MIRO - Miromatrix Medical Inc. (MIRO) Q4 2022 Earnings Call Transcript

2023-03-31 21:38:08 ET

Miromatrix Medical Inc. (MIRO)

Q4 2022 Earnings Conference Call

March 31, 2023 16:30 ET

Company Participants

Hannah Jeffrey - Investor Relations

Jeff Ross - Chief Executive Officer

Jim Douglas - Chief Financial Officer

Conference Call Participants

Phillip Dantoin - Piper Sandler

Alex Nowak - Craig-Hallum Capital Group

Presentation

Operator

Greetings and welcome to the Miromatrix Medical, Inc. Fourth Quarter and Full Year 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Hannah Jeffrey with Investor Relations. Thank you, Ms. Jeffrey, you may begin.

Hannah Jeffrey

Good afternoon and thank you for joining us. Earlier today, Miromatrix released financial results for the fourth quarter and full year ended December 31, 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 and IND filings, and 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 descriptions 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 31, 2023. 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 to everyone who has joined us today for our fourth quarter and full year 2022 earnings call. The past year was very rewarding and challenging at the same time. One of the most rewarding accomplishments was the submission of our IND application for miroliverELAP in November. We believe this was the first IND submission for a bioengineered organ therapy putting us on the forefront of pioneering a new class of therapies to treat patients suffering from organ failure. The FDA then notified us in December that our IND application was placed on clinical hold. And in January, we received the formal clinical hold letter from the FDA, detailing the specific deficiencies and the information needed to resolve the clinical hold. After evaluating the clinical hold better internally, and with our outside advisers, we remain optimistic about the ultimate success of miroliverELAP. We are focused on providing patients with acute liver failure access to miroliverELAP as soon as possible. And over the coming months, we will focus our efforts on resubmitting the IND in the second half of 2023, with the goal of gaining IND clearance from the FDA shortly thereafter.

We believe gaining IND clearance for miroliverELAP is a significant value creation event for Miromatrix, because it will be the first time one of our bioengineered organs is authorized for human use in human clinical trials. Following IND clearance for miroliverELAP, our attention will immediately turn to enrolling patients in a Phase 1 clinical trial which our clinical team is preparing for in parallel to our IND resubmission. As a reminder, miroliverELAP is designed to provide liver dialysis by connecting a Miromatrix single-use bioengineered liver with a software modified Baxter PrisMAX system outside of the body to treat patients suffering from acute liver failure. The potential addressable market for miroliverELAP includes the approximately 80,000 patients who are hospitalized each year due to various types of acute liver failure.

Our initial clinical trial will be targeting patients who represent approximately 5,000 of the 80,000 hospitalizations, and an expansion study would likely be required to address the remaining ALS segments. The prioritization of miroliverELAP enables Miromatrix to sharpen our focus on gaining IND clearance and initiating a Phase 1 clinical trial while maintaining a disciplined operational approach with our strong cash position. As a result of our prioritization of miroliverELAP, investment in our fully implantable kidney and liver programs will be reduced during this time of miroliverELAP focus, which will push out our targeted pre-IND submission dates.

That said, we remain very enthusiastic about are fully implantable bioengineered organ programs. Of course, we could potentially reinvigorate any of our fully implantable bioengineered organ programs if the appropriate partnership revises or circumstances change. I’d like to remind everyone on today’s call that we have already achieved essential proof-of-concept milestones for both fully implantable organ programs and look to maintain that momentum.

For miroKidney, we previously announced that we demonstrated urine production and protein retention in a preclinical testing model. We believe this is the first time a bioengineered kidney has produced urine in any model. We were also selected as 1 of 4 finalists by KidneyX to participate in the innovate KidneyX winner Showcase at ASN Kidney Week, which was a second time Miromatrix has been a KidneyX award recipient. For miroliver, we previously published the results of a study done in collaboration with the Mayo Clinic announcing the successful implantation of our bioengineered livers into large animals. This study showed proof-of-concept data for miroliver and our decellularization, recellularization technology.

In closing, I am proud to announce that we recently had 3 presentations selected for the upcoming American Transplant Congress in June 2023, 2 relating to miroKidney and one related to miroliverELAP. We look forward to continuing to share our progress with the transplant community.

With that update, I will now turn the call over to Jim Douglas, our Chief Financial Officer, to discuss our financial results.

Jim Douglas

Thank you, Jeff. Starting with our balance sheet, we finished 2022 with cash and investments totaling $25.2 million. Adding the $10 million of common stock financing we completed earlier this month. We believe we have adequate capital to fund the company into or past the second quarter of 2024. Additionally, we have not accessed our ATM facility at any point since it was put in place.

Next, I’ll discuss our fourth quarter 2022 income statement results. Licensing revenue for the fourth quarter of 2022 was $930,000 compared to $8,000 in the fourth quarter of 2021. Licensing revenue for the fourth quarter of 2022 was $930,000 compared to $8,000 in the fourth quarter of 2021. The increase in licensing revenue represents collection of minimum royalties due from Reprise Biomedical for 2020 and 2022. The remainder of minimum royalties due from Reprise for 2021 has been deferred to 2023.

