Lisata Therapeutics(LSTA) - 2023 Q4 - Annual Report

Cautionary Note Regarding Forward-Looking Statements This section advises readers that forward-looking statements in the report are subject to inherent uncertainties and risks, and actual results may differ materially - Forward-looking statements are predictions subject to uncertainties and known/unknown risks, and actual results may differ materially[14] - Factors that could cause actual results to differ include the ability to obtain sufficient capital, build management infrastructure, establish market for products, scientific/regulatory developments, intellectual property protection, realization of strategic benefits, diversification of pipeline, results of development activities, and completion of clinical trials[15] PART I ITEM 1. Business Lisata Therapeutics' business overview details its lead product LSTA1 for solid tumors, corporate history, development, IP, and regulatory context Overview Lisata Therapeutics is a clinical-stage pharmaceutical company developing LSTA1 to enhance anti-cancer drug penetration for solid tumors, currently in Phase 2a and Phase 2b studies - Lisata Therapeutics is a clinical-stage pharmaceutical company focused on innovative therapies for solid tumors and other major diseases[17] - LSTA1, the lead investigational product, activates a novel uptake pathway to enhance co-administered anti-cancer drug penetration into solid tumors and can modify the tumor microenvironment[17] - LSTA1 is currently in Phase 2a and Phase 2b clinical studies globally for various solid tumor types, including metastatic pancreatic ductal adenocarcinoma (mPDAC), cholangiocarcinoma, head and neck cancer, appendiceal cancer, colon cancer, and glioblastoma multiforme[17] - Legacy CD34+ cell therapy programs require significant capital and strategic partners for further development[18] Corporate Information Incorporated in Delaware in 1980, the company's principal offices are in Basking Ridge, NJ, with SEC filings available online - Lisata Therapeutics, Inc. was incorporated in 1980 as a Delaware corporation[20] - The principal executive offices are located at 110 Allen Road, Second Floor, Basking Ridge, NJ 07920[20] - Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments are available free of charge through the Investors section of www.lisata.com and www.sec.gov[21](index=21&type=chunk) Merger with Cend Therapeutics, Inc. and Name Change Caladrius Biosciences acquired Cend Therapeutics on September 15, 2022, becoming Lisata Therapeutics after a 1:15 reverse stock split, expensing IPR&D as an asset acquisition - Merger with Cend Therapeutics, Inc. completed on September 15, 2022, with Caladrius Biosciences, Inc. changing its name to Lisata Therapeutics, Inc[22] - A 1:15 reverse stock split was effected prior to the merger, and 3,772,768 shares of common stock were issued to Cend holders[23] - Caladrius was the accounting acquirer, and the merger was accounted for as an asset acquisition, with IPR&D expensed[25] Development Programs Lisata's LSTA1 program activates the CendR system to enhance anti-cancer drug penetration in solid tumors, showing favorable safety and activity in mPDAC Phase 1b, with ongoing Phase 2a/2b studies - LSTA1 activates the C-end rule (CendR) active transport system in a tumor-specific manner, enhancing drug penetration and accumulation in solid tumors[29] - LSTA1 has demonstrated favorable safety, tolerability, and activity in a completed Phase 1b clinical trial for first-line mPDAC patients[32] LSTA1 Phase 1b mPDAC Clinical Trial Results vs. MPACT Trial | Metric | LSTA1 Phase 1b | MPACT Trial (SoC) | | :-------------------------------- | :------------- | :------------------ | | Objective Response Rate (ORR) | 59% | 23% | | Disease Control Rate (DCR) | >79% | 48% | | CA19-9 Reduction | 96% | 61% | | Median Progression-Free Survival | ~10 months | <6 months | | Median Overall Survival | >13 months | <9 months | - LSTA1 is currently the subject of multiple ongoing and planned Phase 2a and Phase 2b clinical trials globally in various solid tumor types, combining with chemotherapy and immunotherapy regimens[33] TECHNOLOGY COLLABORATION AND OUT-LICENSING OPPORTUNITIES The company seeks collaborations to leverage its CendR Platform and LSTA1 for enhancing solid tumor treatments, including nucleic acid, immunotherapy, and targeted therapies - Lisata plans to enter partnerships to exploit the CendR Platform for enhancing solid tumor cancer treatments[37] - Collaboration opportunities include nucleic acid-based treatments (antisense, siRNA, mRNA, gene editing), immunotherapies (adoptive cell, checkpoint inhibitors), and additional targeted therapies[37] Intellectual Property Platform Lisata's IP portfolio for LSTA1 and the CendR Platform includes three pending U.S. and fourteen international patent applications covering tumor reduction and treatment methods - The LSTA1 and CendR Platform patent portfolio includes three pending patent applications in the United States and fourteen pending patent applications outside the United States[43] - Pending claims cover methods for reducing tumor volume using LSTA1 with anti-cancer agents, treating pancreatic cancer with LSTA1 in combination with gemcitabine and/or nab-paclitaxel, and treating tumors with iRGD and a cytokine[43] Pancreatic Cancer & Advanced Solid Tumors (PDAC) Pancreatic ductal adenocarcinoma (PDAC) is a highly aggressive and lethal malignancy characterized by a low 5-year survival rate and significant global incidence Pancreatic Cancer Statistics | Metric | United States | Worldwide | | :-------------------- | :------------ | :---------- | | New Cases Annually | ~64,000 | ~434,000 | | PDAC Annual Incidences| N/A | ~397,000 | | 5-Year Survival Rate | 11% | N/A | | Deaths Annually | ~50,000 | ~466,000 | SEASONALITY The company does not believe that its operations are seasonal in nature - The company does not believe that its operations are seasonal in nature[39] GOVERNMENT REGULATION The highly regulated healthcare