NASDAQ: AEMD
Lili Elston: Hello, and welcome to the Life Sciences Investor Forum. On behalf of OTC Markets and our co-host, Zacks Small Cap Research, we are very pleased you've joined us. The next presentation of the day is from Aethlon Medical. Their session will be moderated by M. Marin, Senior Analyst with Zacks Small Cap Research. Please note, you may submit questions for the presenter. You can also view a company's availability for one-on-one meetings by clicking Book a Meeting. At this point, I am very pleased to welcome Jim Frakes, Chief Executive Officer and Chief Financial Officer of Aethlon Medical (NASDAQ: AEMD). Welcome, Jim and M. Marin.
Jim Frakes: Thank you, Lily.
M. Marin: Thank you. Jim, we're talking about Aethlon Medical at a very exciting point in the company's development. Can you talk to us a little bit about your lead asset, about the Hemopurifier, and what makes it unique?
JF: I'm happy to. And thanks, everybody, for taking time out of your day to learn more about Aethlon Medical. If you can see on the camera, I'm holding one of our products. We make a medical device called a Hemopurifier. It's designed to remove harmful viruses and cancerous particles called exosomes or extracellular vesicles from the bloodstream. This device is hooked to a blood-pumping mechanism, usually a dialysis machine or a CRRT machine. There are a number of blood-pumping devices in hospitals and clinics worldwide, and it plugs in. We only need the blood pump aspect of those machines. We don't need the other pumping issues that a dialysis machine would have. And we have breakthrough device designations from the FDA for life-threatening viruses with no prescribed therapy or life-threatening oncologic situations. The origin of the device was in virology. We did a lot of work in hepatitis C to prove the concept and help some patients. However, I focused the company on oncology, on cancer, and we're doing a clinical trial, a safety trial, in Australia at the moment. We're about two-thirds of the way through. It's going well.
JF: We're also looking at some areas of viruses that involve these EVs, extracellular vesicles. There are platelet-derived EVs that are relevant to autoimmune diseases like lupus. And there have been recent articles on EVs in chronic kidney disease patients, CKD, that lead to heart problems. We're taking a look at that as well. But the emphasis, we're a small company, we have to marshal our resources carefully, our primary focus is oncology. I want to make that clear. That's a very general background on our product.
MM: Thank you. To recap what you said, to make sure that we understand, and for those people who are listening to the presentation who may not be especially focused on this space, but are more generalist investors: the Hemopurifier is designed to remove harmful particles that have been identified as being associated with a multiple of conditions and diseases, including in the oncology space and certainly many other spaces. Is that the right way to think of it?
JF: That's correct. Most harmful viruses and these EVs, extracellular vesicles, are coated with a glycosylation, a sugary surface. And when the blood goes into our device, the plasma is filtered out through about 20,000 little fibers inside the device, and outside the fibers, we have our secret sauce. It's diatomaceous earth bound to a plant lectin. That lectin grabs onto the sugary surface of the viruses and the EVs, and then the plasma, less whatever's been taken out, goes back into the fibers and back in the body. It's a circuit. Typically, patients are treated for four hours, and each pass through, the objective is to take out more and more of the EVs and the viral particles and give the body's immune system a better chance to fight those maladies.
MM: Thank you. Now, you mentioned before that because you're a relatively small company, you need to be focused because you don't have unlimited access to resources. You said oncology. What are the primary clinical indications you're focused on today, and how are you prioritizing that while still preserving your flexibility across multiple potential uses of the device?
JF: Right. Well, as I mentioned earlier, EVs, I'll call them EVs from now on instead of saying extracellular vesicles every time. They're nanoparticles that are released by all cell types. They participate in cell-to-cell communication. In cancer, EVs have been noted to participate in the spread of cancer, also known as metastasis, the growth of new blood vessels to the tumors, known as angiogenesis, cell death, known as apoptosis, and the inhibition of the body's T-cells that kill tumor cells. They also provide resistance to chemotherapy drugs and immunotherapy agents. Our hypothesis is that if we remove some number of these EVs from the bloodstream of cancer patients, it will help reduce their metastasis. I think we all know people, regrettably, that have fallen victim to cancer and it spreads from one part of the body to the other. That is metastasis. We've chosen to work indirectly with two main oncology drugs known as Keytruda or Opdivo. They're the biggest-selling drugs in the world, and they're great, and they work about a third of the time. That's wonderful for the third where it's working, but the two-thirds where it doesn't work, that's not helpful.
