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

All right. Good morning, everybody. Up next, we have Dave Mazzo with Lisata Therapeutics.

Thank you. Good morning, everyone. I appreciate you taking the time to give me the opportunity to introduce you to Lisata Therapeutics. Like all the other public companies that are presenting today. I'll remind you that I'll be making some forward-looking statements and I'll ask that you please keep those in mind as you take investment decisions. So let's start with an overview of Lisata. We are a clinical stage therapeutics development company that's advancing a novel solid tumor targeting and penetration technology that improves the efficacy of anticancer drug. So our product is co-administered with other anticancer drugs with the objective of improving their efficacy, while keeping their safety profile either the same or actually improving that as well. We have a seasoned management team with about 100 years of development experience both in Big Pharma and successful emerging pharma companies. Of course, we have proprietary field-leading technology. But what's important for investors is over the next 12 to 24 months, we have a plethora of milestones that are going to be announced news flow, any one of which could lead to significant improvement in value. And our platform technology, we believe, has been validated in inverted commerce by the fact that we have a number of existing partnerships with big companies, who have obviously done their due diligence, and we have the potential for many others that you'll see. Perhaps most importantly, we are a well-financed small company. So even though like many small companies, our stock doesn't always reflect our value. We have cash through early 2026, so about 2 years of cash on the balance sheet. And enough cash to run all the programs that I'll discuss this morning through to their final data. So let me talk about the problem that we are solving and the approach that we're taking. So most people understand that cancer remains the largest killer of humans in the world. But what is not well known is that more than 90% of newly diagnosed cancers are actually solid tumor cancers. And these are the cancers that really frighten people when that diagnosis is given. It's lung cancer, it's pancreatic cancer, it's kidney and ovary cancer, et cetera. And these have very poor prognosis, even today with the advent of many, many new types of therapies designed to help treat these patients. So the current treatments are suboptimal for a very specific reason. And that's because targeting the tumor with these anticancer agents and then penetrating the tumor are two distinct problems that are often not addressed by a single technology. And the reason that this is a problem is that the tumor morphology is such that the actual tumor is surrounded by a mixture of cells called the stroma. And that stroma contains tumor cells, tumor endothelial cells, fiber blasts -- fibroblast and a number of other types of cells all of which form a physical barrier around the tumor and inhibit the penetration of the tumor by anticancer products. And so that's one of the reasons why you can't get the kind of efficacy that one might expect if you are looking at translating that information from, say, a mouse model to humans. The other thing that's important is these tumors have a microenvironment that is immunosuppressive. So that is the immediately adjacent area to the tumors are what would be called a hot, meaning that they are rather cold that they're immunosuppressive and they don't allow your immune system to act fully against the tumor. And many people have tried to solve this issue by simply increasing the dose or the duration of the chemo or immunotherapy, but that generally leads to off-target side effects and really doesn't solve the problem. So we've looked at a way to solve the problem that takes use of something called the C-end Rule Transport Mechanism. And this is a naturally occurring active transport mechanism that most cells use to transport nutrients. But we're high jacking it, if you will, to actually transport anticancer agents into the tumors. And this is based upon a very logical progression of research over the last several decades that's been -- that's actually been promoted by someone called Erkki Ruoslahti. Erkki is the founder of this technology, and he's recently won the Lasker prize for this, which most people consider as a precursor to a Nobel prize for the significance of the work. So we start with something called RGD peptides, which have been known for quite a long time to be great tumor targeting agents, but they do nothing to enhance penetration. Erkki and his collaborators developed something called internalizing RGD peptides, which combine targeting and penetration enhancement and our lead program, LSTA1 or certepetide, is internalizing RGD that triggers the C-end Active Transport Mechanism, and I'll describe that in more detail in a moment. And LSTA1 is in mid- to late-stage clinical development for a variety of solid tumor cancers. So, why are we so excited about this? Well, in general terms, LSTA1 converts that stroma, that barrier from a blockade to a conduit. It allows us to combat resistance and metastases by depleting the immunosuppressive T cells in the microenvironment, enhancing the cytotoxic C cells and inhibiting the metastatic cascade. And what's really exciting is that the mechanism of action for LSTA1 is agnostic to the type of anticancer agent with which it is co-administered. So we can use it with chemotherapy, immunotherapy, radiotherapy, antisense therapy, cell therapy, et cetera. And it operates in the same way. And so we're developing this compound based on a 2-pillar strategy, focusing on pancreatic and other solid tumor cancers, which by 2030 are going to be among the most prevalent cancers in the medical field. So on the one