Biostage Inc New

Greetings and welcome to the BioStage fourth quarter 2021 conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, please press star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Peter Pellegrino, Interim Vice President of Finance, Thank you, Sarah. Please go ahead.

Good morning. This is Peter Pellegrino, Interim Vice President of Finance. On the call with me today is David Green, our Interim Chief Executive Officer. Before I turn it over to David, let me review the company's forward-looking statements. In our discussion today, we will make statements that constitute forward-looking statements. Our actual results and performance may differ materially. from what we have previously projected due to the risks and uncertainties, including those detailed in our annual report on Form 10-K for the year ended December 31, 2021, and our other public filings. Any forward-looking statements, including those related to our future results and activities, represent our estimates as of today and should not be relied upon us representing our estimates at any subsequent day. Additionally, Any material financial or statistical information presented in the call, which are not included in our press release, will be archived and available in the investor section of our website under events and presentations. Now, I will turn it over to David.

Thank you, Peter, and welcome, everyone. Welcome to this quarterly earnings conference call for BioStage. It has been quite a long time since BioStage has held regular meetings with its shareholders, but this is the start of a new era for BioStage, And from now on, we'll be holding an earnings call every quarter. I was rehired by the board in November last year. And since then, I've already hosted two webinars with investors. I founded BioStage in 2008 at Harvard Bioscience, developed the bioreactor scaffold and cellularization technology, and spun it off as a separate public company in 2013. In 2015, I left BioStage after a nasty road accident that nearly killed me. In November last year, the board asked me to return in order to take Biostage's revolutionary technology to the next level. The share price has almost doubled since I returned. I think it is worth recapping some of the milestone achievements that have got us here. First, we performed the first ever regeneration of an esophagus in a human cancer patient. This was performed by Dr. Dennis Weigel, the chair of thoracic surgery at Mayo Clinic, one of the world's most respected hospitals. Dr. Weigel has been a collaborator with Biostage dating back to the time when I was first CEO. The paper announcing this breakthrough was published in the Journal of Thoracic Oncology Research and Clinical Reports in August 2021. The paper concluded that the biostage esophageal implant, quote, would have considerable clinical use, end quote. In this 75-year-old patient, we saw the regeneration of a functional esophagus with a mucosal lining as well. The mucosal lining is essential to allowing food to slip down to the stomach, and also to act as a barrier to infection. We believe that the patient population that would benefit from a biostage esophageal implant is over 500,000 per year worldwide, and this indication could be worth more than a billion dollars in revenue. Esophageal cancer is one of the most deadly types of cancer. First year survival is only 50%, and five year survival is only 20%. Hence, there's a huge need for better treatment for esophageal cancer. Second, the first in human experience is backed up by the research of the biostage esophageal implant in 45 pigs. This is a very large number of large animal studies, some of which went on for almost two years. This is because the product is novel, and we needed to really understand the science of organ regeneration. Third, one of these implants was not in the esophagus, but instead in the bronchus or airway. This pig showed regeneration of both a bronchial tube and an epithelial lining, which in the airway is just as essential as is the mucosal lining in the esophagus. This pig survived almost two years until scheduled euthanasia. Hence, we already have a second potential indication for use of our technology in the airway. This has the potential to treat a proportion of lung cancer patients where the cancer is confined to the bronchus. We believe this patient population is over 100,000 patients per year worldwide, and this indication could also be worth more than a billion dollars in revenue. Four, the Biostage esophageal implant has been described as revolutionary by Dr. Christine Fink, the surgeon-in-chief at Connecticut Children's Medical Center. CCMC has a long time collaborated with Biostage on the pediatric application of our technology, and CCMC is also an investor in Biostage. It has been described as a breakthrough Quote, unquote, by Dr. J. Vacanti. Dr. J. Vacanti is widely regarded as one of the fathers of the entire field of regenerative medicine, who is now the Emeritus Chair of Pediatric Surgery at Massachusetts General Hospital. We are very proud to have both Drs. Fink and Vacanti on our Scientific Advisory Board, where they have been very helpful in establishing the research agenda for Biostage's next product developments. Five. Based on the work that Dr. Fink did implanting the biostage esophageal implant in 15 piglets, we published another paper in January this year that lays both the scientific and the clinical groundwork for the use of the biostage esophageal implant in babies born with birth defects in the esophagus. Six, the FDA approved our clinical trial for 10 patients in up to five hospitals in the United States. This trial measures both safety and efficacy in the actual patient population. Hence, it is more like a miniature Phase III trial than a typical Phase I safety study in healthy adult volunteers, as is common for small molecule drug development. We expect to add patients to this trial until we have sufficient data to file the Biologic License Application, or BLA, to seek approval to market the biostage esophageal implant in the U.S. This FDA-approved trial allows us to treat babies with birth defects once we have shown safety in adults. In addition, we'll also be seeking to initiate trials in China and the EU, where there are far more patients than there are in the U.S. In addition, both China and the EU allow for conditional approval, which would allow us to market a product and receive revenue after successful Phase II results. This would likely be earlier than is possible in the U.S., which does not have a conditional approval pathway. Seven, BioStage has raised over $22 million in the last four years, mostly from private individuals who have got to know Biostage, its technology and potential, and who are long-term strategic investors. None of these investors is a hedge fund. Our balance sheet is all common stock. There is no preferred stock or convertible debt on our books. One of these investors is me. I invested a quarter of a million dollars in Biostage when I joined in November last year, and apart from the legally required minimum wage, I'm paid entirely in stock options. Hence, Every month, I'm investing in BioStage. My employment is not a drain on the cash flow of the company. All of our employees are also compensated in part through stock options. Eight, we have seven issued patents in the United States and two more in China. These cover the bioreactor, the scaffold, and the retrievable nature of the scaffold, which leaves no permanent implant in the body. We also have two orphan drug designations, one for the trachea, one for the esophagus, which provides seven years of exclusivity in addition to the patents in the US from the date of the approval of the product. So, Buyer Stage has accomplished a lot in the last few years. Despite these successes, Buyer Stage was not able to raise sufficient capital to begin the terms of trial or to get relisted on NASDAQ. Today, we trade on the OTC bulletin board or pink sheets because Buyer Stage was delisted from NASDAQ in 2017. My goals are to raise capital, relist on NASDAQ, and begin the clinical trial. But that is all in the future. So first, let us review the financials for the last year.

