Cytocom, Inc.
Q2 2013 Earnings Call Transcript

Published: 13 Aug 2013

[Operator:]

Greetings, and welcome to the Cleveland BioLabs’ Second Quarter 2013 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rachel Levine, Vice President of Investor Relations, Cleveland BioLabs. Thank you. Ms. Levine, you may begin.

[Rachel Levine:]

Thank you, and good morning, everyone. Welcome to Cleveland BioLabs’ Second Quarter 2013 Investor Conference Call. Joining us today are Dr. Yakov Kogan, Chief Executive Officer; Dr. Jean Viallet, Chief Development Officer; Dr. Andrei Gudkov, Chief Scientific Officer; and Neil Lyons, Chief Financial Officer. 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 the call, particularly our financial and cash outlook and forward-looking development plans, are based on information as of today August 13, 2013 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 Forms 10-Q and K. 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 on this conference call. Dr. Kogan will open this morning’s call with a review of the quarter’s highlights, and hand the call to Dr. Viallet to address recent developments with the Entolimod program. Mr. Lyons will then discuss our financial outlook, and hand the call back to Dr. Kogan for closing remarks and 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. During the quarter we made significant progress with most of our programs. First, a few updates on the Entolimod radiation countermeasure program. We have completed the in-life phase of a major study in non-irradiated non-human primates under our ongoing Department of Defense contracts, and are working on data analysis and preparation of the report. We are working closely with the FDA and are making steady progress towards finalizing the remaining requirements for a BLA and pre-emergency use authorization submissions for this indication. Before I continue I want to address the question that’s on everyone’s mind, I will confirm that our proposal to BARDA is under active review. While we do not yet have a definitive conclusion, we are pleased to be engaged in the process. Now, back to the clinical update

[Jean Viallet:]

Thank you, Yakov. A significant amount of the team’s attention has been focused on advancing the Entolimod radiation program. Last fall we achieved agreement with the FDA on critical aspects of the design of our proposed pivotal animal efficacy studies, and our next goal was to gain further agreement on elements of the design of the final clinical studies needed to fulfill Animal Rule requirements. This was the focus of our most recent meeting with the FDA. As we discussed on the first quarter conference call, last month we presented the FDA with a comprehensive and integrated analysis of all of the of secondary pharmacological and biomarker data from our recent pivotal study with all of our analysis of biomarkers and clinical observations from all previous human and animal studies. Our objective was to provide the FDA with a comprehensive view that could help address any remaining questions on human safety and pharmacology and better direct our discussion. I am very pleased to say that the meeting was successful. The FDA agreed to consider this new comprehensive data analysis in its evaluation of our remaining requirements for a BLA. Moreover, with the new information provided to them, the Division will reconsider the requirements for remaining human studies. Importantly, this ongoing discussion includes the possibility of forgoing certain previously contemplated studies and a revised approach to conducting further healthy volunteer or oncology patient safety studies, if required. We are on the same page as far Entolimod pharmacological profile which is a significant achievement. Our next step is to finalize the algorithm for those conversions and conduct an initial estimate of this final human dose, which we hope to accomplish in the first part of next year. We will provide further update as the process unfolds, but we are very encouraged by our progress. Now let’s turn to a few updates on the Entolimod oncology program. As, we discussed on our last call, the investigators at Roswell Park agreed to make some recommended modifications to our ongoing advanced cancer trials. Specifically, they are moving forward with a revised dosing regimen to further optimize Entolimod’s immunostimulatory effect and are discussing adding a news site to speed up recruitment. These changes are being finalized in the coming weeks and enrollment should be restarted soon, I can’t say exactly when the trial will complete enrollment but it is likely to go into next year. With that I will let Neil take you through a recap of the financial results.

[Neil Lyons:]

Thank you, Jean. First a few comments about our historical second quarter financial results. For the first six months of 2013, our revenues have more than doubled compared to last year and are reported at $3 million. This increase is totally attributable to increased development activities paid for from our Russian grants and contracts. R&D expenses for the same period decreased 11% overall compared to last year and are reported at $10.7 million. This overall decrease resulted from reduced spending associated with our irradiated pivotal study in 179 non-human primates that was underway in 2012, offset in part by less expensive non-irradiated pivotal studies for Entolimod as a radiation countermeasure currently underway, and also offset by increased oncology development activities. These increases in oncology development activities include

[Yakov Kogan:]

Thank you, Neil. In closing, I’ll outline our top development priorities over coming months, one, including new government fund to support Entolimod radiation program; two, finalizing the remaining DLA requirements for FDA and executing them; three, aggressively pursuing (inaudible) and sales; and four, completing our ongoing oncologist studies, with 157, 102 and Entolimod and confirm the future clinical reactions for these programs. Before we open up to questions, I just want to say what I believe in Cleveland BioLabs and the work we are doing, I’m committed to moving this company forward. As always, we thank you for your support. We will now open the call to questions. Operator, please begin the Q&A.

