Welcome to the Caladrius Biosciences Third Quarter 2019 Financial Results and Business Update Conference Call. Currently, all participants are in listen-only mode. Following management’s prepared remarks, we will hold a Q&A session. [Operator Instructions] As a reminder, this conference is being recorded today, Wednesday, November 6, 2019. I will now turn the call over to John Menditto, Vice President of Investor Relations and Corporate Communications at Caladrius. Please go ahead, sir.

Good afternoon, and thank you all for participating in today’s call. Joining me today from our management team are Dr. David Mazzo, President and Chief Executive Officer; and Joseph Talamo, Chief Financial Officer. Earlier today we issued a news release announcing our 2019 third quarter financial results. If you have not received this news release or you would like to be added to the Company’s e-mail distribution list, please e-mail me at jmenditto@caladrius.com. Before we begin, I will remind you that comments made by management during this conference call will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of Caladrius. I encourage you to review the Company’s filings with the Securities and Exchange Commission, including without limitation it’s Forms 10-K, 10-Q and 8-K, which identify specific 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, November 6, 2019. Caladrius Biosciences undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. With that said, I’ll turn the call over to Dr. Mazzo. Dave?

Thank you, John. And good afternoon, everyone, and thank you all for joining us on today’s call. Since our last corporate update, we continue to advance our product candidates where carefully managing our finances. Our ongoing clinical studies including the ESCaPE-CMD study of CLBS16 in coronary microvascular dysfunction or CMD. And the study of CLBS12 in critical limb ischemia, CLI in Japan continued to progress as expected and we look forward to a number of key milestones around both in the coming months. I will discuss the details of each study and related milestones a bit further in a few moments. Turning to our plan confirmatory Phase 3 clinical trial of CLBS14 in no option refractory disabling angina or NORDA. We substantially have completed the preparatory work for the initiation of this trial. However, we’ve decided that is in the best interest of the company for us to forestall enrolling patients until sufficient capital resources are identified. That would give us confidence that the study could be funded through completion. As a result and after eliminating CLBS14 study costs from our 2020 operating budget, our projected cash runway will now extended to early 2021. Before I provide more details on all of these topics, I’ll turn the call over to Joe Talamo, our CFO for his review and commentary on our financial results. Joe?

Thanks, Dave, and good afternoon, everyone. I’m pleased to provide an update on our 2019 third quarter financial results highlighted by our two ongoing clinical studies CLBS12 in critical limb ischemia and the ESCaPE-CMD study of CLBS16 in coronary microvascular dysfunction, as well as the financial implications of deferring the NORDA study as Dave just alluded. With regards to our financial results, our net losses were $4.9 million and $14.4 million for the three and nine months ended September 30, 2019, compared with $3.5 million and $12.6 million for the three and nine months ended September 30, 2018. Moving to our operating expenses, R&D expenses, which are primarily focused on the advancement of our ischemic repair platform were $3 million and $8 million for the three and nine months ended September 30, 2019, compared with $1.7 million and $6.1 million for the three and nine months ended September 30, 2018. And our ongoing study of CLBS12 in critical limb ischemia in Japan, we continue to focus spending on patient enrollment to complete this study. As Dave will discuss shortly, however, we are now anticipating completion of enrollment in the first half of 2020, slightly longer than the previous guidance. However, we have maintained our expense forecast and currently expect to incur approximately $4 million of remaining spend to complete this study. And our ESCaPE-CMD study, we completed enrollment in May and together with significant NIH grant supporting this program. We have funded substantially all study related costs as we target study completion in early 2020. Lastly, throughout 2019, we continue to focus on the preparation and initiation of the Phase 3 in NORDA clinical trial for CLBS14. During the last quarter’s conference call, we communicated that the protocol for this study was finalized with FDA and that the projected and…

Thanks, Joe. This quarter, I’ve decided to start my detailed comments a little differently. As I have done historically, I will provide a summary of our CD34+ technology platform effectively the general reason to believe and then we’ll follow that with specifics on each product development program. But this time, I’m going to start with a simpler and more high level description of what we are doing and why it should be considered so relevant and attractive. As many of you are probably aware, most companies in the cell and gene therapy space are focused on treatments for cancers and/or rare diseases. While there is clearly a need for advances in these areas, it seems to have been overlooked that heart disease not only remains the leading cause of death in the U.S., but is in fact increasing. It goes without saying that the pharmacoeconomic burden of heart disease also remains large and growing. So one of the factors that makes Caladrius Biosciences different is that we are focused on developing therapies for the number one disease killer, cardiovascular disease. Also differentiating us from many autologous cell therapy companies working in any therapeutic category is the fact that we have late-stage clinical programs with a large database of human clinical data. In short, our therapies to date have been shown to be safe, effective, durable, economical as pharmacoeconomically justified. And finally, we are working on products with the goal of providing patients with a curative therapy rather than one that just manages symptoms over their lifespan. So with that said, now let me provide a summary of the basis for our CD34+ cell therapy platform. To repeat my comments from previous quarterly calls, our CD34+ cell technology has led to the development of therapeutic product candidates designed to address diseases…

[Operator Instructions] Your first question comes from Jason Kolbert with Dawson Securities.

