Celcuity Inc (CELC) 2018 Q4 法說會逐字稿

Please stand by. Your program is about to begin.

(Operator Instructions)

And now I would like to turn the call over to over to Brian Sullivan, Chief Executive Officer.

Thank you, and good afternoon, everyone. We announced the financial results for our fourth quarter and year ended December 31, 2018 a few minutes ago. Before I begin, though, I'd like to remind listeners that our comments today will include some forward-looking statements. And these statements involve a number of risks and uncertainties, which are outlined in today's press release and in our reports and filings with the SEC.

Actual results may differ materially from those in the forward-looking statements.

On this call, we'll also refer to non-GAAP financial measures. You can find a table reconciling the non-GAAP financial measures to GAAP financial measures in our earnings release for the 3- and 6 -- 12-months ended December 31, 2018, which is also included in today's press release.

Today's press release is available on our website, www.celcuity.com, under the Investors section.

Also on the call with me today is Vicky Hahne, our CFO.

I'd like to make some comments on our fourth quarter and full year results as well as provide a general outlook for 2019. And then, Vicky will follow with few more details on a few items, and then we'll open the line for questions.

We made significant progress in 2018 on variety of fronts and achieved many of our critical objectives.

Our overarching goals were to advance our CELx platform and expand our pharmaceutical and clinical collaborations. In particular, I would note the following accomplishments. Our first clinical trial, FACT 1, was activated in collaboration with Genentech and the NSABP Foundation. FACT 1 trial is evaluating the safety and efficacy of Genentech's drugs in HER2-negative breast cancer patients selected with Celcuity's HSF test. We signed a clinical trial agreement with Puma Biotechnology and West Cancer Center to conduct a Phase II clinical trial, known as FACT 2, to evaluate the efficacy and safety of Puma's drug Nerlynx and chemotherapy, in breast cancer patients selected with Celcuity's HSF test. And third, we were also selected by NSABP and Puma to evaluate tissue samples from a Phase II study they're conducting that are evaluating Puma's pan-HER inhibitor, Nerlynx; Genentech's HER2 antibody, Herceptin; and Bristol-Myers Squibb’s EGFR inhibitor, Erbitux in metastatic colorectal cancer patients. Fourth, we completed development of our second CELx-signaling function test for HER2-negative breast cancer. And with this test, we confirmed the capability of our platform to analyze the activity of multiple signaling pathways to expand the patient population we can diagnose. The second test identified HER2-negative cancer patients, breast cancer patients who have hyperactive and co-activated HER family and c-Met signaling activity. And we also advanced development of several new CELx Signaling Function tests to diagnose new cancer subtypes, including a third type for breast cancer and tests for 2 new tissue types.

And then finally, we presented results of several preclinical studies at major conferences, including the American Society of Clinical Oncology, the Miami Breast Cancer Conference and the San Antonio Breast Cancer Symposium.

The FACT 1 clinical trial that we activated this year is evaluating Genentech's targeted therapies in patients our CELx test selects, now has 14 activated sites. And while this is consistent with our goal at the beginning of 2018, the enrollment rate of patients at these sites has so far been below NSABP's original expectations. And to offset the lower-than-expected enrollment rate, NSABP has agreed to activate up to 16 additional sites, for a total of 30 sites. The process to add additional sites has begun, and we expect to begin activating new sites this quarter and on a rolling basis through the first half of 2019. We expect the addition of the new sites to increase Celcuity's cost of the FACT 1 trial by up to $650,000. We now expect interim results from this trial in late 2019 and final results approximately 9 months later.

The FACT 2 trial that is evaluating Puma's targeted therapy, Nerlynx in patients that CELx test selects has received all regulatory and institutional review board approvals and is expected to be activated later this quarter, in early 2019. We expect interim results from this trial in late '19 on early '20 and final results approximately 12 months later.

As we look ahead to the remainder of 2019, we have an unidentified -- a number of key objectives. First, we anticipate reporting interim results from our first clinical trial FACT 1 and progressing towards interim results for early 2020 in our second clinical trial FACT 2. Second, we anticipate completing development of another cell-signaling function test for breast cancer that diagnoses a new subtype of breast cancer, not currently detected with molecular test. Our CELx platform enables us to create unique insights into the signaling dysfunction driving a patient's cancer that a molecular test could not detect. And this allows us to assess the crosstalk between different signaling pathways in a very powerful way. An example of this was the CELx Test we announced last year that identified patients with co-activated c-Met and HER family signaling.