JF: Our objective is to try to help some of those two-thirds that participate in our trials, and hopefully, when we receive approval to market down the road, we can help more people. But the objective is to move up that percentage. We're in the first stage, a safety trial. It's designed for about nine patients. It's in three cohorts. The first cohort is three patients treated one time. The second cohort is also three patients, treated twice in a week. And then the last cohort, an additional three patients are treated three times in a week. Let's call it a Monday, Wednesday, and Friday. And it's designed to be done before the patient's next Opdivo or Keytruda treatment. That's kind of a high-level picture of the design of our trial.
MM: And is it right to think that currently those two standard-of-care therapies, Keytruda and Opdivo, you said they currently work on about a third of the patients that are treated, let's call it 33%-ish? That even moving with the Hemopurifier in conjunction with those treatments, moving from 33% up to 34 or 35%, given the unfortunate prevalence of cancerous diseases, we're still talking huge numbers of patients that potentially could benefit.
JF: Yes. These are extremely large markets, both in terms of the number of patients and for those large biotech companies, their sales of those products. The last number I believe I saw for Keytruda was $25 billion. I mean, it's a huge product. They've been approved for, I believe, more than 12 tumor types. And this trial is designed as a basket trial. It could be for most solid tumors that have been approved for Keytruda or Opdivo.
MM: Okay. And what are the key milestones that you think investors should be watching for as your current clinical trial progresses?
JF: Well, we finished the first cohort in the December quarter. The independent Data Safety Monitoring Board met and gave us approval to proceed to the second cohort. We have now treated all three patients in the second cohort, and the Data Safety Monitoring Board will meet later this month to determine whether or not we should proceed to the third cohort. In terms of safety, I don't know why they wouldn't approve it, but if they don't, we'll have to do three additional patients. But assuming they do approve it, then we move on to the third cohort. In terms of milestones, the decision of the Data Safety Monitoring Board later this month is the first milestone. We will have data down the road from this second cohort. We released some data from the first cohort in the December quarter. We can talk about that a bit later if you'd like. And then the beginning of the third cohort, completion of the third cohort, and then the overall data from the whole trial. That data is being generated by the University of Sydney in Australia. They have a center there that's just a group of experts in EVs. We have a number of milestones coming up over the next six months or so.
MM: Staying with this discussion around progressing from the second cohort to the third cohort, potentially, do you currently have qualified candidates that you've already identified for the third cohort?
JF: Yes, we actually have three patients in the queue right now. Assuming the Safety Monitoring Board gives us the green light to move to the third cohort, we'll give revised paperwork to those three interested patients. And assuming they don't change their mind, I think we could move quite quickly through the third cohort. And again, I wanted to point out that we do our treatments immediately before their next Keytruda or Opdivo treatment. We know when these potential patients' next treatments are. We would schedule those three, the Monday, Wednesday, Friday example, the week before their Opdivo or Keytruda treatment. There's some mechanical slotting in, logistics, but it's excellent that we possibly have all three patients lined up if nobody drops out.
MM: Okay, great. Now stepping back, just pivoting a little bit. There have been other indications that have been associated, or rather, the Hemopurifier has been associated with having benefits for other indications. Can you talk a little bit about some of those and how you're maintaining your focus on cost containment, which I know is a big company focus, and how you're maintaining that focus while still maintaining those avenues open as options down the road?
JF: Sure. Well, we don't want to ignore our virology background, and there are some really interesting applications for the Hemopurifier in virology. But we have limited resources. We have to look at every investment. We were able to get a number of long COVID samples from a group, a specialist group at the University of California, San Francisco, and we got those for free except for shipping. Our scientists internally did a lot of analysis. We ran that data by that group at UC San Francisco, participated in a major conference, and we're working on a peer-reviewed article with that UC San Francisco group in long COVID. But it's still early. All these things I'm going to talk about now are early. We're not yet in a clinical trial phase. Platelet-derived EVs, that's very interesting. Again, autoimmune diseases like lupus and rheumatoid arthritis are all potential targets. And more recently, we've learned EVs are very relevant in CKD, or chronic kidney disease, where they travel from the damaged kidney to cause heart problems. All of those, any or all of those, could be possible grant opportunities to move it forward. In the meantime, we're investing some amounts to bring in the necessary items into our lab to do that research work. But again, the main focus is on oncology, and we have to stay focused.
