Miromatrix Medical Inc. (NASDAQ:MIRO) Q4 2022 Earnings Conference Call March 30, 2022 4:30 PM ET
Company Participants
Jeff Ross – CEO
Jim Douglas – CFO
Conference Call Participants
Alex Novak – Craig-Hallum Capital
Operator
Greetings, and welcome to the Miromatrix Medical Fourth Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Hanna Jeffrey [ph]. Thank you, Hannah, you may begin.
Unidentified Company Representative
Good afternoon, and thank you for joining us today. Earlier today Miromatrix Medical released financial results for the quarter and year ended December 31 2021. The release is currently available on the company’s website at www.miromatrix.com.
Jeff Ross, Chief Executive Officer and Jim Douglas, Chief Financial Officer will host this afternoon’s call. Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements within the meeting of the Federal Securities Laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements.
All forward-looking statements are based upon current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the materials risks and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission. The information provided in this conference call speaks only to the live broadcast today, March 30 2022, Miromatrix disclaims any intention or obligation, except as required by law to update or revise any information, financial projections, or other forward looking statements, whether because of new information, future events, or otherwise.
I will now turn the call over to Jeff.
Jeff Ross
Thanks, Hanna. Good afternoon. And thank you for joining us today. For all the biotechnology investors on our call, the volatility we saw in our sector last year, expanded into the broader stock market indices with a tightening interest rate environment and geopolitical tensions. On top of that, our specific segments of the organ transplant market experienced excessive volatility earlier this month, which I’ll touch on later. At Miromatrix we are focused on what we can control and our team is committed to utilizing the cash on our balance sheet to accomplish key preclinical and clinical milestones. We are very excited about our future.
Miromatrix is a life science company, pioneering a novel technology for bioengineering fully transplantable human organs to help save and improve patients lives. We completed our IPO in June 2021 and we had $52.8 million of cash on hand at the end of 2021. We are well capitalized from our IPO enabling us to achieve key milestones for our first three bioengineered organ programs, MiroliverELAP, Miroliver, and Mirokidney.
In addition, we use a small portion of the IPO proceeds to build out our new headquarters incorporating world-class in house manufacturing capabilities, allowing us to manufacture our bio-engineered organs under our own control and timelines.
We are one of a small group of companies at the forefront of developing alternatives to human donor organ transplant. Within this small group of companies, there are important differences between the technologies being developed. Our proprietary technology as a scalable platform that uses a two-step method of decellularization and recellularization, designed to effectively remove the porcine cell from the organs obtained from pigs and replace them with unmodified human cells.
While our initial development focuses on liver and kidneys, our technology platform is also applicable to developing other organs including heart, lungs, and pancreas.
We have collaborations with the Mayo Clinic Mount Sinai in Texas Heart Institute, and have received strategic investments from Baxter, CareDx dx and DaVita.
Before we go deeper into our business, I would like to highlight four recent transplants that took place at leading transplant centers. Because of their unique situation, these transplants were not part of official FDA clinical trials. However, they demonstrate some of the great advancements occurring in the organ transplant field culminating from decades of scientific research. We thank these institutions and the patients for their commitment to advancing the field of organ transplant.
In September surgeons at NYU Langone Medical Center successfully attached a genetically modified pig kidney to blood vessels in a brain dead patients leg. The kidney wasn’t rejected and produce urine during a 54-hour observation period. Also in September surgeons at the University of Alabama at Birmingham, went a step further and fully implanted genetically modified pig kidneys into a brain dead patient. These kidneys were also not rejected and produce urine during a 77-hour observation period.
In November, NYU Langone Medical Center completed another transplant using a genetically modified pig kidney, and they’re able to replicate the success full results of their first study.
Finally, in January, surgeons at the University of Maryland Medical Center, reported the first transplant of a pig’s heart into a living human being. A 57-year old man with severe heart disease who is ineligible for a traditional heart transplant receive the genetically modified pig heart under a compassionate use exemption.
This transplant was initially deemed success, as the patient didn’t experience an immediate rejection and the organ continued to function for over two-months. Sadly, the patient passed away on March 8, and our condolences go out to his family. Doctors continue to analyze the results and have not given an exact cause of death that we are aware of.
After the sad news of this occurrence, we experienced significant volume and volatility in our stock. It is important to reiterate, that doctors have not established an exact cause of death. And it was a challenging case. While I can’t comment on the specifics of any of these cases, I just highlighted what I can say is we continue to believe Miromatrix technology is the most differentiated in the category.
