Imunon Inc (IMNN) 2005 Q2 法說會逐字稿

Ladies and gentlemen, thank you for your patience. Your conference call is scheduled to begin momentarily. Once again, ladies and gentlemen, thank you for your patience. Your conference call is scheduled to begin momentarily.

Good day, ladies and gentlemen and welcome to the Celsion Corporation's second quarter 2005 earnings conference call. My name is Brian and I will be your coordinator for today. At this time, all participants are in a listen-only mode and we will be conducting a question and answer session toward the end of today's call.

If at any time during the call you require assistance, please press star followed by zero and a coordinator will be happy to assist you. As a reminder, this 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 Litigation Reform Act of 1995. Participants are cautioned that such forward-looking statements involve risks and uncertainties including, without limitation, unforeseen changes in the course of research and development activities and in the clinical trial by others, possibly acquisitions of other technologies, assets or business, possible actions by customers, suppliers, competitors, regulatory authorities and other risks detailed from time to time in the company's periodic reports filed with the Securities and Exchange Commission.

And I would like to now turn the presentation over to your host for today's call, Mr. Tony Deasey, Chief Financial Officer at Celsion. Please proceed.

Good morning and welcome to Celsion's 2005 second quarter earnings conference call. I am very pleased to open the call today by introducing Dr. Larry Olanoff, who joined Celsion as its new president and chief executive officer on July 29th. Larry will now have a few words with your. Larry?

Good morning to all. I would like to first say that I am delighted to join Celsion at this point in time, as the company is actively transitioning from its emphasis on Prolieve and other medical devices to a new focus on oncology research with a core program revolving around ThermoDox and liver cancer and other possible cancer indications.

By way of further introduction, I am a medical doctor with over 20 years of experience in the pharmaceutical industry as well as research training in clinical pharmacology and drug delivery, areas which are uniquely aligned to Celsion's current research direction.

During the past 10 years I was the head of research and development at Forest Laboratories, a company with unique skills in the in-licensing, development and successful marketing of a number of drugs across an array of therapeutic areas. It is my intent to apply this experience to the future development of ThermoDox and other possible oncology applications of thermally sensitive liposomal drug targeting, as well as growing the portfolio of oncology projects at Celsion through the future in-licensing of novel oncology directed drug candidates.

I also want to thank Dr. Cheung and other members of the board of directors for offering me this opportunity and I want to extend my heartfelt appreciation for all of the efforts on the part of Celsion's employees to advance these projects into development along with their collaborators at Duke University, MIT, the National Cancer Institute and Memorial Sloan-Kettering Cancer Center.

Tony will now take you through the financial highlights of the second quarter.

Thanks, Larry. We're delighted to report a very good second quarter. Sales for the quarter were $2.9 million, up 53% from the previous quarter. Cumulative sales for the 6 months of this year were $4.8 million. Sales for the year are on track to exceed our projection of $10 million.

As of the end of June, we've placed a total of 245 machines into physicians' offices. Of those placed to date, 108 have been converted to sales and to date 93% of evaluations are either continuing or have been converted to sales. Even indications where evaluations have not resulted in a sale, in many instances those practices are now covered by mobile units which cover several doctors' offices with one machine. We estimate that by the end of June we had treated over 7,000 patients.

During their recent earnings call, Boston Scientific's management professed to being very pleased with Prolieve's progress, attributing to it a 65% quarter over quarter growth and credited Prolieve as being a primary driver of growth within their urology business. Our gross margin for the second quarter was 33.5%, compared to 32% in the first quarter of this year. This continuing improvement is the product of an increasing proportion of kit sales which generates a significantly higher margin than control units. This improving trend should be sustained as kit sales to established users continue to grow.

Additionally, during the quarter we received approval from the FDA for a second kit manufacturer. We're in the process of starting up the new manufacturer and hope to have product available to inventory in September. Our kit prices from the new manufacturer are significantly lower than our current prices.

