Prepared remarks
Good day, and welcome to the Aethlon Medical Third Quarter Fiscal 2026 Earnings and Corporate Update Conference Call. Please note that this event is being recorded. I would now like to turn the conference over to CEO and CFO, Jim Frakes. Please go ahead.
Thank you, operator, and good afternoon, everyone. Welcome to Aethlon Medical's Fiscal Third Quarter 2026 Earnings Conference Call. My name is Jim Frakes, and I'm the Chief Executive Officer and Chief Financial Officer of Aethlon Medical. At 4:15 p.m. Eastern Time today, Aethlon Medical released financial results for its fiscal third quarter ended December 31, 2025. If you have not seen or received Aethlon Medical's earnings release, please visit the Investors page at www.aethlonmedical.com to view it. Following this introduction and the reading of the company's forward-looking statement disclaimer, Dr. Steven LaRosa, our Chief Medical Officer, and I will provide an overview of Aethlon's strategy and recent developments. I will then make some brief remarks on Aethlon's financials. We will then open up the call for the Q&A session. Before we start the business portion of the call, please note that the news release today and this call contain forward-looking statements within the meaning of the Securities Act of 1933 as amended and the Securities Exchange Act of 1934 as amended. The company cautions you that any statement that is not a statement of historical fact is a forward-looking statement. These statements are based on expectations and assumptions as of the date of this conference call. Such forward-looking statements are subject to significant risks and uncertainties, and actual results may differ materially from the results anticipated in the forward-looking statements. Factors that could cause results to differ materially from those anticipated in forward-looking statements can be found under the caption Risk Factors in the company's annual report on Form 10-K for the fiscal year ended March 31, 2025, the company's most recent quarterly report on Form 10-Q and in the company's other filings with the Securities and Exchange Commission. Except as may be required by law, the company does not intend nor does it undertake any duty to update this information to reflect future events or circumstances. Now I would like to begin by highlighting progress during the December quarter and early calendar 2026 as we continue to execute against our strategy of advancing the Hemopurifier platform while maintaining disciplined cost control. Key developments include continued enrollment and treatment progress in our Australian oncology trial; ongoing expansion of our extracellular vesicle, or EV, research platform, supporting the Hemopurifier as a potential multi-indication therapeutic; advancement of work evaluating Hemopurifier compatibility with a simplified blood treatment system that could expand future clinical and commercial flexibility; and sustained operating expense reductions on a year-to-date basis compared to the prior year. And now I will turn the call over to Dr. LaRosa, who will cover updates on the Australian oncology trial and on our R&D efforts.
Thank you, Jim. Ongoing progress has been made in our Australian oncology trial of the Hemopurifier in participants with solid tumors not responding to a treatment regimen that includes immunotherapy with the anti-PD-1 agent, pembrolizumab, known as Keytruda, or nivolumab, known as Opdivo. We have previously reported the successful completion of the first cohort where 3 participants received a single Hemopurifier treatment without any device-related serious adverse events or dose-limiting toxicities. Favorable directional improvement in EV numbers and immune cell numbers were observed in this cohort with the HP treatment. We have now completed 2 HP treatments in 2 participants in the second cohort of the trial. We have also recently enrolled a third patient who has passed screening and is due to receive the 2 Hemopurifier treatments by the end of February. Once the 3 patients have completed treatment in Cohort 2, safety data will be presented to an independent Data Safety Monitoring Board. We are targeting late March for this meeting. The DSMB will provide Aethlon Medical with a recommendation to either advance to the third and final cohort of the trial where patients will get 3 Hemopurifier treatments in a given week or they may require 3 additional patients in the current cohort. Aethlon has noted an uptick in the number of interested potential participants in the study since we contracted the groups Trialfacts and Dedicated. Trialfacts performs online advertising of the trial, while Dedicated performs phone prescreening of interested participants. Participants who pass this initial screening are then referred on to the 3 investigative sites for informed consent and more detailed screening. This process has already resulted in HP treatment of patients in the study and has provided a pool of potential future participants for Cohort 3 of the study. As a reminder, this 9 to 18-patient safety feasibility and dose-finding trial is in patients with solid tumors with stable or progressive disease while on a treatment regimen that includes either Keytruda or Opdivo. Patients who meet all inclusion and no exclusion criteria are enrolled in sequential cohorts to receive 1, 2, or 3 Hemopurifier treatments during a treatment week. In addition to monitoring safety, the study is designed to examine the number of Hemopurifier treatments needed to decrease the concentration