industry impacts all stages of product development, manufacturing, and commercialization, with extensive U.S., EU, and UK compliance requirements and potential penalties U.S. Government Regulation U.S. pharmaceutical products are extensively regulated by the FDA, covering development, manufacturing, and marketing through preclinical studies, multi-phase clinical trials, NDA submission, and cGMP standards, with non-compliance leading to severe sanctions - Pharmaceutical products are subject to extensive pre- and post-market regulation by the U.S. Food and Drug Administration (FDA) and other global agencies[41] - The premarket approval process involves preclinical studies, Investigational New Drug (IND) application, Institutional Review Board (IRB) approval, Good Clinical Practices (GCPs), multi-phase clinical trials (Phase 1, 2, 3, 4), New Drug Application (NDA) submission, and compliance with Good Manufacturing Practices (cGMPs)[48][49][55] - Expedited review programs like Fast Track, Breakthrough Therapy, and Priority Review are available for drugs treating serious or life-threatening conditions with unmet medical needs, potentially accelerating development and review but not guaranteeing approval[60][61][62] - Accelerated approval pathway allows approval based on surrogate or intermediate clinical endpoints for serious conditions, but requires post-marketing confirmatory studies[64][67] - Orphan Drug Designation provides 7-year market exclusivity, fee waivers, and tax credits for drugs treating rare diseases (affecting <200,000 individuals in the U.S.)[72][73][75] - Rare Pediatric Disease Designation (RPDD) can lead to Priority Review Vouchers (PRVs) for drugs treating serious pediatric diseases, which are transferable[76][77][78] - Post-approval, drugs and manufacturers are subject to ongoing FDA regulation, including monitoring, adverse event reporting, promotion restrictions (off-label use), and cGMP compliance, with potential sanctions for non-compliance[80][81][82] Other Health Care Laws and Regulations The company must comply with various U.S. federal and state healthcare fraud and abuse laws, including Anti-Kickback, False Claims, and HIPAA, where violations can lead to severe criminal and civil sanctions - Compliance with U.S. federal and state healthcare fraud and abuse laws is mandatory, including the Anti-Kickback Law, False Claims Act, HIPAA, and the Physician Payments Sunshine Act[84][86] - Violations can result in criminal and civil sanctions, exclusion from federal healthcare programs (Medicare, Medicaid), corporate integrity agreements, fines, and penalties[84][85][88] Coverage, Pricing, and Reimbursement Approved drug sales depend on third-party payor coverage and reimbursement, facing challenges from drug pricing, cost-effectiveness evaluations, and the Inflation Reduction Act's impact on Medicare drug price negotiation - Sales of approved drug products depend on coverage and adequate reimbursement from third-party payors, who increasingly challenge drug prices and examine medical necessity and cost-effectiveness[89][90] - The Inflation Reduction Act of 2022 (IRA) introduces Medicare drug price negotiation and rebates for price increases exceeding inflation, creating uncertainty and potential revenue decreases[94] - Federal and state governments continue to consider legislation aimed at lowering healthcare costs, including PBM reforms, which could affect the pharmaceutical supply chain and the company's business[95] Patent Term Extension FDA-approved prescription drug patents may qualify for a limited five-year extension under the Hatch-Waxman Act, compensating for regulatory review time, subject to specific conditions - A patent for an FDA-approved prescription drug may be eligible for a limited patent term extension of up to five years under the FD&C Act (Hatch-Waxman Amendments)[97] - The extension period is related to the time the drug is under regulatory review, cannot exceed 14 years from approval, and applies to only one patent per approved drug product[97] Data Privacy and the Protection of Personal Information The company is subject to evolving data privacy laws like HIPAA, CCPA, and GDPR, with non-compliance risking penalties, sanctions, reputational harm, and complex compliance issues - The company is subject to numerous and evolving data privacy laws, including state security breach notification laws, HIPAA, the FTC Act, CCPA, and CPRA in the U.S.[99][100][101] - International regulations like the GDPR in the EU also impose stringent data protection requirements and significant fines for breaches[99] - Failure to comply with these laws can result in penalties, sanctions, reputational harm, and complex compliance issues due to varying interpretations and non-preempted state laws[99][101] Environmental, Health and Safety Regulation The company is subject to federal, state, and local EHS laws governing hazardous materials and waste, requiring licenses and permits, with non-compliance risking substantial fines or operational limitations - The company is subject to federal, state, and local environmental, health, and safety (EHS) laws and regulations[102] - These regulations govern safe working conditions, product stewardship, environmental protection, and the handling/disposal of hazardous or potentially hazardous materials[102] - Non-compliance or failure to obtain/comply with permits could lead to substantial fines, permit revocation, or limitations on operations[102] U.S. Foreign Corrupt Practices Act The FCPA prohibits bribing foreign officials for improper business advantages and mandates accurate record-keeping, with healthcare professionals often considered 'foreign officials' requiring strict compliance - The Foreign Corrupt Practices Act (FCPA) prohibits bribery of foreign officials to influence decisions or secure improper advantages[104] - Healthcare professionals in foreign public health systems are often deemed 'foreign officials' under the FCPA, requiring strict policies for interactions[105] - The