Aethlon Medical, Inc. (NASDAQ:AEMD) Q4 2022 Results Conference Call June 28, 2022 4:30 PM ET
Company Participants
Dr. Chuck Fisher – CEO
Jim Frakes – CFO
Dr. Steven LaRosa – Chief Medical Officer
Conference Call Participants
Marla Marin – Zacks
Vernon Bernardino – H.C. Wainwright
Anthony Vendetti – Maxim Group
Operator
Good afternoon, and welcome to the Aethlon Medical Fourth Quarter Fiscal 2022 Earnings and Corporate Update Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.
I would now like to turn the conference over to Jim Frakes, Chief Financial Officer. Please go ahead.
Jim Frakes
Thank you, operator, and good afternoon, everyone. Welcome to Aethlon Medical’s fiscal year-end earnings conference call. My name is Jim Frakes, and I’m Aethlon’s Chief Financial Officer.
At 4:15 pm Eastern Time today, we released financial results for our fiscal year ended March 31, 2022. If you have not seen or received Aethlon Medical’s earnings release, please visit the Investors page at www.aethlonmedical.com.
Following this introduction and the reading of our forward-looking statement, Aethlon’s CEO,
Dr. Chuck Fisher; and our Chief Medical Officer, Dr. Steven LaRosa, will provide an overview of Aethlon’s strategy and recent developments. I will then make some brief remarks on Aethlon’s financials. We will then open up the call for the Q&A session.
Before I hand the call over to Dr. Fisher, please note that the news release today and this call contain forward-looking statements within the meaning 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. 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-K for the fiscal year ended March 31, 2022, our 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 Dr. Chuck Fisher, Aethlon’s Chief Financial Officer — Executive Officer.
Dr. Chuck Fisher
Thanks, Jim, and thanks all of you for dialing in today. This is Chuck Fisher. And I’ll make a few opening comments.
It has been a busy four months since our last investor conference call on February 14, 2022. Before I hand the call over to Dr. Steven LaRosa, our Chief Medical Officer, who will provide an update of our clinical trials in infectious diseases, I would like to make some brief remarks about the current monkeypox outbreak as we receive numerous inquiries about that outbreak from investors and reporters.
We previously commissioned Battelle Memorial Institute in 2008 to run a monkeypox virus about MPV in vitro study using a miniature version of our Hemopurifier. This study demonstrated that high concentrations of monkeypox virus, approximately 35,000s GPUs per mil were rapidly depleted from cell culture fluids when circulated through the Hemopurifier. The study indicated that the Hemopurifier removed 44% of infections monkeypox virus in the first hour of testing, 82% after six hours, and 98% after 20 hours. The studies were conducted in triplicate, and data verification was provided by real time PCR.
Given the recent outbreak of monkeypox virus, we continue to monitor the caseload and disease severity. We’ve had recent communications with the FDA to discuss what process would be should we be reached out to by a hospital requesting a single patient emergency use for our Hemopurifier.
Monkeypox has not yet been declared an emergency by the Department of Health and Human Services Secretary. And as such, there is not an emergency use authorization process in place. However, the World Health Organization has described the outbreak as “unusual” and has said that the virus’s continuing spread was worrying enough to convene its expert committee on Thursday June 23, 2022, to decide whether the disease should be declared a Public Health Emergency of International Concern.
The International Health Regulations Emergency Committee met on 23 June of this year regarding the multi-country monkeypox outbreak to advise the WHO Director General on whether it should be constituted a Public Health Emergency of International Concern or so called pheic.
The committee advised the WHO Director General that the outbreak should not constitute a Public Health International Emergency Concern event at this present time. However, the committee acknowledged that the emergency nature of the event and that controlling the future spread of this outbreak requires intense response efforts.
