Celcuity Inc (CELC) 2020 Q2 法說會逐字稿

Good day, everyone, and welcome to today's Celcuity Release of the Second Quarter 2020 Financial Results. (Operator Instructions) Please note, today's call may be recorded. (Operator Instructions)

It is now my pleasure to turn today's conference over to Brian Sullivan and Vicky Hahne. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining us today for a discussion of Celcuity's Second Quarter 2020 Financial Results and Business Highlights. We issued a press release announcing our financial results for the second quarter ended June 30, 2020, a few minutes ago.

Today's press release can be found on the Investors section of our website, www.celcuity.com. Before we begin, I would like to remind listeners that our comments today will include some forward-looking statements. 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 events or results may differ materially from those projected in the forward-looking statements. Such forward-looking statements and their implications involve known and unknown risks, uncertainties and other factors that may cause actual results or performance to differ materially from those projected.

On this call, we also refer to non-GAAP financial measures. These non-GAAP measures are used by management to make strategic decisions, forecast future results and evaluate the company's current performance. Management believes the presentation of these non-GAAP financial measures is useful for investors' understanding and assessment of the company's ongoing core operations and prospects for the future. You can find a table reconciling the non-GAAP financial measures to GAAP financial measures in today's press release.

And with that, I'd like to introduce Brian Sullivan, our CEO.

Thank you, Vicky, and good afternoon, everyone. I'm very pleased that you joined us today for an update on our progress this past quarter. I'll first comment on our second quarter results, focusing in particular on the status of our product development projects, our collaboration discussions and our FACT-1 and FACT-2 clinical trials. Vicky will follow me to discuss our financial results, and then we will open up the line for questions.

Celcuity's third-generation diagnostic platform, CELsignia, identifies the underlying cellular activity with dysregulated pathway signaling that drives many cancers. And this allows us to diagnose dysregulated signaling pathways in a patient's tumor that have a disease mechanism treatable with a matching targeted therapy. Our strategy is to help pharmaceutical companies obtain new indications for their targeted therapies to treat the patients our CELsignia tests identify. Since dysregulated signaling is too complex for molecular tests to characterize, we can leverage the capability of our CELsignia platform to create a proprietary business model.

To execute our strategy, we continue to advance development of additional CELsignia pathway activity tests during the second quarter. In June, we presented results from studies of our first CELsignia pathway activity test for ovarian cancer at the American Association for Cancer Research, or AACR, Annual Meeting. Our CELsignia test for ovarian cancer identifies a subset of ovarian cancer patients whose tumors have abnormal c-Met signaling that's coincident with abnormal HER2 signaling. Nearly 15,000 women a year die from ovarian cancer, which is a disease that has less than a 50% 5-year survival rate.

Only a small proportion of ovarian cancer patients benefit today from the advancements made over the past 20 years in molecular-based medicine, since most patients lack an actionable biomarker, which is typically a molecular mutation. These patients have an undiagnosed cancer driver and are thus precluded from receiving, in many cases, the optimal drug to treat their cancer. There's also a significant unmet need for a new diagnostic approach that can identify treatment options for ovarian cancer patients who lack actionable molecular mutations. CELsignia test is intended to address this unmet need by helping pharmaceutical companies obtain new indications to treat ovarian cancer patients whose cancer drivers identify by our CELsignia test.

Regarding our collaborations, our discussions with pharmaceutical companies progressed during the quarter. Despite the headwind COVID-19 presents, we remain very confident we'll finalize 1 to 2 collaborations before year-end and then additional ones in the first half of 2021. Our potential collaboration partners include many of the country's leading cancer research centers as well as several global pharmaceutical companies. And these collaborations are intended to evaluate the efficacy of targeted therapies in patient populations our CELsignia test identifies. Pharmaceutical company would not otherwise be able to evaluate their drugs in these patient populations.

These potential collaborations, would it have finalized, enable us to study a range of drugs, either as single or combination agents. If successful, these collaborations would represent a critical step towards obtaining a new indication for the evaluated targeted therapies.

Finally, although our FACT-2 and FACT-1 trials remain somewhat impacted by COVID-19-related delays, we've seen many sites restart their clinical trial activity. We continue to expect interim results as we reported last call from these trials in the second half of 2021. Both the FACT-1 and FACT-2 trials are evaluating anti-HER2 therapies in early-stage HER2-negative breast cancer patients. The goal of each trial is to demonstrate that breast cancer patients identified by our CELsignia HER2 pathway activity test obtain a higher rate of pathological complete response to neoadjuvant anti-HER2 drug treatment than the current therapies.

Since cancer patients who receive a pathological complete response to neoadjuvant drug treatment are less likely to have their cancer recur, we are hopeful our CELsignia test can play a significant role in extending the lives of many breast cancer patients.

So I'd like to now turn back to Vicky, who will review our financial results.

Our second quarter net loss was $2.2 million or $0.21 per share compared to $1.72 million net loss or $0.17 per share for the second quarter of 2019. Net loss for the first 6 months of the year 2020 was $4.45 million or $0.43 per share compared to $3.57 million or $0.35 per share for the same period in 2019. Because these quarterly net losses include a significant noncash item, which is stock-based compensation. We also included in our press release non-GAAP adjusted net loss for the quarter.

