Miromatrix Medical Inc. (NASDAQ:MIRO) Q3 2022 Results Conference Call November 14, 2022 4:30 PM ET
Company Participants
Hannah Jeffrey – IR
Jeff Ross – CEO
Jim Douglas – CFO
Operator
Greetings, and welcome to the Miromatrix Medical Inc.’s Third Quarter 2022 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, Hannah Jeffrey. Thank you. Please go ahead.
Hannah Jeffrey
Good afternoon, and thank you for joining us.
Earlier today, Miromatrix released financial results for the quarter and nine months ended September 30, 2022. 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 meaning of 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 fact, including statements regarding the potential timing of pre-IND filings and IND clearances, the initiation of related clinical trials, future expenses and revenue, capital requirements, cash runway and needs for additional financing 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 materials and risks, 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, November 14, 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, Hannah. Good afternoon, and thank you, everyone, who has joined us today for our third quarter 2022 earnings call.
I am proud to announce what many have been waiting to hear. We recently filed our IND application for miroliverELAP with the FDA. We are pioneering a new class of medicine and believe that this is the first IND to be submitted to the FDA for a bioengineered organ, putting us one step closer to realizing our goal of saving and improving patients’ lives and eliminating the organ transplant waiting list. We will wait for the FDA’s feedback and plan to initiate a Phase 1 clinical trial shortly after receiving their clearance. I’m incredibly proud of our entire team for achieving this important milestone.
Before I provide additional updates on our three programs in development, I’d like to quickly remind everyone about our technology platform and a few key points of differentiation.
So, very quickly, Miromatrix bioengineers organ for human transplant utilizing our proprietary two-step decellularization and recellularization technology platform, which is applicable to all organs. Our initial focus is on bioengineering livers and kidneys, which account for nearly 95% of the organ transplant waiting list. We own all of the core IP around perfusion decellularization and recellularization technology, which has an important point of differentiation versus alternative technologies such as gene editing, which fall under the umbrella of xenotransplantation.
Xenotransplantation is characterized by the presence of living animal cells in the products. These living animal cells have been the source of some key challenges facing xenotransplantation, notably pig virus transmission and organ rejection.
We believe that our bioengineered organs will not be regulated as xenotransplantation because the decellularization step is designed to remove the living animal cells from the organ. We have also demonstrated the required viral and activation steps to reduce the risk of any pig virus transmission. The second step, recellularization repopulates the decellularized matrix with human cells. And therefore, we believe our bioengineered organs will possess a rejection profile similar to human-to-human organ transplants.
Finally, it is easy to visualize the operational efficiencies such as supply chain and cost of goods that our technology enables. Hopefully that gives everyone a good refresher of our technology and a few key points of differentiation.
Now, I’ll provide status update on our three programs in development: miroliverELAP; miroliver; and mirokidney.
As I mentioned at the beginning of the call, we recently achieved a major milestone and filed our IND application for miroliverELAP. We plan to initiate a Phase 1 clinical trial shortly after receiving IND clearance from the FDA. I would like to extend personal gratitude to John Barry, Mason Macenski, Peggy Norris, Joel Brittain and Chris Fecteau, and the members of their teams for achieving this important milestone. I know how hard they’ve all worked to accomplish this goal. Thank you all, and congratulations.
MiroliverELAP is our external liver assist product that we developed to treat patients suffering from acute liver failure, or ALF. The liver is the only organ in the body that can regenerate itself, and miroliverELAP is designed to help in that process. Think of miroliverELAP as liver dialysis where a patient’s blood is circulated through one of our bioengineered livers that can reside bedside in a chamber connected to a continuous renal replacement therapy system, or CRRT.
Over the course of treatment, the patient’s blood is continuously filtered and returned to the patient through the closed loop circuit, so the native liver can be offloaded to provide critical time to receive a life-saving liver transplant or allow their native liver to hopefully recover itself back to health. The CRRT system that will be utilized in our clinical trial have been designed with software updates to accommodate our bioengineered livers and to facilitate liver dialysis. The current generation of these systems is available in most ICUs and are designed to deliver continuous renal replacement therapy and therapeutic plasma exchange. Our modified CRRT systems were created specifically for our study. And if this study is ultimately successful and miroliverELAP gains approval, the existing installed base of CRRT systems can receive similar software updates to accommodate miroliverELAP and enable the delivery of liver dialysis.
Our liver support, or dialysis, has some important differences versus kidney dialysis that I want to highlight. First, liver dialysis is an acute therapy performed once in the ICU, where kidney dialysis is a chronic therapy performed indefinitely in an outpatient center or at home. Again, this is because the liver is the only organ capable of regenerating itself.