MM: We talked a little bit about the current trial. Can you tell us a little bit about the reasons that you decided to conduct this trial in Australia?
JF: Sure. First of all, they practice great medicine there. The doctors are world-class. Dr. Steve LaRosa, our chief medical officer, has run clinical trials in Australia in the past and is knowledgeable about the hospitals and key decision makers there. They also have a very advantageous, they call it a tax credit, where for every dollar that we spend in Australia on our trial, we get reimbursed 43 cents. It's not a tax credit, it's actually cash. That brings down the cost of the trial nicely. The objective of this tax credit in Australia is to spur their indigenous life science industry. But that's very helpful in terms of bringing down the cost of the trial. Those three factors.
MM: How will conducting the trial in Australia in any way impact, or not impact, your applications to the FDA and other regulators outside of Australia?
JF: My only previous experience with giving data that originated internationally to the FDA was in clinical trials we did in India, and they accepted that. I don't know why they wouldn't accept data from Australia. We will apply. The plan is to apply when we finish this trial and write everything up to apply to their equivalent of the FDA, which is called the TGA, to do the next step there. But if we're in a position financially and with sufficient personnel to do it in both countries, we would do that.
MM: Okay. I know you touched upon it earlier, but could you please repeat what you see as key milestones that investors should be looking for over the next 12 to 18 months?
JF: Sure. Well, again, we have a number coming up over the next few months. The decision of the Data Safety Monitoring Board vis-a-vis moving on to Cohort 3, the data from Cohort 2, the two treatments in a week cohort, starting and finishing Cohort 3, and then the overall data from the project. And then so that all could be the next few quarters, and then our move forward into the efficacy trial. I should have prefaced, unlike drugs, devices only need two trials: the safety trial that we're in right now, then the larger efficacy trial, which would have more patients. It would be based on a discussion with the regulator as to how many, but it wouldn't be thousands like a drug would be. We have a number of milestones that we're looking forward to telling the world about over the next 12 months.
MM: Okay, great. And as you look forward to hitting some of those milestones, can you give us a little bit of color on what your capital position is now and your cash runway to get to those events?
JF: We published our December quarterly report just a few weeks ago. We ended December with just under $7 million of cash, no debt of any sort. Our current burn rate is roughly $1.5 million a quarter, or $500,000 a month. And that's dependent somewhat on how many patients are treated because we do pay the hospitals. Part of the payments to them is based on the number of treatments. Potentially 7 million divided by 1.5 is more than four quarters. We also have, I think, $1.85 million available on an at-the-market facility that we could use, but haven't yet, to generate additional cash. We have some cash, and we've kept our burn rate low for what we're trying to accomplish. I feel reasonably good about our position.
MM: Great. Now, you've talked in the past about you're currently leveraging dialysis equipment for the Hemopurifier, but you've talked about how that's not necessarily the best route. Can you talk about what you're doing with a potential usage of a more simplified system?
JF: We know a company here that is trying to develop a much more simplified blood-pumping system. It would work just in the catheters that I'm sure all of us have had in our arms when we've been to the doctor or the hospital. Much simpler. You don't need a nephrologist, a kidney doctor, or a specialist dialysis nurse. Just virtually every healthcare professional could operate it. And right now, the Hemopurifier is typically in a dual-lumen catheter that's placed in the clavicle, which all dialysis patients have. And my feeling is if you have cancer and it's not responding to primary drugs, you wouldn't object to having the catheter in there for one to two weeks. But this would open things up immensely. But I have to caution, this is very preliminary. They don't have FDA approval yet. We have sent them some Hemopurifiers, and they've tested them, running colored water and things like that through them, and it seems to work with these very early-stage tests. But it could open things up quite a bit for us and for other extracorporeal devices as well in the future, but I don't want to overstress it because it is so preliminary.
MM: Right. I know you've gotten questions in the past about strategic partnerships, and then there was a brief announcement that you made earlier today. Can you give us any kind of color on what you're thinking there?