Cost of goods sold was $125,000 for both the fourth quarter of 2022 and 2021. Cost of goods sold for both periods relates to the minimum royalty due to the University of Minnesota under our license agreement. Operating loss for the fourth quarter of 2022 was $7.2 million compared to $5.5 million in the fourth quarter of 2021.

Net loss for the fourth quarter of 2022 was $6.9 million, or $0.33 per share compared to $5.5 million or $0.27 per share in the fourth quarter of 2021. The increase in operating loss and net loss was primarily attributable to increased research and development costs and general and administrative costs, notably, cost increases relating to payroll, lab supplies and costs associated with being a public company.

And finally, I will review our full year 2022 income statement results. Licensing revenue for 2022 was $953,000 compared to $33,000 in 2021. The increase in licensing revenue represents a collection of minimum royalties due from Reprise for 2020 and 2022. The remainder of minimum royalties due from Reprise for 2021 has been deferred to 2023. Cost of goods sold was $500,000 for both 2022 and 2021. Cost of goods sold for both periods relates to the minimum royalty due to the University of Minnesota under our license agreement and operating loss for 2022 was $30.4 million compared to $17 million in 2021. Net loss for 2022 was $30 million or $1.45 per share compared to $14.7 million or $1.28 per share in 2021. The increase in operating loss and net loss was primarily attributable to increased research and development costs and general and administrative costs. Notably, cost increases relating to payroll, lab supplies and costs associated with being a public company.

Additionally, the increase in net loss was magnified by one-time gains recognized in the first quarter of 2021 that impacted the full year comparison. And finally, the increase in weighted average shares used in computing net loss per share for 2022 compared to 2021 is attributable to the issuance of IPO shares in June of 2021.

With that, I will turn the call back over to the operator to open the line for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question is from Matthew O’Brien with Piper Sandler. Please proceed with your questions.

Phillip Dantoin

Hi, this is Phil on for Matt. Thanks for taking our questions. For starters, can you speak to the clinical hold letter and maybe what the FDA was looking for. As I understand that there were both clinical and non-clinical aspects to it. And then you said second half ‘23 clearance, is approval still expected about 30 days following resubmission? And will you let us know when that resubmission occurs?

Jeff Ross

Phil, great question. Thanks for asking it. As we look at the clinical hold and what we kind of highlighted in the earnings call as well is just how forward, we believe we are in terms of progress ahead of others as we pioneer a new class of therapeutics like this. And if you recall from our last earnings call, even upon submission, we had talked about the potential for being put on clinical hold just because the FDA had never seen a therapy like this before. So we had anticipated if you went back to that call, we had talked about potentially a 3 to 4-month clinical hold. With our current guidance, that was certainly extended a little bit longer as we gave our guidance in the second half of 2023. That’s really been driven primarily by two things in the clinical hold letter. The first was a request for some additional biocompatibility testing mainly on all the external components that we utilize to be able to create that circuit to provide the blood from the patient to the – our bioengineered liver graft. So that was one area that unfortunately, because of the length of some of that testing and the facilities to do that in the backlog of though, is that led to a longer time associated with that request.

The second request that the FDA asked for was some additional animals inside of our safety study. We had essentially done kind of a dosing study with that where we kind of did a high bid and a low dose, and the request came back for some additional animals kind of at that mid-range or likely dose associated with that in the safety study. So those still were really the two driving points that led to the longer guidance associated with the second half of this year compared to the guidance of before. The rest of the clinical hold letter was a lot of just clarification and some other questions associated with our process. But as I talked about in the earnings call, we feel really good about where we’re at, and now the ability and the road map to be able to execute on this and bring this forward with the goal of getting IND clearance.

Phillip Dantoin

No. Thank you so much for the color on the IND side of things. And my follow-up question, can you just remind us on your current expectations for trial design, maybe a number of sites, patient numbers. I know you talked about it on the last call, but just a refresher there would be great. Has anything changed on that front?

Jeff Ross

Yes. Nothing has really changed on that front. We’re still targeting up to eight clinical sites. We’ve been actively engaged with some of the clinical sites with the additional time that we have that we’re hopeful brings in the time to be able to activate those sites upon IND clearance. So it’s eight sites still targeting up to 15 patients in the clinical study. So as we talked about before, this is really a needed therapeutic out there because nothing exists today. But at the same time, we anticipate enrollment and completion of this clinical trial to be relatively fast as we’re looking at just a multiple days of therapy after their given the miroliverELAP therapy. So you look at enrollment and a couple of days later. And then our primary endpoint is, as it sits today, is between 48 and 72 hours and the secondary end point would be 21 days.

Phillip Dantoin

Super helpful. I will jump back in queue, but thanks so much.

