an enrollment of 17 patients and 35 patients and

with the stock trading above 73 cents per share. In total, $14.8 million commitment is expected to be achieved later this year. We expect acceleration all the changes made to the nephropathy study and the new sites that are coming online. As mentioned, and combined with the $8.9 million in cash at December 31, 2020, supports the completion of the study. R&D and SG&A expenses for the fourth quarter of 2024 totaled $3 million compared to $4.6 million for the fourth quarter of 2023.

Excluding non-cash stock-based compensation expense, These amounts were $2.8 million for the fourth quarter of 2024 compared to $4.3 million for the fourth quarter of 2023. The decrease in combined R&D and SG&A expenses in the fourth quarter of 2024 was primarily due to reductions in personnel expense and other general and administrative expenses. We expect cash operating expenses or SG&A and R&D excluding stock-based compensation to be in the range of $18 to $19 million in 2025. I'll now turn the call back to you, Vince.

Thank you, Rafi. Before we open the line for questions, I'll reiterate that we've made significant improvements in the study design in concert with the FDA. We now have an improved trial design with the right types of ICUs as operating sites. I look forward to sharing our progress on the NIAT registrational trial over the course of the year. And I'd like to open the line up for any questions you might have. Operator?

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question.

Your first question is from Ed Arce from AHC. Wayne Wright, please go ahead.

Hi, Corretta and everyone. This is Thomas. We have been asking a couple of questions for Ed.

Thank you so much for the kind of questions. So, first, regarding the changes in the inclusion criteria that was formulated by the FDA,

It sounds like it makes a lot of sense. But can you discuss what would be the original line of thought for excluding these patients in the previous program? So we'll have that over . Again, the question is changes in the inclusion criteria. What were the original on Thomas, why that protocol was written originally as it was with law. Yes. Yes, definitely. That's where I'm at. Thank you. Okay. So, Shaquille, you want to answer that? That's relative. and relative to the 48 hours on CRRT and why they were included that way. Sure. So since that was not possible, the initial protocol development.

So I can only guess all the reasons that make the medical sense from my point of view. So 48 hours restriction perhaps was done if you were to look at some important clinical endpoint. And my thinking on this was since we are not really looking at clinical endpoint as a primary efficacy endpoint, time on CRRT had no impact on how somebody's going to respond to NIAID. So that's why we changed it. But my understanding is that because of impact, that longer duration on CRRT, for example, could have patients who are longer on CRRT, they may take longer time to recover their kidney function or they may have higher mortality. because they're not recovering their kidney failure quick enough. So that's my guess. That was the reason. The second in terms of contraindication to use of heparin, FDA's position has been that heparin is FDA approved for this indication, and it is and perhaps should be used or at least offered to every patient who starts on CRRT. As we approached many of these sites and activated these sites, we did not find that to be the case. What we found was most of the sites were not offering haprine at all to their patients. So as a result, it didn't really make any sense for us to require these sites to document contraindication to use of haprine. FDA, as Vince mentioned, also agreed to remove that restriction. Does that answer your question?

Yes. Thank you so much for your clarification.

You know, full updated endpoints.

Nikhil, can I ask you also to quickly elaborate on why have these institutions decided not to use chiropractic for the most part? In your clinic, discussion with these sites. What has been their main rationale for those on the phone today to understand why they're not using the heparin, even though it's indicated for this condition? Right. So there are many reasons. I think overall, most institutions do not. I feel that the risks from half-drain justify the use of half-drain routinely in all patients. population, number one, it has a long half-life, approximately two to three hours. And the half-life can change within a So that makes it very difficult to use. And titration of hafrein is quite difficult.

It takes a while before you titrate to the target therapeutic activated prothrombin time, which is the marker that we use in the clinic. And I think the most important thing perhaps is that it's a systemic anticoagulant. So, you know, you are trying to prevent clotting in a circuit, which is outside the body. So there really is no justification to expose the whole patient to anticoagulation because these patients are very high risk of bleeding from many organs. And so this increases their risk of systemic bleeding. So those are, I think, you know, my top few reasons why, you know, I never liked happening and most physicians don't.

Thanks, Shaquille.

Got it. Thank you so much.

Perhaps a couple of questions regarding the private placement that was announced today. Just wonder the second and third milestones tied to the patient enrollment, 17 and 35 patients respectively. Is there any time limit tied to these achievements of the milestones?

No, they're not.

Okay, so just to be clear, the funding will trigger as soon as both the number of patients being enrolled and also the share price hitting the five-day average.

That's correct. And some normal closing conditions. But yes, that is correct.

Okay. And then one final question also on the private placement. Just wonder if you have disclosed which member of the management team participated and also what the amounts

Yeah, I mean, we didn't, but it's Vince. That would be me, Thomas. Thank you so much. Let's get our questions together. Looking forward to hearing from you. for this study throughout the year. Thanks, Thomas. The next question is from . Please go ahead. Hey, guys. It's Matt on for Jim. Congrats on the quarter and the private placement this morning. First question, I want to follow up on the private placement for those milestones at 17 and 35 patients.

Have you guided at all to when you might see that come in, 17 maybe next quarter? Is that a fair assumption?

Yeah, we haven't, but yeah, we're expecting kind of mid-year for the first one and the third quarter or so for the second one. Gotcha.

And then as far as the existing sites, do you have any plans to shift the PIs to nephrologists and maybe make those sites look a little bit more like the highest enrolling? Is that a possibility?

Yeah, I'm going to turn that one over to Shaquille and just preface it by, Shaquille, can you also include in your answer, you know, as we continue to find highly productive sites that really meet our criteria with a high number of CRRT patients, one, would you ever consider deactivating the unproductive sites? And two, especially with the demand that we're starting to see to get into the trial, And two, for those sites that we have been very close with, which is all of them, the work you're doing to potentially shift those PIs over to the specialty that most fit our needs.

