Hemostemix Inc. (HEM) Earnings Call Transcript & Summary

Thank you. Well, let's call the meeting to order. My name is Peter Lacey, and I'm Chairman of the corporation, and I'll act as Chairman of the meeting. Just before we get started, I'm -- actually I'm flying to Vancouver. And so I apologize for any background noise, and I may have to -- may not be able to participate in all the Q&A session. But we should be able to get through the formal portion of the meeting. So welcome to the Annual General and Special Meeting of the Shareholders of Hemostemix Inc. My name is Peter Lacey. I'm Chairman of the Corporation, and I'm pleased to act as the Chairman of the meeting. Given the lingering effect of the COVID-19 pandemic, this meeting is only being held via Zoom as there is no ability of the scrutineer to properly conduct the vote from the floor, tabulate and verify the results, all the voting is conducted by proxy and will be recorded according to the votes registered by Computershare. The meeting will now come to order. And if there are no objections, I request that Thomas Smeenk to act as the Secretary of the meeting; and Pauline Osayande and [indiscernible] of Computershare Trust Company to act as scrutineer for the meeting. I will now request the Secretary to confirm proof of mailing of the notice of the meeting, the formal proxy and Management Information Circular was sent to the registered shareholders of the corporation.

Mr. Chairman, proof of mailing has been duly filed, and I recommend that copies of the notice of the meeting and proof of mailing be kept with records of this meeting.

Thank you. The Secretary has noted that proof mailing has been duly confirmed and filed. And I direct that copies of the notice of meeting and proof of mailing be kept with the records of this meeting. Quorum. The scrutineers' report is now -- also, if everybody can just put their phone on mute. And then if you do have a question in the Q&A session, then just take it off mute at that point in time. Thank you. The scrutineer's report has now been received, and it shows that there are present at the meeting to 29 shareholders holding or represented in person and by proxy approximately 13,190,177 common shares or 18.7% of the issued and outstanding common shares. I direct a copy of the scrutineers' report be kept with the records of this meeting. I confirm the quorum has now been established for this meeting. I now declare that the meeting is regularly called and properly constituted for the transaction of business. Item 4. The audited consolidated financial statements for the year ended December 31, 2021, and the report of the auditors thereon were mailed out to shareholders with the management information circular for the meeting and can be accessed on the corporation's SEDAR corporate website at www.sedar.com. I would propose that we dispense with reading the financial statements and auditor's report. I now ask if there are any questions concerning financial statements. Okay. Accordingly, I confirm that the audited consolidated financial statements of the corporation for the year ended December 31, 2021, the auditor's report thereon and the related management's discussion and analysis shall be included as part of the formal record of this meeting. Second item of business for this meeting is to fix the size of the Board of Directors at 4 members for the upcoming year. The management information circular indicated that it is proposed that the Board of Directors should be fixed at 4 members. Could I please have a motion to fix the size of the Board of Directors at 4 members?

Move that the Board of Directors of the corporation be fixed at 4 members.

And I second the motion.

As noted by the shares voted on this matter, 11,722,358 shares, representing 97.22% of the votes cast, voted in favor of this resolution. This motion is carried. It's now in order to proceed with the election of the directors of the corporation. In the management information circular, it was proposed that 4 individuals be nominated for election to the Board. Now I have the nominations, please.

David, you're muted.

Thanks, Thomas. I, [ David Reese ], nominate Mr. Peter Lacey, Mr. Thomas Smeenk, Dr. Ronnie Hershman and Mr. Loran Swanberg, for election as directors of the corporation to hold office until the next Annual Meeting of Shareholders unless his office is earlier vacated in accordance with the bylaws of the corporation.