Thank you. This is actually Ken, Jason’s associate.

Hi, Ken.

Jason just wanted me to dig into what Japanese – hello. Jason just wanting me to dig into what Japanese authorities are going to need to see even with the SAKIGAKE designation. How good is the data going to have to be?

So what we’ve been told in multiple conversations with our SAKIGAKE concierge and so yes, we actually have a concierge assigned to us who facilitates regular interactions with the regulatory authorities. What we’ve been told is that in order to qualify for a conditional or perhaps even a full approval, the study has to demonstrate a trend towards therapeutic effect as well as adequate safety. So essentially no adverse events on the safety side and a strong trend toward a therapeutic effect. The reason they use the word trend and not efficacy is because they clearly understand that the study was not powered to show efficacy and it’s got – so simply that it’s not powered to show efficacy. So far, as we’ve reported previously, we are trending not only in that direction, but so far we’ve had a statistically significant indication that we will in fact demonstrate a therapeutic effect in the overall cohort of CLI. Of course, we’ll wait to see when all patients have completed their follow-up, but we’re moving in the direction that should allow us to get conditional improvement and quite possibly a full approval based upon the data to date.

Very exciting. Thank you very much.

Thank you, Ken.

Your next question is from Steve Brozak with WBB.

Hello, Steve.

Hey Dave, thanks for taking the question. I’ve got one question on NORDA and one on CMD and then I’ll hop back into queue. On the NORDA side, obviously you had started to talk about partnering and development. One of the questions that I wanted to talk about, because you do have a history of being able to go out there and complete transactions like with Hitachi and being able to sell an asset for more than your market cap. Can you describe what you would look at in a partnering and development going forward for NORDA, because obviously that’s something that you’re looking to continue this based on the fact that you’ve seen clinical benefits, clinical outcomes that you would want. But obviously, there are other considerations. So if you can be as detailed as possible on that. And then I want to go back into CMD please.

Okay. Well, thanks for that question, Steve. So I think you hit the nail on the head here in the sense that, we believe that we have a reasonable opportunity to identify other sources of capital to augment the traditional equity raises that a company like ours would do. We do have a history of collecting non-dilutive capital from a variety of sources in the past. Quite a bit of that came from the California Institute for Regenerative Medicine. And we have a number of other grant opportunities that we are pursuing at the moment, any one of which could contribute substantially to our overall cash balance. So we’ll continue to do that. As we continue to push the discussions with the likely potential partners for the product. And so our focus is on, I would call it Big Pharma that have a strong interest in cardiovascular medicine or Specialty Pharma that focuses on cardiovascular medicine, including those companies that have a strong presence in the catheter lab, which is where our product is delivered. Our conversations have advanced. We’ve seen a number of companies express interest and are really looking forward to developing relationships with any of those companies where we could either collect enough of a licensing fee up front that would allow us to fund the product substantially to completion or enter into some sort of co-development opportunity that would also reduce the amount of capital that we need to contribute to something that’s much more manageable based upon our size. And those conversations will continue. We’re also investigating the opportunity that might present itself from, I’ll use the term special purpose vehicle that’s a little bit of an outdated term, but from a number of large healthcare specific funds who are now looking at means to specifically put capital to work on a specific product in a specific late-stage study and then work on some sort of royalty or other arrangement. And so we’re exploring all those possibilities as well. And we thought that it would be in our company and therefore our shareholders’ best interests to exhaust all of those opportunities first before we then went out and raise the money necessary to complete this trial, because if we can reduce that amount significantly, it would help us go faster and certainly would make it a much more attractive opportunity for our shareholders. So that’s the approach we’re taking at the moment.

Okay. I very much appreciate the clarity there. On CMD, in a few days we’re going to see American Heart over in Philly. And at that time, are we going to start to see more color, more data from you and Caladrius on your CLBS16 information? What can we – and I know you don’t want to pre-state what you’re going to be talking about there, but what can we expect and I’ll hop back in the queue. Thank you.