Absolutely. So, yes, that is the case. We are in discussions with these PIs to see if either they can shift the primary responsibility to a nephrologist or they can broaden their patient population by including medical ICUs. In terms of closing any of the sites that are not being productive, I think that's possible. Once we recognize or close to getting the 14 sites up and running, and by then if any of these sites have not performed, we would like to swap them for better performing sites. So right now we have a lot of interest in joining this study, and we are activating those sites as quickly as we can.

I think an important additional color add-on that is these sites were the ones that really brought to our attention the challenges that they were experiencing with the protocol and the two particular exclusion criteria. So acute to them even though they haven't been as productive on their engagement and enthusiasm for the study. And I think you have to remember

These are very prominent sites around the country related to the reputation of the institutions.

And the PIs are extraordinary, but these are the same PIs that worked the founding company Lowell and prior to that Lowell Hoyle on Geopresence which is a

The comfort level that was with these PIs as intensivists in the ICUs they were pulling from being cardiothoracic and or surgical. And I think that Lowell slash La Jolla leaned on those relationships. Extraordinary talents, but might not be the best fit, as Dr. Asim has explained, for many reasons for this particular study.

Got it. Okay, thank you for the color. I appreciate that. And lastly, do you have any clues yet to the enrollment rate with this? new revised criteria, or should we assume those six patients that have completed the study are the six patients fully that have been enrolled as of right now?

Yeah, yeah. So those are the original six. Again, I'll reiterate what we said in the script, that five of those six are coming from one of the institutions that we had identified to add into the study that really met the criteria that Dr. Aslam proposed. has framed out moving forward. Got it.

And any clues to the enrollment rate going forward based on these new criteria that have been agreed upon by the FDA, or is it too early to tell?

No, I think it's too early to tell. Again, I'll reiterate what we said, that we had 25 patients excluded since the enrollment started in the trial for these two criteria. 10 on one and 15 on another. I think it was 15 on the 48 hours, 10 on the heparin exclusion. So you can see a number of patients were screened out from these original sites based off of those two criteria. We expect those original sites to have some production moving forward, but we really expect that change in the criteria to more heavily affect these higher potential sites. Remember, as Dr. Aslam said, Our most productive site to date is averaging about 20 CRRT patients per month.

With the site that Dr. Aslam just activated, just started screening. They're averaging historically, now there's peaks and troughs. They're averaging between 90 So you see the magnitude of potential penetration. of that population. And then the additional sites that Dr. Rasmus engaged that we planned on having by mid-year, some of those are even larger. than those sites that are averaging 90 to 100 CRT per month.

And that should work in concert with the inclusion-exclusion criteria the FDA just granted us.

All right, great. Thanks for the call, guys. Congrats on the progress, and thanks for taking my questions.

Thanks, Matt.

The next question is from Naz Rahman from Maxim Group. Please go ahead.

Hi, everyone. Thanks for taking my question, and congrats on the progress. I guess in context of everything that's happened, what ultimately gives you confidence? that you could have the data by the end of the year. You're saying that it still takes four months, give or take, to initiate a site, which is faster than before, but that still seems like it would take a while to initiate additional green and initiate additional sites, which kind of takes us into mid-year. All that considered, what gives you confidence you could have the data by the end of the year?

Yeah, so I can start on the answer to that question, Shaquille. Maybe you can add some additional color. So of our original seven sites you mentioned, we have two more we plan on adding here actually in April. So it's very early on. It's not an additional four months from here. And then the balance of the sites to get us to the 13 that we're currently engaged with will be by mid-year. So it's not four months starting from now. We're already well into it with two of the sites and then fairly far along with the additional sites to get us to the 13 by mid-year. When you just do the math on that, Naz, I mean, you're looking at 13 sites with a balance of 64 patients left to enroll. So one to one and a half patients per month with exponentially larger populations as I just outlined.

I think from an engagement standpoint or other, maybe, Shaquille, you can add some color on the new sites, the engagement, the teams in the profile that we've kind of Ready. Ready. Did we lose Shaquille? Shaquille, you might be muted. There you are. Thank you. we are seeing is the level of engagement that we get from the necrologists. And now, necrologists deal with this issue of anticoagulating these patients and how do you anticoagulate just the circuit and not the patient.

And they deal with this issue, you know, every single time they start a patient on CRRT. So this is an issue which really is very, very close to them. The biggest difference that I see is these nephrologists, they are helping us with the paperwork. They want Nefamistat, you know, available for their patients. Most of them don't use heparin. Most of them do not use citrate. And they want an option so that they don't have to throw away these circuits every six to eight hours in some of these patients. So that level of engagement is what gives me a lot of confidence that they are actually going to go and look for those patients. They know that this is not a big study. And if they can help us, we can actually get this product in their hand, you know, next year. So I think that is the most confidence-inspiring part of these new sites that I'm seeing. And Vince, you've been talking to some of those people as well. I don't know how you felt about their degree of involvement and how enthusiastic they are.

Yeah, I think it's very similar to Dr. Aslam. Not that the engagement from the previous ones wasn't high, but the nephrologists make a big difference because this is their world every day that they're in the hospital doing the CRRT.

Thank you. That was very helpful.

Thanks, Nas. Thanks, Nas. There are no further questions at this time. Please proceed with closing remarks.

Okay, again, thank you for joining our 4Q earnings call, but we're excited about the study modifications to address enrollment and the continued alignment with the FDA, in particular, with the goal of completing the NEPHRO trial in 2025 and an FDA approval of NIAID in 2026. We'll remain disciplined on our cash management, and we look forward to providing additional updates on progress.

Thank you for all your interest, and that concludes our call.