Thank you. As there are no further notification of nominations recorded in advance of the meeting, according to the bylaws, there are no further nominations. I now declare the nominations closed. As there are a majority of shares being at least 93% voted in favor of Dr. Hershman, Mr. Swanberg, Mr. Smeenk and Mr. Lacey. I hereby declare those nominated elected to the Board of Directors of the corporation to hold office until the next annual election of directors unless their offices -- their office is earlier vacated or their successors are appointed in accordance with the articles of the corporation. And so just for everybody is -- for the record of the meeting, Peter Lacey, 93.46% voted in favor, 788,851 withheld and nonvote 1,132,714. Thomas Smeenk, 93.42%, 793,341 withheld and nonvoted 1,132,714. Ronnie Hershman, 97.13%, 345,523 withheld, 1,132,714 nonvoted. And for Loran Swanberg, 97.13% voted in favor or for, 345,465 withheld and 1,132,714 was not voted. The fourth item of business is the appointment of auditors. Could we please have a motion with regard to the appointment of the auditors until the next annual meeting? And could this motion provide that the auditor's renumeration be fixed by the Board of Directors?

I, Thomas Smeenk, move that MNP LLP chartered accountants be appointed as auditors of the corporation until the next Annual General Meeting or until a successor is appointed and that the remuneration be fixed by the Board of Directors.

Seconder?

I second the motion.

Thank you. As the majority of shares of 97.82% were voted in favor, the motion is carried. The final item of business is the reapproval of the stock option plan. The full text of the resolution approving the stock option plan is set out in the information circular. I will now ask for a resolution reapproving the stock option plan.

I, Thomas Smeenk, move the ordinary resolution reapproving the stock option plan as set forth in the information circular be approved, ratified and confirmed.

And I David...

Can I have a second?

Go ahead, David.

I, [ David Reese ], second the motion.

Thank you. As the majority of shares, 91.53% were voted in favor, the motion is carried. And I apologize for the background noise here. If there's no further business to be brought before the meeting, I would request a motion to terminate the meeting.

I, Thomas Smeenk, move that the meeting be terminated.

I, [ David Reese ], second the motion.

And all those in favor, please signify by saying aye. [Voting]

Contrary, if any, say no. [Voting]

I declare the motion carried, and I'd like to declare the meeting terminated. So again, if -- thank you, everybody, for attending the formal portion of the meeting. If you've joined when the meeting was started, can you please send a message to our scrutineer or on the chat board, just give your name and that you have attended the meeting. We'd just like to have an accurate record of who were able to attend the meeting. So like I said, I'm at the airport, and I'm going to go on mute. We're going to open up for Q&A, and I'd ask that Thomas chair the meeting or -- and the Q&A from here on. Thank you very much.

Thank you very much, Peter. Much appreciated. We did want to open the floor to questions from the shareholders. Dr. Fraser Henderson is with us as the Chief Medical Officer, and he can provide some further insights into the clinical trial results and in the retrospective study. And if -- and so with that, we'll open the floor to your questions. Perhaps then with no questions at the moment, Dr. Henderson, would you like to give an overview of the clinical trial and -- for the study and your views on the data, please.

Yes, let me predicate that by saying it right now, I'm 4 hours west of Nairobi in Kenya. I'm at a mission hospital helping my son who's also a neurosurgeon. I'm a neurosurgeon. And I hope the reception is good. Thomas asked me to oversee the cardiac data. As you may know, [indiscernible] the 16 years ago, a cardiologist in Florida performed transcatheter intramyocardial and transcoronary injections of cells made by Hemostemix called angiogenic cell precursor cells or ACP-01. So these were implanted into the hearts of patients who are extremely sick with heart failure, representing the New York Heart Association Class III, Class IV patients. Most of them had MIs. They represented a very sick population. And of 81 consecutive patients who underwent these intramyocardial injections of cells, we are able to get all... [Technical Difficulty]

We seem to have lost you, Dr. Henderson. Let me just text him, so we can...

John?

Let me just text him so he knows we've lost him. There we go.

Okay. Can you hear me all right?

Yes.

