Dawson James - Caladrius (CLBS) - Delays, Delays & delays + Burning Cash
Caladrius has fallen to $0.90 from $1.61 (2.15.21) when we wrote "Dam the Shareholders Full Speed Ahead", commenting on the highly dilutive capital raise. Revisiting the story, we see little progress. Caladrius reported 3Q21 results spending $7M in the quarter, steadily whittling down its $100M in cash balance but to what end? We note multiple delays across previously promoted programs such as CLI in Japan, now suspended.
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HONDERA (CLBS12) – Suspended for CLI in Japan –This was planned as a small Phase 2 study, an interventional, open-label, proof-of-concept (POC) trial planned for two centers, but the company had problems finding patients, blaming COVID. Caladrius now says the program is suspended until a Japanese partner is identified. We remain skeptical and see this program as "dead."
XOWNA (CLBS16) – Enrollment has Slowed: The product is currently being evaluated in a P2b study in patients with CMD and without obstructive coronary artery disease. Patient enrollment is behind schedule, so the company has been expanding the number of sites and modifying the study protocol. These protocol amendments were implemented in the latter part of the quarter. We see these as "red flags."
Management was Pushing the CD34+ cells as a COVID Play – This appears to have fizzled out. Is anyone surprised? What's the Problem? On just about every level, we find management's explanations across multiple programs as lacking. Management seems to lack an understanding of 1. the competitive environment. Multiple off-the-shelf, allogeneic companies are already treating COVID patients but on ventilators and potentially earlier, and recent failures of other cell therapies in COVID due to improved standard of care. 2. For example, in COVID, using cells to ameliorate the after-effects of ventilator therapy for COVID patients is a great idea, BUT a) harvesting cells from these patients is not ideal; b) how do you measure how effective your treatment is? For NORDA, we see a POC trial as a $65M and multi-year investment. What size trial is needed to measure the effect versus standard of care? 3. Caladrius's autologous therapy is very late in the field.
Valuation. For Caladrius, we previously lowered our rating to Neutral from Buy (March 2020) and removed our price target. Our model uses our highest discount rate of 30% in our free cash flow to the Firm (FCFF), discounted EPS, and Sum of the Parts (SOP) models. Our models go out to 2029 and have been updated for the recent dilution. The company now has a negative enterprise value, but we believe that won't last as its likely management will now be on a spending spree. Spending on clinical trials that we feel go nowhere and or looking to make an acquisition. Our bottom-line concern is that Caladrius has, in our opinion, missed the window. Allogenic competitors are advancing now in heart failure, back pain, stroke, CLI, GvHD, and three companies are today treating COVID patients for ARDS
Risks to our thesis include the following: (1) commercial; (2) regulatory; (3) clinical; (4) manufacturing; (5) financial; (6) liability; and (7) intellectual property.
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