FCPA also mandates accurate books and records and adequate internal accounting controls for international operations[105] Government Regulation Outside the U.S. International operations subject the company to diverse foreign regulations for clinical trials and sales, with varying, often complex approval processes, and non-compliance risking fines or withdrawal of approvals - The company is subject to foreign regulations governing clinical trials, commercial sales, and distribution, which vary significantly by country[106] - Foreign regulatory approval processes can be longer and differ from U.S. requirements, and approval in one country does not ensure approval in another[106] - Failure to comply with foreign regulatory requirements can result in fines, suspension or withdrawal of approvals, product recalls, and criminal prosecution[106] Regulation of Pharmaceutical Products in the European Union The EU regulates pharmaceutical products via clinical trial approvals and marketing authorizations, streamlining applications through CTIS, with MAAs following centralized or decentralized procedures, and post-authorization promotion restrictions - The EU's Clinical Trials Regulation (EU) No 536/2014, effective January 31, 2022, streamlines clinical trial approvals via the Clinical Trial Information System (CTIS)[108][109] - Marketing Authorization Applications (MAA) can be submitted via a centralized procedure (single authorization for all EU states) or a decentralized procedure (for specific member states)[110][111] - Marketing authorizations are generally valid for five years and subject to renewal, with a 'sunset clause' for products not placed on the market within three years[112] - Promotion of prescription-only medicines in the EU is restricted to healthcare professionals and must comply with product characteristics and industry codes of conduct[113] Regulation of Pharmaceutical Products in the United Kingdom Post-Brexit, the UK's MHRA handles licensing decisions, and the Windsor Framework, effective January 1, 2025, will make MHRA responsible for all medicines marketed in the UK, independent of the EMA - Post-Brexit, UK licensing decisions transferred from the EMA to the Medicines and Healthcare Products Regulatory Agency (MHRA)[115] - The Windsor Framework, effective January 1, 2025, will make MHRA responsible for approving all medicines marketed in the UK (Great Britain and Northern Ireland), with EMA no longer involved for Northern Ireland[116] ITEM 1A. RISK FACTORS This section outlines significant risks and uncertainties that could materially affect the company's business, financial condition, operating results, and cash flows, spanning financial stability, product development, manufacturing, and regulatory compliance SUMMARY OF RISK FACTORS The company faces numerous risks including substantial losses, financing needs, high dependence on LSTA1, unknown commercial potential, clinical trial challenges, side effects, reliance on CMOs/CROs, competition, growth management, litigation, and IP challenges - The company has incurred substantial losses and negative cash flow, requiring significant additional financing[119] - High dependence on lead product candidate LSTA1; failure in clinical development or regulatory approval would be materially harmful[119] - Risks include unknown commercial potential, lack of marketing/sales organization, challenges in managing multiple late-stage clinical trials, potential for serious side effects, and reliance on contract manufacturing and research organizations[119][121] - Other risks involve potential litigation, product liability claims, inability to retain key employees, international operating risks, cybersecurity threats, extensive government regulation, and intellectual property protection challenges[121][126] RISKS RELATED TO OUR FINANCIAL CONDITION AND CAPITAL REQUIREMENTS The company's history of substantial net losses and negative cash flow necessitates significant additional financing, with revenue generation uncertain and further financial risks from litigation, NOL limitations, and financial services industry instability - The company has incurred aggregate net losses of approximately $528.1 million since inception through December 31, 2023[128] Net Losses from Continuing Operations Attributable to Common Stockholders | Year Ended December 31, | Net Loss (in millions) | | :---------------------- | :--------------------- | | 2023 | $(20.8) | | 2022 | $(54.2) | - Substantial additional capital is required to fund continued development of product candidates and clinical activities, with no guarantee of obtaining financing on acceptable terms[129][133] - The ability to utilize net operating loss (NOL) carryforwards and tax credit carryforwards may be limited due to an 'ownership change' under Section 382 of the Code[140][141] - Adverse developments in the financial services industry could impair access to funding sources and credit arrangements, potentially leading to delayed access to deposits, loss of credit facilities, or breaches of contractual obligations[142][144][146] RISKS RELATED TO OUR PRODUCT DEVELOPMENT EFFORTS The company's success depends heavily on LSTA1's clinical development, with trials being expensive, lengthy, and uncertain, facing risks from delays, side effects, manufacturing issues, and regulatory non-acceptance of foreign data, while expedited designations offer no guarantee of faster approval - The company is substantially dependent on the successful clinical development and commercialization of its lead product candidate, LSTA1, and other future product candidates[148] - Clinical testing is expensive, difficult, and can take many years, with a high risk of failure at any stage due to negative or inconclusive results, adverse side effects, or delays in patient enrollment[155][160][178] - Regulatory authorities may not accept data from clinical trials conducted outside the United States, potentially requiring additional costly and time-consuming trials[171] - Expedited