Aethlon Medical Q2 2024 Earnings Call Transcript

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Provided by Quartr
November 14, 2023

There are 8 speakers on the call.

Operator

Good day, and welcome to the Aflawn Medical Second Quarter Fiscal 20 24 Earnings and Corporate Update Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. Would now like to turn the conference over to Mr.

Operator

Michael Miller with Rx Communications. Please go ahead, sir.

Speaker 1

Thank you, operator, and good afternoon, everyone. Welcome to Aethlon Medical's 2nd Quarter Fiscal 2023 Earnings Conference Call. My name is Michael Miller with Rx Communications. At 4:15 p. M.

Speaker 1

Eastern Time today, Aethlon Medical released financial results for its 2nd fiscal quarter ended September 30, 2023.

Speaker 2

If you

Speaker 1

have not seen or received Aethlon Medical's earnings release, please visit the Investor page at www.aethlonmedical.com. Following this introduction and the reading of the company's forward looking statement, Aethlon's Interim Chief Executive Officer and Chief Financial Officer, James Frakes and Aethlon's Chief Medical Officer, Doctor. Stephen LaRosa, will provide an overview of Aethlon's strategy and recent developments. Mr. Frakes will then make some brief remarks on Aethlon's financials.

Speaker 1

We will then open up the call for the Q and A session. Before I hand the call over to Mr. Frakes, please note the news released today and this call contain forward looking statements within the meanings of the Securities Act of 1933 as amended and the Securities Exchange Act of 1934 as amended. The company cautions you that any statement that is not a statement of historical fact is a forward looking statement. These statements are based on expectations and assumptions as of the date of this conference call.

Speaker 1

Such forward looking statements are subject to significant risks And uncertainties and actual results may differ materially from the results anticipated in the forward looking statements. Factors that could cause results to differ materially from those anticipated in forward looking statements can be found under the caption Risk Factors in the company's annual report on Form 10 ks for the fiscal year ended March 31, 2023. The company's most recent report on Form 10 Q and in the company's other filings with the Securities and Exchange Commission. Except as may be required by law, The company does not intend nor does it undertake any duty to update this information to reflect future events or circumstances. With that, I will now turn the call over to Mr.

Speaker 1

James Frakes, Aethlon's Interim Chief Executive Officer and Chief Financial Officer.

Speaker 2

Thank you, Mike, and I would like to thank all of you for dialing in. This is Jim Frakes. Many of you know me as the longtime CFO of Aethlon Medical. Last Tuesday, November 7, Our Board of Directors made the decision to make a change in the company's leadership and they named me as the Interim Chief Executive Officer, replacing Doctor. Charles Fisher, Jr.

Speaker 2

On behalf of everyone at Aethlon Medical, we would like to thank Doctor. Fisher for his service to the company as our CEO and as a member of our Board of Directors. I'm grateful for our Board's confidence in me. I'm deeply committed to Aethlon's shareholders and employees and plan to work tirelessly to help the company succeed. I look forward to continuing the development of the Hemopurifier and initiating in both India and Australia a potential Phase I clinical trial in oncology, an area where we see great promise and ongoing emphasis.

Speaker 2

We received clearance in October from the Drug Controller General of India or DCGI, the Central Drug Authority in India for our planned oncology trial. We expect this trial to begin following completion of an internal in vitro binding study of relevant targets and subsequent approval by the respective ethics boards of interested sites in India. We previously reported a disruption in our Hemopurifier supply for domestic trials and use and that our intended transition to a new supplier for Stellantis nivalis agglutinin or G and A, A component of our Hemopurifier was delayed as we work with the FDA for approval of the supplement to our IDE, which is required to make this manufacturing change. While we continue to work with the FDA to qualify the 2nd supplier of G and A, I'm pleased to note we're also in the process of completing final testing to begin manufacturing chemopurifiers at our new manufacturing facility here in San Diego for use in clinical trials U. S.

Speaker 2

Clinical trials using G and A from our original G and A supplier. We do have sufficient supply of Hemopurifiers for use in our planned oncology trial in Australia and India. With that, I will now turn the call over to Doctor. Steven LaRosa, Aethlon's Chief Medical Officer.

Speaker 3

Thank you, Jim, And I look forward to continuing to work with you closely in your new role as the Interim CEO of Aethlon Medical. We continue to work toward Studying the Hemopurifier as an adjuvant treatment to anti PD-one antibodies, such as KEYTRUDA and Opdivo in the treatment of solid tumors. Anti PD-one antibodies act to neutralize program death ligand 1 or PD L1, A ligand released by tumors that blocks the ability of one's own immune system, specifically T cells to fight tumors. These agents have been revolutionary in the field of clinical oncology in a number of tumor types. But unfortunately, only approximately 30% of patients will have a lasting A leading theory of why this resistance occurs to these agents is that tumors release Extracellular vesicles containing PD L1 that serve as decoy molecules, in essence distracting the antibodies containing PD L1 have been associated with progressive disease during anti PD-one antibody treatment.

