Lisata Therapeutics, Inc. (LSTA) Earnings Call Transcript & Summary

Okay. Good morning, everybody. My name is Joseph Pantginis, here at H.C. Wainwright. I'm the Director of Research and Managing Director of Equity Research as well. Very happy to provide this fireside chat with Lisata Therapeutics today. I've been covering the company for quite a long time even before when it was Caladrius. So it's been a very interesting ride and very happy to keep covering it. We do have a buy rating from a disclosure standpoint on Lisata. And we're very happy to have with us David Mazzo, who is President and CEO; as well as Kristen Buck, who's the Executive Vice President of R&D and the Chief Medical Officer of the company. So thank you very much for being with us today, and I'd say let's just dive right in.

So David and Kristen, like I said, thanks for joining us today. And I think Lisata is at an important inflection point being driven both in part by your CendR platform and strong cash management at the company, especially during these turbulent times, and we've seen this cash management for many years now. David, before we really dive in, I was hoping you can give a bit of an overview of Lisata and where you look to differentiate?

Well, that's great. And Joe, thanks very much for having Kristen and me here, it's really a pleasure and we really appreciate the opportunity. So relative to Lisata, as most people know, we're as Lisata, a relatively new company, only being formed in September of last year. We have an oncology pipeline focus now, and we're really working on products that are at the clinical stage of development looking to advance towards registration. So fundamental research is not really part of our remit. Now how do we differentiate ourselves from so many other small biotech and biopharma companies? I think it's relatively simple. I mean most companies have sort of 5 parameters on which they like to base their investment rationale for investors, and they include intellectual property and a strong management team, and I think we can check those boxes. But it's on the next 3 where I think in these turbulent times, people are having some difficulty and they involve partnerships, milestones and capital. And where we differentiate ourselves is we already have partnerships with international companies and with large research foundations that I think are validating the interest and potential of our technology. We also have, as Kristen will point out shortly, a pipeline that is rich with milestones over the course of the next 2 years, and that's important for value inflection. And then finally, we have capital, and that is really important in these difficult times. In fact, we have enough capital to fund our company through all of the milestones on all of the programs that Kristen will speak about, and that will take us at least into early 2026. And I think that puts us in a very special category of small cap companies today.

No, that's fantastic. Like I said, I mean, cash management has been one of your real talent at the company for the last several years plus. So thanks for that, David. And now I'd like to go into a bit of detail with both of you, starting with the CendR platform. And the key reasons to believe in this technology and how it helps differentiate in solid tumor efficacy and its potential. So David and Kristen, I was hoping that you can discuss, first, the continuing problem in oncology despite major advances that we've had in both chemotherapy, immunotherapy and targeted agents and beyond. And that is getting drugs where they need to be and in pharmacological concentration. Of course, this is an ongoing problem, as I mentioned, spanning essentially decades from originally the discovery of things like P-glycoprotein to now tumor microenvironment barriers. So I won't go into too much more detail, but I'd love to have you help define the problem for us.

Yes, I'll take that, Joe. Thanks. And again, thanks for having us. I appreciate it. As you discussed, I think there remains significant unmet medical need in oncology. And if you think about the advances in cancer treatment over the last several decades, it really have been lackluster save the PD-1s. I mean despite more and more understanding of the cancer biology, it's really chaotic. We really haven't cracked the code. So as you said, there are multiple problems. We have created targeted therapy of precision therapy. If these drugs typically target one of a bunch of mutated genetic components of the cancer biology, but that leads to constant evolution of mutations and resistance. So the therapies that we give end up causing resistance in the cancer. As you mentioned, the tumor microenvironment is also considered what we call hostile whereby our immune system is evaded and the cancer continues to succeed in our bodies. And I'd say probably most importantly, one of the biggest problems is what we call the stromal barrier. I'd like to think of that as a barrier that surrounds a tumor. The tumor creates such a barrier, and that doesn't allow the anticancer therapies, be that cytotoxic nanoparticle immunotherapy to actually penetrate the tumor and get through the barrier such that you can get the cancer therapy at high enough concentrations inside the cancer without causing massive systemic side effects. And you'll understand when we go through the mechanism of action, that's really where our asset is differentiating.

