What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-05-09 · 70 added, 46 removed, 134 unchanged (46% of the section changed)

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LSTA1 actuates this active transport system in a tumor-specific manner, resulting in systemically co-administered anti-cancer drugs more efficiently penetrating and accumulating in the tumor, while normal tissues are not expected to be affected.

LSTA1 also has the potential to modify the tumor microenvironment (“TME”), with the objective of making tumors more susceptible to immunotherapies.

We and our collaborators have amassed significant non-clinical data demonstrating enhanced delivery of a range of emerging anti-cancer therapies, including immunotherapies and RNA-based therapeutics.

LSTA1 also has the potential to modify the tumor microenvironment (“TME”), thereby making tumors more susceptible to immunotherapies.

We and our collaborators have amassed significant non-clinical data demonstrating enhanced delivery of a range of existing and emerging anti-cancer therapies, including chemotherapeutics, immunotherapies and RNA-based therapeutics.

To date, LSTA1 has also demonstrated favorable safety, tolerability, and activity in completed and ongoing clinical trials designed to enhance delivery of standard-of-care chemotherapy for pancreatic cancer.

We are exploring the potential of LSTA1 to enable a variety of treatment modalities to treat a range of solid tumors more effectively.

In addition, we have development programs based on our autologous CD34+ cell therapy technology platform that we will look to partner while incurring no additional capital outlay.

In addition, we have development programs based on our autologous CD34+ cell therapy technology platform that we are seeking to partner while incurring no additional capital outlay.

Our leadership team has decades of collective biopharmaceutical and pharmaceutical product development experience across a variety of therapeutic categories and at all stages of development from preclinical through to product registration and launch.

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Our current development pipeline includes:

• LSTA1, the subject of Phase 1b/2a and 2b clinical studies being conducted globally in a variety of solid tumor types, including metastatic pancreatic ductal adenocarcinoma (mPDAC), in combination with a variety of anti-cancer regimens.

• LSTA1, the subject of our Phase 1b/2a and 2b clinical studies being conducted globally in a variety of solid tumor types, including metastatic pancreatic ductal adenocarcinoma (mPDAC), in combination with a variety of anti-cancer regimens.

Targeted Solid Tumor Penetration via CendR Active Transport

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These factors negatively impact the ability of many therapeutic agents to effectively treat these cancers.

To address the tumor stroma’s role as a primary impediment to effective treatment, Lisata’s approach is to activate the C-end rule (“CendR”), or CendR system, a naturally occurring active transport system.

Lisata’s lead investigational drug, LSTA1 (a specific internalizing R-G-D or iRGD peptide) activates this transport system in a tumor-specific manner (Sugahara, Science, 2010).

This results in tumors selectively and more efficiently taking up systemically administered anticancer drugs as if they were nutrients.

As a result, more drug accumulates in the tumor than would accumulate without LSTA1, while normal tissues are not affected.

Moreover, the drugs penetrate tumor cells farther away from blood vessels with LSTA1 present than without.

To address the tumor stroma’s role as a primary impediment to effective treatment, our approach is to activate the C-end rule (“CendR”), or CendR system, a naturally occurring active transport system.

Our lead investigational drug, LSTA1 (a specific internalizing R-G-D or iRGD peptide), activates this transport system in a tumor-specific manner (Sugahara, Science, 2010).

LSTA1 enables more selective and efficient uptake of systemically administered anti-cancer drugs resulting in more intratumoral drug accumulation.

The overall result is enhanced anticancer activity without an increase in side effects.

Anticancer drugs can be coupled/tethered or conjugated to LSTA1 or other CendR peptides in Lisata’s portfolio, but can be also co-administered with LSTA1.

Lisata believes that the co-administration option is an advantage because it is not necessary to create a new chemical entity with its attendant development and regulatory hurdles, providing a potentially faster-to-clinic and potentially faster-to-market product opportunity for a range of solid tumor cancers and for co-administration with a range of therapies.

