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

Hello, and welcome to the Aethlon First Quarter Fiscal 2023 Earnings and Corporate Update Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Jim Frakes, CFO. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Aethlon Medical's first quarter 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 first quarter ended June 30, 2022. 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 statements, Aethlon's CEO, Dr. Chuck Fisher; and our Chief Medical and Chief Science 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 of Risk Factors in the company's annual report on Form 10-K for the fiscal year ended March 31, 2022, 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 take undertake any duty to update this information to reflect future events or circumstances. With that, I will now turn the call over to Dr. Chuck Fisher, Aethlon's Chief Executive Officer.

Thank you, Jim, and thank all of you for joining and dialing in. My name is Chuck Fisher, and I'm CEO of Aethlon. Since our last call, it's been a busy 6 weeks since our last call on June 28, and this is 6 weeks. Before I hand the call over to Dr. Steven Larosa, Aethlon's Chief Medical and Chief Scientific Officer, who will provide an update on our clinical trials and infectious diseases and oncology, I'd like to make some brief remarks about our recent developments in COVID-19 infection and monkeypox. We recently published a peer review demonstrating Aethlon's proprietary GNA affinity resin, a key component of the Hemopurifier was able to bind 7 clinically relevant SARS-CoV-2 variants in vitro, including the Delta and Omicron variants. Viral capture efficiency with the GNA affinity resin range from 53% to 89% for all variants tested. The findings from this paper suggests that the Hemopurifier should be able to bind in future SARS-CoV-2 variants that may potentially arise. The manuscript is titled, Removal of Clinically Relevant SARS-CoV-2 Variants by An Affinity Resin Containing Galanthus nivalis Agglutinin, and was published in PLOS ONE on July 28, 2022. Given the ongoing outbreak of monkeypox virus, we are commissioning a new in vitro binding experiment to confirm that Hemopurifier effectively captures the current strain of the current virus. In 2008, we conducted an in vitro study that demonstrated that the Hemopurifier effectively bound and removed monkeypox virus. We believe that the Hemopurifier's ability to bind the current monkeypox strain should not be affected because the mutations present in the strain do not change the mannose sugars in the viral envelope, which is recognized by the GNA within the Hemopurifier. For more context regarding the 2008 study, we commissioned Battelle Memorial Institute to run a monkeypox in vitro study using a miniature version of our Hemopurifier. This study demonstrated high concentrations of monkeypox virus approximately 35,000 GPUs per mil were rapidly depleted from cell culture fluids when circulated through the Hemopurifier. The study indicated that the Hemopurifier removed 44% of the monkeypox virus in the first hour of testing, 82% after 6 hours of testing and 98% after 20 hours of testing. The studies were conducted in triplicate and data verification was provided by real-time polymerase chain reaction or PCR. We continue to monitor monkeypox virus case load and disease severity. We have contacted the FDA and confirm the process by which we could provide the Hemopurifier requesting physicians or single-patient emergency use. That is similar to what we've done in the past with SARS-CoV-2. On August 4, 2022, the U.S. Department of Health and Human Services or DHHS, officially declared monkeypox a health emergency. An emergency use declaration has not yet been made. We plan to submit a pre-emergency use authorization package to the FDA so as to be prepared in the event this declaration does occur. Now let me turn the call over to Steven Larosa, M.D., our Chief Medical Officer and Chief Scientific Officer. Steve?

