Longeveron Inc. (NASDAQ:LGVN) Q2 2024 Earnings Call Transcript

Longeveron Inc. (NASDAQ:LGVN) Q2 2024 Earnings Call Transcript August 14, 2024

Longeveron Inc. misses on earnings expectations. Reported EPS is $-1.83 EPS, expectations were $-1.03.

Operator: Good day, and welcome to Longeveron’s 2024 Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Derek Cole, Investor Relations, Advisory Solutions. Thank you, sir. You may begin.

Derek Cole: Thank you, Maria. Good afternoon, everyone, and thank you for joining us today to review Longeveron’s second quarter 2024 financial results and business update. After the U.S. markets closed today, we issued a press release with financial results in the second quarter, which can be found under the Investor Relations section of the Longeveron website. On the call today are Wa’el Hashad, Chief Executive Officer; Dr. Nataliya Agafonova, Chief Medical Officer; Lisa Locklear, Chief Financial Officer; and Joshua Hare, Co-Founder, Chief Science Officer and Chairman of the Board. As a reminder, during this call, we will be making forward-looking statements. These statements are subject to certain risks and uncertainties that could cause 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 the company’s filings with the Securities and Exchange Commission, which we encourage you to review. Following the company’s prepared remarks, we will open the call to questions from covering analysts. With that, let me hand the call over to Wa’el Hashad, Chief Executive Officer. Wa’el?

Wa’el Hashad: Thank you, Derek. Good afternoon, everyone, and thank you very much for joining us today. Earlier this year, in our letter to the shareholders, we laid out our vision for Longeveron and the strategy we would implement in pursuit of this vision. On our last quarterly call, I detailed the four reasons that drive my confidence in our ability to execute well and make an impact. One, our foundation in strong science, the experience and expertise of the Longeveron team, and the team dedication and commitment to advance this research. And fourth and the most important is a concerted focus on patients impacted by the diseases for which we are attempting to develop treatment. Now, I’m very pleased to update you on our progress and accomplishments since the end of the first quarter, which I can sum up as continued strong execution across all aspects of the organization.

As a reminder for those of you who are new to our story, Longeveron is a regenerative medicine company developing cutting edge cellular therapy. Our lead development compound Lomecel-B, represents a pipeline and a product opportunity that is being evaluated across three important treatment areas, addressing numerous unmet medical needs with U.S. market potential opportunities of approximately US$10 billion to US$18 billion. Lomecel-B is a proprietary scalable allogeneic cellular therapy that has delivered positive initial results across five clinical trials in three indications, Phase 1 and 2 trials in Alzheimer’s disease, Phase 1 and 2 trials in aging-related Frailty, and Phase 1 in hypoplastic left heart syndrome also known as HLHS. HLHS is a key strategic priority for us this year.

The positive results of our Phase 1 study ELPIS I were the basis for our ongoing Phase 2 study ELPIS II, which is evaluating Lomecel-B as a potential adjunct treatment for HLHS. The trial to continue to make progress enrolling patients with enrollment completion targeted for the end of 2024. In June, we hosted successful ELPIS II investigator meeting. Dr. Agafonova will provide more details on their meeting shortly, but I will share that the participation in the level of excitement and enthusiasm was incredible. We believe the HLHS program has high probability of success and the shortest path to potential regulatory approval across our pipeline. This belief is enhanced with ELPIS I data serving as the basis for the U.S. FDA awarding the HLHS program with three distinct and important designations: Orphan Drug disease designation, Fast Track designation, and Rare Pediatric Disease designation.

While we are very focused on HLHS, we also continue to advance our Alzheimer’s disease program. As you hopefully have seen in three important recent events based on the Phase 1 and the CLEAR MIND Phase 2a clinical data, the FDA has granted Lomecel-B both Regenerative Medicine Advanced Therapy, RMAT designation and Fast Track designation for the treatment of mild Alzheimer’s disease. Lomecel-B appears to be the first cellular therapy candidate to receive RMAT designation for Alzheimer’s disease. We are honored to have received these designations and look forward to continue to work with the FDA on the next steps. Full results from the CLEAR MIND Phase 2a clinical trials were presented in a featured research oral presentation at the 2024 Alzheimer’s Association International Conference, AAIC that was just held in Philadelphia.

