Lantern Pharma Inc. (LTRN) Earnings Call Transcript

Good morning and welcome to our Second Quarter 2026 Earnings call. As a reminder, this call is being recorded, [Operator Instructions] A webcast replay of today's conference call will be available on our website at lanternpharma.com shortly after the call. We issued a press release before market opened today, summarizing our financial results and progress across the company for the second quarter ended June 30, 2026. A copy of this release is available through our website at lanternpharma.com where you will also find a link to the slides management will be referencing on today's call. We would like to remind everyone that remarks about future expectations, performance, estimates and prospects constitute forward-looking statements for purposes of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Lantern Pharma cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those anticipated. A number of factors could cause actual results to differ materially from those indicated by forward-looking statements, including results of clinical trials and the impact of competition. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements can be found in our annual report on Form 10-K for the year ended December 31, 2025, which is on file with the SEC and available on our website. Forward-looking statements made on this conference call are as of today, August 14, 2026, and Lantern Pharma does not intend to update any of these forward-looking statements to reflect events or circumstances that occur after today, unless required by law. The webcast replay of the conference call and webinar will be available on Lantern's website. On today's webcast, we have Lantern Pharma's CEO, Panna Sharma; and CFO, David Margrave. Panna will start things off with an overview of Lantern's strategy and business model and highlight recent achievements in our operations, after which, David will discuss our financial results. This will be followed by some concluding comments from Panna, and then we'll open the call for Q&A. I'd now like to turn the call over to Panna Sharma, President and CEO of Lantern Pharma. Panna, please go ahead.