Our platform allowed us to characterize the crosstalk between these new pathways, so that we could not only identify patients whose c-Met and HER family pathways were hyperactive but determine the best drug combination approach to treat it. Third, we anticipate completing development of test with 2 new tissue types. Each of these new tests create opportunities for us to provide companion diagnostics that enable pharmaceutical companies to obtain new drug indications for the cancer subtypes our test diagnose. And fourth, we hope to initiate at least 1 additional clinical collaboration with a pharmaceutical company by year-end to study breast cancer patients identified by our CELx MP Test for hyperactivated and co-activated HER family and c-Met signaling activity. Our currently engaged and productive discussions with a number of pharmaceutical companies, we have to work with these companies first to evaluate the efficacy of their targeted therapeutics in new patient subgroups our CELx tests identify and if successful, to help these therapies gain FDA approval to treat this patient population.

We believe our CELx tests offer the opportunity to expand the patient population for targeted therapeutics beyond patients selected using a molecular biomarker.

And we hope to evaluate the efficacy of additional targeted therapies in breast cancer patients who have either HER2s tumors or co-activated HER2 and c-Met tumors. Now our approach to identifying new cancer subtypes is new, and the patient populations we identify are not initially on the clinical roadmap for the targeted therapies of interest to us. So while, it is difficult to break the timing of our next collaboration agreement, we think it's reasonable for us to expect closing another one this year. Overall, we're excited about the progress we made during the quarter and the year. To review our financial results, I'd like to turn it over to Vicky.

Thank you, Brian. Our fourth quarter net loss was $1.8 million or $0.18 per share compared to $1.7 million net loss or $0.17 per share for the fourth quarter of 2017.

Net loss for fiscal year 2018 was $7.5 million or $0.74 per share compared to $6.3 million or $0.84 per share for the same period in 2017. Because these quarter and year-to-date net losses include significant noncash items, stock-based compensation and noncash interest expense, we also included in our press release, non-GAAP adjusted net loss for the quarter. Our non-GAAP adjusted net loss was $1.6 million or $0.15 per share for fourth quarter of 2018 compared to non-GAAP adjusted net loss of $1.4 million or $0.14 per share for the fourth quarter of 2017.

Non-GAAP adjusted net loss for fiscal year 2018 was $6.3 million or $0.62 per share compared to non-GAAP adjusted net loss of $4.9 million or $0.66 per share for fiscal year 2017.

R&D expenses increased approximately $1.3 million during fiscal year 2018 compared to fiscal year 2017, this was primarily due to $0.6 million increase in compensation-related expenses to support development of our CELx platform.

In addition, other R&D expenses increased $0.7 million due to clinical validation and laboratory studies, legal expenses related to patent cost and operational and business development activities. The approximately $0.6 million in G&A during -- increase during fiscal 2018 compared to fiscal 2017 primarily resulted from a $0.4 million increase in professional fees associated with being a public company for a full year in 2018 versus only 1 quarter in 2017, and director and officer insurance. Other G&A expenses increased $0.2 million in compensation-related expenses including noncash stock-based compensation. We ended the year with approximately $24.9 million of cash, cash equivalents and investments.

All right. Well, thank you, Vicky. Operator, we'd like to take some questions now, please.

(Operator Instructions) We'll go ahead and take our first question from Yi Chen.

This is Edward Marks on for Yi. Just had a quick question on FACT 1. I was wondering if there was going to -- if there was a possibility for any future delays after the end of this year?

The driver of when we would expect interim results is a function of how quickly we enroll patients and how quickly we get the new sites onboard. So far we think we're making good progress in adding the new sites. We're dependent on the estimates for enrollment to be consistent with what we currently expect, but if the rate of enrollment is not what we expect, then that would push it out. That's really the major variable there. Currently, we don't expect that to occur, but there are variables that could affect it.

Okay. And a couple more questions just on the platform. If you can provide a little more color on the CELx MP collaboration you're anticipating for the end of 2019? You mentioned it a little bit in your prepared remarks.

Right. No, so we don't have anything to announce yet, but as we discussed, when we launched the test and announced the test last year, we have an opportunity to help pharmaceutical companies get a new indication for a combination treatment with pan-HER inhibitor and c-Met inhibitor. And so the process of engagement with pharmaceutical companies has been ongoing. We're making progress on that front. There are number of companies that we're engaged in discussions with. The collaboration itself would -- we would anticipate take the form of a clinical trial, approach similar to what we've put in place with Puma and Genentech, where the goal is to evaluate the efficacy of their drugs and the patient population we select as really the first step in working, but we would hope, would be towards an approval for that drug combination to treat those patients.