No, I appreciate that. And so I guess as we have this cornerstone technology in CendR, can you discuss the decision process that you went through regarding the variety or the depth of programs you could go with? And why you chose the current programs that we'll discuss in a minute?

Sure. I'll take that again. Yes, I mean, we really set out to acquire new technology when we were going from Caladrius to forming Lisata. And it was a very rigorous strict criteria that we set out for our search. We look for an asset or assets with sound preclinical data with an established mechanism of action in an area of unmet medical need. And given what we just spoke, the global oncology burden, we felt this was a significant area of unmet medical need. . We were also searching for an asset or assets that had sound clinical data that supported the mechanism of action. We look to assess the competitive landscape, that is to see if there were a lot of assets in that mechanism per se. We didn't want to enter a crowded space. We looked to see that, that mechanism or that asset had a clinical and regulatory pathway that was doable per se and that the probability of success was high enough that we could achieve it. I think we looked at over 400 different assets, believe it or not, in a rigorous due diligence pathway. And I would say that LSTA1 and the platform they're in met all of our criteria. It has over 250 preclinical publications and it had Phase I clinical results that corroborated that mechanism.

No, that's great. So I mean talking about LSTA1, that's coming down to, I call it, the bottom of the funnel right now with all your screens and what have you. So maybe we could just take a quick step back and discuss sort of the overall approach of CendR and how it works?

Thanks. I'll take that. Being the chemist of the group, I'll try to reach back to my scientific background and describe this. And I will mention that a lot of the things that Kristen and I are talking about today are described in more detail and with some nice cartoons around them on the corporate presentation, which is available on our website. So if people need more information, they can go there. But the mechanism of action for the CendR platform and for LSTA1, specifically, is like most, I would say, great advances in science. And I can call this great because it's really the basis of the work done by Erkki Ruoslahti, who recently won the Lasker prize for this, and many people consider that a precursor to a Nobel prize type of acknowledgment. And this is both simple and elegant. And what it is, is a mechanism that involves the determination of [ moiety ], in this case, LSTA1, which is a 9-amino acid cyclic peptide, which has a very high affinity and binding selectivity for a receptor that is more specific to tumors and the tumor stroma than it is to other parts of the body. And in this case, it's the alpha v beta 3 and beta 5 integrins, which are up-regulated on these solid tumors. So LSTA1 binds to those. And when it does, it becomes susceptible to proteases, which exist naturally in this environment, and they cleave this cyclic peptide into linear fragment. And one of those linear fragments, which is the 5-amino acid fragment is a C-end rule peptide fragment, and that fragment has a high binding affinity and selectivity for an adjacent receptor in that same space, and that's neuropilin-1. And when neuropilin-1 is activated through binding, it actually initiates the C-end rule active transport mechanism, and that's manifested by the formation of small vesicles, roughly 200 nanometers in diameter at the surface of the cell, which encapsulates anything that's in the circulation, namely anticancer agents, be them chemotherapeutics or immunotherapeutics or others. And they percolate through the stroma and are deposited into the tumor, thereby having greater access to the tumor itself. They also have an impact on the tumor microenvironment, making it -- at least there's some indication that it makes it less hostile. And also, there's an indication that the intracellular gaps in the stroma are opened when the C-end rule active transport mechanism is activated. And that allows perhaps the penetration of a number of immune cells that -- your Tregs, et cetera, that normally wouldn't be able to get to the tumor. So all this is a rather straightforward way of taking a naturally existing mechanism in the body, activating it specifically at the tumor site and providing greater access for anticancer therapies.

Thanks for that. I appreciate the background. So I think we're going to move now and really add some meat to these core bones here, if you will. So let's look at the proof of pudding potential and what we consider to be a well-thought-out clinical development plan. As you're taking what appears to be a 2-pillar approach, let's lay it out for everyone and also connect it. So going back to the underlying issue continuing in solid tumors that we all -- that you guys just discussed. So first, you have pancreatic cancer and then a broader solid tumor approach. So first, can you walk us through the PDAC approach first? And why it could be different because from an investment standpoint, even medical community standpoint, when you say pancreatic cancers, both investors and physicians tend to cringe based on the success rate in pancreatic cancer. So what are your studies, their design and the overall news flow around them. I know that's a pretty broad question, but there's a lot to discuss.

