Longeveron Inc. (NASDAQ:LGVN) Q4 2023 Earnings Call Transcript February 27, 2024

Longeveron Inc. misses on earnings expectations. Reported EPS is $-0.25 EPS, expectations were $-0.21. FDS isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Ladies and gentlemen, good afternoon, and welcome to the Longeveron Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mike Moyer, Managing Director of LifeSci Advisors. Please go ahead.

Mike Moyer: Thank you, operator. Good afternoon, everyone, and welcome to Longeveron’s 2023 year-end results conference call. Today, we will discuss financial results from the year ended December 31, 2023, and provide a business update. After the market closed today, we issued a press release with these results, which can be found under the Investors section of the Longeveron website. I’m joined on the call today by the following members of Longeveron’s management team. Mr. Wa’el Hashad, Chief Executive Officer; Dr. Nataliya Agafonova, Chief Medical Officer; and Lisa Locklear, Chief Financial Officer. Mr. Hashad will begin with a brief corporate update, then Dr. Agafonova will review Longeveron’s progress in its clinical programs and Ms. Locklear will review financial results for 2023.

Following the company’s prepared remarks, we will open the call to questions from covering analysts. As a reminder, during this call, we will make forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statements should be considered in conjunction with cautionary statements in our press releases and risk factors discussed in our filings with the SEC, including our quarterly reports on Form 10-Q and annual report on Form 10-K and cautionary statements made during this call. We assume no obligation to update any of these forward-looking statements or information. Now I’d like to turn the call over to Mr. Wa’el Hashad, Chief Executive Officer of Longeveron.


Wa’el Hashad: Thank you, Mike. Good afternoon, everyone. We are pleased speaking with you today. On this call, we briefly recap of the major highlight of our year 2023 and outline strategic priorities for 2024. Then we will be happy to answer any questions you have. 2023 was a productive year for Longeveron. During this year, that’s 2023, we made significant progress advancing our lead assets, Lomecel-B, to important milestones. Presenting long-term survival data from our ELPIS I clinical trial in hypoplastic left heart syndrome at the American Heart Association Annual Meeting in Philadelphia and announcing clinically meaningful results from our Phase 2a CLEAR MIND trial in Alzheimer’s disease. We also took steps to strengthen our balance sheet, securing $6.4 million of gross proceeds from equity financing during the fourth quarter.

For 2024, our strategic priorities are focused on our lead program in hypoplastic left heart syndrome, or HLHS. With the goal of completing enrollment in our ELPIS II Phase 2 clinical trial this year, ELPIS II has exceeded its 50% enrollment threshold and we are working with the clinical investigators to expedite enrollment. HLHS is our top priority program, and we believe our most important value driver in near-term. Accordingly, we made the strategic decision to discontinue our Phase 2 clinical program in Aging-related Frailty in Japan in order to focus on our available resources on HLHS and ELPIS II enrollment. We are also exploring opportunities to advance our Alzheimer’s disease program through potential partnerships or other sources of funding.

These steps will allow us to focus our available resources on completing enrollment in our ELPIS II study in 2024. The data that we have generated in HLHS and Alzheimer’s disease all support broader potential for Lomecel-B as a regenerative medical therapy for range of unmet medical needs. Though we remain confident in the broader therapeutic potential of this asset, we believe that narrowing our focus in the near-term on HLHS is the best interest of the patients, investors and our shareholders. With that, I will turn the call to Dr. Agafonova to provide you a review of the recent data on our clinical program so far. Nataliya?

Nataliya Agafonova: Thank you, Wa’el, and good afternoon, everyone. Today, I will provide a brief overview of our HLHS program, discuss the extended survival data we presented from our ELPIS I trial results at the AHA Scientific session and update our progress in enrollment for our ELPIS II study. Then I will review the additional results we announced from our CLEAR MIND study in Alzheimer’s disease. HLHS, for those who might not know, is a rare congenital and devastating birth defect in which the left the ventricle of the heart is either severely underdeveloped or missing. The condition affects approximately 1,000 babies per year in the United States. Babies born with this condition have severely diminished systemic blood flow which require children to undergo a complex three-stage heart reconstruction surgery process over the course of the first five years of their life.

