Q3 2022 Athersys Inc Earnings Call

Please wait the conference will begin shortly.

[music].

Okay.

Okay.

Good morning, My name is Devon, and I will be your conference operator today.

At this time I would like to welcome everyone to the eighth or system.

Third quarter 2022 results conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session.

If you would like to ask a question during this time.

Simply press Star then the number one on your telephone keypad.

If you would like to withdraw your question at any time again press Star and then the number one on your telephone keypad.

Okay.

Corporate communication and Investor Relations Ellen <unk>, you May begin your conference.

Yeah.

Good morning, and welcome to <unk> third quarter 2022 financial results and business update conference call. Please note that any remarks management may make about future expectations plans and prospects constitute forward looking statements for purposes of the safe Harbor provision under the private securities.

Litigation Reform Act of 1995 actual results may differ materially from those indicated by the forward looking statements as a result of various factors, including those discussed in our forms 10-Q, 10-K and other filings with the SEC.

Also this conference call contains time sensitive information that is accurate only as of the date of the live broadcast November 15th 2022.

<unk> undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this conference call, except as required by law.

That I would like to turn the call over to Dan <unk>, Chief Executive Officer of out there says Dan. Please go ahead.

Thank you Ellen and welcome everyone to Athar sits as third quarter 2022 earnings call. Joining me on the call today are Maia Hansen, our Chief operating Officer, Casey Rosato, our interim Chief Financial Officer, and Dr. Robert Willie Mays, Our executive Vice President and head of regenerative medicine and neuro.

Science programs.

Since our second quarter earnings call, we've been hard at work executing on our plan to transform <unk> and put the company on a path to success.

I'd like to start out by affirming our confidence in the potential and opportunity we have in multistem for treating ischemic stroke acute respiratory distress syndrome trauma and several other serious diseases.

During the third quarter, we made good progress across several areas, including addressing our balance sheet and operating expenses growing enrollment of patients in our masters two ischemic stroke trial and pursuing discussions with potential business partners since.

Since we held our business update call last month I'd like to focus our call today on our financial performance and highlight expectations for the fourth quarter.

Since our second quarter earnings call announcement in August we've taken significant actions to improve our financial situation by reducing our operating expenses raising capital in the near term and managing our liabilities.

Mid August we raised approximately $12 million in gross proceeds.

Given other financing options and current market dynamics that initial agreement provided immediate liquidity under attractive terms.

We also just completed a follow on equity financing raising five and a half million dollars in gross proceeds.

The equity raise we completed last week provides us with additional liquidity as we plan for the first quarter of 2023 and work towards achieving several near term milestones.

We fully realize that additional funds are required to bring multistem to market and we remain focused on our primary goal of completing the masters two trial.

And achieve our other value, creating business and strategic objectives.

Actions, we've taken to address our operating expenses and liabilities have yielded meaningful savings didn't moved us toward a more managed and disciplined approach to supporting our priorities.

To date, we've reduced expenses from approximately $7 million a month.

And growing down to approximately $3 million per month, and decreasing with a clear path to $2 $5 million per month by the end of this year.

This has been achieved by thoughtful Matt thoughtfully managing outstanding account payables in relationship with key vendors, our largest liability remains with our C. D M O and represents over 80% of our account payable balance.

We continue to actively engage with this important vendor with the goal of reaching a settlement on our outstanding obligations and preserving our relationship for the long term.

As a reminder, our contract manufacturer has completed production of investigational product necessary for us to complete Masters two under the current clinical protocol.

We have also completed production of clinical product using a more efficient bioreactor process with sufficient inventory available to complete our phase II trauma trial.

We also have a few hundred doses of clinical bioreactor product that was approved for use in our odds mccovey, a trial, which we suspended.

We intend to hold onto that product as we explore various business development options.

Another action, we've taken to reduce our operating expenses as the wind down of Regenesis, which is our animal health research unit in Belgium, we have notified staff of our intention to close this facility by the end of the year.

We're exploring potential business partners for this program, which has demonstrated the benefit of multistem in our preclinical animal setting targeting progressive diseases like canine osteoarthritis.

As far as stabilizing our financial position, we are grateful to have received shareholder support to implement a reverse stock split to satisfy satisfy NASDAQ continued listing requirements.

After discussing our options with NASDAQ on August 29, So we implemented a one for 25 reverse split.

Among other benefits. This action was intended to bring our share price into a more attractive range.

