Delcath Systems, Inc.
Q2 2013 Earnings Call Transcript

Published: 6 Aug 2013

[Operator:]

Good day, ladies and gentlemen, and welcome to the Quarter 2 2013 Delcath Systems Incorporated Earnings Conference Call. My name is Ben, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Mr. Doug Sherk. Please proceed.

[Douglas Sherk:]

Thank you, Ben, and good afternoon, everyone. Thank you for joining us today for this conference call and webcast to provide an update on Delcath's fiscal second quarter 2013 results and recent developments. A replay of the conference call will be available approximately 2 hours after the conclusion of today's call, and it will be available for 7 days. The operator will provide replay details at the conclusion of today's call. A live webcast of this call is also available at www.delcath.com, and the call will also be archived on the company's website. Before we begin, I'd like to remind you that some of the statements made during this conference call will contain forward-looking statements within the meaning of the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. These statements are subject to certain risk and uncertainties, and actual results could differ materially from those projected in any forward-looking statements. Factors that could cause actual results to differ are discussed from time to time in the company’s filings with the SEC, including our annual report on Form 10-K and our reports on Form 10-Q and 8-K. These documents are available on the Investor Relations section of our website, and we encourage you to review the material. The company has no obligation to publicly update or revise these forward-looking statements to reflect the events or circumstances after the date they are made. Participating on today's call are Eamonn Hobbs, President and Chief Executive Officer; and Graham Miao, Executive Vice President and Chief Financial Officer. Following their opening remarks, we will open the call for questions from analysts and institutional investors. [Operator Instructions] With that, I'd like to turn the call over to Mr. Hobbs.

[Eamonn P. Hobbs:]

Thanks, Doug. Good afternoon, everyone, and thanks for joining us today. This afternoon, we'll discuss the current plans to advance our clinical development program for Melblez Kit in other cancers beyond ocular melanoma, and we'll provide an update on clinical adoption of CHEMOSAT in Europe and our progress in laying the groundwork for potential long-term commercialization and future revenue growth. Graham will then review our second quarter financial results and provide an update on the availability and use of resources now and in the coming months. Let's get started. Delcath is committed to establishing CHEMOSAT as a promising new treatment for patients with cancers in the liver, and we remain focused on achieving our main objectives

[Graham G. Miao:]

Thank you, Eamonn. Good afternoon, everybody. Let me start by discussing Delcath's financial condition. I am pleased to report that we have continued to reduce our cash spend by increasing operational efficiencies. During the second quarter, our cash spend was $10.5 million, a reduction of 26% year-over-year for the same period, and a reduction of 7% sequentially from the first quarter of 2013. Importantly, we have met our cash spend guidance of $9 million to $12 million for the last 2 quarters. And we expect to further reduce our quarterly cash spend to $9 million to $10 million in the third quarter and $6 million to $8 million in the fourth quarter of this year, as we continue to focus our increasing efficiencies and allocating resources on key priorities. Cash and cash equivalents as of June 30, 2013 were $32.3 million compared with $23.7 million at December 31, 2012. During the second quarter, we did not access any of our capital facilities. At June 30, 2013, there was approximately $24 million available under the CEFF program. In July 2013, the company raised approximately $1.8 million before related expenses through the ATM equity offering program. As of early August this year, there was approximately $48 million remaining under the ATM program. Turning to the income statement. For the second quarter ended June 30, 2013, there were no reported revenues in the quarter, as we continue to face challenges in the reimbursement landscape. As a result, we expect product revenue will be limited until further progress is made on securing compelling reimbursement in Europe. To that end, we continue to focus our efforts on increasing clinical adoption in key cancer centers in Europe, which we believe will help establish reimbursement mechanisms for the CHEMOSAT procedure in our target countries. We believe that this will help support future revenue growth in Europe. Total operating expenses during the second quarter 2013 decreased by 33% to $10.3 million from $15.4 million for the same period in 2012. The decrease is primarily due to a significant reduction in expenses related to the company's NDA submission to the FDA, as well as the company's overall cost management efforts. Operating loss was $10.6 million, which included noncash stock-based compensation expense of $0.2 million, as compared with an operating loss of $15.3 million, including $1 million in noncash stock-based compensation expense in the year-ago period. In summary, we have reduced the costs during the first half of the year and are examining additional expense reduction strategies, while focusing resources on our clinical development programs and clinical adoption, which we believe will help drive future revenue growth. With that, let me turn the call to the operator. We would like to open the call for questions.

[Operator:]

[Operator Instructions] Doug, your first question appears to be from a webcast participant.

[Douglas Sherk:]

Eamonn, when do you expect Phase II HCC clinical trials to start? And how long do you expect it to take?

[Eamonn P. Hobbs:]

Assuming that we get agreement from FDA on the Phase II trial design, our goal would be to enroll our first patient prior to the end of this calendar year. And based on our enrollment, patient enrollment forecast, we anticipate that we would potentially have a positive signal from the trial in the second half of 2014, and the trial would be fully completed in the middle of 2015.

[Douglas Sherk:]

We appear to have another question from the webcast. Eamonn, are you planning on supporting an IIT in The Netherlands?

[Eamonn P. Hobbs:]

Yes, we are. Although, it's a bit unusual to discuss investigator-initiated trials at an early stage, we were made aware of the Leiden University posting on their website or a government website, their intention to run an investigator-initiated trial on colorectal mets in the liver being treated with our system, which is something we had under discussion with them for quite some time. So we're very excited to work with the University of Leiden and that team. They are very interested in developing CHEMOSAT for use in colorectal patients. And considering the large patient population affected by liver metastases that have primary colorectal disease, this could be a very, very exciting development.

[Operator:]

We now have a third question from via the webcast.

[Douglas Sherk:]

Eamonn, can we get an update on Australia and England?

[Eamonn P. Hobbs:]

Australia and England. The -- in England, we have -- the U.K., we have active procedures being conducted in ocular melanoma primarily. And we are pursuing reimbursement throughout the U.K. On Australia, we have an approval. We have been working with a distributor that has been evaluating the market potential there and we have yet to get any conclusions from them.

[Operator:]

At this time, we still have no further audio questions in the queue. And we have no further questions on the webcast either. Ladies and gentlemen, this concludes the time we have for questions. I would now like to turn the call back over to management for closing remarks.

[Eamonn P. Hobbs:]

Well, thank you, operator. And thank you, everyone, for joining us today. Thank you for your interest and support.

[Operator:]

Thank you very much for your participation in today's conference, ladies and gentlemen, this concludes the presentation. You may now disconnect. Have a good day.