To perform a miroliverELAP procedure, one of our bioengineered livers will be delivered to the ICU from our fully integrated manufacturing facility, in case in a disposable chamber and connected to a CRRT device situated near the patient’s bedside. We currently envision utilizing one bioengineered liver per treatment. If successful, at a minimum, this would serve as a bridge to transplant. And at a maximum, this could serve as a bridge to recovery where it would not only benefit the treated patient, it could also free up livers for others in need of transplant because today over 50% of ALF patients either die or receive a liver transplant.
The impact of miroliverELAP on the health system could be substantial as 50,000 people in the U.S. die every year from all types of liver failure. And in a typical year, only about 9,000 liver transplants are performed due to the lack of supply. Specific to the addressable market for miroliverELAP, approximately 80,000 people are hospitalized each year due to a combination of ALF, acute on chronic liver failure and alcoholic hepatitis.
We expect that the initial addressable market for our miroliverELAP product candidate will be the ALF population, which represents up to 5,000 of the 80,000 hospitalizations I just referenced. While expansion studies would likely be required to address the additional patient population, I want to make sure that people appreciate the potential total addressable market that we can envision for miroliverELAP. Today, there is no gold standard therapy for ALF and supportive and symptomatic management are the cornerstones of current treatment.
Aceta medicine overdose is the most common cause of ALF in the United States, and there is an effective anecdote available that is most effective given within 8 hours of overdose.
Other common causes of ALF are mushroom overdose and viral hepatitis. And treatments often include a cocktail of therapies. As you can appreciate from these examples, without a standard of care, there is significant potential for missing a therapeutic window or lack of a viable therapy. Importantly, miroliverELAP can be used in combination with other therapies than an ALF patient may be prescribed. The current design of our Phase 1 trial for miroliverELAP envisions enrolling up to 15 ALF patients. These patients can be on treatment for up to 3 days and monitored for 21 days thereafter. Our plan is to enroll patients at up to 6 clinical sites, and we have a good sense of which institutions will likely participate in our Phase 1 clinical trial. Participating sites will become known after our IND is cleared by the FDA, at which time institutions can begin their internal IRB process.
The manageable size of this trial and the fast follow-up leads us to believe that we could have Phase 1 data in hand within 9 to 12 months of commencing the trial. If successful, we foresee commencing Phase 2 and Phase 3 clinical trials, potentially a combined Phase 2, Phase 3 trial soon thereafter. We are actively exploring various regulatory and marketing pathways that may be applicable to miroliverELAP. We anticipate seeking an RMAT designation that would allow us to receive greater interactions with the FDA during development and a priority review designation upon BLA submission.
We also anticipate seeking orphan drug designation that would grant us seven years of marketing exclusivity upon BLA approval. Our team will also be turning its attention to pre-commercial activities such as pricing and reimbursement discussions due to the potential short duration of these trials.
As I wrap up my comments around miroliverELAP, it’s valuable to highlight that our pipeline has always been sequenced so that the development of future product candidates can benefit from the learnings of our prior product candidates. This sequential derisking strategy started with our first two products that utilize perfusion decellularization to produce hernia repair and advanced wound care products from porcine livers. Both products received 510(k) clearance from the FDA and have been safely implanted in thousands of patients and were out-licensed in 2019, so we could focus entirely on organ transplant.
The significance of these two products today is that the clinical and regulatory learnings around perfusion decellularization helped us inform certain decisions relating to miroliverELAP. The reason that I leave you with this final thought is that while liver dialysis is an excellent commercial market opportunity on its own, the learning from miroliverELAP should also prove valuable towards informing some of the developmental aspects of our fully implantable bioengineered organs because miroliverELAP is now the first time we are utilizing perfusion decellularization plus recellularization.
Moving on to our fully implantable bioengineered organs, mirokidney and miroliver. We remain on track to submit our pre-IND request for both programs in 2023 and similar to miroliverELAP we will have a better sense of timing regarding their path to the clinic after we receive the FDA responses. As a reminder, we have already achieved very important proof of concepts in both of our fully implantable programs. We published the results of a study in 2021 done in collaboration with the Mayo Clinic, announcing the successful implantation of our bioengineered livers into large animals. This study showed valuable proof-of-concept data for miroliver and also for our entire decellularization and recellularization platform technology.
Our kidney team has also delivered exciting news regarding the development of our fully implantable bioengineered kidney. During our second earnings call, I shared that our kidney team successfully demonstrated early urine production and protein retention in our preclinical bench testing. We believe that this is the first time that a bioengineered kidney has produced urine, an important milestone in the development pathway.