Okay. I'm on my cell phone here, seems to be better than the computer. So we rejected some because they did not have complete preoperative and postoperative ejection fraction data. And there is one patient who is [indiscernible] so from this consecutive series, we performed a data analysis on the remaining 53. And so the data that we ended up with was very clean. We had good preoperative left ventricular ejection fractions and good postoperative ejection fractions and good validation of all the cell therapy and so on. And we had also qualitative statements on the -- or the statements as to the quality of their life after the procedure. The -- so looking at all of these patients together, we saw an improvement over the first average 4 months of approximately 4.5% improvement in the ejection fraction and 4.5% of 20 -- this is approximately one -- about a 15% improvement in overall cardiac function after 4 months. And that same group looking at the final follow-up at approximately 12 months, we saw the improvement for the whole group is approximately 7.7%. And I remind you, 7.7% is a 25% improvement in overall cardiac function. So for this extremely sick group of people, many of whom would normally have died who would be clearly disabled by the cardiac condition, we saw a 25% improvement in their cardiac function. And this was reflected in the quality of life statements. 2/3 said that they enjoyed an improved quality of life. 1 quarter -- in 1 quarter, there's no change. In 6%, they were worse. Now when we broke it down into smaller groups, we looked at the ischemic cardiomyopathy group. And there have been many clinical studies around the world, and none of them have really shown a significant improvement with ischemic cardiomyopathy. And the best kind of improvement that people have shown would be maybe 5%. At 4 months, the improvement in the ischemic group was about 4.8%, and at approximately 12 months, the improvement of those ones we looked at, at 12 months, the improvement was 8%. The other major group of the patients we're looking at was the non-ischemic dilated cardiomyopathy. These are patients who have a dilated diseased heart, but it's not due to coronary artery disease. And it's this population that is actually 50% of all those undergoing a heart transplant, for instance. The -- and in this population and final follow-up, the improvement was 14.3%. Now we only had 8% -- 8 patients in that group, but the improvement was 14%, which is considering that they began with approximately 28% ejection fraction. 28% means that with each heartbeat, 28% of the blood in that heart is pumped out. So an ejection fraction is the percent of blood that's removed from the heart with each heartbeat. So we saw a 50% improvement in those patients. So when you have a heart failure patient, you have a -- at 5 years, you have a 50% mortality rate. These are very, very sick patients and for whom there's -- once they've maximized the medical therapy, there is nothing left. And even if they have a heart transplant, the survival after 1 year is still like there's a tremendous mortality even at 1 year. And these figures hold not just for adults but also in children with dilated -- non-ischemic dilated cardiomyopathy, half of them at 1 year will be needing a heart transplant. And by 5 years, half of them will be not alive anymore. So this is a major problem, and it's -- with the aging population, it's a growing problem. These -- all of these results were highly statistically significant. We had Professor Schubart at Penn State University whose profession is doing outcomes analysis, and she performed statistics on this. And frankly, I didn't believe them so we went over them all again. And so the statistics are very valid, doubly validated. And the results were highly significant with a p-value for many of these results of less than 0.001. We also thought -- well, let's break them into quartiles and look at the patients who had an ejection fraction of less than 20%. So with every heartbeat they're only removing 1/5 of the volume with the heart. I mean, very, very sick patients. The second quartile was 20% to 30%. Third quartile, 30 to 40. The fourth quartile was 40% to 50% ejection fraction. And this is called heart failure with a preserved ejection fraction, the technology by the American Heart Association. And we found that the likelihood of the members of each quartile to improve was highly significant 0.0002. And in the first 2 groups, the patients, the likelihood that they would improve a whole category into the next quartile was highly statistically significant at less than 0.001. And they would -- so these patients with an ejection fraction of less than 30, they did extraordinarily well, all moving up into an entirely new quartile. So we -- in the press release, I said that we have to be -- I mean, these results are spectacular. But we have to be cautious because the -- to really demonstrate the cells doing the job, we need a randomized prospective blinded... [Technical Difficulty]

We lost him again.