designations (Fast Track, Breakthrough Therapy, Accelerated Approval) do not guarantee a faster development, regulatory review, or approval process, nor do they increase the likelihood of marketing approval[179][180][181][182][183] - Initiation of pivotal Phase 3 clinical trials requires validation and establishment of manufacturing controls, and failure to address chemistry, manufacturing, and control (CMC) issues could delay or prevent regulatory submission[174] RISKS RELATED TO MANUFACTURING OUR DEVELOPMENT PRODUCT CANDIDATES The company relies entirely on CMOs for product candidates, lacking internal manufacturing or redundant suppliers, exposing it to risks of limited capacity, disruptions, cGMP compliance issues, and challenges in achieving commercial manufacturing efficiency, with geopolitical tensions also impacting the supply chain - The company has no internal manufacturing capacity and relies on contract manufacturing organizations (CMOs) for product candidates, with no redundant suppliers[189][207][212] - Risks include finite manufacturing capacity, potential disruptions, inability to meet cGMP compliance standards, and challenges in improving manufacturing efficiency to achieve commercially viable cost of goods[190][208][209][210][211][213] - Geopolitical tensions and conflicts could adversely affect the global supply chain, impacting raw material availability and prices[191] RISKS RELATED TO SALES, MARKETING, AND COMPETITION The company lacks internal marketing and sales, requiring reliance on third parties or building new capabilities, facing risks in international markets from differing regulations and IP enforcement, with uncertain market acceptance even post-approval due to efficacy, safety, cost, and competition - The company currently has no internal marketing and sales organization and no experience in marketing products, requiring significant capital and time to develop or reliance on third-party collaborators[214][215][216] - International marketing efforts are subject to risks such as differing regulatory requirements, economic instability, foreign taxes, difficulties in managing foreign operations, and challenges in enforcing intellectual property rights[217][219] - Market acceptance of approved products is uncertain and depends on factors like clinical indications, physician acceptance, perceived advantages over alternatives, side effects, cost, and reimbursement policies[218][220] - The company faces intense competition from pharmaceutical, biopharmaceutical, and biotechnology companies with greater financial resources and experience[197][198][225] RISKS RELATED TO GOVERNMENT REGULATION Product candidate development and commercialization are subject to extensive FDA and global regulation, with failure to obtain/maintain approvals, comply with post-marketing obligations, or adhere to promotion restrictions severely impacting the business, alongside financial and operational risks from evolving healthcare laws and reimbursement uncertainties - The development and commercialization of product candidates are subject to extensive regulation by the FDA and other regulatory agencies, with no guarantee of obtaining or maintaining approvals[228][229] - Post-approval, the company will be subject to ongoing regulatory obligations, including surveillance, REMS, cGMP compliance, and restrictions on advertising and promotion, with potential penalties for non-compliance[231][233][235] - Improper promotion of off-label uses could lead to significant liability, fines, and government enforcement actions[236] - Compliance with complex and frequently changing federal, state, and international healthcare fraud and abuse laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA) is critical, with violations leading to severe sanctions[237][242][245] - Uncertainty exists regarding coverage and reimbursement from government and private payors, with cost-containment measures and legislation like the Inflation Reduction Act potentially limiting demand and pricing[253][258][263][264] - Inadequate funding for regulatory agencies (FDA, SEC) could delay product review and approval, negatively impacting business operations[266][267] RISKS RELATED TO OUR INTELLECTUAL PROPERTY Commercial success depends on obtaining and maintaining robust patent protection, which is uncertain and costly, facing risks from validity challenges, infringement claims, enforcement difficulties, loss of licensed rights, and challenges in protecting trade secrets, with changes in patent law potentially diminishing IP value - Commercial success depends on obtaining and maintaining patent protection, which is highly uncertain, costly, and subject to challenges regarding validity, enforceability, and scope[271][272][285] - Intellectual property litigation is expensive, time-consuming, and could result in substantial damages, licensing requirements, or cessation of activities if infringement claims by third parties are successful[274][275][317] - Failure to comply with obligations under license agreements, such as the SBP License Agreement for LSTA1, could lead to the loss of critical development and commercialization rights[277][278][279][281][290][291][292] - Protecting the confidentiality of unpatented trade secrets and know-how is difficult, and unauthorized disclosure or independent development by competitors could impair the company's competitive position[308][309][310] - Changes to U.S. patent law and the existence of compulsory licensing laws in some countries could weaken the ability to obtain or enforce patents and limit potential revenues[312][313] RISKS RELATED TO OUR RELIANCE ON THIRD PARTIES The company's reliance on collaborations, alliances, and licensing arrangements carries risks from collaborators' discretion, competing products, and IP disputes, while reliance on third-party manufacturers for cGMP compliance and hazardous materials exposes it to delays, sanctions, and liabilities - Collaborations and strategic alliances are subject to risks including