Imunon, Inc.
Q1 2018 Earnings Call Transcript

Published: 11 May 2018

[Operator:]

Good morning. My name is Matt and I will be your conference operator today. At this time, I would like to welcome you to the Celsion’s First Quarter 2018 Financial Results Conference Call. [Operator Instructions] This call is being recorded. At this time, I would like to turn the call over to Mr. Jeffrey Church, Celsion’s Senior Vice President and Chief Financial Officer. Please proceed, Mr. Church.

[Jeffrey Church:]

Thank you. Good morning, everyone and welcome to our first quarter 2018 investor conference call to discuss our first quarter results, which we announced this morning before the market opened. During our call today, Celsion’s Chairman, President and CEO, Michael Tardugno will provide an operational update on our clinical programs and I will summarize our financial results for the first quarter. Today’s call will be archived and a replay will be available beginning tomorrow and will remain available by phone until May 25, 2018 as well as available on Celsion’s website for 90 days. Before we begin the call, we wish to inform participants that we will be making forward-looking statements regarding Celsion’s current expectations and projections about future events. Generally, forward-looking statements can be identified by terminology such as may, should, expect, anticipate and similar expression. These terms are based upon current expectations and assumptions and are subject to a number of risks and uncertainties, including those set forth in the company’s periodic reports filed with the SEC, many of which are difficult to predict. No forward-looking statements can be guaranteed and actual results may differ materially from such statements. The information on this call is provided only as of the date of this call and Celsion undertakes no obligation to update any forward-looking statements made on this conference call based on new information, future events or otherwise except as required by law. At the end of today’s formal remarks, we will open the call for questions. I would now like to turn the call over to Mr. Michael Tardugno. Mike?

[Michael Tardugno:]