of extracellular vesicles and if these changes in EV concentrations improve the body's own natural ability to attack tumor cells. The scientific rationale and full design of this study have recently been published in the peer-reviewed journal, BMJ Open, and the link to this article can be found on the Aethlon Medical website. I'll now change gears and talk about the R&D update. Under a Material Transfer Agreement, Stavro is studying the compatibility of the Hemopurifier with their SLAMB system. This system utilizes a single small lumen vascular catheter and a simplified blood pump, compared to the large double-lumen vascular catheter and more complicated dialysis machines typically used for the treatment. This research could lead to a simplified system for performing Hemopurifier treatments in oncology units and in infusion centers in the future without the requirement to use a large double-lumen dialysis catheter, a bed in a dialysis unit, a dialysis machine, or a supervising nephrologist. The Aethlon Medical R&D team continues to attempt to build on our preclinical data in Long COVID. We have previously shown that the GNA affinity resin in the Hemopurifier binds EVs in Long COVID patient samples and decreases microRNAs known to cause immune dysregulation. This data has been published in the preprint server bioRxiv and has been submitted for consideration in a peer-reviewed journal. We are now exploring possibilities of investigating other cargo within the EVs, such as viral particles, with our technology. Extracellular vesicles, including platelet-derived EVs, have been implicated in the pathogenesis of a myriad of indications in addition to cancer, including, but not limited to, lupus, rheumatoid arthritis, systemic sclerosis, multiple sclerosis, cardiovascular diseases, sepsis, and ALS. Aethlon previously published data on the removal of platelet-derived EVs from healthy plasma by the Hemopurifier in the preprint server bioRxiv. We plan to further this work by examining platelet-derived EV and microRNA removal by the Hemopurifier in patients with some of these indications, so disease plasma, to further this work. This approach is in line with our thinking that the Aethlon Hemopurifier may provide a pipeline within a single device. With that, I'll turn the call back over to Jim for the financial discussion.
Thanks, Steve, and good afternoon again, everyone. Turning briefly to the financials. As of December 31, 2025, we had a cash balance of approximately $7 million. Our consolidated operating expenses for the 3 months ended December 31, 2025, were approximately $2.06 million, up $250,000 or 13.6% compared to the same period last year. This increase was primarily due to higher payroll and related costs, partially offset by lower clinical trial expenses and reduced professional fees, mainly from Investor Relations activities. As a result, the operating loss for the quarter increased to $2.06 million, compared to $1.81 million in the prior year period. Other income, primarily interest income earned on cash balances, was $44,000, slightly lower than the $60,000 recorded in the same quarter last year. Looking at the 9-month period, our operating expenses decreased significantly to $5.36 million, down $1.98 million or 27% from $7.34 million last year. This improvement reflects lower payroll, general and administrative costs, and professional fees, highlighting the impact of our ongoing cost management initiatives. You can find more detail on these expense changes in our 10-Q, which breaks down specific drivers by category. We included these earnings results and related commentary in our press release issued this afternoon. The release also included the balance sheet for December 31, 2025, and the statements of operations for the 3- and 9-month periods ended December 31, 2025, and 2024. We will file our quarterly report on Form 10-Q following this call. Our next earnings call for the fiscal fourth quarter ending March 31, 2026, will coincide with the filing of our annual report on Form 10-K in June 2026. And now we would be happy to answer any questions that you may have. Operator, please open the call for questions.
Questions and answers
The first question today comes from Marla Marin with Zacks.
So I just want to touch on some of the things that you mentioned in the prepared remarks. You've moved on in the trial to Cohort 2. And given that part of the trial's goal is to determine dosage or the number of Hemopurifier treatments and impact that they have on the trial participant, so now you will be administering the treatment twice instead of, with Cohort 1, the one-time treatment. But the participants are involved in the trial for the same length of time. Is that correct?
It's the same follow-up period. The difference is that in Cohort 2, participants receive 2 Hemopurifier treatments instead of 1 in Cohort 1. They typically receive treatments on a Monday and Friday, allowing several days in between. This will enable us to observe how the EV numbers change between treatments. Additionally, we will assess whether the two treatments result in more sustained decreases in EVs and longer-lasting effects on T cells compared to what we observed in the first cohort.
Thank you for clarifying that. My next question is, if you investigate the potential to connect the Hemopurifier to the SLAMB system, can you provide some indication of what that might mean for opening new opportunities or enhancing your ability to introduce the Hemopurifier to different medical centers in the future?