Dr. Agafonova will review the results but I think it is important starting highlight is that the clinical trial. In the clinical trial of Lomecel-B treated an important — treated patients showed an overall slowing or prevention of disease worsening compared to placebo. We understand Alzheimer’s disease has historically been a very difficult area for development. So we are only more encouraged with the results we have seen to-date with Lomecel-B. With this data in hand, we anticipate meeting with the FDA before year-end to review future clinical and regulatory strategies for continuing this important program. As I mentioned on our last call, we are expanding our contract manufacturing operation, as part of the overall resource optimization strategy.

We have assembled a team of experts and proprietary technologies that enable us to take a systematic approach to rapidly develop improved cell therapy. Our state-of-the-art GMP facility in Miami at Life Science and Technology Park consists of 3,000 square feet of cleanroom space containing eight ISO-7 cleanrooms and ancillary areas, as well as 1,150 square feet of process development, quality control, and warehousing space. While this facility give us capacity to manufacture Lomecel-B for clinical trial use and potentially if approved for commercial scale, we are not currently using the facility’s full capacity. This presents an additional opportunity for us as the company’s manufacturing expertise and capabilities and the facility are in demand from other pharmaceutical organizations.

We are performing work under the first contract and we have already generated over $200,000 in revenue. We believe the contract manufacturing business has a potential to expand our team experience and generate approximately $4 million to $5 million in annual revenue once it’s up and running fully. Helping offset our clinical development cost and reducing but not eliminating our additional capital needs. Lastly, we remain tightly focused on optimizing our resources and being good stewards of shareholders capital with focus on expense control and program prioritization. Our total operating expenses through the first half of the year are down 22% year-over-year, following a successful factor raises and warrant exercises in the second quarter and in July, we’re — our existing cash and cash equivalents are expected to be sufficient to fund the company through the fourth quarter of 2025.

With that, I will turn the call to Dr. Agafonova to provide updates on our clinical development program. Nataliya?

Nataliya Agafonova: Thank you, Wa’el, and good afternoon, everyone. As Wa’el mentioned, our HLHS program is a primary focus for us as we believe it is the program with the highest probability of success, a new lease term pathway to potential approval. HLHS or hypoplastic left heart syndrome is a rare pediatric congenital heart birth defect in which the left ventricle of the heart is either severely underdeveloped or missing. The current treatment requires infants to undergo a complex three-stage heart reconstruction surgery process over the first five years of their life. Even with this comprehensive treatment, only 50% to 60% of infants survived to adolescents due to right ventricular failure. There is clear an important unmet medical need to improve right ventricular function in these infants to positively impact both short and long-term patient outcomes.

Our ELPIS I Phase 1 study of Lomecel-B in infant with HLHS demonstrated that infants in the trial experienced 100% transplant-free survival up to five years of age after receiving Lomecel-B during the Stage 2 surgery, compared to approximately 20% mortality rate observed from historical control data. The ELPIS I data were highly encouraging and served as the basis for ELPIS II, our ongoing Phase 2b clinical trial designed to assess the potential of Lomecel-B to improve right ventricular function and long-term outcome. ELPIS II is being conducted in collaboration with National Heart, Lung and Blood Institute through the grants from the National Institutes of Health. As Wa’el mentioned, in June, we hosted an investigator meeting for ELPIS II clinical trials, bringing together principal investigators and side staff from premier infants and children’s treatment institution across the country.

