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Cleveland BioLabs, Inc. (NASDAQ:CBLI)

Business Update Call

January 23, 2014 9:00 a.m. ET

Executives

Rachel Levine – Vice President, Investor Relations

David Hohn – Chairman of the Board

Yakov Kogan – Chief Executive Officer

Ann Hards – EVP, Regulatory Affairs

Neil Lyons – Chief Financial Officer

Analysts

Boris Peaker – Oppenheimer

Robert Brous – Wunderlich Securities

Operator

Greetings and welcome to the Cleveland BioLabs’ Update Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Ms. Rachel Levine, Vice President of Investor Relations. Thank you. You may now begin.

Rachel Levine

Thank you and good morning everyone. Thank you for joining us to discuss the update provided this morning regarding our negotiations with BARDA.

Joining us on the call are Dr. Yakov Kogan, Chief Executive Officer; Dr. David Hohn, Chairman of the Board; Ann Hards, EVP of Regulatory Affairs; and Neil Lyons, Chief Financial Officer.

Before we begin, I would like to remind all listeners that throughout this call, we may make statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or the successful execution of the company’s strategic plans and involve risks and uncertainties.

Additionally, I want to emphasize that some of the information discussed on this call, particularly any discussion of financials or forward-looking development plans, is based on information as of today, January 23, 2014 and that actual results may differ materially from the expectations and assumptions discussed today as a result of various factors. Such risks, uncertainties and factors include the risks outlined in our company’s filings with the Securities and Exchange Commission, including our most recently filed Forms 10-Q and K. The information provided on this conference call should be considered in light of such risks. CBLI does not assume any obligation to update information contained in this conference call.

Dr. Kogan will review the developments outlined in this morning’s press release and company’s ongoing strategy. Dr. Hards will then discuss update to our regulatory process for Entolimod as the radiation countermeasure and turn the call over to Dr. Hohn for concluding remarks. We will then open the call to questions.

At this time, I’d like to turn the call over to Dr. Yakov Kogan, CEO. Please go ahead.

Yakov Kogan

Thank you, Rachel. And thank you to everyone for joining this call. Yesterday, BARDA informed us what they are not moving ahead with negotiations for our development proposal. They noted what, negotiations are always subject to availability of funds. And what, our case was no different. They didn’t provide us with any specific reasoning or details beyond our availability of funds.

Clearly we are not happy with this result but to recognize what funding constraints facing all federal [ph] agencies. We didn’t get [ph] development funding from BARDA to support our path to full licensure, was one of the two strategies we have been focused on in the past few months.

We are still moving forward with our pursuit of pre-Emergency Use Authorization, or EUA. We believe this is a crucial and critical value adding step for this program. As a pre-EUA represents a good [ph] commercial opportunity for Entolimod.

Historically, pre-EUA is difficult through which over 70% of a dollar value of drugs in the strategic national stockpile have been historically purchased, many of which are still not fully licensed. EUA provides the route for the government to distribute unlicensed drugs in an emergency scenario. There are no over [ph] licensed effective treatment is available.

We also believe what any potentially poised to attribute pre-EUA application could hold significant waiting for end markets. Our plan is to make a decision regarding the future of Entolimod radiation program depending on the outcome of -- to this scheduled pre-EUA meetings with FDA which Ann will review in a few minutes.

At this juncture, we see three paths forward for Entolimod radiation program. One, proceed [ph] this pre-EUA filings after we receive the FDA’s confirmation of our recommended human dose, or two, extract value from a program at its current stage through partnership or outright sale, or shut it down. At the end of the day, the BARDA decision does not change our strategy, which is to develop our pipeline of oncology drugs and pursue commercial exits through partnering or sale, if any one [ph] data or indication.

David will comment later on our search for a new Chief Medical Officer to lead clinical development. But as far as the upcoming FDA meeting goes, we have confidence in our existing team. I will let Ann provide you with an update on our next steps with FDA.

Ann Hards

Thank you, Yakob. I will review the steps leading up to our next FDA meeting on a pre-EUA submission for the Entolimod radiation program as previously discussed on our third quarter 2013 call.

During our last meeting, FDA acknowledged that CBLI would be making a pre-EUA proposal after dose conversion was worked out. In order to accomplish this, several steps needed to take place including the finalization and integration of data from our non-irradiated GOP biomarker study in non-human primates, which was concluded this past summer.

The formal study report, which is necessary to perform the dose conversion, is very close to signoff. This being said, the data themselves have already been incorporated into the statistical dose conversion methods previously discussed with the FDA.

