What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2021-02-25 compared with 2020-03-05 · 76 added, 45 removed, 66 unchanged (65% of the section changed)

1 unchanged sentence

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements” and under “Risk Factors” herein.

Caladrius Biosciences, Inc.

(“we,” “us,” "our," “Caladrius” or the “Company”) is a clinical-stage biopharmaceutical company dedicated to the development of cellular therapies designed to reverse cardiovascular disease.

We are developing first-in-class therapy products that are based on the notion that our body contains finely tuned mechanisms for self-repair.

Our technology leverages and enables these mechanisms in the form of specific, naturally-occurring minimally manipulated cells, using formulations unique to each indication.

Our leadership team collectively has decades of biopharmaceutical development experience and world-recognized scientific achievement in the field of cardiovascular disease, among other fields.

Our goal is to build a broad portfolio of novel and versatile products that address important unmet medical needs.

Our current product candidates include three developmental treatments for ischemic diseases based on our CD34+ cell therapy platform:

CLBS12, recipient of SAKIGAKE designation and eligible for early conditional approval in Japan for the treatment of critical limb ischemia ("CLI") based on the results of an ongoing clinical trial;

CLBS16, in a Phase 2 clinical trial in the U.S.

The following discussion should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Annual Report.

We are a clinical-stage biopharmaceutical company dedicated to the development and commercialization of cellular therapies designed to reverse disease and/or promote the regeneration of damaged tissue.

We are developing first-in-class therapeutics based on the characteristics of naturally occurring CD34+ cells and their ability to stimulate the growth of new microvasculature.

Our technology leverages these cells to enable the body's natural repair mechanisms using formulations unique to each medical indication.

Our leadership team has decades of collective biopharmaceutical development experience.

Our goal is to develop and commercialize products that address important unmet medical needs based on a broad and versatile portfolio of candidates.

The Company’s current product candidates include:

CLBS16, the subject of both a recently completed positive Phase 2a study and a newly initiated Phase 2b study in the U.S.

for the treatment of coronary microvascular dysfunction (“CMD”);

and CLBS14, a Regenerative Medicine Advanced Therapy ("RMAT") designated therapy for which we have finalized with the U.S.

Food and Drug Administration (the "FDA") a protocol for a Phase 3 confirmatory trial in subjects with no-option refractory disabling angina ("NORDA").

Additional Out-licensing Opportunities

Our broad intellectual property portfolio of cell therapy assets includes notable programs available for out-licensing in order to continue their clinical development.

Our current long-term strategy focuses on advancing our therapies through development with the ultimate objective of obtaining market authorizations and entering commercialization, either alone or with partners, to provide treatment options to patients suffering from life-threatening medical conditions.

We believe that we are well-positioned to realize potentially meaningful value increases within our own proprietary pipeline if we are successful in advancing our product candidates to their next significant development milestones.

HONEDRA® (CLBS12), recipient of SAKIGAKE designation and eligible for early conditional approval in Japan for the treatment of critical limb ischemia (“CLI”) and Buerger’s Disease based on the results of an ongoing clinical trial;

CLBS201, designed to assess the safety and efficacy of CD34+ cell therapy as a treatment for pre-dialysis patients with chronic kidney disease (“CKD”) and OLOGO™ (CLBS14), a Regenerative Medicine Advanced Therapy (“RMAT”) designated therapy for which the Company is in discussion with the U.S.

Food and Drug Administration (the “FDA”) to finalize a Phase 3 protocol of reduced size and scope for a confirmatory trial in subjects with no-option refractory disabling angina (“NORDA”).

Results of Operations

2 unchanged sentences

Operating Expenses

For the year ended December 31, 2019 , operating expenses totaled $20.1 million compared to $17.0 million for the year ended December 31, 2018 , representing an increase of $3.1 million or 18% .

For the year ended December 31, 2020, operating expenses totaled $19.1 million compared to $20.1 million for the year ended December 31, 2019, representing a decrease of $0.9 million or 5%.

Operating expenses comprise the following:

Research and development expenses were approximately $10.8 million for the year ended December 31, 2019 compared to $7.6 million for the year ended December 31, 2018 , representing an increase of approximately $3.2 million , or 42% .