They advised that the event should be closely monitored and reviewed after a few weeks where additional information about the current unknowns, for instance, incubation period as well as sexual transmission et cetera become available to determine if significant changes have occurred that may warrant a reconsideration of their advice. It is worth noting that the NPR wrote a piece expressing concern regarding the inadequate testing on 25 June, 2022 — inadequate testing for monkeypox virus. Additionally, Nature Medicine made the observation that there are far more mutations than would be expected in this particular outbreak with double-stranded DNA mutation rates being significantly elevated.
Now, let me turn the call over to Steven LaRosa, our Chief Medical Officer.
Dr. Steven LaRosa
Hello, everyone, and thanks for listening to our presentation. I’m Dr. Steven LaRosa, the Chief Medical Officer at Aethlon.
First, I would like to give you an update on our U.S. clinical trial, investigating the Hemopurifier for the treatment of patients with severe SARS-CoV-2 or COVID — known as COVID-19 infection. This trial is conducted under the open Investigational Device Exemption or IDE for the Hemopurifier in life-threatening infections.
The trial is designed to allow for up to 40 patients to be treated under an early feasibility study protocol and up to 20 clinical sites in the United States. As you may recall, we entered into an agreement with PPD, a leading global contract research organization or CRO, to oversee our U.S. clinical studies investigating the Hemopurifier for critically ill COVID-19 patients. We continued to make progress in our severe COVID trial during the March 2022 quarter under our open Investigational Device Exemption for the Hemopurifier for life-threatening viral infections.
We now have nine hospitals activated for patient enrollment, and they are actively screening patients for the trial. These hospitals include LSU Shreveport, Valley Baptist Medical Center in Texas, Loma Linda Medical Center, Hoag Irvine and Newport Beach in Southern California, University of California Davis, University of Miami Medical Center, Cooper Medical and Thomas Jefferson Medical Center. We are in the site activation process with additional U.S. medical centers as well.
In June 2022, LSU Shreveport enrolled the first patient in the clinical trial. The patient completed the Hemopurifier treatment phase of the study and is now in the 28-day follow-up period. The patient tolerated all the Hemopurifier treatment patients — all the Hemopurifier treatments without adverse events.
Also on the COVID-19 front, during our recent earnings call, I noted that we had recently obtained ethics review board approval and entered into a clinical trial agreement with Medanta Medicity Hospital, a multispecialty hospital in Delhi, India for a COVID trial — COVID-19 clinical trial at that location. We have previously conducted multiple clinical trials with the principal investigator as well as a previous clinical trial with Medanta Medicity Hospital in hepatitis C patients. Our goal with this trial in India’s to help COVID-19 patients there and also generate supporting patient data that we expect will be submitted to the FDA along with our U.S. clinical trial data. This site in India is now open for enrollment and has treated one patient and is actively screening for additional COVID-19 patients. We are also in the process of selecting additional clinical sites for this study.
Now, let me turn the call back over to Chuck Fisher.
Dr. Chuck Fisher
Thanks, Steve. I’d also like to give an update on our head and neck cancer trial. We’ve enrolled two patients in the trial to date. The team at the University of Pittsburgh Medical Center has continued to actively screen for additional patients for this trial. We are in the process of creating a protocol supplement to potentially increase the pool of subjects for the study. We are also in discussions with additional sites and are designing a basket trial to examine the effect of our Hemopurifier on exosomal removal in multiple tumor types.
We have an active preclinical research program where we are conducting experiments on additional targets for our Hemopurifier, as well as the ones to further define exosome bindings.
With that I’ll turn it back over to Jim for the financial discussion, and then open up for questions.
Jim Frakes
Thanks, Chuck, and good afternoon, again, everyone.
On March 31, 2022, we had a cash balance of approximately $17.1 million. Our current cash position sets us up very well for conducting our planned clinical trials as Steve LaRosa just noted and for the manufacturing of our Hemopurifier for those trials.