collaborators' discretion in resource allocation, potential for developing competing products, and disputes over intellectual property rights[321] - Reliance on third-party manufacturers requires compliance with cGMP regulations, and any failure to comply could lead to delays, clinical program termination, or withdrawal of regulatory approvals[322] - The use of hazardous and biological materials by third-party manufacturers exposes the company to liability for damages or fines if injury or violations of applicable law occur[323] RISKS RELATED TO MANAGING GROWTH AND EMPLOYEE MATTERS Anticipated significant growth requires hiring and retaining qualified personnel and expanding facilities, with difficulties in managing growth, overseeing outsourced activities, or recruiting key employees impeding goals, and inherent product liability risks posing substantial liabilities and reputational damage - The company expects to grow its organization, requiring additional managerial, operational, sales, marketing, financial, and other personnel, as well as facilities[324] - Difficulties in recruiting and retaining key officers and employees, or effectively managing outsourced activities, could delay research and development and harm business operations[204][325][326][327] - The company faces inherent product liability risks from clinical testing and potential commercial sales, which could result in substantial liabilities, decreased demand, and reputational injury[200][202][328] GENERAL RISK FACTORS General risks include EHS non-compliance, restrictive data privacy regulations (CCPA, GDPR), cyberattacks threatening information systems, highly volatile stock price influenced by clinical development and financial results, and risks of Nasdaq delisting or significant dilution - Failure to comply with environmental, health, and safety laws and regulations could result in fines, penalties, or significant costs[330][331] - The company is subject to restrictive data privacy regulations (e.g., CCPA, GDPR), and non-compliance could lead to government enforcement actions, private litigation, or adverse publicity[333][334] - Cyberattacks and security breaches on internal or third-party information systems could result in disclosure of confidential information, operational disruption, reputational damage, and significant financial and legal exposure[335][337] - The company's stock price has been and is likely to remain highly volatile, influenced by clinical trial results, financial performance, and broader economic/geopolitical events[338][339][340] - Risks include potential delisting from the Nasdaq Capital Market if continued listing requirements are not met, and significant dilution from future fundraising or the exercise of outstanding securities[341][342][343] ITEM 1B. UNRESOLVED STAFF COMMENTS There are no unresolved staff comments - There are no unresolved staff comments[348] ITEM 1C. CYBERSECURITY The company maintains a comprehensive cybersecurity program based on NIST frameworks, overseen by its board and audit committee, including security monitoring, vulnerability assessments, employee training, and incident response planning, with third-party diligence - The company maintains a comprehensive cybersecurity program based on NIST frameworks to identify, prevent, and mitigate cybersecurity threats[349][351] - The board of directors, through its audit committee, actively oversees cybersecurity risk management and strategy, receiving quarterly updates from the Chief Information Officer[356][357][359] - Cybersecurity activities include network monitoring, vulnerability assessments, penetration testing, mandatory employee training, phishing simulations, and incident response planning[352] - Diligence is performed on third-party service providers with access to systems or data, requiring contractual agreements for cybersecurity risk management[354] ITEM 2. PROPERTIES The company's corporate headquarters in Basking Ridge, NJ, occupy 8,100 rentable square feet under a lease extending through September 30, 2025, with two five-year renewal options - Corporate headquarters are in Basking Ridge, New Jersey, with approximately 8,100 rentable square feet[360] - The base monthly rent is approximately $15,900 through September 30, 2025, with two five-year renewal options[360] ITEM 3. LEGAL PROCEEDINGS The company faces ordinary course legal proceedings, none believed to materially affect its financial condition, including ongoing litigation with Lingmed Limited over a success fee from Cend's Qilu Pharmaceuticals agreement, with a trial set for August 2, 2024 - The company is subject to legal proceedings and claims in the ordinary course of business, with no current belief of a material adverse effect on financial condition[361] - An ongoing litigation involves Lingmed Limited alleging breach of contract and fraud against Cend (now Lisata) for a success fee related to a Qilu Pharmaceuticals agreement[362] - The trial date for the Lingmed lawsuit is set for August 2, 2024, and the company intends to vigorously defend itself[363] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable - This item is not applicable[364] PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The company's common stock trades on Nasdaq under 'LSTA,' with 292 record holders as of February 29, 2024, no cash dividends paid or anticipated, and details on equity compensation plans are provided - Common stock trades on The Nasdaq Capital Market under the symbol 'LSTA'[367] - As of February 29, 2024, there were approximately 292 holders of record of common stock[367] - The company has not paid cash dividends and does not anticipate doing so in the foreseeable future, intending to retain earnings for business development[368] Equity Compensation Plan Information (as of December 31, 2023) | Metric | Number of Securities to be Issued Upon Exercise of Outstanding Options (1) | Weighted Average Exercise Price of Outstanding Options and Rights | Number of Securities Remaining Available for Future Issuance (excluding