Aethlon Medical, Inc. (AEMD) Earnings Call Transcript & Summary

Good day, and welcome to Aethlon Medical's Second Quarter Fiscal 2022 Earning and Corporate Update. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Jim Frakes, Chief Financial Officer. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Aethlon Medical's Second Quarter 2022 Earnings Conference Call. My name is Jim Frakes, and I am Aethlon's Chief Financial Officer. At 4:15 p.m. Eastern Time today, Aethlon Medical released financial results for its second quarter ended September 30, 2021. If you have not seen or received Aethlon Medical's earnings release, please visit the Investors page at www.aethlonmedical.com. Following this introduction and the reading of our forward-looking statement, Aethlon's CEO, Dr. Charles Fisher; and our Chief Medical Officer, Dr. Steven Larosa, will provide an overview of Aethlon's strategy and recent developments. I will then make some brief remarks on Aethlon's financials. We will then open up the call for the Q&A session. Before I hand the call over to Dr. Fisher, please note that the news release today and this call contain forward-looking statements within the meaning of the Securities Act of 1933, as amended; and the Securities Exchange Act of 1934, as amended. The company cautions you that any statement that is not a statement of historical fact is a forward-looking statement. These statements are based on expectations and assumptions as of the date of this conference call. Such forward-looking statements are subject to significant risks and uncertainties, and actual results may differ materially from the results anticipated in the forward-looking statements. Factors that could cause results to differ materially from those anticipated in forward-looking statements can be found under the caption Risk Factors in the company's annual report on Form 10-K for the fiscal year ended March 31, 2021, our most recent report on Form 10-Q and in the company's other filings with the Securities and Exchange Commission. Except as may be required by law, the company does not intend nor does it undertake any duty to update this information to reflect future events or circumstances. With that, I will now turn the call over to Dr. Charles Fisher, Aethlon Medical's Chief Executive Officer.

Thank you, Jim. And thank all of you for dialing in. This is Chuck Fisher. It's been a busy 3 months since our last investor conference call on August 9, 2021. Since then, we have made significant improvements towards initiating our clinical trials. I thought it would be -- I would take this opportunity today to introduce you to Dr. Steven Larosa, Aethlon Medical's Chief Medical Officer; who will provide an update on our clinical trials.

Hi, everyone, and thanks for listening into our presentation. I'm Dr. Steve Larosa, and I'm the Chief Medical Officer at Aethlon. First, I would like to give you an update on our U.S. clinical trial, investigating the Hemopurifier for the treatment of patients with SARS-CoV-2 COVID-19 infection. The trial is being conducted under the open Investigational Device Exemption, IDE, for the Hemopurifier in life-threatening viral infections. The trial is designed to allow for up to 40 of these patients to be treated under an Early Feasibility Study protocol at up to 20 clinical sites in the United States. During the recent quarter, we entered into an agreement with PPD, Inc., a leading global contract research organization, or CRO, to oversee our U.S. clinical studies investigating the Hemopurifier for critically ill COVID-19 patients. PPD has put together a strong team that is particularly well suited to carry out our U.S. COVID-19 trial. Chuck Fisher and I have both worked with PPD over 20 years on a number of well-executed clinical trials in critically ill patients. Together with PPD, we continue to advance site readiness at sites including Cooper Medical Center in New Jersey, Loma Linda Medical Center in Southern California, University of California Davis Medical Center, Virginia Commonwealth University Medical Center, LSU Health Shreveport, University of Miami Medical Center; and Thomas Jefferson Medical Center in Philadelphia. All these sites were carefully selected based on their track record of success in clinical trials in critically ill patients, including trials involving extracorporeal devices. What does advancing site readiness mean? There is a long process involved in launching a clinical trial site, and we are working with the individual hospitals to advance through this process, starting of course, with getting an interested principal investigator at each site. We then need to obtain approval for the trial from each hospital's Institutional Review Board, or IRB, and enter into a clinical trial agreement or CTA with each site. A budget then has to be agreed upon between the sponsor and site that will cover the cost of the procedures being performed during the trial. One of the final steps is the Site Initiation Visit, or SIV, where the relevant [ principal ] investigators, research coordinators and other involved hospital personnel are trained on the clinical trial protocol, collection of clinical data, safety monitoring and operation of the Hemopurifier. Following those steps, [indiscernible] finally in a position to begin screening and enrolling patients. Last week, PPD completed the Site Initiation Visit at Cooper Medical Center based in Camden, New Jersey, one of the final stages of clinical site readiness. We are in late stages of clinical site readiness with several other sites as well. Beyond the sites that I just noted, we recently obtained IRB approval and have entered into a clinical trial agreement with Stanford Hospital. We are also in discussions to bring onboard other key U.S. medical centers. Also on the COVID-19 front, we recently obtained ethics review board approval and entered into a clinical trial agreement with Medanta Medicity Hospital, a multi-specialty hospital in Delhi, India for a COVID-19 clinical trial at that location. On-site training is expected to take place this month. We have previously conducted multiple clinical trials with the principal investigator at this site as well as previous clinical trials with Medanta Medicity Hospital in hepatitis C patients. Our goal with the India trial is to help patients there and also to generate [ supportive ] data that we expect to be submitted to the FDA along with our U.S. clinical data. Regarding our head and neck cancer trial, we recently performed a refresher training session at the University of Pittsburgh for the investigative group on the operation of the Hemopurifier cartridge. This trial is also opened up to allow screening of patients at UPMC-affiliated community hospitals. The recent COVID outbreak has delayed recruitment there. We are working with them to resume recruitment as soon as possible. Now let me turn the call back over to Dr. Charles Fisher.