Participating organization included Children’s Hospital of Los Angeles, Children’s Healthcare of Atlanta, Ann and Robert Lurie Children’s Hospital of Chicago, Boston Children’s Hospital, Children’s Nebraska, John and Kathrine McGovern Medical School of University of Texas Health, Primary Children’s Hospital at University of Utah. Three additional nationally recognized pediatric cardiothoracic institutions participated in the investigator meeting as a part of their preparation for participating as investigators in ELPIS II. Since then, Children’s Hospital of Colorado has officially became an active clinical trial site. We could not be more pleased with participating group and their enthusiasm for ELPIS II and thanks them for all their work they do for their patients and patient families.

With their support, we have now reached 70% enrollment in the trial and are targeting completing enrollment of the trial by the end of this year. We believe that pediatric cardiothoracic community recognizes that there is an important unmet medical need to improve right ventricular function in this infants to positively impact both short and long-term patient outcomes. Further advanced this program, we anticipate feedback from a Type C meeting with the FDA before end year on development strategy for HLHS and expectations for the potential biologics license application, BLA approval. Lastly, for HLHS, we anticipate ELPIS I five-year post-treatment completion data in the third quarter of this year and look forward to sharing that important information.

Turning now to Alzheimer’s disease program. We have multiple exciting things to discuss. Data from the CLEAR MIND Phase 2a clinical trial were selected for a future research oral presentation at the 2024 Alzheimer’s Association International Conference held at the end of July. We are very excited about the positive results. In the clinical trial, Lomecel-B treated patients showing overall flowing prevention of disease worsening compared to placebo. The trial achieved the primary safety and secondary efficacy endpoint and showed statistically significant improvement in pre-specified clinical and biomarker endpoints in specific Lomecel-B group compared to placebo. The established safety profile of Lomecel-B for single and multiple dosing regimens was demonstrated in study data that showed no incidence of hypersensitivity, infusion-related reactions, and no cases of amyloid-related imaging abnormalities, ARIA.

Administration of Lomecel-B was associated with slowing cognitive and functional decline as demonstrated by statistically significant results in the Montreal Cognitive Assessment and statistical trending improvements compared to placebo in CDR-SB and MMSE. There was a statistically significant improvement relative to placebo observed in Alzheimer’s Disease Cooperative Study Activities of Daily Living. Brain MRI results demonstrated a 49% reduction in brain volume loss and improvement in cerebral blood flow. Based on the data generated on our Phase 1 and Phase 2 Alzheimer’s clinical trials in July, the FDA has granted Lomecel-B both Regenerative Medicine Advanced Therapy, RMAT designation and Fast Track designation for the treatment of mild Alzheimer’s disease.

We plan to meet with the FDA before year-end to review future clinical and regulatory strategy for Alzheimer’s program. We are currently seeking partnership in non-dilutive functioning to find and to support further development of Lomecel-B in Alzheimer’s disease. We believe that results from CLEAR MIND support the therapeutic potential of Lomecel-B in the treatment of mild Alzheimer’s disease and provided evidence-based support for the clinical development. I will hand the call over Lisa Locklear, our Chief Financial Officer, to discuss our financial results for the second quarter. Lisa?

Lisa Locklear: Thank you, Nataliya, and good afternoon, everyone. This afternoon we issued a press release and filed our quarterly report on Form 10-Q, both of which present our financial results in detail. So I will touch on some highlights, including our expense management, contract manufacturing business and successful capital raising. Revenues for the first half of 2024 were $1 million, up $0.5 million, or 105%, when compared to the first half of 2023, mainly as a result of increased participant demand for our Frailty and Cognitive Impairment registry trial in the Bahamas and new contract manufacturing revenue. Contract manufacturing revenue for the six months ended June 30, 2024, was $0.2 million from our first manufacturing services contract with Secretome Therapeutics.

As Wa’el indicated, we believe that there is opportunity to expand this area of business to make use of our team’s significant expertise at our state-of-the-art GMP facility to potentially generate up to $4 million to $5 million in revenue annually. Earlier this year, we discussed our plan for program prioritization and focused expense management, and we have successfully executed in both areas. First half total operating expenses declined 22% year-over-year, with G&A expenses for the six-month period ending June 30, 2024, decreasing to approximately $4.3 million, compared to $5.5 million for the same period in 2023. R&D expenses for the six months ended June 30, 2024, also decreased approximately $1.2 million, or 22% to approximately $3.9 million.

