Good day, and welcome to the PolarityTE First Quarter 2020 Earnings Conference Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Mr. Richard Haerle, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Operator. Good morning and thank you for joining PolarityTE's call to discuss first quarter 2020 results. I'm Rich Haerle, Vice President of Investor Relations. On the call today are members of the Executive team which includes David Seaburg, CEO; Richard Hague, President and COO; and Jake Patterson, Interim CFO. Before we begin, I would like to remind everyone that today's discussion will include forward-looking statements about the company's future expectations, plans and prospects that constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. We caution that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated. These forward-looking statements are based on our current expectations and may differ materially from actual results due to a variety of factors that are more fully detailed under the caption "Risk Factors" in our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2019, as well as the 10-Q for the quarter ended March 31, 2020, to be filed with the SEC today. Any forward-looking statements made on this call speak only as of today's date Monday, May 11, 2020, and we disclaim any obligation to update such statements to reflect events or circumstances that occur after today's call, except as required by law. I'd like to highlight to participants on the call that today is being recorded. We are making it available to investors and the media via webcast and a replay will be available on our website in the Investor Relations section shortly following the conclusion of the call. Additionally, it is the property of PolarityTE and any redistribution, retransmission or rebroadcast of the call in any form without PolarityTE's expressed written consent is strictly prohibited. I would now like to turn the call over to David Seaburg.

Thanks, Rich. Good morning, everyone and thank you all for joining us today. I'd like to begin today's call by highlighting the achievement of an encouraging milestone. Three separate SkinTE publications involving a wide range of wounds are recently published or accepted for publication. This is a testament to the value we believe SkinTE offers patients. Richard Hague will go into greater detail during his prepared remarks, but we're pleased to report that the data from our DFU pilot study was accepted for publication in the International Wound Journal. One study involving a Warfighter was published in Cureus and another case series of 15 patients was accepted for publication in Plastic and Reconstructive Surgery - Global Open. Now I'd like to address a few important points regarding our recent decision to pursue a BLA for SkinTE. First, why we made this decision? We received preliminary feedback from the FDA which indicated that a BLA pathway for SkinTE would be most appropriate. The catalyst for this decision was not a formal designation or final determination from the FDA. Rather, we made this decision because we believe that it's the BLA pathway for SkinTE will create a more valuable asset as a result of the clinical data that will support our submission and the benefits from regulatory exclusivity that can be gained through a BLA. We also think that we're more likely to be successful by taking a collaborative approach with the FDA and that a pivot to making PolarityTE primarily a clinically-staged development company is in the best interest of shareholders. Second, we're hopeful that we will be able to leverage our existing data to demonstrate the safety and effectiveness of SkinTE. Over the past two years, we have been actively engaged in a clinical development program which includes a completed SkinTE study in burn wounds, our ongoing randomized control trials in diabetic foot ulcers and venous leg ulcers and outcomes data from many of the approximate 700 SkinTE clinical cases completed to-date. Importantly there have been zero reported adverse reactions to SkinTE since the launch of this product. We intend to submit these data set -- this data to the FDA and are hopeful they will be considered in a clinical package to support a BLA. Third, cost cutting and organizational changes related to our new strategy will be in addition to the steps we've already taken to reduce our operating expenses. It is important to note that until the FDA has determined the precise development program for a BLA for SkinTE, it would be imprudent for us to speculate on the potential cost, requirements and timeframes. We will provide investors with periodic updates over the next several months as we meet with the FDA and agree on a development plan. It is also important to recognize that in the weeks prior to receiving preliminary feedback from the FDA; we had already taken several steps to reduce operating expenses in response to the COVID-19 pandemic. We took several meaningful steps to reduce our operating expenses by lowering payroll expenses, and cutting discretionary spend across the entire organization. We believe these cuts will bring our monthly cash burn rate down below $3 million by the end of Q2, assuming zero contribution from SkinTE sales. Now given the change in our strategy, our goal is to close the year with a cash burn of less than $2 million per month, which we would consider a base case cash burn for the business absent BLA-related expenses. We expect the second quarter will be a period of transition due to notice periods required for certain reductions. So we expect to see the impact of these cost savings in the third and fourth quarters of 2020. Fourth and finally, we're significantly scaling back our commercial operations. We plan to continue to offer SkinTE in a limited basis during this transition subject to the future discussions with the FDA. We believe this approach will allow us to maintain connectivity with our key opinion leaders, while at the same time significantly reducing costs associated with the commercial sales force and related functions. The most important thing, I hope investors take away from today's call is our commitment to execute on the following three specific objectives. One, working closely with the FDA to determine the most efficient development pathway to obtain a BLA for SkinTE; two, generating the necessary clinical data to support a BLA submission and approval for SkinTE; and three, significantly reducing and managing cash burn. Now let's move on to commercial metrics. The commercial metrics for SkinTE in the first quarter of 2020 compared to the first quarter of 2019 were as follows: one, paid cases, in Q1 2020 paid cases were 81 versus 41 in Q1 2019; SkinTE revenue in Q1 2020 was $428,000 versus preliminary guidance of $350,000 to $450,000 and versus $297,000 in Q1 of 2019; new paid users were 24 in Q1 of 2020 versus 18 in Q1 of 2019; and repeat paid users in Q1 2020 were 28 versus nine in Q1 of 2019. Please note that going forward; we plan to focus more on clinical development catalysts relevant to our BLA in our performance metrics. Now I'd like to turn the call over to Richard Hague to provide an update on operational aspects of the business and some of the steps we're taking as we go through this transformation. Richard?

