Cytocom, Inc.
Q3 2014 Earnings Call Transcript

Published: 5 Nov 2014

[Operator:]

Greetings, and welcome to the Cleveland BioLabs Third Quarter 2014 Investor Update. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Rachel Levine, Vice President of Investor Relations. Thank you. You may begin.

[Rachel Levine:]

Thank you, and good morning, everyone. Welcome to Cleveland BioLabs’ third quarter 2014 investor conference call. Joining us today are Dr. Yakov Kogan, Chief Executive Officer; Mr. Neil Lyons, Chief Financial Officer; Dr. Andrei Gudkov, Chief Scientific 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 plans 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, 2014, and then 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 by reviewing operational updates and pass the call to Mr. Neil Lyon to review financial results for the period and the financial outlook. Dr. Kogan will then return for closing remarks and open the call for 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 us this morning. Earlier this year, we outlined this way out to increase value for our shareholders. These revenues included, pursued as a pre-emergency use authorization or pre-EUA submission for Entolimod biodefense indication, and delivering data indication pharmacodynamic activities of our drug candidate in March Phase 1 oncology trial. Today, we can say what we have made significant strides forward in achieving these goals. We are not ready yet, but we are getting closer every day. Let us both address, our progresses pursued the pre-EUA for Entolimod. In early September, we announced with the FDA has given us a green light for the pre-EUA application and for Entolimod to use as their antibiotic in the event of radiation or nuclear disaster. Pre-emergency use authorization is difficult for which the regular government is able to administer unlicensed rescue therapies in the emergency situations. If FDA grants the pre-EUA status, purchases of Entolimod could be made for stock piling in the events of disaster. Even actual use of the stock pile drug would occur only in a declared emergency situation. And receiving this news from FDA, our team has been focused on compiling a pre-EUA dose here. This effort involves technical summaries, update and additional analysis of data, based on anticipated storage and transfer conditions for an emergency scenario. And that recent plan and controls for administration Entolimod in an emergency. I’m pleased to say, what this enormous body of work is moving forward in line with our expectations. And I believe we are on track to complete our submissions in the third quarter of 2015. In parallel, we are reaching out and coordinate in discussion. This various U.S. government agencies to include so perspective on emergency scenario plan and got our support for Entolimod’s proposed pre-EUA status. We believe with achievement of the pre-EUA status in the United States would participate Entolimod’s commercialization in the U.S. as well as the partnerships and foreign government interest in this program. Let’s now turn to advances we made in our oncology programs. We concluded the Phase 1 study of Entolimod in patients of advanced cancer at Roswell Park Cancer Institute. Analysis of the trial data including immune cell response is expected to be completed in the first half of 2015. We believe was measuring various spots of specific types of immune cell to administration of Entolimod will help us better assess Entolimod’s potential as an immunotherapeutic agent. We have opened on IND for a small expansion study with Entolimod in the Russian Federation to cover additional immune cell response and safety data, as the highest dose levels reached in the Roswell Park study. This expansion study is being financially supported by the nation, from the Ministry of Industry and Trade or MPT of Russian Federation. And is expected to commence those in, before the end of the year. With respect to our product candidate both CBL0137 trials are federation owned schedule, the recruitment of the six cohort was recently opened in the intravenous study and dosing of the eight cohort is ongoing in the auto study. To-date no drug related serious absorptive adds have been reported in any trial. Dose escalation in both trials will continue until a maximum tolerated dose is reached. We are planning to release an interim report on safety, pharmacokinetics and pharmacodynamic data, collected from the stored sixth cohort of overall studies later this year, as soon as this data are finalized. Once the Phase 1, pharmacodynamic and pharmacokinetics and safety profile provides the basis for selected recommended starting doses for CBL0137, we intended to pursue Phase 2 revolution of the drug in selected tumor type. Finally, doses began in the Phase 1 healthy subject study is CBLB612, the endpoint of this study include established and maximally tolerated dose and characterizing CBLB612’s ability to mobilize bone marrow stem cells into a blood circulation. The clinical studies have shown what the efficacy of CBLB612 exceeds that of G-CSF, the market leading drug used for stimulating the bone marrow to produce white blood cells. This study is also supported by mentioned form contracts from MPT. At this point, I will hand the call over to Neil to review the financials. I will rejoin in a bit for closing remarks.