Our operating expenses for the quarter were $3.6 million, compared to $1.8 million in the second quarter of last year. However, this increase was largely driven by a non-cash item. As you're all aware, we mark to market certain employee stock options. In the second quarter of 2004, our stock price declined significantly and as a result, we had a credit to expenses of $1.3 million. In the second quarter of this year, the stock price was stable and there was no impact on expenses. If we add back the credits to last year's expenses, the actual out-of-pocket cash expenses were $3.1 million.

The increase against the adjusted number was $500,000. Of this, $350,000 was a one time charge triggered by the approval of the new kit manufacturer. The net increase after backing out the change in stock based compensation and the one-time charge was less than $200,000, or 5.5%. For the year to date, operating expenses were $6.5 million, compared to 7.9 million for the same period in 2004. This decrease was due mainly to non-recurring expenses incurred as a result of the FDA approval for Prolieve in the first half of last year and changes in stock-based compensation.

For the year to date, we've used $5.1 million in operating -- we've used cash of $5.1 million in operating activities and had an average spend of about $850,000 a month. However, increased working capital requirements account for approximately $550,000 of that increase. Adjusted for this, the monthly operating cash burn was about $750,000 a month, slightly less than the 800,000 we had been projecting.

Our loss for the quarter was equivalent to a penny per share, which was no change from last year and for the year to date we have lost $0.03 per share compared to $0.05 per share for the first 6 months of last year. Just this morning, we announced that we had signed a loan agreement with Boston Scientific through which we can borrow up to $15 million. The loan will be disbursed in up to 3 installments, $6 million on closing, which we expect to occur later this week and 2 further equal installments of which could be disbursed in January 2006 and May 2006.

The second and third installments will be disbursed if Boston continues to be happy with our progress in developing Prolieve, and of course, assumes that Boston has not exercised its option by that time. The loan can be repaid either by offsetting the outstanding principal and interest against the $60 million option purchase price or by converting the outstanding principal and interest into stock.

We also have the right to prepay the loan at any time. As a condition of the loan, we fixed the price of Prolieve at $60 million and gave up the multiple of sales. However, more than offsetting that, Boston is giving us convertible debt at a 50% premium to our current stock price with no prepayment penalties and we believe that there is a high likelihood that no conversion into stock will ever take place. This is a very favorable deal for Celsion. From the management perspective, we're very pleased with this arrangement. We're confident that Boston will exercise its option in the near term. Our confidence is based on the fact that the product is doing very well in the market and is a growth driver for their urology business.

Celsion is earning half of the capital (ph) sales revenue. As sales growth, this is a significant amount of money that Boston is leaving on the table. We have been projecting that our cash will last us until the end of the year. Prudence dictates that we raise money now. With the stock currently trading at around $0.40 a share, the alternative to this loan was a very dilutive equity raise.

If we did an equity raise at the current price and Boston exercised its option at the end of the year, we would have saddled ourselves with very expensive capital. If Boston did not exercise their options, this cash, combined with revenues from Prolieve, should be sufficient to fund us through 2006, by which time we should have advanced our development program to the point where more funding options could be available to us, including licensing and other forms of alliance.

Larry will now talk to you about progress on our liver cancer study.

Turning to our liver cancer program, we expect to have the Hong Kong clinical site and another site in the US up and running in the fall of this year, to further accelerate enrollment within the phase I clinical trial currently ongoing. In the meantime, we hope to complete the second cohort of patients at the National Cancer Institute shortly. Depending on the ultimate maximum tolerated dose in these phase I patients, we could finish this study yet this year. We continue to make good progress and are optimistic about the balance of the year. We will now open up your lines -- open up the phone lines to take your questions.

Thank you.

[Operator Instructions].

And your first question comes from the line of Chris Bafta (ph) of RBC. Please proceed.

Congratulations on a good quarter and great news, I think, from Boston Scientific. And Larry, welcome to the team, it's good to have you.

