Cytocom, Inc.
Q3 2015 Earnings Call Transcript

Published: 6 Nov 2015

[Operator:]

Greetings. And welcome to the Cleveland BioLabs Third Quarter 2015 Investor Update Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rachel Levine, Vice President of Investor Relations for Cleveland BioLabs. Thank you, Ms. Levine. You may begin.

[Rachel Levine:]

Thank you and good morning. Joining us today are Dr. Yakov Kogan, Chief Executive Officer; Dr. Langdon Miller, President and Chief Medical Officer; Mr. Neil Lyons, Executive Vice President and Chief Financial Officer; and Dr. Ann Hards, Executive Vice President of Regulatory Affairs. 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 plan and involve risks and uncertainties. Additionally, I want to emphasize that some of the information discussed on this call, particularly our financial and cash outlook and our forward-looking development plans, are based on information as of today, November 5, 2015, 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 10-K and 10-Q. 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 open this morning’s call with a review of recent events and pass the call to Dr. Langdon Miller to share additional updates on our clinical programs. Mr. Lyons will then provide financial results for the period, update the financial outlook, and hand the call back to Dr. Kogan for closing remarks. We will then host a Q&A session. 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 us this morning. Let me start by sharing our excitement regarding the two development contracts we announced in September with the Department of Defense or DoD. These awards were highly competitive, and we believe further validate entolimod’s potential utility as a lifesaving, radiation rescue medication. The contract are valued at up to $15.8 million and fund additional pivotal animal and clinical studies supporting the future full licensure of entolimod under a Biologics License Application, or BLA. Our team is currently coordinating with both the DoD and the FDA to get these studies underway. In the meanwhile, we continue to work with the FDA to facilitate the review of our pre-Emergency Use Authorization or pre-EUA dossier. At this point, we have received initial comments from FDA, for which we are developing responses. We expect to receive additional questions as the FDA continues further review. Consequently, and as a reminder, the FDA does not have a PDUFA deadline for review. However, we estimate that their review will continue into 2016. A positive outcome of this review could enable the use of entolimod in an emergency, when there are no adequate, approved, or available alternatives. Products with pre-EUA status can be purchased by certain U.S. government stakeholders for stock piling in the event of a disaster and we believe achievement of this status may also increase interest from foreign governments. In an effort to support entolimod’s potential commercialization, we are increasing our focus on the publication of data highlighting entolimod’s attributes and advantages. In September, we published the results from several of our initial studies in non-human primates in the peer review journal, PLOS ONE. The data demonstrated the ability of entolimod to reduce radiation injury and improve survival when the drug is administered up to 48 hours after lethal radiation exposure. Following exposure to the whole body radiation, what was fatal in 50% to 75% of placebo-treated animals, a single, intramuscular injection of entolimod substantially reduced radiation-induced mortality, providing an absolute improvement in survival of 40% to 60%. Survival benefit were accompanied by accelerated recovery of hematopoietic and immune systems with decreased severity and duration of thrombocytopenia, neutropenia, and anemia in entolimod-treated animals compared to control animals. Entolimod treatment also reduced the radiation-induced damage and accelerated recovery in the gastrointestinal tract. Importantly, entolimod alone achieved these positive effects. Animals did not require additional intensive, individualized support care. To our knowledge, these are the first published data documenting significant increases in the survival of non-human primates using a pharmacological agent administered as late as two days after lethal, total body radiation exposure. We plan to submit additional publications in the coming months summarizing entolimod’s advanced development under the Animal Rule. With that, I will hand the call over to Landon to review progress with our other programs.

[Langdon Miller:]

Thank you, Yakov. In addition to support of the entolimod pre-EUA review and preparations for additional studies supporting a BLA for the radiation indication, we continue to work toward generation of data supporting the potential utility of entolimod and CBLB612 as immune activators. Following the data reported from a Phase 1 trial of entolimod in patients with advanced cancer at the 2015 Annual Meeting of the American Society of Clinical Oncology, or ASCO, we are evaluating combinations of entolimod with immune checkpoint inhibitors in preclinical models of breast, colon, and bladder cancer. While immune checkpoint inhibitors are delivering breakthrough results in several challenging indications, overall tumor response rates are only in the range of 20% to 30%. We believe there is an opportunity to increase response with the addition of another immunotherapy like entolimod that could improve immune response and enhance the efficacy of these types of drugs. A second Phase 1 study of entolimod in patients with advanced cancer continues to enroll in the Russian Federation. The goal of this study is to expand upon clinical observations made at the higher dose levels in the prior U.S. study and gather further statistics on immune response to administrations of entolimod. As a reminder, this study is supported by a development contract from the Russian Ministry of Industry and Trade or the MPT. We also are progressing with preparations for IND-enabling studies of entolimod as a local therapy in non-invasive bladder cancer. Current first line therapy for this indication is an immunotherapy agent targeting a different Toll-like receptor. Unfortunately, with that agent, recurrence rates are high, leaving patients without adequate treatment options which has prompted the FDA to encourage new entrants into this therapeutic area. We believe that bladder cancer might be a particularly interesting indication for entolimod, given the high level of expression of entolimod’s target receptor in the bladder and the ability to assess the potential response in a Phase 1 study through the use of cystoscopy. Our newest immunotherapy application for entolimod is SA-702, which utilizes minimal amounts of entolimod in combination with alum as a vaccine super adjuvant. Many vaccines require an adjuvant to induce sufficient immune response, and there is an opportunity for the entrance of new vaccine boosters combining classic adjuvants with immunomodulators like entolimod. Our first collaboration in this area is with a thought leader in the anti-addiction space, Dr. Thomas Kosten at Baylor College of Medicine. Dr. Kosten’s team has funding through the National Institutes of Health, or NIH, and the National Institute for Drug Addiction, or NIDA, and is preparing an IND filing for clinical testing of SA-702. Our goal is to validate the use of such an adjuvant for many vaccine applications and we are working on additional academic or commercial collaborations to generate such data. Let’s now turn to CBLB612. Having completed a Phase 1 healthy subject study in the Russian Federation, we are in the midst of preparations for a Phase 2 study of CBLB612 in a clinical model of chemotherapy-induced myelosuppression. This study will be supported by an existing contract with MPT. We believe an opportunity exists for CBLB612 to offer a single-dose alternative to existing hematopoietic growth factors, such as G-CSF, which comprises a multibillion dollar market in support of chemotherapy administration. G-CSF modestly shortens the duration of chemotherapy-related neutropenia, but does not improve thrombocytopenia or anemia and does not provide anti-tumor efficacy. Unlike G-CSF, which acts specifically to mobilize neutrophils and to increase their production and decrease their generation time, the potential utility of CBLB612 to counter myelosuppression results from Toll-like receptor 2 mediated myeloprotective and myelorestorative effects as demonstrated in studies performed on mice and non-human primates experiencing life-threatening myelosuppression due to whole body radiation. Recent pre-clinical research with CBLB612 also indicates the stimulation of Toll-like receptors 2 and 6 that may enhance anti-tumor efficacy. Last but not least, our Panacela subsidiary continues to dose prostate cancer patients in a Phase 1 dose escalation study with Mobilan evaluating single injections administered directly into the prostate. Mobilan is a nanoparticle-formulated recombinant non-replicating adenovirus that directs expression of TLR5 and its agonistic ligand, flagellin. Target indications for Mobilan include tumors expressing a specific viral receptor known as Coxsackievirus and adenovirus receptor, or CAR. This study is also supported by a contract with MPT. That concludes my update. I will now hand the call over to Neil to review the financials.