col (a)) (3) | | :------------------------------------------------ | :--------------------------------------------------------- | :---------------------------------------------------------- | :----------------------------------------------------------------------- | | Equity compensation plans approved by security holders (2) | 1,322,501 | $10.81 | 615,052 | | Equity compensation plans not approved by security holders | 0 | — | 0 | | Total | 1,322,501 | $10.81 | 615,052 | ITEM 6. [RESERVED] This item is reserved - This item is reserved[372] ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial performance and condition for 2023 and 2022, covering business overview, results of operations, liquidity, capital resources, off-balance sheet arrangements, and critical accounting policies Overview Lisata Therapeutics is a clinical-stage pharmaceutical company focused on developing and commercializing innovative therapies for solid tumors, with its lead candidate LSTA1 in Phase 2a and Phase 2b clinical studies - Lisata Therapeutics is a clinical-stage pharmaceutical company dedicated to discovering, developing, and commercializing innovative therapies for solid tumors and other major diseases[374] - LSTA1, the lead investigational product, is designed to activate a novel uptake pathway for enhanced anti-cancer drug penetration into solid tumors and is currently in Phase 2a and Phase 2b clinical studies globally[374] Results of Operations The company reported a $20.8 million net loss in 2023, a significant improvement from $54.2 million in 2022, primarily due to a $31.9 million decrease in operating expenses from the absence of 2022 IPR&D, alongside increased other income Consolidated Results of Operations (in thousands) | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | Change (2023 vs 2022) | | :-------------------------- | :---------------------- | :---------------------- | :-------------------- | | Research and development | $12,734 | $13,067 | $(333) | | In-process R&D | $0 | $30,393 | $(30,393) | | General and administrative | $12,974 | $14,141 | $(1,167) | | Total operating expenses | $25,708 | $57,601 | $(31,893) | | Loss from operations | $(25,708) | $(57,601) | $31,893 | | Total other income | $2,538 | $897 | $1,641 | | Benefit from income taxes | $(2,330) | $(2,479) | $(149) | | Net loss | $(20,840) | $(54,225) | $33,385 | - Total operating expenses decreased by $31.9 million (55.4%) primarily due to the absence of a $30.4 million IPR&D expense in 2023 related to the Cend merger[378] - Research and development expenses decreased by $0.3 million (2.5%) due to lower costs associated with LSTA1 programs compared to legacy CD34+ cell therapy programs in the prior year[384] - General and administrative expenses decreased by $1.2 million (8.3%) due to non-recurring merger-related costs and lower equity expense in the prior year, partially offset by severance costs in 2023[384] - Total other income increased by $1.6 million, primarily from investment income and the sale of NJ NOLs[380] - The company received a $2.3 million income tax benefit in 2023 from the sale of NJ NOLs, compared to $2.5 million in 2022[381][382] Analysis of Liquidity and Capital Resources As of December 31, 2023, the company held $50.5 million in cash and marketable securities, with $20.0 million net cash used in operations, $10.1 million provided by investing, and $0.4 million by financing, expecting existing funds to cover 12 months but anticipating future capital needs Key Financial Position Metrics (as of December 31, 2023, in millions) | Metric | Amount | | :------------------------------------ | :----- | | Cash, cash equivalents, and marketable securities | $50.5 | | Working capital | $47.3 | | Stockholders' equity | $48.1 | Net Cash Flows (in thousands) | Activity | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :-------------------------------- | :---------------------- | :---------------------- | | Net cash used in operating activities | $(20,032) | $(21,170) | | Net cash provided by investing activities | $10,102 | $28,911 | | Net cash provided by (used in) financing activities | $385 | $(224) | - Net cash provided by investing activities in 2023 was primarily due to net sales of marketable securities[388] - Net cash provided by financing activities in 2023 included proceeds from ATM Agreement ($0.3 million) and option exercises ($0.2 million)[390] - The company believes its cash on hand and marketable securities will fund operating expenses for at least the next 12 months[392] - Future capital requirements are difficult to forecast, and the company may seek additional financing through debt, equity, partnerships, or asset sales, with no assurance of acceptable terms[392][395] Off-Balance Sheet Arrangements The company does not have any off-balance sheet arrangements - The company does not have any off-balance sheet arrangements[396] Critical Accounting Policies and Estimates Financial statement preparation requires significant estimates and judgments, with critical accounting policies including share-based compensation valuation and the Cend merger's asset acquisition accounting, where IPR&D was expensed - Critical accounting policies involve significant management estimates and judgments, particularly for share-based compensation and the valuation of the Cend merger[397][398] - The Cend merger was accounted for as an asset acquisition, with substantially all fair value concentrated in in-process research and development (IPR&D), which was expensed[399] - Share-based compensation expense is recognized over the service period based on grant date fair value, using the Black-Scholes option-pricing model for options[400] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This item is not applicable - This item is not applicable[401] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section presents the company's audited consolidated financial statements for 2023 and 2022, including the Independent Auditor's Report, Balance Sheets, Statements of Operations, Comprehensive Loss, Equity, Cash Flows, and accompanying Notes Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248) Grant Thornton LLP issued an unqualified opinion on Lisata Therapeutics' consolidated financial statements for 2023 and 2022, confirming fair presentation in conformity with U.S. GAAP, without auditing internal control effectiveness or identifying critical audit matters - Grant Thornton LLP issued an unqualified opinion on the consolidated financial statements for 2023 and 2022, confirming fair presentation in accordance with U.S. GAAP[409] - The audit did not include an opinion on the effectiveness of internal control over financial reporting[411] - No critical audit matters were identified for the current period audit[413] Consolidated Balance Sheets at December 31, 2023 and 2022 Consolidated balance sheets show total assets decreased from $73.0 million in 2022 to $54.7 million in 2023, driven by reduced cash and marketable securities, with total equity decreasing from $66.3 million to $47.9 million Consolidated Balance Sheet Highlights (in thousands) | Metric | December 31, 2023 | December 31, 2022 | | :-------------------------------- | :------------------ | :------------------ | | Cash and cash equivalents | $22,593 | $32,154 | | Marketable securities | $27,942 | $37,072 | | Total current assets | $53,924 | $71,876 | | Total assets | $54,694 | $73,034 | | Total current liabilities | $6,590 | $6,383 | | Total liabilities | $6,800 | $6,710 | | Total Lisata Therapeutics, Inc. stockholders' equity | $48,148 | $66,578 | | Total equity | $47,894 | $66,324 | - Total assets decreased by $18.3 million (25.1%) from $73.0 million in 2022 to $54.7 million in 2023[416] - Total equity decreased by $18.4 million (27.8%) from $66.3 million in 2022 to $47.9 million in 2023[416] Consolidated Statements of Operations - Years Ended December 31, 2023 and 2022 Consolidated statements of operations show a net loss of $20.8 million for 2023, a significant reduction from $54.2 million in 2022, primarily due to decreased operating expenses from the absence of 2022 IPR&D, and increased investment income Consolidated Statements of Operations (in thousands, except per share data) | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :------------------------------------------------ | :---------------------- | :---------------------- | | Research and development | $12,734 | $13,067 | | In-process research and development | $0 | $30,393 | | General and administrative | $12,974 | $14,141 | | Operating expenses | $25,708 | $57,601 | | Operating loss | $(25,708) | $(57,601) | | Investment income, net | $2,724 | $1,052 | | Total other income | $2,538 | $897 | | Net loss before benefit from income taxes and noncontrolling interests | $(23,170) | $(56,704) | | Benefit from income taxes | $(2,330) | $(2,479) | | Net loss | $(20,840) | $(54,225) | | Net loss attributable to Lisata Therapeutics, Inc. common stockholders | $(20,840) | $(54,225) | | Basic and diluted loss per share | $(2.58) | $(10.47) | | Weighted average common shares outstanding | 8,073 | 5,180 | - Net loss decreased by $33.4 million (61.6%) from $54.2 million in 2022 to $20.8 million in 2023[419] - Operating expenses decreased by $31.9 million (55.4%) in 2023, primarily due to the absence of in-process research and development expenses[419] - Basic and diluted loss per share improved from $(10.47) in 2022 to $(2.58) in 2023[419] Consolidated Statements of Comprehensive Loss - Years Ended December 31, 2023 and 2022 Consolidated statements of comprehensive loss show a $20.9 million comprehensive loss for 2023, a significant improvement from $54.2 million in 2022, including net loss adjusted for unrealized gains on available-for-sale securities and foreign currency translation Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :------------------------------------------------ | :---------------------- | :---------------------- | | Net loss | $(20,840) | $(54,225) | | Available for sale securities - net unrealized gain | $12 | $52 | | Cumulative translation adjustment arising during the period | $(25) | $(11) | | Total other comprehensive income (loss) | $(13) | $41 | | Comprehensive loss | $(20,853) | $(54,184) | | Comprehensive loss attributable to Lisata Therapeutics, Inc. common stockholders | $(20,853) | $(54,184) | - Comprehensive loss decreased by $33.3 million (61.5%) from $54.2 million in 2022 to $20.9 million in 2023[422] Consolidated Statements of Equity - Years Ended December 31, 2023 and 2022 Consolidated statements of equity reflect a decrease in total equity from $66.3 million in 2022 to $47.9 million in 2023, primarily due to net loss, partially offset by share-based compensation and proceeds from common stock issuance and option exercises Consolidated Statements of Equity Highlights (in thousands) | Metric | Balance at Dec 31, 2022 | Net Loss (2023) | Share-based Compensation (2023) | Net Proceeds from Issuance of Common Stock (2023) | Proceeds from Option Exercises (2023) | Unrealized Gain on Marketable Securities (2023) | Foreign Currency Translation Adjustment (2023) | Balance at Dec 31, 2023 | | :-------------------------------- | :---------------------- | :-------------- | :------------------------------ | :------------------------------------------------ | :------------------------------------ | :---------------------------------------------- | :--------------------------------------------- | :---------------------- | | Common Stock | $8 | — | — | — | — | — | — | $8 | | Additional Paid-in Capital | $574,548 | — | $1,947 | $321 | $155 | — | — | $576,971 | | Accumulated Other Comprehensive Loss | $(29) | — | — | — | — | $12 | $(25) | $(42) | | Accumulated Deficit | $(507,241) | $(20,840) | — | — | — | — | — | $(528,081) | | Treasury Stock | $(708) | — | — | — | — | — | — | $(708) | | Total Lisata Therapeutics, Inc. Stockholders' Equity | $66,578 | $(20,840) | $1,947 | $321 | $155 | $12 | $(25) | $48,148 | - Total Lisata Therapeutics, Inc. stockholders' equity decreased