Yes, currently you have to insert a dialysis catheter, which is quite invasive and is often referred to in medical terms as a large-bore catheter with two lumens, one for drawing blood and the other for returning it. The SLAMB system introduces a smaller single-lumen catheter that doesn’t need to be placed in the neck. In hospitals, there are small, thin catheters called PICC lines that can typically be inserted in the arm, which is what I envision. This represents a significant reduction in invasiveness. For the Hemopurifier, we currently rely on a dialysis machine, specifically using its blood pump, without utilizing its other functions since we aren't removing fluids or electrolytes. This dependence means we have to secure a dialysis bed and rely on a nephrologist to operate the machine, as they are trained in its use. The SLAMB system allows for a single-lumen catheter and a simplified pump, making operation easier. This opens up the possibility of using the system in oncology units, where patients receive chemotherapy, or in infusion centers common in ambulatory settings. Essentially, this could shift our approach away from traditional dialysis environments.
So just to make sure I understand, it removes you from that dialysis space and makes it much simpler for the hospital staff to administer the treatment. But also from the patient's perspective, it makes it less invasive and probably less daunting to receive the treatment. Is that the right way to think about it?
Yes. Because as I say, these PICC lines, they're typically put in what we call the antecubital fossa. That's the space in between your forearm and your upper arm, right in front of your elbow. Getting a thin catheter there is a lot less daunting to a patient than getting a large catheter placed up in their neck. And they're also easier to take care of as well. They tend to have fewer complications. So yes, I think that from a patient perspective, I'd much rather have one of these catheters than a dialysis catheter. And I'd much rather be able to stay in my therapeutic home, meaning I'm going to an oncology unit to get my immunotherapy, I'd like to get my EV removal treatment in the same place and not have to go to a dialysis unit to have that done, which is what has to happen now. So it just makes it more integrated into care.
Got it. Okay. Last question for me. Jim, I know that you are very mindful about costs related to the company's activities, and you are focused on maximizing R&D spending and optimizing operating costs. In the press release and prepared remarks, you mentioned building upon some preclinical research you conducted. Can you confirm that your current efforts remain aligned with this cost-effective strategy and explain how you are managing to conduct initiatives like Long COVID in an economical way?
Right. I acknowledge my Scottish heritage in terms of cost management. We are working to minimize costs while still making progress. For instance, we are focusing on obtaining samples mainly for shipping costs whenever possible. We're attempting to handle most of the work internally with our small scientific team and limit the reliance on outside laboratories, all while continuing to advance our initiatives. We are publishing articles and gaining insights, and although we must make trade-offs, we believe we are making progress. We are particularly pleased that we have treated two out of the expected three patients in the second cohort after completing the first cohort last quarter. Progress is indeed picking up on that front as well.
The next question comes from Jeremy Pearlman with Maxim Group.
Now for the first question regarding the oncology trial. You mentioned the timeline, which is your best estimate. You indicated that the third patient should receive treatment by the end of February, and you plan to present the safety data by late March. How long do you anticipate it will take for the board to decide whether you can proceed to the third cohort or if you need to add more patients to the second cohort? What do you expect the timeframe for that decision to be?
Great question. Yes, I misspoke, so I appreciate your correction. The third patient will be treated at the end of this month, February. The Data Safety Monitoring Board meeting will likely take place in late March. Historically, after the open session on the day of the meeting, they have a closed session and return a signed document to me within a couple of hours. Therefore, I expect a decision on the same day or the next business day.
Okay. Great. Assuming you move on to the third and final cohort, and considering you mentioned an increase in interest from potential participants, how quickly do you think you could arrange the three Hemopurifier treatments, finalize the last cohort data, and move that forward?
Yes, that's a great question. This is really exciting. Thanks to our Controller, Michele Bombardiere, we have partnered with Trialfacts and Dedicated, who are helping us with site referrals. We have several potential participants lined up. Once we advance to the next cohort, we can approach these patients for consent. They will then undergo a screening period involving additional lab tests and reviews. We will also need to schedule the HP treatment around their next Hemopurifier session. The encouraging part is that, while we can't predict outcomes, there is a queue of potential participants waiting, which is very exciting for me.
And they can roll into the third cohort.
They can move into the third cohort without any issues. They will sign consent and proceed. Instead of having to search for new participants, we already have a group to draw from.
No, that's great. It's really good to have that pool to draw on. This is just a theoretical question related to how you decide on the time gap between the first treatment and the second treatment. You mentioned earlier that the first treatment was on a Monday and the second on a Friday. Is there a specific reason for choosing the 5-day gap? Is there a possibility that extending the gap between treatments could be more beneficial for the patient? Is this time frame considered optimal? I'm just curious.