[Operator:]

Thank you. We will now be conducting the question-and-answer session. (Operator Instructions) Our first question comes from the line of Matt Kaplan with Ladenburg Thalmann. Please proceed with your question. Matt Kaplan, you are now live. Please check to see if your phone is muted sir. Okay, our next question comes from the line of Boris Peaker with Oppenheimer. Please proceed with your question.

[Boris Peaker:]

So just a question on the BARDA process, I’m just curious if there are any internal timelines let’s say whether associated with the budget or any kind of annual reviews, whatever it may actually be within BARDA any of those timelines may kind of push them to get something done before a certain period of time.

[Yakov Kogan:]

Boris, we are unable to comment on this subject any further.

[Boris Peaker:]

Okay, all right. I’m also curious though - yesterday actually coincidentally the FDA awarded an almost $6 million grant to the Harvard Institute for technology to evaluate medical countermeasures to treat acute radiation syndrome. I wasn’t aware that the FDA was in a position to make those awards. I’m just curious if that’s something that may be a possibility in the future for you guys somehow to get money from the FDA for this program.

[Yakov Kogan:]

Absolutely. We are definitely looking at different non-dilutive opportunities, and we were very pleased to hear that the FDA awarded such funding to Harvard because one of the greater challenges the FDA is facing in reviewing various medical countermeasures such as Entolimod, for example, is to determine the efficacy in the animal models and how to convert them into human conditions. So this organ-on-a-chip technology, which was developed by researchers in Harvard, may in the future potentially help them to make such kind of estimates. We also do not expect that FDA’s investment in organ-on-a-chip technology would affect the development of Entolimod since this technology needs to be developed further.

[Boris Peaker:]

And my last question, in terms of Entolimod for the oncology indications from Roswell Park just curious how different is the revised dosing from the original dosing? What is the target that’s being used to optimize the dosing in terms of efficacy or safety?

[Yakov Kogan:]

I will ask Jean Viallet to answer this question.

[Jean Viallet:]

It’s a very different schedule. The initial schedule was five consecutive daily injections. The revised schedule is four injections given four days apart on days one, four, eight, and eleven, and this choice was driven by the PNAS paper that was published last spring, which revealed quite striking immunostimulatory properties of Entolimod generating a powerful innate immune response, particularly targeted to the liver. And in this view we’re looking at it as a potential candidate (this alternative schedule) for the treatment of hepatotrophic tumors. We have additional pre-clinical work ongoing with very specific models, and we’re hoping that between now and the end of the year we’ll be able to make a decision in terms of future efficacy directed trials for such indication.

[Boris Peaker:]

Do you anticipate the efficacy to be better with these schedules than consecutive based schedules basically?

[Jean Viallet:]

This schedule is more directed at stimulating an immune response directed to the cancer, and we’ll be monitoring the immune response of the patients enrolled in this trial to validate this concept. The initial schedule was more directed at utilizing Entolimod as a direct cytotoxic agent so it’s an alternative strategy, if you will.

[Operator:]

Thank you. (Operator Instructions) Our next question comes from the line of Mara Goldstein with Cantor Fitzgerald. Please proceed with your question.

[Mara Goldstein:]

I had a question regarding some of the comments around the FDA and your bid to get them to consider the new data analysis and reconsider listing certain requirements. While I certainly understand that nothing has been decided yet, maybe you could provide some color for us in terms of what this might mean from a timeline development perspective for the BLA.

[Yakov Kogan:]

I’ll ask Jean Viallet to answer the question, Mara.

[Jean Viallet:]

So in terms of the timeline, we need to complete some ongoing discussions with the FDA, particularly in terms of the usability of some reanalyzed biomarker data from our original human clinical trial. If we reach a positive agreement with them, it may obviate or limit the need to conduct additional dose ranging clinical studies in the human healthy volunteers, and as a consequence might help us accelerate the overall timeline to a certain extent. But, we need to complete that discussion with them over the next month or so.