First, our technology does not rely on genetically modified pigs. And our decellularization step removes all living biologic material from the porcine organ we source. Therefore, we believe we will not be classified or regulated as a xenotransplantation.
Second, we recellularize the decellularize organs with unmodified human cells, which we believe could result in a favorable organ rejection profile. These two important points of differentiation support our goal of being first to market with alternatives to human donor organ transplants.
To help you further understand why we believe we will be first to market, it is essential to distinguish between our bioengineered organs and xenotransplantation. The FDA defines xenotransplantation as the transplantation of live cell tissue or organs from a non-human animal source. The agency has also published xenotransplantation guidance which we believe we’ll increase the regulatory timeline for that technology classification.
Beyond the potential regulatory challenges for xenotransplantation, organ rejection is a significant issues xenotransplantation will have to overcome as well. Unfortunately, the length of the recent studies have been relatively short, and the long-term survivability of genetically modified living pig cells in humans remains unknown.
Let me provide you a little deeper understanding of our technology platform. And I think this will help everyone better understand and appreciate how are bioengineered organs are differentiated among our peers. At the highest level our proprietary technology of a scalable platform that uses a two-step method of decellularization and recellularization.
The first step decellularization is a process that is designed to remove porcine cells from the organ obtained from pigs to create a purified A Cellular Extracellular Matrix or ECM. The elimination of animal cells from the ECM is why we believe our bioengineered organs will not be regulated as xenotransplantation.
To support this view, we rely upon two commercialize products we developed, for hernia and wound care applications utilizing porcine liver decellularization. And neither of these products have been classified or regulated as xenotransplantation. In 2019, we license these products to a third-party to focus 100% of our resources on developing bioengineered organs.
During decellularization our bioengineered organs are individually perfused with a gentle solution to purify the organ while preserving the mechanical structures and vascular networks. This is a good time to point out that maintaining or replicating mechanical structures and vascular networks is a significant challenge for other organ transplant technologies, such as 3d printing to overcome.
The second step recellularization incorporates a perfusion process that receives DCM with unmodified human cells inside of bioreactors. The integration of unmodified human cells into the A cellular ECM, is why we believe our bioengineered organs will have a favorable organ rejection profile.
We sourced the human cells from human kidneys and livers not placed for transplant. We have agreement with several organ procurement organizations, or OPOs to secure our supply of human kidneys and livers. Hopefully, this brief discussion of our two-step technology platform helps everyone better understand and appreciate how our bioengineered organs are differentiated among our peers. This is a good spot to segue into an update on our three bioengineered organ programs.
Our first program MiroliverELAP is our external liver assist product or ELAP, and is designed to treat acute liver failure patients. The system consists of an external perfusion system and our initial bioengineered liver that will reside outside the human body to provide temporary liver support. We believe this will be the first ever clinical trial program designed to assess the ability of a bioengineered organ to deliver critical liver function in humans.
We are pioneering a new class of therapy and like other new classes of therapies such as CAR T and gene therapies, the innovators work closely with the FDA to establish the original regulatory pathway to approval. We are very appreciative with how constructive The FDA has been during our regulatory interactions. And just this month we received a formal response to our pre IND submission. This was an important step in further establishing our regulatory pathway. And based on these interactions, we anticipate filing an IND application for MiroliverELAP in the second half of 2022 and initiating a Phase 1 clinical study shortly after our IND clearance is received from the FDA.
Our second program is Miroliver. Our fully implantable bioengineered liver intended to treat patients with acute and chronic liver failure that we have been developing in collaboration with the Miro Clinic. Miroliver is bioengineered by recellularizing a decellularized porcine liver with human vascular liver and bile duct cells.
Miroliver will be implanted using orthotopic liver transplantation where the native liver is completely removed and replaced with a Miroliver. Orthotopic procedures are the standard of care for liver transplants, which means surgeons won’t need to learn a new procedure.
On the regulatory front, we have had consultations with the FDA, and we anticipate submitting our pre IND requests in 2023. Similar to MiroliverELAP after the FDA responds to our pre IND submission, we’ll have a better sense of timing regarding the filing of our IND application for Miroliver and our path to the clinic.
In October 2021in collaboration with the Mayo Clinic, we published a study in Nature Communications biology, announcing the first ever heterotopic implantation of our bioengineered livers into large animals. The results show that the pigs that received our bioengineered livers maintained detectable hepatic health in the graph sustained blood perfusion and demonstrated early liver function post transplantation. This study provided excellent proof of concept regarding our bioengineered livers as we progress towards human trials for Miroliver and MiroliverELAP.