Speaker 3

The hypothesis exists that if we can decrease or debulk extracellular vesicles containing PD L1 with the Hemopurifier, then we can resuscitate the ability of the anti PD-one antibodies to reinvigorate the T cells response to tumors. In vitro, we have previously shown that the Affinity resin within the Aethlon Hemopurifier Combined tumor derived extracellular vesicles from a number of cancer types. In a patient with severe COVID-nineteen infection, We demonstrated in vivo a decrease in extracellular vesicles during Hemopurifier treatment. We are currently working on in vitro experiments to specifically address the ability of the Hemopurifier to decrease extracellular vesicles containing PD L1. If this is confirmed as we expect, We plan to seek approval of a clinical trial of the Hemopurifier by ethics board committees at interested sites in Australia and India.

Speaker 3

The planned clinical trial is designed as a basket trial, meaning encompassing multiple tumor types for which anti PD-one antibodies are considered standard of care. In this trial, patients want to go a run-in period where they receive 2 months of initial anti PD-one therapy, during which total extracellular vesicle concentrations as well as extracellular vesicles containing PD L1 concentrations will be measured. We'll also be measuring markers of immune function. Patients who have stable or Aggressive disease after this 2 month run-in period of anti PD-one therapy will go on to the Hemopurifier phase of the study where different intervals of Hemopurifier treatment will be examined. As such, each patient will be serving as their own control.

Speaker 3

This design is expected to help us answer a number of important questions, including, is the Hemopurifar Does the Hemopurifier have the same effect on Removal of extracellular vesicles in the immune system regardless of tumor type. How often do you need to treat with the Hemopurifier to have And does decreasing extracellular vesicles containing PD L1 The answers to all of these questions will inform the development With that, I'll turn the call back over to Jim for the financial discussion, and then he will open it up for questions.

Speaker 2

Thanks, Steve, and good afternoon again, everyone. As of September 30, 2023, Aethlon Medical had a cash balance of approximately $10,200,000 Now some of you that listened to our previous quarterly calls So, I'll try to keep my remarks a bit more high level this quarter. You will find detailed expense information in the financial statements attached to our earnings release that just hit the wire or in our soon to be filed report on 10 Q. Our consolidated operating expenses for 3 months ended September 30, 2023 were approximately $3,200,000 compared to $3,700,000 for the 3 months ended September 30, 2022. This decrease of approximately $500,000 or 13.4 percent in the 2023 period was due to decreases in G and A expenses of approximately $700,000 offset by increases in professional fees of approximately $129,000 and an increase in our payroll and related expenses of 78 $1,000 The $700,000 decrease in general and administrative expenses or G and A expenses This is primarily due to the combination of a $377,000 decrease in clinical trial expenses associated with the closed COVID trial.

Speaker 2

A $261,000 decrease in the purchase of raw materials for research and development testing for use in our Hemopurifier and a $140,000 decrease in subcontract expenses associated with previous government contracts. The $129,000 increase in professional fees was primarily due to an increase of $72,000 in accounting fees associated with audit and compliance services and a $38,000 increase relating to services for our Australian subsidiary And the $78,000 increase in payroll expense was due to a $135,000 increase in salary expense related to an increase in headcount, which was partially offset by a $56,000 decrease in stock based As a result of the changes in expenses that I just noted, The company's net loss decreased from $3,800,000 in the 3 months ended September 30, 2022 to 3,000,000 in the 3 months ended September 30, 2023. We included these earnings results and related commentary in a press release issued earlier this afternoon. That release included the balance sheet for September 30, 2023 and the statements of operations for the 3 6 months ended September 30, 2023, 2022. We will file our quarterly report on Form 10 Q following this call.

Speaker 2

Our next earnings call for the fiscal Q3 ending December 31, 2023, will coincide with the filing of our quarterly report on Form 10 Q in February 2024. And now, Steve and I would be happy to take any questions that you may have. Operator, please open the call for questions.

Operator

Thank you. We will now begin the question and answer session. Our first question will come from Marla Marin with Zacks. Please go ahead.

Speaker 4

Thank you. So you said something in your prepared remarks that I was hoping we could get a little bit more color on where you spoke about in the expected basket trial analyzing the Hemopurifier for multiple cancer types and seeing its efficacy in helping to, I guess, despite the PD L1 challenge, you said that each Patient would serve as its own control. Could you give us a little bit more color there on exactly how that will work?

Speaker 3

Yes. Thanks, Marla. So, because the patients are going to have a run-in period with their anti PD-one therapy alone, we'll be able to see what the anti PD-one therapy has done to their exosomes and their immune function, their T cell response to the tumor. So we'll have that as a control. And then when you When they if they go on to the Hemopurifier phase because they're progressing, their tumor is progressing, then we'll be able to see what the exosome levels and the T cell responses are with Hemopurifier.