I'll try to tackle that. If I miss an answer, you'll let me know. As you noted, we do have 2 clinical development strategies. And as you noted, the first one is to tackle pancreatic ductal adenocarcinoma. We call that PDAC. PDAC was chosen originally by the former company because it does have a dense stromal barrier. And it has been shown in the Phase Ib study that LSTA1 enhances the penetration of the standard of care chemotherapy, gemcitabine and nab-paclitaxel. So going down that path, although it does make physicians and investors cringe, the Phase Ib data did show an incremental benefit versus standard of care alone. So we want to explore LSTA1 in the most rapid pathway to registration in PDAC. And that's something that we believe we can do. And therein, as I just said, we have the Phase Ib data in patients with metastatic pancreatic ductal adenocarcinoma. And those data showed significant improvements when we added LSTA1 with gem and nab-paclitaxel compared to historical controls, not only in overall response rate, but in progression-free survival and overall survival. So that's a pretty big step. We also have another study evaluating LSTA1 in combination with FOLFIRINOX. I'll pause here for just a second. Patients with PDAC either get FOLFIRINOX as a backbone chemotherapy or gemcitabine, nab-paclitaxel as a backbone. So we are tackling the gemcitabine and nab-paclitaxel, which is given to the majority of patients who have poor performance status, and we're also tackling the other 50% of patients that get FOLFIRINOX. That's in a Phase Ib study evaluating LSTA on top of FOLFIRINOX in locally advanced recyclable PDAC. Importantly, we have a Phase IIb study called ASCEND, which is run by the Australasian Gastro-Intestinal Trials Group, and that's in Australia and New Zealand. This is a pretty robust trial. It's a Phase IIb, placebo-controlled trial in multicenter and it involves 155 subjects and they're randomized to LSTA1 in combination with nab-paclitaxel and gemcitabine versus placebo and standard of care gemcitabine and nab-paclitaxel. So this is a pretty rigorous trial. With this -- with these data, so the Phase Ib and potentially the FOLFIRINOX and this ASCEND data, we're really exploring conditional approvals around the world, specifically in Australia, hopefully, quickly. And just harkening back to the mechanism of action, along with that mechanism of action in the Phase Ib results showing that we've gotten through that stroma and percolated into the tumor. Should those Phase IIb data replicate those Phase Ib trial results, I think we're looking at a pretty significant advancement in the treatment of mPDAC patients.

What kind of milestones can we expect from these 2 programs?

Certainly, I mean we have data coming out, and you can see those slides on our website, but we have data coming out from the FOLFIRINOX data hopefully by end of year. And then I think for Australasian trial, we'll be looking at that, I think, by early 2025.

Got it. Got it. And you know what, I mean, you raised a good point there. I think I just want to take a little bit of a tangent because you said the ASCEND study is being run in Australia and you alluded to also in your answers, I mean, you really are taking a global approach to your development programs here. So I guess, like you said, rapidity to the market, rapidity to patients, how eventually do you link up with the FDA with this global approach?

Certainly, I mean -- go ahead, Dave, do you want to take it?

No, no, I was going to say, go ahead, Kristen, and then I can add if there's anything to add.

Certainly, I mean my hope is that when the ASCEND trial comes out positive, we will understand the true effect size of our drug, and that could be used if robust potentially as the basis for an accelerated approval in the U.S., but it will also lead us to understand the -- furthermore, the safety profile and allow us to potentially have only 1 trial going forth in the Phase III trial for FDA. FDA does recognize Australia and New Zealand as robust data to support a submission package. So it may or may not be registration-worthy depending on the robustness of it for accelerated approval, but it certainly will support our registration in the U.S.