hand, we're looking at pursuing rapid registration in pancreatic ductal adenocarcinoma, and that's initially combined with gemcitabine and nab-paclitaxel, which is 1 of the 2 standards of care used in this. And for this, we're actually quite far advanced our Phase IIb trial is completely enrolled, and we're on our way to data, which is expected to read out in the fall of this year. In parallel, we're pursuing a number of different programs in a variety of different cancer types, and we've got a number of proof of concepts, that's going on with this product, LSTA1 in a number of different cancers. So as I mentioned earlier, we have a number of partnerships. What's interesting is in our R&D partnerships, we actually are able to exploit resources and money from others, but we don't give up any commercial rights to our product. So that's a way to use non-dilutive funding to run our research. In the case of our commercial partnerships, we have a large relationship with a company called Qilu Pharmaceutical in China, which is one of the top 10 Chinese pharmaceutical companies. And this is a standard biobucks deal, where we pay -- we are paid milestones for development, regulatory and eventually sales achievements. And we've already collected $15 million in milestones, and there's another roughly 200-plus milestones available to us throughout the life of this particular contract, and we have the additional possibility of partnerships with many other companies because we can mix LSTA1 with lots of different compounds. So how does this work? It's actually quite simple and elegant once you see how it is put together in this diagram. So LSTA1 is a 9 amino acid cyclic peptide. So it's not quite a small molecule, but it's not very complicated. It's made by solid-state peptide synthesis and it has a very high binding affinity and specificity for alpha v beta 3 and beta 5 integrins, which are up-regulated significantly on the surface of the tumor and the surface of the cells in the stroma. Once it's bound to these integrins, it becomes susceptible to proteolytic enzyme cleavage by enzymes that are naturally occurring in the tumor microenvironment, and that produces a 5 amino acid linear peptide, which is called the C-end Rule fragment. And that Cend fragment has a very high binding affinity and specificity for an adjacent receptor called neuropilin-1. And once neuropilin-1 is activated, it activates the Cend transport mechanism, which is manifested by the formation of microvesicles on the surface of the cell, which encapsulates moieties that are in the circulatory system and percolates them or ferries them through the stroma and deposit the payload deep into the tumor. This also provokes the relaxation of the gap junctions between the cells in the stroma and the tumor, and that allows for greater infiltration of immune cells. So it potentiates your own immune system at the same time. So we have a number here of slides that demonstrate preclinically how this will work. This is a mouse model with a human mPDAC tumor implanted in it. And this nude mouse is then dosed with something called fluorescent quantum dots as the moiety that could be co-administered with LSTA1. And when fluorescent quantum dots are in circulation, and you provide an expectation source, the whole mouse would light up green. But if you add an etching solution, anything in circulation goes dark. And so you can see in the panel on the left, everything was in circulation because everything has gone dark. If we then add LSTA1 to the same experiment, you can see that after the etching solution, all of the quantum dots are in the tumor. So there's a very high degree of selectivity and specificity associated with that tumor penetration. There are also more than 350 peer-reviewed publications that have been put together by Lisata and as well as academic collaborators around the world that demonstrate consistently that when you mix LSTA1 or one of its IRGD analogs, with almost any anticancer agent in a validated solid tumor model, you end up with an increased efficacy of those agents, and that happens every single time. We also have here the fact that our Phase I trial corroborates everything that has happened preclinically. And that's unusual because it's often difficult to translate what happens in a mouse to humans. I mean we've probably cured cancer in mice 100 times in the last decade or so. But getting that to work in people has been challenging. But here, it seems that, that translation is working. This is a 31-patient, open-label trial done in Australia, 3 sites looking at LSTA1 in combination with gemcitabine, nab-paclitaxel, as I said, one of the standards of care. And you can see, of course, LSTA1 was well tolerated. It's a small peptide. It has really very benign safety profile. There were no dose-limiting toxicities, and the safety of the combination essentially mimic the safety of the chemotherapy alone. So it didn't exacerbate the adverse events. But what it did augment significantly was the efficacy of that standard of care. And you can see that more easily, perhaps graphically on the next few slides. Overall survival was increased by 55% in this population. And progression-free survival was improved by 76%, importantly as well, all of the other markers in the trial, moved consistently in the same direction. So there's internal consistency within the clinical trial that demonstrates that LSTA1 improves the efficacy of gemcitabine, nab-paclitaxel in mPDAC patients without causing any further side effects. We've also done some work exploratory in a number of other solid tumors, and I just point this case study. This was published recently. And this is in metastatic gastroesophageal adenocarcinoma, another cancer with a very poor prognosis for those people who are diagnosed with it. This patient, a 53-year-old male have been going through standard of care, which is neo-adjuvant