Imunon Inc (IMNN) 2005 Q1 法說會逐字稿

Good day and welcome to the First Quarter 2005 Celsion Corporation Earnings Conference Call. My name is Bill and I'll be your conference coordinator for today.

At this time, all participants are in a listen-only mode. However, we will be facilitating a question and answer session with the end of today's conference. If anytime during our conference today you require assistance, please key star followed by zero and an operator will be happy to assist you.

As a reminder, today's conference is being recorded for replay purposes. Celsion wishes to inform participants that forward-looking statements in this call are made pursuant to the "Safe Harbor" provisions of the Private Securities and Litigation and Reform Act of 1995. Participants are cautioned that such a forward-looking statements involve risks and uncertainties without limitation unforeseen changes in the course of research and development activities and in clinical trials by others, possible acquisitions of other technologies, assets or businesses, possible actions by customers, suppliers, competitors, regulatory authorities and other risks detailed from time to time, the company's periodic reports filed with the Securities and Exchange Commission.

At this time, I would now like to turn the conference call over to your host for today's presentation Mr. Tony Deasey, Chief Operating and Financial Officer. Please proceed sir.

Good morning and welcome to Celsion's Earnings Call for First Quarter 2005. As you are aware, annual meetings of stockholders is taking place on May 19th, which is Thursday of next week. I will there limit my remarks today to our financial results for the first quarter of 2005 and we will give a completed review of the status of the business at the stockholder meeting.

As the business portion of the stockholder meeting will be webcast, you'll have an opportunity to listen in to that presentation during the stockholder meeting next Thursday.

As many of you are seeing from our first quarter 10-Q which we filed yesterday evening we had a very good first quarter. The fastest growth is due to some surprises issues in January.

Our sales for the quarter were up 36% from the previous quarter. That is the fourth quarter of 2004. During the first quarter of 2005, 58 machines were place into service in doctor offices bringing the total of machines in service up to 159.

We treated approximately 1,500 patients during the quarter bringing the total number of patients since approval up to approximately 4,000 patients. This rapid expansion has continued into the second quarter of this year and in April we placed more than 30 additional units into service and treated almost 1,000 patients.

This ramp up is having a very positive on our growth margins which more than doubled as a percentage of sales from 15% in the fourth quarter of 2004 to 32% in the first quarter of 2005. We continue to be very confident that our sales for 2005 will exceed $10 million.

As you will have noticed that operating expenses in the first quarter of 2005 were substantially lower than in the first quarter of last year. This 50% reduction was largely due to normal accounts of expenses associated with the approval of Prolieve in February of 2004.

However, we continue to manage our costs and operating cash burn came in at close to the $800,000 per month that we've been projecting. We continue to project that we have sufficient cash on hand for the remainder of this year with some rollover into 2006.

Overall we're delighted with the progress of Prolieve and we believe the business currently is in very good shape. As we have the stockholder call coming up, we're limiting our remarks to the numbers. They're very brief but actually I'm delighted to take any of your questions related to the numbers at this point in time.

Operator could you queue the questions?

Certainly sir. Ladies and gentlemen if you wish to ask a question, please key star one now. If your question has been answered or you wish to withdraw your question at anytime, please key star two. Questions will taken in the order they are received. Please key star one now to begin.

Then again ladies and gentlemen that's star one for a question.

Our first question comes from the line of Mr. Steven Ellenbecker. Please proceed sir.

Hi, Steve Ellenbecker from Wyoming. A personal investor, private investor. Tony, appreciate the news on the forward progress with Prolieve. My concern would be related to finances. If the cash burn rate is such that we can just see through 2005 or early 2006 on available funds and if your stockholders are facing a reverse split, does that suggest you'll be having a look to the market place for additional financing just after the reverse split?

No it doesn't. We're confident that we will be able to - we're hoping that Boston Scientific will exercise their option before the end of the year and we're not planning to do a financing immediately - we do it after we do a reverse split so we are hoping that we will not have to go back to the market.