And the only thing I would add -- if I may, Joe, the only thing I would add is that we're not neglecting other portions of the world. So we've already started discussions with the European Medicines Association agency rather and looking at how we can bring this into Europe and also exploring always is there an accelerated path to approval initially and perhaps then followed by a more traditional path. And we have multiple discussions ongoing around the world with regulatory authorities to support that strategy.

And seeking orphan status around the world, so -- including FDA.

Got it. Great. Great. So I'll save some of the history for LSTA1 for the next question. But right now, I guess, since we're talking about your development programs, I know I want to focus on the second pillar of solid tumors here and your overall strategy. How should we view your approach? What's the plan, study designs, anticipated catalyst around your broader solid tumor approach?

I'll take that too. I mean the second pillar really is to exploit this technology. I mean, it's cancer penetrating. So we're looking to address a variety of solid tumors, right? And we're deciding which tumors to evaluate with LSTA1. We first looked at tumors with poor cytotoxic or immunotherapeutic penetration. I think we've met with over 20 global key opinion leaders to understand the clinical challenges, the lines of therapy, the evolving lines of therapy because the cancer landscape is constantly changing. And we look for tumor types that had significant unmet medical need, and I think that we wanted to expedite the clinical development. In my mind, this is a platform play akin to PD-1s. And so we think that this is agnostic to tumor type. And so we designed an operationally seamless basket trial. What do I mean by that? We designed what we call the BOLSTER trial, and it involves 3 tumor types seamlessly operating in 1 trial. We are looking at first-line cholangiocarcinoma; second-line, head and neck squamous cell carcinoma; and second line esophageal squamous cell carcinoma. All 3 of those tumor types have difficult-to-treat tumors, have poor penetration and have a competitive landscape such that we believe we can make an incremental effect size when adding LSTA1 to standard of care. Importantly, in the BOLSTER trial, each of these arms is LSTA1 on top of standard of care versus placebo on top of standard of care. These are placebo-controlled trials as we didn't want to be criticized just having an open-label trial and showing something. Part of our exploitation for lack of a better way to state this is assessing this also in investigator-initiated trials. We have a lot of interest in our asset, and we've been approached by many investigators and we've chosen very carefully. One of such is glioblastoma multiforme, which is the most horrific first brain cancer. We have a study ongoing or starting as we speak in first-line GBM with LSTA1 with temozolomide versus placebo with temozolomide. We also have another pancreatic ductal adenocarcinoma in nonresectable PDAC, but what's important about this study is we're demonstrating LSTA1 with chemo and durvalumab. So we're demonstrating, as we have preclinically that LSTA1 works with immuno-oncology. The goal of that is to make nonresectable tumors resectable, and therefore, curable. We have a trial -- a sister trial to that, that we're looking at gastroesophageal adenocarcinoma. So in the BOLSTER trial, squamous cell in the investigator-initiated adenocarcinoma, again, LSTA1 with an I-O therapy in nonresectable adenocarcinoma to make those potentially resectable and curable. And then lastly, I think another very interesting asset -- excuse me, avenue we're exploring this technology is in patients with peritoneal carcinomatosis specifically subjects with colorectal and ovarian cancers that their cancer has spread along the peritoneal cavity. These patients typically get HIPEC or high-temperature peritoneal lavage chemotherapy. And we're adding LSTA1 to that lavage into their peritoneal cavity versus placebo with chemotherapy, and we're assessing whether or not the depth of the tumor penetration that's left behind and their overall survival. So I think taken together, we've really exploited the technology agnostic to tumor type with intent, with capital efficiency and hoping that it will be a platform play akin to the PD-1s, where it can be used across multiple tumor types.

No, that's very helpful. And you know what, David, I'm going to throw it in here again because we started with it, and I know we're going to end with it as well. But going back to cash management, after Kristen's discussions here, you guys have a lot going on. How are you able to manage having cash to 2026 with all these different studies ongoing?