Good morning, everyone, and thank you for joining us to discuss our second quarter 2026 results. As I've said before, AI and computationally driven approaches are now becoming central to how both large and emerging biopharma companies discover and develop drugs but also how they allocate their resources and think about staffing their scientific teams. Today, we're at an inflection point that's actually accelerating, not just for Lantern, but for how science itself will be conducted. And we are watching it happen in real trials with real patients at Lantern. The golden age of artificial intelligence in medicine isn't beginning, it's actually accelerating. And this quarter, that idea has resulted in the development of a new company, Open Medicine AI. In August, we established Open Medicine AI as a separate company with commercial licenses and agreements with Lantern in place to take the AI data models to the next level. I'll spend some real time on that today because I think it's the most consequential structural decision we've made since starting Lantern. But let me first walk you through what got us here. A clinical signal that sharpened into a defined patient population, a signal that was actually validated in using big data, a European regulatory clearance in a challenging recurrent cancer and allowed patent on a patient selection method for one of our most valuable assets, LP-184, and a FDA-cleared trial in triple-negative breast cancer that's moving toward launch. All of these were backed by numerous observations in our trials, the LP-300 trial, the LP-184 trial and even the LP-284 trial. What those observations were is that the mechanistic insights gained during our preclinical work actually have real-world parallels. And they could be the basis for meaningful activity in actual cancer patients. The remainder of 2026 is a defining year for Lantern Pharma and especially as we launched in '27. We've achieved clinical validation across mobile programs while establishing the foundation for our next phase of growth in both of our engines: Our drug development engine and also now our AI engine. In addition, our midyear financial results reflect highly disciplined execution with a 25% reduction in total operating expenses year-over-year, even as we advanced multiple clinical programs through key inflection points and launched an entirely new company into one of the most promising and disruptive areas of AI medicine. Our AI-driven clinical pipeline now encompasses multiple drug candidates across solid tumors, blood cancers and now pediatric oncology with a combined annual market potential estimated at over $15 billion. Let's start with our Phase II program, LP-300 and the HARMONIC trial in never-smokers, non-small cell lung cancer who progressed after TKI therapy. We believe there's about 400,000 to 500,000 patients diagnosed globally each year that have no specific therapy aimed at never-smokers that progressed after TKI. In Asia, it's about 35% to 40-plus percent of non-small cell lung cancer cases, in U.S. and Europe, it's between 15% and 20%. In June, we reported emerging data as the May 11 cutoff, and it shows something we didn't expect to see this clearly, but the benefit of LP-300 deepens, the longer patients stay on it. Among L858R patients who completed 6 cycles, median progression-free survival reached 8.9 months. That's 9 patients, 3 of them hadn't progressed at analysis. Across the full cohort of L858R patients, median PFS was 8.4 months. The hazard ratio for that group was 0.37 with a confidence interval of 0.15 to 0.89. So that means more than -- also more than 70% of the L858R patients saw a target lesion reduction and some of the response is sustained beyond 2 years. We've had a 77% clinical benefit rate, which is phenomenal for that line of therapy. I'll be direct. These are small exploratory cohorts, not powered for statistical significance yet. And a median from 9 patients can move up or down but what makes us take it very seriously is that a Cox regression controlling for race, gender TP53 status, which is very important, confirmed L858R as an independent predictor. This is not a demographic or a statistical artifact and safety was comparable between 4 and 6 cycles with no added toxicity from longer exposure. So a drug that helps more, the longer you stay on it, without costing you more in side effects is a drug worth extending, especially where there's no other great therapy for these patients. And that's actually the science and the data behind what we did next. We had successful Type C meeting, where no objections were raised to our key proposed amendments. We've concentrated the enrollment now on the L858R patients. These patients actually tend to do worse on current therapy regimens. That's why we also think there's a great need. We've extended the treatment from now 6 to up to 8 cycles, and we've moved into a single-arm design, which should be more efficient and less costly. The trial continues enrolling in the U.S. and Taiwan, and we've used this data set and other observations, of course, about the future of the program in active partnering discussions. Let's talk a little bit about LP-184 this quarter. We've made several advances, all of which were driven by data and AI leverage methodologies. First, the EMA clearance. In July, we got clearance for an investigator-initiated Phase Ib/II trial in advanced bladder cancer. This is in Copenhagen at Denmark's national referral center for urologic cancers Rigshospitalet. And this is with Professor Rohrberg and Pappot. They're the coordinating investigators. This will be a 39 patient trial and very uniquely on 2 biomarker -- dual biomarker strategy, one on PTGR1 overexpression and then combining that with DNA damage repair deficiency. And we're hoping to enroll patients, very importantly, that our platform has predicted should respond and more importantly, have a mechanistic basis to be held by that drug. Second major milestone is the 184 monotherapy in relapsed or refractory triple-negative breast cancer. That will be a Phase Ib/II trial. That protocol has been FDA cleared and is now moving toward launch with a number of sites. We've also applied for grants for that trial for that study as well, which we're pretty excited about. This drug targets tumors of DNA damage repair alterations, homologous recombination deficiency or a genomic loss of heterozygosity. We expect to enroll up to 40 patients across 2 dose cohorts and will follow by a Simon 2-stage efficacy read. Third very important is that we received a notice of allowance in July, covering our 3 gene selection where we use 3 genes, PTGR1, PTPN14 and ASPH for selection of patients most likely to respond to LP-184. We issued a notice of allowance in 4 tumors: Ovarian, liver, kidney and thyroid cancer. So that's a patent on the selection logic itself, which is one of the hardest parts of it is to replicate and then map that directly to an incredible therapeutic intervention, where safety is known and mechanism is beginning to be more and more observable. This all built on our 63 patient trial that we did for 184. And now that we have a dose of 0.39 mgs per kg and very importantly, what we saw in that trial is that we saw tumor reduction in patients that were carrying these DNA repair deficiency genes, CHEK2, ATM, BRCA1, STK11, KEAP1. Those alterations conferred exceptional sensitivity to the drug. Unlike conventional chemotherapies and other DNA damaging agents that indiscriminately target dividing cells both LP-184 and 284 exploit specific genomic vulnerabilities in cancer cells. And that precision is a thread that runs parallel to both programs and which we expect to give our programs a meaningful advantage in their development. LP-284 continues in hematologic malignancies and in adult soft tissue sarcomas, where we've got orphan designation earlier this year. And Starlight briefly on the science, STAR-001, which is LP-184 in brain cancers. Our RADR platform identified that those particular brain tumors would be very sensitive if ERCC3 was removed as a protein because that's involved in the repair mechanism. Well, what we did is we characterized that with our group at Johns Hopkins that we collaborate with. And we're using spironolactone, which is already well characterized, safe in pediatric and adults. And it actually does exactly that. It degrades the ERCC3 protein and shuts down the repair route. And we've had great preclinical data, and now we're taking that now into the clinic. We're taking it into disease designations where we have orphan designation and also rare pediatric such as ATRT, hepatoblastoma, rhabdomyosarcoma and malignant rhabdoid tumors. Bear in mind that each of these is independently eligible for a priority review voucher upon approval, and they recently transferred for $150 million to $200 million or more, and Lantern holds 4 of those. On the pediatric program specifically, I'm very excited, and I want to give you an update. We're actively working with several pediatric oncology consortia to determine the best and most expedient path to bring these into a trial as soon as possible. We've got 2 consortia that we're working with, and we'll have more data in this coming quarter. We're also working closely to enable compassionate use for the drug, especially in some of these rare pediatric brain tumors where there's an exceptional need. Again, Starlight is 100% owned by Lantern. We expect to raise additional funding for it as a separate funding, holds its own INDs now, its own regulatory designations. And it's not just a program status. It's actually a way to monetize it independently of the rest of Lantern. And more importantly, it's a template. We're about to use that same template again this time with the underlying platform itself. Now going back to Open Medicine. And this is, we believe, it is structural news of the quarter. In August, we formally established Open Medicine, OMAI as a separate company, executed our Board-approved commercial licensing agreements. And more importantly, OMAI now can operate the multi-agentic AI co-scientists that we launched as withZeta and use it in the commercial setting. Here's the logic. Most people using AI drug development today, ask one model a question and get an answer. We now see that things are moving well beyond a single line of questioning or query. So we've built an orchestrated system. And this orchestra brings together specialized agents for literature synthesis, medicinal chemistry, pathway analysis, data curation, literature analysis, portfolio prioritization, clinical trial development and that -- and they challenge each other, and they pass information and ideas, and they cross-validate before delivering hardened results or ask the scientists or drug developer to get more engaged and ask them questions. And this, we believe is multi-agentic non-monolithic model is really the standard infrastructure for specialized domains that are multidisciplinary, and we think it will be the standard infrastructure for drug discovery. And we think this is something that will be critical. In addition to that, we believe that the computational biology model and the computational chemistry model that run deep and in their own large quantitative models is critical. And more importantly, it can generate publication quality results with a full audit trail. As the platform gets smarter and more users use it and data flows through it, each engagement for a user will feed the next. And this is exactly the kind of dynamic that deserves its own capital structure. Clinical drug development and enterprise software are priced by different investors and different metrics. Held inside a clinical stage oncology company, a software business may or may not get the credit for what it's worth because investors who price AI and software generally don't own clinical stage biotech and vice versa. That's the entire rationale for separating and racing forward with Open Medicine AI. Open Medicine AI is 100% owned by Lantern today. It intends to raise capital at its own level in exchange for Open Medicine equity with the longer-term objective of becoming a separately listed company. Lantern expects to remain one of its largest shareholders. So Lantern continues to retain the rights to the full access to the platform for our own drugs. And this changes nothing about this program's priority or timing. And we believe that the market there is much, much larger than just on early oncology companies like ourselves. Analysts project the market to reach about $10 billion by 2030, 2031, with oncology is one of its largest segments. Even doing my own bottoms-up analysis on companies in drug discovery, drug discovery technology, AI-enabled, I expect it to easily reach $9 billion to $10-plus billion by 2031. We'll host a dedicated informational call in mid-September on Open Medicine AI's market opportunity, platform, road map, commercial model. But putting all this together, a clinically validated platform with 3 drugs and trials, a commercially accessible AI platform and software company with models and state-of-the-art tools and a drug pipeline that -- these all feed each other. You get a business model that extends well beyond just the clinical assets. We think it's a very powerful complement to have both of these engines, an AI engine that can be separated and power dozens of companies and drug assets that are going after meaningful, challenging rare and aggressive diseases. And we think these are very complementary. The AI tools and services, we think can grow to being several hundred million dollars in stand-alone value as part of this larger $10 billion market. We think a nice chunk of that $10 billion market will be agentic in nature, and Open Medicine will have the real chance at driving a significant piece of that. So these are 2 great growth engines in the company. And I'll let David talk a little bit -- David Margrave, to discuss our financials or key metrics and also dig into the details behind the noncash expenses that are related to warrants that drive a higher net operating loss than what's actually underneath the hood. So David, I'll turn it over to you.