Peter? Thank you, David. I want to briefly cover the highlights of our annual financial results. Our net loss was approximately $8 million, or $0.79 per basic and diluted share for the year ended December 31, 2021. Those figures include approximately $0.7 million of non-cash items related to stock-based compensation and depreciation expenses, which were offset in part by the forgiveness of our notes payable during the second quarter of 2021. At December 31, 2021, we had cash on hand of approximately $1.2 million and had no debt. We expect that cash on hand will enable us to fund our operating expenses and capital expenditure requirements early into the third quarter of 2022. We used $2.6 million in cash for operations in the fiscal year 2021. We funded our operating activities through private placement transactions that resulted in the issuance of 1,372,464 shares of our common stock in warrants to existing investors. During the fourth quarter, we recorded a charge of $3.25 million related to the contingency matter for our ongoing litigation for a wrongful death complaint and related matters, which are more fully described in Note 9 to our consolidated financial statements on Form 10-K. The method of satisfaction of this estimated liability is yet to be determined. David?

Thank you, Peter. So, let's now open up the call for questions and answers.

Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star two 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 keys. Once again, that's star one to register a question at this time. We'll pause for a moment for questions to be submitted. Once again, that is star one to register questions at this time. The first question today is coming from Jared Cohen of JM Cohen. Please go ahead.

Yeah, thank you. Just can you give us a broad view of how long it would take with your trials, theoretically, if everything goes well? Because I know, you know, a long time ago, we were investors in the company. And, um, just, uh, from start to finish, uh, how many years it would take for you to go, uh, I guess what the file, uh, PMA if, uh, with your trials from, uh, what, uh, from now and so forth.

Yeah, sure. Jared, this is David Green here. Um, so there's, there's several answers to your question. Let me take it piece by piece. Uh, For the U.S. trial, we have to do staggered enrollment. So after one patient is enrolled, we have to wait three months, review that with the FDA, then we can recruit the next three patients, and so on. So it's not like we can recruit everyone up front. As a result, it's going to take us quite a while to recruit all these patients and treat them and follow them up. The FDA requires us in this trial to follow them up for two years before the trial is finished. Hence, it might take us between three and six years to complete the trial in the U.S. However, I mentioned earlier, we intend to apply for approval in both the EU and in China. And in both those jurisdictions, there is something called conditional approval, which allows us to get to revenue faster than in the United States, which does not have a conditional approval pathway. But the way conditional approval works in China and the EU is after successful phase two results. So you've shown safety and efficacy in the patient population, but you don't have a lot of data yet on those patients, then you can be approved to market the product and get revenue on those results subject to the regulatory authority being able to rescind that approval if something goes wrong as the patients are treated beyond the clinical trial. And that conditional approval pathway, both in the EU and China, would allow us to get to market much quicker than we can in the U.S. So that's why I need to take a quarter of a while to answer your question, Jared, because there are multiple ways of answering a question. And also, just a minor point, this is not a PMA pathway. This is a BLA pathway. All right.

I wasn't sure. Yeah, I always get confused. Yeah, BLA, okay.

It's an alphabet soup here of three better acronyms. But, yes, it will be a BLA pathway.

Yeah. Yeah. And just in order to do that, how much money do you think you're going to have to raise in order to do all this, give or take?

Yeah, so a very conservative estimate of how much it will cost us to do the clinical trial is about $1 million per patient. And that $1 million, it has 30 patients in the clinical trial. There's 10 approved for this initial Phase I, Phase II trial in the U.S. I'm guessing it might be up to about 30 patients by the time we get to actually getting approval for the product. So that might be about $30 million for all of that. That's sort of the worst-case scenario. That's if we have to pay $1 million for each one of those patients. That is based off the U.S. patient cost. The cost to treat patients in China is much lower than that. The cost to treat patients in the EU is much lower than that. So the overall cost is probably lower than that per patient, but that is our – a conservative estimate, and a conservative timeline as well, that really assumes we have to go all the way through all 30 patients and not get the conditional approval. But if we do have to go all the way through on all those patients and we have to do it all in the U.S., it would cost us about $30 million to do that.

Okay. Thank you very much.

Okay. You're welcome, Jared.

Once again, ladies and gentlemen, that's star one if you would like to register a question at this time. Mr. Green, I'm showing no further questions in queue at this time. Did you have any additional or closing comments?

I just want to say thank you all for joining us. This is the first call we've had in a long time now, and it actually feels good to be back talking with investors about the prospects of the company. And I very much look forward to making Buyer's Day a success. for both its patients and for its shareholders. Have a good day, everyone. Bye-bye.

Ladies and gentlemen, thank you for your participation and interest in BioStage. This concludes today's event. You may disconnect your lines and log off the webcast at this time and enjoy the rest of your day.