Well, it's interesting, Joe. We've taken what we think is a relatively obvious approach to managing our capital. So -- and this -- I'll reach back a little bit to even prior to Lisata. But we've always taken the approach that, first of all, we spend the company money like we spend our own. So we're very careful about how we do it and very focused in our intent. We also have been very careful about and actually quite successful about accessing nondilutive forms of capital. So I have to put a shout out here to the State of New Jersey, who has to date provided us with almost $18 million in nondilutive capital as part of their New Jersey Net Operating Loss Sale Program. We've also had grants from NIH, from the California Institute for Regenerative Medicine and others. And so that's been very, very helpful. We've also taken advantage of appropriate moments in the capital markets and now a [ plug ] for H.C. Wainwright. When we've been able to raise money together, at a cost of capital that is actually quite reasonable in comparison to what would have been considered normal at that time, and we were able to do that during the COVID pandemic when many companies were suffering. And we were also able to do that through a variety of pipe transactions, et cetera. So we've always taken money at an appropriate time and at an appropriate cost, with the idea that value for our shareholders comes from generating positive data and moving products forward not necessarily from hoarding capital and not making advancements. And then I think more recently, we've been very careful about spinning out those assets that we own that are no longer core, but to have value. Probably the largest example of that was when we sold our contract development manufacturing arm, what was called PCT at the time for a large amount of cash which helped sustain the business over the course of a number of years. And we're presently in the process of looking to spin out some of the nascent technologies. By nascent, I mean, early preclinical technologies, very interesting, but fundamentally don't fit into Lisata's strategic round but may have value as well. We'll spin those out in a manner that preserves value for our shareholders, but takes the burden of spend off. And then finally, to compliment Kristen and the rest of the team, we are doing our studies in geographies that are very favorable economically. That means the costs are lower or they provide direct cash rebates as incentives to work there. Yet the GCP, the clinical quality is very, very high. We also are working, as Kristen pointed out, with investigator-initiated trials where we have access to the data. We have a say in the protocol, but where the costs are borne by grants from other institutions. And so it's a very capital-efficient way of doing very, very many things with a very small company and on a very tight budget.

I appreciate that, and I apologize for throwing it in there. Just like I said, you're hearing just how broad your programs are. I just think it's massively important be able to highlight the cash management around it while you're going to deliver very critical catalysts that will then link up to Kristen's discussion on rapidity of regulatory pathways. So with that said, Kristen, you did discuss your ex U.S. strategies, discussions with the FDA. How should we link what you're doing globally to be able to bring it to patients rapidly with potential business development around these assets?

You want to take that, Dave, do you want me to take that?

Why don't I start, and then I'll turn it over to you. So generally, as Kristen pointed out, we've got a broad platform that we believe not only will set the stage for bringing the asset to registration in a very important indication. And as you pointed out Joe, it's a place where there have been multiple failures. That presents a challenge, but it also is an enormous opportunity. I mean the average PDAC patient has a 5-year survival rate of around 10%. And so there's a lot to be done in this particular area. And then simultaneously, we're demonstrating, we believe, that LSTA1, when added to almost any modality of anticancer agent in any other solid tumor can also have a positive impact. This has a real, I think, pharmacoeconomic attractiveness because what we're doing is being -- is demonstrating that we can take existing drugs, some of which are already generic and make them more effective without exacerbating their safety profile. And that, I think, should have very favorable pharmacoeconomic impact in the long run while also allowing us to combine with brand new modalities of product and new mechanisms that are in development. So I think that's really important. But in the end, because we've done this broad approach, we think it will set the stage for additional partnerships. We already have the partnership with Qilu Pharmaceutical, a very large pharmaceutical company in China for that part of the world, but we have the ability to partner for other specific modalities of technology by indication, by geography. It's kind of wide open for us in this regard, and that gives us the opportunity, I think, to fully exploit commercially the way things are developed here from a business development perspective. I'll add one last metaphor. When we were at Schering-Plough we developed the cholesterol absorption inhibitor called Zetia in combination with every statin because in combination with statin, it demonstrated a syngeneic effect that was really compelling. So we did a program much like we're doing here, a very broad approach, which ultimately led to approvals with any combination and then eventually led to the acquisition of Schering-Plough by Merck, and the creation of Vytorin, which is a combination of Merck's anticholesterol statin with Zetia. So that kind of approach has been done in multiple therapeutic areas before, and it's the approach we're taking now. And then on top of that, we're also mindful that single product companies are not sustainable in the long run. And because of that -- and because of her great success with the team of identifying LSTA1, Kristen and our business development team are added again looking to add other assets. And maybe I'll turn it over to Kristen here to talk a little bit about the kinds of things that we're looking for and how we can see that as being complementary in the long run.