chemotherapy with radiation, plus FOLFIRINOX plus pembrolizumab. So immunotherapy as well, the full cocktail and they were only getting a partial response and things were looking quite dismal. The investigator here asked for us that we provided under a compassionate use protocol, LSTA1, which was added to the cocktail. And after several more cycles with LSTA1, the -- and an exploratory laparoscopy, it turns out that the patient was in full remission. The cancer tumor was eradicated and the only thing that was left was scar tissue. So this is really an important -- a complete remission or a complete response in this type of cancer is very rare, and it points again to the high utility and broad applicability of LSTA1 in solid tumors. Okay. Thank you. So we've advanced this clinical portfolio now. And as a result, we received quite a few regulatory designations that are quite important to us. We have Fast Track Designation in the United States, in pancreatic cancer. We also have Orphan Drug Designation in pancreatic cancer in the U.S. and Europe in glioblastoma, which is brain cancer in the United States and just announced today, we just received an Orphan Designation in osteosarcoma in the United States. We also have a rare pediatric disease designation in osteosarcoma for the United States. And I won't spend a lot of time on this slide, but I think most of you know that these are more than just gold stars that the regulatory agents. They carry significant benefits in terms of rapidity of review, interaction and collaboration with the agencies, as well as commercial financial benefits. Shortened review times, and in the case of orphan drug designation, increased exclusivity and the applicability of getting grants to help support your research. So these are very, very important to us. And I think they all point to the recognition by the regulatory agencies of the promise that this particular technology brings. So the next 2 slides just are a list of all the trials that we have ongoing. There's about 10 of them at the moment. And I will point you to the top line because that's probably from a near-term data perspective, the most significant. This is our ASCEND trial. It's Phase IIb. It's a 158 patient randomized, double-blind, placebo-controlled trial that's being done across about 20 sites in Australia and New Zealand. It's done in Australia and New Zealand for economic reasons, which I can discuss later for those who might be interested. This trial is completely enrolled, and we will expect data from this in the early fourth quarter of this year. That will be seminal for the company because we've already have an agreement with the Australian authorities, the TGA that if the data from this corroborates the Phase I data, they will accept an accelerated approval application based upon this particular study. And we're in the process of having those discussions with FDA and EMA in order to pursue possible accelerated approval in those jurisdictions, but also to prepare for a likely Phase III trial, which we would like to kick off as quickly as possible thereafter. We also have a trial running called the BOLSTER trial that's running here in the United States in cholangiocarcinoma. And that is enrolling extremely, extremely well. We'll probably complete enrollment well before the projected fourth quarter of this year, and we'll have data from that trial during the course of next year. Anecdotally, our investigators there visited the blinded trial, have told us they're convinced that they're seeing positive results from the addition of LSTA1. So that's always very helpful. And then you can see a list of other trials that are being run with a variety of different cancers, in a variety of different combinations around the world, including with our partner, Qilu, which has completed their Phase I trial and corroborated the Australia results and has now initiated their Phase II trial as well as trials in glioblastoma in Europe and peritoneal carcinomatosis here in the United States. So a lot of very good things going on. And a lot of data coming out. So the circles are execution milestones that will be announced to show the progression of development. The stars are data milestones. And you can see starting later this year and running basically throughout 2025, there'll be a pretty steady news flow of additional data as we progress this through development and move it toward registration and commercialization. As I mentioned, the company is very well positioned financially. We just reported our 2023 full year results. We still had over $50 million of cash on our balance sheet. We have no debt. That's enough cash to take us into early 2026. So about 2 years, a relatively clean balance sheet and the ability to operate very frugally by using and taking advantage of geographies, in which clinical trials are less expensive and also looking for non-dilutive funding, which we have collected quite a bit of from the government, the state and also from partners. So in the end, I think Lisata actually represents a really attractive investment opportunity today. We're undervalued. We have a tremendous amount of news flow coming up. The data continues to move in a positive direction, and we're expecting it to be a crescendo of positivity coming with the ASCEND data by the end of the year. We have a seasoned team, who has brought products to market internationally for the life of their careers, a strong technology with a number of patent prosecutions pending that will actually increase our patent life, well beyond the 2030s. Milestones, as I've discussed, capital and the opportunity for partnering. In fact, we've had discussions with many potential partners and that ASCEND data is probably going to be a catalyst for a number of partnering deals at that time. So I will stop at this point, and thank you for your attention, and I have a few minutes to answer some questions.