While it is possible to couple/tether or conjugate some anticancer drugs to LSTA1, we believe that the co-administration approach is an advantage because it does not create a new chemical entity with its attendant development and regulatory hurdles, thereby providing an anticipated faster-to-clinic and faster-to-market product opportunity for a range of co-administration therapies.

Clinical progress with other approaches to address delivery to highly fibrotic tumors, such as PEGylated hyaluronidase and hedgehog inhibitors, has been limited by toxicity and side effects.

LSTA1 has demonstrated favorable safety/tolerability and activity in clinical trials to enhance delivery of standard-of-care chemotherapy for mPDAC.

Lisata and its collaborators have also amassed non-clinical data demonstrating enhanced delivery of a range of emerging anticancer therapies, including

immunotherapies, and RNA-based therapeutics.

LSTA1’s cancer-targeted delivery may enable such emerging treatment modalities to treat a range of solid tumors potentially more effectively.

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LSTA1 is an investigational drug that actuates the CendR active transport mechanism while also having the potential to modify the TME and make it less immunosuppressive, thereby making the tumor more susceptible to attack by the immune system.

It is targeted to tumor vasculature, tumor cells and some intratumoral immunosuppressive cells by its affinity for alpha-v, beta-3 and beta-5 integrins that are upregulated on these cells.

LSTA1 is a nine amino acid cyclic internalizing RGD (“iRGD”) peptide that, once bound to these integrins, is cleaved by proteases expressed in tumors to release a peptide fragment, called a CendR fragment, which binds to a second receptor, called neuropilin-1 receptor, to activate a novel uptake pathway that allows circulating moieties such as anticancer drugs to more selectively penetrate solid tumors.

The ability of LSTA1 and iRGD peptides to modify the TME to enhance delivery and efficacy of co-administered drugs has been demonstrated in many preclinical models in a range of solid tumors with the results from Lisata, collaborators and research groups around the world having been the subject of over 200 scientific publications.

It is targeted to tumor vasculature, endothelial cells, tumor cells and some intratumoral immunosuppressive cells by its affinity for alpha-v, beta-3 and beta-5 integrins that are upregulated on these cells.

The CendR fragment then binds to an adjacent receptor, called neuropilin-1 receptor, to activate a novel uptake pathway that allows circulating moieties such as anticancer drugs to more selectively and effectively penetrate solid tumors.

The ability of LSTA1 to modify the TME to enhance delivery and efficacy of co-administered drugs has been demonstrated in many preclinical models in a range of solid tumors with the results from Lisata, collaborators and research groups around the world having been the subject of over 300 scientific publications.

With regard to clinical development, LSTA1 is the subject of a completed Phase 1b clinical trial of 31 first-line metastatic pancreatic ductal adenocarcinoma patients, of which 29 were evaluable.

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Through the administration of CD34+ cells, we seek to promote the development and formation of new microvasculature and thereby increase blood flow to the impacted area.

We believe that a number of conditions caused by underlying ischemic injury can be improved through our CD34+ cell technology, including, but not limited to, Buerger's disease, critical limb ischemia (“CLI”), coronary microvascular dysfunction (“CMD”), and diabetic kidney disease (“DKD”).

HONEDRA ® for Treatment of Critical Limb Ischemia

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Following study suspension, we completed all protocol-defined patient observations and completed the clinical study report.

Data from the follow-up of all patients completed in the registration-eligible clinical trial in Japan have been compiled and are the subject of discussions with the Pharmaceuticals and Medical Devices Agency (“PMDA”) in Japan as part of the Japanese regulatory pre-consultation process and in preparation for the formal clinical consultation meetings which precede a Japanese new drug application.

To date, the PMDA has provided advice on how to prepare for the formal consultation meeting, which we expect to occur later this year.

To date, the PMDA has provided advice on how to prepare for the formal consultation meeting and has indicated their preference for additional clinical information to accompany the filing of a JNDA.

Concomitantly, the Company has reinforced its efforts to secure a Japanese partner to complete the remaining steps of development/registration as well as eventual commercialization in Japan.