Thanks, Steve. I'd like to touch on some important individuals that we've recently brought onboard to assist our clinical trials. Dr. Dennis Amundson has recently joined Aethlon Medical as a consultant physician. Dr. Amundson has a long and extensive track record in managing critically ill patients. Most recently, since the onset of SARS-CoV-2 COVID-19 pandemic, Dr. Amundson has personally seen and treated greater than 4,000 critical ill COVID-19 patients in the ICU at Scripps Mercy Chula Vista Hospital. Dr. Amundson has received numerous teaching clinical service and military awards throughout his extensive career. Additionally, we've been fortunate to hire [indiscernible], RN, a critical care nurse with extensive critical care experience. Mr. [indiscernible] has been seen -- has seen and treated greater than 4,000 COVID-19 patients during the pandemic. On his extensive experience, Mr. [indiscernible] will serve as Aethlon's Director of Education and Product Innovation. And we are pleased to have both of these outstanding individuals join our Aethlon team. Regarding our head and neck program, as Steve previously mentioned, we have recently performed a refresher training session at the University of Pittsburgh for the investigative group on the operation of Hemopurifier cartridge and look forward to enrolling patients from UPMC and its affiliated hospitals. Additionally, we are exploring other tumor types and opportunities and institutions in the cancer space. We remain very optimistic about our potential in the cancer arena. We continue our research and clinical development on the Hemopurifier to bind and remove COVID-19 viral particles, including many variant COVID-19 particles of interest and related exosomes. As discussed in our last call, the Aethlon Hemopurifier has demonstrated binding of SARS-CoV-2 spike protein and binding and removal from circulation of SARS-CoV-2 virus from a human patient. We may also treat additional patients with our Hemopurifier under our emergency use program, which remains open for patients who do not meet the criteria for starting [ feasibility trial ]. Now I'll turn it back over to Jim Frakes for the financial discussion, and then we can open up for questions.