The decrease was primarily due to a reduced expenses associated with the completed CLEAR MIND Alzheimer’s disease clinical trial and reduced costs for the aging-related Frailty clinical trial, following our decision to discontinue trial activities in Japan. Our net loss decreased to approximately $7.5 million for the six months ended June 30, 2024, from a net loss of $10.3 million for the same period in 2023. Cash and cash equivalents as of June 30, 2024, were $12.4 million. Following capital raises and warrant exercises in April and June 2024, resulting in gross proceeds of $17.6 million. In July 2024, we completed a registered direct offering, which resulted in gross proceeds of $9 million, additionally; certain warrant holders exercised their existing warrants in July generating gross proceeds of another $6.3 million.

We believe our existing cash and cash equivalents will fund our operating expenses and capital expenditure requirements through the fourth quarter of 2025 based on our current spending estimates. I will now hand the call over to Dr. Joshua Hare, our Co-Founder, Chief Science Officer and Chairman of the Board. Joshua?

Joshua Hare: Thank you, Lisa, and good afternoon, everyone. As you’ve heard from the team, we are making great progress advancing cellular therapy research in our lead product candidate Lomecel-B. Recognizing Longeveron’s continued growth and evolution, we are fortunate to have recently added three industry veterans to our Board of Directors. First, Dr. Roger Hajjar brings incredible experience as a scientist, academic and operational executive. He’s an internationally recognized scientist whose cardiac gene therapy discoveries have spurred clinical trials for heart failure and whose methodologies for cardiac directed gene transfer are currently utilized by investigators around the world. So he knows quite a lot about what we’re doing here at Longeveron.

He was recently Head of R&D at Ring Therapeutics and was appointed as the inaugural Director of the Gene and Cell Therapy Institute at Mass General Brigham. Our second new Director is Rich Kender, who is a retired Senior Vice President of Business Development and Corporate Licensing at Merck & Company Incorporated. He spent his entire professional career at Merck in various corporate roles of increasing responsibility and was involved more than 100 business development and licensing transactions. Finally, Neha Motwani has over 25 years of healthcare investment banking experience, most recently having served as Managing Director, Healthcare Investment Banking at William Blair. She previously held investment banking roles of increasing responsibility with Truist Securities, Oppenheimer & Company, Stifel Financial and Cowen and Company, were collectively she completed transactions raising over US$6.8 billion.

I believe all three of these individuals will add tremendous value to the Board and to Longeveron and look forward to collaborating with them. Thank you. And I will turn the call back over to Wa’el at this time.

Wa’el Hashad: Thank you, Dr. Hare. The data generated to-date in HLHS and Alzheimer’s disease supports the broad potential for Lomecel-B as a regenerative medicinal therapy across multiple indications. The strength of the data, our experienced and committed team and unwavering focus on patients give me confidence in the future of Lomecel-B on Longeveron. What really drives everyone here at Longeveron day in and day out is the patients and the opportunity to have a positive impact for them. They are why we are working every day to hopefully develop therapeutic solutions for these unmet needs. Operator, we would now like to open the call for questions from our covering analysts. Thank you.

Q&A Session

Operator: Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from Ram Selvaraju of H.C. Wainwright. Please proceed with your question.

Ram Selvaraju: Hello, thank you very much for taking my questions, and congratulations on all this important progress. Firstly, with respect to Lomecel-B in the ELPIS II study. Can you give us some more granularity around how close you are to completion of enrollment? How long do you expect the enrollment of the remaining patients to take? And assuming completion of enrollment in accordance with your previously reported guidance, when could we see top-line data from this trial? Is it potentially disclosable before the end of 2025? Thank you.