[Neil Lyons:]

Thank you, Yakov. For the quarter ended September 30, 2014 our total revenues decreased by $1.2 million to $400,000, compared to the third quarter of 2013. Total revenues for the nine months period decreased by $2.3 million to $2.3 million compared to the same period in 2013. These decreases were primarily the result of the completion of sales and development contracts with the U.S. Department of Defense for Entolimod’s biodefense indication completion of the scope of a brand for development of CBL0137 and differences in the level of underlying research activities associated with the development contracts from MPT in the Russian Federation. Research and development expenses for Q3 of 2014 decreased by $2.1 million or 50% compared to Q3 of 2013 and are reported at $2.1 million. Research and development expenses for the first nine months of 2014 decreased by $8.1 million or 54% overall, compared to the same period in 2013 and are reported at $6.8 million. As we discussed last quarter, from a product perspective there were three drivers for these overall decreases. First biodefense spending is down largely due to the completion of Entolimod trial in non-irradiated non-human primate, and other activities that were underway in 2013. Second, development of the Panacela compound was narrowed and focused through IND enabling studies and move along. And finally, costs related to the Curaxin compounds CBL0102 and CBL0137 were less due primarily to the completion of the CBL0102 study. For Q3 of 2014, general and administrative expenses decreased $1.5 million or 45% compared to Q3 in 2013 and are reported at $1.8 million. For the first nine months of 2014, general and administrative expenses were down $3.3 million or 34% compared to the same period in 2013 and are reported as $6.5 million. All of these reductions are due to reductions in personal and other cost saving activities. Let us now review our existing liquidity and capital resources. On a consolidated basis, we reported $9.1 million of cash and short term investments as of September 30, 2014 with $4.3 million restricted for the years of our majority subsidiaries. At September 30, 2014 we had $4.7 million in funded contract backlog and 44.1 million in unfunded contract backlog. With regard to Incuron, we noted last quarter that a final investment tranche by Bioprocess into Incuron would reduce our ownership below 50% and as a result, we would deconsolidate Incuron from our results and record our investment in Incuron through the equity methods. More specifically there were two investments that Bioprocess needed to make in order for that outcome to occur. As the time, we saw those of these investments would occur in Q3, however only one investment occurred in that timeframe. We expect that the second transaction will occur in Q4, which will reduce our ownership below 50% and as a result our and our deconsolidation of Incuron and accounting for investment in Incuron through the equity method. And so doing we will record initial asset value based on an independent valuation of Incuron. It is important to note that when Bioprocess obtains a majority equity interest, our team still has significant input into strategic decisions like financing and licensing, as well as the development program for CBL0137. In fact our team is guiding worldwide development strategy for 137 and is responsible for planning and overseeing all drug development activities. Now moving on to historical cash burn and cash guidance, certain of the financial measures we will discuss are calculated on a non-GAAP basis. These reference payable of non-GAAP measures included in our earnings release this morning for a reconciliation of these non-GAAP measures to the comparable GAAP measures. For the quarter, CBLI’s standalone monthly cash burn, that is without Panacela or Incuron, was $900,000, below our guidance, $1.1 million to $1.2 million on average per month. We continue to believe CBLI’s standalone cash resources will last into the first quarter of 2015. CBLI’s consolidated monthly cash burn was $1.4 million below our guidance of $1.7 million to $1.8 million on average per month. But the expected deconsolidation of Incuron for part of the fourth quarter, we are updating our guidance for consolidated cash burn without Incuron per month on average to be $1.2 million to $1.4 million. The continued financing of our operations is the top priority and is an obvious need. As you can see from our reduced spending compared to prior periods, management has taken significant actions to conserve cash resources. As Yakov noted, with the green light from the FDA to file a pre-EUA submission we may be nearing commercialization of Entolimod within the next two years, and we have other potential products in our pipeline. We are evaluating a variety of options to fund operations, while we would rather not raise capital through an equity investment at current evaluation levels, we may need to do so. We also believe that maintenance of our NASDAQ listing is in the long-term interest of our shareholders. As such we may need to execute a reverse stock split in order to maintain the listings. Whether or not, we ultimately decided to consummate a reverse stock split. We may need to commence necessary actions to execute one. Since our shareholder requires a shareholder vote, which takes two to three months to work this out. That concludes my comments. Yakov, please continue.

