Lisata Therapeutics, Inc. (NASDAQ:LSTA) Q1 2023 Earnings Call Transcript May 12, 2023

Operator: Welcome to the Lisata Therapeutics First Quarter 2023 Financial Results and Business Update Conference Call. Currently all participants are in listen-only mode. [Operator Instructions] As a reminder, this call is being recorded today, Tuesday, May 9, 2023. I will now turn the call over to John Menditto, Vice President of Investor Relations and Corporate Communications at Lisata. Please go ahead, sir.

John Menditto : Thank you, operator, and good afternoon, everyone. Welcome to Lisata’s first quarter 2023 conference call, to discuss our financial results and the opportunity to provide a business update. Joining me today from our management team are Dr. David Mazzo, Chief Executive Officer; Dr. Kristen Buck, Executive Vice President of Research and Development and Chief Medical Officer; and James Nisco, Vice President of Finance and Treasury. Shortly before this call, we issued a press release announcing our first quarter 2023 financial results, which is available under the Investors & News section of the company website, along with the webcast replay of this call. If you have not received this news release or if you’d like to be added to the company’s e-mail distribution list, please email me at jmenditto@lisata.com.

Before we begin, I remind you that comments made by management during this conference call will contain forward-looking statements and involve risks and uncertainties regarding the operations and future results of Lisata. I encourage you to review the company’s filings with the Securities and Exchange Commission including, without limitation, its forms 10-Q, 8-K and 10-K, which identify specific risk factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, Tuesday, May 9, 2023. Lisata undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

With that, I will now turn the call over to Dr. Mazzo. Dave? Dave, I believe you may be on mute.

David Mazzo : There we are. We’re having technical difficulties today. My apologies, everyone. And thank you, John, for the introduction. And good afternoon, everyone, and thank you once again for joining us as we provide an overview of recent business highlights, discuss our first quarter 2023 financial results and give an update on progress of our various development programs. During the first quarter, the vast majority of our efforts remain focused on advancement of our clinical development programs for the treatment of advanced solid tumors. As those who follow us now know, Lisata is a clinical-stage therapeutic development company with a novel solid tumor targeting and penetration technology to improve the efficacy of anticancer drugs.

Our development portfolio contains programs that are designed to bring significant therapeutic improvement in the treatment of solid tumors in a pharmacoeconomically attractive paradigm. LSTA1, our lead product candidate, is the subject of multiple planned and ongoing clinical trials being conducted globally in a variety of solid tumor types and in combination with multiple anticancer agents of different modalities. Based on substantial preclinical and, most importantly, early human clinical data, we believe that LSTA1 has the potential to become an integral part of a revised standard-of-care treatment regimen for many difficult-to-treat cancers. Our Chief Medical Officer, Dr. Kristen Buck, shortly will provide more specifics on our clinical programs following our review of financial results.

However, before we get to those subjects, I will take a moment to elaborate on the organizational change that we announced last week. Operating a sustainable clinical-stage biopharmaceutical business involves constant vigilance of capital utilization and often difficult decisions by management teams and Boards of Directors involving programs and people. The need for scrutiny of resource allocation has become even more acute in the volatile and unpredictable capital markets environment of today and that may exist for the foreseeable future. With that in mind and coupled with our operational imperative to ensure that we have sufficient capital to reach important data milestones for all our clinical development programs, we’ve recently implemented a number of capital-preserving measures based on an updated review of business priorities and capital allotment.

Among the measures that were enacted was the streamlining of our organization at the non-executive and executive level. As part of this organization optimization, the President — the position of President and Chief Business Officer was eliminated, and David Slack’s employment with the company was ended. On a personal level, we are saddened to see David’s departure from Lisata. And I will take this opportunity to publicly acknowledge his many contributions to the evolution of Cend Therapeutics and the transaction that formed Lisata. David was instrumental in leading the efforts to identify a means by which to exploit the promise of LSTA1 in a comprehensive clinical development program as he was in the licensing deal of LSTA1 with our Chinese partner, Qilu Pharmaceutical.