Speaker 3

So each patient then is their own control, meaning they you have with and without the Hemopurifier.

Speaker 4

Got it. Okay. So then when you're thinking about that, there's that 70% of the population that just unfortunately doesn't respond to KEYTRUDA and other therapies like KEYTRUDA. And you'll be looking at How those patients respond once they are on the Hemopurifier, which day 1 will be their baseline and you'll

Speaker 3

That's correct, Marl. We'll be able to see what Happens to their exosome levels and their T cell functions after the Hemopurifier compared to when they were not on the Hemopurifier. And you stated correctly, we acknowledge that Fortunately or happily 30% of people will do just fine on their anti PD-one and they'll just they won't go on to the Hemopurifier. They'll just Continue getting their effective therapy, but those 70% will go on will be eligible for the Hemopurifier phase in the trial.

Speaker 4

Okay, got it. Thanks. So just switching topics a little bit in terms of where you are with Obtaining a second supply of I'm not even going to try to say it, so that you have enough Hemopurifiers for your ongoing clinical efforts. So right now, what you have already in hand is sufficient For the BACON oncology trials planned in India and Australia. Is that correct?

Speaker 2

Yes. We think it's good prudent business to have 2 sources of supply for critical Inventory components? The FDA is really making us they just really We'll go through a whole gamut of responses adding the second supplier. But we have We are now in a position with our original supplier to manufacture. So we're actually very excited about that, Marla, that It opens up opportunities in the U.

Speaker 2

S. And perhaps we can talk to the FDA about moving the same basket trial that Steve just described into the U. S. And that's one of my goals as interim CEO is to try to bridge that into the U. S.

Speaker 2

As well, I mean, that's our home market. So yes, it's we're moving in the right direction on that G and A front.

Speaker 4

Got it. So then just one follow-up and I'll step out of queue. So moving The U. S, I think when you originally talked about doing clinical trials in Australia, I think that part of the strategy was to generate some positive data in Australia where the costs Generating data would be lower and then using that data in the U. S.

Speaker 4

To possibly shorten Your timeline, is that the right way to think about it if you do move back into the U. S. At some point in the near term?

Speaker 3

Yes. But the Marla, the FDA has also said we could submit under our breakthrough designation in oncology, we can submit A new oncology trial to them as an IDE.

Speaker 2

So we do plan to In Australia, they have some great labs. We've met some fantastic principal investigators that are very interested in exosomes. And we may use their labs for trials in other countries like the U. S. And India as well, which would give us Potentially that tax benefit you referred to, which is about $0.44 on the dollar in cash, not a Tax credit is actually a cash incentive, because they're trying to build their life science industry in Australia.

Speaker 4

Okay, got it. Thank you. Thank you.

Operator

Thank you, Marla. The next question will come from Thomas McGovern with Maxim Group. Please go ahead.

Speaker 5

Hey, guys. How is it going? So, yes, so my first question Hi, Collyn. Hey, how is it going? So my first question is On the progress in Australia, I just wanted to see if there's any updates in that regard, specifically relating to some site identification or qualification, the Okay.

Speaker 5

And then finally, patient enrollment, where do you guys when you guys believe you'll be able to

Speaker 3

So we as I mentioned during the during our talk, we're completing some in vitro Experiments, which should allow us to complete the clinical investigator brochure, which is a necessary document for ethics board submission. We have already we're working closely with a CRO, NAMSA, in Australia and with Qualtran in India. We've all I can't tell you the exact name of the site because we don't have contracts in place with them yet, but we have a number of sites in Australia who have already Had interest, 2 of which have already undergone site qualification visits, as well as a major center in India. So we have a number of centers that are poised To submit to their ethics board the materials once we have them complete.

Speaker 5

Great. Great to see Progress there. My next question, similar in kind of construct, I suppose, but is there any progress Worth noting on your investigation to Hemopurifier's utility in organ transplants?

Speaker 3

We have collaborated with an outside group and have done Studies on perfusates, meaning fluid that's gone through retrieved organs. And we are About analyzing that data now with the hopes of publishing it down the line. So yes, we've made progress on the in vitro experiments

Speaker 6

on the transplant side.

Speaker 5

Great. And then finally, just real quick, if you guys could give us some type of expected The timeline for I mean, I know working with the FDA can be very difficult to kind of approximate this. But if you have any type of visibility into How long do you expect it to take for that second supplier to be approved? And then kind of a second question, then I'll hop back into the Thanks.

Speaker 2

Guy Cipriani, our Chief Operating Officer is here and he Overseas the manufacturing group and regulatory. So I think this falls into his wheelhouse.