Jeff Ross

Absolutely, thanks, Phil.

Operator

Thank you. Our next question is from Alex Nowak with Craig-Hallum Capital Group. Please proceed with your question.

Alex Nowak

Okay, great. Good afternoon everyone. Around the animal study, with the FDA trying to get to questions around organ function, how long the organs can last when they are sitting in the external pump or – was this solely the questions really with regards to safety of biocompatibility? Just trying to understand the nature of what FDA is trying to get to there.

Jeff Ross

Yes. Thanks, Alex, for that question. I mean, as we look through those, it was the latter. The requests have been on the biocompatibility and an additional animals inside the safety study. Obviously, we put forth a lot of data associated with functionality of the graft at various end points in various times. So the FDA, we didn’t see any questions directly related to that coming back from the FDA.

Alex Nowak

Okay. And I know you’re doing the bench studies, doing the animal studies now. Is there a time point in the next few months where you’re going to have visibility to say, yes, we can, in fact, resubmit everything in the second half of this year? Or is there going to be a certain time period where the study needs to be delayed? The bench studies need to be delayed or the Analyst Day is taking a little bit longer, where you’re going to have to revise the time frame. I’m just trying to understand if there is a time point catalyst we can look to just gives us confidence in that second half 2023 resubmission?

Jeff Ross

Yes. I think if you look at our earnings call and some of the things that I just talked about as well is we’re really prioritizing miroliverELAP, given the importance of this, not only for the patients, but also demonstrating the willingness to be able to work with the FDA, and to be able to move one of our bioengineered organs into human clinical studies. And with that prioritization, we’re really focused on moving this forward, Alex. So we’re constantly monitoring our time lines and ensuring that we’re able to hit the second half of this year, should something slip with that or should something happen that’s unforeseen. We would certainly redo the guidance at that point. But at this point, everything is well in hand.

Alex Nowak

Okay. Understood. And if I remember correctly, there was due to a plan for – I think it’s a Type D meeting with the FDA during this kind of this process. Has that taken place? Or is that in a next couple of weeks or months or so?

Jeff Ross

Yes, we’ve been working on multiple fronts, I mean, throughout this to just kind of work with the FDA, whether it’s Type D or whether it’s through informal meetings as well. So we have had some communications with the FDA. And we look to continue to those communications right up until we do our full resubmission.

Alex Nowak

Okay. Got it. The ATC presentation, you mentioned two were going to be on kidney, one on miroliverELAP. Can you expand on those presentations is just a little bit of a review of the clinical data – or excuse me, the preclinical data that you’ve put out so far – or what are the nature of the ATC presentations?

Jeff Ross

Yes. It’s really on that front. It’s just providing additional clarity on some of the functionality on the recellularizations of the kidney, where we’ve really more for the scientific and medical side as well, where we’ve really solved some of those key components like the recellularization of the glomerulus and demonstrated that we’re able to get that podocyte differentiation, maturation and then functionality on the backside of that, including some of the protein retention that we talked about. And then on the miroliverELAP, it’s going to be some of the preclinical data that we discussed as well.

Alex Nowak

Okay. Got it. And then a two-parter, first for you, Jeff. With regard to the kind of deportation of kidney, I guess how should we think about that? Is that much more on I guess what specifically you’re deprioritizing? It sounds like you’re going to still keep the bench warm with kidneys and continue to develop some of the work there. Is it much more around kind of the regulatory and the paperwork side of getting this through doing the pre-IND meetings with the FDA? Is that where the presentation comes from? And then Jim, same topic, just how to think about expense reductions because of focusing liver versus kidney.

Jeff Ross

Yes, Alex, when we look at the prioritization that I talked about, it’s just really putting a key focus on miroliverELAP comes first. The old adage, you can do many things. But if you do a lot of things, you’re not able to do them well. And we just took a step back, knowing the importance of miroliverELAP and getting the IND cleared and set that internally to say that, that’s our number one priority and then make sure that we assemble the teams and other things to really have that focus. And then with the extra time, we still have activity that’s going on, on miroKidney, it’s just not necessarily at the same pace that we were before because we’re ensuring that we’re able to move forward as quickly as possible on miroliverELAP to be able to hit the milestones that we talked about previously because we really don’t want those to slip.

Alex Nowak

And then just on the expense side?

Jim Douglas

Yes, you’ll see a reduction expenses driven predominantly by the reduction of the need for manufacturing organs on the fully implantable kidney liver side. So we will see a reduction on that front. And then we will – essentially, you’ll see that historical through 2022 ran about a 2% to 2.5% monthly cash burn. We’re going to do our best to get that below $2 million. and continue to really streamline the business. So you’ll see that there’ll just be impacts driven by this focus on miroliverELAP that will flow through on various aspects of our cost structure.

Alex Nowak

Okay, got it. That makes sense. Appreciate the update. Thank you.

Jeff Ross

Thanks, Alex.

Operator

There are no further questions at this time. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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