I was curious on the opening comments you had had, Larry, as far as the heat-activated liposome technology, outside of doxorubicin, to my knowledge there have been several chemotherapy drugs identified that could be encapsulated with the technology. Has the company made a decision yet as to which chemotherapy drug they might move forward with or is that an ongoing process?

Chris, thank you for your comments and you're welcome.

Just to address your question specifically, the company is greatly interested and I am personally interested in looking at other drugs within the thermally sensitive liposome targeting approach. We talked about a few of them but we haven't made a decision yet. We believe these are covered under the current intellectual property so we have that option.

I think it's going to be mixed - a mixed decision, meaning in the sense that we have to look at both the drugs, the stability of the drug under the conditions that we're going to be using it as well as the cancer indications we think are best searched for, especially those indications which might be very useful from a heating application source but may not be currently directed or better-addressed through doxorubicin.

So the answer to your question is we remain very interested and this is the part of the process we plan to explore over the next few months and I think by early next year we'll probably have some feasibility testing ongoing with some other drugs.

Thank you.

Thank you and your next question comes from the line of Marvin Porter (ph), a private investor. Please proceed.

Gentlemen, just a point of clarification regarding the Boston Scientific loan and you were talking about 3 incremental parts of that and you were also saying that even if Boston Scientific did not exercise their purchase option that you'd have enough cash to support operations through 2006. I was just unclear, maybe it's just me, on how many of those 3 incremental payments you would receive to get you through the end of 2006.

I'll let Tony address that question.

The loan we've agreed with Boston Scientific is up to $15 million. They will - We would close on the first installment of that loan later this week and we'll receive $6 million. The balance of the loan will be disbursed in January and May, providing Boston is still happy with the progress of the business in equal installments of 4.5 million each. So, I'm assuming that the cash we have on hand, plus the 15 million, plus any income that we generate from Prolieve will be sufficient to fund the business through the end of 2006.

Okay. Thank you very much.

Thanks.

[Operator Instructions].

And your next question comes from the line of Daniel Ryan (ph), a private investor. Please proceed.

Morning, gentlemen. I was wondering how many individuals were in the first cohort of the liver cancer trial and how many will be in the second cohort? Thank you.

The trial is currently designed as the cohorts are escalated up, as the dose is escalated up, there are 3 patients in each cohort. So the first cohort had 3 patients. The second cohort will also have 3 patients at this time.

Thank you gentlemen. And your next question comes from the line of Alec Roberts (ph), a private investor.

Yes. Hello. Welcome, doctor. One question I have is that over the last few -- I've been an investor now since, I think, 1999, long-suffering as you might imagine, is that there seems to be very little information that comes out between the conference calls. We're left sort of dangling in a bit of a vacuum. Is there any way that we can get a little bit more information on the various things that are happening in the interim period of 2 to 4 months between these calls?

You know, Alec, we've talked to you many times on these calls. We release news, material news, as soon as it's available and as soon as we have to disclose it. We would like to have more news to release between calls, but it just so happens that, for example, the loan with Boston Scientific, I would love to have released the news earlier, but we actually literally closed, or got to the point where we could announce that half an hour before this call. We will keep shareholders informed of developments as often as we can and anything that's material will be put out through a press release as soon as it's available.

I understand your constraints except it's sometimes frustrating when we see information that's in fact sort of leaked through Boston Scientific, for example, on how their sales are going from their end and we don't hear anything from our end.

Well, you know, the information that came from Boston Scientific was on their earnings call, which happened to be earlier than ours, but that's the only information they've leaked, if you like, about us.

I would like to have a second question which has -- completely different than that. Back, I think, Dr. Olanoff mentioned -- or --something about patents, covering patents with the additional drugs that you might use with the heat active liposomes. Could you expand on that intellectual property aspect a little bit, please?