Yes sir.

Are you comfortable? Do you have enough cash on hand out to completely you need to do or...

So I am comfortable that we have enough cash to complete what I've showed you here. We'll get all these trials through to data. I am never comfortable though I have enough cash. And clearly -- excuse me, I'll get to you. Clearly, we will be raising cash post ASCEND data, in order to fund the likely commercialization in Australia, as well as the Phase III programs for the rest of the world. Our best guess right now is $100-plus million to do all of that commercialization plus the Phase III programs. But that could be mitigated significantly by partnerships that are potentially on the horizon as well. So we'll see. Yes, sir.

[indiscernible] I don't know you mentioned anything about collaborations. Are there any collaborations at present that [indiscernible] you're in to or looking to enter...

So we have collaborations with Qilu in China for the Chinese development. We have a quite a few academic collaborations as well as collaborations with foundations, which are providing money. In terms of additional pharma foundations, excuse me, pharma collaborations. We're in the process of, I would call it, the end stage of those discussions with the likelihood, as I mentioned of some of those, if not all of them, bringing broth to consummation around the time of the final data from ASCEND, so later this year.

And the second question is about the side effects. I think you did mention something about that filing confidence in the clinical test that you performed the date, the side effects have been minimal or...

We have not found any side effects that we can directly attribute to LSTA1, none at all. In fact, the product is completely benign, and we haven't been able to find a dose-limiting toxicity. Anyone else? Yes sir.

[indiscernible]

I appreciate this question because it gives me an opportunity to address sort of the elephant in the room. So Lisata, is the result of our predecessor company, Caladrius, which purchased a small private company called Cend Therapeutics to acquire this technology and move this forward through development. That occurred in September of '22, so about 18 months ago. Since that time, the shareholder base of Lisata is comprised of the shareholder base of the private company, which is mostly folks who are looking to play the long game and don't trade on the open market as well as most of the major shareholders of Caladrius, which also were playing the long game with us and don't trade on the open market, high net worth individuals, a couple of funds and also founders, et cetera. So we are essentially a private company disguised as a NASDAQ-listed company from the trading perspective. We have a very low volume of trading on a daily basis because none of our holders sell. And so that's why -- and since the merger, we have not raised money. We haven't had to. And that's why you don't see any of the other funds. Now conferences like this and road shows that will start probably in the next couple of months, leading up to the data point in the fall. That's when we'll be looking to transform our database to bring in some of the healthcare specific funds and that actually open up the opportunity to anyone else who is interested in what could be a very lucrative investment opportunity. I hope I answered your question.

[indiscernible]

Sure. So I am a chemist by training. I did my PhD at the University of Massachusetts, and I did a postdoctoral fellowship at the Ecole Polytechnique Federale de Lausanne, Switzerland. And then I joined Merck. I spent a number of years at Merck, then from -- in exploratory pharmaceutics and drug delivery. I went from there running exploratory infusion development at Baxter Healthcare, which is the hospital business. And then from Baxter joined what became RPR, moved my family back to Paris. We lived in Europe for 7 years, where I ran pharmaceutical development, for RPR. And then as RPR and HMR, we're preparing to become Aventis. I actually became the Head of Development for HMR for a number of years before then moving to the Head of Development operations globally for Schering-Plough. And then for the last 15 to 18 years, I've been in the emerging world. I was the CEO of Chugai U.S. subsidiary, part of the Roche Group. And also this is now my third -- I'll call it start-up company and the others having exited already. So I've been doing this for now 41 years, which is a long time. I'm not -- so the Regado got sold to another company, which then ultimately got sold to Cubist, which got sold to Merck. And the previous company was merged into a company that was part of the BASF family of companies in Europe. Thank you. Appreciate it. Have a good day.