While these children can now live into adulthood with surgical intervention, only 50% to 60% of affected individuals survive to adolescents due to right ventricle failure, which is often unable to handle the increased load required to support systemic circulation. Furthermore, even those children this successful surgical intervention are at elevated trees of short-term mortality, delayed development and long-term complications, including organ failure. As such, there is an important unmet medical need to improve right ventricular function in these patients to improve both short-term and long-term patient outcomes. As Wa’el mentioned, the latest long-term survival data, from our ELPIS I study, Phase 1 of Lomecel-B in children with HLHS were presented as a poster at the scientific sessions of the American Heart Association.

10 patients participated in ELPIS I trial, during which Lomecel-B was injected into the right ventricle concurrent with the Stage 2 surgery, also known as the Glenn procedure. In the presented data, 10 patients were monitored for up to five years after treatment. The data showed that 100% of the 10 patients who participated in ELPIS I trial survived and remain heart transplant free for up to five years of age after receiving Lomecel-B during their Stage 2 surgery. The extended follow-up data on all patients enrolled in this study now includes monitoring for up to five years following treatment with Lomecel-B. The average age at the time of the last follow-up visit was 4.5 years, with two patients being five years of age. Additional long-term follow-up with ongoing in the ELPIS I participants.

Historical results from outside studies have shown the children with HLHS has approximately 20% mortality by five years. The ELPIS I data were highly encouraging and reinforce our enthusiasm for Lomecel-B as a potential treatment to transform care for patients with HLHS. Our ELPIS II trial is designed to assess the potential of Lomecel-B to improve right ventricular function and long-term outcomes. The trial is a 38 patient controlled Phase 2 clinical trial, evaluating the safety and efficacy of Lomecel-B as an adjunct therapeutics to standard of care HLHS journey. The primary outcome measure is the change in right ventricular ejection fraction from baseline to 12 months. The trial is funded by a grant from the National Institute of Health, National Heart, Lung, and Blood Institute.

A scientist at a state-of-the-art laboratory closely examining a cellular therapy sample.
A scientist at a state-of-the-art laboratory closely examining a cellular therapy sample.

Our ELPIS II trial is more than 50% enrolled, and we are working with clinical investigators and trial sites to expedite enrollment. Completion of ELPIS II is our priority and our focus and current plan is to complete enrollment in this trial in 2024. I will turn now to our Phase 2a trial of Lomecel-B for mild Alzheimer’s disease. We call it CLEAR MIND trial, 48 patients four-arm parallel design, randomized clinical trial of Lomecel-B designed to evaluate the safety of single and multiple infusions of 2 different dose levels of Lomecel-B compared to placebo in patients with mild Alzheimer’s disease. We announced top line results from this trial in October 2023, an additional positive clinical data and MRI data results last December. To recap these results, the study met the primary safety endpoint and no patients experienced Alzheimer-related imaging abnormalities.

The study also met its secondary endpoint, a prespecified composite Alzheimer’s disease endpoint with prespecified p-value of less than 0.1. The additional clinical data and MRI data we announced in December showed improvement in clinical and MRI endpoints in specific Lomecel-B growth compared to placebo. Specifically, cognitive function improved as measured by MOCA, Montreal Cognitive Assessment Score, with p-value 0.05. Daily life activity increased as assessed by the caregiver and measured by Alzheimer’s disease cooperative activity daily living with p-value 0.05. Brain MRI demonstrated whole brain volume loss slowed accompanied by significant preservation of left hippocampal volume. Both this p-value 0.5. Brain neuroinflammation as measured by diffuse tensor imaging, DTI also diminished with p-value 0.01.

We believe these results support the therapeutic potential of Lomecel-B in the treatment of mild Alzheimer’s disease and provide evidence-based support for further clinical development. We intend to present CLEAR MIND results at major medical meetings in 2024. As Wa’el mentioned, we are seeking appropriate partnership and sort of non-dilutive funding to support further development of Lomecel-B in Alzheimer’s disease. With that, I’d now like to turn the call over to Lisa Locklear, our CFO, to discuss our financial results of 2023. Lisa?

Lisa Locklear: Thanks, Nataliya, and good afternoon, everyone. Most of what I’ll be covering this afternoon is presented in more detail in our condensed financial statements and in our management’s discussion and analysis of operations in our annual report on Form 10-K, which we filed today. Revenues for the years ended December 31, 2023 and 2022 were $0.7 million and $1.2 million, respectively. 2023 revenues decreased $0.5 million or 42% when compared to 2022 as a result of decreased grant revenue and lower participant demand for our Bahamas Registry Trial. Grant revenue for the years ended December 31, 2023, and 2022 was less than $0.1 million and $0.3 million, respectively. The decrease of $0.2 million when compared to 2022 was primarily due to a reduction in grant funds available due in part to the completion of the grant-funded clinical trials.