[Mara Goldstein:]

And then just if I could ask, Yakov, in your initial comments when you said you were engaged in the process of BARDA should we interpret that to mean that you’re essentially in a Q&A process with them about the request for funding?

[Yakov Kogan:]

We were specifically asked and instructed by BARDA not to comment any further in our discussions with outside investors.

[Operator:]

Thank you. And our next question comes from the line of Christian Glennie with Edison Investment Research. Please proceed with your question.

[Christian Glennie:]

Hi, good morning. Just following up on the timeline, are you able to put a specific sort of timeline on the pre-EUA submission?

[Yakov Kogan:]

I’ll ask Jean to comment on this.

[Jean Viallet:]

Right. So this was discussed with the FDA at the meeting we held a month ago, what the requirements would be that they would expect us to fulfill before we can engage in specific conversations with them. One of the key requirements was to provide them with a draft of the dose conversion algorithm with an initial estimate of the likely dose in humans. Of course, you can’t get pre-EUA authorization if you don’t have a dose that you claim as part of the initial label, and so we anticipate having that in the first quarter, and that would then help us crystalize our thoughts in terms of the feasibility and the timeline of executing the pre-EUA submission.

[Christian Glennie:]

Then just on CBL0137, given the trials that you’ve got ongoing and obviously looking at the activity of the compound, and then also the viability of FACT as a biomarker as a companion diagnostic, as you sit today what do you envision as a point in time where you might have a very compelling case for either taking it forward in to a real proof of concept phase two and/or partnering in terms of getting that data package together?

[Jean Viallet:]

We have already had preliminary discussions with a number of pharma and biotech companies that are a statistical group of people that are looking to in-license exterior assets, and the feedback is that they’d like to see us complete the Phase 1 program before engaging in serious discussions. These two studies, one oral related, one i.v. single agent, are active, have recruited patients, and we need to progress them. It’s a little bit difficult to be able to make firm decisions when you’re engaged in a dose-escalating Phase 1 study because you can never be absolutely certain of how many dose levels you’re going to have to complete before getting to dose limiting toxicity. But, you know, a guestimate of roughly a year would be an appropriate ballpark, and in parallel, as I discussed on previous calls, we are in an active collaboration with the Cancer Treatment Evaluation program at the NCI evaluating CBL0137 in a large pediatric treatment pre-clinical screening program. The Children’s Oncology Group is waiting for us to start seeing evidence of pharmacological activity and start defining the dose limiting toxicities for this agent in order to initiate the process of addressing a pediatric Phase 1 study, which is envisioned to have an expansion phase recruiting in particular children with neuroblastoma because of the particularly striking activity seen in a clinically relevant transgenic mouse model of neuroblastoma. This may be an early opportunity to achieve proof of clinical concept as well.

[Yakov Kogan:]

I just want to make one clarification that the 12 month estimated time that Jean mentioned is related to the beginning of dosing of patients in the trial.

[Operator:]

And our next question comes from the line of Walter Schenker with MAZ Partners. Please proceed with your question.

[Walter Schenker:]

Actually, I guess I’ve got one question, a follow-up. Neil’s comment about changing, which you’re working on this quarter, internal versus external (his way of putting it) use of personnel, is that something which is likely to result in lower cash expense or we’re just taking people who are currently employees, removing that expense but then paying people on the outside to do similar levels or other types of work?

[Neil Lyons:]

Thanks, Walter, for the question. We anticipate it will be a net overall lower cash expense. This is a fairly classic evolutionary process in biotech as drug candidates mature, particularly in our case we had the high-class problem of clinical work being done in irradiated animals. That’s a little different than even your typical inject a rabbit and evaluate the safety and PK data of the animal so we had a need for a lot of in-house talent that we have previously had. As the drugs mature and, as we’ve stated on calls for several quarters now, with the advent of Jean and his team focused on moving us to a clinical stage company from a sort of preclinical company that’s all part of it. So, we anticipate a lower cash burn as we kind of pay for the services that are needed going forward versus a constant headcount.

[Walter Schenker:]

My follow-up question, I still don’t understand on the FDA and dose conversion. Dose conversion has been an issue for years and regular discussion on calls and with management. What is different today that it’s going to take six to nine months to come up with—what additional data you’re going to get without using additional studies so that you can finalize those conversions as opposed to all the data and work that’s been done over the last couple years on dose conversion?