Thank you, Jeff. Good morning, everyone and thank you for joining today’s call. With me are Dr. Nicholas Borys, Celsion’s Chief Medical Officer and Jeffrey Church, our Chief Financial Officer from whom you have just heard. As always, we are very pleased to have the opportunity to update you on our progress and to answer your questions. Now, let me start this call by reminding you that our 2018 Annual Shareholder Meeting will be held on Tuesday of next week at the Westin Hotel in Princeton, New Jersey, I would like to encourage all shareholders of record to consider joining us for the meeting if you can. If you have pleasure to see you, because as always, it’s great to meet with you in person whenever possible and we are on a great deal. Since we just held our year end call a little over a month ago, today’s conference call will be relatively brief and perhaps redundant in a few closes, but there is much worth repeating. So, let me start this call, where we ended our call in March and to remind you, I made four key points for investors to consider as Celsion entered this year 2018. Number one, we have an operationally tight focus with both conserves cash and more importantly ensures the timely events when of our two very promising clinical trials, the OPTIMA study, our pivotal Phase 3 trial of ThermoDox, a newly diagnosed primary liver cancer reminds you that’s the largest unmet medical need remaining in oncology today in the OVATION II study, a Phase 1/2 trial of our gene mediated immunotherapy GEN-1 in newly diagnosed advanced ovarian cancer patients. And number two, Celsion started the year with a strong balance sheet over 20 months worth of cash and runway sufficient to achieve a number of very important development objectives, including full enrollment and rate of the data from the first interim analysis of the OPTIMA study and the initiation of OVATION II in top line results from the first cohort of up to 12 patients and that will be 6 in the treatment arm and 6 in the control arm in the study by the end of the year. The third point to consider, if you are thinking about Celsion is our trials continue to advance. Investors should have expectation in steady news flow of key developments over the course of 2018 and into 2019. And now before we will be pursuing non-dilutive means to add to our financial resources, including the sale of net operating losses or NOLs, which could add two to three quarters worth of operating run-rate taking the company well into 2020, the point at which the results from our Phase 3 OPTIMA study should be well behind us. Now, Jeff will speak to this in more detail later in the call. We are very pleased with 2018 and operationally tight focus ensuring timely achievement of clinical development goals and efficient cash utilization, a strong balance sheet providing runway to critical inflation points, including full enrollment of the Phase 3 study in the first interim efficacy analysis, a commitment to steady news flow of key developments and a financing strategy that focuses on shareholder value. That’s our client. Now, I would like to review our technology in the clinical studies beginning with our lead investigation on drug, ThermoDox. ThermoDox, as you know, as the name implies is a heat sensitive liposomal formulation of doxorubicin, being evaluated in combination with radiofrequency ablation, administered for a minimum of 45 minutes in a patient population with tumors greater than 3 centimeters less than 7 centimeters, in a Phase 3 study called the OPTIMA study. Now, this is a global trial being conducted in 14 countries across 17 time zones in all markets for hepatocellular carcinoma, primary liver cancer or HCC as we will call it is a significant product. The 550 patient study is quality to the type of 33% improvement in overall survival. The thesis for our protocol is based on our understanding of the application of RFA for 3 centimeter and greater lesions and the survival impact on RFA is just correctly up to minimum of 45 minutes when combined with ThermoDox. A 285-patient subgroup that represents 42% of the intent to treat population from the prior HEAT study, a group that was followed for over 2.5 years. Median time to death in the treatment arm was never reached after 80 months, that’s more than 6.5 years median survival and over 2 years better than the control group. Our investigators are excited about the results that concluded that the single dose of ThermoDox with properly administered RFA has the potential to be cured. We have been presenting this narrative at multiple medical conferences over the last number of years. In addition to our survival observations, the thesis for combining ThermoDox with RFA standardized for a minimum of 45 minutes has been tested in preclinical and computational models. Our conclusion of combining ThermoDox with properly administered RFA has the potential for greater than 2 year survival benefit is not Celsion’s alone. It has been validated by the medical research community in multiple publications and journals. Manuscripts supporting the basis for the OPTIMA study cover virtually every respect of our analyses and have been published in peer reviewed journals, including our clinical cancer research in 2017 plus 1 in 2015 in the Journal of Hyperthermia in 2010. These analysis support the premise that the longer the HEAT target lesion and surrounding tissue was heated, the greater the doxorubicin concentration, bidding to rehypothesize and more effective tumor treatment and potential for significant improvement in overall survival. In April, this past April, the Independent Data Monitoring Committee or DMC met for schedule unblended review of the data from the study was reviewed among other things, includes ensuring each sites compliance with the specified minimum RFA heating time. The DMC unanimously recommended that the OPTIMA study continued according to its protocol to its data readout. Recommendation that was based on their assessment of safety and data integrity of the first 75% of patients randomized in the trial through early February. In addition and very importantly, we learned that the blinded progression-free survival in the intent to treat population for this study was so far consistent with the PFS in the subgroup population that showed benefit in the HEAT study and we can see that again. We learned that the blinded progression-free survival in the intent to treat population in the OPTIMA study is so far consistent with the PSS in the subgroup patient population that showed benefit in the HEAT study. I want to emphasize the study is blinded and remains blind and no definitive conclusion can be drawn to point at ThermoDox’s performance specifically. We nevertheless view this finding as encouraging and continue to believe that ThermoDox with properly administered RFA will be found in the acceptance in treating HCC. Now, I want to repeat some comments from the last call, last March call for those who are new to Celsion. In 2016, at the request of Director of Interventional Oncology, we provided the National Institutes of Health with 3 terabytes of HEAT study data from which they conducted an independent analysis of the intent to treat population of 437 single lesion patients from the HEAT study, now that’s in a different population and then I just discussed where we saw an improvement in overall survival in the treatment arm equal to greater than 80 months, median time to death greater than 80 months. So this population, single lesion patients all patients with single lesions in the study were evaluated. While the study looked too virtually identical with evaluation of study two virtually identical cohorts, it’s RFA with ThermoDox and RFA alone, NIH concluded was that when combined with ThermoDox, longer RFA heating