This is Larry Olanoff. I think at this time all I can say, because I'm not that familiar with the patent and its details, is to say that my understanding is that the thermally sensitive liposome research that was performed at Duke and is covered in the patent would apply to other drugs as well. I don't know if specific drugs are mentioned, per se, but the technology and the approach has the ability to potentially cover other drugs. That's as much as I can say at this time.

Okay. Thanks a lot.

And gentlemen, that appears to be the final question from the queue at this time. Oops! My apologies. Actually we do have another question from the line of John Dunn (ph), a private investor. Please proceed.

Good morning, everybody. Congratulations on a good quarter. I am trying to find out about your other trials. The prostate cancer and what's the status with breast cancer?

This is Larry Olanoff. We have -- as you are aware, we did a partial phase I trial in prostate cancer. We closed that file at the time for a number of reasons which related largely, I think, to focusing our capital on the liver cancer approach so that trial remains closed at this time, but we have approached the FDA about the possibility of opening -- reopening that trial and we are considering that, again, relative to what our focus with ThermoDox will be going forward.

The second question related to the breast cancer trials. In terms of breast cancer in general, our approach here, again, will be, if we go back into breast cancer from a research, or clinical research perspective at this time, we would be doing it through ThermoDox applications combined with heat and -- that scenario that we are actively exploring and talking with a number of investigators about. And that's as much as I can say at this time, but it is an interest of ours.

Thank you.

And gentlemen, the next question comes from the line of Martin Walsh (ph), a private investor. Please proceed.

Hello. As a private investor, I try to stay apprised of the types of competition that might be in other companies regarding ThermoDox and, however, I realize you folks might have your finger on the pulse of that a little better. Could you tell us what types of research might be out there that might be alternatives to ThermoDox at this time?

I think that's a very broad question. I'm not personally aware of any other proprietary systems that are under clinical trials at this time that would be a direct competitor to ThermoDox in the context of delivering doxorubicin to a specific tumor site and then applying heat to essentially activate the liposome to release doxorubicin. Beyond that I can't comment.

We're not aware of any other competitor studies going on now.

So as far as you know, for the indication for treating liver cancer, this potential treatment still -- is still positioned to be the gold standard as far as what is out there right now?

Well, I think in the broader sense in terms of what's going on in liver cancer, there is quite a few treatment initiatives. Again, to my understanding, thus far, though, there has not been a clear clinical trial indicating a particular agent from a chemotherapeutic standpoint combined with heat or some other modality that would compete, at least, with the theoretical promise that we believe ThermoDox will offer.

Okay. And also, I may have missed, did you mention what your cash on hand presently is?

Yes, in our press release at the end of the second quarter we had 5 million, just over $5 million on hand.

And you said that, that along with the loan amount as well as earnings would last through 2006. Do you anticipate an increase in burn rate then?

Yes, I guess -- I'm being conservative in terms of the end of 2006, but we've just brought onboard a new CEO and we need to look at all of our plans going forward and our burn related to that will be clearer within a couple of months.

And then finally, do you have a number on how many investors there are in Celsion at this time?

Our estimate is around 20,000. Last time we got a listing it was around 20,000.

Okay. All right. Thank you, gentlemen.

Thanks.

And your next question comes from the line of Glen Fein (ph), a private investor. Please proceed.

Hey guys. Congratulations. I didn't hear any word on the potential reverse split. Any word, any direction, any ideas?

As you know, the shareholders gave the Board authorization to do a reverse split at the stockholder meeting. The Board will basically try to pick a time when it's beneficial to everybody, if we do the reverse. We are under no obligation to do it but it's really a question of timing.

Okay. Thank you very much.

And gentlemen, that appears to be the final question from the queue at this time.

Okay. This is Larry Olanoff to conclude. We at Celsion would like to thank you for your continued support as shareholders. We look forward to communicating with you again in November regarding our progress with Prolieve and our other cancer research projects. Thank you very much for joining us today and I hope the information was beneficial. Thank you.

Ladies and gentlemen, that concludes today's conference call. You may now disconnect your lines and have a great day.