Our non-GAAP adjusted net loss was $1.78 million or $0.17 per share for the second quarter of 2020 compared to non-GAAP adjusted net loss of $1.53 million or $0.15 per share for the second quarter of 2019. Non-GAAP adjusted net loss for the first 6 months of 2020 was $3.56 million or $0.34 per share compared to non-GAAP adjusted net loss of $3.19 million or $0.31 per share for the first 6 months of 2019.

R&D expenses increased approximately $0.55 million during the first 6 months of 2020 compared to the first 6 months of 2019. This was primarily due to a $0.52 million increase in compensation expense, which included $0.36 million of noncash stock-based compensation. In addition, other research and development expenses increased $0.03 million due to clinical validation and laboratory studies, and operational and business development activities. The approximately $0.16 million increase in G&A during the second quarter of 2020 compared to the second quarter of 2019 was attributable to noncash stock-based compensation.

We ended the quarter with approximately $15.4 million of cash and cash equivalents. The net cash used in operating activities for the second quarter of 2020 was $1.56 million. This was a result of non-GAAP adjusted net loss of $1.78 million, offset by $0.12 million of working capital changes in prepaid assets and accounts payable and depreciation expense of $0.10 million.

Thank you, Vicky. So in summary, we're pleased with the progress we're making. We've presented data for 2 new CELsignia tests in 2 different tumor types over the past 9 months. Our discussions with pharmaceutical companies and clinical sponsors continue to advance, and we expect to close some collaborations this year. We expect to present data for another CELsignia test for breast cancer patients by the end of 2020. And we remain confident that we'll obtain interim results from FACT-1 and 2 trials in the second half of 2021.

Operator, I would now like to take questions.

(Operator Instructions)

And we'll take our first question from Yi Chen with H.C. Wainwright.

This is Boobalan dialing in for Yi Chen. So I had a couple of questions. So the first one, you mentioned about the new clinical trial collaboration. So do you happen to know how many such collaborations are expected to be announced later this year? And will it be focused on ovarian cancer?

So thanks for the question. We expect 1 to 2 collaborations to be announced this year and then additional -- several additional ones first half next year. The collaborations that we're working on now or that we would expect to announce in the near term would be for breast cancer. Discussions for ovarian cancer just begun, and we won't expect those collaborations to come to fruition until probably toward the end of next year, 2021.

Yes. That's really helpful. And do you expect any upfront payment from your partners for such collaborations?

We're not going to characterize the collaborations until they're finalized. But -- so at the time we announce them, we'll be able to describe those in detail.

[Collaboration] is announced, when the clinical trials may start?

I'm sorry. For the collaboration, is that what you're talking about?

Yes.

Well, as you know, there's a fair amount of time from when you may reach agreement to conduct a study to the work of getting IRB approval, coordinating the logistics of the drug supply. And so it depends on a particular partner and their processes, but there can be 6 to 9 months of time from the time you announce an agreement to when you're actually enrollment-ready. And again, that will be specific to each collaboration.

Okay. That's helpful. And on FACT-1 and FACT-2 trials, still enrolling patients amid the pandemic?

Towards the end of the quarter, yes. But there's obviously a period in bulk of the second quarter when most of the sites were not admitting patients who weren't COVID-19, and I think, for the most part, shut down their clinical trial activity.

Okay. And one final question from me. When do you expect to release validation results for the CELsignia RAS pathway test?

So we expect to be able to provide additional data. The next round of data would be towards the end of this year. That's our current goal.

(Operator Instructions) We'll take next question from Alex Nowak.

This is actually Will Fafinski on for Alex. First for me, can you just provide us with a look into how things effectively progressed this summer with the FACT trials and just discuss the pace of enrollment thus far in Q3?

So I would say, up through Q2, the sites were, and that means end of June. Most of our sites were either not enrolling or just getting back online. And I would say, in July, we saw more of the sites begin to reinitiate activity. There's been -- I don't want to say necessarily a pause, but I think, as you know, in some of the states, there was an uptick, which caused some sites -- and it was very site-specific, location-specific -- to curtail some activities.

So I would say the trend has been upward, and I would say most sites have reengaged. But there are, as you might expect, some bumps along the way. But I would expect -- unless some other -- and again, that's the problem with COVID-19, there's a lot of unknowns. But the current trajectory would suggest that we would be back to full activity by the end of this quarter, certainly, and maybe before. But we're still maintaining our guidance for results second half of '21.

Got you. I appreciate it. That's very helpful color there. And then actually just one more for me. We were wondering how is the reduction in patients getting screened thus, less cancer diagnoses impacted the prevalence of cancers targeted in FACT-1 and FACT-2. Can you just -- what are your thoughts on how this impacts enrollment in Q3 and beyond?

I would hate to get too precise about that. I mean I think you may have read, there's been some reports out that the number of cancer diagnoses in general declined in the second quarter because patients weren't being scheduled for biopsies and diagnostic procedures. Does that lead to a blip in Q3? I don't want to get in the business of trying to forecast something like that. I think there's so much noise in the system. It's hard to -- at least I'm not comfortable projecting off of that. But I'm aware of the fact that some people are suggesting that there's a backlog and maybe in some areas that, that will translate directly. We don't have enough experience given the nature of what we're doing to forecast it that precisely.

(Operator Instructions)

Okay. So I think -- unless we have other questions. I mean are there any other questions in the queue?

There are no further questions on the line at this time.

Okay. Well, thank you very much, everyone. I appreciate you attending the call and look forward to speaking with you next quarter. Take care.

This does conclude today's program. Thank you for your participation, and you may now disconnect.