Thank you.

Thank you very much sir. Again, ladies and gentlemen if you wish to ask a question, please key star one now. Our next question comes from the line of Mr. Paul Ervin. Please proceed.

I was wondering I noticed the accounts receivable increase quite a bit. Is that mostly from Boston Scientific?

The accounts receivable - yes it's almost entirely from Boston Scientific and most of that accounts receivable was collected in early April.

Okay and it was great to see you revving up still more machines but percentage wise I guess the kits are increasing every month right? A portion of the total?

Yes. As we do more treatment our kits increases relative to the revenues generated from the sales of machines.

Okay. Could you tell us how many employees CLN has now?

We have 32 employees.

All right thank you very much.

Thank you.

Thank you very much sir. Again ladies and gentlemen please key star one. Our next question comes from the line of Justin Porter. Please proceed.

Good morning.

Good morning.

Do you consider a machine placed if it's still in trial?

Yes we consider machines in service as being machines we placed for evaluation where those machines are being used to treat patients and we also include in that number machines that have actually been sold to physicians.

In previous calls, I believe you have indicated what percentage of the machines that have been placed finally get bought. Do you have an update on that number?

The current rate to date has been around 95%. So we've had very few machines that have gone into evaluation but have not eventually turned out to be sale by the terms. So right now we have a large number of machines in evaluation and we hope that they will be converted into sales during this - a lot of them during the second quarter though we're putting more machines into evaluation all the time.

Do you have some general ideas as to when a machine is not purchased what the reasons are?

It varies. Some doctors prefer the system they have already. Some doctors are skeptical about microwaves in the first place so you get them to try it and they remain skeptical, but generally speaking when we place the machine as reflected by the 95% conversion rate, doctors are very happy and patients are very happy with the street.

Excellent. Of 159 placed can you indicate how many are still in evaluation?

Approximately 100 of those are in evaluation.

Thank you very much sir.

Thank you very much sir. And again ladies and gentlemen if you do have a question, please key star one. Our next question is a follow-up from Mr. Paul Ervin. Please proceed.

Could you tell me do you have any difficulty in supplying machines when Boston Scientific wants them?

No. We have sufficient capacity at our manufacturer to more than meet the demands for machines at Boston Scientific. In fact, we have more than enough capacity to provide catheter kits as well.

And I noticed your inventory had increased and I imagine you have to have more kits on hand because of the increased use of them but you keep some machines in the inventory also?

Actually the inventory is principally machines. Our inventory of catheters is very low because manufacturer to order and ship them to Boston Scientific and when we ship them to Boston Scientific we invoice them. In terms of machines that inventory number includes machines that are on evaluation as well as machines in inventory at Boston Scientific.

Okay. Can you give us an approximate number of the 159 that are still under evaluation?

Yes, I just - we approximately 100 of those machines under evaluation.

Okay and how long a period can they keep it on evaluation?

The average period is 60-90 days. Some evaluation periods go on for longer than that but we're trying to get doctors to commit to buying the machine in the period between 60 and 90 days.

And the machines that are currently being placed are they being placed in facilities that would most likely treating a lesser number of patients than the first machines that were placed?

You know we tried to hit the high volume sites first, but with 158 machines in the market we're still hitting generally high volume offices. There're about 400 large urology offices in the U.S. so we still have a lot of distribution to get with high volume offices.

Have you found that when you're placing these machines will the biggest majority of them not have an in-house procedure?

I think this mixed across the board. Some offices have audit procedures as well as ours. Some have tried microwave before and they're trying again. It's a mixed bag.

Okay. Thank you very much.

Thank you very much sir. Ladies and gentlemen your next question comes from the line of Mr. John Gabriel. Please proceed.

Hi Tony. John Gabriel. I'm a private shareholder and many times I've brought up the concern about the reverse split. With all the good news you have today I think that's a great thing and we have been waiting for that because we haven't had much news.