Thanks, David. Having been previously involved with two autologous products that were ultimately approved as a BLA halfway, I'm confident that pursuing a BLA for SkinTE is the right decision for the company. As a successful outcome should address two critical areas, that have eliminated SkinTE adoption in the past. First is regulatory clarity. Given the nature of the 361 pathway, products in this class are inherently susceptible to significant scrutiny by FDA, healthcare providers in their hospital systems, and payers. The BLA approval provides validation and self-confidence that a product is clearly safe and effective, and is manufactured and released according to strict standards. Second is that the development and delivery of the comprehensive clinical data required to receive BLA approval. Early adopters have seen positive outcomes to SkinTE and based on this real world experience, we believe that through the BLA pathway, SkinTE can deliver results to demonstrate its value to a wide range of wound care physicians and patients. In addition, to my own experience, we have other people on the team with extensive backgrounds in a variety of regulatory pathways, including biologics and medical devices, as well as possessing experience with GMP manufacturing. Additionally, we will be engaging with outside consultants for a specific BLA expertise in wound care to assist our team in the development of the comprehensive BLA strategy. As David mentioned, we're significantly scaling back our commercial operations but do intend to maintain connectivity with our key opinion leaders. Many of these physicians have expressed a strong desire for continued access with SkinTE to their patients, and also a willingness to support our BLA review process through direct interaction with the FDA in order to articulate the differentiated value that SkinTE brings to their patients, especially those with complex wounds and limited treatment alternatives. We're grateful for their support and for those relationships which is a direct result of their compelling outcomes they've experienced with SkinTE. Regarding our chronic wound trials, we currently have two ongoing multicenter randomized clinical trials, one for DFUs and one for VLUs. In the DFU trial the pre-specified target enrolment through the interim analysis of 50 patients has already been met with 61 patients currently enrolled. In the VLU trial, there are currently 26 patients enrolled. As we have previous reported, the pilot evaluations in DFUs and VLUs for the single application of SkinTE were supportive of advancing these RCTs given wound closure rates and time to closure. And we look forward to presenting the data from these larger studies at the appropriate time. As David mentioned previously, we plan to meet with FDA as soon as possible to discuss our pivot through a BLA and the development plan. Until that time, we cannot speculate to what extent our current trial data or other patient data might be part of the current package to support a BLA. In the meantime, we intend to work closely with our consultants who have extensive experience related to the BLA submission process as we develop our strategy related to clinical trials. As a result, we will limit investments in any other trials outside of the DFU and VLU RCTs until our strategy is fully developed. That said, we continue to see the publication of clinical outcomes in patients treated with SkinTE which we believe is an important validation of our technology and the tremendous promise of this product. There are multiple manuscripts in various stages of review. And at this time, we do not expect the disruptive review and publication processes, many of which are controlled by independent third parties. Now I'd like to offer some additional detail pertaining to the publications that David mentioned earlier. Last week, the peer reviewed article entitled successful treatment of War Zone traumatic lower extremity wound for the exposed tendons using an Autologous Homologous Skin Construct was published in Cureus. This case involved the treatment of a Warfighter who suffered a 42 square centimeter wound with exposed tendons while on active duty. Nine weeks after the application of SkinTE, the wound was completely closed and remain closed at the most recent follow-up 16 weeks post SkinTE application. As a company, we're proud to have been able to play a part in the solely remarkable recovery. We're equally pleased to report that a 15 patient case study has been accepted for publication in Plastic and Reconstructive Surgery - Global Open, which demonstrated closure of 15 acute and chronic wounds in both pediatric and adult patients ranging in size from 27 to 4,800 square centimeters with a single application of SkinTE. This landmark paper details the clinical utility of SkinTE in closing difficult to treat wounds that failed conventional therapies. In addition, the data from our pilot study of 10 patients suffering from DFUs rather successfully treated with SkinTE have been accepted for publication in the International Wound Journal. We thought we draw great strength and inspiration from these publications. While the decision to pursue a BLA for SkinTE is a major shift in the strategy for the company, it is the patient outcomes that I just described that drive us and keep us committed to developing and executing a strategy in collaboration with FDA to ensure that SkinTE could be made available to the entire wound care community. We look forward to providing updates on our progress throughout the remainder of 2020. Now I'd like to turn the call over to Jake Patterson for a financial update.