[Yakov Kogan:]

One of the essential pieces of dose conversion is the dose response of the biomarkers in non-irradiated non-human primates, and that particular study is in the process of being performed. The in-life portion is completed. As we speak, the contract laboratories are performing the analytical measurements of the plasma samples from these animals to determine the animals’ cytokine levels at various data points, and we don’t have this data yet. Once we have this data and a report of this particular study then we’ll use this data in conjunction with the cytokine data obtained in the RS23 irradiated non-human primate study and in conjunction with the cytokine data from the previously concluded human studies, which we still need to get confirmation with the FDA that will be sufficient and hopefully will not require supplemental dose ranging studies in humans to get a more robust data set. So all of this work is funneling over the next couple of months so that we can reach an appropriate scientific conclusion whether or not the data set that exists is sufficiently robust to obtain a good estimate of what the efficacious human dose will be claimed. We don’t know until we get at the end, and since it’s not something that has been done in the past, we can’t prognosticate what the likely outcome is based on the historical perspective of other sponsors doing similar work.

[Walter Schenker:]

But the conclusion is that if you—and you don’t know that—if you are successful and if the FDA accepts your data, which is what you’re working towards, it would mean the final human trial would be substantially reduced because you wouldn’t have to do an extensive dose conversion human study.

[Yakov Kogan:]

That’s the hope. That’s the hope that the current human data set is made sufficient to fully support the dose conversion exercise but that’s still an open question at this particular point.

[Operator:]

Our next question comes from the line of Jeffrey Powers who is a private investor. Please proceed with your question.

[Jeffrey Powers:]

My question has to do with whether you’ve contacted the member of Congress that represents the district that you’re located in -Brian Higgins? He’s a member of Homeland Security and I’m just wondering if you’ve reached out to him and if you’ve had a chance to educate him on Entolimod? Thank you.

[Yakov Kogan:]

I would like to confirm that we are actively working with this congressional representative as well as other members of the U.S. Government, operational community at DoD and first responders to educate them about the capabilities of our medical countermeasure which we are developing.

[Operator:]

Our next question comes from the line of Ronald Lukas who is also a private investor. Please proceed with your question.

[Ronald Lukas:]

I’ve been an investor in this company probably about three, four years ahead of its highest $7 a share. Anyway, I’ve been hearing about this BARDA and hoping this BARDA would come through. The question is if this BARDA situation does come through how much money would you anticipate it will bring in to the company; and second of all, can you actually promise that there won’t be any stock reversals or any more diluting of the stock by selling more stock in order to raise more capital? Those are my questions.

[Yakov Kogan:]

I’ll ask our Chief Financial Officer, Neil Lyons to answer your questions.

[Neil Lyons:]

The BARDA contract we have indicated is in the range of $50 million. This is a contract that has been presented to BARDA in the form of some basic activities as well as options. All-in it’s a material amount of money. It depends on how BARDA decides to award the contract, if they decide to award the contract, how much money it actually means to CBLI. The monies are paid as costs are incurred and we progress through the process of doing the contractive work. It pays the out-of-pocket costs we would incur to hire and do contracted studies with third party vendors directly. It pays for part of our staff and part of our in-direct costs so it helps to reduce the monthly cash burn of the company. That’s mechanically how it works. It’s not like the company receives $50 million on day one, and then goes and does work. It comes in over time. With regard to promising on dilutive transactions, equity based transactions in the future, we would not ever promise that. The company and the board will look at financing opportunities as they are made available to the company and make a decision at the time to decide on whether a transaction is in the interest of the stockholders for us to execute. As I mentioned in our call in my script, we are focused on maintaining liquidity in this company and we’re focused with a priority on non-diluted sources, but we would never take off the table a potential dilutive transaction if that was warranted.

[Ronald Lukas:]

Are you up to – is there any ongoing things with any partnerships that you are looking or coming close to going partners with?

[Yakov Kogan:]

Yes, as Jean already alluded in the case of CBL0137, as well as in the case of other compounds, we are having several interactions with promising potential partners. Our general rule is these conversations and any interactions are considered confidential, and our general policy is not to disclose any details until a deal is in place. As an arrangement is reached we will update shareholders. I want to bring up to your attention again that these arrangements can take some time to come to fruition if they do.

[Operator:]

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. To access a replay of this conference please dial 877-660-6853 and enter conference ID number 418722. Thank you for your participation.