With this information in hand, we plan to make a pre-EUA submission meeting requests to FDA in the first quarter of this year. Given the 75-day PDUFA timeline for FDA to grant the meeting, I would expect the meeting to occur late in the second quarter. The goals for this meeting are to get FDA’s feedback on the human dose predicted by our dose conversion methodology and potentially to achieve agreement to review a pre-EUA application based on this dose. The PDUFA timing for receiving FDA confirmatory minutes on the results of the meeting will be an additional 30 days after the meeting.

If FDA agrees to accept the pre-EUA application for review on the basis of the proposed human Entolimod dose, CBLI will immediately begin to prepare the dossier. It’s worthwhile to note that a pre-EUA dossier is very similar and comprehensive in nature to BLA although some of the studies normally required for a formal BLA may not be required in this setting.

It is a large undertaking and it will require months of preparation and compilation. If FDA does not agree to accept the pre-EUA dossier for a review on the basis of the proposed human Entolimod dose, we will have to consider the implications of their response and evaluate the potential cost benefit of moving forward with it or looking at exit options for the program as Yakob mentioned.

At this point, I will hand the call to David to share some additional perspective.

David Hohn

Thank you. I want to underscore what Ann has just said. Our Board strongly supports this strategy and believes that pursuit of pre-EUA authorization is an essential next step in creating value for our company and our shareholders.

Recruitment of a Chief Medical Officer to lead our oncology clinical development is at the top of our priority list. And to this end, I have been working very closely with Yakob to identify and recruit the most capable candidate for this important position. I believe that we are on track to engage very capable medical leadership. We believe that Cleveland BioLabs science remains compelling and that our pipeline holds great promise for a range of applications and we continue to make progress with our clinical trials.

We would now like to open the call to questions. Operator, please begin the Q&A.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question is coming from the line of Boris Peaker with Oppenheim. Please proceed with your question.

Boris Peaker – Oppenheimer

Good morning. My question is on the EUA process. Could you just give us some comments in terms of what the clinical basis is for FDA decisions on pre-EUA approval? How do they decide if something fits pre-EUA or it does not and exactly what kind of clinical data do they typically look for?

Yakov Kogan

Thank you, Boris. I’ll ask Ann to cover this question.

Ann Hards

So under the Animal Rule, the clinical data that is relevant for pre-EUA is the same as it would be for BLA, which is safety data. So we have the two studies that were previously performed in healthy subjects – the 150 healthy subjects.

Boris Peaker – Oppenheimer

Okay. And you’ve said that the FDA is going to decide at some point during the meeting if the pre-EUA pathway is appropriate, I mean what’s the basis for decision at that point?

Ann Hards

We have been – we were told at our last meeting that identification of the human dose is the main criteria that they are looking for in accepting a pre-EUA application for Entolimod.

Boris Peaker – Oppenheimer

Got it. And so is that the same thing that you were essentially working on when BARDA was involved?

Yakov Kogan

Boris, could you please repeat your question?

Boris Peaker – Oppenheimer

No, I mean it’s like – is that the same kind of issue that you were working on with the FDA when BARDA was part of the negotiation, because I recalled that there was a lot of discussion in terms of how to convert the actual animal dosing into human dosing? And so I’m just trying to understand if that’s the same kind of issue that the FDA is trying to get comfortable around -- in terms of making decision on pre-EUA like if it makes sense to convert animal to human if they get comfortable around that?

Yakov Kogan

Yes. Determination of a human dose is one of the main remaining issues in our development.

Boris Peaker – Oppenheimer

Okay. I guess – just a quick last question. So if BARDA is not moving forward due to funding allocation decisions, it means if you get a pre-EUA approval, what’s the source of funds for actual procurement? Or does that mean that nobody – there is no procurement until there is an emergency? How does that work?

Yakov Kogan

Boris, so regardless of current [indiscernible] situation with BARDA, both HSS, Congress always identify and express concern over lack of available counter measures in the national stockpile, which could be used in case of emergency. In this particular case, radiological emissions [ph]. So the federal government’s policy was consistent and have not been changed, which is to make a decision [ph] at appropriate time of what counter measures which are deemed to be most robust and to meet FDA’s guidances for efficacy and safety for licensure.

So as we identify, we have focused on moving forward with the pre-EUA submission as quickly as possible. We believe a pre-EUA opens a door for United States and foreign governments to stockpile Entolimod for the use in this event of radiation exposure.

Boris Peaker – Oppenheimer

Okay, great. Thanks for taking my questions.

Operator

Thank you. The next question is coming from the line of Robert Brous with Wunderlich Securities. Please proceed with your question.

