Cytocom, Inc.
Q4 2014 Earnings Call Transcript

Published: 24 Feb 2015

[Operator:]

Greetings, and welcome to the Cleveland BioLabs Fourth Quarter and Fiscal 2014 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. I would now like to turn the conference over to Rachel Levine, Vice President of Investor Relations. Thank you. Please go ahead.

[Rachel Levine:]

Thank you, and good morning, everyone. Welcome to our fourth quarter and fiscal 2014 call. Joining us today are Dr. Yakov Kogan, Chief Executive Officer; Mr. Neil Lyons, EVP and Chief Financial Officer; and Dr. Langdon Miller, our Strategic Medical Advisor. 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 February 24, 2015, 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 now assume any obligation to update information contained in this conference call. Dr. Kogan, will open this morning's call by sharing highlights of the quarter and pass the call to Dr. Lyon to recap results of the period and discuss updates to the financial outlook. Dr. Langdon Miller to review detailed progress with our clinical oncology 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. Before we start reviewing the progress with our development pipeline, I want to say that we are 100% committed to making CBLI a success. We have made it through some tough times over the past few years and have always emerged, more focused and determined to price. More importantly, our science has continued to prove itself. Regarding recent corporate developments, we executed a reverse stock split in late January to maintain our NASDAQ listing. We also recently announced a financing which extends our cash runway and give us the opportunity to hit a few important milestones, including, finding of pre-EUA submission, for Entolimod's Biodefense indication, and the formal release of clinical results for a completed Entolimod's Oncology trial. Neil will address the specifics of our financial outlook later in this call, but I want to emphasize our belief that 2015 will be a critical year for CBLI in terms of our ability to move Entolimod's Biodefense indication to potential commercialization and deliver clinical data supporting our novel oncology program. With that in mind, I will review events we have made in the last few months. Our top priority is a separation of a pre-Emergency Use Authorization or pre-EUA submission for Entolimod's Biodefense indication. As a reminder, EUA is a vehicle through which the US government is able to administer unlicensed rescue therapies in emergency situations. If the FDA grants EUA status, we believe purchases of Entolimod could be made for stockpilings in the event of a disaster, even if actual use of a stockpiled drug would occur only in a declared emergency situation. The dossier is coming to IDA and we are on track to file this in the first half of 2015. Since receiving the FDA’s agreement, where we have sufficient data to file, we have been in discussion with several U.S. government agencies to solicit their input to our pre-EUA package. We have also been looking for additional development funding to get the food Licensure and laying the foundation for potential procurement. This discussion is ongoing and they recently announced receipt of a notice from the Department of Defense that that our proposal to support ongoing development of Entolimod was recommended for funding. Our proposal is to conduct several pivotal animal efficacy studies required by the FDA for submission of a Biological License Application or BLA. The negotiations for funding of this proposal may last several months and funding is subject to this negotiation has been successful and to our ability of funds. Let me be clear with the activities covered by this proposal are not needed to file the pre-EUA for Entolimod rather we are intended to support full licensure. We believe that achievements of a pre-EUA status in the United States would facilitate Entolimod’s commercialization in the United States as well as partnerships and boost interest in this program from foreign governments. We have already started reaching out to select foreign countries in order to educate and update them on Entolimod’s advanced development stages and our progress with the FDA. We will keep everyone apprised of any major development in this area as appropriate. Now let’s turn to oncology where we have also made significant headway. I will ask Langdon Miller out Strategic Medical Advisor to review the status of this program and share his perspectives on next steps. I will return in a bit for closing remarks.

[Langdon Miller:]