Yes, because -- and actually before you start, Kristen, and I was going to say that. So thanks for that segue, David, because it's important because LSTA1 right now is really going to drive the lion's share of the value in the intermediate to -- intermediate terms, but you have a long path ahead of you, hopefully. So how are you going to look to build your assets?

Yes. And I would just add to Dave's last comment. Having spoken to many investigators at ASCO and around our studies, the application of LSTA1 is so wide, whether it's intratumoral injection with nanoparticles, with gene therapy, with theranostics, I mean, the application is just, as Dave said, open ended. But we don't want to be a single platform company. And for me, we really need -- we are solely now focused besides our clinical platform on looking for other assets to expand our portfolio. Obviously, we would love to stay in the oncology space as a complementary asset to LSTA1 on our current platform. As we did prior looking for this platform, we have a set of criteria similar where we're looking for clinical data with a regulatory pathway that's established with the clinical paradigm that it could be expedited with our team. I have a team here -- we have a team here that is very tenured and experienced and willing and ready to go. So looking across assets that at least have Phase I data, preferably Phase II data with commercial viability, and we're ready to go, and we're actively pursuing.

And I'll add one other point, which is, I think, important for investors to know that we're looking for assets that either come with capital or where we have sufficient capital without detracting from our current programs to move this new asset to its next development milestones. So we're not looking to be medically or scientifically dilutive. We really want to continue our history of being good stewards of our capital.

Yes. No, absolutely. And look, I want to thank you both very much as a little bit of a wrap-up. You gave a lot of detailed explanation. We peppered in some of the things that I think would be part of a wrap-up, but I think we're like I said, very important and important to repeat as well. So you talked about your cash management in difficult situations, nondilutive aspects that you've taken, potential to grow the company with different assets. So I guess, David, even with some of that repetition now, how do we look towards Lisata building value for investors over the next 12 months?

So I think it comes down to a lot of what Kristen has said. And I hope that people can sense the level of enthusiasm and passion that Kristen brings to the company, and that permeates our entire team as they work throughout with the help of everybody. I mean we're really dedicated to getting something to patients. That's -- this is not a science project is what I want to say, basically. And in terms of delivering value, there are several ways we hope to do that. But foremost among them is getting to unambiguous data quickly. As quickly, expeditiously as possible because it's data that drives the regulatory process, it's data that drives acceptance by the medical community, it's data that will ultimately lead to commercial success. And so that's where we're focused is on execution and data. And over the next 12 to 18 months, as you'll see on the milestone slide, I'll refer again to the corporate presentation for those who have the time to go look, you'll see there is a lot of data coming out across the entire platform over the course of the next year, 1.5 years. Any one of which could be, I think, enormously value-creating or it has the potential to be so. And in combination could really lift the profile of the company significantly. And that, coupled with consistent cash management and the opportunity to do some additional partnerships to support the breadth of LSTA1 applicability and perhaps bringing in some new assets to provide portfolio diversification and to some extent, risk mitigation, all should lead to value uptake and I hope a very attractive investment opportunity for investors.

Absolutely. And I really appreciate that. So first, I wanted to thank everybody that signed in today for this fireside chat. Really appreciate it. If you do have any follow-up questions, et cetera, please feel free to contact me for the appropriate follow-up or answers, connect with management or what have you. And most importantly, again, thank you very much, David and Kristen for joining us today. A lot of great details. And like I said, you have so much going on here and being able to do that with cash to 2026 is, I think, a really good feather in your cap. So thank you again, and we'll call it quits right now. Thank you.

Thank you.

Thank you, Joe. Appreciate it.

You well. Bye-bye.