Thanks, Chuck, and good afternoon again, everybody. At September 30, 2021, we had a cash balance of approximately $23.2 million. Our current cash position sets us up very well for conducting our planned clinical trials, as Dr. Steve Larosa just noted, and for the manufacturing of our Hemopurifier for those trials. During the 6 months ended September 30, 2021, we raised approximately $17.5 million in net proceeds from the issuance of common stock in a combination of a registered direct financing and ATM sales. We recorded approximately $115,000 of government contract revenue on our Phase II melanoma cancer contract in the 3 months ended September 30, 2021. We also recorded approximately $17,000 of revenue related to our cost reimbursable subaward arrangement with the University of Pittsburgh in connection with an NIH contract. As a result, we recorded total government contract revenue of approximately $132,000 in the 3 months ended September 30, 2021. We did not report any government contract revenue in the 3 months ended September 30, 2020. Our consolidated operating expenses for the 3 months ended September 30, 2021, were approximately $2.1 million compared to approximately $1.8 million for the 3 months ended September 30, 2020. This increase of approximately $300,000 or 20% in the 2021 period was due to increases in payroll and related expenses of approximately $200,000 and in general and administrative expenses of approximately $100,000. The $200,000 increase in payroll and related expenses was primarily due to the combination of a $101,000 increase in our research and development payroll as a result of hiring additional scientists and a $100,000 increase in the general and administrative payroll expense as a result of additional headcount. The $100,000 increase in general and administrative expenses was primarily due to a $72,000 increase in our rent expense, a $54,000 increase in our amortization expense and a $46,000 increase in our insurance expenses, which were partially offset by a $57,000 increase in our clinical trial expenses [indiscernible]. Our professional fees were basically unchanged from the December 2020 quarter. As a result of the changes in revenues and expenses that I just reviewed, our net loss before noncontrolling interests increased to approximately $2 million for the 3 months ended September 30, 2021, from approximately $1.8 million for the 3 months ended September 30, 2020. Our next earnings call for the fiscal third quarter ending December 31, 2021, will coincide with the filing of our quarterly report on Form 10-Q in late January or February 2022. We will file our Form 10-Q for this quarter, the September quarter, following this call. And now Chuck, Steve and I would be happy to take any questions that you may have. Operator, please open the call to questions.

[Operator Instructions] Our first question comes from M Marin from Zacks.

So can you give us a general sense of what the estimated time line is of getting to what you call clinical state readiness to include a new site in a trial? And given where we are in the pandemic, will that time line be shorter than the usual average for the COVID trial?

So this is Steve Larosa. I'll take that question. So we have a number of sites, which I referenced to, will undergo Site Initiation Visits within the next -- a month to 2 months. Remember that's the last time point, the last hurdle, if you will, before the site can actually enroll a patient. I will point out that the COVID pandemic in general [indiscernible] time line that takes to get site readiness accomplished because of people working remotely and committees not meeting as often as possible. So I would say overall during the COVID pandemic, the time to site readiness has increased.

Okay. And what about the data? Because you have generated some very positive data from the 2 COVID patients that were not part of the actual study. Will that data be included in the data that you present once the study is complete?

So those 2 patients that you referred to, which the results were published in Frontiers in Medicine are single patient emergency use patients. So these are critically ill COVID patients who are not included in the clinical trial. So they would not be -- the data from those patients would not be included with the clinical trial data in terms of combining that data, but it would be a clinical experience in terms of the safety and outcomes that would be presented in any regulatory finding for the FDA. So the answer is they won't be combined with the clinical trial group of patients, but they would be presented as additional clinical experience to the FDA.

Okay. And then switching topics a little bit. You talked about some -- given some refresher training on the use of the Hemopurifier. So can you provide a little bit more color there? How easy do you think it is to train people in the use of the Hemopurifier? And do you anticipate that this could in any way create any kind of challenge to generating data that is not compromised?

So with the refresher course on training, with our -- we're using our extracorporeal cartridge, the Hemopurifier, along with already established hemodialysis infrastructure. So in the training, what -- the training amounts to teaching a site how to prep and prime the cartridge for use. But we are utilizing the pump for the flow rate. So the training has to -- is specific for our cartridge, but it can be accomplished in one site with one training experience with the site.

What's the feedback that you've received post the training sessions?