• Research and development expenses were approximately $9.3 million for the year ended December 31, 2020 compared to $10.8 million for the year ended December 31, 2019, representing a decrease of approximately $1.5 million, or 14%.

Research and development in both periods focused on the advancement of our ischemic repair platform and related to:

ongoing registration-eligible study expenses for CLBS12 in critical limb ischemia in Japan, whereby we continue to focus spending on our patient enrollment, and anticipate completing enrollment in the first half of 2020;

ongoing Phase proof-of-concept study expenses for CLBS16 in coronary microvascular dysfunction, whereby study enrollment was completed in the second quarter of 2019, preliminary top-line results were reported in November 2019 and full results expected in the first half of 2020;

expenses associated with preparation our confirmatory Phase 3 study of CLBS14 in NORDA.

In late 2019, we projected that the Phase 3 study would cost approximately $70 million in external expenses over the next several years to complete, and as a result, we elected to postpone the initiation of the study until we have confidence that we can access sufficient capital to allow us to complete the study uninterrupted.

General and administrative expenses were approximately $9.3 million for the year ended December 31, 2019 , compared to $9.4 million for the year ended December 31, 2018 , representing a decrease of approximately $0.1 million , or 1% .

◦ expenses associated with investigational new drug application and planning for commencement in the third quarter of 2020 of a pilot study of CLBS119, a CD34+ cell therapy for repair of COVID-19 induced lung damage targeting patients with severe SARS-CoV-2 infection that required ventilatory support due to respiratory failure;

◦ ongoing registration-eligible study expenses for HONEDRA® in critical limb ischemia in Japan, whereby we continue to focus spending on our patient enrollment.

We may continue to experience delays in enrollment in that study due to the “State of Emergency” issued in Japan on Jan 7, 2021 and now extending through March 7, 2021 covering Tokyo and other regions in response to increased number of COVID-19 patients as well as a severe shortage of beds in intensive care units (and other hospital beds) affecting all of our clinical sites.

We expect to complete enrollment during the second quarter of 2021;

◦ expenses associated with the proof-of-concept study for CLBS16 in coronary microvascular dysfunction, whereby study enrollment was completed in the second quarter of 2019 and full results reported in May 2020 and continuing efforts to advance CLBS16 into a Phase 2b study (the FREEDOM study) in the second half of 2020;

◦ expenses associated with the preparation of our confirmatory Phase 3 study of OLOGO TM in NORDA in the second quarter of 2019.

In late 2019, we projected that the Phase 3 study then agreed with the FDA would

cost approximately $70 million in external expenses over the next several years, and as a result, we elected to postpone the initiation of the study until we have confidence that we can access sufficient capital to allow us to complete the study uninterrupted.

Discussions with FDA aimed at reducing the size and scope of the Phase 3 requirement continue.

• General and administrative expenses were approximately $9.9 million for the year ended December 31, 2020, compared to $9.3 million for the year ended December 31, 2019, representing an increase of approximately $0.6 million, or 6%.

Our general and administrative expenses focus on general corporate-related activities.

3 unchanged sentences

Total other income (expense) is primarily comprised of investment income on cash and marketable securities.

Income Tax Benefit

In April 2020, we received approval from the New Jersey Economic Development Authority ("NJEDA") to participate in the Technology Business Tax Certificate Transfer Program (the "Program"), whereby we qualified to sell a percentage of our New Jersey net operating losses ("NJ NOLs").

We subsequently sold a portion of our NJ NOLs to a qualifying and approved buyer pursuant to the Program for net proceeds of $10.9 million.

Analysis of Liquidity and Capital Resources

1 unchanged sentence

During the year ended December 31, 2020, we met our immediate cash requirements through existing cash balances.

Additionally, we used equity and equity-linked instruments to pay for services and compensation.

Net cash provided by or used in operating, investing and financing activities were as follows (in thousands):

1 unchanged sentence

Net cash used in operating activities $ (8,823) $ (18,882)

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities (7,277) 21,432

Net cash provided by financing activities 18,580 1,183

Operating Activities

Our cash used in operating activities during the year ended December 31, 2019 totaled approximately $18.9 million , which is the sum of (i) our net loss of $19.4 million , and adjusted for non-cash income and expenses totaling $1.6 million (which includes adjustments for equity-based compensation, depreciation and amortization, and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities of approximately $ 1.1 million .