Our third program is Mirokidney, our fully transplantable bioengineered kidney, intended to treat patients with end stage renal disease. Mirokidney was awarded the kidney X prize from the Department of Health and Human Services and the American Society of Nephrology in 2019. Mirokidney is bioengineered by recellularizing a decellularized porcine kidney, with human vascular and renal specific cells.
Mirokidney will be implanted using heterotopic kidney transplant procedures where the native kidneys are left in place and a single kidney is grafted into the vasculature. Heterotopic procedures are the standard of care for kidney transplants, which means surgeons don’t have to learn a new procedure. On the regulatory front we will begin consultations with the FDA this year, and we anticipate submitting our pre IND requests in 2023.
Consistent with our other programs after the FDA response to our pre IND submission, we’ll have a better sense of timing regarding the filing of our IND application for Mirokidney and our path to the clinic.
Switching to the operational front. One of the things I’m most excited about is our new headquarters in Suburban Minneapolis. The state-of-the art facility includes world class in-house manufacturing capabilities, we believe our in-house manufacturing facility provides us with adequate capacity to manufacture bioengineered organs under our control, and timelines through clinical trials.
As we continue to make strides towards fundamentally transforming the organ transplant industry, we are focused on ensuring the company has the right team to execute our strategy. As part of building out this team, we recently hired Jim Douglas as the company’s new Chief Financial Officer who brings significant life science experience.
Jim joins us from Piper Sandler, where he was a Managing Director on the healthcare investment banking team specializing in advising biotechnology and med tech companies. Prior to Piper Sandler, Jim was at Abbott Laboratories and Price Water Coopers. Jim will succeed Brian Niebur, who will remain a vital part of Miromatrix team in his new role as Vice President of Finance.
Brian played a critical role through the company’s IPO. And we are excited that he will work alongside Jim during this next phase of our development.
In closing, a special thank you to the Miromatrix employees who work tremendously hard on a daily basis to make bioengineered organs a reality for patients. We believe that Miromatrix is uniquely positioned and well capitalized from our IPO to hit the milestones I have outlined today. We remain dedicated to saving and improving patients lives with our bioengineered organs.
Thank you for your continued support. And I will now turn the call over to Jim Douglas, our Chief Financial Officer to discuss our financial results in the fourth quarter and full year 2021.
Jim Douglas
Thank you, Jeff. And it’s truly an honor to be a member of the Miromatrix team working towards one of the most aspirational and noble missions a company could have.
On a personal note, my father received a kidney transplant after years of dialysis, so I’ve seen firsthand the positive impact organ transplants have on patients and their families.
Moving to our financial results. Miromatrix generates a small amount of licensing revenue from two commercialized products that we licensed to a third-party in order to focus 100% of our resources on developing bioengineered organs.
Cost of goods sold represents the royalty we pay to the University of Minnesota to license our platform technology. The licensing revenue and cost of goods sold should fully offset each other as both have $500,000 annual minimums. The gross loss position arises because we are reserving against a significant portion of the licensing revenue. Due to us, while we are not reserving against the royalty payments we are obligated to make to the University of Minnesota.
Transitioning to operating expenses. In the fourth quarter of 2021 total operating expenses were $5.3 million versus $2.2 million in the fourth quarter of 2020, a $3.1 million increase. For the full year of 2021, total operating expenses were $16.5 million versus $9.8 million for the same period in 2020, a $6.7 million increase.
The primary drivers of the spending growth in both reportable periods are costs attributable to being a public company, hiring of additional employees, and the purchasing of clinical and lab supplies to advance our bioengineered organ programs.
Net loss for the fourth quarter of 2021 was $5.5 million, or $0.27 a share, as compared to a net loss of $1.1 million or $0.50 per share for the fourth quarter of 2020. For the full year of 2021, net loss was $14.7 million, or $1.28 per share, as compared to a net loss of $10.3 million or $4.76 per share for the same period in 2020.
The $4.4 million increase in net loss during the fourth quarter was primarily driven by the increase in total operating expenses, as well as net investment gains that were recorded in the fourth quarter of 2020, without similar gains recorded in the fourth quarter of 2021. The $4.4 million increase in net loss for the full year was driven by the increase in total operating expenses and partially offset by a $2.4 million equity loss and affiliate recorded in 2020, which was significantly larger than the amount recorded in 2021.