times resulted in a statistically significant improvement in overall survival. This is not true of RFA alone. These findings were presented at the RSNA conference in December 2016, that’s the Radiological Society of North America Conference, one of the largest medical conferences conducted annually in the world. More recently in February of 2018, an abstract discussing the company’s Phase 3 HEAT study, evaluating ThermoDox in combination with RFA was 1 of 6 selected for presentation by the HEAT study manuscript by leading author Dr. Won Young Tak and is part of the luxury of the Presidential selection of the Korean Liver Cancer Association’s 12th Annual Scientific Meeting in Seoul, South Korea. So when you look at all of this, the NIH’s interest on investigators in the HEAT study interest in bringing the HEAT study data and the results are showing an improvement in overall survival to their colleagues at multiple medical conferences, Dr. Tak’s presentation. If you look at all of this, you can’t help but conclude as I said before, this is one rare time, where clearly the medical community gets it before Wall Street does. I will also note that the 14 regulatory authorities from across the globe in all major HCC markets, including Europe, North America and Asia that reviewed and approved the OPTIMA study protocol. Our regulatory strategy is based on these interactions. We have designed the OPTIMA study to enroll sufficient number of patients from each country to support registration filings and market launch in the U.S., Canada, Europe, China, South Korea, Taiwan, the Philippines, Thailand, Malaysia and Vietnam. In the U.S., ThermoDox has received fast-track designation and provides for among other things priority review. ThermoDox has also been granted orphan drug designation for primary liver cancer both in United States and Europe, which extends market exclusivity for 7 and 10 years respectively in these major revenue markets. Additionally, the CFDA, that’s the China Food and Drug Administration informed Celsion, that’s Dr. Borys and me, so if the ongoing Phase 3 OPTIMA study is successful, the trial could serve as a basis data from the trial, can serve as a basis for direct regulatory filing in China without the need to file for prior approval in the U.S. or Europe, which is currently required for many foreign company applications. While this departure from conduction would allow Celsion to accelerate its financial and regulatory filing in China and if approved, but provide for significantly earlier launch in China than originally anticipated. China represents of course perhaps the most significant market opportunity for ThermoDox globally is approximately 50% of deal with 850,000 newly diagnosed HCC patients originating in China each year. Now, with regard to the trial itself on the execution side, we have engaged internationally recognized world class contract research organizations and data management teams to ensure Good Clinical Practice, ICH compliance, protocol adherence and high quality data analytics. We also have a proven and highly reliable supply chain with 3 redundant contract manufacturing organizations were registered and capable of producing ThermoDox in all regions of the world supporting high gross margins regardless of the market. Now, I want to turn to GEN-1. As I discussed last month, GEN-1 developed on our TheraPlas technology platform is a gene-mediated immunotherapy, which recruits the body’s immune system to fight malignancy. GEN-1’s active agent is a DNA plasmid coded for the potent anticancer cytokine, IL-12, or interleukin-12. The IL-12 plasmid is incorporated into our proprietary synthetic nanoparticle delivery system called TheraPlas. When administered locally into a body cavity like the bladder or the peritoneum or even a cavity created by surgical removal of a tumor mass, these nanoparticles invade or transvect the surrounding cells and take over the metabolic machinery, turning each cell into a little biopharmacy for the local sustained production of interleukin-12. The first indication we are studying for GEN-1 is as you know is ovarian cancer. For patients newly diagnosed with this cancer, there is less than a 45% chance of surviving 5 years. One of the major reasons for this is that the diagnosis is made when the patients have advanced disease particularly in stages 3 and 4, when the cancer is spread throughout the pelvic region. In previous clinical trials in patient populations with recurrent disease, GEN-1 has been used both as a monotherapy and in combination with standard chemotherapy and is showing promising results. Most importantly, however, GEN-1 demonstrated clear signs of activity in clinical benefit in newly diagnosed ovarian cancer patients in our Phase 1b dosing escalation trial, the OVATION I study. The OVATION I study evaluated GEN-1 plus neoadjuvant chemotherapy followed by interval of debulking surgery in newly diagnosed advanced ovarian cancer patients. The goal of neoadjuvant chemotherapy is to improve surgical outcome by shrinking the tumor mass and drying up the accompanying fluids [indiscernible]. In the study, we added 8 weekly cycles of GEN-1 to this chemotherapy regimen then followed by surgery. Our findings from this study include the following and I would say in this population include very impressive findings. First, the GEN-1 plus neoadjuvant chemotherapy demonstrated no dose limiting toxicities and is safe up to the highest dose tested at 79 milligrams per meter square. The investigators in the oversight committee, that’s DSMB, did not find any significant toxicities associated with GEN-1. There are clear dose-dependent bioactivity and efficacy findings among the patients treated in the protocol. The clinical findings included a partial or complete response in 86% of patients. The surgeons were able to completely remove all visible tumor and outcome known as an R0 resection in 100% of patients treated with the highest dose. Distinct immunological changes in the tumor micro environment appear to be prone immune in 75% of patients, PFS importantly following this clinical result. PFS is projected to be over 21 months. Historically, PFS is in this patient population is approximately 12 months. Now, based on these findings in November 2017, we announced the submission of a Phase 1/2 clinical trial protocol to the FDA for the localized treatment of ovarian cancer. It’s an open label randomized study called the OVATION II study. We plan to treat the first 6 patients in the GEN-1 arm at 100 milligrams per meter square, that’s 30% – approximately 30% greater than the previous dose by the last dose that was treated, last cohort that was treated with the highest dose in the last study. So, the study will start with 100 milligrams per meter square, followed by a continuation of the selected dose in the Phase 2 portion in up to 130 patients. The entry criteria and treatment protocol are the same as the prior OVATION I study with one major addition. Following debulking surgery, patients will continue to receive up to 9 additional intraperitoneal doses of GEN-1, this will be a maintenance therapy. Our hypothesis is that continuous stimulation of the immune system after surgery may provide a further beneficial effect by delaying progression. Before we expect to initiate enrollment in this Phase 1 portion by June just a few weeks away and anticipate initiating Phase 2, the Phase 2 portion of the study in the first quarter of 2019. This will be an open label study we expect to report data periodically throughout 2019. Now, we are excited with the GEN-1’s potential as our PIs. As an example, in March 2018, Dr. Premal Thaker, the lead principal investigator for our GEN-1 development program presented – made a presentation entitled Ovarian Cancer