Fast forward to the third quarter, the same kidney team was selected as a finalist by KidneyX to participate in the Innovation Kidney Winner Showcase at ASN Kidney Week, earlier this month. As many of you know, KidneyX is a partnership between the U.S. Department of Health and Human Services and the American Society of Nephrology with a mission to accelerate innovation in the treatment of kidney disease. This is the second time Miromatrix has been a KidneyX finalist, so a great accomplishment for Miromatrix. I’d like to specifically acknowledge Emily Beck and our scientific kidney team members for being recognized by such a prestigious organization.
Moving away from our pipeline updates, I would like to conclude my portion of this call by sharing a couple of business updates related to strengthening of our IP portfolio and a strategic hire.
On the intellectual property front, you may have seen that we recently issued a press release regarding the receipt of a new patent for methods of recellularizing a tissue or organ for improved transplantability. This new patent covers the revascularization of decellularized organs and tissues encompassing all types of organs, including kidneys, livers, lungs and hearts. This is our 119th issued patent relating to our technology platform in the United States and major markets worldwide. We continue to believe that Miromatrix possesses the core patents related to perfusion decellularization and recellularization, which is a desirable position for us to begin.
On the hiring front, we announced the appointment of Dr. Jack Lake as our new Medical Director. Dr. Lake brings tremendous expertise and knowledge of liver and whole organ transplantation to our team, which we believe will prove invaluable on multiple fronts. Dr. Lake will be on site one day per week, while remaining in his current roles at the University of Minnesota as Professor of Surgery and Medicine, the Chief of Hepatology and Executive Medical Director for solid organ transplantation. Dr. Lake brings so many other relevant credentials to our organization that we highlighted in his hiring press release that I would like to encourage you to take a look at. We are delighted to have Jack on our team.
I will now turn it over to Jim Douglas, our Financial Officer, to discuss our financial results in the third quarter of 2022.
Jim Douglas
Thank you, Jeff.
We finished the third quarter with cash and investments totaling $31.5 million as compared to $38.6 million at the end of the second quarter. We continue to believe this is sufficient to fund the Company through 2023. Additionally, we have not accessed our ATM facility that we put in place earlier this year.
Moving on to the income statement. Operating loss was $7.8 million and $23.2 million for the three and nine-month periods ended September 30, 2022 as compared to $5.2 million and $11.5 million for the 3 and 9-month periods ended September 30, 2021.
The increase in operating loss for comparable periods was primarily attributable to increased research and development costs and general and administrative costs, notably cost increases relating to being a public company, payroll and lab supplies.
Net loss was $7.6 million or $0.37 per share and $23 million or $1.11 per share for the 3 and 9-month periods ended September 30, 2022, as compared to $5.1 million or $0.25 per share and $9.2 million or $1.08 per share for the 3 and 9-month periods ended September 30, 2021. The increase in net loss for comparable periods was primarily attributable to the same cost decreases described within operating loss above, plus onetime gains recognized in the first quarter of 2021 that impact the 9-month period comparison. The increase in share count for the 9-month comparable periods is attributable to the issuance of IPO shares in June 2021.
And in closing, we are looking forward to presenting at the upcoming Craig-Hallum and Piper Sandler investor conferences and hope to see many of you there.
With that, I’ll turn the call back over to the operator and open the line for questions. Thank you.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question is from Alex Nowak of Craig-Hallum Capital Group. Please go ahead.
Unidentified Analyst
Good afternoon, everyone. This is Jason [ph] on for Alex. First off, congrats on the big milestone guys, fun day. And I guess, starting off from us, I guess, how are you thinking about a time line to potentially hear back from the FDA? And what are you expecting to hear back as far as any back and forth that might be required with the agency?
Jeff Ross
Thanks for the congratulations. I think, as we highlighted in the call, this is a big milestone as we look at pioneering a whole new class of therapeutics. With the IND process once that’s submitted, we look to have feedback from the FDA roughly around 30 days or so to get the initial feedback from them on the application and any additional questions they have. So, we’re really looking forward now to moving to that phase to be able to engage in that level of dialogue.
Unidentified Analyst
That’s helpful. I guess, kind of following up on that, anything major to report that was in the IND filing that we may have not discussed before, that is of note? And then, just general confidence from you guys that this will get accepted based on your previous conversations with the FDA and their expectations.
Jeff Ross
Yes. I think if you look at how we’ve executed over the past year, we started off the year with our pre-IND submission. And as we highlighted before, we had really good dialogue and feedback from the FDA in terms of what they were looking for in an IND submission that allowed us to really go forward, gather that data and put together what we feel is a really strong IND package to be able to submit that with the FDA. With that notion, we know that this is a new class of therapies. We’ve kind of hit this on before. And we do expect that the FDA likely will have a couple of questions around this technology. But I’d say, going into this, we’re incredibly confident being able to work through any questions from the FDA to ultimately lead to a clearance.
