Delcath Systems, Inc.
Q2 2020 Earnings Call Transcript

Published: 13 Aug 2020

[Operator:]

Ladies and gentlemen, thank you for standing by. And welcome to the Delcath Systems, Inc. Second Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to James Carbonara. Thank you, please go ahead sir.

[James Carbonara:]

Thank you. And once again welcome to Delcath Systems second quarter 2020 earnings call. With me on the call are John Purpura, Interim Chief Executive Officer, Christine Padula, Principal Accounting Officer, Dr. Johnny John, VP of Medical Affairs and Dr. Gilad Aharon, Director.

[John Purpura:]

Thank you James. And thanks to everyone for joining us today. We will arrange our comments by providing a strategic overview highlights of our second quarter performance and operational update and our financial results before having our Q&A. So first up, a strategic overview. This second quarter has been truly transformational for Delcath and the culmination of a 12-month process of restructuring, recapitalisation and refocusing the company. This included among other things management as well as board transitions. Delcath is now fully restructured with a clean balance sheet and cap table, fully recapitalized with 51.5 million raised over the past 12-months through Q2 led by fundamental health care focussed funds to allow us to complete our Phase 3 registration FOCUS trial of our therapeutic treatment platform Melphalan/HDS in liver-dominant metastatic ocular melanoma for which we have an orphan drug designation and we file our new drug application with FDA by mid-2021.

[Christine Padula:]

Thank you, John and good afternoon to everyone. I'd like to provide everybody a summary of our second quarter 2020 financial results. Our product revenue for the first three months ended June 30 2020 was approximately $262,000 as compared to the $221,000 for the prior year results of sales of our CHEMOSAT procedures in Europe. Our selling, general administrative expenses were approximately $2.3 million compared to $2.7 million in the prior year quarter. Research and Development expenses for the second quarter were $2.2 million compared to $1.7 million in the prior year quarter. Our total operating expenses for second quarter were $4.5 million compared with $4.4 million in the prior year quarter. We recorded a net loss for the three months ending June 30, 2020 of $4.3 million, compared to the net loss of $6.0 million in the same period in 2019. On -- highlight on our balance sheet, at June 30 2020, we had cash, cash equivalents and restricted cash totaling $16.2 million as compared to cash, cash equivalents and restricted cash totaling $10.2 million at December 31, 2019 and $1.4 million at June 30, 2019. During the three months ended June 30 2020, and June 30 2019, we used 7.9 million and 3.2 million respectively, of our cash in operating activities. In Q2 2020, we made a number of one-time cash payments that are not indicative of our usual cash usage trend, totaling approximately $3.3 million. This included compensation payable subsequent to the resignation of executives, and a director and several paths to payable. At this point, we believe our cash resources, and anticipated milestones -- milestone payments to be received are adequate to fund our operating activities into mid-2021. That concludes my financial remarks. I will now ask the operator to open the lines for Q&A.

[Operator:]

Your first question in queue comes from Scott Henry with Roth Capital.

[Scott Henry:]

Thank you and good afternoon. A couple of questions. First, there's mention of the expected cash milestones from Medac. Have you given a sense of magnitude of what range those would be in?

[John Purpura:]

So those hi, Scott, this is John Purpura. How are you? Good to hear you. Those, those milestones are not very substantial, but they're substantial enough to allow us to declare that we have enough cash runway through NDA filing.

[Scott Henry:]

Okay, thank you. That's helpful. And with regards to the on-going trial in COVID-19, did you lose any patience to follow up or were there any dropouts as a result of what's going on? I doubt it would. But…

[John Purpura:]

So the effort that has been a Herculean effort to keep patients on protocol and throughout the comings and goings of the waves of the pandemic, to actually keep the patients within the treatment window has been a Herculean effort. But we've managed to do that. Dr. John, who is also on the line, can give you some further details with respect to that. Back to John?

[Johnny John:]

Yes, thank you, John. So we have managed to keep all on-going patients to continue on the protocol and have treatment based on the window prescribed by the protocol. So all treatment patients that were on-going at the time of the pandemic hits, which would be mid-March and these past few months have been, have continued and they've been treated on protocol stipulated timelines for treatment. So we're very fortunate to have continued that.

[Scott Henry:]

Okay, great. Thank you for that color. And then with pre-commercialization going on right now, can you give me a sense of how I should think about spending for the next couple quarters should it maybe just a slight upward trend? And also, how should we think about spending during perhaps the first year of launch? Any any sort of parameters or color you can give would be great.

[John Purpura:]

So we're, we're maintaining our current spend on a quarterly basis Scott of about four and a half to 5 million per quarter. And as expenses come and go, we’ll have certain expenses go down due to the ending of FOCUS trial, and other expenses go up. So our guidance is roughly 5 million a quarter.

[Scott Henry:]

Okay, that's helpful. And then when we do get to the product launch, have you put any parameters in terms of what sources, what magnitude of resources you would utilize there?

[John Purpura:]

So, the company has as you know a former Chief Commercialization Officer, John Sylvester on our board, and John's unique presence, giving us commercialization guidance is a significant addition to the restructured board, but also in terms of how we're moving forward in this pre-commercialization phase. So as all these commercialization pieces are coming together, we're taking guidance from various sources. And as we as we proceed through the coming months, that will become clearer, and we'll be able to update you on future calls.