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There can be no assurance that we will be able to identify such a partner and enter into an agreement with such partner on acceptable terms or at all.

Beyond its impact on our development pipeline described above, the extent to which COVID-19 ultimately impacts our business, results of operations and financial condition will depend on future developments, which remain highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the emergence of new variants, new information that may emerge concerning the severity of COVID-19 or the effectiveness of actions taken to contain COVID-19 or treat its impact, including vaccination campaigns, among others.

cannot be predicted with confidence, such as the duration of the outbreak, the emergence of new variants, new information that may emerge concerning the severity of COVID-19 or the effectiveness of actions taken to contain COVID-19 or treat its impact, including vaccination campaigns, among others.

If we or any of the third parties with whom we engage, however, were to experience any additional shutdowns or other prolonged business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially or negatively affected, which could have a material adverse impact on our business, financial condition and results of operations.

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Results of Operations

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

The following table summarizes our results of operations for the three months ended March 31, 2023 and March 31, 2022:

Three Months Ended March 31,

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

The following table summarizes our results of operations for the three months ended June 30, 2023 and June 30, 2022:

Three Months Ended June 30,

2023 2022 Change

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Net loss $ (4,027) $ (6,626) $ 2,599

Overall, net losses were $6.2 million for the three months ended March 31, 2023, compared to $4.2 million for the three months ended March 31, 2022.

For the three months ended March 31, 2023, operating expenses totaled $6.8 million compared to $6.6 million for the three months ended March 31, 2022, representing an increase of 3.4%.

Overall, net losses were $4.0 million for the three months ended June 30, 2023, compared to $6.6 million for the three months ended June 30, 2022.

For the three months ended June 30, 2023, operating expenses totaled $6.9 million compared to $6.7 million for the three months ended June 30, 2022, representing an increase of 2.3%.

Operating expenses comprised the following:

• Research and development expenses were approximately $3.2 million for the three months ended March 31, 2023, compared to $3.3 million for the three months ended March 31, 2022, representing a decrease of $0.1 million or 3.2%.

This was primarily due to expenses associated with our XOWNA ® Phase 2b study (the FREEDOM Trial) in the prior year (study was suspended in 2022), partially offset by study start up activities in the current year associated with the planned LSTA1 Phase 2 proof-of-concept basket trial in various solid tumors in combination with the corresponding standards of care, enrollment activities for the LSTA1 Phase 2b ASCEND study and chemistry, manufacturing and control (CMC) activities for LSTA1.

• General and administrative expenses were approximately $3.7 million for the three months ended March 31, 2023, compared to $3.3 million for the three months ended March 31, 2022, representing an increase of $0.3 million or 9.8%.

This was primarily due to the addition of an employee acquired through the Merger with Cend, an increase in external legal fees and an increase in accounting and tax related fees.

• Research and development expenses were approximately $3.2 million for the three months ended June 30, 2023, compared to $3.2 million for the three months ended June 30, 2022, representing a decrease of $0.1 million or 2.2%.

This was primarily due to expenses associated with our study start up activities in the current year associated with the LSTA1 Phase 2 proof-of-concept basket trial in various solid tumors in combination with the corresponding standards of care, enrollment activities for the LSTA1 Phase 2b ASCEND study and chemistry, manufacturing and control (CMC) activities for LSTA1 being offset by expenses associated with our Ischemic Repair programs (XOWNA ® Phase 2b study, HONEDRA ® and diabetic kidney disease) in the prior year.

• General and administrative expenses were approximately $3.7 million for the three months ended June 30, 2023, compared to $3.5 million for the three months ended June 30, 2022, representing an increase of $0.2 million or 6.5%.

This was primarily due to severance costs associated with the elimination of the Chief Business Officer position on May 1, 2023, partially offset by non-recurring merger related costs in the prior year.

Historically, to minimize our use of cash, we have used a variety of equity instruments to compensate employees, consultants and other service providers.