Unidentified Analyst
Yes, that all makes sense. And I guess, kind of next just around — maybe one for Jim. With the IND filing now submitted, what kind of activities are underway to prepare for the trial? Is there any additional staffing that’s needed? And then, with the trial launching early in 2023, how should we think about kind of expense ramp and additional hiring that might be needed?
Jim Douglas
Yes. We’re always looking for blue chip talent. And I think that Jeff highlighted the hiring of Dr. Lake recently. And also, in his remarks, he mentioned the fact that we’re in a fortunate position now to be talking about pricing and reimbursement and pre-commercialization strategies. So that will be on the top of our mind here as we get towards year-end. And as far as the trial itself goes, the trial size that Jeff mentioned is 5 to 15 patients with a very quick follow-up. So, a little different than most trials. Our burn actually goes down as it relates to miroliverELAP versus where it was in the developmental stage. So, our cash burn, we still feel confident that we’re going to have enough cash to get us through 2023 based upon the cash we have on our balance sheet today. So, I guess, the speed and size of that miroliverELAP trial is something important to highlight.
Unidentified Analyst
And I guess, with miroliver and mirokidney, progressing down the pathway as well, I mean, any kind of ramp-up in expenses we should be thinking about there? Just to kind of wholesome of all your programs into 2023?
Jeff Ross
Yes, the two of those would stay at a similar rate as we have today as far as the R&D development of the organs themselves. So, I think that we would envision that the burn we’ve experienced through the second half of 2022 is likely not going to be too dissimilar to what we see in the first half and potentially second half of 2023.
Unidentified Analyst
Okay. Great, guys. I’ll hop back in the queue. Thanks for the questions.
Jeff Ross
Thank you.
Operator
Next question is from Matthew O’Brien of Piper Sandler.
Unidentified Analyst
Hey. This is Phil [ph] on for Matt. Thanks for taking my questions. And just for starters, congrats on the milestone. It’s definitely a big deal. I guess, just in terms of those early commercialization conversations that you guys are starting to have, this being such an innovative and novel product, what do you expect in terms of reimbursement? Obviously it’s difficult to kind of figure out where reimbursement might land. But how are you even starting those conversations and what is that looking like?
Jeff Ross
Yes, I think you’ve hit on it. And this is pioneering a new class of medicine. We’re going to make sure we have all the right stakeholders involved and getting input from all different angles. And I think, the value that this is providing to the healthcare system is enormous. And so, we’ll be taking guidance from a lot of folks that have been in this realm from new classes of medicine. I think that on a somewhat comparative scale, there has been new approvals for things like gene therapies, CAR-Ts, et cetera, that are value-based reimbursement approaches. And I think this is not dissimilar.
Unidentified Analyst
That makes a lot of sense. And I guess, just one clarification question here. Just how hard is that upgrade from the current CRRT systems to the miroliverELAP compatible one [Technical Difficulty] right that it’s just a simple software update and you can fully utilize the current installed base of those systems?
Jeff Ross
Yes. So, I think you’re looking at that exactly right from the standpoint that we are able to kind of take that existing system and through some software updates enable us to create and support the system to be able to have our external liver or bioengineered liver external to the patient and then be able to utilize that system to essentially to liver dialysis.
Unidentified Analyst
That’s great. And then, I guess, just to kind of put a finer point on things, and just because it was in the press release with the patent that covers all types of organs, are you starting to look at more organs, I would guess, for your system here? Are you still focusing most of your bandwidth on the kidney and the liver at this point?
Jeff Ross
Yes. Phil, that’s a really good question. I mean, if we do look at this, I mean, one of the reasons we chose liver and kidney for the first organs is, 95% of those who are waiting for an organ today are either waiting for a liver or a kidney. On the liver, we know there is no alternative therapies besides transplant. On the kidney side, the only alternative therapy is dialysis, which we’ve highlighted before, while it is lifesaving technology, the five-year mortality rate with that is still 50% or higher. So, we’ve really focused on those two organs to start with, both from the need and the market size, and we’ll continue to keep the focus on that. And our goal has always been once we start getting into human clinical studies and further, that would be the point that we’d look to start to expand this into lung or heart or some of the other programs because we feel strongly to keep the focus and that really strong need is going to be beneficial for us to execute and be able to bring that therapy to patients.
Unidentified Analyst
Absolutely. Thanks for that color. And again, congrats on the milestone here, guys. Thanks so much.
Jeff Ross
Absolutely. Thank you.
Operator
Ladies and gentlemen, we have reached the end of the question-and-answer session. And this concludes today’s conference. Thank you for joining us. You may now disconnect your lines.
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