Welcome to the Talphera First Quarter 2024 Financial Results Conference Call. This call is being webcasted live via the Events page of the Investors section of Talphera's website at www.talphera.com. This call is the property of Talphera, and any recording, reproduction or transmission of this call without the express written consent of Talphera is strictly prohibited. As a reminder, this webcast is being recorded. You may listen to a replay of this webcast by going to the Investors section of Talphera's website. I would now like to turn the call over to Raffi Asadorian, Talphera's Chief Financial Officer. Please go ahead.

Thank you for joining us on the call today. This afternoon, we announced our first quarter 2024 financial results and associated business updates in a press release. This press release can be found within the Investors section of our website. With me today are Vince Angotti, our Chief Executive Officer; and Dr. Pam Palmer, Talphera's Founder and Chief Medical Officer. Before we begin, I want to remind listeners that during this call, we will make -- likely make forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve risks and uncertainties regarding the operations and future results of Talphera. Please refer to our press release in addition to the company's periodic, current and annual reports filed with the Securities and Exchange Commission for a discussion of the risks associated with such forward-looking statements. These documents can also be found on our website within the Investors section at www.talphera.com. I'll now hand the call to Vince.

Thank you, Raffi. Good afternoon, and thank you for joining us on the call. Today, I'll provide a status update of our NEPHRO CRRT study evaluating nafamostat's use as an anticoagulant in the extracorporeal circuit. Later, we'll provide some other corporate updates, and Raffi will update you on the financial results for the quarter. And since our last call was just 2 months ago, we'll keep our prepared remarks brief, so we can move directly to any questions you may have. Before we begin, I'm thrilled to welcome Dr. Shakil Aslam to the Talphera team as our new Chief Development Officer, effective May 20. Dr. Aslam has over 20 years of clinical research experience specializing in the field of nephrology. He'll support Dr. Palmer and rest of the team in the development of Niyad and support the preparation of Niyad for commercialization. Dr. Aslam joins us from BioCryst Pharmaceuticals, where he was the Vice President, Clinical Development, Nephrology and Rare Diseases. He's held development roles at Angion, Fresenius and Amgen and was an assistant professor at Georgetown University Hospital for 11 years with a focus on clinical services with acute and chronic kidney disease, hypertension, renal transplantation and other nephrological diseases. His extensive experience across industry and academia as a renal expert is impressive and is a true asset to our organization. Welcome, Dr. Aslam. Now moving to our study update. As a reminder, this FDA agreed registrational study will enroll only 166 patients at up to a limit of 10 sites. Once sites are activated, we expect enrollment and completion of the study will be rapid, particularly since the design of the study calls for the primary endpoint to be achieved within 24 hours, with a patient completed after only 72 hours. We have finalized the negotiation of clinical…

Thank you, Vince. After completing the Xoma Royalty transaction in January, all DSUVIA royalties and milestones earned will be paid to Xoma until they reach their agreed return. Only royalties earned from DoD revenues will be recorded in revenues going forward. There were no revenues recorded during the first quarter. Royalties earned on commercial DSUVIA sales going forward will have no revenue impact due to the accounting for the transaction. Further, we have recorded a $6.3 million liability on our balance sheet related to the transaction, even though there was no recourse to Talphera or obligation to repay the proceeds received from the transaction should DSUVIA sales not result in achievement of the agreed return. Our cash operating expenses or combined R&D and SG&A expenses in the first quarter, excluding non-stock -- noncash stock-based compensation of $0.3 million, totaled $3.9 million compared to $4.8 million last year. The decline from 2023 is due to the reduction in headcount and other costs related to DSUVIA that was divested in April 2023. Full year 2024 cash operating expenses are expected to be at the lower to middle end of the previously provided range of $21 million to $23 million. Cash and investments totaled $18.6 million at the end of the first quarter. As mentioned earlier, we completed 2 separate financings during the quarter, $8 million received from partial monetization of our DSUVIA royalties and milestones and $6 million received from the first closing of our equity financing with Nantahala and Rosalind. The second closing of this equity transaction is committed upon the achievement of the pivotal trial milestone. While the delay we have experienced in initial enrollment may impact the timing of the completion of the clinical trial and therefore the achievement of the pivotal trial milestone, our lead investor, Nantahala, has expressed their continued financing support as required to ensure the company is appropriately funded through at least an approval of Niyad. We are grateful for the commitment demonstrated by Nantahala as we aim to rapidly enroll and complete the Niyad study. I'll now turn the call back to Vince.