Our cash used in operating activities during the year ended December 31, 2018 totaled approximately $20.0 million , which is the sum of (i) our net loss of $16.2 million , and adjusted for non-cash income and expenses totaling $ 1.5 million (which includes adjustments for equity-based compensation, depreciation and amortization, gain on disposal of assets, deferred income taxes, and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities of approximately $ 5.3 million .

Our cash used in operating activities during the year ended December 31, 2020 totaled approximately $8.8 million, which is the sum of (i) our net loss of $8.1 million, as adjusted for non-cash income and expenses totaling $1.6 million (which includes adjustments for equity-based compensation, depreciation and amortization, and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities of approximately $2.3 million.

Our cash used in operating activities during the year ended December 31, 2019 totaled approximately $18.9 million, which is the sum of (i) our net loss of $19.4 million, as adjusted for non-cash income and expenses totaling $1.6 million (which includes adjustments for equity-based compensation, depreciation and amortization, and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities of approximately $1.1 million.

Investing Activities

Our cash provided by investing activities during the year ended December 31, 2019 totaled approximately $21.4 million and was entirely due to net proceeds from the sale of marketable securities investments (net of purchases of marketable securities).

Our cash used in investing activities during the year ended December 31, 2018 totaled approximately $4.7 million and was primarily due to net purchases of marketable securities (net of sales of marketable securities), and partially offset by $2.5 million in proceeds from the sale of our Counterflow Centrifuge System device.

Our cash used in investing activities during the year ended December 31, 2020 totaled approximately $7.3 million and was primarily due to net purchases of marketable securities (net of sales of marketable securities).

Our cash provided by investing activities during the year ended December 31, 2019 totaled approximately $21.4 million and was primarily due to net proceeds from the sale of marketable securities (net of purchases of marketable securities).

Financing Activities

Our cash provided by financing activities during the year ended December 31, 2020, consisted of (i) net proceeds of $4.5 million through the issuance of common shares and warrants in our April 2020 registered direct offering, (ii) net proceeds of $3.8 million through the issuance of common shares and warrants in our May 2020 registered direct offering, (iii) net proceeds of $1.9 million through the issuance of common shares and warrants in our July 2020 private placement offering, and (iii) net proceeds of $8.4 million through the issuance of common shares under our common stock sales agreement with H.C.

Wainwright, which was partially offset by tax withholding-related payments on net share settlement equity awards to employees.

Our cash provided by financing activities during the year ended December 31, 2019 consisted of proceeds of $1.0 million through the issuance of shares of our common stock under the provisions of our common stock purchase agreement with Lincoln Park Capital, and proceeds of $0.3 million through the issuance of shares of our common stock under the provisions of our Common Stock Sales Agreement with H.C.

Wainwright, which was partially offset by tax withholding-related payments on net share settlement equity awards to employees.

Our cash provided by financing activities during the year ended December 31, 2018 consisted of proceeds of approximately $1.0 million through the issuance of shares of our common stock under the provisions of our Common Stock Sales Agreement with H.C.

Wainwright and $0.4 million of option exercise proceeds, which was partially offset by payment obligations under equipment finance leases and tax withholding-related payments on net share settlement equity awards to employees.

Liquidity and Capital Requirements Outlook

3 unchanged sentences

The demand for the equity and debt of biopharmaceutical companies like ours is dependent upon many factors, including the general state of the financial markets.

During times of extreme market

volatility, capital may not be available on favorable terms, if at all.

During times of extreme market volatility, capital may not be available on favorable terms, if at all.

Our inability to obtain such additional capital could materially and adversely affect our business operations.

We will also continue to seek, as appropriate, grants for scientific and clinical studies from various governmental agencies and foundations, and other sources of non-dilutive funding.

For example, in December 2019, we received preliminary approval from the New Jersey Economic Development Authority to participate in the Technology Business Tax Certificate Transfer (NOL) Program.