Robert Brous – Wunderlich Securities

Thank you for taking my question. How does the Board and management believe that Asper [ph] will continue to support or buy or purchase upon an EUA if they choose not to fund you through BARDA?

Yakov Kogan

I believe over to the decision to purchase of drug as I said based on them -- and where HSS’ understanding of them how drug meets FDA’s guidance for efficacy and safety. So we believe in drug and there is no doubt for the drug in work. Drug is working. So where process of getting the agreement on the dose is very complex, it’s a complex regulatory process. But it’s a politics or a budget constraint. So I think what, we’ve taken very calculated risk in pursuing this, our previous strategies. And if it will be successful, we will move forward to different exit options as we discussed during the call.

Robert Brous – Wunderlich Securities

So in about six to seven months, you know whether or not you’re on the same page with the FDA you could file an EUA, what are the funds that are required to get to that point that the company is going to spend?

Yakov Kogan

Neil, could you please answer this question?

Neil Lyons

Yes Robert. The activities needed to define the human dose and the preparation for this meeting that Ann outlined has always been in our forecast and always planned -- no change there. After the FDA says we are pre-EUA ready, so to speak and assuming they do, it’s going to cost roughly about $600,000 an out-of-pocket cost we estimate and we have provided in the 2014 budget plenty of money to cover out-of-pocket costs related to our clinical development program. It’s going to be a matter at that time to treatise [ph] which dollars go to which program. That’s the level of spending we are talking about. It will take a series of months to compile this dossier after we get the greenlight and move forward with it. So there is a timeline that Ann could speak to about that, if needed but that’s our rough order of magnitude on the numbers.

Robert Brous – Wunderlich Securities

I don’t know if my question was answered. But again what is it – the funds that you have that gets you how far?

Neil Lyons

Well, it’s a question of how long will our cash last us. With the raise we recently completed, our cash will last us into Q1 2015, for the whole of the company, for the whole of the U.S. CBLI operation.

Robert Brous – Wunderlich Securities

Okay. And of that, if you were to stop Entolimod today, how much of a savings would the company have that it can apply to its oncology and how much longer would that burn provide you past that Q1?

Neil Lyons

There is not a lot of out-of-pocket cost. We have a few employees that are – two to three employees that are more or less dedicated to the 502 program. That’s the total planned costs in the 2014 budget right now. So it’s not a lot of money. We’re not developing – we were not going out on any new activities on our own nickels – that’s what this contract was to pay for. We were only providing for the emergency use authorization and this upcoming FDA meeting which involves some money for some consultants and our own staff. So not a lot.

Robert Brous – Wunderlich Securities

So roughly three salaries is what you are telling me for the remainder of this year, it’s going to cost you to continue down this avenue and then have to make a decision as to whether or not to go forward out of pocket?

Yakov Kogan

So let me rephrase. We hope the FDA meeting would take place this around end of the second quarter, when -- which is our decision would be made. So three salaries goes to our full year.

Robert Brous – Wunderlich Securities

So essentially you haven’t changed your strategy, now that you haven’t received BARDA but the strategy kind of stays the same until you get to any EUA decision?

Yakov Kogan

Yes.

Robert Brous – Wunderlich Securities

Thank you for taking my call.

Operator

(Operator Instructions) Our next question is coming from the line of Bergen Maleskey [ph] with Max Ventures.

Unidentified Analyst

One of the questions I did have, which is if the answer was the money situation, how long would that hold you all of four? And I also noticed that Sabby acquired like a 9.9% stake in the company. Do you know what their intention is for their stake in the company? And is there also a point where some of the proceeds that you received, is there other drugs, other type of products you’d maybe want to acquire to add, that may be something what -- in the shorter team? Does that change your focus at all?

Yakov Kogan

Neil, could you please answer these two questions?

Neil Lyons

Yes, with regard to Sabby’s intentions on their investment we cannot speculate. With regard to potential drugs to in-license, that is not high on our priority list and frankly, we wouldn’t comment on until we have something public to comment on any way. We have our own pipeline that we are prioritizing development efforts on as companies like ours do continually prioritize development efforts given their activities, then we will be able to report on those intentions more fully at our annual call in early March.

Unidentified Analyst

Okay. I appreciate and good luck to you guys.

Operator

(Operator Instructions) Thank you. It appears we have no questions at this time. Ladies and gentlemen we have reached the conclusion of today’s conference call. To ask us the replay of this conference, you may dial 877-660-6853 or 201-612-7415. When prompted, please enter the conference ID number 13575137. This replay will be available until February 6, 2014. An archive of this conference will also be available via webcast on the company’s website. Again, this does conclude today’s teleconference. Thank you for your participation and have a wonderful day.

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