Thank you, Yakov. Let’s begin with Entolimod. In September, a Phase I study in patients with advanced cancers at Roswell Park Cancer Center which concluded the formal results of this study were submitted for presentation at the Annual Meeting of the American Society of Clinical Oncology or ASCO, which will be held from May 29 to June 2 in Chicago, Illinois. ASCO is a preeminent oncology conference for both clinicians and the industry and major new developments in the fields are often showcased there. The study was designed to evaluate the safety pharmacokinetics and immune activation profiles of Entolimod’s assessments for evidence of anti-cancer activity were also performed. Preliminary evaluations in this study indicate that the tolerability profile of patients with advanced cancer was similar to that observed and to previously conducted studies in 150 healthy volunteers. This is significant for future clinical directions that also adds to the safety database for our pre-EUA dossier. Initial assessments in immunologic response were consistent with activation of toll-like receptor 5 Entolimod’s target. Early analyses also indicate that stable disease was observed in several patients with heavily pretreated cancers. These observations confirm our preclinical findings to finally support the hypothesis that Entolimod has potential as an immunotherapeutic agent. In order to expand upon clinical observations made with the higher dose levels in the Roswell Park study and together furnished with this on immune through administration of Entolimod we have initiated a follow-on study in Russia. We currently estimate that the second trial will include dosing sometime in late spring to report later the year. This study is supported to matching matching-funds development contract with the Ministry of Industry and Trade of the Russian Federation or MPT. Our goal with these studies is to gather sufficient clinical data on specific innate immune response through administrations of Entolimod to seek clinical development partnerships with academic collaborators and other companies developing checkpoint inhibitors or vaccines that could potentially benefit for Entolimod-mediated enhanced study of the immune response. Now let’s turn to Curaxin CBL0137. Incuron's two ongoing clinical studies evaluating oral and intravenous administrations of Curaxin CBL0137 in patients with advanced solid tumors are recruiting patients to the ninth and seventh dose-escalation cohorts respectively. To-date, no dose-limiting toxicities have been observed with either oral or intravenous administration through the highest CBL0137 dose levels tested. A formal interim analysis of the 19 patients enrolled in the first six cohorts of the ongoing oral administration study indicated that the drug was well tolerated at all investigated dose levels. The observation of drug exposure in plasma documented high oral bioavailability typically estimated to be greater than or equal to 50%. Heavily pretreated patients from both studies with advanced cancers of the esophagus, colon, breast, cervix, and prostate have had stable disease for periods ranging from 4 to 6 months. This is an encouraging sign considering the advanced disease in these patients as well as the fact that we have yet to reach doses to have an effect on tumor response in pre-clinical studies. Peripheral blood mononuclear cells or PBMCs from evaluable blood samples have also shown pharmacodynamic effects consistent with the expected mechanism of action of CBL0137. Dose escalation and dose studies will continue, in addition, based on pre-clinical results and immunologic cancer models Incuron is planning to initiate a multi-center study of CBL0137 in patients with hematological malignancies in 2015. We had a successful meeting with the FDA in December, during which we presented a stage study design in patients with relapsed cancers that will enable simultaneous evaluation of drug effects in several immunologic indications. And for my final oncology update, the Phase 1 study of CBLB612 in healthy subjects is ongoing. The endpoints of this study include establishing a maximum tolerated dose in characterizing CBLB612’s feasibility to mobilize bone marrow stem cells into this blood circulation. Pre-clinical studies have shown that 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 matching-fund grants from MPT. At this point, I'll hand the call over to Neil to review the financials.

[Neil Lyons:]

Thank you, Langdon. For the quarter ended December 31, 2014, our total revenues decreased by $2.5 million, to $1.4 million compared to the fourth quarter of 2013 and for the year they decreased by $4.8 million to $3.7 million compared to 2013. These decreases related to the completion of development contracts with the DoD for Entolimod's Biodefense indication and variances in the levels of development activity under our contracts with the Russian Federation. Research and development expenses for Q4 of 2014 decreased by $1.8 million to $2.8 million, compared to Q4 of 2013 and for the year they decreased by $9.9 million to $9.7 million compared to 2013. These decreases were primarily due to completion of third-party contracts with several compounds in-line with and largely in support of the contracted development works discussed previously as well as reduced compensation costs inline with our reduced workforce between the periods. For Q4 2014, general and administrative expenses decreased by $230,000 to $2 million compared to Q4 2013 and for the year they decreased by $3.6 million to $8.5 million compared to 2013. For the year, $2.2 million of these decreases were due to reduction in personnel and consultants. I’d like to take a moment to highlight a few personnel items in our financial statements that pertain to our deconsolidation of Incuron and reporting of our investment in Incuron through the equity method. We have recorded a non-cash gain of $14.2 million due to Incuron’s deconsolidation. That gain comprises two parts, the recognition of the fair value of our ownership in Incuron and the elimination of Incuron’s accumulated deficit from our consolidation. $4.6 million was recorded as the fair value of our ownership interest in Incuron as determined by an independent valuation expert and invested for uncertainties of the Russian capital markets. The earning then with the $4.6 million asset as of the date of deconsolidation which was November 25, 2014, we reduced the value of that asset by approximately 300,000 through the recognition of our equity in Incuron’s loss for the post-deconsolidation period of November 25 to December 31, 2014. The deconsolidation gain of $14.2 million resulted in a significant increase in net income from both the fourth quarter and fiscal 2014. Income for each period increased to $11.3 million or $3.95 per share and $1.6 million or $0.60 per share respectively. Excluding the gain on the deconsolidation of Incuron and on a non-GAAP basis, net loss per share for the fourth quarter was $1.2 and net loss per share for fiscal 2014 was $4.66. This references non-GAAP reconciliation of loss per share to the comparable GAAP measure as set forth at the bottom of our statement of operations included in the earnings release this morning. So let us now review our existing liquidity and capital resources. At December 31, 2014, CBLI had cash, cash equivalents and short-term investments of $3.1 million, $500,000 of which was restricted for the use of Panacela. In addition, on February 6, 2015, we closed an equity transaction with few institutional investors pursuant to which we received net proceeds of approximately $3.7 million bringing our pro forma December cash balance to $6.8 million. At December 31, 2014, we had $3.1 million in funded contract backlog and $2.1 million in unfunded contract backlog with contracts from the Russian Federation. Now, moving on to historical cash burn and cash guidance, please reference the table of non-GAAP cash burn measures included in our earnings release this morning for a reconciliation of these non-GAAP measures to the comparable GAAP measures. CBLI’s standalone monthly cash burn for the fourth quarter, that is without Incuron and Panacela, was $770,000 compared to our guidance of $1.1 million to $1.2 million on average per month and down from $957,000 for Q4 2013 and down from $923,000 for all of 2014. We expect Q1 2015 average monthly cash burn to be higher than Q4 2014 due to the additional expenses of our equity raise, the professional services that support the annual audit, proxy and shareholders meeting and our outsourced pre-EUA activities. After Q1, we expect our monthly cash burn to decline with fall-off in these related activities. With that, we anticipate monthly cash burn to be approximately $1.1 million on average through June and we believe CBLI’s standalone cash resources will last into June 2015. CBLI’s consolidated monthly cash burn was $1.3 million for both Q4 and all of 2014 which is in line with our guidance of $1.2 million to $1.4 million. Going forward, we will no longer Incuron’s activities and we’ll therefore reduce our guidance to an average monthly consolidated burn of approximately $1.2 million. As Yakov noted, we are nearing contingent commercialization of Entolimod and our oncology products are starting to produce clinical results. We are evaluating a variety of options to continue to fund our operations including the sale of licensure of any or all compounds to sale of interest and our subsidiaries or joint ventures, various partnership structures, warrant sales of Entolimod as well as sale of additional equity. Our goal between now and the end of June is to submit the pre-EUA filing and formally report the Entolimod oncology study results at or around the ASCO Meeting. Before I hand the call back to Yakov, I want to review some of the special items to be covered in the upcoming proxies for our Annual Shareholders Meeting which is scheduled to take place on April 14 at our headquarters in Buffalo. One of the main topics for this proxy is shareholder approval of our recent financing in accordance with the NASDAQ’s Listing Rule 5635(g), which requires shareholder approval of a transaction, amendment of public offering involving the sale of securities equal to 20% or more of the common stock outstanding at a discount to market price. Approval of this item is very important to the company’s ability to continue operations. Other special items include changes to our employee incentive and employee stock purchase plans which are designed to attract and retain talents. These are important notes particularly with regard to the approval of our recent financing and we encourage all of our shareholders to vote. In addition, one of our largest shareholders Elena Kasimova has notified us that he proposes to nominate eight Directors for elections to our Board including himself all of them are Russian citizens and that he intends to bring two proposals at the Annual Meeting relating to the ability of shareholders to call special meeting and director compensation. Our Board does not recommend voting for his nomination or his proposals other than Elena Kasimova who was also nominated by our Board, as our Board does not believes his proposals to be in the best long-term interest of the company. His nominations and proposals maybe withdrawn before the Annual Meeting, if not you may receive a separate proxy card conducting vote on these items if you do we advice that you not sign or return any such proxy cards. That concludes my comments. Yakov, please continue.