We subsequently received a notice of noncompliance with NASDAQ on October 14th that our market valuation of common stock had fallen below $35 million for 30 consecutive days.

And we have until April 12, 2023 to regain compliance and avoid the possibility of delisting.

As we presented our preclinical and clinical work during our research webinar and at industry conferences, such as meeting on the Mesa, we are pursuing discussions with potential partners.

Much of our preclinical research has been highlighted in various scientific publications, but was never offered are pursued from a business development perspective.

Now in addition to licensing opportunities for ischemic stroke. We're also looking at co commercialization opportunities.

Ways to advance our pipeline.

We've made significant investments over time to understand how multistem cells work why they are unique and how they can optimally being manufactured at scale and we intend to work with partners to build on our experience.

Although our efforts are resulting in conversations with new potential partners, it's too early to predict outcomes.

In Japan, we continue to work with Helios as they hold meetings with P. M D E and determine their next steps related to achieving commercial approval for multistem in both a R D S and ischemic stroke.

As part of our restructuring efforts and ongoing negotiations with our C. D. M. O. We agreed to a license and tech transfer of certain manufacturing rights to Helios for producing product in Japan.

This is a lengthy process that we've initiated with Helios, while we continue to evaluate a path forward for multistem approval in Japan.

Turning now to our clinical work our top priority remains achieving a successful outcome for masters two and we are currently in a critical window of time to review potential protocol changes with FDA and EMA.

We analyzed results from the Masters, one and treasure trials to generate statistical models and align insights to reevaluate the masters two trial design with the goal of enhancing the prospect of a timely outcome focused on the most appropriate targets.

This month, we will be meeting with key opinion leaders regulatory experts and statisticians to review the data and determine what if any protocol changes should be made.

Once we receive input from these experts we will then consult with the FDA and the EMA.

On any potential recommendations to modify the masters two trial design and be in a better position to communicate and expected enrollment completion date.

In the meantime, we continue to actively engage clinical trial sites and work toward growing patient enrollment.

As we look ahead for the remainder of Q4, we are clear on our priorities number one we continue to enroll patients in our masters two trial.

Number two we engage with key opinion leaders and other industry experts on the totality of data. We now have available to us with the recent treasure trial results and evaluate our options to then discuss with regulatory agencies.

Number three is to advance our business development discussions with the intention of seeking strategic partnerships that will work with us to advance multistem on a regional or global level.

And number four we will continue to manage our balance sheet actively and responsibly for long term success.

Coming off our recent financing we will continue to raise our presence with institutional investors and we look forward to participating in an alliance global partner Biotech conference at the end of this month.

We'll also be meeting with investors in person during the JP Morgan Healthcare conference in San Francisco in early January .

I would now like to turn the call over to Casey Risotto to discuss the quarter's financial results.

Thank you Dan.

The final topic I'd like to summarize our financial results for the third quarter.

Revenues for the quarter were 6500 compared to $4 8 million for the third quarter of 2021.

Elaboration revenues fluctuate from period to period based on the delivery of services under the arrangements with Helios.

As of September 30th 'twenty, 'twenty, two and during the third quarter of 2022, the services under that arrangement are largely complete and our limited to pose out activities.

Research and development expenses were $12 4 million for the third quarter of 2022, compared with $17 2 million for the comparable period in 2021.

The $4 8 million decrease is due to our restructuring efforts, which have reduced salaries and benefits of $2 million.

Internal research supplies of $1 8 million Manny.

Manufacturing costs of 200000.

Outstanding services of 600000.

And decreases in other research and development cost of 400000.

General and administrative expenses were $3 7 million for the third quarter of 2022, compared with $3 6 million for the comparable period in 2021.

Slight increase is primarily related to restructuring cost.

We expect our general and administrative expenses to decrease in connection with our restructuring plan.

Net loss for the third quarter of 2022 was $13 7 million or $1 15 per share.

Compared to a net loss of $16 2 million or $1 76 per share for the third quarter of 2021.

Our cash balance at the end of September was $13 8 million.

We have made substantial progress in reducing our operating burn rate, while working with suppliers on payables and other obligations, but as Dan mentioned, we will need additional capital to support ongoing operations.

Thank you Casey.

So with that overview I'd like to thank everyone for their attention.

I'd like to answer a few questions. We received in advance before opening the lines for additional questions.

One of the first questions, we received as Ken management address the risk of stock delisting from the NASDAQ exchange.