Extracellular vesicles are continuously produced by active tumors, leading to a rapid turnover. Since this is a safety feasibility trial and our initial foray into oncology, we decided to start with a single treatment and evaluate the outcomes. We understood that a single treatment would likely not sustain low levels of EVs in the long term. Therefore, we proposed administering two treatments within a week, as well as three treatments during the week, specifically on Monday, Wednesday, and Friday. We believed that exceeding three treatments in one week would be difficult for patients, similar to the challenges faced by those undergoing dialysis. This seemed to be the maximum number of treatments a patient could tolerate in a week. Additionally, we will assess how frequently the treatment regimen needs to be repeated—whether it needs to occur weekly, biweekly, or monthly. Our lab sampling will help determine this frequency, whether it’s once a week with additional treatments or twice or three times a week. The design of this approach was influenced by findings from the plasma exchange trial at Mayo, which suggested that maintaining low EV numbers would require at least two to three treatments per week.
Got it. Understood. Just a final question regarding the potential integration into the SLAMB system. Will there be any regulatory challenges on your end? Since the device is probably already approved, if we can ensure the Hemopurifier is compatible, is it good to go? Or will you need to conduct a safety test or any other assessments before it can be used in that system?
Yes, they are in the process of submitting their application to the FDA, which means it is not yet approved. Once that is complete, we would need to integrate it. I expect we will be required to conduct a certain number of treatments with both systems in place. So that's the plan.
The next question comes from RK with H.C. Wainwright.
I have a couple of quick questions. With Cohort 2, two out of three patients are enrolled, and if I understand correctly, you are essentially using the same patients from Cohort 1 for Cohort 2? Is that true?
No. These are entirely new. These aren't the same patients that were in Cohort 1. These are entirely new patients.
So they are completely new patients. You mentioned that the third patient is starting at the end of this month. Do you think we will finish with Cohort 2 in a couple of months? The key question is whether there is a genuine need for Cohort 3. Do you believe Cohort 2 will provide enough information to determine if two treatments with the Hemopurifier are sufficient, or do you still think Cohort 3 will be necessary?
The third patient will receive their two HP treatments at the end of this month. After that, the independent Data Safety Monitoring Board will determine if that’s enough or if we need to add three more patients, as this is a 3 plus 3 safety study. I can't speak for them, but ideally, by the time they meet at the end of March, we would receive guidance to proceed with Cohort 3 in April. Regarding the necessity of Cohort 3, the decision is informed by the Mayo Clinic data, which indicated that two or three treatments are needed. I believe it would limit our potential to stop at two without exploring three, as I have reason to think that three could be more effective in terms of EV removal or T cell response. It would be a disservice to ourselves to halt at two, and I haven't received any data from the two treatments yet to make any predictions about their efficacy. Thus, it's too early to evaluate the effectiveness of two treatments right now.
It was a good question, but no, it's not right without knowing the data.
I have a couple of questions about the SLAMB device integration. As you mentioned, when transitioning from the dialysis machine to this device, the tubing and catheters are smaller, which makes it more comfortable for the patient. However, the flow dynamics of the blood significantly differ between the larger and smaller tubing. Do you anticipate needing to undergo additional testing with this machine due to the changes in flow dynamics? Could the amount of captured extracellular vesicles vary because of these dynamics? What are your thoughts?
Yes, there are many forward-looking questions, but the first thing to note is that the initial experiments will focus on testing the compatibility of their pump with our device. This means we need to ensure our device operates correctly without triggering alarms or causing clotting. They will conduct these tests in a lab setting using colored fluid to monitor the pressures. Additionally, there will likely need to be some ex vivo experiments to confirm that the capture of the extracellular vesicles is similar. So, the primary step is to verify the compatibility of their pump with our device.
Okay. So basically, that's not going to really help us move this trial any faster at this point. So it's something in the future basically, correct?
Not the current trial and probably not even the next trial. I don't think it'd be done in time.
Okay. And then the last question from me is, at one point you were talking about India and then you kind of walked away from that idea. Do you still see a possibility of having the Indian hospital get back into doing a clinical trial so you can kind of speed up the progress here? Or is it first Australia and then we'll see what happens?
Yes, we are very focused on Australia. While the performance indicator and the hospital situation there are promising, we are making significant progress in Australia. Our priority is to complete the current trial and get the results. There may be some costs and distractions involved, so we will not be returning to India at this time.
It'd be hard to advance to a PMA trial if you had another safety feasibility trial going on somewhere else in the world.
In closing, we remain focused on advancing the Hemopurifier platform through disciplined clinical execution and careful capital management. We appreciate your continued interest and support. Have a good day. Goodbye.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.