Do you think there's any possibility that this reverse split can be kept at a minimum due to the fact that you are bringing in revenues and things look positive through 2006? I know in the voting you were asking for I believe a one-to-seven to a one-to-fifteen reverse and I myself have had some bad experience with reverse splits, but I've also understood from you that there could be a positive end to this and do you think that with these revenues coming in that the possibility does exist that we can keep this at a bare minimum?

I think first thing is John we have to get the vote and the votes will be tallied for the stockholder meeting on May 19th and I think if the company decides to do the reverse, then that will be done in the light of circumstances at the time of the reverse and one of the factors in that is the stock price.

The higher the stock price the lower the ratio of the reverse that will be required so at this point I think you know first we have to get the votes and then once we've got the votes and the Board and management will have to consider all the factors in place and make a decision about what to do at that point in time.

Okay very good, because I believe that most of us have been hanging in there hoping that the news would come because we've always believed in what you have and hopefully we can keep this at a minimum or God only knows it'll go up so high that we won't have to do it if you get good news. Okay thank you very much and good luck.

Thanks John.

Thank you very much sir. Ladies and gentlemen your next question comes from the line of Mr. Philip Bearing. Please proceed sir.

Hi Tony Phil Bearing, private investor. Just checking, you had mentioned 1,500 patients had been treated and you mentioned 159 machines. It works out to about 9 patients per machine over the past three months if we look at it that way which means about to be per machine per month. Is that correct?

I think you have to look at that slightly differently because the machines were placed at different times during the quarter. More machines were placed late in the quarter than early in the quarter. Our average is running closer to 6 treatments per machine per month.

Okay what you consider to be realistic and ideal for you guys? I mean obviously the more the better.

Yes, the more the better I believe are the guides in the microwave segment getting three to four treatments a month. We would hope that we would do better than that. We would like to maintain an average of between five and seven and the doctors and patients are happy with the treatment and we do have the advantages that we believe we have then that should be profitable. You know the more the better but we'd be very disappointed if we were at only three to four patients a month.

Okay I understand. Thank you. Once other thing. You had mentioned and I wasn't sure I caught this is that you expected sales to exceed $10 million in 2005. Would that be Proleive in total or Celsion's part?

That would be Celsion's sales of Proleive. So that would be our sales to Boston Scientific.

Wonderful. Okay great thank you.

Thank you .

Thank you very much sir. Ladies and gentlemen your next question comes from the line of Mr. Martin Walsh. Please proceed.

Good morning. You mentioned there were a total of 4,000 patients treated. Does that number include the 1,000 patients that were treated in April?

No it doesn't.

It does not-

And that was 4,000 from approval to the end of the first quarter.

Okay so there has been a total of 5,000 patients treated. Can you tell us some details on the successes of those treatments? Are you having any minor problems or patient feedback?

The overall experience has been very good. The patients are happy with the treatment and the physicians are happy with the treatment. I'm not hearing any negative feedback from the market concerns of previous experience.

Okay thank you.

Thank you very much sir and again ladies and gentlemen if you do wish to ask a question, please key star one now. Our next question is a follow-up from Mr. Justin Porter. Please proceed.

Two brief questions. One with respect to the reverse split and I understand that you can't commit on that but if I understand from previous calls the general idea would be to get the new price above $5.00 per share?

We would like to get ourselves in a position where the stock is above $5.00 a share so that we would be in a position to be eligible for Nasdaq at some point in time. That actually is where we'd like to be.

With respect to the placement of machines is there any noticeable geographic pattern?

No. Boston Scientific has the best and the largest sales force in the urology market and they have national coverage and the machines are being place all over the country.

Very good thank you.

Thank you.

Thank you very much sir. Ladies and gentlemen if you do have a question, please key star one now. Our next question comes from the line of Mr. Daniel J. Ryan. Please proceed.