Speaker 6

Sure. Hi, this is Guy. So First, regarding the manufacturing site and when that's online, we're currently doing engineering batches and validation batches in that facility. So we hope to be able to submit to the FDA to add that site to our IDE before the end of the year. So and then we'll have to wait some period of time after we submit to the FDA to either get an okay

Speaker 3

or to be told we have

Speaker 6

to do some additional work. So I think in the Q1, We'll have clarity on that. Regarding bringing the 2nd supplier of G and A online, that's an ongoing process. We have some work to do to address some of their concerns still. We think we should be able to accomplish all of that in the Q1.

Speaker 6

I think bringing the site online in the early part of the Q1 and getting the G and A clearance somewhere midway through the Q1, if not soon.

Speaker 2

Thank you, Guy. And Thomas, of course, we can't predict when the FDA will Prove something or come back with more questions, but all we can do is look at when we could submit Our packages to them.

Speaker 5

Yes, totally understandable. And just for clarity, when you refer to the Q1, you're referring to the 3rd fiscal quarter for you guys, Q1 being the calendar year quarter in 24. Calendar year. Yes. Okay.

Speaker 5

Understood. All right. Great. Thanks for

Operator

The next question will come from Vernon Bernardino with H. Wainwright, please go ahead.

Speaker 7

Hi, guys. Thanks for taking my question. And Jim and Guy, Congratulations on the new appointment. Just wanted to ask, I guess a little bit more about the timelines. Just wondering if you could map out a little bit as far as the initial What we may see as far as the in vitro work before we could see perhaps And announcement that you would think about starting a human clinical trial?

Speaker 3

Yes, sure. Hi, Vernon, this is Steve. So we would envision that those in vitro experiments Take place during November December with the hopes of being able to enroll in early 2024.

Speaker 7

Perfect. Regarding the new supply, do you have to do any GMP work as far as the new supplier is concerned? And Again, could you remind us where or how the current supply is obtained?

Speaker 6

So we have an existing supplier of our G and A and sector laboratories in the Bay Area and California. All of our manufacturing is done Under GMP, so because this is a natural plant product, We want to have more than one supplier providing that key ingredient to us. So really this is part of the strategy to derisk Our supply chain at some point in the future, as we get going on our studies, we'll probably look to see if we can do or a common version of the protein to even derisk it further. So these are all activities that we're thinking about and we're being very Cautious in how we

Speaker 2

kind of roll them out.

Speaker 6

But we right now, we need to mitigate any risk of supply I have a more than 1 supplier of this Keystar in Turin.

Speaker 7

As part of that work, going to evolve Supply that is needed to dovetail with the initiation of studies or do you have enough supply now such that Once you do get FDA approval through the supplement of your IDE that you could start studies right away.

Speaker 3

Yes, we are able to manufacture devices to support a study today. So,

Speaker 6

Fractured devices to support the study today. So we don't have a we currently don't have supply constraints on the G and A.

Speaker 2

Right. Just to expand further on Guy's comments, Vernon, so while we're waiting for our Own manufacturing facility here in San Diego to come online with FDA approval. We can easily go back to the contract research Facility, which is a little north of us here in Southern California. And we could run a few batches Manufacturing campaigns there. So we don't things can always change.

Speaker 2

But at the moment, our feeling is supply is not No problem. Which is the nice change from points in the past.

Speaker 7

Yes, terrific. I look forward to perhaps announcement of those in future results and the start of the

Operator

This concludes our question and answer session. I would like to turn the conference back over to Mr. James Frakes for any closing remarks. Please go ahead, sir.

Speaker 2

I'd like to thank all of you again for joining us today for a discussion of our quarter end results. We look forward to keeping you up to date on future calls. Thanks again for your support. Goodbye.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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Key Takeaways

  • Aethlon appointed longtime CFO Jim Frakes as Interim CEO, replacing Dr. Fisher and aiming to maintain leadership continuity and strategic focus.
  • Received DCGI clearance in October to initiate a Phase I clinical trial of the Hemopurifier in India, with plans to begin a parallel basket trial in Australia after in vitro binding studies and ethics board approvals.
  • While awaiting FDA IDE supplement approval for a second supplier of the key GNA component, Aethlon’s new San Diego manufacturing facility is completing validation batches to ensure sufficient Hemopurifier supply for forthcoming trials.
  • The planned basket trial will evaluate the Hemopurifier as an adjuvant to anti–PD-1 therapies (e.g., KEYTRUDA), using each patient as their own control to assess removal of PD-L1–containing extracellular vesicles and T-cell reinvigoration.
  • As of September 30, Aethlon reported a $10.2 million cash balance, reduced quarterly operating expenses by 13%, and lowered net loss to $3 million from $3.8 million year-over-year.
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Earnings Conference Call
Aethlon Medical Q2 2024
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