Hi, everyone, and thanks for listening in to our presentation. I'm Dr. Steven Larosa, the Chief Medical and Chief Scientific Officer, Aethlon. We continue to advance our severe COVID-19 clinical trial for the Hemopurifier under our open investigational device exemption known as an IDE for life-threatening viral infections. Since our last update, the first patient has completed the study. Our active sites continue to actively screen patients along with our contract research organization, PPD. On July 6, 2022, the U.S. Food and Drug Administration approved a supplement to our COVID-19 clinical trial protocol. This newly approved protocol supplement eliminated the inclusion criteria that patients must have a dialysis catheter in place and had previously tolerated dialysis at the time of screening. This change should improve the feasibility of enrolling new patients in our study. The sites are currently submitting this supplement to their Institutional Review Boards, IRBs, and we expect to have approvals in August and September of this year. In India, Medanta Medicity Hospital, a multi-specialty hospital in Delhi, has enrolled 1 patient in our COVID-19 trial in India and continues to actively screen patients. Our CRO, Qualtran, LLC, has identified additional potential sites for the trial in India and is currently assessing feasibility. In addition to our work with COVID-19, we continue to screen patients for our IDE clinical trial in head and neck cancer. We have submitted a protocol supplement to the FDA to request the inclusion of patients who have failed platinum chemotherapy in the trial. If this change is accepted by the FDA, it would increase the eligible population for the study. We are also currently drafting a new protocol for a clinical trial that would allow us to examine the effects of the Hemopurifier in multiple tumor types where the cancer has progressed despite a 2-month period of previous checkpoint inhibitor therapy. I will now turn the call back over to James Frakes.

Thanks, Steve, and good afternoon again, everyone. At June 30, 2022, we had a cash balance of approximately $14.9 million. Our consolidated operating expenses for the 3 months ended June 30, 2022 were approximately $2.91 million compared to $2.23 million for the 3 months ended June 30, 2021. This increase of approximately $680,000 or 30% in the 2022 period was due to increases in our general and administrative expenses of approximately $402,000, and our professional fees of approximately $261,000 and in our payroll and related expenses of approximately $13,000. The $402,000 increase in our general and administrative expenses in the June 30, 2022 quarter was primarily due to the combination of a $161,000 increase in our clinical trial expenses, a $97,000 increase in supplies, a $91,000 increase in our rent expense and a $27,000 increase in our insurance expense. The $261,000 increase in our professional fees was primarily due to the combination of a $154,000 increase in our contract labor expense associated with product development and analytical services, and a $95,000 increase in professional fees associated with regulatory strategy services. The $13,000 increase in our payroll and related expenses was due to an increase in our stock-based compensation expense of $95,000. Our cash-based compensation expense decreased by $82,000 primarily because our CEO received a $215,000 bonus in the June 2021 period for achieving certain contractual milestones in his employment agreement, and that there were no bonuses paid out in the June 2022 period. We did not record any revenue related to our government contracts with the NIH in the 3 months ended June 30, 2022 compared to approximately $132,000 in the 3 months ended June 30, 2021. In the June 30, 2022, we had approximately $459,000 of deferred revenue related to those contracts as a result of not achieving certain milestones in those contracts. However, we did receive the payments in those amounts from the government. As a result of the changes in the revenues and expenses I just noted, our net loss before noncontrolling interests increased to approximately $2.9 million for the 3 months ended June 30, 2022 from approximately $2.1 million for the 3 months ended June 30, 2021. During the 3 months ended June 30, 2022, we raised approximately $619,000 in net proceeds under our ATM agreement with H.C. Wainwright & Co., pursuant to sales of our common stock. In July and August 2022 to date, we raised approximately $8.3 million under our ATM agreement through sales of our common stock. Our current cash position sets us up very well for conducting our planned clinical files, as Steve Larosa just noted, and for the manufacturing of our Hemopurifier for those trials. We included these earnings results and related commentary in a press release issued earlier this afternoon. That release included the balance sheet for June 30, 2022, and the statements of operations for the 3 months ended June 30, 2022 and 2021. We will file our quarterly report on Form 10-Q following this call. Our next earnings call for the fiscal second quarter ending September 30, 2022 will coincide with the filing of our quarterly report on Form 10-Q in early November. And now Chuck, Steve and I would be happy to take any questions that you may have. Operator, please open the call for questions.

[Operator Instructions] Our first question today comes from Marla Marin of Zacks.

So I have 2 questions. One is on the monkeypox virus. Given where we are right now and given how I think that people, including the regulators, the CDC, are probably leaning towards being more cautious than not, given what we've experienced over the past few years, have you had any kind of informal incoming inquiries regarding the Hemopurifier that you can share with us?

Yes. Thanks, Marla. We have not received specific inquiries from specific physicians about the Hemopurifier for monkeypox to date.