Tony, if my memory serves correctly the number of machines placed at the end of December was 100. If they're purchasing within 60 to 90 days there should 100 machines purchased by now. Is my math off some where?

At the end of the year we had 101 machines in service; 42 of those have been sold and that would leave 69 were in evaluation. Some of the evaluations are taking longer than we would have anticipated. So about half of those were converted into sales in the first quarter - between a third and a half and most of those remain in evaluation. We have a push going on to convert from the evaluations to sales right now.

Thank you.

Thank you very much sir. Ladies and gentlemen your next question comes from the line of Mr. Steve Simmons. Please proceed.

Tony, where do our machines get made? What state makes them and what's the company that making them?

The machines are made by Sanmina which is based in Alabama.

Okay. Do we have a backorder waiting?

No, right now we're current with - the accounts on our orders.

Okay and what is the time element in the option for BSX on our Prolieve?

They have a five year option which started with approval on February 19, 2004.

'04?

Right. It's five or nine.

Okay and I heard it a four times gross revenue earnings?

It four times - trailing 12-month sales or with a minimum of $60 million.

I see okay. Thank you.

Thank you very much sir. Again ladies and gentlemen if you have a question please key star one. Our next question comes from the line of Mr. Joseph Garber. Please proceed.

Yes hello. I just have a question about the future financing. You had mentioned earlier that you didn't believe you would need to go back to the market to get financing based upon the income you've been getting through Prolieve and also anticipating the sales to Boston Scientific later this year. My question is, how long do you anticipate if Boston Scientific does purchase at the minimum price of $60 million to have financing for the company?

If Boston exercises their option in the second half of this year, we would have cash based on our current plans for three to four years but that's based on what we're doing now in the area of (inaudible). So three to four years cash would be about where we'd be.

And you wouldn't anticipate in that three to four to years that we would then have another product that would be generating income for the company?

We would hope that by that point in time we would have made very good progress on the use of Thermadox in combination with radio frequency abalation to treat primary liver cancer. You know we're in a Phase I now. We have to establish the - we have to get to a Phase II but we would hope that by that point in time we'd have made sufficient progress that we would either be in the market or we'd be partnered with somebody but we would have a source of cash other than equity.

Okay thank you.

Thank you very much sir. Ladies and gentlemen your next question comes as a follow-up from Mr. Martin Walsh. Please proceed.

Please give us some information on whether or not there is any progress on the international front regarding Prolieve?

We are still in the process of gaining approval in China and we hoped to launch the product in Hong Kong within the next couple of months.

Great. Regarding reverse split. If the reverse split approved will that affect only outstanding shares or will that also affect the shares that you are authorized to issue?

In the proposal we put to shareholders we proposed that we would leave the authorized shares outstanding at 250 million but we would - the reverse would be applied to all the outstanding shares, warrants and options that have been issued to date.

So it would not affect the number of shares that you are authorized to issue then?

No it would not.

Okay thank you and could you please tell me - I've expected on the liver cancer trials because of the severity of the disease and the promise that our treatment offers that we would have more than one patient by now. Could you tell me what you all feel the reason is for that? Is there-

You know we'll talk about this more on Friday but right now we're at one site where the National Cancer Institute is the National Institute for Health and there is a lot of competition for patients and given that we're at Phase I study and given that this is a very serious disease we're completing for patients with studies that are in Phase III's and where the patients wanted guaranteed success that would see results the success is higher. So that's the principal reason. As we announced on the last call however, we are in the process of looking for additional sites in the U.S. and we hoped to have an additional site in Asia where the incidents of - I think we said this in the 10-Q where the incidence of primary liver cancer is much higher than in the U.S. so our anticipation is that we hope shortly to have additional sites up to increase the enrollment in that study.

Thank you very much sir.

Sir are you all through with your questions?

Yes I am. Thank you.

Thank you very much and again ladies and gentlemen if you do have a question please key star one now. And at this time Mr. Deasey we have no further questions for you.