[Jeffrey Church:]

Thank you, Mike. During the first quarter of 2018, we continued to execute our important clinical development initiatives with a very tight focus on our two lead product candidates. We ended the quarter with $20.8 million of total cash and investments. During the first quarter, we used approximately $4.7 million in cash in line with our current year projections. Typically, the first quarter of each year is the highest due to one-time payments with respect to respective things as annual insurance premiums for 2017 performance bonuses. Based on our budget projections, our current cash position enables us to cover our projected operating needs into the third quarter of 2019. We are pursuing additional non-dilutive capital doing innovative program offered by the state of New Jersey. This creative economic development program of Forbes companies like Celsion, the opportunity to sell is accumulated net losses to profit generating businesses. We estimate that this program could generate $10 million in additional cash to extend their operating run-rate into the first half of 2020 well beyond several important value inflection points for both ThermoDox and GEN-1 clinical development programs. Celsion’s first quarter 2018 financials were included in the press release which was issued before the market opened this morning. Our Form 10-Q for the quarter ended March 31 was also filed this morning. We continue to monitor our cash expenditures to ensure the most efficient use of cash to create shareholder value. We maintain a very tight focus on our pivotal Phase 3 trial for ThermoDox in primary liver cancer and the follow-on Phase 1/2 clinical trial for GEN-1 in newly diagnosed ovarian cancer patients. Operating expenses were $4.4 million in Q1 2018 compared to $4.9 million in the same period last year. This decrease is in line with our earlier projections and the result of our cost reduction efforts implemented during 2017 and prudent cash management. Our projected cash utilization for 2018 the entire year is approximately $16 million or averaging about $4 million per quarter. This projection should remain consistent into 2019 as we complete full enrollment of 550 patient Phase 3 OPTIMA study in the third quarter of this year and increase our clinical development focus on GEN-1 in the second half of this year through 2019. We continue to operate with a lean organizational structure with approximately 21 full-time equivalent employees. Most of our spending is directed to research and development activities. As we look forward, we believe that maintaining the strong balance sheet is important to continue the strong development momentum we have built around our lead program. For the quarter ended March 31, 2018, we reported a net loss of $4.5 million which compares to a net loss of $5.2 million in the same prior year period. R&D costs for Q1 2018 were $2.7 million compared to $3.5 million in 2017. Our research and development expenditures were lower due to tighter clinical development focus on those programs that we believe to help drive shareholder value in the near-term through the readout of our pivotal Phase 3 OPTIMA study. General and administrative expenses for the first quarter of 2018 were $1.7 million compared to $1.5 million in 2017. This increase in G&A costs were due to higher non-cash stock compensation expense, coupled with higher professional fees largely related to recruiting and consulting services for business development and commercialization initiatives. As a result of paying all of our venture debt loan with Hercules in June 2017 the company had no interest expense in 2018. That compares to $150,000 of interest expense in the first quarter of last year. I would like to conclude by stating that our balance sheet and business fundamentals are strong. We are well positioned to deliver important milestones around each of our product development programs. We have the financial tools and support to properly capitalize the company for future success. I will now turn the call back to Mike.