[Scott Henry:]

Okay, I look forward to that. Final question. Just when we think about expanded indications in the timing of that, would that be something you would wait to pursue until after the filing? Or would you even wait till approval, just trying to think about when we might get updates there?

[John Purpura:]

So there's the strategic assessment of exactly which indication to pursue, which, given the number of treatments in the European commercial experience was over 1000 plus our clinical work in the U.S. and KOL and other Medical Advisory Board discussions. We have to decide which is the best way to spend our R&D dollars. So, the timing of that, of course, cannot interfere with the NDA submission and the roll up of FOCUS trial data. So we have sort of a parallel path, these activities, but will when happen sequentially after the other? It's unknown at this point in time. We're trying to parallel paths, multiple strategic events. Whether or not that starts after the NDA is submitted or approved, has yet to be seen.

[Scott Henry:]

Okay, great. Thank you for taking the questions.

[Operator:]

Your next question is from Yale Jen with Laidlaw and Company.

[Yale Jen:]

Good afternoon, and thanks for taking the question.

[John Purpura:]

Hello, Yale. How are you?

[Yale Jen:]

I'm fine. How you doing?

[John Purpura:]

Very well. Thanks.

[Yale Jen:]

And in the prepared remarks you mentioned about you have spoken with FDA get some feedback from their comments on the intra hepatocellular carcinoma and any details specific you can reveal?

[John Purpura:]

Well, so yes, we did receive feedback from FDA regarding our Phase 3 ICC program that gives us the path forward should we so choose to decide. But now, so that is part of our strategic review comprehensive strategic review, which has already started even prior to FDA feedback. We are focused on better defining the potential and market opportunities for which we have interest in pursuing for additional clinical development. As it turns out, this is highlighted in our corporate deck relevant ICC incidence rates, the annual incidence for the U.S. is somewhat smaller than we originally perceived. So at the same time, by the way, the annual incidence for limited dominant metastatic ocular melanoma was somewhat larger than we originally perceived. So in light of these data, as well as additional clinical evidence emerging in the EU from various centers and the 1000 treatments, we've conducted there, management is considering its options in relation to the clinical trial initiation, to be able to understand and pursue the most attractive clinically and commercially follow on indication. So this is a strategic reassessments that we're looking forward to executing in the coming months.

[Yale Jen:]

Okay, great. That's very helpful. And another question is that if -- eventually going to file assuming the positive data, you guys in sort of rolling submission pathway, or that's not the case?

[John Purpura:]

So, the rolling submission pathways for you know, an original NDA filing, this is categorized as a resubmission, pursuant to a receipt of a complete response letter way back when. So, we have the review clock, a PDUFA assigned review clock on a resubmission of six months. So and within that six month window, there will also be, we expect to be the potential for us to be in front of Advisory Committee or ODAC. So, that six month window could potentially put the approval of our resubmission towards the end of 2021. But there's there's no plan at this point to go with a rolling submission -- a rolling resubmission to FDA.

[Yale Jen:]

And you mentioned that you were potentially in Pennsylvania ODAC meeting or ACOM meeting. Is that the assumption at this moment?

[John Purpura:]

So we are -- we anticipate that. Well there has been absolutely no confirmation from FDA that, that will be the case. So, but we always will we anticipate it and we'll be prepared for it.

[Yale Jen:]

Okay, and…

[John Purpura:]

That would go on curve by the way, sorry to interrupt that would occur probably at the month four or five of the review.

[Yale Jen:]

Okay, great. And then maybe the last question here is that, as you guys going through the assessment of different indications to be explored in theory, are we I understand different tumors different, but once they’re metastatic to the liver. Are they overall similar to some extent that as well as the Melphalan or other chemo agents is effective? You can just treat them in the same manner. In other words, I don't know whether they'll be, as you'd mentioned, the CRC colorectal cancer or even breast cancer or any other and yes to that organ.

[John Purpura:]

That's a great question, Yale. So, this therapy Melphalan/HDS is the treatment of the liver. So we have actually had Delcath’s R&D departments several years ago released a published paper on the apoptotic effect of Melphalan on liver hepatocytes. So it's actually quite an effective compound in many, many different cancers of the liver. What is interesting in relation to the various disease states is the effect of potentially extra hepatic disease and the control of the disease in the liver, which is usually the life limiter. So, while there are other agents out there that one might envision so for example, one might say oxaliplatin because it's colorectal. But remember our disease, the disease organ that we're focusing on is the liver, and we believe Melphalan to be the best compound of choice for disease in the liver. While there may be other organs and other compounds to address those, we believe Melphalan hydrochloride to be the best, the best compound for addressing cancers of the liver.

[Yale Jen:]

Okay, great. That's a very important. Well, I appreciate that. Again, congrats on the progress and looking forward to speaking with you guys.

[John Purpura:]

Absolutely Yale, anytime.

[Operator:]

That concludes the Q&A session, and this earnings call. Thank you everyone for joining. You may now disconnect your lines.

[John Purpura:]

Thank you.