Okay. And then the final question just on the 2 new tumor types here, exploring. Can you provide a little more detail on maybe what tumor types they are? And any potential partnerships that you might be anticipating for those tumor types as well?

Right. No. So we -- until we are completed development and have studies ready to present, we won't be announcing the tumor types yet, just for confidentiality. But the model that we would pursue with the development of tests in these other tissue types will be very similar to what we've done in breast cancer, where we would identify saline dysfunction, pathway disease and that would be the basis for partnering and collaborating with pharma to fill the trial to evaluate the patients our test selects. This is, again, the first step towards potential new indication. And with those tests, we would expand the range of collaborations where is -- the goal would be to expand the range of collaborations and potential opportunities for us to position our CELx test as companion diagnostics for new drug indications.

(Operator Instructions) And it looks like we have a question from Per Ostlund.

I want to go back to FACT 1. So understanding that this is -- we're kind of breaking new ground as you noted in your prepared remarks, Brian, and so I think most everybody would expect, this isn't going to be a fluid situation, but is there a way to characterize the why behind the pacing of enrollment? I know originally, there had been the issue with getting the IRBs or having site-specific IRBs versus a central, and so that slowed things up a little bit. Is there anything that you would point to in terms of why enrollment itself -- assuming the IRBs have taken hold at this point, is there anything that you can point to on the enrollment pacing to explain why it's a little bit short of NSABP's target?

Sure, well, I -- first, I would say, in general, in most, if you were to tell, any folks who are involved in clinical trials and the challenges of predicting enrollment, would tell you that it's a very imprecise art. That each site will have to test the competing trials that are, in some cases, going after the same patients or the clinicians are involved with trials that are mainly -- them to -- not prioritize one trial over another trial. And so, there are some rules of thumb that sites used, based on prior history, to come up with estimates, but anybody that is involved in this business would tell you that there's a high variance associated with those estimates. When we talk with NSABP and obviously, we're digging into the rate of enrollment, their answer really is that while this is just a reflection of the challenges of predicting how many patients are eligible for the trial and how many patients agree to participate in the trial, and those are, again, just hard to predict. Each site will have its own characteristics that -- and different drivers, and really it's -- on the one hand, it's complicated because there's a lot of factors that go into getting a patient to enroll. On the other hand, it's kind of -- it's somewhat simple and that it's hard to predict and rules of thumb are used and in many cases, those rules of thumb don't come through, for reasons that really have nothing to do with the trial itself but more to do, potentially, just with the general state of getting patients enrolled in trials besides that we're working with.

Sure. That make sense. I guess, with -- this question may be early given that the data -- the interim data will be later this year, but can you characterize the nature of the data that we'll get when that comes out? Is it going to be a PCR rate for an initial tranche of patients that were selected and went through the therapy? Is it going to be something different? Or is it completely up to Roche's discretion or Genentech's discretion to determine exactly what they release in terms of top line data?

NSABP and Genentech will control what's released. But typically, with interim results, the -- and depending on whether they are announced in conjunction with a conference where potentially more detail can be provided or announce in between conferences. If it's announced in time to present as part of a release at a breast cancer conference, more detail is usually provided. Typically, the drug companies and research organizations like NSABP, provide only top line results until they present data in more detail at a research forum. If it's a top line result, essentially, what they -- what is typically done is that they would indicate whether the trial has matched or on track with its endpoints and -- or not. And so, even with completion of trials and where final data is available before a major meeting, the drug companies will indicate that they're -- they met their endpoints and -- that they will describe the data in more detail in the next meeting, whether it's ACSO or San Antonio Breast Cancer Conference or European ESMO Meeting. But I think it would be sufficient detail to indicate whether the goals have been met, and we're on track to, hopefully, achieve what we set out to achieve with the trial.

Sure, that make sense. And I guess, maybe dovetailing off of that, that answer, Brian. I assume that there are a range of potential next steps that ensue from the data, whether it's at the interim level or final, but does it stand a reason that a larger Phase III assuming good data is in place -- is a larger Phase III the likely outcome? Or if the data is just so good, could Roche go to FDA with that in hand, seeking the additional indication without it -- without a Phase III?