JF: Sure. Well, I think I've been pretty clear over the last couple of years. We think we've got the resources, both monetary and personnel, to complete this safety trial. But to go on to the larger efficacy trial, we need a partner. And we've talked to people from time to time. We decided that we needed more of a process. We needed to reach out to strategic and other financing partners. We engaged an investment bank called Maxim, and we put out a press release on that this morning. And the best case would be a company that's in our industry that really knows the markets that we're in, but if it's more of a financially oriented, strong partner, that would be great too. We decided we needed a process and just start moving forward because we feel like we're pretty well along in this safety trial. We feel like we've really accomplished something.
MM: That said, how many Hemopurifiers do you currently have, how many people have you treated, and how scalable do you think this platform could be?
JF: Right now, we've had 173 Hemopurifier treatments in 44 patients. That number is growing pretty nicely. Quite largely, it's been very safe. There have been no serious adverse events, device-related. We needed to tune the throughput of the plasma through the device. That was achieved early on. Since then, there have been no significant issues. We do have a manufacturing facility here in San Diego. We could ramp up the number of Hemopurifiers that we make quite a bit. At the moment, we have enough for the trial. We're manufacturing three or four times a year, but it is scalable, yes.
MM: Okay, great. You touched on this before, about the target addressable market. We all know, without knowing actual statistics, that it's large. Do you have anything you want to share about the size of the market opportunity for you?
JF: Well, I mean, those oncology drugs, successful oncology drugs, are just huge. And I don't want to imply that we're going to grab a significant percentage of that. That would not be the correct way to approach this. But it's quite a big market. If we can improve that one-third percentage that I mentioned earlier, even 1%, it would be significant. But we're a high-risk investment. I always tell people that. But the return could be very nice as well. It's a high-risk, high-return, kind of hitting for the fences type of investment opportunity here with a lot of risk, no doubt, but big markets, and we're trying to do something that could be very important for people.
MM: When you talk to clinicians, it may be too early to ask this question, but are you getting any feedback that supports your confidence that the Hemopurifier could really be beneficial here?
JF: I think it's too early to answer that in any specific way. The data from the first cohort did show that the targets that we were looking at largely went in the direction we wanted them to go, the T cells and EVs, but it was only three patients. We need to get through the safety trial and perhaps even get into the efficacy trial to generate more data to have a better answer to that question. But there was nothing in the data that was going in the wrong direction. I was actually pretty excited about it.
MM: Two more questions before I want to ask about your conclusions or wrap up. First, what do you think the market might be overlooking? What stands out as the key thing you're thinking the market could be overlooking? And what do you think the Hemopurifier solves that current treatments are not solving?
JF: Well, it's hard to say what the market's overlooking. The company's been around a long time. It spent a lot of years in virology. Perhaps we had a good opportunity with COVID, but the vaccinations really did a good job and removed that opportunity. But I wouldn't say we were a restart, but the refocus on oncology, I think, is relatively recent, and I would like to think people could focus on that and see something here. Your second question was...
MM: What you just said, you did have some positive data during the pandemic when you did emergency use cases, correct?
JF: Yes. We removed EVs. We helped one patient who was severely ill with COVID. It helped her survive. If we can improve patient outcomes in cancer even a few percent, that's just moving the needle quite a bit. I like to think we can make a difference. We are the only product that removes EVs. That's a differentiating factor with us versus everybody else, as far as I know. And we are out of time. There were some good questions asked. I'm sorry we couldn't respond to them, but you could email me or Susan Noonan, our investor relations expert, and we'll try to answer them if we can. I'd like to thank everybody for taking the time out of their busy day to learn more about our company.
MM: Thank you. This concludes the presentation.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks Investment Awareness (ZIA) is a Zacks SCR product. The Zacks SCR analyst conducting this Chat hereby certifies that the views expressed accurately reflect the personal views of the analyst about the subject securities and issuer. Zacks SCR certifies that no part of any analyst’s compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this Chat. Zacks SCR believes the information used for the creation of this Chat has been obtained from sources considered to be reliable, but we can neither guarantee nor represent the completeness or accuracy of the information herewith. Such information and the opinions expressed are subject to change without notice.
This text is not a verbatim transcript. This transcript has been edited and does not reflect the video-recording exactly. You may find the video recording in its entirety here. Full Disclaimer HERE.