Net loss per share was impacted by the items mentioned, as well as the significant increase in our weighted average number of shares following our IPO.
Finally, we ended the year with $52.8 million of cash, which we believe is sufficient to last us through 2023. And will allow us to achieve key milestones for our bioengineered organ programs that Jeff highlighted earlier.
And with that, I will turn the call back over to the operator to open up the line for questions. Thank you.
Question-and-Answer Session
Operator
[Operator Instructions] Thank you. Our first question is from Alex Novak, with Craig-Hallum Capital Group. Please proceed with your question.
Alex Novak
Great. Good afternoon, everyone. Jeff, I was hoping we could kick things off by getting a little bit more diving in diving into the feedback received from the FDA on ELAP and the pre IND submission. What were some of the comments that you got back where you’re comfortable, you already have the data necessary that FDA is requesting? And where in addition, do you think that more data is going to be needed over the next couple months here?
Jeff Ross
Yes, I appreciate the question, Alex. Well, I can’t go into the specifics, exactly what the dialogue was or what some of the requests were, what I can say is that everything that we were asked, we believe is very achievable. So, as we talked about earlier, being the pioneer in a field, we were very, we felt the feedback was incredibly constructive, straightforward. And most of it really relied around just a key area of Leucine off some of our data packages that we’ve already been working on. So that’s really what led to some of the guidance of increasing our confidence and being able to submit our IND, and then moving forward with that. So we were very happy with the response.
Alex Novak
And that’s good, and maybe for a just little bit more just, do you think there’s going to be a need for additional animal studies, potentially different models beyond the pigs that you’ve done potentially non-human primates? Or is this more all bench data for the most part?
Jeff Ross
Yes, I mean, the FDA always has the capability to ask for more at various steps where we feel confident in the approach that we have, and no comments on anything that we received from them was there any requests for primate data associated with anything.
So, as I mentioned before, I think we have a really good path forward and understanding where we are to the IND. And I think given the guidance on where we put the timelines that should signify the level of data that’s needed. The additional data that is needed, isn’t overly onerous, or something that we feel isn’t achievable.
Alex Novak
Yes, understood. That makes total sense. So maybe speak to some of the actions you’re taking to get transplant centers ready to start enrolling in the ELAP liver clinical study here. Once you do get that IND accepted. And what sort of timeline or lead time should we expect from once IND acceptances received to starting that clinical trial?
Jeff Ross
Yes, that’s a great question, Alex. And you know, what we look at with that are what are some of the key centers that would be seen these ELAP patients? So we look at it both from what’s the capabilities of the centers. What are some of the physicians that are there, as well as the ability to bring those centers relatively active relatively fast. The best guidance in the field usually is, we try to target around that 90 days post IND approval, to be able to have that center up and live. And those are the timelines that we’re striving towards in terms of really working with centers moving forward, to be able to move as fast as we possibly can once we have that IND in hand.
Alex Novak
Alright, perfect. And then just lastly, once you do file the IND, maybe walk us through the process towards seeking various FDA designation such as breakthrough or fast track? And then any additional studies or publications, abstracts that we should be watching for over the remainder of the year?
Jeff Ross
I think we look at it from that standpoint, once we have that IND, our focus is really going to be on Phase 1 clinical study in driving that forward. That’s our opportunity to demonstrate the safety of our product. But again, you got to remember we believe that this is going to be the first bioengineered organ that’s going to be clearer for IND. So our focus is really going to be on executing that Phase 1 clinical study. And then we’ll look at the options on the backside of that for a breakthrough or fast track or any of those other things once we have some of that clinical data in hand.
Alex Novak
And then anything on the publications or studies to watch for?
Jeff Ross
Yes, I think on the publication, I wouldn’t expect much on the ELAP over the next year, really, because we’re moving towards the clinic. And that’s really where our focus is in generating that human clinical data.
On our other programs. We continue to move those forward and continue to look at opportunities to publish, when available, but our focus is really on generating those pre IND packets and moving that forward as well.
Alex Novak
Understood makes sense. Thank you, Jeff, and Jim for the update. Appreciated.
Jeff Ross
Absolutely. Thanks Alex for the questions.
Operator
Thank you. There are no further questions at this time. I’d like to turn the floor back over to Jeff Ross, for any closing comments.
Jeff Ross
Great. Well, I appreciate all the shareholders tuning in today and everyone else. And we look forward to continue to execute on our plan. Thank you, everyone. Have a great day.
Operator
This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
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