That program permits qualified companies to sell a percentage of their New Jersey net operating losses to unrelated profitable corporations.

While we expect to receive final approval for our New Jersey net operating losses sale in the first quarter of 2020, there can be no assurance that such approval will be received at that time, if ever.

We believe that our cash on hand will enable us to fund operating expenses for at least the next 12 months following the issuance of our financial statements considering the assumption that any initiation of a CLBS14 Phase 3 study is contingent on our acquisition of additional capital to fund such a study.

We believe that our cash on hand will enable us to fund operating expenses for at least the next 12 months following the issuance of our financial statements considering the assumption that any initiation of an OLOGO TM Phase 3 study is contingent on our acquisition of additional capital to fund such a study.

On February 12, 2021, we entered into a Securities Purchase Agreement (the “Institutional Purchase Agreement”) with certain institutional investors (the “Institutional Purchasers”).

Pursuant to the terms of the Institutional Purchase Agreement, we sold to the Institutional Purchasers in a registered direct offering an aggregate of 24,906,134 shares of our common stock and warrants to purchase an aggregate of 12,453,067 shares of our common stock at a combined purchase price equal to $2.45 per share and associated warrant.

Each warrant features an exercise price equal to $2.90 per share, is exercisable immediately upon issuance and will expire five years from the issuance date.

Additionally, in a concurrent non-brokered registered direct offering, we entered into a Securities Purchase Agreement (the “Additional Purchase Agreement”) with certain accredited investors (the “Additional Purchasers”).

Pursuant to the terms of the Additional Purchase Agreement, we sold to the Additional Purchasers an aggregate of 1,632,652 shares of our common stock and warrants to purchase an aggregate of 816,326 shares of our common stock at a combined purchase price equal to $2.45 per share and associated warrant.

Each warrant features an exercise price equal to $2.90 per share, is exercisable immediately upon issuance and will expire five years from the issuance date.

The closing of the offerings occurred on February 17, 2021.

In connection with the registered direct offerings, we received net proceeds of approximately $60.7 million.

On February 12, 2021, we suspended the use of the at-the-market transactions facility (the “ATM”) and terminated the continuous offering pursuant to the Common Stock Sales Agreement (“Sales Agreement”) entered into in February 2018 with H.C.

Wainwright & Co., LLC (“HCW”).

In accordance with the terms of the Sales Agreement, we could offer and sell shares of our common stock having an aggregate offering price of up to $25.0 million from time to time through HCW pursuant to the ATM program.

As of February 12, 2021, we had sold an aggregate of 3,784,912 shares of our common stock pursuant to the Sales Agreement for aggregate gross proceeds of $9.5 million.

We will no longer make any sales of our common stock pursuant to the Sales Agreement unless and until a new prospectus supplement is filed with the Securities and Exchange Commission.

In January 2021, we entered into a Securities Purchase Agreement (the “January Purchase Agreement”) with certain institutional and accredited investors (the “January Purchasers”), pursuant to which the Company issued and sold to the January Purchasers in a private placement an aggregate of (i) 12,500,000 shares of common stock, and (ii) warrants exercisable for up to an aggregate of 6,250,000 shares of common stock at a combined offering price of $2.00 per share of common stock and associated warrant.

The warrants have an exercise price of $2.90 per share.

Each warrant will be immediately exercisable and will expire five and one-half years from the issuance date.

The closing of the offering occurred on January 25, 2021.

We received gross proceeds of $25.0 million in connection with the private placement, before deducting placement agent fees and related offering expenses.

In July 2020, we entered into a securities purchase agreement (the “July Private Placement”) with certain investors (the “July Purchasers”).

Pursuant to the terms of the July Private Placement, we sold to the July Purchasers an aggregate of 969,694

shares of our common stock at a purchase price equal to $2.0625 per share, along with warrants to purchase an aggregate of 484,847 shares of our common stock.

In connection with the July Private Placement, we received gross proceeds of $2.0 million.

Each warrant is exercisable for one share of common stock and features an exercise price equal to $2.0625 per share.

The warrants are exercisable immediately upon issuance and will expire five and one-half years from the issuance date.