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Other Income (Expense)

Total other income (expense) is comprised of investment income from cash, cash equivalents and marketable securities for both three months ended March 31, 2023 and 2022 and a loss on sale related to the sale of our NJ NOLs in the three months ended March 31, 2022.

Total other income (expense) is comprised of investment income from cash, cash equivalents and marketable securities for both three months ended June 30, 2023 and 2022 and a loss on sale related to the sale of our New Jersey net operating losses (“NJ NOLs”) in the three months ended June 30, 2023.

Income Tax Benefit

In February 2022, we received final approval from the New Jersey Economic Development Authority (“NJEDA”) under the Technology Business Tax Certificate Transfer Program (“Program”) to sell a percentage of our NJ NOLs, which were subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $2.3 million.

In April 2023, we received final approval from the New Jersey Economic Development Authority (“NJEDA”) under the Technology Business Tax Certificate Transfer Program (“Program”) to sell a percentage of our NJ NOLs, which were subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $2.2 million.

The $2.3 million of NJ NOLs related tax benefits (“NJ NOL Tax Benefits”) have been recorded as a benefit from income taxes and the loss on sale of $0.1 million recorded in other income (expense).

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

The following table summarizes our results of operations for the six months ended June 30, 2023 and June 30, 2022:

Six Months Ended June 30,

2023 2022 Change

Operating Expenses:

Research and development $ 6,341 $ 6,516 $ (175)

General and administrative 7,378 6,824 554

Total operating expenses 13,719 13,340 379

Loss from operations (13,719) (13,340) (379)

Total other income (expense) 1,175 9 1,166

Benefit from income taxes (2,330) (2,479) (149)

Net loss $ (10,214) $ (10,852) $ 638

Overall, net losses were $10.2 million for the six months ended June 30, 2023, compared to $10.9 million for the six months ended June 30, 2022.

For the six months ended June 30, 2023, operating expenses totaled $13.7 million compared to $13.3 million for the six months ended June 30, 2023, representing an increase of 2.8%.

Operating expenses comprised the following:

• Research and development expenses were approximately $6.3 million for the six months ended June 30, 2023, compared to $6.5 million for the six months ended June 30, 2022, representing a decrease of $0.2 million or 2.7%.

• General and administrative expenses were approximately $7.4 million for the six months ended June 30, 2023, compared to $6.8 million for the six months ended June 30, 2022, representing an increase of $0.6 million or 8.1%.

Historically, to minimize our use of cash, we have used a variety of equity instruments to compensate employees, consultants and other service providers.

The use of these instruments has resulted in charges to the results of operations, which have been significant in the past.

Other Income (Expense)

Total other income (expense) is comprised of investment income from cash, cash equivalents and marketable securities for both six months ended June 30, 2023 and 2022 and a loss on sale related to the sale of our NJ NOLs in the six months ended June 30, 2023 and 2022.

Income Tax Benefit

In April 2023, we received final approval from the NJEDA under the Program to sell a percentage of our NJ NOLs, which were subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $2.2 million.

The $2.3 million of our NJ NOL Tax Benefits have been recorded as a benefit from income taxes and the loss on sale of $0.1 million recorded in other income (expense).

In February 2022, we received final approval from the NJEDA under the Program to sell a percentage of our NJ NOLs, which were subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $2.3 million.

The $2.5 million of our NJ NOL Tax Benefits have been recorded as a benefit from income taxes and the loss on sale of $0.1 million recorded in other income (expense).

Analysis of Liquidity and Capital Resources

As of March 31, 2023, we had cash, cash equivalents and marketable securities of approximately $61.1 million, working capital of approximately $60.0 million, and stockholders’ equity of approximately $61.0 million.

During the three months ended March 31, 2023, we met our immediate cash requirements through existing cash balances.

As of June 30, 2023, we had cash, cash equivalents and marketable securities of approximately $57.6 million, working capital of approximately $57.1 million, and stockholders’ equity of approximately $58.0 million.