We are grateful for his past contributions and wish him well in the future. And with that, I now will turn the call over to James Nisco, our VP of Finance and Treasury, to review and provide commentary on our financial results. James?

James Nisco : Thanks, Dave. Good afternoon all. I’m pleased to join you today to present a summary of our first quarter 2023 financial results. Starting with operating expenses. Research and development expenses were approximately $3.2 million for the three months ended March 31, 2023, compared to $3.3 million for the three months ended March 31, 2022, representing a decrease of $0.1 million or 3.2%. This was primarily due to expenses associated with our XOWNA Phase IIb study, the FREEDOM Trial, in the prior year, partially offset by study start-up activities in the current year associated with the planned Phase II proof-of-concept BOLSTER Trial studying LSTA1 in various solid tumors in combination with the corresponding standards of care.

Enrollment activities for the LSTA1 Phase IIb ASCEND study and chemistry and manufacturing and control activities for LSTA1. General and administrative expenses were approximately $3.7 million for the three months ended March 31, 2023, compared to $3.3 million for the three months ended March 31, 2022, representing an increase of $0.3 million or 9.8%. This was primarily due to the addition of one employee acquired through the merger with Cend Therapeutics, an increase in external legal fees and an increase in accounting and tax-related fees. Overall, net losses were $6.2 million for the three months ended March 31, 2023, compared to $4.2 million for the three months ended March 31, 2022. Turning now to our balance sheet and cash flow. As of March 31, 2023, the company had cash, cash equivalents and marketable securities of approximately $61.1 million.

These figures do not include the recently announced $2.2 million in non-dilutive funding that we received as an approved participant of the Technology Business Tax Certificate Transfer Program sponsored by the New Jersey Economic Development Authority, which will be recorded in the second quarter of 2023. As we have reported previously, the program enables qualifying New Jersey-based biotechnology companies to sell a percentage of their New Jersey net operating losses and research and development tax credits to unrelated qualifying corporations. With several operational initiatives underway that will help manage external costs and, as Dave mentioned, the elimination of the President and Chief Business Officer position, we now project that our current available capital should take us into the first quarter of 2026, encompassing anticipated data milestones from all of our ongoing and planned clinical studies.

This completes my financial overview, and I will now turn the call over to our Chief Medical Officer, Dr. Kristen Buck, for the review of our clinical development pipeline. Kristen?

Kristen Buck : Thank you, James, and good afternoon, everyone. I realize that we just reviewed our programs a few weeks ago during our full year 2022 results call, but I believe it’s important to keep our stakeholders up to date on the continuous progress being made by the Lisata team. Lisata’s pipeline is built on a portfolio of proprietary and patented technology that is grounded in strong scientific rationale and a body of published preclinical and early clinical data. Our technologies are designed to address major impediments to successful treatment of solid tumors in the context of increasing pharmacoeconomic pressures on the health care system. We appreciate the critical importance of generating meaningful clinical data to advance our platform technology, and I can assure you that our entire organization has this goal top of mind in everything we do.

With that, I will now provide a summary and status update for each of Lisata’s active clinical development programs. Kicking off with our lead product candidate, LSTA or LSTA1, for the treatment of advanced solid tumors in combination with other anticancer agents. Despite advances in cancer therapy today, many solid tumors remain difficult to treat effectively. Cancers such as pancreatic cancer, gastric cancer and other solid tumors are surrounded by dense fibrotic tissue known as stroma, which limits access of most pharmacotherapies to the tumor. Many tumors also exhibit a hostile tumor microenvironment, or TME, which suppresses a patient’s immune system and makes it less effective in fighting cancer. The combination of a dense stroma and a hostile TME negatively impacts the ability of many cytotoxic agents and immunotherapies to effectively treat these cancers.

This, coupled with the fact that most anticancer therapies are not efficient in targeting only cancer tissue, defines the major challenge in maximizing effectiveness and safety in the treatment of solid tumors. To combat this, Lisata’s approach is to activate the C-end Rule or CendR system, a naturally occurring active transport system to selectively deliver anticancer drugs through the stroma and into the tumor. Lisata’s lead product candidate, LSTA1, is an investigational drug that actuates the CendR active transport mechanism while also having the potential to modify the tumor microenvironment and make it less immunosuppressive. LSTA1 targets tumor vascular endothelial cells as well as tumor cells themselves based on its affinity for alpha-v beta 3 and beta 5 integrins that are operated later on these cells but not necessarily healthy tissue.