Okay. So thanks again. And you’re right. We’re under an embargo with the AHA. We can’t divulge the results of what’s going to be presented. But I can tell you, you should expect to see a detailed data on coronary flow reserve and on a variety of other CMD markers of frequency and severity of angina and a couple of other things. For 17 of the 20 patients that’s the number that will have completed their six-month follow-up by the time, the abstract is being presented. And I should point out that that this abstract was accepted as a rapid fire oral presentation, which is under the umbrella of the late breakers at AHA. And those are the kinds of things that are accepted when the – even though the study is not complete, when the results are expected to be interesting enough – perhaps even lead to either new treatment paradigms or breakthroughs in the way a disease is characterized or treated. And so that’s the kind of impact that you should expect from the results that are going to be presented by Dr. Barry Merce at AHA. And we’re very excited about that. And then we’ll be obviously in a position to speak about all of that in much greater detail after those announcements are made. And I’ll clearly on the next conference call, but sooner than that as well.

Great. Well, again, Dave, thank you for taking the questions and I’m looking forward to the 16 November data and obviously everything that you are able to execute on NORDA. Thanks, again.

Thanks, Steve.

Thank you. Our next question is from Joe Pantginis with H.C. Wainwright.

Good evening, Joe.

Hey guys. Hey, good afternoon. Thanks for taking the question. I’m curious it’s a nice feather in the cap to have the regulatory visibility around the NORDA study for the pivotal program. So assuming you get the adequate funding through whatever mechanism. Just curious what’s the punch list to be able to get that study up and running as quickly as possible?

Thanks Joe for that question. Actually as Joe mentioned in his remarks, we’ve substantially completed that punch list and that punch list includes everything from, of course starting with a finalized protocol, then having a qualified manufacturing facility. And we’ve already talked about that in previous calls we’ve been listed Cognate BioServices as our manufacturer. Cognate was chosen not only because they can supply the – with – they have the technical capabilities and the capacity to supply us for Phase 3, but they’re also a qualified commercial facility for cell therapy. So they could be the launch facility going forward. We’ve undergone technology transfer. We’re doing validation batch record preparation. So from a CMC and manufacturing perspective, we’re essentially are ready. And then on the clinical operations side, we have engaged a CRO. W have consent forms sorted out. We’ve got site identification underway. And really the last step before actually enrolling patients will be to get the final site IRB approvals and then move into enrollment. So from an operational perspective, we’ve done just about everything that one should do in order to be ready to initiate patient’s enrollment. And as we said, now several times, we’re just going to make sure that we have the financial aspects of this, well stabilized and then we’ll be ready to move forward.

Got it. Thanks for the added color on that.

Thank you, Joe.

And our next question is from Pete Enderlin with MAZ Partners.

Hey, Pete.

Hi, thanks for taking the questions. It seems like a prudent decision to wait until you have the funding more or less lined up on NORDA. But I’ve just wondered, is there any likely change in the projected cost of the trial as a result of that? Or can you refine the specifics of how much it will cost a little more clearly at this point?

No, I mean the external costs of the trial are essentially defined by the protocol, the number of patients, the follow-up, tests that are done and the frequency of those tests. And that’s not going to change. So that $70 million external remains our accurate projection at this point in time. When we speak about roughly a $100 million total over the course of three to four years, that includes the some allocation to the operating of the company. And that number will also remain consistent, because it really doesn’t start until you start the study. So overall, the study costs are essentially fixed. We don’t expect that there’ll be any changes based upon what we have organized with the FDA at this point in time.

Okay. And then getting back to CLBS12, what were the factors, I mean I know it’s just a difficult process, but anything specific on why it took quite a bit longer to enroll the patients than you originally thought?

Yes. I think there are two factors that we’ve identified that have had a major contributing influence on prolonging enrollment a little longer than we expected. And I’ll mention those in a minute, but I do want to emphasize that what’s important is that the goalpost, which is earliest likely approval in Japan remains unchanged. And that’s largely due to the six-month review time afforded by the SAKIGAKE designation. And we’ve been saying all along that that would be a second half of 2021 early as possible approval and that remains intact. But the two – back to your question, there are two things, one of which I may have mentioned previously, but – and one which is a little bit newer. The major influence on this was the fact that the practice of medicine in Japan was something that was determined ultimately to be different than what we expected as it relates to CLI patients. And by that I mean the patient flow. So here in the United States, patients who have CLI, usually end up – well, usually start with their primary physician, when the symptoms begin to appear. And then as the disease progresses, they are sent to a specialist, which in the United States of the vascular, usually a vascular surgeon. And it’s those vascular surgeons who would be the call point for CLBS12 here. Those are the folks who really treat the advanced CLI patients and would be the ones administering CLBS12. We assumed and it turns out wrongly that was the same patient flow in Japan. But it turns out that the – what is the Japanese equivalent of the primary physician really very infrequently turns that patient over to a vascular surgeon. They hold onto those patients for a very long time until…

Your next question is from Keay Nakae with Chardan.

Hey, Keay. How is it going?