So again, I can't speak for Genentech and Roche. And so, I can only, I guess, provide some thoughts about what the FDA has shown willingness to do when compelling data is made available. They have approved several drugs recently with Phase II data. They have a number of pathways, regulatory pathways, whether it's an expedited review or accelerated review or breakthrough therapy designation that lead to quick reviews of the data and if favorable, quick decisions and approvals. They also have, to the extent that they would like further data, for whatever reason, whether they just would like a larger sample size, they have changed their practice of requiring separate Phase II and III trials or at least, in cases now they are willing to be more flexible and allow a Phase II trial to amend and increase the sample size, and in effect, morph into a Phase III trial. And those are all options, I can't project and say that's what Genentech would do, but obviously, they know what they're doing, and they would presumably proceed with what they think is the most efficient manner possible. But the good news for us is that the FDA is very, very focused on finding ways to more precisely identify patients for all the reasons that you'd expect, and they've shown a willingness to be very aggressive in allowing new options to get to market when there's, well, good data for the drug, safe and effective, and they have an experience with it, but also when there's a strong rationale for the patient population that's being treated, that is, would be the case with this patient group because of our test.

Sure, sure. Okay. Excellent. A couple of more questions. One on the c-Met pathway test. So I appreciate the context around striking a collaboration sometimes during 2019. Given the, I would say, very promising and good depth of data that you presented at San Antonio Breast in the fall, when you're having the discussions with pharma in conjunction with presenting that data and that sort of thing, how do we think about how that potential pharma partner looks at that data in terms of striking a collaboration? Are they going to be looking for additional data? Are they going to be looking for the data that's been presented to mature a little further? What sorts of gating factors, I guess, are there between here and a collaboration?

I think, we've put together a very good data package. I think, we have a package of similar, if not more complete, than what we had available for Genentech and Puma with this new population. We're also published in San Antonio, interesting analysis about how these pathways interact, how c-MET and pan-HER or rather HER family pathways are co-activated. And that's very powerful. Not only is our ability to assess an individual pathway powerful, but the ability to assess how these pathways interact in unexpected ways or ways that haven't really been understood and identified before is very intriguing. And I think, we have sufficient data to support our findings in that area. And so, then the question is okay, what -- why don't these guys all just jump in our lap and move forward? There's a thick constituency within these pharmaceutical companies. And since it's not too similar for many large organization where you have a lot of people that have to say, yes. And in many -- I would say, in many of these organizations, at least the larger ones, you generally need a consensus. And so, it takes time. I mean, there's not an individual that we have to pitch and get a yes from, there's a group of individuals across a fairly wide range of department, whether it's transitional science or medical affairs, the R&D group, diagnostic group, bio-marketer group, business development, all those groups tend to participate in the decision-making process. And we understand that. We work all those to engage all those folks, but it's a process. And that's why, again, we believe we have very compelling data. We've had very productive conversations. And so, that's why we anticipate having a collaboration that we can announce this year. But it's, again, in this case, you also have 2 drugs, that makes it somewhat more complicated than a -- and these are 2 different drugs. The Genentech drugs, they're 2 different drugs, but they're used in a current indication. So it's -- you can almost think of it as a -- really a single decision. In this case, we're evaluating 2 different drugs, pan-HER inhibitor, c-Met inhibitor, that today are not used in combination. So that, again, requires 2 different drug groups in some cases to get together and collaborate themselves, which, again, just not uncommon, it's just -- is one more variable that needs to be worked through.

That's absolutely fair. And then I say, just last, last question, and this one might be more of a Vicky question. So the operating expenses, I would say, have continued to be very, very well controlled here. Is the range that we've seen, kind of, plus or minus over the last few quarters a reasonable range to think about over the ensuing few quarters, in addition to the $650,000 that you talked about incremental cost for FACT 1? Is that really the only additional thing we should be thinking about vis a vis the last few quarters run rate for OpEx? Or is there something else we should be contemplating in our models?

I'll just take this for a second, and maybe Vicky can add color. I mean, we've indicated from the time we did our offering 18 months ago, that our run rate would be in the $7 million to $9 million range, average $8 million over the 3-year period, so that we would end 2020. We would get to the end of 2020 with sufficient cash to continue i.e. the money that we raised in '17 would take us through the end of '20. And that's what our current expectation is. That's what our current estimates and internal budgets suggest. So nothing has changed in terms of what we expect to spend. I mean, we have the $600,000 of additional side expense, but I think we've come in probably under our expenses this year, so when we look at the total spend over the 3-year period, we're on track.

And it doesn't look like we have any further questions at this time. (Operator Instructions)

Okay. Well, it looks like, no more questions. I'd like to thank everyone for participating, and look forward to catching up with you later. Goodbye.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.