During the fiscal year ended March 31, 2022, we raised approximately $17.5 million in net proceeds from the issuance of common stock and a combination of a registered direct financing and ATM sales. We recorded approximately $294,000 of revenue related to our government contracts with the NIH and the fiscal year ended March 31, 2022 compared to approximately $659,000 in the fiscal year ended March 31, 2021.
On March 31, 2022, we had approximately $345,000 of deferred revenue related to those contracts, as a result of not achieving certain milestones on those contracts.
Our consolidated operating expenses for the fiscal year ended March 31, 2022 were approximately $10.72 million, compared to approximately $8.55 million for the fiscal year ended March 31, 2021, an increase of approximately $2.17 million in the fiscal year ended March 31, 2022. The $2.17 million increase in the 2022 period was due to increases in payroll and related expenses of approximately $1.17 million and in general and administrative expenses of approximately $1 million, which were partially offset by a decrease of approximately $4,000 in our professional fees.
The $1.17 million increase in the fiscal year ended March 31, 2022 in payroll and related expenses was due to an increase in cash-based compensation of approximately $1.2 million, which was partially offset by a decrease in stock-based compensation of approximately $29,000. The $1.2 million increase in cash-based compensation was primarily due to increases of approximately $826,000 and $721,000 in G&A payroll and in R&D payroll, respectively, due to headcount increases and approximately $203,000 in relocation-related compensation to senior executives that relocated to San Diego, California, as a condition of their employment. Those increases were partially offset by the combination of a $452,000 accrual in the 2021 period related to the separation agreement with our former CEO with no comparable expense in the 2022 period and a net decrease of approximately $135,000 in cash bonuses.
The $1 million increase in the fiscal year ended March 31, 2022 in G&A expenses primarily arose from increases of $453,000 and clinical trial expenses, $209,000 in rent expense, and $195,000 in insurance expenses.
As a result of the changes in revenues and expenses I just described, our net loss before non-controlling interests increased to approximately $10.4 million for the fiscal year ended March 31, 2022 from approximately $7.9 million for the fiscal year ended March 31, 2021.
We included these earnings results and related commentary in a press release issued earlier this afternoon. That release included the balance sheet for March 31, 2022 and the statements of operations for the fiscal years ended March 31, 2022 and 2021. We will file our annual report on Form 10-K following this call.
Our next earnings call for the fiscal first quarter ending June 30, 2022 will coincide with the filing of our quarterly report on Form 10-Q in early August. And now Chuck, Steve and I would be happy to take any questions that you may have.
Operator, please open the call for questions.
Question-and-Answer Session
Operator
We will now begin the question-and-answer session. [Operator Instructions] The first question is from Marla Marin with Zacks. Please go ahead.
Marla Marin
You’ve done a lot of work outside of the ongoing clinical trials that you’re conducting now, a lot of work on researching the impact of the Hemopurifier. Can you give us any color on how that enters into some of your conversations or interactions with the regulators as you try to move forward?
Dr. Steven LaRosa
Marla, this is Steven LaRosa. Thank you for your question. So, we are — we have a breakthrough designation in COVID-19 and viral infections with the FDA and are in close contact with them in terms of — in our current clinical trials, we noted that we enrolled our first patient. So that data will be forthcoming. We don’t have that currently. But we we’ve had conversations with them about potential ways to adjust the study to — so that we can continue the trial and enroll more patients. I don’t know if that answers your question.
Marla Marin
Well, I was thinking about some of the data that you’re getting outside of the trial…
Dr. Steven LaRosa
Yes. The data we have, Marla, outside the trial is data that — are from patients we’ve treated as single patient emergency use criteria. These were published in a peer-reviewed journal in Frontiers in Medicine. The data is very interesting in that in one patient who was not viremic, we were able to show the removal of exosomes and exosomal micro RNAs that are implicated in coagulopathy and acute lung injury. And those exosomes micro RNAs decreased with Hemopurifier treatment at the same time the patient’s oxygenation and coagulopathy were improving. In a second patient who was in fact viremic with COVID-19, we’re able to show for the first time in vivo that the Hemopurifier decreased the COVID viral load by 58% during the first six hour Hemopurifier treatment.
Marla Marin
And when you speak to or interact with the FDA, does any of that come into play, given that it’s not actually the outcome of an ongoing clinical trial?
Dr. Steven LaRosa
They are aware of this data. But, they want to see obviously safety and efficacy data and a larger number of patients enrolled in the clinical trial.
Marla Marin
Okay. Thank you.
Operator
The next question is from Vernon Bernardino with H.C. Wainwright. Please go ahead.
Vernon Bernardino
I was wondering, we still have over 100,000, at least a seven-day average cases of COVID recorded daily, but a lot of them are not severe cases anymore. Just wondering, what are the key challenges you think you’ve — what have you identified are the key challenges for enrolling patients in the study? And perhaps a little differently, what have your clinical sites, or activated hospitals think may be the challenges or ways that they could perhaps enroll patients more quickly? Thank you.
Dr. Steven LaRosa
So, as I think you’ve picked up on, there are still a number of — fairly large number of COVID-19 cases. But what we’ve noted as others have noted is that vaccines have been quite good at preventing severe infection. So, what we’re seeing is although the cases are up, the number of — the sites are telling us the number of hospitalizations and ICU admissions is still relatively low, although it has increased recently is the feedback we’ve received from hospitals. So, we still feel that the story is not over with COVID and that there will likely still be cases that are eligible.
The other interesting — the challenge is, to get into our current trial, you have to be on renal replacement therapy, and that has decreased. The need for renal replacement due to COVID has decreased during the pandemic. So, we’re also trying to work with the regulators to see if we can increase the potential pool of patients that would be eligible for the study.
Vernon Bernardino
Now, pardon me if I don’t remember this. But as far as the patients are concerned, how — what is the length of treatment, and as far as the design of the study is concerned, the original number of patients that you were targeting for a complete study?
Dr. Steven LaRosa
So, we were granted approval to conduct a trial of up to 40 patients in a safety and feasibility type trial. So, that is still the plan. Could you repeat the second part of your question?
Vernon Bernardino
Just wondering if the length of the treatment is still the same as originally designed?
Dr. Steven LaRosa
Right. So, the design is that a patient will receive a four- to six-hour chemo purifier session once daily for four consecutive days, during which time there would be blood drawn for both COVID viral load measurements in the blood to see if the Hemopurifier decreases viral load as well as biomarkers of inflammation and coagulation. Throughout the whole 28-day study period, we’d also be monitoring, see if a patient’s organ failures improve and what their clinical outcome is at the end of that time period. So that our design has stayed the same throughout the trial, we’re not going to — we don’t plan on making changes to that follow-up period or treatment period going forward.
Vernon Bernardino
Okay. And sorry to jump back to the first question. With the 40 patients, can you either describe or provide some kind of insight as to what the FDA thinks as to the number of patients that you plan to enroll those patients? And are they open to a lower number of patients such that this study could be completed in a time in which perhaps the Hemopurifier could be considered sooner rather than later as a treatment option for severe COVID patients?
Dr. Steven LaRosa
So, to answer your question, they gave us approval to treat up to 40 patients as part of this approval. A typical safety and feasibility study, however, typically is on the order of 10 to 15 patients. So, we would have the ability where this is an open label study to review our data as it comes in, both safety and efficacy, and then revisit the time point — revisit that data with the FDA, especially given the breakthrough designation at any time. So, it’s not a situation where we have to enroll 40 patients. There is the latitude to examine the data as it comes in and then discuss with the FDA.
Vernon Bernardino
Thank you for that. And last question for me and sorry to keep on and on and on. Do you test — are the patients tested for, for example like PCR, the type of variant that they have, for example, if B45 [ph] is now comprising 50% of the patients, is that some kind of data that you’d be able to collect?
Dr. Steven LaRosa
Yes. We will have multiple viral measurements in the blood from every patient and have the ability then to determine exactly which variant it is. Yes.
Vernon Bernardino
Terrific. Thank you for taking my questions, and looking forward to more data.
Dr. Chuck Fisher
And Vernon, I think it’s worth noting that to date, we also demonstrated binding of most known variants, and we anticipate that that will continue.
Vernon Bernardino
No, exactly. And that’s why I asked the question, and looking forward to more of that kind of data. Thank you.
Dr. Chuck Fisher
Sure.
Operator
The next question is from Anthony Vendetti with Maxim Group. Please go ahead.
Anthony Vendetti
So, just following up on the KEYTRUDA trial. So, you have two patients so far. If I remember from the last call, Chuck, you mentioned about increasing the number of sites to try to increase enrollment to get up to 10 to 12. Have you been successful in recruiting physicians and patients at these other sites and it’s just taken longer to sign up, or what can you give us an update on the additional sites?
Dr. Chuck Fisher
Sure. Good question. Thanks for calling. Obviously, the first patient went very smoothly, but that was at a time when the hospital was not hit by COVID. Subsequently we were hit by COVID pretty badly, including running over to the cancer hospital. And that embargoed use of patients — or having patients would come in that could get the — our treatment for COVID. Subsequently, where we are now is the same has tapered off a bit. They’re not as severe, which Steve mentioned earlier and less in the ICU. Sorry, the head and neck patients are hard to come by at present. And there’s been a lot of screening. So, what we’re working with the University of Pittsburgh, as well is thinking more broadly than them to be adding other hospital sites with other physicians that specialize in head and neck to increase numbers in those trials.
Dr. Steven LaRosa
Yes. I would just comment that one of the challenges in head and neck is having patients who have enough reserve, enough strength to tolerate the Hemopurifier. So, there may be people who are eligible by their disease, but because of their functional status that is — that’s been a challenge as well as with COVID. Well, we’ve had some recent discussions with the PI about some attempts that we can make any protocol supplement to broaden the inclusion criteria, and we’re going to pursue those.
Additionally, as Chuck said, we’re also currently drafting a protocol for an additional trial, which is more of a basket trial where you’re looking at the effect of the Hemopurifier upfront before KEYTRUDA in a number of different tumor types that — where KEYTRUDA is indicated. So, we’re rapidly pursuing getting that protocol draft written, so that we could get that trial going.
Anthony Vendetti
Right, because KEYTRUDA is used for a number of different cancers. What do you think would be the logical next cancer to look at after head and neck with KEYTRUDA?
Dr. Steven LaRosa
Well, there’s a whole host that we’re — in a basket trial, we would include a number of different tumor types. And what we would particularly be interested in looking at is, can we restore responsiveness to KEYTRUDA in people who’ve had a run-in period and are showing signs of their failing. Because that is actually 70% of the people who get KEYTRUDA ultimately go on to fail. So, if we can actually restore their responsiveness in a number of tumor types that would be the next strategy.
Anthony Vendetti
Okay. That makes sense. Just to Chuck’s point that some patients are not strong enough to withstand the Hemopurifier. How do you measure that? How do you determine if — is it a number of factors or is there a specific determinant?
Dr. Steven LaRosa
Yes. There’s a number of grading and scoring scales that describe someone’s functional status, and you include those in your inclusion criteria to make sure that you have somebody who is not severely debilitated from their cancer, to understand — to grade that.
Anthony Vendetti
Okay. Thank you very much. I appreciate it. That was helpful.
Dr. Chuck Fisher
Thanks, Anthony.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Dr. Chuck Fisher for any closing remarks.
Dr. Chuck Fisher
We’d like to thank everybody for joining us on this call today to discuss our fourth quarter results. We look forward to keeping you up to date on future calls. And thank you very much for joining, and have a good day. Good bye.
Operator
The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.
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