Yes, thanks, Dave. With respect to CMD, can you give us your latest estimate of the market opportunity and given that what would be your view of the ability to partner that maybe on the basis of data that would be sufficient for you to advance into a pivotal study?

Sure, thank you. So CMD is just tried to describe during my prepared comments is a very unusual disease and that until fairly recently it was underdiagnosed or misdiagnosed, because there wasn’t a quantitative measurement for cardiologists to look at. And so when these patients came in to see an intervention list and they complained to this debilitating angina, they did a stress test. They showed the immediate signs of blockages. And so they took them to the Cath Lab with the expectation that they were going to find large vessel lesions and stent them or bypass them. And when they don’t find anything, they were kind of at a loss. Now by measuring coronary flow reserve, they can actually identify these patients, specifically if they have a CFR below two, then they have CMD. Now it turns out that based upon data that we’ve taken out of some large databases that have been provided by the WISE study and a number of others that the prevalence of CMD in the United States is going to be in the millions, somewhere between 5 million and 10 million patients likely have CMD or a component of coronary arterial disease that’s associated with microvascular deficiency. So in fact, from a patient prevalence perspective, CMD is a much, much, much larger commercial opportunity than say, NORDA or CLI would be. What also interesting about CMD is that CLBS16 is administered with an intracoronary injection, whereas CLBS14 in NORDA is done with an interim myocardial injection. So CLBS16 and CMD treatment is much simpler, much less restrictive, much less intrusive, and much less costly than the NORDA treatment will be. And so that’ll make it, I think, much easier to test more widely and probably much more attractive to prospective partners. So in the end, whether this data that we’ll be presenting, will be sufficient for partnering, or not will remain to be seen. But I think that, whether this data plus perhaps the next follow on Phase 2 trial, moving on to Phase 3 should all be compelling enough to increase interest in CLBS16 in a manner that’s probably greater than comparable interest would have been shown at this stage for CLBS14. I hope that answers your question.

And your next question is from Pete Enderlin with MAZ Partners.

Welcome back, Pete.

Thanks. Well, this question is sort of conceptual and actually two parts. The first part of the question is, I’ll give you -- what I think the answer is, which is no. But theoretically, does the FDA take into account the potential cost of the treatment when they -- when you’re doing a clinical trial and they’re overseeing that process?

No, no.

Okay. However, there’s so much focus on the cost of drugs and treatment and all that sort of thing. And there’s an outfit up in Boston called, I think it’s the Institute for Clinical and Economic Review, ICER, and they’re looking at something called quality, quality of life years.

Sure.

And so this seems to be, if not a part of what the FDA looks at, certainly, what a part of the payers and the insurance companies would look at and potential partners would look at. So I guess, the second part of the question is, if you’re talking about treatments that are really quite expensive, although not like, high end cancer treatments, but tens, hundreds, thousands more. And so are you guys looking at any considerations of how you can reduce the cost of these things? I mean, I know it’s somewhat early, but you mentioned that you’re talking to some companies that have capabilities in the Cath Lab area and all that. So I guess, the question is basically, how much of a role does the cost of all these things play into your future planning?

All right, so that’s a multilayered question. So I’ll try to address it in a coherent order. So first and foremost, the eventual price of a product to the best of our ability to project it and its ability to be reimbursed based upon a pharmacoeconomic argument. That is that we deliver a treatment effect at a value price in competition with whatever else is out there. And in the context of what the healthcare system can afford. That’s the baseline from which we start when we conceive of a product candidate concept. So you start there, there’s no point in developing something that nobody can pay for or that nobody’s going to buy or is that going to just simply be too expensive for it to make its money back on the research investment. So you have to start there. And we do that consistently. So all of our products have been started with that concept that we can make a pharmacoeconomic case for the product based upon our best guess of what our cost of goods will be, what a reasonable markup in the market that will be sustainable, what will be reimbursed, what the friction penetration will be in all of those things. And that’s just part of the process. So we’ve done that for all of our products now. So that’s the – yes, our products will be more expensive as a onetime treatment than, let’s say, a years worth of pills for a particular treatment. But the difference between our product and a years worth of pills, let’s use statins as an example. You take statins for the rest of your life, every day for the rest of your life. Our treatments are designed to be given one time and they’re designed to be curative,…

This concludes the question-and-answer portion of the presentation and I’ll now turn the call back over to Dr. Mazzo for closing remarks.

Okay. Well again, I’d like to thank everyone for participating on today’s call and thank you for the folks who asked the insightful questions. We look forward to speaking with you all again during our next conference call in a few months and to continuing to bring you news of our achievements and progress. We remain grateful for your continued interest in and support of Caladrius Biosciences and we wish you a good evening. Thank you.

Ladies and gentlemen, this does conclude today’s conference call. Thank you for participating. You may now disconnect.