by $18.4 million from $66.6 million in 2022 to $48.1 million in 2023[425] - The accumulated deficit increased by $20.8 million in 2023 due to the net loss[425] Consolidated Statements of Cash Flows - Years Ended December 31, 2023 and 2022 In 2023, net cash used in operating activities was $20.0 million, investing activities provided $10.1 million, and financing activities provided $0.4 million, reflecting shifts from 2022 primarily due to marketable securities sales and common stock issuance Consolidated Statements of Cash Flows (in thousands) | Activity | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :-------------------------------- | :---------------------- | :---------------------- | | Net cash used in operating activities | $(20,032) | $(21,170) | | Net cash provided by investing activities | $10,102 | $28,911 | | Net cash provided by (used in) financing activities | $385 | $(224) | | Net (decrease) increase in cash and cash equivalents | $(9,561) | $7,507 | | Cash and cash equivalents at end of year | $22,593 | $32,154 | - Net cash used in operating activities decreased by $1.1 million (5.4%) in 2023 compared to 2022[428] - Net cash provided by investing activities decreased by $18.8 million (65.1%) in 2023, primarily due to lower net sales of marketable securities[428] - Net cash provided by financing activities in 2023 was $0.4 million, a positive shift from $0.2 million used in 2022, driven by proceeds from common stock issuance and option exercises[428] Notes to Consolidated Financial Statements These notes provide detailed information supporting the consolidated financial statements, covering business overview, significant accounting policies, the Cend merger, available-for-sale securities, property and equipment, loss per share, fair value measurements, accrued liabilities, operating leases, stockholders' equity, share-based compensation, income taxes, and license agreements Note 1 – The Business This note overviews Lisata Therapeutics, a clinical-stage pharmaceutical company focused on solid tumors with LSTA1, detailing the September 2022 Cend merger, name change, 1:15 reverse stock split, and asset acquisition accounting where IPR&D was expensed - Lisata Therapeutics is a clinical-stage pharmaceutical company focused on discovering, developing, and commercializing innovative therapies for solid tumors, with LSTA1 as its lead candidate[430] - The company completed a merger with Cend Therapeutics, Inc. on September 15, 2022, changed its name from Caladrius Biosciences, Inc. to Lisata Therapeutics, Inc., and effected a 1:15 reverse stock split[433][434][438] - The merger was accounted for as an asset acquisition, with in-process research and development (IPR&D) expensed, as Caladrius was considered the accounting acquirer[436][437] Note 2 – Summary of Significant Accounting Policies This note outlines significant accounting policies, including classification and valuation of marketable securities, depreciation, impairment review, share-based compensation expensing using Black-Scholes, and the five-step revenue recognition process for license and collaboration arrangements, including IPR&D and milestones - All marketable securities are classified as available-for-sale, carried at estimated fair values, with unrealized gains/losses excluded from net income and reported in accumulated other comprehensive income (loss)[446] - Property and equipment are depreciated using the straight-line method over estimated useful lives (e.g., 10 years for furniture, 3 years for computer equipment)[447] - Share-based compensation for employees, directors, and consultants is expensed over the requisite service period based on grant date fair value, using the Black-Scholes option-pricing model for options[449] - Research and development (R&D) expenses are recognized when incurred, and upfront payments for new drug compounds are immediately expensed as in-process R&D (IPR&D) if they have no alternative future use[453][455] - Revenue from license and collaboration arrangements is recognized using a five-step process, allocating transaction price to performance obligations and recognizing revenue as obligations are satisfied[457] Note 3 – Merger The Cend Therapeutics merger was accounted for as an asset acquisition with a total purchase price of $36.1 million, allocating fair value primarily to in-process research and development (IPR&D) and a license, with IPR&D expensed - The merger with Cend Therapeutics was accounted for as an asset acquisition, with a total purchase price of $36.1 million[462][463] - The purchase price was allocated to net assets acquired, including $30.4 million for acquired in-process research and development (IPR&D) and $0.4 million for a license, with IPR&D being expensed[462][464] Note 4 – Available-for-Sale-Securities The company's available-for-sale securities portfolio totaled $44.7 million at December 31, 2023, primarily corporate debt, commercial paper, money market, and municipal debt, carried at fair value with a small net unrealized loss of $5 thousand, and most maturities under one year Available-for-Sale Securities (in thousands) | Type | Cost (2023) | Fair Value (2023) | Cost (2022) | Fair Value (2022) | | :-------------------- | :---------- | :---------------- | :---------- | :---------------- | | Corporate debt securities | $37,791 | $37,786 | $44,308 | $44,291 | | Commercial Paper | $1,981 | $1,981 | $7,953 | $7,953 | | Money market funds | $4,268 | $4,268 | $4,871 | $4,871 | | Municipal debt securities | $622 | $622 | $7,626 | $7,625 | | Total | $44,662 | $44,657 | $64,758 | $64,740 | - As of December 31, 2023, the total estimated fair value of available-for-sale securities was $44.7 million, with a gross unrealized gain of $3 thousand and gross unrealized losses of $8 thousand[465] - All available-for-sale securities had contractual maturities of less than one year as of December 31, 2023 and 2022[465] [Note 5 – Property and Equipment](index=86&type=section&id=Note%205%20%E2%80%93%20Property%20and%20Equip