Wa’el Hashad: Sure, Raj. Hi, this is Wa’el Hashad. So first, I want to remind you on everyone, our projection is the best of our ability. Of course, as you know, with rare diseases, there is no easy way to predict exact timing to grow. So we’re still targeting the end of this year. We’re hoping that the addition of the new sites will accelerate the enrollment but definitely, things can also vary a little bit. But we are not that far, as you heard from Nataliya that we are 70% enrollment can — Nataliya can give you more specificity around the exact number of patients being recruited. And then the second thing is I just want to remind you that our follow-on to the closure or the closure of the trial is one year from the last patient in, and that has not changed. And with that, I will give it to Nataliya to give you more specificity around your question.

Nataliya Agafonova: Thank you very much, Wa’el. As Wa’el mentioned, and thank you, Raj, for your question. As Wa’el mentioned, currently, we enrolled 27 out of 38 patients. So we have 11 patients remaining to enroll. We are absolutely hopeful that the new sites we just currently enrolled to the clinical trial will help us to expedite enrollment. So the primary endpoint design that way that we evaluate the effects for the function 12 months after the last patient enrolled. So approximately, we are looking for filing in for probably first quarter of 2026 as a best scenario.

Ram Selvaraju: And with respect to the ELPIS I study, can you just remind us about what additional data you expect to generate from long-term follow-up of the patients who are enrolled and followed as part of that study. And what do you expect to be the key amount of follow-up necessary to secure regulatory approval of Lomecel-B in HLHS. I would understand and imagine that it could be the 12-month follow-up endpoint, but you certainly would be able to obtain longer-term follow-up data from the ELPIS I patient. So just wanted to get some additional color there. Thank you.

Nataliya Agafonova: Thank you so much. It’s a very great question. You’re absolutely right. We are collecting long-term data from 10 patients on ELPIS I. In August — end of August this year, we will have full five-year follow-up after the patient completed Glenn procedure, Stage 2 procedure. So the type of the data we are looking for is a transplant, its survival and transplant-free survival data that can definitely be included in our BLA submission to support not only safety, but actually the most important endpoints such as long-term transplant-free survival and can support the rest of the data for the rest of the patients. And we did present a full year survival last year in the American Heart Association. And hopefully, once we have more data this year you might see this information on future scientific presentation.

Ram Selvaraju: Great. And then shifting to Lomecel-B on the regulatory front. I just wanted to confirm what the outlook was there with respect to the Type B meeting that you originally indicated you would seek on Lomecel-B? And then with respect to Alzheimer’s disease, maybe you can comment a little bit on the changing state of the field. You mentioned earlier the lack of ARIA abnormalities in patients treated with Lomecel-B and how important that is from a competitive positioning perspective. But I also wanted to better understand how you’re thinking about the timing with which you may advance Lomecel-B into further clinical development within the Alzheimer’s context. And if you are contemplating the possibility of doing that before we actually see final data from the HLHS study and if you are pursuing any potential non-dilutive routes of funding to advance that initiative, like, for example, from NIH and so on.

Nataliya Agafonova: Wa’el, would you like to take the first part of the question?

Wa’el Hashad: Yes. So there is multiple questions here, Raj, and I will try to just in, if I forget any of the parts of the question, you can remind me. But first, regarding the regulatory process. We’re actually meeting with the super division or we’re planning to meet with the super division on both HLHS as well as the Alzheimer’s program, and those will be separate meetings. And while both of them are reviewed by the same division, sometimes the review works could be different depending on the indication as well. We, as you know, part of the RMAT designation that we have received, the FDA has requested us to prepare for Type B meeting, as Nataliya has mentioned, which we plan to have before the end of the year. That the Type B meeting, as you know, it takes time to prepare for from a briefing book and timing from the agency, but we’re hopeful that we can get this one done by the end of the year.