Thank you, Panna, and good morning, everyone. I'll now share some financial highlights from our second quarter ended June 30, 2026. Before getting into the details of the quarter, I want to note that this quarter was different from prior quarters because we had a substantial noncash expense related to the issuance of warrants in connection with our May financing transaction and the way those warrants are treated for accounting purposes. I'll discuss this topic in detail later in my discussion. Cash, cash equivalents and marketable securities were approximately $7.4 million at June 30, '26, consisting of approximately $6.7 million in cash and cash equivalents and approximately $0.7 million in marketable securities compared to approximately $10.1 million in cash, cash equivalents and marketable securities as of December 31, 2025. Funding received during the second quarter of 2026 consisted of approximately $4.4 million in gross proceeds from our registered direct offering that closed on May 14, 2026. Additional funding is a top priority, and we intend to pursue additional capital raises, collaborations and other opportunities to extend our operating runway. R&D expenses were approximately $1.8 million for the 3 months ended June 30, 2026 compared to approximately $3.1 million for the 3 months ended June 30, 2025. This was a decrease of approximately $1.3 million or 42%. The decrease was primarily attributable to reductions of approximately $1 million in research studies and materials expenses relating to the conduct of our clinical trials and decreases of approximately $0.3 million in salaries and benefit expenses. G&A expenses were approximately $1.7 million for the 3 months ended June 30, 2026 compared to approximately $1.6 million for the 3 months ended June 30, 2025. This was an increase of approximately $0.13 million or 8%. The increase was primarily attributable to increases in business development and investor relations expenses of approximately $0.36 million and salaries and benefit expense increases of approximately $0.14 million, offset in part by decreases in other professional fees of approximately $0.35 million. Loss from operations was approximately $3.5 million for the 3 months ended June 30, 2026 compared to a loss from operations of approximately $4.7 million for the 3 months ended June 30, 2025, representing a decrease of approximately 25%. In connection with our May 2026 registered direct offering, in which we raised approximately $4.4 million in gross proceeds, the company issued investor warrants to purchase up to 2,135,923 shares of common stock at an exercise price of $2.27 per share and placement agent warrants to purchase up to 106,796 shares of common stock at an exercise price of $2.575 per share. These warrants are accounted for as liabilities due to a settlement feature that may be triggered in the event of a fundamental transaction. During the 3 months ended June 30, 2026, the company recorded an aggregate of approximately $3.6 million of expense related to these warrants. The main component of this was noncash expense arising from an increase in the fair value of the warrants that was driven primarily by a substantial increase in the company's stock price between the May 14, 2026 warrant issuance date and June 30, 2026. Other components related to warrant expense were loss on issuance of the warrants and warrant issuance costs. After including the noncash and other items related to warrants our net loss was approximately $7.1 million or $0.57 per share for the 3 months ended June 30, 2026 compared to a net loss of approximately $4.3 million or $0.40 per share for the 3 months ended June 30, 2025. For the 6 months ended June 30, 2026, our net loss was approximately $10.4 million or $0.88 per share compared to a net loss of approximately $8.9 million or $0.82 per share for the 6 months ended June 30, 2025. From a capitalization standpoint, as of June 30, 2026, the company had 12,759,146 shares of common stock outstanding. And as we described, in May '26, we closed a registered direct offering and concurrent private placement, comprising 1,454,175 shares of common stock, prefunded warrants to purchase up to 681,748 shares of common stock, investor warrants to purchase up to 2,135,923 shares of common stock at an exercise price of $2.27 per share and placement agent warrants to purchase up to 106,796 shares of common stock at an exercise price of $2.575 per share. There was no activity under our ATM sales facility during the 3 months ended June 30, 2026. I'll now turn the call back over to Panna for an additional update on our programs and operations. Panna?