Okay. And -- but I think I looked at 10 other studies and most of the cell, it's -- most of the studies have failed to show a significant improvement in part, I think because they're using bone marrow-derived mesenchymal cells, which are known not to have a long survival. Most of them die within 4 days. Many of them -- some of them have used fat-derived cells, adipose-derived cells. Some have used allogeneic cells, cells from other people. But I think that the value of ACP-01 is that it's autologous. It comes from the blood of that patient. It's a cell about which there's been some good size performed earlier by [indiscernible] and others. And a clinical study was also performed in Thailand using these cells, which showed very good results. The -- so it's an autologous cell, but it's also a cell that forms new blood vessels. It's an endothelial lineage cell that once implanted will help form new blood vessels and improve blood flow. It's a cell that can form a cardiomyocyte, a heart cell. It's a cell that releases Interleukin-8 that helps to -- that has anti-inflammatory characteristics. And so there are a number of good things. It produces vascular endothelial growth factor and angiogenin. And so it has an effect of deep -- of decreasing the scar tissue from an infarct by decreasing the inflammation. It increases new blood vessel formation. It has a higher survival. It forms cardiomyocytes and the cells secrete hormones like vascular endothelial growth factor that helped to nurture and support surrounding tissue that has a tenuous existence. And the fact that it's autologous. So I think there are a number of reasons why we may have seen this success. I've spoken to several cardiologists because remember, I'm just a neurosurgeon. But the cardiologists with whom I've spoken said this data is very good. And it deserves a proper randomized perspective double-blinded study. And I think that there's reasonable -- a reason to be optimistic that this cell would show good results for heart failure. Last thing, the across-the-board implantation of cells into the heart appears to be a very safe, very feasible procedure. So the safety does not appear to be -- there have been a couple of studies that were shut down, one with adipose cells and not show what went wrong. But I think most people would agree that this intramyocardial implantation of cells through our catheter technique, cardiac catheter is a safe, extremely feasible procedure. So it's my belief that these cells should be given a shot at a formal multi-institutional double-blinded study. So with that, I'll turn it back to you, Thomas.

Thank you very much, Dr. Henderson. Are there any questions for Dr. Henderson on the material he just presented on? Okay. Well, I want to thank you all for your attendance of today's shareholders meeting. We appreciate it very much. We believe the -- that obviously, ACP-01 is safe. It's been proven safe and efficacious in ischemic and dilated cardiomyopathy. We think the -- we've learned a lot from the current Phase II clinical trial in critical limb ischemia, especially with respect to the design of a study going forward. And we believe that based on the previous studies of critical limb ischemia, the safety profile of ACP and the preliminary efficacy profile of ACP that it is worthwhile to move forward with an additional study of ACP for the condition of critical limb ischemia.

There are a couple of questions on the chat.

Okay. One question is financial requirements and plans for financing future operations. I mean, we are looking to finance in the context of the [ HART ] trial, we think that there's enough merit in the results that we will pursue a partnership, a licensing-type arrangement that would include the funding of the study. And the -- it would be preliminary to pinpoint the size of that study and to put a number on it as that has not been formally assessed at this point.

We did do a power analysis, and even 32 patients was enough to show a significant difference. So if you had 66 patients or 60 patients receiving cells and 30 patients is a control, I suspect you'll find a significant difference with that.

Okay. There's a question with respect to the treatment arm that are truly recipients who withdrew. The -- there are a number of reasons for withdrawal. The majority of the individuals who withdraw -- withdrew was related really to the study -- the mismanagement of the study at the time that Aspire was managing the study. There was insufficient oversight, and there are a number of principal investigators who withdrew their subjects from the trial. And the question is, is there -- was the [ HART ] trial more encouraging than the critical limb ischemia trial. And I would say, yes, overwhelmingly so. And we've got data now on 200 ACP recipients or ischemic and dilated cardiomyopathy as compared to approximately 43 for critical limb ischemia. And so the -- that data is bearing out the treatment of ischemic and dilated cardiomyopathy as safe and efficacious.

Thomas, [indiscernible] is it fair to say that the study that was done for CLI, critical limb ischemia, it may not have been done to the best ability of performing a study? So I wouldn't want people to leave with the view that CLI is not a promising disease that ACP-01 could ultimately treat, but we need to do more work on that front.

Okay. That's a very fair comment.