We — same thing was happening also with HLHS and we’ll update you once the meeting takes place and the minutes comes in. So that’s regarding our regulatory process from both of them are very important because both are going to outlay what is the path for BLA on the HLHS front and the other one is a very important because, as you know, with the RMAT designation, it’s an equivalent of breakthrough and therefore, there could be a streamlined approach to the — to approval as well with Alzheimer’s disease. And we want to discuss that first with the FDA before we finalize our plan moving forward because we believe that this could be a streamlined and the cost needed could be significantly reduced. Now, we will not know that until we meet with the FDA and agree on that plan.

In terms of our needs, yes, we are pursuing non-dilutive funding, looking at grants all the time. And NIA is one of them with others as well. And we’re also pursuing, as you have heard from multiple also possibility of partnerships and none also private funding as well from other sources as well. So we’re exploring multiple avenues when it comes to funding related to Alzheimer’s research. So that’s regarding the funding, that’s regarding the regulatory cash. Do we have a final plan yet for the FDA for the Alzheimer path forward? As I said, we will not be able to specifically communicate anything until we meet with the FDA. I hope I answered all your questions. Nataliya, if I missed anything, feel free to add. And if I miss any part of your question, happy to answer it as well, Raj.

Ram Selvaraju: No, I think that was very helpful. And then the last question I had was in relation to the contract services business. And there are really two parts here. The first is I wanted to understand better. You mentioned that there may be the possibility to generate as much as $4.5 million in annualized revenue from contract services. I just wanted to get a sense of what the timeline might be to get to that level of revenue generation? Would it be a year from now, two years from now? How are you thinking about that? And then the second question is specifically around one of your contract manufacturing clients, the Secretome Therapeutics. It would be interesting to learn a bit more about this company, what they do, what the nature of Longeveron’s relationship is to Secretome and if there might ultimately be the possibility of Longeveron collaborating with the Secretome on programs from Secretome’s proprietary platform.

Because as I understand it, this is a technology platform company and its approach may be viewed as complementary to that of Longeveron and could potentially broaden Longeveron’s own pipeline. So I was just hoping maybe you could comment a little bit on that and how you see the relationship between yourselves and Secretome developing over time?

Wa’el Hashad: Sure. So first, I can tell you that I will start with the second part of your question, which is the relationship with Secretome. And I can tell you at this time, our relationship is purely related to us helping them with the manufacturing capabilities of their products. We are not collaborating with Secretome in any other front. We have not been engaged in any other discussions or anything outside of the scope of the manufacturing at this time. We’re always open to new technologies and new areas that we can expand our science and research and therapeutic areas. But we — in that avenue, we’re going to pursue much more broader opportunities and you’ve heard from Dr. Hare, we brought several experts on our Board that can help us formulate that strategy how we can go and move forward, and we’ll be communicating some of that also in the future as what would say, Longeveron 2.0, how we can go beyond almost of the in the future.

And those things is always going to be in our plan and the strategy. And definitely, there will be a time and place when we are ready to communicate around this. But it would be much more broader than Secretome. Regarding the potential and when can we see that $4 million to $5 million, we are working on full scale, full speed, and full steam ahead to try to get everything ready. We are doing a full assessment of what additional equipment because we don’t want to limit ourselves to just the stem cell manufacturing. We want to go broader for cell therapy. We have the capabilities and expertise to cover broader other types of cell therapies that we can manufacture in our facility. And we don’t want to limit ourselves onto one type of manufacturing.

And therefore, we are right now in the middle of assessing what additional needs that we need to do and make sure that we’re ready from both human capital and human resource standpoint as well as any other need. And we are already engaging. We are present in many of the meetings of the cell therapies and gene therapies. And we’re speaking with potential customers and looking forward to build it up. How it specifically, I don’t know, but we anticipate a year or two, we’ll be able to get to the full potential with the $4 million to $5 million.

Operator: [Operator Instructions]. There are no further questions at this time. I would now like to turn the floor back over to Wa’el Hashad for closing comments.

Wa’el Hashad: Thank you, Maria. And thank you all for attending our today’s call. We greatly appreciate your interest and support and look forward to updating you on our progress throughout the remainder of the year. Thank you. Operator, you may end the call now.

Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.