Well, the feedback we received from University of Pittsburgh after we did the refreshers that they were comfortable enrolling patients and performing the procedure.

Okay. And you also said in your prepared remarks that you are thinking that there is potential applications for use of the Hemopurifier in other cancers in addition to the head and neck trial that's currently -- the current one. Have you known where you stand in terms of potentially expanding the applicability of the Hemopurifier? Is it all in the very conceptual stage now? Or are there discussions going on to potentially move forward on other applications?

So there are a number of cancer tumor types, where exosomes in the literature are well described to play a role in the spread of those cancers. Where we are now is reaching out to different institutions and investigators to discuss clinical development in other potential cancers.

[Operator Instructions] Our next question comes from Dave Lavigne with Trickle Research.

Yes, I'm just curious, I think last time we talked a little bit about the difficulty of just kind of even enrolling trials around COVID just because there's been a large number of companies participating in those, I guess, one way or another. But has the -- is the fact that the Hemopurifier is a device, obviously, has that made the site preparation or site readiness, whatever the right term is, has that made that longer for you than it has been for some -- for many of the others that are using, say, a pharmaceutical to address that? I mean that seems kind of obvious. But I'm wondering if that has made this process longer for you than others? Because I know there's -- we see a lot of things in the market about companies that are conducting trials in one form or another. It seems like they've -- some of those have gotten there quicker than you. Maybe that's not true, but has that device nature made that a longer process?

So again, this is Steve Larosa. So there are -- as you mentioned, there have been a number of competing clinical trials in the COVID space. But as we go into the site readiness process, I have not seen any delays in the process, specifically around the fact that we're investigating a device versus drug.

Well, but as you said, you had to give a refresher course on the cancer side. So obviously, I'm thinking your site readiness process on the COVID trials includes teaching people how to use the device. I mean you don't have to teach somebody to administer a pharmaceutical. So I'm assuming that means it's taken longer because of that.

Dave, this is Chuck Fisher. I think what Steve said is correct. The point you're making, I think, is in -- there has been a time gap, in part because the site was clearly overflowing with COVID patients -- sorry, not COVID, but -- sorry, COVID patients. They interrupted the ability to enroll cancer patients. And as a result, they weren't using the procedures that we had trained them on. And we wanted to make sure that we got them back up to speed in an appropriate manner to how to run everything smoothly per the protocol for the cancer patients. I think that's really what the dynamic is.

No, I understand that. I'm just wondering, because the process of treating somebody with the Hemopurifier is more extensive than just keeping them with pharmaceutical, does -- has that made your site preparation process longer?

We do have to identify sites that have the existing machines that we have compatibility data with the cartridge. And you're right, we do have to train them on the use of the cartridge. And we've also been very specific at seeking out sites that have actually done trials of extracorporeal therapies in critically ill. So that would be -- the list that I gave you, there's a number of sites on there that were specifically chosen because they have done clinical trials with extracorporeal devices in the critically ill population.

Okay. And so on this list -- I'm sorry. Sorry, go ahead. So -- and of this list is -- and I wasn't writing fast enough. Is the New Jersey site the only one where those are largely -- where that process is largely totally completed, so they can presumably start treating people soon or...

Right. They are the -- other than -- we have one site that's already opened, Hoag Medical Center in Newport Beach, they're open. Cooper Medical Center is in site initiation, they're next to open. And then we have a few other sites that are on tap to be training in the next month.

Okay. And so is it fair to say that Newport Beach is probably treating people right now then?

They are in the process of evaluating, but they have not enrolled anyone as yet in the trial. And just to add to that, they have noticed an uptick in their general number of critically ill patients, but their number of COVID patients has been quite low, [ that site, the total ].

This concludes our question-and-answer session. I would like to turn the conference back over to Dr. Fisher for closing remarks.

Thank you, operator, and thanks, everybody, on the call for joining us today to discuss our Q2 results. We look forward to keeping you up to date on future calls. Thank you for joining us.

The conference has now concluded. Thank you attending today's presentation. You may now disconnect.