Thank you, Raffi, and I'd now like to open the line for any questions you might have. Allan?

[Operator Instructions] Your first question comes from Ed Arce of H.C. Wainwright.

Let me add my congratulations to Dr. Aslam. I have 3 questions for the team. First, on the timeline delay, you mentioned the PMA filing delay would not be significant. At this point, out of the 10 possible sites, you have now 5 finalized agreements. I'm wondering if we can reasonably assume top line results this year. That's first. Second, the opportunity size in CRRT. You mentioned that CRRT is up about 1/3 since COVID and has remained elevated. I'm wondering if you can give some range or quantify what numbers we're talking about here in terms of those procedures. And then lastly, around the cost for Niyad -- or excuse me, the price. You mentioned the total cost of citrate. I'm wondering again if you could quantify exactly either a point estimate or some sort of a range for that.

This is Vince. We'll take each of those 3 in sequence. From the time delay, again, we don't expect significant delays. I know I'm repeating what has already commented, but we hope to provide better guidance on our next earnings call. I think something that's important you've continued to hear as a theme on this call is the rapid enrollment and how the PIs continue to communicate that to us. Just to give you an order of magnitude of the size of some of these sites, Dr. Palmer has spoken to or been at many of these sites. Dr. Palmer, can you just talk about the number of machines some of these sites have and the fact that on the high end of those numbers, those sites are actually involved with the first 5 we finalized agreements with?

Yes. These are all large academic institutions. I mean some of them have over 30 CRRT machines. So they're massive, massive ICUs, a large number of beds, plenty of CRRT going on. They just feel like patients qualifying for this study is not going to be a limiting factor. And so we definitely have enrollment scenarios that do have us playing into what you mentioned as far as top line still this year. That's absolutely within the realm of our enrollment scenarios.

And Ed, I think importantly, on average, this was a interesting data point for us. When you look at all 10 sites that we either have ready to go or in the process of ready to go, about 20 machines per site, CRRT machines. And again, some sites have over 30 machines. And some of those larger sites are already involved with those initial 5 we've identified. The second question, I want to be sure we understand what you're asking relative to CRRT and the 100 million in the range of procedures. Can you question that one more time, Ed?

Yes, I think you were referring to the number of procedures annually and that since the start of COVID, it's up 1/3. So are we to assume it's 133 million a year or...

No, no, no. So I think the point of that, what we stated in the prepared remarks, is to give everyone comfort that this study will be rapidly enrolled. It's not like CRRT procedures are declining and there's not enough CRRT machines at these large academic institutions and that the study is going to be long. So we wanted to give you comfort that this -- we believe this study and through our discussions with the PIs that this will rapidly enroll. And that's the point. So I mean I think our procedures that we've outlined in previous discussions of CRRT, there's 165,000 patients and increasing at a relatively good rate. It's not increasing year-over-year-over-year at 33%. But the COVID definitely had an impact on the number of procedures.

And that $100 million was the same estimate we had post-COVID when we realized that the number of procedures had increased, so we're reiterating that.

Yes. So there's been no change to the market for CRRT specifically.

And then Raffi, Ed's third question was about the comment we made off of the market research, reinforcing the customer's perspective that competitive pricing would revolve around the total cost of anticoagulation with citrate. Can you comment further on that for Ed, please?

Yes. So we may have stated this earlier, but the total cost that we are and through the secondary research, secondary market research, that we've just performed -- sorry, let me restate that. It was primary market research but a second qualitative study that we performed supported what our assumptions were of having the cost of nafamostat or the price of nafamostat at a price that is, I would say, between parity to about a 10% premium to the cost of citrate. And that cost of citrate includes the cost of the calcium that has to be infused on the back end as well as all the monitoring. We've not included any additional HR and personnel for the nurses and a bunch of other costs, but we're just focused on those direct costs. And so where that's gotten to us right now, it's going to price around $47 to $49 a vial for nafamostat. Obviously, we will continue to work on pricing and additional commercial launch prep during this year, but that's where we think we'll end up pricing.

Your next question comes from James Molloy of Alliance Global Partners.

I'd love to walk through, have you guys elucidated what's sort of the main reasons for the delay? Are there particularly one or 2 main reasons? Or is it a variety of issues that's sort of been a perfect storm that's kind of pushed back the delay a little bit? I agree it's going to -- it should run very quickly once it gets up and running but obviously, focused on getting it up and running. And then the OpEx levels, pretty good levels here. I presume those will be -- what sort of change do we expect as the trial gets up and running through 2024? And then I have a follow-up from there.