Could I make a comment?

Yes, please.

When I came on a minute ago, I didn't realize you had moved to CLI because my -- I lost reception. But we really needed 95 patients to get a good power analysis for that study. And so the study was vastly underpowered. There is only with the final number of patients that the previous administrators in the company had ended with the likelihood of getting a significant outcome was only 25%. It's extremely unlikely that, that study would have come out with significant results, given the small number of patients you had. And so it was extremely underpowered. Secondly, you have to remember critical limb ischemia, there's up to a 40% rate of amputation in 1 year and a 20% rate of death. I mean, these are really, really sick people. And as the population gets older, 20% of older people have some degree of critical limb ischemia. This is a huge potential group of people. And I think that ACP should be given another shot at a properly powered, well-conducted study. And the complications that this group of patient had were much less than the population at large. And so I think that it was the opinion of many of the people who performed the study that these patients were doing really well. But they just weren't enough to show that statistically significant difference between the ACP patients and the placebo patients. And keep in mind, a placebo is a powerful effect as up to 60% of patients will demonstrate placebo effect. So just injecting saline into a patient, a lot of those patients, things happen that make them better. So that's part of an issue with the placebo.

Well, thank you very much. We appreciate your attendance today.

Thomas, I have a quick question, sorry.

Sure.

[indiscernible] in Toronto. I'm just wondering about the PreCerv that we spun out a few months ago. Will we be receiving shares for that as existing shareholders? Or is that something that you plan on doing down the road? And will there be possibly another spin out?

Yes. The -- so PreCerv has -- the concept is that we would dividend out to shareholders a share in PreCerv for some number of shares they hold in Hemostemix. And we're looking at -- and I've been looking at and speaking with management that would be hired to run PreCerv. We just are at the beginning stages of that. The second part of your question is there are additional indications that we would use the same concept for. Hemostemix is a platform technology, so properly understood. ACP is 1 of 3 patented stem cell lines that we have. NCP, which is the basis of PreCerv is a neuronal cell precursor. And it is a promising treatment for the conditions that Dr. Henderson treats every day, the central and peripheral nervous system conditions. And the third line is a cardiomyocyte cell precursor, which is still at the bench. The neuronal cell precursor has been studied in 2 small animal studies. And we do have some news forthcoming in that realm as well.

Excellent. Thank you.

My pleasure. Well, with that, I'd like to, again, thank you for your attendance of today's shareholders' meeting of Hemostemix.

Tom, just before we finish, there were some additional questions in the chat that have been just recently come on.

Okay. Will the Phase III trial be approved by the FDA? We think that, again, that the design of the trial, the results of the previous studies, the safety profile of ACP as developed in the -- not only the critical and ischemia studies, but in the heart studies is sufficient to -- certainly to make application. I can't speak to the FDA and whether or not it is going to grant Phase III status, but we certainly have sufficient data to make application for Phase III. And I believe Dr. Henderson, you spoke to the placebo effect in wound healing. So I think that answers all the questions that we have. Thank you very much.

What date did you know specifically, the results?

The results were published on August 30. The unblinding occurred on August 30 in the press release.

I had a question about the ulcer healing in the CLI for limbs. Was there anything documented showing that ACP was successful in changing -- improving the wounds or improving the ulcers as the amputation rate was not statistically significantly more?

The wounds did get -- the ulcers got smaller in the ACP group compared to the others.

Is it smaller in a way that's significant to the patient's life or function?

Sorry, could -- would you repeat that question?

So you said there was some healing, but was this healing significant in a manner to the patient to say that they've recovered or there's an improvement in the quality of life, for example?

Yes, that's a good question. I did not do quality of life studies like that. So there's -- we don't know if the healing of the ulcers correlated with improvement of their quality of life. But that's something that would obvious -- that would be addressed in any future studies.

Okay. Well, with that, thank you very much again for attending today's shareholders' meeting, and look forward to speaking with you in the near future one-on-one. That concludes today's meeting. Thanks very much.

Thank you, everyone.

Thanks, everyone.