Thank you, Richard, and good morning everyone. For the first quarter of 2020, we reported approximately $933,000 in total revenues which includes revenues from SkinTE which we refer to as products in our 10-Q and revenues from the sale of Contract Research Services, which we refer to as services in the 10-Q. Revenues from products during the quarter were $428,000 and revenues from services were $505,000. For the first quarter of 2020, cash used in operations were $13.9 million which included approximately $1.2 million of issuance fees from the February raise. The cash used in operations net of these issuance fees were $12.7 million or approximately $4.2 million per month, which is lower than the cash used in operations during the fourth quarter. As noted in our April 21 press release, and by David earlier on the call, we have already taken action to further reduce future cash burn by reducing payroll expense, adopting a salary and wage reduction and reducing discretionary spending across the organization to minimal levels. As discussed in our April 30th press release updating corporate strategy and regulatory pathway for SkinTE, we're substantially reducing commercial operations and other functions to further decrease cash burn. We finished the first quarter of 2020 with $39.5 million of cash, cash equivalents and short-term investments on our balance sheet. And we believe there's sufficient liquidity in the balance sheet to fund our operations beyond the next 12 months. Our highest financial priority is the reduction of cash burn to enable the BLA for SkinTE. I'd now like to turn the call back over to David Seaburg for some concluding remarks.

Thank you, Jake. I'd like to conclude by saying that we remain passionate in our mission to see SkinTE achieve widespread adoption, and improve the lives of people living with debilitating cutaneous defects, while at the same time delivering long-term value to our shareholders. We firmly believe that our decision to pursue a BLA is the appropriate pathway for us to accelerate and achieve both of these objectives. Thank you for joining the call today. I'd now like to turn the call back over to the operator and open it up for Q&A. Thank you.

Thank you. [Operator Instructions]. Our first question comes from the line of Kevin DeGeeter of Oppenheimer. Please go ahead.

Hey, guys. Thanks for the call. Appreciate the transparency today, it's extremely helpful. Maybe a couple of questions. With regard to clinical trial enrollment, appreciate the DFU and VLU enrollment updates, could you speak to the current trends in light of your restrictions around COVID-19 and hospital and outpatient procedures, are those studies personally confirm those studies are still actively enrolling patients. And do you feel you have data to speak to some sort of enrollment metrics over the coming weeks and months for both of those programs?

Thanks, Kevin for your call. We actually have Nik Sopko in the line. I'd like Nik, Nik maybe you can answer Kevin's question most adequately.

Sure. Hi, Kevin. Thanks for the question. So we have done numerous steps to make sure we follow the trials closely during this time period. And thankfully, we haven't lost any patients to COVID-19 or seen any shutdown of our sites. Wound care is considered critical for patient care as these untreated ulcers can become infectious and bring the patient into the hospital and possible loss of limbs. So most of actually all of our sites have remained open and continue to enroll. We did see some decreased rates during March. But nothing incredibly significant has continued to enroll through April and in May as well. So it's hard to totally know how in the next couple months we'll proceed. But we're thankful that the trials have continued to enroll. We've continued to closely follow our patients; we've allowed our sites to be able to see the patients virtually, if needed, and other things that the CDC have recommended to make sure that we're having a safe trial. But we anticipate to continue enrolling in these trials and potentially finishing the DFU enrollment by the end of this year.

Terrific. Appreciate that update. And just as a clarification question, yes, there's language in the 10-Q that just sort of highlights November 2020 as the end of the 36 months of the FDA enforcement discretion period around 361. Can you just talk about what that means and what that doesn't mean particularly in light of the company's ongoing dialogue regarding the BLA submission?