In May 2020, we entered into a securities purchase agreement (the “May Purchase Agreement”) with certain investors (the “May Purchasers”).

Pursuant to the terms of the May Purchase Agreement, we sold to the May Purchasers an aggregate of 2,084,850 shares of our common stock at a purchase price equal to $2.0625 per share.

In a concurrent private placement, we issued to the May Purchasers warrants to purchase an aggregate of 1,042,425 shares of our common stock.

In connection with the registered direct offering and concurrent private placement, we received gross proceeds of $4.3 million.

Each warrant is exercisable for one share of common stock and features an exercise price equal to $2.0625 per share.

The warrants are exercisable immediately upon issuance and will expire five and one-half years from the issuance date.

In April 2020, we entered into a securities purchase agreement (the “April Purchase Agreement”) with certain investors (the “April Purchasers”).

Pursuant to the terms of the April Purchase Agreement, we sold to the Purchasers an aggregate of 2,162,166 shares of our common stock at a purchase price equal to $2.3125 per share.

In a concurrent private placement, we issued to the April Purchasers warrants to purchase an aggregate of 1,081,083 shares of our common stock.

In connection with the registered direct offering and concurrent private placement, we received gross proceeds of $5.0 million.

Each warrant is exercisable for one share of common stock and features an exercise price equal to $2.25 per share.

The warrants are exercisable immediately upon issuance and will expire five and one-half years from the issuance date.

In December 2019, we received preliminary approval from the New Jersey Economic Development Authority ("NJEDA") to participate in the Technology Business Tax Certificate Transfer Program (the "Program").

The Program permits qualified companies to sell a percentage of their New Jersey net operating losses ("NJ NOLs") to unrelated profitable corporations.

On April 21, 2020, we received final approval from NJEDA, and we subsequently sold a portion of our NJ NOLs to a qualifying and approved buyer pursuant to the Program for net proceeds of $10.9 million.

In March 2019, we and Lincoln Park Capital Fund, LLC (“Lincoln Park”) entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”), pursuant to which we have the right to sell to Lincoln Park shares of our common stock having an aggregate value of up to $26 million, subject to certain limitations and conditions set forth in the Purchase Agreement (the “Offering”).

6 unchanged sentences

As of December 31, 2020, the Company had not made any sales of common stock to Lincoln Park under the Purchase Agreement other than the Initial Purchase.

In February 2018, we entered into a common stock sales agreement (the "Sales Agreement") with H.C.

Wainwright & Co., LLC ("HCW"), as sales agent, in connection with an “at the market offering” under which we from time to time may offer and sell shares of our common stock, which was further amended in August 2018, having an aggregate offering price of up to $25 million.

In March 2019, subsequent to the filing of our 2018 Form 10-K, the aggregate market value of our outstanding common stock held by non-affiliates was approximately $52.8 million.

Pursuant to General Instruction I.B.6 of Form S-3, since the aggregate market value of our outstanding common stock held by non-affiliates was below $75.0 million at the time of our 2018 Form 10-K filing, the aggregate amount of securities that we were permitted to offer and sell at such time was reduced to $17.6 million (or a maximum of 4.8 million shares), which was equal to one-third of the aggregate market value of our common stock held by non-affiliates at such time.

Subject to the terms and conditions of the Sales Agreement, HCW will use its commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares from time to time, based upon our instructions, including any price, time or size limits specified by us.

We have provided HCW with customary indemnification rights, and HCW will be entitled to a commission at a fixed commission rate equal to 3.0% of the gross proceeds per share sold.

We have no obligation to sell any of the shares and may at any time suspend sales under the Sales Agreement or terminate the Sales Agreement.

The Sales Agreement will terminate upon the sale of all of the shares under the Sales Agreement unless terminated earlier by either party as permitted under the Sales Agreement.

As of December 31, 2019 , we issued 260,349 shares of common stock under the Sales Agreement for net proceeds of $1.3 million .

While we continue to seek capital through a number of means, there can be no assurance that additional financing will be available on acceptable terms, if at all, and our negotiating position in capital generating efforts may worsen as existing resources are used.

24 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis