Biostage, Inc.
Q1 2022 Earnings Call Transcript
Published:
- Operator:
- Greetings. Welcome to the Biostage Q1 2022 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Peter Pellegrino, Interim Vice President of Finance. You may begin.
- Peter Pellegrino:
- Thank you. Good morning. This is Peter Pellegrino, Interim Vice President of Finance. On the call with me today is David Green, our Interim Chief Executive Officer. Before I turn it over to David, let me review the company's forward-looking statements. In our discussion today, we will make statements that constitute forward-looking statements. Our actual results and performance may differ materially from what we have previously projected due to the risks and uncertainties, including those detailed in our annual report on Form 10-K for the year ended December 31, 2021, and our other public filings. Any forward-looking statements, including those related to our future results and activities, represent our estimates as of today and should not be relied upon as representing our estimates at any subsequent day. Additionally, any material, financial or statistical information presented in the call, which are not included in our press release, will be achieved and available in the Investor Section of our website under Events and Presentations. Now I will turn it over to David.
- David Green:
- Thank you, Peter, and good morning, everyone. And welcome to this quarterly conference call for Biostage, where we will be discussing our earnings for the quarter and recent progress for the company. Biostage has had a number of important developments during fiscal '22 so far. So let me review those. First, we've strengthened our intellectual portfolio -- intellectual property portfolio with the issuance of a new United States patent that is our 8th patent -- 8th U.S. patent that protects our technology for use in the bronchus or the airway in addition to the currently patent protected applications in the esophagus or the gastrointestinal tract. Second, following the end of our first quarter, we settled a lawsuit that had been outstanding against us for almost five years. This lawsuit was settled without any admission of liability or wrongdoing for Biostage. Third, we recently closed, also post the end of the quarter, a private placement of shares in the company for approximately $5.1 million. In Q1, we continued to lay the groundwork for us to be able to raise further capital, to apply to relist on NASDAQ and to prepare to treat the first patient in our FDA approved clinical trial. I think it's worth recapping some of the milestone achievements that have got us to this point. First, we performed the first ever regeneration of an esophagus in a human cancer patient. This was performed by Dr. Dennis Wigle, the Chair of Thoracic Surgery at Mayo clinic, one of the world's most respected hospitals. That paper concluded that the Biostage esophageal implant “Would have considerable clinical use.” Other surgeons have described our product as “Revolutionary or “A breakthrough.” This first in human experience is backed up by the research of the Biostage esophageal implant in more than 45 pigs. That is an enormous number of pigs for a biotech company going into clinical trials. Some of those pigs were taken out for almost two years. One of these implants was not in the esophagus, but actually in the bronchus. And this pig showed regeneration of a functional bronchus just like we had seen in the pigs treated in the esophagus. The patent that was issued in Q1 protects this application in the bronchus. The FDA approved our clinical trial for a maximum 10 patients in up to 5 hospitals in the United States. This trial measures both safety and efficacy in the actual patient population. Hence, it is more similar to a miniature Phase 3 trial than a typical Phase 1 study -- a safety study on pharmaceuticals in healthy adult volunteers. Biostage has raised over $22 million in the last four years that excludes the $5 million in the recent private placement. Most of that was from private individuals as was the recent private placement. And those investors got to know Biostage’s technology, its personnel and its potential, and they're long-term strategic investors. None of these investors is a hedge fund. One of these investors is me. I invested $250,000 in Biostage when I joined back in November last year. And apart from the legally required minimum wage, I'm paid entirely in stock options. As I mentioned earlier, we also closed a $5.1 million round of financing last week. Hence every month I’m investing in Biostage. My employment is not a drain on the cash flow of the company. I've also invested in this recent private placement round. All of our employees are also compensated in part through stock options. We have 8 issued patents in the United States and 2 in China, which includes the new one on the bronchus. These cover the bioreactor, the scaffold and the retrievable nature of the scaffold, which leaves no permanent implant in the body. We also have 2 Orphan Drug Designations, which can provide 7 years of exclusivity as an addition to the patents in the United States from the date of approval of the product. So Biostage has accomplished a lot in the last few years and in quarter one. And its current and short-term goals are to raise additional capital to relist on NASDAQ, and to begin the clinical trial. I'll now turn the call back to Peter to review the financials of Q1. Peter?
- Peter Pellegrino:
- Thank you, David. I want to briefly cover the highlights of our first quarter financial results. Our net loss was approximately $2.2 million or $0.20 per basic and diluted share for the quarter ended March 31, 2022. Those figures include approximately $0.3 million of non-cash items related to share-based compensation and depreciation expenses. At March 31, 2022, we had cash on hand of approximately $0.7 million and had no debt. We used $0.5 million in cash for operations during the quarter. As of May 16, 2022, we have received aggregate proceeds of approximately $5.1 million from the private placement, which closed on May 12, 2022. Based on our current operating plan and given considerations of this cash infusion, we expect that our current cash will be sufficient to fund our operating expenses and capital expenditure requirements through the first quarter of 2023. In relation to our ongoing litigation, settlement and related legal expenses, we estimate that we will incur approximately $6 million of costs of which approximately $5.5 million remain unpaid. This amount includes the cost of both the accrual for contingency matter of $3.3 million and approximately $2.7 million of legal and related costs, which consists of attorney’s fees and advisor and specialist costs as part of our defense in this matter. With respect to these costs, we are required to either pay such costs directly or indemnify Harvard Bioscience as to such amount it incurs. Of such amounts, we anticipate that HBIO or Harvard Bioscience will pay an aggregate amount of $4 million by the end of the second quarter of 2022. With respect to our indemnification obligations to Harvard Bioscience, we have collectively entered into a Preferred Issuance Agreement dated as of April 27, 2022, or the PIA. In connection with the PIA, we have agreed that once Harvard Bioscience has paid at least $4 million in such costs to satisfy our indemnification obligations, in lieu of paying cash, we will issue a senior convertible preferred stock to Harvard Bioscience. We currently estimate that the remaining aggregate amount of indemnification obligations that we will be obligated to pay will be approximately $1.5 million. Thank you. I'll turn it back over to David.
- David Green:
- Thank you, Peter. So we'll now open the calls up for anyone who has questions for us to answer them.
- Operator:
- Operator:
- It looks like we don't have any questions at this time. And I will like to turn the call back over to David Green for closing remarks.
- David Green:
- Well, it's been a great start to the year for Biostage and we look forward to making Biostage a success for both its patients and its shareholders in the future. Thank you all and have a good day.
- Operator:
- This concludes today's conference. And you may now disconnect your lines at this time. Thank you for your participation.