LSTA1 is a 9-amino acid cyclic internalizing RGD peptide that, once bound to these integrins, is cleaved by proteases expressed in the tumor microenvironment to release a peptide fragment called the CendR fragment. The CendR fragment then has high affinity for and binds to an adjacent receptor called neuropilin-1, also upregulated on tumor vascular endothelial and tumor cells to activate the C-end Rule active transport pathway and ferry anticancer drugs more efficiently into solid tumors. Additionally, LSTA1 has been shown in a range of preclinical models to modify the tumor microenvironment, making it less hostile to immune cells and adding to the efficacy of anticancer drugs used against solid tumors. These results come internally from Lisata and from collaborators and research groups around the world and have been the subject of over 200 scientific publications.

Along with our collaborators, we have amassed significant non-clinical data demonstrating enhanced delivery of a range of emerging anticancer therapies, including immunotherapies and RNA-based therapeutics. Clinically, LSTA1 has demonstrated favorable safety, tolerability and activity to enhance the delivery of standard-of-care chemotherapy for patients with metastatic pancreatic cancer. Our development programs are designed to exploit the potential of LSTA1 to enhance a variety of anticancer treatment modalities in a range of solid tumors. Currently, LSTA1 is the subject of about a dozen planned or active clinical trials globally for the treatment of various solid tumors. Let me touch on a few of these individually. Firstly, the ASCEND trial is a 155-patient double-blind, randomized, placebo-controlled clinical trial evaluating LSTA1 in combination with gemcitabine and nab-paclitaxel in patients with metastatic pancreatic ductal adenocarcinoma.

The trial is being conducted at up to 40 sites in Australia and New Zealand led by the Australasian Gastro-Intestinal Cancer Trials Group or AGITG. In collaboration with the NHMRC Clinical Trials Centre at The University of Sydney. We are very pleased with the work of AGITG. To date, an enrollment is progressing quite well. We originally projected enrollment completion by the second quarter of 2024. But if current enrollment rates continue, we could complete enrollment sooner than that. Just recently, along with our clinical research partner WARPNINE, we treated two of our first patients in the iLSTA Trial in Australia, evaluating LSTA1 in combination with standard of care, gemcitabine and nab-paclitaxel chemotherapy; and immunotherapy that is durvalumab, as a first-line treatment in locally advanced nonresectable pancreatic ductal adenocarcinoma.

This is the first of several planned trials in which we are expanding the study of LSTA1’s impact on existing therapies to include immunotherapies. We also expect enrollment completion in this trial by the second quarter of 2024. Next is CENDIFOX. CENDIFOX, the Phase Ib/IIa open-label trial of LSTA1 in combination with neoadjuvant FOLFIRINOX-based therapies in pancreatic, colon and appendiceal cancers, continues to make steady progress. And we expect enrollment completion by the fourth quarter of this year with data readouts in 2024. This trial will provide us with post-treatment biopsy immunoprofiling data as well as long-term outcome data. LSTA1 is also currently being evaluated in combination with gemcitabine and nab-paclitaxel in a Phase Ib/IIa open-label trial in China led by our licensee in that territory, Qilu Pharmaceutical.

Preliminary progression-free survival data are expected to be presented at the upcoming ASCO Meeting in June. The company’s BOLSTER Trial of LSTA1 is a Phase II placebo-controlled basket trial evaluating LSTA1 in combination with standards of care in advanced solid tumors, including head and neck, esophageal and cholangiocarcinoma. This trial will include both cytotoxic and immunotherapy standards of care. We’re excited to announce this trial is now up and running, and we hope to announce enrollment of the first patient by the end of the second quarter. Lastly, iGoLSTA, a Phase Ib/IIa proof-of-concept safety and early efficacy study evaluating LSTA1 in combination with nivolumab and FOLFIRINOX as a first-line treatment in locally advanced nonresectable gastroesophageal adenocarcinoma, is on track to initiate by the third quarter of this year.