[Neil Lyons:]

Thank you, Langdon. For Q3, our total revenues increased by 21% to approximately $501,000 compared to approximately $415,000 in the third quarter of 2014. This increase primarily attributable to reimbursements from Incuron for development support for CBL0137, which are now separately reported after Incuron’s deconsolidation in Q4 of 2014, offset by variances and levels of development work reimbursable under our other contracts. Nine-month revenue decreased by approximately $900,000 to $1.4 million, compared to $2.3 million for the same period last year. This decrease primarily related to the final $1 million in revenue from the Skolkovo Foundation which was recognized in 2014 for Curaxin research associated with Incuron, with offsetting variances in levels of development work for other contracts. Research and development expenses for Q3 were relatively unchanged at approximately $2.1 million. Nine-month research and development costs decreased to approximately $5.2 million compared to $6.8 million for the same period last year. This decrease is primarily due to the deconsolidation of Incuron and other variances in the levels of outsourced research. Q3 G&A expense decreased by approximately $500,000 to $1.3 million compared to $1.8 million in the third quarter of 2014. Nine-month general and administrative costs decreased by approximately $1.2 million to $5.2 million compared to $6.4 million for the same period last year. These decreases primarily resulted from the deconsolidation of Incuron and general reductions in personnel and use of outside professionals. Let us now review our existing liquidity and capital resources. As of September 30th, we had $22.5 million in cash, cash equivalents, and short-term investments. On July 9, the company sold approximately 6.5 million shares of the company’s common stock to a single individual investor for $25 million, which we had previously reported. On June 30, the previously announced option to purchase our remaining equity interest in Incuron for $1 million was exercised, and the proceeds from such exercise were received in July. Additionally in August, we elected to prepay the outstanding obligations under the Hercules loan, which amounted to approximately $2 million. At September 30, with the award of the DoD contracts that Yakov mentioned, we had $18.1 million in funded and unfunded contract backlog related to contracts from the DoD and the Russian Federation. Prospectively, we anticipate increased spending on our research programs. However, these spending increases will only increase monthly burn modestly, compared to historical rates which have trended around $1.2 million per month on a consolidated basis, adjusted for nonrecurring transaction costs. Increased development spending for entolimod as a radiation countermeasure will largely be paid for by our newly awarded DoD contracts, and now that the Hercules debt has been paid off, monthly debt service of approximately $76,000 will no longer be needed. As a consequence, we expect our current financial resources to fund operations for at least the next 12 months. That concludes my comments. Yakov, please continue.

[Yakov Kogan:]

Thank you, Neil. We look forward to reporting our continued progress over the coming months. With a stronger balance sheet and new funding commitments from the DoD, we believe we are well positioned to pursue commercialization of entolimod for biodefense and advance development of our medical programs. We will now open the call to questions. Operator, please begin the Q&A.

[Operator:]

Thank you. We will now be conducting a Q&A session. [Operator Instructions]) Our first question comes from John Ressiger with Red Blue Digital. Please go ahead.

[John Ressiger:]

Hi, yes. This question is for Ann Hards. Are there any restrictions on selling entolimod to the country of India?

[Yakov Kogan:]

Thank you for your question. This is Yakov. I think I am the more appropriate person to address.

[John Ressiger:]

Okay, Yakov, that’s fine.

[Yakov Kogan:]

We discussed this question with the Department of Commerce several years ago, and we received an indication for our product that it is not restricted for export to countries like India.

[John Ressiger:]

Excellent. Okay, a follow-up question. Given that in 2010 the Department of Defense ordered 86,000 doses at a cost of $700 million? If India wished to purchase, say 50 million doses, will you give them a discount?

[Yakov Kogan:]

So the price of the compound is negotiated with each buyer individually. The pricing which was discussed with the DoD was pricing of 37.5 thousand doses of the drug and this was discounted due to the fact that DoD had supported the development of the compound.

[John Ressiger:]

It’s my understanding in large quantities, it costs about $10 per dose to make this and put it in an injector, and it would seem to me that if you could sell 50 million doses at $20 a dose, you could get a bunch of capital to develop your other programs. Does that seem logical to you?

[Yakov Kogan:]

I don’t want to comment on the specific cost per dose, but what I would like to confirm is that we have very highly efficient manufacturing process that allows us to produce a significant number of estimated human doses.