[Michael Tardugno:]

Thank you, Jeff. I will conclude my prepared remarks by saying that our two drug candidates represent exciting advances in cancer research and have the potential to change the trajectory for patients with pro-prognosis. If either ThermoDox or GEN-1 shows continued positive data we have the opportunity not only to transform patient’s lives and medical practice, but the company as well. Our work is very important. Our aspirations are high and I look forward to reporting our progress this year as we continue our pursuit of effective new medicines for patients with difficult cancers. So now, I would like to ask the operator to open the line for your questions. Operator?

[Operator:]

Thank you. [Operator Instructions] And our first question will come from Hartaj Singh with Oppenheimer.

[Emma Nealon:]

Hi, good morning. This is actually Emma on for Hartaj. First, is there any update on the enrollment status for OPTIMA, I think it was about 80% last quarter?

[Michael Tardugno:]

Yes. So, when we continue to progress according to our schedules, we are over 86%, 87% enrolled. So, actually a little bit of both in our projections out.

[Emma Nealon:]

Great. And then just on GEN-1 do you plan to present the Phase 1b PFS data from OVATION at medical conference?

[Michael Tardugno:]

Nick?

[Nicholas Borys:]

Yes. We are looking at both presenting that data at a conference we are going to be discussing that which one with our investigators and also writing that up as an abstract and submitting it.

[Emma Nealon:]

Great. Should we expect initial announcement to come in the form of a press release or is that still kind of TBD?

[Michael Tardugno:]

Could you repeat that please, Emma?

[Emma Nealon:]

Sure. When the PFS data is available around midyear, should we expect that to first come as a top line press release or is that still to be determined?

[Michael Tardugno:]

Well, that would be a top line press release.

[Emma Nealon:]

Great. Thank you, both.

[Michael Tardugno:]

Thank you.

[Operator:]

[Operator Instructions] We will now go to Edward Sherman with DSW Associates.

[Edward Sherman:]

Hi guys. I think you are doing a fantastic job given the resources that you have, it’s not easy to conduct two trials, but I have a question regarding the milestone payment for GEN-1 when would that be due?

[Michael Tardugno:]

Yes. So, the milestone payment with some referred to as contingent value rights, milestone payment that they are likely talking about is tied to achieving progress in the Phase 2 portion of the GEN-1 study in ovarian cancer. That’s not likely to happen on our current estimate. That’s not likely to happen until later in 2019.

[Edward Sherman:]

Great. And let me ask you this, you seek that…

[Michael Tardugno:]

Edward just so while running on topic, the milestone at the company’s election can be paid in either cash or stock from a combination thereof.

[Edward Sherman:]

Sure, right. I saw that actually. So, you say that this is one of the rare occasions where the medical community gets it before the investment community. Why do you think that is and if it’s true and I don’t mean to be critical, but what does it say about the efforts the company is making in getting the word out?

[Michael Tardugno:]