And our answer as you recall, we had received a notice from NASDAQ of noncompliance back on March 18th.

For a share price trading below $1 for 30 consecutive days, we had a deadline of September 14th with the $1 share price requirement.

And after gaining shareholder support for conducting a reverse split.

In discussing our options with NASDAQ, we decided to implement a one for 25 reverse split at the end of August , particularly since we were not eligible for any extension because our shareholder equity was below $4 million.

After trading for 10 consecutive days above one dollar. We then received a notice from NASDAQ that we had regained compliance on September 13th.

Unfortunately, then on October 14th we received a notice of noncompliance from NASDAQ for failing to maintain a minimum market value of $35 million in traded securities over 30 consecutive days.

Now have until April 12, 2023 to regain compliance and maintain a minimum market value of $35 million for 10 consecutive trading days and our intention is to achieve this objective in order to avoid the potential delisting from Nasdaq.

A second question. We received was that it will be almost six months since the treasure trial was completed and Helios has not made any progress with <unk> and filing for approval can you. Please provide details if there is still a working relationship with the two companies.

Yes as mentioned previously we continue to work with Helios and support their efforts as they engage Japanese regulators to determine the next steps with both <unk> and stroke.

And this has been an ongoing and time consuming process for both companies and we expect that as Helios has determined a final path forward they will communicate their plants.

Since we announced our restructuring plans a few months ago, our conversations with Helios have centered around manufacturing.

August we granted Helios a license to manufacture multistem for commercial use in Japan, and we've been working closely with them on the tech transfer process.

We continue engage with Helios regularly and it had an opportunity to meet in person at the recent meetings on the Mesa.

Okay.

And our recent filings with the SEC, including our Form 10-Q filed last night, we disclosed that Helios has alleged that we were in material breach of our comprehensive framework agreement for commercial manufacturing and support for among other things our supply obligations.

We continue we strongly disagree with Helios his allegations and we'll continue to work with Helios to try and resolve this dispute.

A third question that we received is can you provide more details on this on the decision to conduct a recent financing and an update on business development tugs.

As we discussed today and communicated previously one of our priorities is to work on identifying potential co development and co commercialization partners to advance Multistem on both a regional and global level for ischemic stroke and other potential indications. This process takes time.

As we advanced conversations we need to balance this effort and our expectations with the need to raise additional capital and support operations.

We decided it was our best in our best interest to conduct a small financing before the end of 2022 to raise additional cash to support operations through Q1 of 2023.

Given our financing activities over the past few months, we structured this recent financing as a confidentially marketed public offering or C. M. P O.

And it would qualify as a public offering under NASDAQ rules.

We felt that compared to other options like that.

M. P. O structure was the most attractive on terms by providing us future flexibility and also giving us the opportunity to bring in new large investors.

However, we were limited to the amount available to raise based on the availability under our registration statement.

And while I recognize that equity financing are not well received by current investors.

It is our best mechanism to raise capital, while we execute on our business development plans.

Our fourth question that we received in advances can you provide an update on masters, two and timing to complete enrollment of the trial.

Yeah.

As I mentioned, we continue to focus on increasing patient enrollment and clinical trial site engagement with close to 40 active sites in the U S Europe and other parts of the world.

In fact since the release of topline treasure data back in May Dr. Mason has been actively presenting at grand rounds at clinical trial sites across the country and the totality of data with Masters, one and treasure is being well received.

We've observed growth in patient enrollment rates since this effort began back in may.

And during our second quarter earnings call, we communicated that our trial enrollment target was no longer the first quarter of 2023.

And we have not communicated a new trial enrollment target date, just yet.

I'm waiting until we've had a chance to meet with key opinion leaders and industry experts on the data analysis. We conducted now that we have the full treasure dataset and determine if any changes to our masters two trial design should be discussed with regulatory agencies.

Once we've discussed the analysis with our expert panel and discussed our options with the FDA and EMA officials.

<unk> communicated more accurate enrollment target.

And we expect to be able to communicate that target.

And new enrollment date sometime in the first quarter of 2023.

So now I'd like to turn it over to the operator to see if we have any additional questions at this time.

There are no further questions at this time with that said concludes today's conference. Thank you for attending today's presentation. You may now disconnect.

Please wait the conference will begin shortly.

[music].

Okay.

[music].

Yeah.

Yeah.

Yeah.

Yeah.

[music].