[Yakov Kogan:]

Thank you, Neil. Before we open the call to questions, I want to make a few comments about our belief in CBLI’s potential. When we found the CBLI, we had one goal in mind to develop and commercialize truly innovative drug, what would make an impact on [indiscernible] ability to treat and to ride cancer hence our life threatening conditions, like exposure to equal level of radiation. Our phase in potential of our drug candidate has not changed. Despite various ups and downs over many years. We have continued to develop Entolimod and other drug candidates such as CBL0137 and 6 trials from concept we are looking. We have to pursue for U.S. government budget issues changes in over size of our IND for FDA and mainly our typical challenges of drug development. The science and beta behind our drug candidate have continued to progress over the years. We believe our recent achievements is with the FDA demonstrates what we are on the right track is Entolimod’s biodefense indication. And every additional patient will subject those in our clinical trial getting us one step closer to our goal. And with this, I would like to open the call for Q&A.

[Operator:]

Thank you. [Operator Instructions] We have a question from Robert Brous with Wunderlich Securities. Please state your question.

[Robert Brous:]

Hi thanks for taking my call. I missed being in the call, so if you could just give further detail on the timing of filing of the EUA and the process surrounding that?

[Yakov Kogan:]

Thank you, Robert. So, I’ll answer the first question and ask Ann Hards to give you some details. So, we planned to file the pre-EUA this year with the FDA in the first half of 2015. This is the timing which we believe we’ll be able to do this. Ann, if you can provide few details at both what’s behind this.

[Ann Hards:]

Sure. So you can think of a pre-EUA submission as somewhat of a mini-BLA. It requires summarization of all Entolimod development data to-date related to the claimed indication. In addition, during the July meeting, FDA requested additional analysis based on the human dose estimate. These analysis do not require new statics to be performed, but they still take time to do. We also need to finalize our chemistry manufacturing and control or CMC information, which includes testing of anticipated storage and transport conditions for an emergency scenario. This does require an additional study, it also requires conversations with government agencies as well as addressing plans and controls for administration of Entolimod in such cases of emergency. And finally, we do have to convert all of these data into a form that is suitable for electronic submission to the FDA. So that’s the short summary of what’s going on.

[Robert Brous:]

Have the distribution parts, have you had a discussion with the government about the distribution arm of the product and the warehousing of it or that has not occurred yet?

[Neil Lyons:]

That has not occurred yet, it’s in the works.

[Robert Brous:]

Okay and I’ll get back in the queue. Thanks for taking my questions.

[Operator:]

Our next question comes from the Charles [indiscernible]. Please go ahead.

[Unidentified Analyst:]

Yes, Dr. Kogan mentioned that, there was line to be in interim report that’s coming out this quarter, I just I missed what the subject of the interim report is and this quarter do you mean December 31st?

[Yakov Kogan:]

Charles, this is Yakov. And as we illustrate, so we are planning to release the interim report, which would be focused on basis of pharmacodynamic data collected from a [indiscernible] this 0137. We planned to do it this quarter, we are not planning to do it on December 31st, but as soon as over date that would be finalized [indiscernible] and we would release the date to the public.

[Unidentified Analyst:]

Okay, so that will be by December 31st?

[Yakov Kogan:]

We are planning to do it this quarter.

[Unidentified Analyst:]

Okay. Can I ask, the next question I have is the, the completion date of the pre-EUA of the year, the third quarter of 2015, is that, I think this question might have already been answered, but is that, why does it take that amount of time, and there is a ram testing that should take time to age or to mature or there has been a stage, the number of people that are working at, or how does that, why does it take another year for that to be complete?

[Yakov Kogan:]

Charles, first of all I would like to correct you, so the guidance that which we provided over filing pre-EUA booking is the first half of 2015 not the third quarter, so it is beginning in this year. And Ann if you can provide some light on what going on behind this, probably it could equate.

[Unidentified Analyst:]

Yes, well I just heard it wrong, I think, I heard it’s around the third quarter, I thought I heard, but yes that’s all. I didn’t know and I’m not sure, I don’t know that’s administered or if it’s pumping just three quarters planning to age or mature or what I don’t know how that works.