Yes. So, I mean – and I am not going to apologize for the efforts we spend a good deal of time in conferences and meeting with investors individually and in small groups. Getting the word out is a top priority for the company. I will have to say we are – the major portion of the investment of the company has been focused on ThermoDox over the last number of years. It’s not usual for a company to continue to develop a product particularly in the same indication following a sale of trial. So, we are not used to putting good money after that. And I can promise you the majority of us here, maybe one or two, they are qualified, but majority of us here are not candidates, but we are pretty darn good at what we do. So, just to give you a little bit more history so far on this the failure of the case study, to me this primary endpoint TFS, we took a very intense look at the data as we headed at the time with some of the most notable names in the hepatocellular carcinoma research. It appeared to us that there was a relationship between heating dwell time and an improvement in outcome in patients. So, when we pursue that and not only relied on the data from the study but also as I pointed out in my prepared remarks, we evaluated these hypotheses in computational models and in prospective preclinical models, notably in a pig model. All of that took time to be honest with you. In the meantime, on the company’s confidence in this notion that’s radiofrequency ablation was conducted with an extreme amount of variability that was not obvious to anyone when the study was – the HEAT study was originally conceived. But what I am trying to get to is that following a failed study, there is an inappropriate and a reasonable amount of skepticism around any kind of subgroup analysis. I think the company has done an incredible job of determining that the potential for ThermoDox to be successful through standardized radiofrequency ablation has done an incredible job of supporting that with the appropriate analysis scientific investigation inputs on the medical community and research community and most recently with an independent analysis by the NIH. Now, we are getting to your point, so putting all of that together and now getting it published, I think that’s probably a major milestone in the company that does not get a lot of credit, but the publication of the HEAT study, if you read it, focuses on a great deal of the narrative on the subgroup analysis and why it’s valid and why it’s important for the medical community to further evaluate ThermoDox in combination with radiofrequency ablation in a Phase 3 trial publication of our prospective preclinical trials, the publication of the computational analysis. Now, after this time, I believe we have earned the right to present the information that as I have said the medical community and the research community get it. So they have been apart of all of the work that has been done to assure this management team and our investors that the work they were doing in Phase 3 study in primary liver cancer is based on very sound and substantial science. So going forward, I think we have earned the right. We now have not only the results of our research, but peer-reviewed journals have critically evaluated the work that has been done. And now with this information in hand, I believe it’s just the matter of time now that the investment community will get it.

[Edward Sherman:]

Okay. If I may ask just one last question, there was I believe something intimated by Adam Forstein about a chart after the HEAT study that showed that after 45 minutes, the uptake of ThermoDox basically fell off the mat, so that there is no reason to believe that it would be more effective after 45 minutes?

[Michael Tardugno:]

Well, I am not familiar with that. And I think our research would suggest quite a bit otherwise. I would refer you to the HEAT study manuscript publication in CCR and also to our publication on [indiscernible] demonstrating the accumulation of doxorubicin, there is a function of heating dwell time in healthy livers of pigs. I think that point that you just made would be immediately dismissed.

[Edward Sherman:]

I am glad to hear that actually. I am glad to hear that, but if that were the case though, why if given that it’s a HEAT-sensitive liposome, why isn’t there something that you thought about prior to the HEAT study if it seemed sort of obvious?

[Michael Tardugno:]

Yes. So, well, maybe we should take some of this offline, but it was not – the variability in the use of radiofrequency ablation was not obvious. There was a point of discussion among our investigators and during the prosecution of the negotiation of the SPA with the FTA, we have spent a considerable amount of time on the standard of care in the application of radiofrequency ablation in newly diagnosed patients with tumors greater than 3 centimeters. It was the opinion of this group that radiofrequency ablation administered according to academic procedures was reasonably consistent throughout medical practice. And in fact, it turned out not to be. So, there was a point of discussion, it wasn’t a major oversight on the company’s part – what twice the major oversight was our lack of knowledge and I think the medical communities knowledge of how RFA was being applied. In fact, I think there maybe some embarrassment when we look back at HEAT study data, because we now know, Edward, this company, your company, if you have an investment in our stock.

[Edward Sherman:]

And I do.

[Michael Tardugno:]

Now knows more about the use of radiofrequency ablation in primary liver cancer than any other company on the planet and that was not true just when we initiated the HEAT study.

[Edward Sherman:]

Okay. I just want to say you guys are doing a great job. Keep it up the good work.

[Michael Tardugno:]

Thank you.

[Operator:]

[Operator Instructions]

[Michael Tardugno:]

So operator, there appears to be no more questions. So, I am going to close the meeting and thank all of you for listening, for your attention and your interest in the company. We encourage your questions like Edward’s and for those of you on the line, the next time we get a chance to speak with you by conference call, please feel free to ask questions, particularly those that are maybe knowing actually and reading you to accept some information that may not be correct with regards to the company. So with that again, I want to thank you. We remain very excited about our prospects for 2018. You can count on this management team to keep you updated as we advance our development pipeline and we look forward to successful results. Thank you again.

[Operator:]

And once again, this does conclude our call for today. Thank you for your participation. You may now disconnect.