Clinical trial revenue, which is derived from the Bahamas Registry Trial for the years ended December 31, 2023, and 2022 was $0.7 million and $0.9 million, respectively. Clinical trial revenue for the year ended December 31, 2023, decreased by $0.2 million when compared to 2022 as a result of decreased participant demand. Related cost of revenues was $0.5 million and $0.7 million for the years ended December 31, 2023, and 2022, respectively. The decrease of $0.2 million was primarily due to the decrease in the revenues earned from Bahamas Registry Trial and reduced direct costs associated with our Grants program. This resulted in a gross profit of approximately $0.2 million for the year ended December 31, 2023, when compared – a decrease of $0.3 million when compared with a gross profit of $0.5 million for 2022.

General and administrative expenses for the year ended December 31, 2023, increased to approximately $11.4 million compared to $8.1 million for the same period in 2022. The increase of approximately $3.3 million was primarily related to an increase of $1.6 million for compensation and benefit expenses, which included $0.4 million of separation costs, $1 million in higher legal, professional and consulting fees, $0.4 million of public company expenses and $0.2 million higher equity-based compensation costs allocated to general administrative expenses and $0.1 million for higher Board fees. Research and development expenses for the year ended December 31, 2023, decreased to approximately $9.1 million from approximately $9.4 million for the same period in 2022.

The decrease of $0.3 million was primarily due to decreases of $0.5 million in equity-based compensation allocated to research and development expenses and $0.3 million in compensation and benefits offset by increases of $0.4 million in supplies and costs to manufacture Lomecel-B and $0.2 million in research and development expenses that were not reimbursable by grants. Selling and marketing expenses for the year ended December 31, 2023, and 2022 were $0.8 million and $1.1 million, respectively. The decrease of $0.3 million was primarily due to decreases in Investor Relations and international development expenses. Other expense for the years ended December 31, 2023, and 2022 was $0.4 million and $0.8 million, respectively. Other expense for 2023 decreased mainly as a result of nonoperating lawsuit expenses of $1.4 million in 2022 compared to less than $0.1 million in 2023.

This decrease was partially offset by realized losses on sales of marketable securities of $0.3 million, write-off of intangible assets of $0.3 million and reduced benefit of tax credits of $0.3 million. So recorded in other income in 2022 was approximately $27,000 for a gain resulting from foreign currency changes and $27,000 of sublease rental income. Net loss increased to approximately $21.4 million for the year ended December 31, 2023, from a net loss of $18.8 million for the same period in 2022. The increase in the net loss of $2.6 million was for the reasons I explained previously. As of December 31, 2023, we had $5.4 million in cash, cash equivalents and marketable securities. We believe that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2024.

We are actively seeking financing opportunities to extend our cash runway while taking measures to reduce our cash expenditures as we focus our resources on our primary strategic program in HLHS. These cost saving measures include the discontinuation of our Aging-related Frailty clinical trial in Japan, related staff reductions and continued prudent management of our discretionary spend. I would also like to share a key subsequent events on February 21, 2024, the company’s stockholders approved an amendment to the company’s Certificate of Incorporation to effect a reverse stock split of its outstanding shares of Class A common stock and Class B common stock at a ratio ranging from one for five to one for 15, with the exact ratio to be set within that range at the discretion of its Board of Directors without further approval or authorization of its stockholders.

The date of our reverse stock split and the ratio have not yet been determined. The reverse stock split is intended to address the current stock price which has been trading below the NASDAQ minimum requirement of $1 per share for nearly a month. With that, I thank you, and I will turn the call over to Wa’el.

Wa’el Hashad: Thank you, Lisa. So to conclude, our focus in 2024 is on advancing our clinical program in HLHS and completing ELPIS II enrollment. We also are leveraging the data from our CLEAR MIND study with the goal of securing an appropriate partnership for continued advancement of Lomecel-B in Alzheimer’s disease indication. We are taking appropriate measures to support our efforts within currently available resources, managing our cash spending and are seeking additional financing opportunities to help realize Lomecel-B full potential. Supported by data obtained from ELPIS I and CLEAR MIND, we are confident that Lomecel-B represents an important potential breakthrough for patients and an attractive value proposition for our investors. Now I would like to open the call for questions. Operator, please open the line to our covering analysts.

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