Yes, sure Kevin. I mean, we are absolutely waiting for to meet with the FDA to get clarity around our pathway forward from the standpoint of really what their expectations are. Whether or not the FDA after that period tells us that we can or cannot market this SkinTE as a product, we are not making a bet that they will allow us to. We want to make sure that we are working with them in collaboration, doing everything possible to make sure that we’re respectful during this process. We don't know what their requirements will be, if they are going to take action and make people remove products from market. We're not going to bet on the fact that they will or won't. We're going to wait and make sure that we have very high-level and direct conversations with them to get some really better information around that.

Fair, thanks, it makes a lot of sense. And one last one, I'll get back in queue. Could you just provide an update with regard to IP and patent review? You've had some success outside the U.S. in the last six months. Can you talk specifically about the U.S. filings and expectations for the balance of 2020 for a potential update?

Sure Kevin. We are -- still remain very confident that we will be receiving a U.S. patent. As far as timing is concerned, when you're dealing with the patent office, you don't have necessarily full clarity on that. So although we have been very successful in receiving patents outside of the U.S., we still remain very confident in our ability to retain a U.S. patent, and it's just a matter of time.

Thank you so much, Kevin.

Thank you, Kevin.

Okay. We'll take our next question from Kristen Kluska of Cantor Fitzgerald. Please go ahead.

Hi, good morning. Thanks for taking my questions. And I hope that everyone on your team remains well at this time. So my first question is a follow-up from one of Kevin's, I wanted to talk a little bit more in depth about what the virtual visits entail as it relates to the ongoing trials. Could you talk about whether you see any challenges related to collecting any data from wound closure in these patients and how specifically physicians are looking to measure the wound closure virtually?

Sure. I'll actually push that question back to Nik Sopko. Nik?

Yes, hi Kristen. It’s a great question. So these are measures that we put in place to allow for flexibility if the patient is unable to be seen and thankfully I haven't actually had to totally utilize the virtual visits. But again, we've kind of put that in place given the uncertainties and those are some of the recommendations that CDC and other groups have put forth to allow visits. We've also allowed for a little bit more flexibility in some of the timing of the visits. But actually, in general, the sites have been very good at being able to closely follow the patients and make sure that they're healthy and safe. And as you know part of our protocols that these patients have a dressing change each week. So this will only be allowed for patients that can actually physically dress themselves. Many of them will require assistance. But to your point, all of our patients are seen weekly for protocol and then have the wound, documented photography and in that process using digital perimetry that wound is measured by the software system. So and those virtual visits can only be used sparingly because ultimately they need those intermittent visits to track the closure time and be able to get into their 3D software that only the sites have, as well as the high quality documentation that's required to confirm closure. So, for the final visit or something, the virtual visit would not be acceptable. But for perhaps some of the interim visit or two, a virtual visit could be used just to ensure that the patient is safe, that there's not some ongoing infection with the wound and that the dressing is appropriate.

Okay, thank you, Nik. And you discussed the possibility of continuing to market SkinTE via 361 on a limited basis. So I wanted to ask how you specifically define limited basis and where the focus might be there.

Sure, we decided to for several reasons, Kristen, limit this on SkinTE marketing really to our -- really to the physicians, or the KOLs that have really supported this product. They have really defined the fact that they want this product in their hands. We also recognize the importance of those relationships, when presenting to the FDA and putting our package together essentially. So we decided that having a limited -- very limited marketing effort to make sure that we preserve and maintain our KOL relationships. And at the same time, conserve our cash right, making sure that we're not spending to build out a very expensive commercial effort; we felt that was the most appropriate thing to do. So when I look at the landscape of physicians or doctors that we're engaged with right now and how supportive they've been of this product, the core focus here is to really make sure that we're able to continue to drive the clinical evidence necessary to go down this pathway with the key supporters or the KOLs that have really been side-by-side with us through this entire process. And it's very important to us to maintain those relationships and I think it's very important for this process as well.

Thanks, David. And the last question here is, last quarter; you had recognized that you were going to implement a new pricing strategy related to the larger wounds. So wanted to ask if this is still a priority for the company considering the new change to pursue the BLA route and whether or not you have any update there? Thank you.