We'll have Dr. Palmer start, Jim, with the examples of the delays. Raffi will handle the OpEx.

Yes. I mean it's -- there are some consistent factors. I mean the budgeting offices and the contracting offices of these massive institutions are understaffed basically and have a lot of different -- you line up in a queue for their attention. Luckily, we've been in that queue for a while so as you can -- you heard, half of our sites, we've already finalized the CTAs with. In addition to CTAs and budgets, there is nurse education. There is pharmacy work that needs to be done to bring in investigational products and get it in sort of storage locations, get it on their computer systems, et cetera. So there's common things and also unique things in each site. But once we get through these, and clinical trials are never easy, especially when they're in large academic institutions, the enthusiasm of the PIs and the sheer number of patients that need anticoagulation for CRRT on a daily basis leads us to believe that we're through the painful part of this clinical trial and that we'll hopefully be smooth sailing very, very shortly.

Second question, Raffi?

Yes. And James, so the OpEx levels we had this quarter were -- on a cash basis were $3.9 million. The guidance for the full year, we've given a range of $21 million to $23 million. We'll probably end up in that $21 million to $22 million range. So you can see it's going to ramp up a little more as the clinical study starts enrolling much quicker. So I think it's similar to the guidance that we've given, but probably in the lower to mid of that range.

That's very helpful actually because I heard the $21 million, $23 million. I was wondering what you were referencing earlier, so thank you very much for clarifying that for me. Maybe some more on Ed's question from earlier. You mentioned the $47 to $49 per vial. Rough estimate, how many vials per patient do you anticipate you'll be using? And then I know that back in December, the KOL call, the KOLs on your call are estimating that this -- if approved, nafamostat could replace all of the 30% of citrate market in CRRT and almost half of the heparin market. Sounds like you have done some additional research on that. How have those numbers sort of changed or have stayed the same, given what you guys have seen subsequent to last December when we had the KOL call?

Yes, I can take the first part of that on what the assumption is that we use in terms of number of days. And so we've assumed about 10 vials a day and 6 days on therapy, so it ranges 5 to 7 days on a CRRT therapy. So yes, 10 per day and about 6 days of therapy is what we've assumed. That good?

Yes.

And the comment was about replacing citrate and half of heparin, et cetera. We're remaining -- that's actually been consistent feedback, but we're remaining what I'll call measured communications on the peak sales at the $100 million. Depending on which physician you speak to, every institution is different. Some have a standard of care of no anticoagulation. And the rationale for that is they find heparin and citrate to be dirty drugs as it relates to this particular use and the training required and the risk involved for the patients. Well, there's an opposite use, where they'll use citrate as a standard of care. Now clearly, citrate comes with limitations, in particular, based off of training of the staff. And anybody with liver -- compromised liver function, you can't use it. So there is a clear opportunity for simplicity if the study achieves what we certainly expect it to achieve based off the 30 years use outside the U.S. And then to your point on heparin, heparin has been an old standby in what I'll call -- there's been tolerant use of it, where they can use it because of the longevity of experience with it. But it's often used at risk in patients where they prefer not to. And we all know that in the ICU, the risk of bleeding can be high. These are very fragile patients. There's significant mortality rates involved in them. There's complications. So depending on the institution you speak to, some could say it could take more than half. Some will say it will take half. Some might say a little bit less. But there's clearly a high medical need for this alternative. And I think I'm going to leave it at that. Our guidance of $100 million remains where it is, but the receptivity towards this product is extraordinary. As a matter of fact, I was on a call with one of our clinical sites this morning, one of our large academic institutions. And again, as we had mentioned, the eagerness of the PI, and what was interesting to me, the entire nephrology team and intensivist group's interest in this product to get it into their clinic was extraordinary as you hear them comment on the safety profile of our product versus what they're using as a standard of care. Their standard of care happens to be heparin.

Sorry, there are no further questions at this time. I would hand over the call to Vince Angotti for closing comments. Please go ahead.

Again, thank you to Ed and Jim for being on the call today and the continued interest and sharp questioning relative to our commentary. I also want to thank the balance of you for joining us today and your continued support. Look, we remain absolutely focused on driving long-term shareholder value, especially on the execution of the NEPHRO study to make Niyad, which we certainly believe is a very promising product candidate, to be made available to patients. It can have a real change in standard of care for these patients undergoing CRRT. If you have any additional questions after the call, please don't hesitate to contact us through our investor line. And we certainly look forward to sharing with you our future developments and progress. Allan, thank you for the call.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.