[John Ressiger:]

Okay. I’ve talked to several senators, United States Senators, and they’re oblivious to the fact that a radiation antidote exists, and I’m just curious as to why it takes the FDA so long to answer questions. It seems to me, what’s going on with our soldiers in the Middle East, that they should be able to answer questions more quickly.

[Yakov Kogan:]

First of all I am very thankful for your discussions with our Congressional representatives. It’s very important for them to understand the current state of development of medical countermeasures. What I believe is that the FDA is performing a very a thorough review of our pre-EUA dossier and they are looking at all the studies which the company has performed with the drug and asking us questions, which we are responding to.

[John Ressiger:]

Okay, Yakov. Well, thank you very much for your time.

[Yakov Kogan:]

Thank you for questions.

[John Ressiger:]

You're welcome.

[Operator:]

Our next question comes from Ben Rad with Ascending Capital. Please go ahead.

[Ben Rad:]

Hi, Yakov. I think you mentioned earlier that there was some communications from the FDA regarding the pre-EUA process. There was some comments, I believe. My connection wasn’t well. If you could just repeat what is the status of that?

[Yakov Kogan:]

So I’d like to confirm that we received initial comments from the FDA and we are developing responses. We do expect to receive additional questions as the FDA will continue their review, and this is the current status.

[Ben Rad:]

Can you reveal anything about those comments or the timeline?

[Yakov Kogan:]

We are not going to comment on the details of the process. The only thing I would like to confirm again is that this is an ongoing and highly interactive process. And I want also remind you that there is no PDUFA deadline. So there is no specific date in the future by when the FDA is supposed to provide us a response, a definitive response. But based on the estimate of the ongoing process, we believe the review will continue into 2016.

[Ben Rad:]

Okay. And just one follow-up question. Once you do get that approval, if you get it, how quickly can the company scale up to production and commercialization?

[Yakov Kogan:]

It’s going to be a separate discussion with both FDA as well as the purchasing agency.

[Ben Rad:]

Okay. So no kind of estimate on months, weeks, after approval.

[Yakov Kogan:]

Again, it would depend on the requirements of the purchasing agency and our ability and ability of our commercial manufacturing site to provide.

[Ben Rad:]

Okay. Would additional capital be needed at that point?

[Yakov Kogan:]

We believe that if a purchasing agreement would be put in place that it would provide funding for delivery of drug to the national stockpile.

[Ben Rad:]

Okay. Very good. Thank you.

[Operator:]

[Operator instructions] Our next question comes from [Chuck Levitan] [ph]. Please go ahead, sir.

[Unidentified Analyst:]

Okay. My question has to do with pre-EUA also, and most of that has been answered, but I just want to clarify. The company submitted for pre-EUA about 10 or 11 months ago?

[Yakov Kogan:]

Excuse me, I’m sorry. We submitted the response in June of 2015.

[Unidentified Analyst:]

You submitted the response?

[Yakov Kogan:]

We submitted the pre-EUA dossier in June 2015.

[Unidentified Analyst:]

Four months ago? Five months ago?

[Yakov Kogan:]

Correct.

[Unidentified Analyst:]

Okay. I thought it was earlier in the year. Okay. And you got questions from the -- on the pre-EUA how long ago?

[Yakov Kogan:]

I would like -- again we received the questions and we are currently developing responses.

[Unidentified Analyst:]

When did you receive the questions? I’m just trying to get an idea how long it takes the agency.

[Yakov Kogan:]

During the third quarter.

[Unidentified Analyst:]

You got them sometime during the third quarter. Okay, so, it took them about three or four months to return initial questions to you.

[Yakov Kogan:]

Correct.

[Unidentified Analyst:]

For some reason I thought the pre-EUA was submitted much earlier, but alright, thank you very much.

[Yakov Kogan:]

You’re welcome. Thank you. Thank you for your question.

[Operator:]

There are no further question at this time. Today’s call will be available for replay until November 19, 2015. You may access the call by dialing 877-660-6853 and entering ID number 13622699. The webcast will also be archived on the IR section of the Cleveland BioLabs website. This concludes today’s call. Thank you for your participation. You may disconnect your lines.