Yes, sure, Kristen. So we did design a new pricing structure that we're super confident in. That was right around the time COVID came into play. What's interesting is we were fortunately able to roll that out with certain providers, not all but certain providers based on having meetings with them, and really lining this up. We're really confident that that was the right decision. And we frankly did see some case development around that. We will continue to offer that pricing as we move forward based on our strategy because it's the right thing to do. And again, we'll do that in a way that's limited based on the Salesforce but we do intend to keep that pricing structure -- that new pricing structure in place and roll it out to anybody using the product.

We'll now take our next question from Swayampakula Ramakanth of H.C. Wainwright. Please go ahead.

Thank you. Thank you, David and team for doing this. My first question is a follow-up from what Kevin was asking initially regarding the regulations on the HCT/P. There are four criteria which are in the register in the CFR 1271 -- 21 CFR 1271. Has your team looked at those criteria? And do you feel comfortable that you could still be considered 361 HCT/P products in your thinking, you may not be able to comply with those four criteria, so you will need to be aware for sure.

Sure, thank you. I'll turn that to Richard Hague. Richard, would you like to take that one?

Sure. Thank you. Yes, thanks for the question RK. Certainly we've done an extensive analysis of the 361 criteria. Obviously, there's a part of the -- part and parcel of the conversations we had with FDA. And we certainly feel like we have a good case for meeting those criteria. As we mentioned earlier FDA felt differently certainly in some certain areas. So going forward until we can have deeper discussions with FDA, we can't make a determination as to, how they're going to ultimately decide our ability to market this product going forward. But it's certainly clear that from this point forward until we have those discussions, we plan to be able to continue to do that. As I said, I think we all felt confident that 361 was an appropriate pathway for HCT. And the FDA felt a little bit differently. And we felt as David described earlier that the best path forward here was to be collaborative with the FDA and work towards up BLA. So that's where we stand right now. And until we have those future meetings, it's probably not appropriate especially as to how they're going to determine our ability to market the product going forward.

Okay, thank you, Richard. And a follow-up on the BLA approval -- hello?

Hello?

Okay. I got your responses [indiscernible]. I discontinue.

Mr. Swayampakula, are you done with your question, sir?

I have one additional question, can I?

Go ahead.

Thank you. Regarding the studies for the BLA, you have currently a couple of pilot studies ongoing, do you feel that they will be sufficient or you will need to do additional BLA studies and if required, how large of a study do you think you will need to do?

Well, I'd say that our belief here is we are -- we need to communicate with the FDA to get more information. We are really confident in a lot of the -- as we talked earlier about the 700 plus patients that have been treated with no adverse reactions, the trials that we're running, we're really confident that SkinTE is an amazing product. And we've got a lot of data on that. But we don't know what's going to be asked from us. So until we meet with the FDA and get more clarity, we're not sure what exactly is going to be asked of them. We're trying to be very transparent with them and trying to be very open. We hope to meet with them and arrange a meeting with them as soon as we can. And once we do so, and we have more information, we will absolutely report back to the Street on what their findings are.

[Operator Instructions]. And we have no further questions on the audio phone lines. I'd like to hand it back over to Mr. Haerle for our webcast questions today. Thank you.

Thank you, Operator. Somewhat of a tangential question, but one of the questions we have on the webcast is when you expect to file the BLA with the FDA?

Yes, that is in response to that, it would be very similar to the last question, which is once we have more specific information about, we will have more specific information around timelines, once we meet with them. And again we're hoping that we can arrange a meeting, let's say in late second or early third quarter of 2020 and at that time have more information around the timeframes of filing, et cetera. And then we promise to report back to the Street in a timely fashion as we can on any updates going forward. Back to you, Rich.

Yes and so one more webcast question for the team. The question is assuming a successful BLA, when would you plan to ramp commercial operations back in at a later date or would you plan to ramp commercial operations back to a later date?

Right now our main focus is pursuant -- to pursue a BLA. I mean that is our absolutely focus. As we get down the road and we are -- we have a much more clarity around our cash position and where we stand, we'll be able to answer those questions much more directly. But right now our focus is to make sure we're doing everything necessary to obtain a BLA. That is our -- one of our core three focuses and again as we get down the road, and we understand our capital position and needs and et cetera, we'll have more information around that. But right now it's too early to answer. Back to you, Rich.

There are actually no further questions on the webcast, I believe, and there no more audio questions. So gentlemen, can you confirm that you would like me to close off?

All right, yes.

Perfect. Thank you, everyone for joining us today. We appreciate your participation. You may now disconnect your lines and have a wonderful day everyone. Take care.