In addition to the clinical trials I just mentioned, we also plan to have other studies up and running in the next few months, including LSTA1 in combination with temozolomide in glioblastoma multiforme, or GBM, as well as LSTA1 in combination with HIPEC, intraoperative intraperitoneal lavage in patients with peritoneal carcinomatosis. For those who are interested, a more complete description of each of our trials is available in the appendix of the corporate presentation available on our website. Additionally, in the body of the presentation, there are two slides that depict the anticipated timing of all data readouts from our trials. Turning now to LSTA12, also known as HONEDRA in Japan, our product candidate for the treatment of critical limb ischemia, or CLI, and Buerger’s disease.

HONEDRA is the company’s SAKIGAKE-designated product candidate for the treatment of CLI and Buerger’s’ disease in Japan. As we have reported for several quarters, we have completed a registration-eligible study of HONEDRA in Japan, and those data from that study formed the basis of a pre-consultation and, ultimately, a consultation process with the Japanese regulatory authorities to determine the next step of development for the program. To date, the PMDA has provided an advice on how to proceed — excuse me, how to prepare for the formal consultation meeting and has indicated their preference for additional clinical information to accompany the filing of a JNDA. As a result, we are considering our options for next steps and have engaged a specialized boutique firm to assist in our efforts to secure a Japanese partner to complete the remaining steps of development and registration as well as eventual commercialization in Japan.

Lastly, LSTA201 for the treatment of diabetic kidney disease, or DKD. In 2022, the company initiated a Phase Ib open-label, proof-of-concept trial evaluating LSTA201, a CD34+ regenerative cell therapy investigational product for intrarenal artery administration in patients with diabetic kidney disease. Our proof-of-concept protocol had the objective of determining the tolerance of intrarenal cell therapy injection in DKD patients as well as the ability of LSTA201 to regenerate kidney function. As we reported on 6 February 2023, the top line results from the study showed that LSTA201 was safe and well tolerated by patients with no serious adverse events related to the therapy. However, the study did not demonstrate a consistent improvement in kidney function among all patients.

That said, encouragement received from the study’s principal investigator and key opinion leaders led us to conclude that there still may be potential for use of CD34+ cell therapy for the treatment of diabetic kidney disease. Further development of LSTA201 though will certainly require significantly larger studies and capital investment, and thus, development by Lisata would only be continued if a strategic partner that can contribute the necessary capital for future development is identified. With that, I will now turn the call back to Dave.

David Mazzo : Thanks, Kristen. As Kristen has outlined, the Lisata team is making continual progress advancing our development programs with the goal of maximizing the potential of our development pipeline. We have designed our studies to be scientifically and medically rigorous and to provide results expeditiously while also assuring that we are operating in a maximally capital-efficient manner. We are excited by the promise of our platform technology and are committed to achieving meaningful data readouts as soon as possible with the goal of benefiting patients, the physicians who treat them and our shareholders. And with that, operator, we’re now ready to take questions.

Q&A Session

Operator: [Operator Instructions] Our first question comes from Steve Brozak with WBB Securities. Your line is open.

Operator: Thank you. Our next question comes from Kemp Dolliver with Brookline Capital Markets. Your line is open.

Operator: Our next question comes from Pete Enderlin with MAZ Partners. Your line is open

Operator: Thank you. Our next question comes from Joe Pantginis with H.C. Wainwright. Your line is open.

Operator: Our next question is a follow-up from Pete Enderlin with MAZ Partners. Your line is open.

Operator: Thank you. This concludes the question-and-answer session. I would now like to turn the call back over to Dr. Mazzo for closing remarks.

David Mazzo : Thanks, operator. And again, thank you all for participating to today’s call. And I really appreciate the questions that gave us the opportunity to provide some additional color. We look forward to speaking with you again during our next quarterly conference call and continuing to provide updates on our achievements and progress. We remain grateful for your continued interest and support in Lisata. And we wish you a very good evening. Thank you, and goodbye.

Operator: Thank you for your participation. This does conclude the program. You may now disconnect. Everyone have a great day.