During the six months ended June 30, 2023, 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 (used in) or provided by, operating, investing and financing activities were as follows (in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

Net cash used in operating activities $ (12,380) $ (10,704)

Net cash provided by (used in) investing activities 4,289 (6,090)

Net cash used in financing activities (85) (168)

Net cash provided by investing activities 3,564 19,544

Net cash provided by (used in) financing activities 367 (139)

Operating Activities

Our cash used in operating activities during the three months ended March 31, 2023 was $8.2 million, which is comprised of (i) our net loss of $6.2 million, adjusted for non-cash expenses totaling $0.6 million (which includes adjustments for equity-based compensation, depreciation and amortization, a loss on disposal of fixed assets, and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities using approximately $2.6 million.

Our cash used in operating activities during the three months ended March 31, 2022 was $5.6 million, which is comprised of (i) our net loss of $4.2 million, adjusted for non-cash expenses totaling $1.3 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 using approximately $2.7 million.

Our cash used in operating activities during the six months ended June 30, 2023 was $12.4 million, which is comprised of (i) our net loss of $10.2 million, adjusted for non-cash expenses totaling $0.9 million (which includes adjustments for equity-based compensation, depreciation and amortization, a loss on disposal of fixed assets, and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities using approximately $3.1 million.

Our cash used in operating activities during the six months ended June 30, 2022 was $10.7 million, which is comprised of (i) our net loss of $10.9 million, adjusted for non-cash expenses totaling $2.0 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 using approximately $1.9 million.

Investing Activities

Our cash provided by investing activities during the three months ended March 31, 2023 totaled $4.3 million and was primarily due to net sales of marketable securities (net of purchases of marketable securities).

Our cash used in investing activities during the three months ended March 31, 2022 totaled $6.1 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 six months ended June 30, 2023 totaled $3.6 million and was primarily due to net sales of marketable securities (net of purchases of marketable securities).

Our cash used in investing activities during the six months ended June 30, 2022 totaled $19.5 million and was primarily due to net sales of marketable securities (net of purchases of marketable securities) partially offset by our investment in Cend.

Financing Activities

Our cash used in financing activities during the three months ended March 31, 2023 totaled $0.1 million and consisted primarily of tax withholding-related payments on net share settlement equity awards to employees.

Our cash provided by financing activities during the three months ended March 31, 2022 totaled $0.2 million and consisted primarily of tax withholding-related payments on net share settlement equity awards to employees.

Our cash provided by financing activities during the six months ended June 30, 2023 totaled $0.4 million and consisted of proceeds from the issuance of shares through our ATM Agreement of $0.3 million, option exercise proceeds of $0.2 million partially offset by tax withholding-related payments of $0.1 million on net share settlement equity awards to employees.

Our cash used in financing activities during the six months ended June 30, 2022 totaled $0.1 million and consisted primarily of tax withholding-related payments on net share settlement equity awards to employees.

Liquidity and Capital Requirements Outlook

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On June 4, 2021, we entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C.

Wainwright & Co., LLC 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 having an aggregate offering price of up to $50.0 million.

Wainwright & Co., LLC 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 having an aggregate offering price of up to $50.0 million.

Subsequent to the filing of our Form 10-K on March 22, 2022, the aggregate market value of our outstanding common stock held by non-affiliates was approximately $43.6 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 such Form 10-K filing, the aggregate amount of securities that we are permitted to offer and sell was reduced to $17,698,943, which was equal to one-third of the aggregate market value of our common stock held by non-affiliates as of September 21, 2022.

As of March 31, 2023, we had not issued any shares under the ATM Agreement.

Since inception we have issued 64,394 shares of common stock under the ATM Agreement for net proceeds of $270,774.

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.

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Critical Accounting Policies and Estimates

There have been no material changes in our critical accounting policies and estimates during the three months ended March 31, 2023, compared to those reported in our 2022 Form 10-K.

There have been no material changes in our critical accounting policies and estimates during the three and six months ended June 30, 2023, compared to those reported in our 2022 Form 10-K.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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-Q

Item 2. Management’s Discussion and Analysis