Thank you, David. So 2 closing points. First number I want all of you to remember is that we advanced programs from AI-derived insights to first-in-human clinical trials in a time line under 3 years and roughly 2 to 3 years at approximately $2 million to $3 million each. The industry norm to reach that same point and is 5 to 10 years is at 25 to 100. We have 3 molecules in clinical trials have dosed over 100 patients and at the same time, have been able to advance an AI platform that's launching commercially. Those numbers are not a marketing claim. It's actually our operating model, and it's a key part of our core advantage. Secondly, what we now have structurally that we didn't have just in April is a lung cancer trial refined around a specific patient population, L858R mutations. We have European clearance for a dual biomarker trial, which will be led by investigators in Denmark and a challenging recurrent bladder cancer setting. And FDA cleared a second trial in triple-negative breast cancer post-PARP refractory patients moving toward launch and an AI and software company with executed licenses, multiple engineering centers and a growing user base. As David just walked you through, we actually did all that, while our actual operating losses or loss from operations were down approximately 25% year-over-year. And we did all of this while continuing to advance both engines of growth. We believe that's a really important and smart way to build, and that's the argument for continuing to operate this way. We're not just building better tools. We're reimagining what's possible in precision oncology and building the tools to support it. We believe this will be the standard for the rest of the industry. And more importantly, it's the platform that we think will be positioned to scale. I want to thank our team, our investigators and our shareholders as we light our way through precision oncology solutions, and we expect to have a lot of great additional results over the coming quarters. And I want to especially thank our own team here at Lantern, especially a longtime member of our team, who's moving on to a new leadership opportunity in media and technology after 5 years with us. 5 years of building this company's brand, voice, communications and also being an amazing colleague. So thank you very much. With that, I'd like to now open the call to questions. You can type your question using the QA tool, or raise your hand, and we'll try to unmute your line and repeat your question. So any questions with the remaining time that we have.

Michael, you should be unmuted.

Can you hear me?

Yes.

2 questions, Panna. One on LP-300 and then the other on OMAI. Just on LP-300, can you talk about what -- where are you in the data analysis? It's obviously nice to see the PFS stretching out a little bit more. But how mature is this data set? Will it mature further? When do you plan to update us again? And any other -- well, and then the next question related to that is now that you've got the protocol amendment in place, have any patients been enrolled under the new protocol?