[Yakov Kogan:]

Thank you, Neil. Before we open the call for questions, I want to reiterate our commitment to realizing the value of our pipeline of dose and therapeutics. I hope recent developments have demonstrated that there is more to CBLI on Biodefense. While coming to get license Entolimod’s Biodefense indication is both a high priority and a major value driver, we believe that our oncology drugs is an equally exciting opportunity and hope that future clinical data releases will continue to validate our approaches and drive value creation. We will now open the call to questions. Operator, please begin the Q&A.

[Operator:]

[Operator Instructions] Our first question comes from the line of [Indiscernible] who is a private investor. Please proceed with your question.

[Unidentified Analyst:]

Yes, my question, I think is for Neil. And looking at the press release for the – I think the summary and the announcement of the meeting and one thing that’s included in the press release since the – the fact that there is 2.3 million shares of common stock reserve for issuance pursuant to outstanding warrants, I am trying to cross-reference that to the recent 8-K filing regarding the stock issuance. Does that 2.3 million shares include about 1.4 million shares discussed in the 8-K at $3.64?

[Neil Lyons:]

You are exactly right. It does include that 1.4 million shares at $3.64.

[Unidentified Analyst:]

Okay, so, under the 8-K filing and if my interpretation is correct, the total or capital issuance of shares is about 2.8 million, between now and the end of the six year period that these warrants are available for issuance for market sales? That’d be correct.

[Neil Lyons:]

I think – but to clarify, the deal we just did was for a total of 2.8 million shares, we have some common shares directly at the time to other securities that be funded more and convertible preferred docs and fully converted – both of those converted along with the common shares that we issued it would have issued 1.4 million shares in regard to that transaction and there was a 100% warrant coverage for another 1.4 million shares from that 2.8 million and so on.

[Unidentified Analyst:]

Got it, 2.8 million, okay. So, and prior to that, there was 2.9 million outstanding?

[Neil Lyons:]

Yes.

[Unidentified Analyst:]

Prior to any of those transactions, there was 2.9 million – here is the potential to go up to, if my arithmetic is correct, about 5.7 million. Okay, thank you.

[Neil Lyons:]

Yes.

[Operator:]

[Operator Instructions] Okay, thank you. Well ladies and gentlemen to access the replay of this call, please dial 877-660-6853 and enter access ID 13601010. As a reminder this call will be archived on the company’s website. This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.