[Ann Hards:]

It does require time to do the things that I have brought up before. So, this essentially a mini-BLA, its all of the data that has been acquired today on the claimed indication, but I think probably since you do understood about the final date, if it may make more sense at this point.

[Unidentified Analyst:]

You’re right. For our funding source, I think Mr. Lyons one of our [indiscernible], but I’m just, you made a base center, I’m confused, how do we, how do we just hearing, how do we guess from where we are announced there on a funding basis. And we can’t say two years for Entolimod to become our commercial product or, how do we get there is my question?

[Neil Lyons:]

So our current funds as we have said last end of the first quarter of next year. And the Board and management are reviewing the, a variety of financing options. We have been things by both interested in our story, so this is good news. We’re evaluating these different options, they come in different forms, we are evaluating a potential equity raise or evaluating the timing that’s currently reducing and it tranche away or in a larger way, kind of everything is on the table, and the Board is evaluating with the management. The price strategy to move forward and the timing of all of this is based on various actions we have in place some of which are public and some of which are not public information. So, as any company would be doing, it’s evaluating all of its options and when we have something firmly we can announce it, we will.

[Unidentified Analyst:]

Okay.

[Yakov Kogan:]

Thank you, Charles.

[Unidentified Analyst:]

That’s all I have. Thank you.

[Operator:]

[Operator Instructions] Ladies and gentlemen it appears that’s all, actually we have one more question. Our next question comes from Robert Brous with Wunderlich Securities. Please go ahead.

[Robert Brous:]

This is a follow up question, is pre-BLA meeting on the calendar yet or kind of where you’re heading in that direction or am I jumping the gun?

[Yakov Kogan:]

Please go ahead.

[Ann Hards:]

Sorry, the – I think, I believe that the July meeting served as our pre-EUA meeting as well we’ve talked about the typical. In addition to those conversion and the other things that have been mentioned before, we did talk about the contents of the pre-EUA half year at that time.

[Robert Brous:]

No I was referring to BLA.

[Ann Hards:]

That, well we’re that, will be considered after the submission of the pre-EUA at this point, we’re really focused on just preparing the submission of the pre-EUA.

[Robert Brous:]

Okay. And then after that’s been filed what are the steps going forward?

[Ann Hards:]

So there are no PDUFA steps on a pre-EUA, the situation again should be similar to a BLA, however which we make the submission. We then wait for FDA’s feedback as to whether a submission has been made completely and then a manner which they believe that they can make a legitimate review of it. And then we wait for, question on whatever they may have questions since earnings related to the clients of the FDA.

[Robert Brous:]

Okay. And then do the EUA cover, the liquid form analyzed or just the liquid form?

[Neil Lyons:]

Just the liquid.

[Robert Brous:]

Okay. And with regards to follow up on the previous question, what agency is the distribution discussion happening with after?

[Yakov Kogan:]

So we have scheduled meetings with the Department of Defense, Department of Homeland Securities.

[Robert Brous:]

Okay, thank you very much.

[Yakov Kogan:]

Thank you.

[Operator:]

Thank you. Our next question comes from Greg [indiscernible]. Please go ahead.

[Unidentified Analyst:]

Hi its [indiscernible] investor, I’m curious about the possible dealers sitting on the stock, and I know that there is like given a 100, 80 days and there has been mentioned of a reverse split. As far as timing goes that’s going to be, if it’s going to take a few months to get this process rolling, I’m assuming that communication will be coming out shortly, because of the timing is that correct?

[Neil Lyons:]

Yes that is correct. The date that we need to be in compliance with the listing standards is March 9, so we need at least 10 trading days prior to March 9, where our stock is above the dollar and so backing up from that to issue a proxy call the shareholder meeting all of those type of thing, information on a reverse split would be coming within the month.

[Unidentified Analyst:]

That’s great.

[Operator:]

Thank you. Ladies and gentlemen that is all the questions we have for today. You could reach a replay of this webcast which will be archived on the Cleveland BioLabs website. You can also access telephone replay by dialing 877-660-6853, the conference ID for this replay will be 13593933 and will be available until November 19th. This concludes today’s conference, all parties may disconnect. Have a great day.