Okay well thank you all for-

Sorry sir, someone just queued up. Okay it's a question from Mr. Glen Fine. Please proceed sir.

Good morning fellows. Thank you very much for your time. I didn't get the entire call but one question with regard to the reverse split and the authorized shares. If you reverse the outstanding shares and leave the authorized number at 250 million the dilution of the stock seems potentially outrageous. All the current shareholders will reduce the number of shares and then you have the ability to authorize - I suspect another 200 million shares. What guarantees could you provide the shareholders that those shares being authorized have the potential reverse split price will be used for shareholder value and top board member key executive compensation?

Well I answer the last point first. The last point is in relation to board members and key executive compensation. We have a stock option plan and the number of shares in that stock option plan will be reversed the same way as any issued options currently and if we want to issue more options to key executives or directors we have to go back to the stockholders to get an increased authorization for that plan done. Secondly, there's no dilution until we issue shares. Our hope is that Boston Scientific will exercise their option to purchase Prolieve. We'll get $60 million and that we won't have to issue any more shares in which case they'll be dilution to anybody.

The only reason for leaving that number at 250 million is that if we do need to issue more shares then we have to go back to shareholders for approval and an increase that authorized number. It's just a matter of convenience to leave it where it is. There's no intentions to go out and issue that number of shares. I think any fears along those lines are unfounded.

Okay well I appreciate that. I'm sorry for the directness of the question but it gave me a little uneasy feeling.

I appreciate the directness. A direct question can give us - we can answer directly too.

Absolutely. I appreciate your time. Best of luck. All the success in the world. Thank you very much.

Thanks.

Thank you very much sir and we do have a couple more questions Mr. Deasey if you'd like to take them.

Sure.

A couple of follow-ups. The first one comes from Mr. Mitchell Lamka. Please proceed.

Mr. Deasey hello and thank you for all your hard work. Please keep it up. I wanted to ask a question about what you were just referring in regard to the China venture and you've talked about a scenario that is BSX exercise their option in the latter half of this year my understanding would be that any international ventures we're looking at to try to kind of revenue generator from Prolieve would be money expended that would be a detriment to us if BSX exercise that option prior to the time that we turn that international venture into something that generated revenue.

Not necessarily. For the markets that we've carved out which was greater China, Mexico, Central and South America we have - in China which is the market we're talking about we have a distribution agreement with our joint venture in China. If Boston Scientific acquires Prolieve, that distribution agreement stays in place until they terminate. So if Boston Scientific were happy with the way the Prolieve distribution was going in China then they could leave that in place and any income generated from that joint venture would accrue to us.

That's wonderful. So it could be - I mean the efforts that you're making right now-

We're continuing efforts.

A source of revenue as we work on Therma.

It should be positive.

Okay thank you.

Thank you very much sir. Ladies and gentlemen again if you do have a question please key star one. Our next question comes as a follow-up from Mr. Justin Porter. Please proceed.

I think we all believe and hope that the current share price is way below what it should be. Given that if I were working for Boston Scientific I would be thinking about buying out the whole company and not just Prolieve. Can you just give us any sense of any level of interest in that regard?

No I can't speak for Boston Scientific. My personal opinion is there unlikely to buy the whole thing but I have no way of speaking to that. So you know they don't normally go - our technologies are very early stage and its not the normal practice to acquire companies at that early stage in their development. So other than that I really can't comment.

Thank you very much.

Thank you.

Thank you very much and at this time Mr. Deasey we have no further questions.

Okay well thank you all very much for calling in today. We look forward to sharing our vision and progress with you at our annual stockholder meeting which is taking place at the BWI Sheraton on Thursday May 19th at 11:00 and we look forward to a large turnout and to seeing many of you there. So once again, thank you for your continued support and thank you for your attention today.

Thank you very much sir and thank you ladies and gentlemen for your participation in today's conference call. This concludes your presentation and you may now disconnect. Have a good day.